Navient : 2nd Quarter 2022 Earnings Call

2022 2nd Quarter Earnings Call Presentation

July 27, 2022

Forward-Looking Statements; Non-GAAP Financial Measures

The following information is current as of June 30, 2022 (unless otherwise noted) and should be read in connection with Navient Corporation's "Navient" Annual Report on Form 10-K for the year end December 31, 2021 (the "2021 Form 10-K"), filed by Navient with the Securities and Exchange Commission (the "SEC") on February 25, 2022 and subsequent reports filed by Navient with the SEC. Definitions for capitalized terms in

this presentation not defined herein can be found in the 2021 Form 10-K. This presentation contains "forward-looking statements," within the meaning of the federal securities law, about our business, and prospects and other information that is based on management's current expectations as of the date of this presentation. Statements that are not historical facts, including statements about the company's beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "may," "could," "should," "goal," or "target." Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements.

For Navient, these factors include, among others, the risks and uncertainties associated with:

• the continuing impact of the COVID-19 pandemic, including changes in the macroeconomic environment, restrictions on business, individual or travel activities intended to slow the spread of the pandemic and volatility in market conditions resulting from the pandemic including interest rates;
• the value of equities and other financial assets; the risks and uncertainties associated with increases in financing costs;
• the availability of financing or limits on our liquidity resulting from disruptions in the capital markets or other factors;
• unanticipated increases in costs associated with compliance with federal, state or local laws and regulations;
• changes in the demand for asset management and business processing solutions or other changes in marketplaces in which we compete (including increased competition);
• changes in accounting standards including but not limited to changes pertaining to loan loss reserves and estimates or other accounting standards that may impact our operations;
• adverse outcomes in any significant litigation to which the company is a party;
• credit risk associated with the company's underwriting standards or exposure to third parties, including counterparties to hedging transactions; and
• changes in the terms of education loans and the educational credit marketplace (including changes resulting from the CARES Act or other new laws and the implementation of existing laws).

The company could also be affected by, among other things:

• unanticipated repayment trends on education loans including prepayments or deferrals resulting from new interpretations of current laws, rules or regulations or future laws, executive orders or other policy initiatives which operate to encourage or require consolidation, abolish existing or create additional income-based repayment or debt forgiveness programs or establish other policies and programs which may increase the prepayment rates on education loans and accelerate repayment of the bonds in our securitization trusts;
• reductions to our credit ratings, the credit ratings of asset-backed securitizations we sponsor or the credit ratings of the United States of America;
• failures of our operating systems or infrastructure or those of third-party vendors;
• risks related to cybersecurity including the potential disruption of our systems or those of our third-party vendors or customers or potential disclosure of confidential customer information;
• damage to our reputation resulting from cyber-breaches or litigation;
• failure to successfully implement cost-cutting initiatives and adverse effects of such initiatives on our business;
• failure to adequately integrate acquisitions or realize anticipated benefits from acquisitions including delays or errors in converting portfolio acquisitions to our servicing platform;
• changes in law and regulations whether new laws or regulations or new interpretations of existing laws and regulations applicable to any of our businesses or activities or those of our vendors, suppliers or customers;
• changes in the general interest rate environment, including the availability of any relevant money-market index rate, including LIBOR, or the relationship between the relevant money-market index rate and the rate at which our assets are priced;
• our ability to successfully effectuate any acquisitions and other strategic initiatives;
• activities by shareholder activists, including a proxy contest or any unsolicited takeover proposal;
• changes in general economic conditions, including the potential impact of persistent inflation; and
• the other factors that are described in the "Risk Factors" section of Navient's Annual Report on Form 10-K for the year ended December 31, 2021, and in our other reports filed with the Securities and Exchange Commission.
  The preparation of the company's consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect and actual results could differ materially. All forward-looking statements contained in this release are qualified by these cautionary statements and are made only as of the date of this release. The company does not undertake any obligation to update or revise these forward-looking statements except as required by law.
  Navient reports financial results on a GAAP basis and also provides certain non-GAAP performance measures, including Core Earnings, Adjusted Tangible Equity Ratio, and various other non-GAAP financial measures derived from Core Earnings. When compared to GAAP results, Core Earnings exclude the impact of: (1) mark-to-market gains/losses on derivatives; and (2) goodwill and acquired intangible asset amortization and impairment. Navient provides Core Earnings measures because this is what management uses when making management decisions regarding Navient's performance and the allocation of corporate
  resources. Navient Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see Core Earnings in Navient's second quarter earnings release and pages 16 - 18 of this presentation for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.

© 2022 Navient Solutions, LLC. All rights reserved.

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Delivering Long-term Value

Federal Education Loans		Consumer Lending		Business Processing

• Successfully assisted borrowers in returning to repayment
• Net interest margin of
  111 bps reflects our continued success in managing interest rate risk
• Annualized charge-off rate of 9 bps, catalyzed by our data- driven risk management platform

• Originated $420 million of high-quality Private Education Loans, targeting mid-teensROE return thresholds
• Continuing to leverage our capital markets expertise to produce consistent risk adjusted margins
• Private Education Loan delinquency & charge-off rates continue to perform at historically low levels

• Navient employees continue to support our state and municipal clients
• Broad array of solutions continue to drive opportunities for organic revenue growth
• Technology enabled platform and differentiated expertise enhances the client experience and allows for rapid implementation

111 bps NIM

266 bps NIM

16% EBITDA margin 1

Note: Financial data is as of Q2 2022.

1 Item is a non-GAAP financial measure. See pages 16 - 18 for a description and reconciliation.

© 2022 Navient Solutions, LLC. All rights reserved.

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Operating Results

"Core Earnings" Basis

Selected Financial Information and Ratios

(In millions, except per share	Q2 22	Q1 22	Q2 21
amounts)
GAAP diluted EPS	$1.22	$1.67	$1.05
Adjusted Core Earnings EPS 1	$0.92	$0.90	$0.98
Average common stock equivalent	147	153	176
Ending total education loans, net	$68,882	$71,101	$75,275
Average total education loans	$71,390	$73,415	$77,379

2nd Quarter 2022 Highlights

• Adjusted Core Earnings 1 per share of $0.92 - Core Return on Equity 1 of 20%
• Increased FFELP Net Interest Margin to 111 bps
• Originated $420 million of high-quality private education loans in the quarter
• Generated $87 million of Business Processing Services revenue
• Increased Adjusted Tangible Equity Ratio to 7.5% 1
• Returned $128 million to shareholders through dividends and share repurchases

1 Item is a non-GAAP financial measure. See pages 16 - 18 for a description and reconciliation.

© 2022 Navient Solutions, LLC. All rights reserved.

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Federal Education Loans Segment

"Core Earnings" Basis

Selected Financial Information and Ratios

($ In millions)	Q2 22	Q1 22	Q2 21
Segment net interest margin	1.11%	1.04%	0.97%
FFELP Loans:
Provision for loan losses	$ -	$ -	$ -
Charge-offs	$10	$7	$5
Annualized charge-off rate	0.09%	0.07%	0.04%
Greater than 30-days	15.9%	13.5%	8.3%
delinquency rate
Greater than 90-days	7.4%	6.4%	3.8%
delinquency rate
Forbearance rate	13.1%	12.9%	13.9%
Average FFELP Loans	$50,534	$52,258	$56,649
Operating Expense	$25	$28	$55
Net Income	$110	$107	$113
Total federal loans serviced	$57	$59	$283
(billions) 1

1 As of June 30, 2022, we serviced $57 billion in FFELP (federally guaranteed) loans.

© 2022 Navient Solutions, LLC. All rights reserved.

2nd Quarter 2022 Highlights

Federal Education

Q2 22 Net Interest Margin: 111 bps

Q2 22 Annualized Charge-off Rate: 9 bps

• Successful risk management and hedging strategies reflected in Net Interest Margin that increased to 1.11% from 0.97%
• FFELP Loan delinquency rate increased to 15.9% from 8.3%, as borrowers return to repayment
• Forbearance rate decreased to 13.1% from 13.9%
• Annualized charge-off rate increased to 0.09% from 0.04%
• Operating expense declined to $25 million from $55 million

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