UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑ |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20222023
or
☐ |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-36228
Navient Corporation
(Exact name of registrant as specified in its charter)
Delaware | 46-4054283 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | ( |
(302) 283-8000(703)810-3000
(Registrant’s telephone number, including area code)
123 Justison Street, Wilmington, Delaware19801
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No ☐☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
| ☒ |
| Accelerated filer | ☐ | ||
Non-accelerated filer |
| ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
SecuSecurities registered pursuant to Section 12(b) of the Act.rities
registeredpursuanttoSection12(b)oftheAct.
Title of each class | Trading Symbol(s) |
| ||
Common stock, par value $.01 per share | NAVI | The NASDAQ Global Select Market | ||
6% Senior Notes due December 15, 2043 | JSM | The NASDAQ Global Select Market | ||
Preferred Stock Purchase Rights | None | The NASDAQ Global Select Market |
As of SeptemberJune 30, 2022,2023, there were 135,614,173121,601,864 shares of common stock outstanding.
TABLE OF CONTENTS
Organization ofOur Form 10-Q
The order and presentation of content in our Form 10-Q differsdiffers from the traditional Securities and Exchange Commission (SEC) Form 10-Q format. Our format is designed to improve readability and to betterpresent how we organize and manage our business. See Appendix A, "Form 10-Q Cross-Reference Index" for a cross-reference index to the traditional SEC Form 10-Q format.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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FORWARD-LOOKING AND CAUTIONARY STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking” statements and other information that is based on management’s current expectations as of the date of this report. Statements that are not historical facts, including statements about our 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,” “goals,” or “target.” Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties are discussed more fully under the section titled “Risk Factors” and include, but are not limited to the following:
• the continuing impacts of the COVID-19 pandemic and related risks; • general economic conditions, including the potential impact of persistent inflation and increasing interest rates on Navient and its clients and customers and on the creditworthiness of third parties; • increased defaults on education loans held by us; • the cost and availability of funding in the capital markets; • changes in the general interest rate environment, including the availability of any relevant money-market index rate, including LIBOR or SOFR, or the relationship between the relevant money-market index rate and the rate at which our assets are priced; • 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 that 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; • our unhedged Floor Income is dependent on the future interest rate environment and therefore is variable; • a reduction in our credit ratings; • adverse market conditions or an inability to effectively manage our liquidity risk or access liquidity could negatively impact us; • the interest rate characteristics of our assets do not always match those of our funding arrangements; • our use of derivatives exposes us to credit and market risk; • our ability to continually and effectively align our cost structure with our business operations; • a failure or breach of our operating systems, infrastructure or information technology systems; • failure by any third party providing us material services or products or a breach or violation of law by one of these third parties; • changes to applicable laws, rules, regulations and government policies and expanded regulatory and governmental oversight; • our work with government clients exposes us to additional risks inherent in the government contracting environment; • shareholder activism; • shareholders’ percentage ownership in Navient may be diluted in the future; • reputational risk and social factors; • obligations owed to parties under various transaction agreements that were executed as part of the spin-off of Navient from SLM Corporation (the Spin-Off); and • acquisitions or strategic investments that we pursue. |
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Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business.
The preparation of our 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 report are qualified by these cautionary statements and are made only as of the date of this report. We do not undertake any obligation to update or revise these forward-looking statements except as required by law.
Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity and cash flows.
1
USE OF NON-GAAP FINANCIAL MEASURES
We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present our financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings, which is a non-GAAP financial measure. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also include this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds tois our segment financial presentations,measure of profit or loss for our segments, we are required by GAAP to provide Core Earnings disclosures in the notes to our consolidated financial statements for our business segments.
In addition to Core Earnings, we present the following other non-GAAP financial measures: Adjusted Core Earnings, Tangible Equity, Adjusted Tangible Equity Ratio, Pro forma Adjusted Tangible Equity Ratio, Earnings before Interest, Taxes, Depreciation and Amortization Expense (EBITDA) (for the Business Processing segment), and Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off Loans. Definitions for the non-GAAP financial measures and reconciliations are provided below, except that reconciliations of forward-looking non-GAAP financial measures are not provided because the company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of certain items, including, but not limited to, the impact of any mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.
2
OverviewOverview and Fundamentals of Our Business
Navient (Nasdaq: NAVI) provides technology-enabled education finance and business processing solutions that simplify complex programs and help millions of people achieve success. Our customer-focused, data-driven services deliver exceptional results for clients in education, health care and government. Learn more at navient.com.
With a focus on data-driven insights, service, compliance and innovative support, Navient’s business consists of:
| • Federal Education Loans
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We own a portfolio of $46.9$40.9 billion of federally guaranteed Federal Family Education Loan Program (FFELP) Loans. As a servicer on our own portfolio and for third parties, we deploy data-driven approaches to support the success of our customers. Our flexible and scalable infrastructure manages large volumes of complex transactions, simplifying the customer experience and continually improving efficiency.
| • Consumer Lending
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We help students and families succeed through the paying-for-collegecollege journey with innovative planning tools, student loans and refinancing products. Our $19.2$17.7 billion Private Education Loan portfolio demonstrates high customer success rates. In the thirdsecond quarter of 2022,2023, we originated $447$197 million inof Private Education Loans.
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We leverage our loan servicing expertise to provide business processing solutions for approximately 500 public sector and healthcare organizations, and their tens of millions of clients, patients, and constituents. Our suite of workflow processing,omnichannel customer experience, digital processing and revenue cycle solutions enables our clients to focus on their missions, optimize their cash flow and deliver essential services.better results for the people they serve.
Superior Operational Performance with a Strong Customer Service and Compliance Commitment
We help our customers — both individuals and institutions — navigate the path to financial success through proactive, data-driven, simplified service and innovative solutions.
| • Delivering superior performance. Whether supporting student loan borrowers in successfully managing their loans, designing and implementing omnichannel contact center solutions for public sector agencies, generating additional revenue for hospitals and medical systems, or helping a state manage communications or recover revenue that funds essential services, Navient delivers value for our clients and customers.
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We leverage our experience,customer service expertise, data-driven insights, customer service skills, technology platforms, and scale to maximize value for our clients.
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We leverage
3
| • Improving customer experience and success. We continually make enhancements to improve the customer experience, drawing from a variety of inputs including customer surveys, research panels, analysis of customer inquiries and activities, complaint data, and regulator commentary. Across our businesses, our customer-facing representatives are trained to provide empathetic, accurate support. • Commitment to compliance. We maintain a robust, multi-layered compliance management system and thoroughly understand and comply with applicable federal, state, and local laws. We use a “Three Lines of Defense” compliance framework, considered best practice by the U.S. Federal Financial Institutions Examination Council (FFIEC). This framework and other compliance protocols ensure we adhere to key industry laws and regulations including: Fair and Accurate Credit Transactions Act (FACTA); Fair Credit Reporting Act (FCRA); Fair Debt Collection Practices Act (FDCPA); Electronic Funds Transfer Act (EFTA); Equal Credit Opportunity Act (ECOA); Federal Information Security Management Act (FISMA); Gramm-Leach-Bliley Act (GLBA); Health Insurance Portability and Accountability Act (HIPAA); IRS Publication 1075; Servicemembers Civil Relief Act (SCRA); Military Lending Act (MLA); Telephone Consumer Protection Act (TCPA); Truth in Lending Act (TILA); Unfair, Deceptive, or Abusive Acts and Practices (UDAAP); state laws; and state and city licensing. • Corporate social responsibility. We are committed to contributing to the social and economic wellbeing of our communities; fostering the success of our customers; supporting a culture of integrity, inclusion and equality in our workforce; and embracing sustainable business practices. Navient has earned recognition from the Forum of Executive Women, Human Rights Campaign Foundation, and military publisher VIQTORY, among other organizations, for our continued commitment to fostering diversity. Our employees are active in our communities, through local and national organizations, including a national partnership with Boys & Girls Clubs of America.
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Navient is committed to a sustainable future. Our work is largely services based; as a result, our day-to-day operations require relatively small amounts of natural resource and energy inputs. We leverage technology that minimizes energy usageuse in our office buildings and promote widespread adoption of “paperless” digital customer communications. Navient prioritizes adding or updating insulation and otherthe usage of power-saving features to our buildings to further reduce energy usage. Energy efficiency and reducing CO2 and CO2 equivalents are among the many factors considered in our growth and real estate decisions.
Strong Financial Performance Resulting in a Strong Capital Return
Our third-quarter 2022second-quarter 2023 results continue to build upon our previous year’s results demonstratingdemonstrate the strength of our business model and our ability to deliver predictable and meaningful cash flow and earnings in all types of economic environments.
Our significant earnings generate significant capital, which results inallows for a strong capital return to our investors. Navient expects to continue to return excess capital to shareholders through dividends and share repurchases in accordance with our capital allocation policy.
By optimizing capital adequacy and allocating capital to highly accretive opportunities, including organic growth and acquisitions, we remain well positioned to pay dividends and repurchase stock, while maintaining appropriate leverage that supports our credit ratings and ensures ongoing access to capital markets.
In December 2021, our Board approved a share repurchase program authorizing the purchase of up to $1 billion of the Company’s outstanding common stock. At September 30, 2022, $685June 30,2023, $435 million remained in share repurchase authorization.
To inform our capital allocation decisions, we use the Adjusted Tangible Equity Ratio(1) in addition to other metrics. Our Adjusted Tangible Equity Ratio(1) was 7.8%8.4% as of SeptemberJune 30, 2022.2023.
(Dollars and shares in millions) |
| Q2-23 |
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| Q2-22 |
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Shares repurchased |
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| 4.9 |
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| 6.9 |
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Reduction in shares outstanding |
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| 4 | % |
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| 5 | % |
Total repurchases in dollars |
| $ | 80 |
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| $ | 105 |
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Dividends paid |
| $ | 20 |
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| $ | 23 |
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Total Capital Returned(2) |
| $ | 100 |
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| $ | 128 |
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Adjusted Tangible Equity Ratio(1) |
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| 8.4 | % |
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| 7.5 | % |
(Dollars and shares in millions) |
| Q3-22 |
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| Q3-21 |
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Shares repurchased |
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| 6.3 |
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| 7.0 |
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Reduction in shares outstanding |
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| 4 | % |
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| 4 | % |
Total repurchases in dollars |
| $ | 95 |
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| $ | 150 |
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Dividends paid |
| $ | 22 |
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| $ | 26 |
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Total Capital Returned(2) |
| $ | 117 |
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| $ | 176 |
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Adjusted Tangible Equity Ratio(1) |
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| 7.8 | % |
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| 6.4 | % |
4
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How We Organize Our Business
We operate our business in three primary segments: Federal Education Loans, Consumer Lending and Business Processing.
Federal Education Loans Segment
Navient owns FFELP Loans and performs servicing and asset recovery services on this portfolio. We also service and perform asset recovery services on FFELP Loans owned by other institutions. Our servicing quality, data-driven strategies and omnichannel education about federal repayment options translate into positive results for the millions of borrowers we serve. We generate revenue primarily through net interest income on our FFELP Loans.Loans and servicing-related fee income.
Consumer Lending Segment
Navient owns, originates and services in-school and refinance Private Education Loans. "In-school" Private Education Loans are loans originally made to borrowers while they are attending school whereas "Refinance" Private Education Loans are loans where a borrower has refinanced their education loans. We generate revenue primarily through net interest income on our Private Education Loan portfolio.
Navient helps students and families through the going-to and paying-for-college journey. Our digital tools empower people to find grants and scholarships, compare financial aid offers and complete the FAFSA. Our Private Education Loans offer easy-to-understand payment options. After graduation, we offer student loan refinancing to help people simplify their repayment and earn a better rate. We believe our 50 years of experience, product design, digital marketing strategies, and origination and servicing platform provide a unique competitive advantage. We see meaningful growth opportunities in originating Private Education Loans, to financially responsible consumers, generating attractive long-term, risk-adjusted returns. We generate revenue primarily through net interest income on our Private Education Loan portfolio.
Business Processing Segment
Navient provides business processing solutions such as omnichannel contact center services, workflow processing, and revenue cycle optimization. We leverage the same expertise and intelligent tools we use to deliver successful results for portfolios we own. Our support enables our clients to ensure better serve their constituents,constituent outcomes, meet rapidly changing needs, improve technology, reduce operating expenses, manage risk and optimize revenue opportunities. Our clients include:
| • Government: We offer our solutions to federal agencies, state governments, tolling and parking authorities, and other public sector clients. • Healthcare: Our clients include hospitals, hospital systems, medical centers, large physician groups, other healthcare providers and public health departments.
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Other Segment
This segment consists of our corporate liquidity portfolio, gains and losses incurred on the repurchase of debt, unallocated expenses of shared services (which includes regulatory expenses) and restructuring/other reorganization expenses.
5
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Selected Historical Financial Information and Ratios
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| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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(In millions, except per share data) |
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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GAAP Basis |
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Net income |
| $ | 105 |
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| $ | 173 |
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| $ | 540 |
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| $ | 728 |
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Diluted earnings per common share |
| $ | .75 |
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| $ | 1.04 |
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| $ | 3.67 |
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| $ | 4.15 |
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Weighted average shares used to compute diluted earnings per share |
| $ | 141 |
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| 167 |
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| 147 |
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| 176 |
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Return on assets |
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| .57 | % |
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| .86 | % |
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| .96 | % |
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| 1.19 | % |
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Core Earnings Basis(1) |
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Net income(1) |
| $ | 87 |
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| $ | 149 |
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| $ | 356 |
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| $ | 618 |
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Diluted earnings per common share(1) |
| $ | .62 |
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| $ | .89 |
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| $ | 2.42 |
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| $ | 3.52 |
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Adjusted diluted earnings per common share(1) |
| $ | .75 |
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| $ | .92 |
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| $ | 2.58 |
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| $ | 3.65 |
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Weighted average shares used to compute diluted earnings per share |
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| 141 |
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| 167 |
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| 147 |
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| 176 |
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Net interest margin, Federal Education Loans segment |
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| .94 | % |
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| 1.04 | % |
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| 1.03 | % |
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| .99 | % |
Net interest margin, Consumer Lending segment |
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| 2.90 | % |
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| 2.98 | % |
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| 2.78 | % |
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| 2.98 | % |
Return on assets |
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| .47 | % |
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| .73 | % |
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| .63 | % |
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| 1.01 | % |
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Education Loan Portfolios |
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Ending FFELP Loans, net |
| $ | 46,891 |
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| $ | 54,350 |
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| $ | 46,891 |
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| $ | 54,350 |
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Ending Private Education Loans, net |
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| 19,151 |
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| 20,018 |
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| 19,151 |
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| 20,018 |
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Ending total education loans, net |
| $ | 66,042 |
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| $ | 74,368 |
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| $ | 66,042 |
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| $ | 74,368 |
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Average FFELP Loans |
| $ | 48,443 |
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| $ | 55,435 |
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| $ | 50,398 |
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| $ | 56,711 |
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Average Private Education Loans |
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| 20,308 |
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| 20,938 |
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| 20,771 |
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| 21,266 |
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Average total education loans |
| $ | 68,751 |
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| $ | 76,373 |
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| $ | 71,169 |
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| $ | 77,977 |
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| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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(In millions, except per share data) |
| 2023 |
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| 2022 |
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| 2023 |
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| 2022 |
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GAAP Basis |
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Net income |
| $ | 66 |
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| $ | 180 |
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| $ | 177 |
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| $ | 435 |
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Diluted earnings per common share |
| $ | .52 |
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| $ | 1.22 |
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| $ | 1.39 |
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| $ | 2.90 |
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Weighted average shares used to compute diluted |
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| 125 |
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| 147 |
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| 128 |
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| 150 |
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Return on assets |
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| .41 | % |
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| .96 | % |
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| .55 | % |
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| 1.15 | % |
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Core Earnings Basis(1) |
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Net income(1) |
| $ | 88 |
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| $ | 134 |
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| $ | 221 |
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| $ | 269 |
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Diluted earnings per common share(1) |
| $ | .70 |
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| $ | .91 |
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| $ | 1.73 |
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| $ | 1.79 |
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Weighted average shares used to compute diluted |
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| 125 |
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| 147 |
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| 128 |
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| 150 |
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Net interest margin, Federal Education Loans segment |
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| .97 | % |
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| 1.11 | % |
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| 1.05 | % |
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| 1.08 | % |
Net interest margin, Consumer Lending segment |
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| 2.97 | % |
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| 2.66 | % |
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| 3.05 | % |
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| 2.73 | % |
Return on assets |
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| .55 | % |
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| .72 | % |
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| .69 | % |
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| .71 | % |
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Education Loan Portfolios |
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Ending FFELP Loans, net |
| $ | 40,851 |
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| $ | 49,214 |
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| $ | 40,851 |
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| $ | 49,214 |
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Ending Private Education Loans, net |
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| 17,732 |
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| 19,668 |
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| 17,732 |
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| 19,668 |
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Ending total education loans, net |
| $ | 58,583 |
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| $ | 68,882 |
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| $ | 58,583 |
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| $ | 68,882 |
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Average FFELP Loans |
| $ | 41,869 |
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| $ | 50,534 |
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| $ | 42,562 |
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| $ | 51,391 |
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Average Private Education Loans |
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| 18,690 |
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| 20,856 |
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| 18,988 |
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| 21,006 |
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Average total education loans |
| $ | 60,559 |
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| $ | 71,390 |
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| $ | 61,550 |
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| $ | 72,397 |
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76
The Quarter inin Review
We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also include this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments. See “Non-GAAP Financial Measures — Core Earnings” for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.
Third-quarter 2022Second-quarter 2023 GAAP net income was $105$66 million ($0.750.52 diluted earnings per share), compared with $173$180 million ($1.041.22 diluted Core Earnings per share) for the year-ago quarter. See “Results of Operations – GAAP Comparison of Third-Quarter 2022Second-Quarter 2023 Results with Third-Quarter 2021”Second-Quarter 2022" for a discussion of the primary contributors to the change in GAAP earnings between periods.
Third-quarter 2022Second-quarter 2023 Core Earnings net income was $87$88 million ($0.620.70 diluted Core Earnings per share), compared with $149$134 million ($0.890.91 diluted Core Earnings per share) for the year-ago quarter. Third-quarter 2022 and 2021 adjusted diluted Core Earnings(1) per share were $0.75 and $0.92, respectively. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.
Financial highlights of third-quarter 2022second-quarter 2023 include:
Federal Education Loans segment:
| • Net income of $76 million. • Net interest margin of 0.97%.
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Consumer Lending segment:
| • Net income of $75 million. • Net interest margin of 2.97%. • Originated $197 million of Private Education Loans.
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Business Processing segment:
| • Revenue of $83 million. • Net income of $6 million and EBITDA(1) of $8 million.
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Capital, funding and liquidity:
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Operating Expenses:
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Restructuring Expenses:
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Navient’s Response to COVID-19
Since its emergence in early 2020, the impactsRestructuring expenses of COVID-19 have been dynamic and unpredictable. In response to COVID-19, we prioritized the safety of our employees and business partners, while continually striving to support the needs of our customers and communities. During 2021 and the first nine months of 2022, the COVID-19 pandemic and long-lasting changes it has produced have continued to affect our business operations. The future direct and indirect impact of the pandemic on our businesses, results of operations and financial condition remains uncertain. Should current economic conditions deteriorate or if public health worsened$15 million primarily due to various factors, such conditions could have an adverse effect on our businessesseverance costs in connection with the CEO transition.
7
Results of Operations – Navient’s Response to COVID-19” in our 2021 Form 10-K.
Results of Operations
GAAP Income Statements (Unaudited)
|
| Three Months Ended September 30, |
|
| Increase (Decrease) |
|
| Nine Months Ended September 30, |
|
| Increase (Decrease) |
|
| Three Months Ended June 30, |
|
| Increase |
|
| Six Months Ended June 30, |
|
| Increase |
| ||||||||||||||||||||||||||||||||||||||||
(In millions, except per share data) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
|
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
| ||||||||||||||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FFELP Loans |
| $ | 553 |
|
| $ | 368 |
|
| $ | 185 |
|
|
| 50 | % |
| $ | 1,312 |
|
| $ | 1,106 |
|
| $ | 206 |
|
|
| 19 | % |
| $ | 720 |
|
| $ | 410 |
|
| $ | 310 |
|
|
| 76 | % |
| $ | 1,413 |
|
| $ | 759 |
|
| $ | 654 |
|
|
| 86 | % |
Private Education Loans |
|
| 309 |
|
|
| 291 |
|
|
| 18 |
|
|
| 6 |
|
|
| 862 |
|
|
| 905 |
|
|
| (43 | ) |
|
| (5 | ) |
|
| 341 |
|
|
| 277 |
|
|
| 64 |
|
|
| 23 |
|
|
| 686 |
|
|
| 553 |
|
|
| 133 |
|
|
| 24 |
|
Cash and investments |
|
| 19 |
|
|
| 1 |
|
|
| 18 |
|
|
| 1,800 |
|
|
| 25 |
|
|
| 2 |
|
|
| 23 |
|
|
| 1,150 |
|
|
| 36 |
|
|
| 5 |
|
|
| 31 |
|
|
| 620 |
|
|
| 70 |
|
|
| 6 |
|
|
| 64 |
|
|
| 1,067 |
|
Total interest income |
|
| 881 |
|
|
| 660 |
|
|
| 221 |
|
|
| 33 |
|
|
| 2,199 |
|
|
| 2,013 |
|
|
| 186 |
|
|
| 9 |
|
|
| 1,097 |
|
|
| 692 |
|
|
| 405 |
|
|
| 59 |
|
|
| 2,169 |
|
|
| 1,318 |
|
|
| 851 |
|
|
| 65 |
|
Total interest expense |
|
| 641 |
|
|
| 326 |
|
|
| 315 |
|
|
| 97 |
|
|
| 1,301 |
|
|
| 995 |
|
|
| 306 |
|
|
| 31 |
|
|
| 919 |
|
|
| 371 |
|
|
| 548 |
|
|
| 148 |
|
|
| 1,756 |
|
|
| 660 |
|
|
| 1,096 |
|
|
| 166 |
|
Net interest income |
|
| 240 |
|
|
| 334 |
|
|
| (94 | ) |
|
| (28 | ) |
|
| 898 |
|
|
| 1,018 |
|
|
| (120 | ) |
|
| (12 | ) |
|
| 178 |
|
|
| 321 |
|
|
| (143 | ) |
|
| (45 | ) |
|
| 413 |
|
|
| 658 |
|
|
| (245 | ) |
|
| (37 | ) |
Less: provisions for loan losses |
|
| 28 |
|
|
| 22 |
|
|
| 6 |
|
|
| 27 |
|
|
| 62 |
|
|
| (66 | ) |
|
| 128 |
|
|
| 194 |
|
|
| 11 |
|
|
| 18 |
|
|
| (7 | ) |
|
| (39 | ) |
|
| (3 | ) |
|
| 34 |
|
|
| (37 | ) |
|
| (109 | ) |
Net interest income after provisions for loan losses |
|
| 212 |
|
|
| 312 |
|
|
| (100 | ) |
|
| (32 | ) |
|
| 836 |
|
|
| 1,084 |
|
|
| (248 | ) |
|
| (23 | ) |
|
| 167 |
|
|
| 303 |
|
|
| (136 | ) |
|
| (45 | ) |
|
| 416 |
|
|
| 624 |
|
|
| (208 | ) |
|
| (33 | ) |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Servicing revenue |
|
| 24 |
|
|
| 47 |
|
|
| (23 | ) |
|
| (49 | ) |
|
| 60 |
|
|
| 149 |
|
|
| (89 | ) |
|
| (60 | ) |
|
| 16 |
|
|
| 17 |
|
|
| (1 | ) |
|
| (6 | ) |
|
| 33 |
|
|
| 36 |
|
|
| (3 | ) |
|
| (8 | ) |
Asset recovery and business processing revenue |
|
| 80 |
|
|
| 135 |
|
|
| (55 | ) |
|
| (41 | ) |
|
| 264 |
|
|
| 416 |
|
|
| (152 | ) |
|
| (37 | ) |
|
| 83 |
|
|
| 88 |
|
|
| (5 | ) |
|
| (6 | ) |
|
| 155 |
|
|
| 185 |
|
|
| (30 | ) |
|
| (16 | ) |
Other income |
|
| 6 |
|
|
| 3 |
|
|
| 3 |
|
|
| 100 |
|
|
| 22 |
|
|
| 9 |
|
|
| 13 |
|
|
| 144 |
| ||||||||||||||||||||||||||||||||
Gains on sales of loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 78 |
|
|
| (78 | ) |
|
| (100 | ) | ||||||||||||||||||||||||||||||||
Losses on debt repurchases |
|
| — |
|
|
| (20 | ) |
|
| 20 |
|
|
| (100 | ) |
|
| — |
|
|
| (32 | ) |
|
| 32 |
|
|
| (100 | ) | ||||||||||||||||||||||||||||||||
Other revenue |
|
| 4 |
|
|
| 7 |
|
|
| (3 | ) |
|
| (43 | ) |
|
| 11 |
|
|
| 16 |
|
|
| (5 | ) |
|
| (31 | ) | ||||||||||||||||||||||||||||||||
Gains (losses) on derivative and hedging activities, net |
|
| 40 |
|
|
| (5 | ) |
|
| 45 |
|
|
| 900 |
|
|
| 161 |
|
|
| 21 |
|
|
| 140 |
|
|
| 667 |
|
|
| 26 |
|
|
| 22 |
|
|
| 4 |
|
|
| 18 |
|
|
| 17 |
|
|
| 120 |
|
|
| (103 | ) |
|
| (86 | ) |
Total other income |
|
| 150 |
|
|
| 160 |
|
|
| (10 | ) |
|
| (6 | ) |
|
| 507 |
|
|
| 641 |
|
|
| (134 | ) |
|
| (21 | ) |
|
| 129 |
|
|
| 134 |
|
|
| (5 | ) |
|
| (4 | ) |
|
| 216 |
|
|
| 357 |
|
|
| (141 | ) |
|
| (39 | ) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating expenses |
|
| 194 |
|
|
| 248 |
|
|
| (54 | ) |
|
| (22 | ) |
|
| 588 |
|
|
| 758 |
|
|
| (170 | ) |
|
| (22 | ) |
|
| 182 |
|
|
| 190 |
|
|
| (8 | ) |
|
| (4 | ) |
|
| 368 |
|
|
| 395 |
|
|
| (27 | ) |
|
| (7 | ) |
Goodwill and acquired intangible assets impairment and amortization expense |
|
| 10 |
|
|
| 4 |
|
|
| 6 |
|
|
| 150 |
|
|
| 17 |
|
|
| 14 |
|
|
| 3 |
|
|
| 21 |
|
|
| 3 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| 7 |
|
|
| (2 | ) |
|
| (29 | ) |
Restructuring/other reorganization expenses |
|
| 21 |
|
|
| — |
|
|
| 21 |
|
|
| 100 |
|
|
| 25 |
|
|
| 8 |
|
|
| 17 |
|
|
| 213 |
|
|
| 15 |
|
|
| — |
|
|
| 15 |
|
|
| 100 |
|
|
| 19 |
|
|
| 3 |
|
|
| 16 |
|
|
| 533 |
|
Total expenses |
|
| 225 |
|
|
| 252 |
|
|
| (27 | ) |
|
| (11 | ) |
|
| 630 |
|
|
| 780 |
|
|
| (150 | ) |
|
| (19 | ) |
|
| 200 |
|
|
| 193 |
|
|
| 7 |
|
|
| 4 |
|
|
| 392 |
|
|
| 405 |
|
|
| (13 | ) |
|
| (3 | ) |
Income before income tax expense |
|
| 137 |
|
|
| 220 |
|
|
| (83 | ) |
|
| (38 | ) |
|
| 713 |
|
|
| 945 |
|
|
| (232 | ) |
|
| (25 | ) |
|
| 96 |
|
|
| 244 |
|
|
| (148 | ) |
|
| (61 | ) |
|
| 240 |
|
|
| 576 |
|
|
| (336 | ) |
|
| (58 | ) |
Income tax expense |
|
| 32 |
|
|
| 47 |
|
|
| (15 | ) |
|
| (32 | ) |
|
| 173 |
|
|
| 217 |
|
|
| (44 | ) |
|
| (20 | ) |
|
| 30 |
|
|
| 64 |
|
|
| (34 | ) |
|
| (53 | ) |
|
| 63 |
|
|
| 141 |
|
|
| (78 | ) |
|
| (55 | ) |
Net income |
| $ | 105 |
|
| $ | 173 |
|
| $ | (68 | ) |
|
| (39 | )% |
| $ | 540 |
|
| $ | 728 |
|
| $ | (188 | ) |
|
| (26 | )% |
| $ | 66 |
|
| $ | 180 |
|
| $ | (114 | ) |
|
| (63 | )% |
| $ | 177 |
|
| $ | 435 |
|
| $ | (258 | ) |
|
| (59 | )% |
Basic earnings per common share |
| $ | .75 |
|
| $ | 1.05 |
|
| $ | (.30 | ) |
|
| (29 | )% |
| $ | 3.71 |
|
| $ | 4.20 |
|
| $ | (.49 | ) |
|
| (12 | )% |
| $ | .53 |
|
| $ | 1.23 |
|
| $ | (.70 | ) |
|
| (57 | )% |
| $ | 1.40 |
|
| $ | 2.93 |
|
| $ | (1.53 | ) |
|
| (52 | )% |
Diluted earnings per common share |
| $ | .75 |
|
| $ | 1.04 |
|
| $ | (.29 | ) |
|
| (28 | )% |
| $ | 3.67 |
|
| $ | 4.15 |
|
| $ | (.48 | ) |
|
| (12 | )% |
| $ | .52 |
|
| $ | 1.22 |
|
| $ | (.70 | ) |
|
| (57 | )% |
| $ | 1.39 |
|
| $ | 2.90 |
|
| $ | (1.51 | ) |
|
| (52 | )% |
Dividends per common share |
| $ | .16 |
|
| $ | .16 |
|
| $ | — |
|
|
| — |
|
| $ | .48 |
|
| $ | .48 |
|
| $ | — |
|
|
| — |
|
| $ | .16 |
|
| $ | .16 |
|
| $ | — |
|
|
| — |
|
| $ | .32 |
|
| $ | .32 |
|
| $ | — |
|
|
| — |
|
8
GAAP Comparison of Third-Quarter 2022Second-Quarter 2023 Results with Third-Quarter 2021Second-Quarter 2022
For the three months ended SeptemberJune 30, 2022,2023, net income was $105$66 million, or $0.75$0.52 diluted earnings per common share, compared with net income of $173$180 million, or $1.04$1.22 diluted earnings per common share, for the year-ago period.
The primary contributors to the change in net income are as follows:
• Net interest income decreased by $143 million primarily as a result of an $87 million decrease in mark-to-market gains on fair value hedges recorded in interest expense, the paydown of the FFELP and Private Education Loan portfolios and an increase in interest rates. • Provisions for loan losses decreased $7 million from $18 million to $11 million: o The provision for FFELP Loan losses increased $5 million from $0 to $5 million. o The provision for Private Education Loan losses decreased $12 million from $18 million to $6 million. |
|
|
|
|
|
|
|
|
|
|
The FFELP Loan provision for loan losses was unchanged at $0, butof $5 million in the current period provision includes a $13 million increase related to an increase in expected losses in anticipation of a deteriorating economy, and a $13 million decrease aswas primarily a result of the Loan Forgiveness Plans discussed above.extension of the portfolio and the resulting increase in expected future defaults.
The Private Education Loan provision for loan losses of $28$6 million in the current period included $13$4 million in connection with loan originations, $10 million related to a reserve build and $(8) million in connection with the adoption of a new accounting standard (ASU 2022-02). The provision of $18 million in the year-ago quarter included $7 million in connection with loan originations and $15$11 million related to ana reserve build.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We repurchased 6.34.9 million and 7.06.9 million shares of our common stock during the thirdsecond quarters of 20222023 and 2021,2022, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 2622 million common shares (or 16%15%) from the year-ago period.
9
GAAP Comparison of NineSix Months Ended SeptemberJune 30, 20222023 Results with NineSix Months Ended SeptemberJune 30, 20212022
For the ninesix months ended SeptemberJune 30, 2022,2023, net income was $540$177 million, or $3.67$1.39 diluted earnings per common share, compared with net income of $728$435 million, or $4.15$2.90 diluted earnings per common share, for the year-ago period.
The primary contributors to the change in net income are as follows:
• Net interest income decreased by $245 million primarily as a result of a $133 million decrease in mark-to-market gains on fair value hedges recorded in interest expense, the paydown of the FFELP and Private Education Loan portfolios and an increase in interest rates. • Provisions for loan losses decreased $37 million from $34 million to $(3) million: o The provision for FFELP Loan losses increased $15 million from $0 to $15 million. o The provision for Private Education Loan losses decreased $52 million from $34 million to $(18) million. |
|
|
|
|
|
|
|
|
The FFELP Loan provision for loan losses was unchanged at $0, butof $15 million in the current period provision includes a $13 million increase related to an increase in expected losses in anticipation of a deteriorating economy, and a $13 million decrease aswas primarily a result of the Loan Forgiveness Plans discussed above.extension of the portfolio and the resulting increase in expected future defaults.
The Private Education Loan provision for loan losses of $62$(18) million in the current period included $31$(60) million in connection with the adoption of a new accounting standard (ASU 2022-02), $9 million in connection with loan originations, $10 million related to a reserve build and $23 million in connection with the resolution of certain private legacy loans in bankruptcy in the first quarter of 2023. The provision of $34 million in the year-ago period included $18 million in connection with loan originations and $31$16 million related to ana reserve build.
We adopted ASU No. 2022-02, “Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures” on January 1, 2023. This new ASU eliminates the troubled debt restructurings (TDRs) recognition and measurement guidance. Prior to adopting this new guidance, as it relates to interest rate concessions granted as part of our Private Education Loan modification program, a discounted cash flow model was used to calculate the amount of interest forgiven for loans that were in the program and the present value of that interest rate concession was included as a part of the allowance for loan loss. This new guidance no longer allows the measurement and recognition of this element of our allowance for loan loss for new modifications that occur subsequent to January 1, 2023. As of December 31, 2022, the allowance for loan loss included $77 million related to this interest rate concession component of the allowance for loan loss. We elected to adopt this amendment using a prospective transition method which results in the $77 million releasing in 2023 and 2024 as the borrowers exit their current modification programs. $60 million of the $77 million was released in the period.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
We repurchased 19.49.8 million and 26.913.1 million shares of our common stock during the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 2922 million common shares (or 16%15%) from the year-ago period.
10
Segment Results
Federal Education Loans Segment
The following table presents Core Earnings results for our Federal Education Loans segment.
|
| Three Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Nine Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Three Months Ended June 30, |
|
| % Increase |
|
| Six Months Ended June 30, |
|
| % Increase |
| ||||||||||||||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
|
| 2022 |
|
| 2021 |
|
| 2021 vs. 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
| ||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
FFELP Loans |
| $ | 555 |
|
| $ | 353 |
|
|
| 57 | % |
| $ | 1,298 |
|
| $ | 1,062 |
|
|
| 22 | % |
| $ | 721 |
|
| $ | 409 |
|
|
| 76 | % |
| $ | 1,416 |
|
| $ | 743 |
|
|
| 91 | % |
Cash and investments |
|
| 9 |
|
|
| — |
|
|
| 100 |
|
|
| 12 |
|
|
| — |
|
|
| 100 |
|
|
| 18 |
|
|
| 3 |
|
|
| 500 |
|
|
| 38 |
|
|
| 3 |
|
|
| 1,167 |
|
Total interest income |
|
| 564 |
|
|
| 353 |
|
|
| 60 |
|
|
| 1,310 |
|
|
| 1,062 |
|
|
| 23 |
|
|
| 739 |
|
|
| 412 |
|
|
| 79 |
|
|
| 1,454 |
|
|
| 746 |
|
|
| 95 |
|
Total interest expense |
|
| 444 |
|
|
| 202 |
|
|
| 120 |
|
|
| 905 |
|
|
| 627 |
|
|
| 44 |
|
|
| 633 |
|
|
| 266 |
|
|
| 138 |
|
|
| 1,223 |
|
|
| 461 |
|
|
| 165 |
|
Net interest income |
|
| 120 |
|
|
| 151 |
|
|
| (21 | ) |
|
| 405 |
|
|
| 435 |
|
|
| (7 | ) |
|
| 106 |
|
|
| 146 |
|
|
| (27 | ) |
|
| 231 |
|
|
| 285 |
|
|
| (19 | ) |
Less: provision for loan losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 100 |
|
|
| 15 |
|
|
| — |
|
|
| 100 |
|
Net interest income after provision for loan losses |
|
| 120 |
|
|
| 151 |
|
|
| (21 | ) |
|
| 405 |
|
|
| 435 |
|
|
| (7 | ) |
|
| 101 |
|
|
| 146 |
|
|
| (31 | ) |
|
| 216 |
|
|
| 285 |
|
|
| (24 | ) |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Servicing revenue |
|
| 21 |
|
|
| 47 |
|
|
| (55 | ) |
|
| 51 |
|
|
| 146 |
|
|
| (65 | ) |
|
| 13 |
|
|
| 14 |
|
|
| (7 | ) |
|
| 27 |
|
|
| 30 |
|
|
| (10 | ) |
Asset recovery and business processing revenue |
|
| 1 |
|
|
| 13 |
|
|
| (92 | ) |
|
| 4 |
|
|
| 39 |
|
|
| (90 | ) |
|
| — |
|
|
| 1 |
|
|
| (100 | ) |
|
| — |
|
|
| 4 |
|
|
| (100 | ) |
Other income |
|
| 6 |
|
|
| 1 |
|
|
| 500 |
|
|
| 24 |
|
|
| 3 |
|
|
| 700 |
| ||||||||||||||||||||||||
Other revenue |
|
| 2 |
|
|
| 8 |
|
|
| (75 | ) |
|
| 7 |
|
|
| 18 |
|
|
| (61 | ) | ||||||||||||||||||||||||
Total other income |
|
| 28 |
|
|
| 61 |
|
|
| (54 | ) |
|
| 79 |
|
|
| 188 |
|
|
| (58 | ) |
|
| 15 |
|
|
| 23 |
|
|
| (35 | ) |
|
| 34 |
|
|
| 52 |
|
|
| (35 | ) |
Direct operating expenses |
|
| 25 |
|
|
| 53 |
|
|
| (53 | ) |
|
| 79 |
|
|
| 170 |
|
|
| (54 | ) |
|
| 18 |
|
|
| 25 |
|
|
| (28 | ) |
|
| 38 |
|
|
| 54 |
|
|
| (30 | ) |
Income before income tax expense |
|
| 123 |
|
|
| 159 |
|
|
| (23 | ) |
|
| 405 |
|
|
| 453 |
|
|
| (11 | ) |
|
| 98 |
|
|
| 144 |
|
|
| (32 | ) |
|
| 212 |
|
|
| 283 |
|
|
| (25 | ) |
Income tax expense |
|
| 29 |
|
|
| 37 |
|
|
| (22 | ) |
|
| 95 |
|
|
| 107 |
|
|
| (11 | ) |
|
| 22 |
|
|
| 34 |
|
|
| (35 | ) |
|
| 50 |
|
|
| 67 |
|
|
| (25 | ) |
Net income |
| $ | 94 |
|
| $ | 122 |
|
|
| (23 | )% |
| $ | 310 |
|
| $ | 346 |
|
|
| (10 | )% |
| $ | 76 |
|
| $ | 110 |
|
|
| (31 | )% |
| $ | 162 |
|
| $ | 216 |
|
|
| (25 | )% |
Comparison of Third-Quarter 2022Second-Quarter 2023 Results with Third-Quarter 2021Second-Quarter 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
11
Key performance metrics are as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Segment net interest margin |
|
| .94 | % |
|
| 1.04 | % |
|
| 1.03 | % |
|
| .99 | % |
FFELP Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loan spread |
|
| 1.05 | % |
|
| 1.10 | % |
|
| 1.12 | % |
|
| 1.05 | % |
Provision for loan losses |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Net charge-offs |
| $ | 12 |
|
| $ | 8 |
|
| $ | 29 |
|
| $ | 19 |
|
Net charge-off rate |
|
| .12 | % |
|
| .07 | % |
|
| .09 | % |
|
| .06 | % |
Greater than 30-days delinquency rate |
|
| 18.6 | % |
|
| 8.5 | % |
|
| 18.6 | % |
|
| 8.5 | % |
Greater than 90-days delinquency rate |
|
| 10.1 | % |
|
| 4.3 | % |
|
| 10.1 | % |
|
| 4.3 | % |
Forbearance rate |
|
| 16.4 | % |
|
| 15.4 | % |
|
| 16.4 | % |
|
| 15.4 | % |
Average FFELP Loans |
| $ | 48,443 |
|
| $ | 55,435 |
|
| $ | 50,398 |
|
| $ | 56,711 |
|
Ending FFELP Loans, net |
| $ | 46,891 |
|
| $ | 54,350 |
|
| $ | 46,891 |
|
| $ | 54,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total federal loans serviced(1) |
| $ | 54 |
|
| $ | 284 |
|
| $ | 54 |
|
| $ | 284 |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Interest Margin
The following table details the net interest margin.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
FFELP Loan yield |
|
| 6.46 | % |
|
| 2.80 | % |
|
| 6.27 | % |
|
| 2.44 | % |
Floor Income |
|
| .45 |
|
|
| .44 |
|
|
| .44 |
|
|
| .47 |
|
FFELP Loan net yield |
|
| 6.91 |
|
|
| 3.24 |
|
|
| 6.71 |
|
|
| 2.91 |
|
FFELP Loan cost of funds |
|
| (5.84 | ) |
|
| (2.05 | ) |
|
| (5.55 | ) |
|
| (1.76 | ) |
FFELP Loan spread |
|
| 1.07 |
|
|
| 1.19 |
|
|
| 1.16 |
|
|
| 1.15 |
|
Other interest-earning asset spread impact |
|
| (.10 | ) |
|
| (.08 | ) |
|
| (.11 | ) |
|
| (.07 | ) |
Net interest margin(1) |
|
| .97 | % |
|
| 1.11 | % |
|
| 1.05 | % |
|
| 1.08 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
FFELP Loan yield |
|
| 4.16 | % |
|
| 1.90 | % |
|
| 3.00 | % |
|
| 1.90 | % |
Hedged Floor Income |
|
| .34 |
|
|
| .42 |
|
|
| .34 |
|
|
| .41 |
|
Unhedged Floor Income |
|
| .05 |
|
|
| .20 |
|
|
| .10 |
|
|
| .19 |
|
FFELP Loan net yield |
|
| 4.55 |
|
|
| 2.52 |
|
|
| 3.44 |
|
|
| 2.50 |
|
FFELP Loan cost of funds |
|
| (3.50 | ) |
|
| (1.42 | ) |
|
| (2.32 | ) |
|
| (1.45 | ) |
FFELP Loan spread |
|
| 1.05 |
|
|
| 1.10 |
|
|
| 1.12 |
|
|
| 1.05 |
|
Other interest-earning asset spread impact |
|
| (.11 | ) |
|
| (.06 | ) |
|
| (.09 | ) |
|
| (.06 | ) |
Net interest margin(1) |
|
| .94 | % |
|
| 1.04 | % |
|
| 1.03 | % |
|
| .99 | % |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
FFELP Loans |
| $ | 48,443 |
|
| $ | 55,435 |
|
| $ | 50,398 |
|
| $ | 56,711 |
|
Other interest-earning assets |
|
| 2,124 |
|
|
| 1,801 |
|
|
| 1,991 |
|
|
| 1,809 |
|
Total FFELP Loan interest-earning assets |
| $ | 50,567 |
|
| $ | 57,236 |
|
| $ | 52,389 |
|
| $ | 58,520 |
|
As of SeptemberJune 30, 2022,2023, our FFELP Loan portfolio totaled $46.9$40.9 billion, comprised of $16.7$14.7 billion of FFELP Stafford Loans and $30.2$26.2 billion of FFELP Consolidation Loans. The weighted-average life of these portfolios as of SeptemberJune 30, 20222023 was 67 years and 78 years, respectively, assuming a Constant Prepayment Rate (CPR) of 8% and 5%, respectively.
12
Floor Income
The following table analyzes on a Core Earnings basis the ability of the FFELP Loans in our portfolio to earn Floor Income after SeptemberJune 30, 20222023 and 2021,2022, based on interest rates as of those dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(Dollars in billions) |
| September 30, 2022 |
|
| September 30, 2021 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||
Education loans eligible to earn Floor Income |
| $ | 46.5 |
|
| $ | 54.1 |
|
| $ | 40.5 |
|
| $ | 49.0 |
|
Less: post-March 31, 2006 disbursed loans required to rebate Floor Income |
|
| (21.9 | ) |
|
| (24.9 | ) |
|
| (19.3 | ) |
|
| (22.9 | ) |
Less: economically hedged Floor Income |
|
| (12.5 | ) |
|
| (13.3 | ) |
|
| (5.9 | ) |
|
| (12.3 | ) |
Education loans eligible to earn Floor Income after rebates and economically hedged |
| $ | 12.1 |
|
| $ | 15.9 |
|
| $ | 15.3 |
|
| $ | 13.8 |
|
Education loans earning Floor Income |
| $ | .1 |
|
| $ | 10.6 |
|
| $ | — |
|
| $ | .8 |
|
The following table presents a projection of the average balance of FFELP Consolidation Loans for which Fixed Rate Floor Income has been economically hedged with derivatives for the period OctoberJuly 1, 20222023 to December 31, 2026.2027.
(Dollars in billions) |
| October 1, 2022 to December 31, 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| July 1, 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
| ||||||||||
Average balance of FFELP Consolidation Loans whose Floor Income is economically hedged |
| $ | 12.4 |
|
| $ | 7.8 |
|
| $ | 2.0 |
|
| $ | 1.0 |
|
| $ | 1.0 |
|
| $ | 5.2 |
|
| $ | 2.0 |
|
| $ | 1.0 |
|
| $ | 1.0 |
|
| $ | .3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Servicing Revenue
Servicing revenue decreased $26 million primarily related to the transfer of the ED servicing contract to a third party in October 2021. To aid in the transition, Navient is providing limited services in 2022 to the third party through a transition services agreement (see discussion below related to “Other income”). As part of the transaction, approximately 700 Navient employees were transferred to the third party.This transaction provided a seamless transition for millions of borrowers ensuring the ongoing servicing capacity for the Department of ED through the knowledge transfer and ongoing employment of 700 employees. Additional benefits to Navient of this transaction are the simplification of our business, reducing our overall risk profile and avoiding significant severance expense.
Third-party loan servicing fees in the three months ended September 30, 2022 and 2021 included $0 and $34 million, respectively, of servicing revenue related to the ED servicing contract.
Asset Recovery and Business Processing Revenue
Asset recovery and business processing revenue decreased $12$1 million primarily as a result of exiting the impactFFELP asset recovery business in the fourth quarter of COVID-19 on certain collection and processing activities (temporary stoppage or other restrictions on certain activities).2022.
Other IncomeRevenue
Other income increased $5revenue decreased $6 million primarily related to thelower contract-exit transition services being performed in connection with the transfer of the ED Servicing contract to a third party as discussed above. services.
Operating Expenses
Operating expenses for the Federal Education Loans segment primarily include costs incurred to perform servicing and asset recovery activities on our FFELP Loan portfolio and federal education loans held by other institutions. Expenses were $28$7 million lower primarily as a result of the paydown of the loan portfolio and the decrease in servicing and asset recoveryother revenue discussed above.
13
Federal Loan Forgiveness
On August 24, 2022, the Biden-Harris Administration announced its Student Debt Relief (SDR) Plan. The SDR Plan that extends the repayment pause on ED held student loans through December 31, 2022 and providesprovided up to $20,000 in one-time debt relief to income-qualified recipients with ED held student loans and a repayment pause on ED held loans. Privately held FFELP Loans, like ours, were not eligible for debt forgiveness under the SDR Plan
Following the initial announcementpublication of the SDR Plan, a number of states and private organizations initiated legal challenges to the SDR Plan in various courts throughout the country, which ultimately resulted in the implementation of the SDR Plan being disallowed. The Biden-Harris Administration and ED provided more specific guidance onsubsequently appealed both cases to the Supreme Court of the United States. On June 30, 2023, the Supreme Court ruled that ED was prohibited from implementing the SDR Plan; thus, payments are expected to resume in October 2023. While the current version of the SDR Plan has been invalidated, ED recently announced that it has begun a new rulemaking process to consider other ways to provide debt relief through its studentaid.gov websiteto borrowers, which could include borrowers with privately held FFELP Loans.
Further, on September 29, 2022,July 10, 2023, ED issued final regulations on income-driven repayment plans for Direct loans, which guidance was subsequently revisedare student loans held by ED. Eligible FFELP borrowers can access the new changes by consolidating their loans into the Direct Loan Program. The new regulations are effective July 1, 2024; however, ED has elected early implementation for some features starting July 30, 2023. The regulations provide a lower monthly loan payment on a Direct loan by decreasing discretionary income (i.e., taxable income over 225% of the federal poverty guideline), decreasing the percentage of discretionary income that must be paid toward a Direct loan to 5% (for undergraduates), and publishedproviding the option for married borrowers to exclude their spouse’s income from being factored by filing a separate tax return. Other changes provide for the elimination of accrued interest that is not covered by the monthly payment amount, provide credit towards loan forgiveness that counts certain periods of deferment and forbearance, a shorter loan forgiveness period (10-years) for borrowers with an original principal balance less than or equal to $12,000, and credit toward loan forgiveness for eligible payments on a Direct or FFELP loan that is repaid by a Direct Consolidation loan. This new income-driven repayment plan may increase consolidation activity in the Federal Register on October 12, 2022. The studentaid.gov website currently provides the following guidance:
|
|
|
|
|
|
|
|
Based on this recent announcement, we estimate that borrowers holding approximately $600 million of the total $47 billion of FFELP Loans on our balance sheet as of September 30, 2022 have applied to have their loans consolidated with ED priorinto the Direct Loan Program in order to be eligible for the deadline established by the SDR Plan.
At this time, there is notnew income-driven repayment plan. This could have a material impact on the Company’s accounting and related third-quarter results related to the SDR Plan as:in future periods.
14
|
|
|
|
As a result, we do not expect there to be incremental consolidation activity in the future related to potential loan forgiveness under the SDR Plan. The Company’s current accounting policies and related estimates appropriately consider the impact of FFELP borrowers who applied to consolidate loans into the Direct Loan program in the third quarter, but the funding of such consolidations will not occur until after September 30, 2022.
Consumer Lending Segment
The following table presents Core Earnings results for our Consumer Lending segment.
|
| Three Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Nine Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Three Months Ended June 30, |
|
| % Increase |
|
| Six Months Ended June 30, |
|
| % Increase |
| ||||||||||||||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
| ||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Private Education Loans |
| $ | 309 |
|
| $ | 291 |
|
|
| 6 | % |
| $ | 862 |
|
| $ | 905 |
|
|
| (5 | )% |
| $ | 341 |
|
| $ | 277 |
|
|
| 23 | % |
| $ | 686 |
|
| $ | 553 |
|
|
| 24 | % |
Cash and investments |
|
| 3 |
|
|
| 1 |
|
|
| 200 |
|
|
| 5 |
|
|
| 1 |
|
|
| 400 |
|
|
| 7 |
|
|
| 1 |
|
|
| 600 |
|
|
| 13 |
|
|
| 2 |
|
|
| 550 |
|
Interest income |
|
| 312 |
|
|
| 292 |
|
|
| 7 |
|
|
| 867 |
|
|
| 906 |
|
|
| (4 | ) |
|
| 348 |
|
|
| 278 |
|
|
| 25 |
|
|
| 699 |
|
|
| 555 |
|
|
| 26 |
|
Interest expense |
|
| 159 |
|
|
| 129 |
|
|
| 23 |
|
|
| 421 |
|
|
| 416 |
|
|
| 1 |
|
|
| 205 |
|
|
| 136 |
|
|
| 51 |
|
|
| 402 |
|
|
| 262 |
|
|
| 53 |
|
Net interest income |
|
| 153 |
|
|
| 163 |
|
|
| (6 | ) |
|
| 446 |
|
|
| 490 |
|
|
| (9 | ) |
|
| 143 |
|
|
| 142 |
|
|
| 1 |
|
|
| 297 |
|
|
| 293 |
|
|
| 1 |
|
Less: provision for loan losses |
|
| 28 |
|
|
| 22 |
|
|
| 27 |
|
|
| 62 |
|
|
| (66 | ) |
|
| 194 |
|
|
| 6 |
|
|
| 18 |
|
|
| (67 | ) |
|
| (18 | ) |
|
| 34 |
|
|
| (153 | ) |
Net interest income after provision for loan losses |
|
| 125 |
|
|
| 141 |
|
|
| (11 | ) |
|
| 384 |
|
|
| 556 |
|
|
| (31 | ) |
|
| 137 |
|
|
| 124 |
|
|
| 10 |
|
|
| 315 |
|
|
| 259 |
|
|
| 22 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Servicing revenue |
|
| 3 |
|
|
| — |
|
|
| 100 |
|
|
| 9 |
|
|
| 3 |
|
|
| 200 |
|
|
| 3 |
|
|
| 3 |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
|
| — |
|
Other income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
| ||||||||||||||||||||||||
Gains on sales of loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
|
| (100 | ) | ||||||||||||||||||||||||
Other revenue |
|
| 2 |
|
|
| 1 |
|
|
| 100 |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
| ||||||||||||||||||||||||
Total other income |
|
| 3 |
|
|
| — |
|
|
| 100 |
|
|
| 10 |
|
|
| 95 |
|
|
| (89 | ) |
|
| 5 |
|
|
| 4 |
|
|
| 25 |
|
|
| 7 |
|
|
| 7 |
|
|
| — |
|
Direct operating expenses |
|
| 43 |
|
|
| 45 |
|
|
| (4 | ) |
|
| 113 |
|
|
| 124 |
|
|
| (9 | ) |
|
| 42 |
|
|
| 35 |
|
|
| 20 |
|
|
| 79 |
|
|
| 69 |
|
|
| 14 |
|
Income before income tax expense |
|
| 85 |
|
|
| 96 |
|
|
| (11 | ) |
|
| 281 |
|
|
| 527 |
|
|
| (47 | ) |
|
| 100 |
|
|
| 93 |
|
|
| 8 |
|
|
| 243 |
|
|
| 197 |
|
|
| 23 |
|
Income tax expense |
|
| 20 |
|
|
| 23 |
|
|
| (13 | ) |
|
| 66 |
|
|
| 123 |
|
|
| (46 | ) |
|
| 25 |
|
|
| 22 |
|
|
| 14 |
|
|
| 58 |
|
|
| 47 |
|
|
| 23 |
|
Net income |
| $ | 65 |
|
| $ | 73 |
|
|
| (11 | )% |
| $ | 215 |
|
| $ | 404 |
|
|
| (47 | )% |
| $ | 75 |
|
| $ | 71 |
|
|
| 6 | % |
| $ | 185 |
|
| $ | 150 |
|
|
| 23 | % |
Comparison of Third-Quarter 2022Second-Quarter 2023 Results with Third-Quarter 2021Second-Quarter 2022
| • Originated $197 million of Private Education Loans compared to $420 million. o Refinance Loan originations were $142 million compared to $374 million. The decrease in originations is primarily the result of borrowers with fixed interest rate loans having less of an incentive to refinance in light of the significant increase in interest rates that occurred in 2022. o In-school loan originations were $55 million compared to $46 million. • Net income was $75 million compared to $71 million. • Net interest income increased $1 million due to an increase in the net interest margin primarily due to improved funding spreads. This was partially offset by the paydown of the loan portfolio. • Provision for loan losses decreased $12 million. The provision for loan losses of $6 million in the current period included $4 million in connection with loan originations and $2 million related to a reserve build. The provision of $18 million in the year-ago period included $7 million in connection with loan originations and $11 million related to a reserve build. o Net charge-offs were $62 million, down $8 million from $70 million. o Private Education Loan delinquencies greater than 90 days: $351 million, down $50 million from $401 million. o Private Education Loan forbearances: $328 million, up $25 million from $303 million. • Expenses increased $7 million primarily as a result of marketing for the upcoming peak in-school loan origination season. 15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key performance metrics are as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Segment net interest margin |
|
| 2.90 | % |
|
| 2.98 | % |
|
| 2.78 | % |
|
| 2.98 | % |
Private Education Loans (including Refinance Loans): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loan spread |
|
| 3.03 | % |
|
| 3.17 | % |
|
| 2.93 | % |
|
| 3.19 | % |
Provision for loan losses |
| $ | 28 |
|
| $ | 22 |
|
| $ | 62 |
|
| $ | (66 | ) |
Net charge-offs(1) |
| $ | 99 |
|
| $ | 39 |
|
| $ | 238 |
|
| $ | 109 |
|
Net charge-off rate(1) |
|
| 2.01 | % |
|
| .77 | % |
|
| 1.59 | % |
|
| .72 | % |
Greater than 30-days delinquency rate |
|
| 4.4 | % |
|
| 3.0 | % |
|
| 4.4 | % |
|
| 3.0 | % |
Greater than 90-days delinquency rate |
|
| 2.0 | % |
|
| 1.1 | % |
|
| 2.0 | % |
|
| 1.1 | % |
Forbearance rate |
|
| 1.9 | % |
|
| 3.9 | % |
|
| 1.9 | % |
|
| 3.9 | % |
Average Private Education Loans |
| $ | 20,308 |
|
| $ | 20,938 |
|
| $ | 20,771 |
|
| $ | 21,266 |
|
Ending Private Education Loans, net |
| $ | 19,151 |
|
| $ | 20,018 |
|
| $ | 19,151 |
|
| $ | 20,018 |
|
Private Education Refinance Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
| $ | 4 |
|
| $ | 3 |
|
| $ | 14 |
|
| $ | 8 |
|
Greater than 90-day delinquency rate |
|
| .2 | % |
|
| .1 | % |
|
| .2 | % |
|
| .1 | % |
Average balance of Private Education Refinance Loans |
| $ | 9,966 |
|
| $ | 8,987 |
|
| $ | 10,056 |
|
| $ | 8,622 |
|
Ending balance of Private Education Refinance Loans |
| $ | 9,751 |
|
| $ | 9,171 |
|
| $ | 9,751 |
|
| $ | 9,171 |
|
Private Education Refinance Loan originations |
| $ | 231 |
|
| $ | 1,489 |
|
| $ | 1,546 |
|
| $ | 4,445 |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Interest Margin
The following table details the net interest margin.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Private Education Loan yield |
|
| 7.33 | % |
|
| 5.34 | % |
|
| 7.28 | % |
|
| 5.31 | % |
Private Education Loan cost of funds |
|
| (4.21 | ) |
|
| (2.54 | ) |
|
| (4.08 | ) |
|
| (2.42 | ) |
Private Education Loan spread |
|
| 3.12 |
|
|
| 2.80 |
|
|
| 3.20 |
|
|
| 2.89 |
|
Other interest-earning asset spread impact |
|
| (.15 | ) |
|
| (.14 | ) |
|
| (.15 | ) |
|
| (.16 | ) |
Net interest margin(1) |
|
| 2.97 | % |
|
| 2.66 | % |
|
| 3.05 | % |
|
| 2.73 | % |
|
| |||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Private Education Loan yield |
|
| 6.04 | % |
|
| 5.52 | % |
|
| 5.55 | % |
|
| 5.69 | % |
Private Education Loan cost of funds |
|
| (3.01 | ) |
|
| (2.35 | ) |
|
| (2.62 | ) |
|
| (2.50 | ) |
Private Education Loan spread |
|
| 3.03 |
|
|
| 3.17 |
|
|
| 2.93 |
|
|
| 3.19 |
|
Other interest-earning asset spread impact |
|
| (.13 | ) |
|
| (.19 | ) |
|
| (.15 | ) |
|
| (.21 | ) |
Net interest margin(1) |
|
| 2.90 | % |
|
| 2.98 | % |
|
| 2.78 | % |
|
| 2.98 | % |
|
| |||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Private Education Loans |
| $ | 20,308 |
|
| $ | 20,938 |
|
| $ | 20,771 |
|
| $ | 21,266 |
|
Other interest-earning assets |
|
| 580 |
|
|
| 771 |
|
|
| 659 |
|
|
| 804 |
|
Total Private Education Loan interest-earning assets |
| $ | 20,888 |
|
| $ | 21,709 |
|
| $ | 21,430 |
|
| $ | 22,070 |
|
The decreaseincrease in the net interest margin from the prior year is primarily a result of an increase in the refinance loan portfolio becoming a larger percentage of the overall portfolio.net interest margin due to improved funding spreads.
As of SeptemberJune 30, 2022,2023, our Private Education Loan portfolio totaled $19.2$17.7 billion, comprised of $9.8$9.1 billion of refinance loans and $9.4$8.6 billion of non-refinance loans. The weighted-average life of these portfolios as of SeptemberJune 30, 20222023 was 4 years and 5 years, respectively, assuming a Constant Prepayment Rate (CPR) of 15% and 10%, respectively.
16
Provision for Loan Losses
ProvisionThe provision for loanPrivate Education Loan losses increased $6decreased $12 million. The provision for loan losses of $6 million in the current period included $13$4 million in connection with loan originations, $10 million related to a reserve build and $(8) million in connection with a new accounting standard (ASU 2022-02). The provision of provision$18 million in the year-ago quarter included $7 million in connection with loan originations and $15$11 million related to an increase in expected losses in anticipation of a deteriorating economy. The provision in the year-ago quarter primarily related to loan originations.
Gains on Sales of Loans reserve build.
Gains on sales of loans for the nine months ended September 30, 2022 decreased $91 million in connection with the sale of $1.6 billion of Private Education Loans in first-quarter 2021. There were no such sales in the current period.
Operating Expenses
Operating expenses for our consumer lending segment include costs to originate, acquire, service and collect on our consumer loan portfolio. Operating expenses decreased $2increased $7 million primarily due to lower refinance loan originations as a result of marketing for the higher interest rate environment and the potential forupcoming peak in-school loan forgiveness.origination season.
Business Processing Segment
The following table presents Core Earnings results for our Business Processing segment.
|
| Three Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Nine Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Three Months Ended June 30, |
|
| % Increase |
|
| Six Months Ended June 30, |
|
| % Increase |
| ||||||||||||||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
| ||||||||||||
Business processing revenue |
| $ | 79 |
|
| $ | 122 |
|
|
| (35 | )% |
| $ | 260 |
|
| $ | 377 |
|
|
| (31 | )% |
| $ | 83 |
|
| $ | 87 |
|
|
| (5 | )% |
| $ | 155 |
|
| $ | 181 |
|
|
| (14 | )% |
Direct operating expenses |
|
| 67 |
|
|
| 87 |
|
|
| (23 | ) |
|
| 216 |
|
|
| 270 |
|
|
| (20 | ) |
|
| 75 |
|
|
| 74 |
|
|
| 1 |
|
|
| 142 |
|
|
| 150 |
|
|
| (5 | ) |
Income before income tax expense |
|
| 12 |
|
|
| 35 |
|
|
| (66 | ) |
|
| 44 |
|
|
| 107 |
|
|
| (59 | ) |
|
| 8 |
|
|
| 13 |
|
|
| (38 | ) |
|
| 13 |
|
|
| 31 |
|
|
| (58 | ) |
Income tax expense |
|
| 3 |
|
|
| 8 |
|
|
| (63 | ) |
|
| 11 |
|
|
| 25 |
|
|
| (56 | ) |
|
| 2 |
|
|
| 3 |
|
|
| (33 | ) |
|
| 3 |
|
|
| 7 |
|
|
| (57 | ) |
Net income |
| $ | 9 |
|
| $ | 27 |
|
|
| (67 | )% |
| $ | 33 |
|
| $ | 82 |
|
|
| (60 | )% |
| $ | 6 |
|
| $ | 10 |
|
|
| (40 | )% |
| $ | 10 |
|
| $ | 24 |
|
|
| (58 | )% |
Comparison of Third-Quarter 2022Second-Quarter 2023 Results with Third-Quarter 2021Second-Quarter 2022
| • Revenue was $83 million, $4 million lower due to the expected $27 million reduction in revenue from the wind-down of pandemic-related contracts which was partially offset by a $23 million increase in revenue from services for our traditional Business Processing clients. • Net income was $6 million compared to $10 million. • EBITDA(1) was $8 million, down $6 million, primarily the result of the revenue decrease discussed above.
|
|
|
|
|
|
Key performance metrics are as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Revenue from government services |
| $ | 52 |
|
| $ | 53 |
|
| $ | 92 |
|
| $ | 102 |
|
Revenue from healthcare services |
|
| 31 |
|
|
| 34 |
|
|
| 63 |
|
|
| 79 |
|
Total fee revenue |
| $ | 83 |
|
| $ | 87 |
|
| $ | 155 |
|
| $ | 181 |
|
EBITDA(1) |
| $ | 8 |
|
| $ | 14 |
|
| $ | 14 |
|
| $ | 33 |
|
EBITDA margin(1) |
|
| 10 | % |
|
| 16 | % |
|
| 9 | % |
|
| 18 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue from government services |
| $ | 47 |
|
| $ | 75 |
|
| $ | 149 |
|
| $ | 204 |
|
Revenue from healthcare services |
|
| 32 |
|
|
| 47 |
|
|
| 111 |
|
|
| 173 |
|
Total fee revenue |
| $ | 79 |
|
| $ | 122 |
|
| $ | 260 |
|
| $ | 377 |
|
EBITDA(1) |
| $ | 13 |
|
| $ | 38 |
|
| $ | 46 |
|
| $ | 113 |
|
EBITDA margin(1) |
|
| 16 | % |
|
| 31 | % |
|
| 18 | % |
|
| 30 | % |
(1)
1817
Other Segment
The following table presents Core Earnings results for our Other segment.
|
| Three Months Ended September 30, |
|
| % Increase (Decrease) |
|
| Nine Months Ended September 30, |
|
| % Increase (Decrease) |
| ||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 vs. 2021 |
| ||||||
Net interest loss after provision for loan losses |
| $ | (26 | ) |
| $ | (15 | ) |
|
| 73 | % |
| $ | (57 | ) |
| $ | (50 | ) |
|
| 14 | % |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
| — |
|
|
| 2 |
|
|
| (100 | ) |
|
| (3 | ) |
|
| 5 |
|
|
| (160 | ) |
Losses on debt repurchases |
|
| — |
|
|
| (20 | ) |
|
| (100 | ) |
|
| — |
|
|
| (32 | ) |
|
| (100 | ) |
Total other income (loss) |
|
| — |
|
|
| (18 | ) |
|
| (100 | ) |
|
| (3 | ) |
|
| (27 | ) |
|
| (89 | ) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated shared services expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated information technology costs |
|
| 21 |
|
|
| 20 |
|
|
| 5 |
|
|
| 64 |
|
|
| 61 |
|
|
| 5 |
|
Unallocated corporate costs |
|
| 38 |
|
|
| 43 |
|
|
| (12 | ) |
|
| 116 |
|
|
| 133 |
|
|
| (13 | ) |
Total unallocated shared services expenses |
|
| 59 |
|
|
| 63 |
|
|
| (6 | ) |
|
| 180 |
|
|
| 194 |
|
|
| (7 | ) |
Restructuring/other reorganization expenses |
|
| 21 |
|
|
| — |
|
|
| 100 |
|
|
| 25 |
|
|
| 8 |
|
|
| 213 |
|
Total expenses |
|
| 80 |
|
|
| 63 |
|
|
| 27 |
|
|
| 205 |
|
|
| 202 |
|
|
| 1 |
|
Loss before income tax benefit |
|
| (106 | ) |
|
| (96 | ) |
|
| 10 |
|
|
| (265 | ) |
|
| (279 | ) |
|
| (5 | ) |
Income tax benefit |
|
| (25 | ) |
|
| (23 | ) |
|
| 9 |
|
|
| (63 | ) |
|
| (65 | ) |
|
| (3 | ) |
Net income (loss) |
| $ | (81 | ) |
| $ | (73 | ) |
|
| 11 | % |
| $ | (202 | ) |
| $ | (214 | ) |
|
| (6 | )% |
|
| Three Months Ended June 30, |
|
| % Increase |
|
| Six Months Ended June 30, |
|
| % Increase |
| ||||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 vs. 2022 |
| ||||||
Net interest loss after provision for |
| $ | (28 | ) |
| $ | (17 | ) |
|
| 65 | % |
| $ | (54 | ) |
| $ | (31 | ) |
|
| 74 | % |
Other revenue (loss) |
|
| — |
|
|
| (2 | ) |
|
| 100 |
|
|
| 3 |
|
|
| (3 | ) |
|
| 200 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unallocated shared services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unallocated information |
|
| 19 |
|
|
| 19 |
|
|
| — |
|
|
| 39 |
|
|
| 40 |
|
|
| (3 | ) |
Unallocated corporate costs |
|
| 28 |
|
|
| 37 |
|
|
| (24 | ) |
|
| 70 |
|
|
| 82 |
|
|
| (15 | ) |
Total unallocated shared services |
|
| 47 |
|
|
| 56 |
|
|
| (16 | ) |
|
| 109 |
|
|
| 122 |
|
|
| (11 | ) |
Restructuring/other reorganization |
|
| 15 |
|
|
| — |
|
|
| 100 |
|
|
| 19 |
|
|
| 3 |
|
|
| 533 |
|
Total expenses |
|
| 62 |
|
|
| 56 |
|
|
| 11 |
|
|
| 128 |
|
|
| 125 |
|
|
| 2 |
|
Loss before income tax benefit |
|
| (90 | ) |
|
| (75 | ) |
|
| 20 |
|
|
| (179 | ) |
|
| (159 | ) |
|
| 13 |
|
Income tax benefit |
|
| (21 | ) |
|
| (18 | ) |
|
| 17 |
|
|
| (43 | ) |
|
| (38 | ) |
|
| 13 |
|
Net income (loss) |
| $ | (69 | ) |
| $ | (57 | ) |
|
| 21 | % |
| $ | (136 | ) |
| $ | (121 | ) |
|
| 12 | % |
Net Interest Loss after Provision for Loan Losses
Net interest loss after provision for loan losses is due to the negative carrying cost of our corporate liquidity portfolio. The amount of the net interest loss is primarily a result of the size of the liquidity portfolio as well as the cost of funds of the debt funding the corporate liquidity portfolio.
Losses on Debt Repurchases
Losses on debt repurchases decreased $20 million. We repurchased $757 million of debt at a $20 million loss in the year-ago quarter. There were no debt repurchases in the current quarter.
Unallocated Shared Services Operating Expenses
Unallocated shared services operating expenses are comprised of costs primarily related to information technology costs related to infrastructure and operations, stock-based compensation expense, accounting, finance, legal, compliance and risk management, regulatory-related expenses, human resources, certain executive management and the board of directors. Regulatory-related expenses include actual settlement amounts as well as third-party professional fees we incur in connection with such regulatory matters and are presented net of any insurance reimbursements for covered costs related to such matters. On an adjusted basis, expensesExpenses decreased $1$9 million from the year-ago quarter. Adjusted expenses exclude $3Expenses include $2 million and $6$2 million, respectively, of regulatory-related expenses in the thirdsecond quarters of 20222023 and 2021.2022.
See “Note 9 – Commitments and Contingencies” for a discussion of legal and regulatory matters where it is reasonably possible that a loss contingency exists. The Company is unable to anticipate the timing of a resolution or the impact that these matters may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with these matters and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.
Restructuring/Other Reorganization Expenses
During the third quarterssecond quarter of 2021 and 2020,2023, the Company incurred $21$15 million and $0, respectively, of restructuring/other reorganization expenses primarily due to severance costs in connection with an effort to reduce costs and improve operating efficiency. The chargesthe CEO transition. There were due primarily to severance-related costs and facility lease terminations.no such expenses in the year-ago quarter.
18
Financial Condition
This section provides information regarding the balances, activity and credit performance metrics of our education loan portfolio.
Summary of Our Education Loan Portfolio
Ending Education Loan Balances, net
|
| June 30, 2023 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Private |
|
| Total |
| |||||
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
In-school(1) |
| $ | 13 |
|
| $ | — |
|
| $ | 13 |
|
| $ | 53 |
|
| $ | 66 |
|
Grace, repayment and other(2) |
|
| 14,829 |
|
|
| 26,209 |
|
|
| 41,038 |
|
|
| 18,336 |
|
|
| 59,374 |
|
Total |
|
| 14,842 |
|
|
| 26,209 |
|
|
| 41,051 |
|
|
| 18,389 |
|
|
| 59,440 |
|
Allowance for loan losses |
|
| (147 | ) |
|
| (53 | ) |
|
| (200 | ) |
|
| (657 | ) |
|
| (857 | ) |
Total education loan portfolio |
| $ | 14,695 |
|
| $ | 26,156 |
|
| $ | 40,851 |
|
| $ | 17,732 |
|
| $ | 58,583 |
|
% of total FFELP |
|
| 36 | % |
|
| 64 | % |
|
| 100 | % |
|
|
|
|
|
| ||
% of total |
|
| 25 | % |
|
| 45 | % |
|
| 70 | % |
|
| 30 | % |
|
| 100 | % |
|
| December 31, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Private |
|
| Total |
| |||||
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
In-school(1) |
| $ | 16 |
|
| $ | — |
|
| $ | 16 |
|
| $ | 54 |
|
| $ | 70 |
|
Grace, repayment and other(2) |
|
| 15,834 |
|
|
| 27,897 |
|
|
| 43,731 |
|
|
| 19,471 |
|
|
| 63,202 |
|
Total |
|
| 15,850 |
|
|
| 27,897 |
|
|
| 43,747 |
|
|
| 19,525 |
|
|
| 63,272 |
|
Allowance for loan losses |
|
| (159 | ) |
|
| (63 | ) |
|
| (222 | ) |
|
| (800 | ) |
|
| (1,022 | ) |
Total education loan portfolio |
| $ | 15,691 |
|
| $ | 27,834 |
|
| $ | 43,525 |
|
| $ | 18,725 |
|
| $ | 62,250 |
|
% of total FFELP |
|
| 36 | % |
|
| 64 | % |
|
| 100 | % |
|
|
|
|
|
| ||
% of total |
|
| 25 | % |
|
| 45 | % |
|
| 70 | % |
|
| 30 | % |
|
| 100 | % |
|
| June 30, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Private |
|
| Total |
| |||||
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
In-school(1) |
| $ | 18 |
|
| $ | — |
|
| $ | 18 |
|
| $ | 34 |
|
| $ | 52 |
|
Grace, repayment and other(2) |
|
| 17,492 |
|
|
| 31,949 |
|
|
| 49,441 |
|
|
| 20,555 |
|
|
| 69,996 |
|
Total |
|
| 17,510 |
|
|
| 31,949 |
|
|
| 49,459 |
|
|
| 20,589 |
|
|
| 70,048 |
|
Allowance for loan losses |
|
| (171 | ) |
|
| (74 | ) |
|
| (245 | ) |
|
| (921 | ) |
|
| (1,166 | ) |
Total education loan portfolio |
| $ | 17,339 |
|
| $ | 31,875 |
|
| $ | 49,214 |
|
| $ | 19,668 |
|
| $ | 68,882 |
|
% of total FFELP |
|
| 35 | % |
|
| 65 | % |
|
| 100 | % |
|
|
|
|
|
| ||
% of total |
|
| 25 | % |
|
| 46 | % |
|
| 71 | % |
|
| 29 | % |
|
| 100 | % |
|
| September 30, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Private Education Loans |
|
| Total Portfolio |
| |||||
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-school(1) |
| $ | 17 |
|
| $ | — |
|
| $ | 17 |
|
| $ | 31 |
|
| $ | 48 |
|
Grace, repayment and other(2) |
|
| 16,851 |
|
|
| 30,256 |
|
|
| 47,107 |
|
|
| 19,972 |
|
|
| 67,079 |
|
Total |
|
| 16,868 |
|
|
| 30,256 |
|
|
| 47,124 |
|
|
| 20,003 |
|
|
| 67,127 |
|
Allowance for loan losses |
|
| (165 | ) |
|
| (68 | ) |
|
| (233 | ) |
|
| (852 | ) |
|
| (1,085 | ) |
Total education loan portfolio |
| $ | 16,703 |
|
| $ | 30,188 |
|
| $ | 46,891 |
|
| $ | 19,151 |
|
| $ | 66,042 |
|
% of total FFELP |
|
| 36 | % |
|
| 64 | % |
|
| 100 | % |
|
|
|
|
|
|
|
|
% of total |
|
| 25 | % |
|
| 46 | % |
|
| 71 | % |
|
| 29 | % |
|
| 100 | % |
|
| December 31, 2021 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Private Education Loans |
|
| Total Portfolio |
| |||||
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-school(1) |
| $ | 20 |
|
| $ | — |
|
| $ | 20 |
|
| $ | 19 |
|
| $ | 39 |
|
Grace, repayment and other(2) |
|
| 18,379 |
|
|
| 34,504 |
|
|
| 52,883 |
|
|
| 21,161 |
|
|
| 74,044 |
|
Total |
|
| 18,399 |
|
|
| 34,504 |
|
|
| 52,903 |
|
|
| 21,180 |
|
|
| 74,083 |
|
Allowance for loan losses |
|
| (180 | ) |
|
| (82 | ) |
|
| (262 | ) |
|
| (1,009 | ) |
|
| (1,271 | ) |
Total education loan portfolio |
| $ | 18,219 |
|
| $ | 34,422 |
|
| $ | 52,641 |
|
| $ | 20,171 |
|
| $ | 72,812 |
|
% of total FFELP |
|
| 35 | % |
|
| 65 | % |
|
| 100 | % |
|
|
|
|
|
|
|
|
% of total |
|
| 25 | % |
|
| 47 | % |
|
| 72 | % |
|
| 28 | % |
|
| 100 | % |
19
|
| September 30, 2021 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Private Education Loans |
|
| Total Portfolio |
| |||||
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-school(1) |
| $ | 23 |
|
| $ | — |
|
| $ | 23 |
|
| $ | 17 |
|
| $ | 40 |
|
Grace, repayment and other(2) |
|
| 18,706 |
|
|
| 35,890 |
|
|
| 54,596 |
|
|
| 20,981 |
|
|
| 75,577 |
|
Total |
|
| 18,729 |
|
|
| 35,890 |
|
|
| 54,619 |
|
|
| 20,998 |
|
|
| 75,617 |
|
Allowance for loan losses |
|
| (184 | ) |
|
| (85 | ) |
|
| (269 | ) |
|
| (980 | ) |
|
| (1,249 | ) |
Total education loan portfolio |
| $ | 18,545 |
|
| $ | 35,805 |
|
| $ | 54,350 |
|
| $ | 20,018 |
|
| $ | 74,368 |
|
% of total FFELP |
|
| 34 | % |
|
| 66 | % |
|
| 100 | % |
|
|
|
|
|
|
|
|
% of total |
|
| 25 | % |
|
| 48 | % |
|
| 73 | % |
|
| 27 | % |
|
| 100 | % |
|
|
|
|
Education Loan Activity
|
| Three Months Ended June 30, 2023 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Private |
|
| Total |
| |||||
Beginning balance |
| $ | 15,199 |
|
| $ | 26,949 |
|
| $ | 42,148 |
|
| $ | 18,275 |
|
| $ | 60,423 |
|
Acquisitions (originations and purchases)(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
|
|
| 164 |
|
Capitalized interest and premium/discount |
|
| 119 |
|
|
| 149 |
|
|
| 268 |
|
|
| 42 |
|
|
| 310 |
|
Refinancings and consolidations to third |
|
| (163 | ) |
|
| (345 | ) |
|
| (508 | ) |
|
| (59 | ) |
|
| (567 | ) |
Repayments and other |
|
| (460 | ) |
|
| (597 | ) |
|
| (1,057 | ) |
|
| (690 | ) |
|
| (1,747 | ) |
Ending balance |
| $ | 14,695 |
|
| $ | 26,156 |
|
| $ | 40,851 |
|
| $ | 17,732 |
|
| $ | 58,583 |
|
|
| Three Months Ended June 30, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Private |
|
| Total |
| |||||
Beginning balance |
| $ | 17,828 |
|
| $ | 33,185 |
|
| $ | 51,013 |
|
| $ | 20,088 |
|
| $ | 71,101 |
|
Acquisitions (originations and purchases)(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 425 |
|
|
| 425 |
|
Capitalized interest and premium/discount |
|
| 155 |
|
|
| 185 |
|
|
| 340 |
|
|
| 55 |
|
|
| 395 |
|
Refinancings and consolidations to third |
|
| (273 | ) |
|
| (762 | ) |
|
| (1,035 | ) |
|
| (111 | ) |
|
| (1,146 | ) |
Repayments and other |
|
| (371 | ) |
|
| (733 | ) |
|
| (1,104 | ) |
|
| (789 | ) |
|
| (1,893 | ) |
Ending balance |
| $ | 17,339 |
|
| $ | 31,875 |
|
| $ | 49,214 |
|
| $ | 19,668 |
|
| $ | 68,882 |
|
|
| Six Months Ended June 30, 2023 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Total Private |
|
| Total |
| |||||
Beginning balance |
| $ | 15,691 |
|
| $ | 27,834 |
|
| $ | 43,525 |
|
| $ | 18,725 |
|
| $ | 62,250 |
|
Acquisitions (originations and purchases)(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 438 |
|
|
| 438 |
|
Capitalized interest and premium/discount |
|
| 266 |
|
|
| 313 |
|
|
| 579 |
|
|
| 91 |
|
|
| 670 |
|
Refinancings and consolidations to third |
|
| (416 | ) |
|
| (781 | ) |
|
| (1,197 | ) |
|
| (132 | ) |
|
| (1,329 | ) |
Repayments and other |
|
| (846 | ) |
|
| (1,210 | ) |
|
| (2,056 | ) |
|
| (1,390 | ) |
|
| (3,446 | ) |
Ending balance |
| $ | 14,695 |
|
| $ | 26,156 |
|
| $ | 40,851 |
|
| $ | 17,732 |
|
| $ | 58,583 |
|
|
| Six Months Ended June 30, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP |
|
| FFELP |
|
| Total |
|
| Total Private |
|
| Total |
| |||||
Beginning balance |
| $ | 18,219 |
|
| $ | 34,422 |
|
| $ | 52,641 |
|
| $ | 20,171 |
|
| $ | 72,812 |
|
Acquisitions (originations and purchases)(1) |
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| 1,515 |
|
|
| 1,516 |
|
Capitalized interest and premium/discount |
|
| 325 |
|
|
| 368 |
|
|
| 693 |
|
|
| 108 |
|
|
| 801 |
|
Refinancings and consolidations to third |
|
| (519 | ) |
|
| (1,448 | ) |
|
| (1,967 | ) |
|
| (333 | ) |
|
| (2,300 | ) |
Repayments and other |
|
| (687 | ) |
|
| (1,467 | ) |
|
| (2,154 | ) |
|
| (1,793 | ) |
|
| (3,947 | ) |
Ending balance |
| $ | 17,339 |
|
| $ | 31,875 |
|
| $ | 49,214 |
|
| $ | 19,668 |
|
| $ | 68,882 |
|
|
| Three Months Ended September 30, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Total Private Education Loans |
|
| Total Portfolio |
| |||||
Beginning balance |
| $ | 17,339 |
|
| $ | 31,875 |
|
| $ | 49,214 |
|
| $ | 19,668 |
|
| $ | 68,882 |
|
Acquisitions (originations and purchases)(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 249 |
|
|
| 249 |
|
Capitalized interest and premium/discount amortization |
|
| 166 |
|
|
| 187 |
|
|
| 353 |
|
|
| 55 |
|
|
| 408 |
|
Refinancings and consolidations to third parties |
|
| (477 | ) |
|
| (1,251 | ) |
|
| (1,728 | ) |
|
| (62 | ) |
|
| (1,790 | ) |
Repayments and other |
|
| (325 | ) |
|
| (623 | ) |
|
| (948 | ) |
|
| (759 | ) |
|
| (1,707 | ) |
Ending balance |
| $ | 16,703 |
|
| $ | 30,188 |
|
| $ | 46,891 |
|
| $ | 19,151 |
|
| $ | 66,042 |
|
|
| Three Months Ended September 30, 2021 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Total Private Education Loans |
|
| Total Portfolio |
| |||||
Beginning balance |
| $ | 18,861 |
|
| $ | 36,689 |
|
| $ | 55,550 |
|
| $ | 19,725 |
|
| $ | 75,275 |
|
Acquisitions (originations and purchases)(1) |
|
| 60 |
|
|
| 34 |
|
|
| 94 |
|
|
| 1,564 |
|
|
| 1,658 |
|
Capitalized interest and premium/discount amortization |
|
| 164 |
|
|
| 197 |
|
|
| 361 |
|
|
| 46 |
|
|
| 407 |
|
Refinancings and consolidations to third parties |
|
| (190 | ) |
|
| (318 | ) |
|
| (508 | ) |
|
| (119 | ) |
|
| (627 | ) |
Loan sales |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Repayments and other |
|
| (350 | ) |
|
| (797 | ) |
|
| (1,147 | ) |
|
| (1,198 | ) |
|
| (2,345 | ) |
Ending balance |
| $ | 18,545 |
|
| $ | 35,805 |
|
| $ | 54,350 |
|
| $ | 20,018 |
|
| $ | 74,368 |
|
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Total Private Education Loans |
|
| Total Portfolio |
| |||||
Beginning balance |
| $ | 18,219 |
|
| $ | 34,422 |
|
| $ | 52,641 |
|
| $ | 20,171 |
|
| $ | 72,812 |
|
Acquisitions (originations and purchases)(1) |
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| 1,764 |
|
|
| 1,765 |
|
Capitalized interest and premium/discount amortization |
|
| 491 |
|
|
| 555 |
|
|
| 1,046 |
|
|
| 163 |
|
|
| 1,209 |
|
Refinancings and consolidations to third parties |
|
| (996 | ) |
|
| (2,698 | ) |
|
| (3,694 | ) |
|
| (394 | ) |
|
| (4,088 | ) |
Repayments and other |
|
| (1,012 | ) |
|
| (2,091 | ) |
|
| (3,103 | ) |
|
| (2,553 | ) |
|
| (5,656 | ) |
Ending balance |
| $ | 16,703 |
|
| $ | 30,188 |
|
| $ | 46,891 |
|
| $ | 19,151 |
|
| $ | 66,042 |
|
|
| Nine Months Ended September 30, 2021 |
| |||||||||||||||||
(Dollars in millions) |
| FFELP Stafford and Other |
|
| FFELP Consolidation Loans |
|
| Total FFELP Loans |
|
| Total Private Education Loans |
|
| Total Portfolio |
| |||||
Beginning balance |
| $ | 19,607 |
|
| $ | 38,677 |
|
| $ | 58,284 |
|
| $ | 21,079 |
|
| $ | 79,363 |
|
Acquisitions (originations and purchases)(1) |
|
| 64 |
|
|
| 37 |
|
|
| 101 |
|
|
| 4,607 |
|
|
| 4,708 |
|
Capitalized interest and premium/discount amortization |
|
| 516 |
|
|
| 599 |
|
|
| 1,115 |
|
|
| 136 |
|
|
| 1,251 |
|
Refinancings and consolidations to third parties |
|
| (670 | ) |
|
| (1,145 | ) |
|
| (1,815 | ) |
|
| (385 | ) |
|
| (2,200 | ) |
Loan sales |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,488 | ) |
|
| (1,488 | ) |
Repayments and other |
|
| (972 | ) |
|
| (2,363 | ) |
|
| (3,335 | ) |
|
| (3,931 | ) |
|
| (7,266 | ) |
Ending balance |
| $ | 18,545 |
|
| $ | 35,805 |
|
| $ | 54,350 |
|
| $ | 20,018 |
|
| $ | 74,368 |
|
20
|
|
FFELP Loan Portfolio Performance
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 1,659 |
|
|
|
|
| $ | 1,772 |
|
|
|
|
| $ | 2,064 |
|
|
|
| |||
Loans in forbearance(2) |
|
| 6,316 |
|
|
|
|
|
| 7,603 |
|
|
|
|
|
| 6,227 |
|
|
|
| |||
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans current |
|
| 27,756 |
|
|
| 83.9 | % |
|
| 29,004 |
|
|
| 84.4 | % |
|
| 34,627 |
|
|
| 84.1 | % |
Loans delinquent 31-60 days(3) |
|
| 1,596 |
|
|
| 4.8 |
|
|
| 1,247 |
|
|
| 3.6 |
|
|
| 2,163 |
|
|
| 5.3 |
|
Loans delinquent 61-90 days(3) |
|
| 1,013 |
|
|
| 3.1 |
|
|
| 833 |
|
|
| 2.4 |
|
|
| 1,323 |
|
|
| 3.2 |
|
Loans delinquent greater than 90 days(3) |
|
| 2,711 |
|
|
| 8.2 |
|
|
| 3,288 |
|
|
| 9.6 |
|
|
| 3,055 |
|
|
| 7.4 |
|
Total FFELP Loans in repayment |
|
| 33,076 |
|
|
| 100 | % |
|
| 34,372 |
|
|
| 100 | % |
|
| 41,168 |
|
|
| 100 | % |
Total FFELP Loans |
|
| 41,051 |
|
|
|
|
|
| 43,747 |
|
|
|
|
|
| 49,459 |
|
|
|
| |||
FFELP Loan allowance for losses |
|
| (200 | ) |
|
|
|
|
| (222 | ) |
|
|
|
|
| (245 | ) |
|
|
| |||
FFELP Loans, net |
| $ | 40,851 |
|
|
|
|
| $ | 43,525 |
|
|
|
|
| $ | 49,214 |
|
|
|
| |||
Percentage of FFELP Loans in repayment |
|
|
|
|
| 80.6 | % |
|
|
|
|
| 78.6 | % |
|
|
|
|
| 83.2 | % | |||
Delinquencies as a percentage of FFELP Loans in |
|
|
|
|
| 16.1 | % |
|
|
|
|
| 15.6 | % |
|
|
|
|
| 15.9 | % | |||
FFELP Loans in forbearance as a percentage of |
|
|
|
|
| 16.0 | % |
|
|
|
|
| 18.1 | % |
|
|
|
|
| 13.1 | % | |||
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 1,983 |
|
|
|
|
|
| $ | 2,220 |
|
|
|
|
|
| $ | 2,430 |
|
|
|
|
|
Loans in forbearance(2) |
|
| 7,410 |
|
|
|
|
|
|
| 6,292 |
|
|
|
|
|
|
| 8,029 |
|
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
| 30,720 |
|
|
| 81.4 | % |
|
| 39,679 |
|
|
| 89.4 | % |
|
| 40,404 |
|
|
| 91.5 | % |
Loans delinquent 31-60 days(3) |
|
| 1,917 |
|
|
| 5.1 |
|
|
| 1,696 |
|
|
| 3.8 |
|
|
| 1,181 |
|
|
| 2.7 |
|
Loans delinquent 61-90 days(3) |
|
| 1,291 |
|
|
| 3.4 |
|
|
| 904 |
|
|
| 2.0 |
|
|
| 665 |
|
|
| 1.5 |
|
Loans delinquent greater than 90 days(3) |
|
| 3,803 |
|
|
| 10.1 |
|
|
| 2,112 |
|
|
| 4.8 |
|
|
| 1,910 |
|
|
| 4.3 |
|
Total FFELP Loans in repayment |
|
| 37,731 |
|
|
| 100 | % |
|
| 44,391 |
|
|
| 100 | % |
|
| 44,160 |
|
|
| 100 | % |
Total FFELP Loans |
|
| 47,124 |
|
|
|
|
|
|
| 52,903 |
|
|
|
|
|
|
| 54,619 |
|
|
|
|
|
FFELP Loan allowance for losses |
|
| (233 | ) |
|
|
|
|
|
| (262 | ) |
|
|
|
|
|
| (269 | ) |
|
|
|
|
FFELP Loans, net |
| $ | 46,891 |
|
|
|
|
|
| $ | 52,641 |
|
|
|
|
|
| $ | 54,350 |
|
|
|
|
|
Percentage of FFELP Loans in repayment |
|
|
|
|
|
| 80.1 | % |
|
|
|
|
|
| 83.9 | % |
|
|
|
|
|
| 80.9 | % |
Delinquencies as a percentage of FFELP Loans in repayment |
|
|
|
|
|
| 18.6 | % |
|
|
|
|
|
| 10.6 | % |
|
|
|
|
|
| 8.5 | % |
FFELP Loans in forbearance as a percentage of loans in repayment and forbearance |
|
|
|
|
|
| 16.4 | % |
|
|
|
|
|
| 12.4 | % |
|
|
|
|
|
| 15.4 | % |
|
|
|
|
|
|
Private Education Loan Portfolio Performance
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 341 |
|
|
|
|
| $ | 354 |
|
|
|
|
| $ | 348 |
|
|
|
| |||
Loans in forbearance(2) |
|
| 328 |
|
|
|
|
|
| 401 |
|
|
|
|
|
| 303 |
|
|
|
| |||
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans current |
|
| 16,942 |
|
|
| 95.6 | % |
|
| 17,838 |
|
|
| 95.0 | % |
|
| 19,116 |
|
|
| 95.9 | % |
Loans delinquent 31-60 days(3) |
|
| 276 |
|
|
| 1.6 |
|
|
| 335 |
|
|
| 1.8 |
|
|
| 269 |
|
|
| 1.3 |
|
Loans delinquent 61-90 days(3) |
|
| 151 |
|
|
| .8 |
|
|
| 186 |
|
|
| 1.0 |
|
|
| 152 |
|
|
| .8 |
|
Loans delinquent greater than 90 days(3) |
|
| 351 |
|
|
| 2.0 |
|
|
| 411 |
|
|
| 2.2 |
|
|
| 401 |
|
|
| 2.0 |
|
Total Private Education Loans in repayment |
|
| 17,720 |
|
|
| 100 | % |
|
| 18,770 |
|
|
| 100 | % |
|
| 19,938 |
|
|
| 100 | % |
Total Private Education Loans |
|
| 18,389 |
|
|
|
|
|
| 19,525 |
|
|
|
|
|
| 20,589 |
|
|
|
| |||
Private Education Loan allowance for losses |
|
| (657 | ) |
|
|
|
|
| (800 | ) |
|
|
|
|
| (921 | ) |
|
|
| |||
Private Education Loans, net |
| $ | 17,732 |
|
|
|
|
| $ | 18,725 |
|
|
|
|
| $ | 19,668 |
|
|
|
| |||
Percentage of Private Education Loans in |
|
|
|
|
| 96.4 | % |
|
|
|
|
| 96.1 | % |
|
|
|
|
| 96.8 | % | |||
Delinquencies as a percentage of Private Education |
|
|
|
|
| 4.4 | % |
|
|
|
|
| 5.0 | % |
|
|
|
|
| 4.1 | % | |||
Loans in forbearance as a percentage of loans in |
|
|
|
|
| 1.8 | % |
|
|
|
|
| 2.1 | % |
|
|
|
|
| 1.5 | % | |||
Percentage of Private Education Loans with a |
|
|
|
|
| 33 | % |
|
|
|
|
| 33 | % |
|
|
|
|
| 33 | % | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 348 |
|
|
|
|
|
| $ | 361 |
|
|
|
|
|
| $ | 389 |
|
|
|
|
|
Loans in forbearance(2) |
|
| 371 |
|
|
|
|
|
|
| 535 |
|
|
|
|
|
|
| 814 |
|
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
| 18,426 |
|
|
| 95.6 | % |
|
| 19,634 |
|
|
| 96.8 | % |
|
| 19,196 |
|
|
| 97.0 | % |
Loans delinquent 31-60 days(3) |
|
| 305 |
|
|
| 1.6 |
|
|
| 222 |
|
|
| 1.1 |
|
|
| 247 |
|
|
| 1.2 |
|
Loans delinquent 61-90 days(3) |
|
| 159 |
|
|
| .8 |
|
|
| 131 |
|
|
| .6 |
|
|
| 136 |
|
|
| .7 |
|
Loans delinquent greater than 90 days(3) |
|
| 394 |
|
|
| 2.0 |
|
|
| 297 |
|
|
| 1.5 |
|
|
| 216 |
|
|
| 1.1 |
|
Total Private Education Loans in repayment |
|
| 19,284 |
|
|
| 100 | % |
|
| 20,284 |
|
|
| 100 | % |
|
| 19,795 |
|
|
| 100 | % |
Total Private Education Loans |
|
| 20,003 |
|
|
|
|
|
|
| 21,180 |
|
|
|
|
|
|
| 20,998 |
|
|
|
|
|
Private Education Loan allowance for losses |
|
| (852 | ) |
|
|
|
|
|
| (1,009 | ) |
|
|
|
|
|
| (980 | ) |
|
|
|
|
Private Education Loans, net |
| $ | 19,151 |
|
|
|
|
|
| $ | 20,171 |
|
|
|
|
|
| $ | 20,018 |
|
|
|
|
|
Percentage of Private Education Loans in repayment |
|
|
|
|
|
| 96.4 | % |
|
|
|
|
|
| 95.8 | % |
|
|
|
|
|
| 94.3 | % |
Delinquencies as a percentage of Private Education Loans in repayment |
|
|
|
|
|
| 4.4 | % |
|
|
|
|
|
| 3.2 | % |
|
|
|
|
|
| 3.0 | % |
Loans in forbearance as a percentage of loans in repayment and forbearance |
|
|
|
|
|
| 1.9 | % |
|
|
|
|
|
| 2.6 | % |
|
|
|
|
|
| 3.9 | % |
Percentage of Private Education Loans with a cosigner(4) |
|
|
|
|
|
| 33 | % |
|
|
|
|
|
| 35 | % |
|
|
|
|
|
| 36 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
| Three Months Ended June 30, |
| |||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
|
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| ||||||
Allowance at beginning of period |
| $ | 214 |
|
| $ | 706 |
|
| $ | 920 |
|
| $ | 255 |
|
| $ | 964 |
|
| $ | 1,219 |
|
Total provision |
|
| 5 |
|
|
| 6 |
|
|
| 11 |
|
|
| — |
|
|
| 18 |
|
|
| 18 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross charge-offs |
|
| (19 | ) |
|
| (73 | ) |
|
| (92 | ) |
|
| (10 | ) |
|
| (82 | ) |
|
| (92 | ) |
Expected future recoveries on current period gross |
|
| — |
|
|
| 11 |
|
|
| 11 |
|
|
| — |
|
|
| 12 |
|
|
| 12 |
|
Net charge-offs(1) |
|
| (19 | ) |
|
| (62 | ) |
|
| (81 | ) |
|
| (10 | ) |
|
| (70 | ) |
|
| (80 | ) |
Decrease in expected future recoveries on previously |
|
| — |
|
|
| 7 |
|
|
| 7 |
|
|
| — |
|
|
| 9 |
|
|
| 9 |
|
Allowance at end of period (GAAP) |
|
| 200 |
|
|
| 657 |
|
|
| 857 |
|
|
| 245 |
|
|
| 921 |
|
|
| 1,166 |
|
Plus: expected future recoveries on previously fully |
|
| — |
|
|
| 262 |
|
|
| 262 |
|
|
| — |
|
|
| 312 |
|
|
| 312 |
|
Allowance at end of period excluding expected future |
| $ | 200 |
|
| $ | 919 |
|
| $ | 1,119 |
|
| $ | 245 |
|
| $ | 1,233 |
|
| $ | 1,478 |
|
Net charge-offs as a percentage of average loans in |
|
| .22 | % |
|
| 1.39 | % |
|
|
|
|
| .09 | % |
|
| 1.40 | % |
|
|
| ||
Allowance coverage of charge-offs (annualized)(3) |
|
| 2.7 |
|
|
| 3.7 |
|
| (Non-GAAP) |
|
|
| 6.4 |
|
|
| 4.4 |
|
| (Non-GAAP) |
| ||
Allowance as a percentage of the ending total loan |
|
| .5 | % |
|
| 5.0 | % |
| (Non-GAAP) |
|
|
| .5 | % |
|
| 6.0 | % |
| (Non-GAAP) |
| ||
Allowance as a percentage of ending loans in |
|
| .6 | % |
|
| 5.2 | % |
| (Non-GAAP) |
|
|
| .6 | % |
|
| 6.2 | % |
| (Non-GAAP) |
| ||
Ending total loans |
| $ | 41,051 |
|
| $ | 18,389 |
|
|
|
|
| $ | 49,459 |
|
| $ | 20,589 |
|
|
|
| ||
Average loans in repayment |
| $ | 33,790 |
|
| $ | 17,990 |
|
|
|
|
| $ | 42,163 |
|
| $ | 20,162 |
|
|
|
| ||
Ending loans in repayment |
| $ | 33,076 |
|
| $ | 17,720 |
|
|
|
|
| $ | 41,168 |
|
| $ | 19,938 |
|
|
|
| ||
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
|
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| ||||||
Beginning balance |
| $ | 245 |
|
| $ | 921 |
|
| $ | 1,166 |
|
| $ | 277 |
|
| $ | 976 |
|
| $ | 1,253 |
|
Total provision |
|
| �� |
|
|
| 28 |
|
|
| 28 |
|
|
| — |
|
|
| 22 |
|
|
| 22 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
| (12 | ) |
|
| (118 | ) |
|
| (130 | ) |
|
| (8 | ) |
|
| (45 | ) |
|
| (53 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 19 |
|
|
| 19 |
|
|
| — |
|
|
| 6 |
|
|
| 6 |
|
Total(1) |
|
| (12 | ) |
|
| (99 | ) |
|
| (111 | ) |
|
| (8 | ) |
|
| (39 | ) |
|
| (47 | ) |
Adjustment resulting from the change in charge-off rate(2) |
|
| — |
|
|
| (30 | ) |
|
| (30 | ) |
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
Net charge-offs |
|
| (12 | ) |
|
| (129 | ) |
|
| (141 | ) |
|
| (8 | ) |
|
| (55 | ) |
|
| (63 | ) |
Decrease in expected future recoveries on previously fully charged-off loans(3) |
|
| — |
|
|
| 32 |
|
|
| 32 |
|
|
| — |
|
|
| 37 |
|
|
| 37 |
|
Allowance at end of period (GAAP) |
|
| 233 |
|
|
| 852 |
|
|
| 1,085 |
|
|
| 269 |
|
|
| 980 |
|
|
| 1,249 |
|
Plus: expected future recoveries on previously fully charged-off loans(3) |
|
| — |
|
|
| 280 |
|
|
| 280 |
|
|
| — |
|
|
| 397 |
|
|
| 397 |
|
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)(4) |
| $ | 233 |
|
| $ | 1,132 |
|
| $ | 1,365 |
|
| $ | 269 |
|
| $ | 1,377 |
|
| $ | 1,646 |
|
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(2) |
|
| .12 | % |
|
| 2.01 | % |
|
|
|
|
|
| .07 | % |
|
| .77 | % |
|
|
|
|
Net adjustment resulting from the change in charge-off rate as a percentage of average loans in repayment (annualized)(2) |
|
| — | % |
|
| .60 | % |
|
|
|
|
|
| — | % |
|
| .33 | % |
|
|
|
|
Net charge-offs as a percentage of average loans in repayment (annualized) |
|
| .12 | % |
|
| 2.61 | % |
|
|
|
|
|
| .07 | % |
|
| 1.10 | % |
|
|
|
|
Allowance coverage of charge-offs (annualized)(4) |
|
| 5.0 |
|
|
| 2.2 |
|
| (Non-GAAP) |
|
|
| 8.4 |
|
|
| 6.3 |
|
| (Non-GAAP) |
| ||
Allowance as a percentage of the ending total loan balance(4) |
|
| .5 | % |
|
| 5.7 | % |
| (Non-GAAP) |
|
|
| .5 | % |
|
| 6.6 | % |
| (Non-GAAP) |
| ||
Allowance as a percentage of the ending loans in repayment(4) |
|
| .6 | % |
|
| 5.9 | % |
| (Non-GAAP) |
|
|
| .6 | % |
|
| 7.0 | % |
| (Non-GAAP) |
| ||
Ending total loans |
| $ | 47,124 |
|
| $ | 20,003 |
|
|
|
|
|
| $ | 54,619 |
|
| $ | 20,998 |
|
|
|
|
|
Average loans in repayment |
| $ | 39,573 |
|
| $ | 19,628 |
|
|
|
|
|
| $ | 45,201 |
|
| $ | 19,894 |
|
|
|
|
|
Ending loans in repayment |
| $ | 37,731 |
|
| $ | 19,284 |
|
|
|
|
|
| $ | 44,160 |
|
| $ | 19,795 |
|
|
|
|
|
|
| Three Months Ended June 30, |
| |||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
| ||
Beginning of period expected future recoveries on |
| $ | 268 |
|
| $ | 321 |
|
Expected future recoveries of current period defaults |
|
| 11 |
|
|
| 12 |
|
Recoveries (cash collected) |
|
| (11 | ) |
|
| (15 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (6 | ) |
|
| (6 | ) |
End of period expected future recoveries on previously |
| $ | 262 |
|
| $ | 312 |
|
Change in balance during period |
| $ | (7 | ) |
| $ | (9 | ) |
22
|
| Six Months Ended June 30, |
| |||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
|
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| ||||||
Allowance at beginning of period |
| $ | 222 |
|
| $ | 800 |
|
| $ | 1,022 |
|
| $ | 262 |
|
| $ | 1,009 |
|
| $ | 1,271 |
|
Total provision |
|
| 15 |
|
|
| (18 | ) |
|
| (3 | ) |
|
| — |
|
|
| 34 |
|
|
| 34 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross charge-offs |
|
| (37 | ) |
|
| (161 | ) |
|
| (198 | ) |
|
| (17 | ) |
|
| (164 | ) |
|
| (181 | ) |
Expected future recoveries on current |
|
| — |
|
|
| 24 |
|
|
| 24 |
|
|
| — |
|
|
| 25 |
|
|
| 25 |
|
Net charge-offs(1) |
|
| (37 | ) |
|
| (137 | ) |
|
| (174 | ) |
|
| (17 | ) |
|
| (139 | ) |
|
| (156 | ) |
Decrease in expected future recoveries on |
|
| — |
|
|
| 12 |
|
|
| 12 |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
Allowance at end of period (GAAP) |
|
| 200 |
|
|
| 657 |
|
|
| 857 |
|
|
| 245 |
|
|
| 921 |
|
|
| 1,166 |
|
Plus: expected future recoveries on |
|
| — |
|
|
| 262 |
|
|
| 262 |
|
|
| — |
|
|
| 312 |
|
|
| 312 |
|
Allowance at end of period excluding |
| $ | 200 |
|
| $ | 919 |
|
| $ | 1,119 |
|
| $ | 245 |
|
| $ | 1,233 |
|
| $ | 1,478 |
|
Net charge-offs as a percentage of |
|
| .22 | % |
|
| 1.5 | % |
|
|
|
|
| .08 | % |
|
| 1.39 | % |
|
|
| ||
Allowance coverage of charge-offs |
|
| 2.7 |
|
|
| 3.3 |
|
| (Non-GAAP) |
|
|
| 7.3 |
|
|
| 4.4 |
|
| (Non-GAAP) |
| ||
Allowance as a percentage of the ending |
|
| .5 | % |
|
| 5.0 | % |
| (Non-GAAP) |
|
|
| .5 | % |
|
| 6.0 | % |
| (Non-GAAP) |
| ||
Allowance as a percentage of ending loans |
|
| .6 | % |
|
| 5.2 | % |
| (Non-GAAP) |
|
|
| .6 | % |
|
| 6.2 | % |
| (Non-GAAP) |
| ||
Ending total loans |
| $ | 41,051 |
|
| $ | 18,389 |
|
|
|
|
| $ | 49,459 |
|
| $ | 20,589 |
|
|
|
| ||
Average loans in repayment |
| $ | 34,046 |
|
| $ | 18,270 |
|
|
|
|
| $ | 42,922 |
|
| $ | 20,274 |
|
|
|
| ||
Ending loans in repayment |
| $ | 33,076 |
|
| $ | 17,720 |
|
|
|
|
| $ | 41,168 |
|
| $ | 19,938 |
|
|
|
| ||
| (1) Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” For FFELP Loans, the recovery is received at the time of charge-off. (2) At the end of each month, for Private Education Loans that are 212 or more days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." If actual periodic recoveries are less than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans:
(3) The allowance used for these metrics excludes the expected future recoveries on previously fully charged-off loans to better reflect the current expected credit losses remaining in the portfolio. 23
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Three Months Ended September 30, |
| |||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
| ||
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 312 |
|
| $ | 434 |
|
Expected future recoveries of current period defaults |
|
| 19 |
|
|
| 6 |
|
Recoveries (cash collected) |
|
| (14 | ) |
|
| (22 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (37 | ) |
|
| (21 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 280 |
|
| $ | 397 |
|
Change in balance during period |
| $ | (32 | ) |
| $ | (37 | ) |
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
|
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| ||||||
Beginning balance |
| $ | 262 |
|
| $ | 1,009 |
|
| $ | 1,271 |
|
| $ | 288 |
|
| $ | 1,089 |
|
| $ | 1,377 |
|
Provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of allowance related to loan sales(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (107 | ) |
|
| (107 | ) |
Remaining provision |
|
| — |
|
|
| 62 |
|
|
| 62 |
|
|
| — |
|
|
| 41 |
|
|
| 41 |
|
Total provision |
|
| — |
|
|
| 62 |
|
|
| 62 |
|
|
| — |
|
|
| (66 | ) |
|
| (66 | ) |
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
| (29 | ) |
|
| (281 | ) |
|
| (310 | ) |
|
| (19 | ) |
|
| (125 | ) |
|
| (144 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 43 |
|
|
| 43 |
|
|
| — |
|
|
| 16 |
|
|
| 16 |
|
Total(2) |
|
| (29 | ) |
|
| (238 | ) |
|
| (267 | ) |
|
| (19 | ) |
|
| (109 | ) |
|
| (128 | ) |
Adjustment resulting from the change in charge-off rate(3) |
|
| — |
|
|
| (30 | ) |
|
| (30 | ) |
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
Net charge-offs |
|
| (29 | ) |
|
| (268 | ) |
|
| (297 | ) |
|
| (19 | ) |
|
| (125 | ) |
|
| (144 | ) |
Decrease in expected future recoveries on previously fully charged-off loans(4) |
|
| — |
|
|
| 49 |
|
|
| 49 |
|
|
| — |
|
|
| 82 |
|
|
| 82 |
|
Allowance at end of period (GAAP) |
|
| 233 |
|
|
| 852 |
|
|
| 1,085 |
|
|
| 269 |
|
|
| 980 |
|
|
| 1,249 |
|
Plus: expected future recoveries on previously fully charged-off loans(4) |
|
| — |
|
|
| 280 |
|
|
| 280 |
|
|
| — |
|
|
| 397 |
|
|
| 397 |
|
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)(5) |
| $ | 233 |
|
| $ | 1,132 |
|
| $ | 1,365 |
|
| $ | 269 |
|
| $ | 1,377 |
|
| $ | 1,646 |
|
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(3) |
|
| .09 | % |
|
| 1.59 | % |
|
|
|
|
|
| .06 | % |
|
| .72 | % |
|
|
|
|
Net adjustment resulting from the change in charge-off rate as a percentage of average loans in repayment (annualized)(3) |
|
| — | % |
|
| .20 | % |
|
|
|
|
|
| — | % |
|
| .11 | % |
|
|
|
|
Net charge-offs as a percentage of average loans in repayment (annualized) |
|
| .09 | % |
|
| 1.79 | % |
|
|
|
|
|
| .06 | % |
|
| .83 | % |
|
|
|
|
Allowance coverage of charge-offs (annualized)(5) |
|
| 6.1 |
|
|
| 3.2 |
|
| (Non-GAAP) |
|
|
| 10.5 |
|
|
| 8.3 |
|
| (Non-GAAP) |
| ||
Allowance as a percentage of the ending total loan balance(5) |
|
| .5 | % |
|
| 5.7 | % |
| (Non-GAAP) |
|
|
| .5 | % |
|
| 6.6 | % |
| (Non-GAAP) |
| ||
Allowance as a percentage of the ending loans in repayment(5) |
|
| .6 | % |
|
| 5.9 | % |
| (Non-GAAP) |
|
|
| .6 | % |
|
| 7.0 | % |
| (Non-GAAP) |
| ||
Ending total loans |
| $ | 47,124 |
|
| $ | 20,003 |
|
|
|
|
|
| $ | 54,619 |
|
| $ | 20,998 |
|
|
|
|
|
Average loans in repayment |
| $ | 41,793 |
|
| $ | 20,056 |
|
|
|
|
|
| $ | 46,191 |
|
| $ | 20,145 |
|
|
|
|
|
Ending loans in repayment |
| $ | 37,731 |
|
| $ | 19,284 |
|
|
|
|
|
| $ | 44,160 |
|
| $ | 19,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
| ||
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 329 |
|
| $ | 479 |
|
Expected future recoveries of current period defaults |
|
| 43 |
|
|
| 16 |
|
Recoveries (cash collected) |
|
| (43 | ) |
|
| (69 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (49 | ) |
|
| (29 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 280 |
|
| $ | 397 |
|
Change in balance during period |
| $ | (49 | ) |
| $ | (82 | ) |
|
|
Liquidity and Capital Resources
Funding and Liquidity Risk Management
The following “Liquidity and Capital Resources” discussion concentrates primarily on our Federal Education Loans and Consumer Lending segments. Our Business Processing and Other segments require minimal liquidity and funding. See “Navient’s Response to COVID-19” for a discussion of COVID-19’s impact on liquidity and capital resources.
We define liquidity as cash and high-quality liquid assets that we can use to meet our cash requirements. Our two primary liquidity needs are: (1) servicing our debt and (2) our ongoing ability to meet our cash needs for running the operations of our businesses (including derivative collateral requirements) throughout market cycles, including during periods of financial stress. Secondary liquidity needs, which can be adjusted as needed, include the origination of Private Education Loans, acquisitions of Private Education Loan and FFELP Loan portfolios, acquisitions of companies, the payment of common stock dividends and the repurchase of our common stock. To achieve these objectives, we analyze and monitor our liquidity needs and maintain excess liquidity and access to diverse funding sources including the issuance of unsecured debt and the issuance of secured debt primarily through asset-backed securitizations and/or other financing facilities.
We define our liquidity risk as the potential inability to meet our obligations when they become due without incurring unacceptable losses or to invest in future asset growth and business operations at reasonable market rates. Our primary liquidity risk relates to our ability to service our debt, meet our other business obligations and to continue to grow our business. The ability to access the capital markets is impacted by general market and economic conditions, our credit ratings, as well as the overall availability of funding sources in the marketplace. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including over-the-counter derivatives.
Credit ratings and outlooks are opinions subject to ongoing review by the rating agencies and may change, from time to time, based on our financial performance, industry and market dynamics and other factors. Other factors that influence our credit ratings include the rating agencies’ assessment of the general operating environment, our relative positions in the markets in which we compete, reputation, liquidity position, the level and volatility of earnings, corporate governance and risk management policies, capital position and capital management practices. A negative change in our credit rating could have a negative effect on our liquidity because it might raise the cost and availability of funding and potentially require additional cash collateral or restrict cash currently held as collateral on existing borrowings or derivative collateral arrangements. It is our objective to improve our credit ratings so that we can continue to efficiently access the capital markets even in difficult economic and market conditions. We have unsecured debt totaling $7.0$6.5 billion at SeptemberJune 30, 2022.2023. Three credit rating agencies currently rate our long-term unsecured debt at below investment grade.
We expect to fund our ongoing liquidity needs, including the repayment of $1.3$1.2 billion of senior unsecured notes that mature in the short term (i.e., over the next 12 months) and the remaining $5.7$5.3 billion of senior unsecured notes that mature in the long term (from 20232024 to 2043 with 80%70% maturing by 2029), through a number of sources. These sources include our cash on hand, unencumbered FFELP Loan and Private Education Refinance Loan portfolios (see “Sources of Primary Liquidity” below), the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered education loan assets, and the distribution of overcollateralization from our securitization trusts. We may also, depending on market conditions and availability, draw down on our secured FFELP Loan and Private Education Loan facilities, issue term ABS, enter into additional Private Education Loan ABS repurchase facilities, or issue additional unsecured debtdebt..
We originate Private Education Loans (a portion of which are doneis obtained through a forward purchase agreement). We also have purchased and may purchase, in future periods, Private Education Loan and FFELP Loan portfolios from third parties. Loan originations and purchases are part of our ongoing liquidity needs. We purchased 6.34.9 million shares of common stock for $95$80 million in the thirdfirst quarter of 20222023 and have $685$435 million of unused share repurchase authority as of SeptemberJune 30, 2022.2023.
24
Sources of Primary Liquidity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
| ||||||
Ending Balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total unrestricted cash and liquid investments |
| $ | 1,364 |
|
| $ | 905 |
|
| $ | 1,050 |
|
| $ | 1,317 |
|
| $ | 1,535 |
|
| $ | 976 |
|
Unencumbered FFELP Loans |
|
| 151 |
|
|
| 124 |
|
|
| 106 |
|
|
| 69 |
|
|
| 68 |
|
|
| 89 |
|
Unencumbered Private Education Refinance Loans |
|
| 270 |
|
|
| 383 |
|
|
| 520 |
|
|
| 45 |
|
|
| 55 |
|
|
| 42 |
|
Total |
| $ | 1,785 |
|
| $ | 1,412 |
|
| $ | 1,676 |
|
| $ | 1,431 |
|
| $ | 1,658 |
|
| $ | 1,107 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||||||||||
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
Average Balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total unrestricted cash and liquid investments |
| $ | 1,363 |
|
| $ | 1,339 |
|
| $ | 1,047 |
|
| $ | 1,037 |
|
| $ | 1,166 |
|
| $ | 963 |
|
| $ | 1,517 |
|
| $ | 875 |
|
| $ | 894 |
|
| $ | 874 |
|
Unencumbered FFELP Loans |
|
| 123 |
|
|
| 119 |
|
|
| 296 |
|
|
| 172 |
|
|
| 297 |
|
|
| 94 |
|
|
| 153 |
|
|
| 215 |
|
|
| 90 |
|
|
| 196 |
|
Unencumbered Private Education Refinance Loans |
|
| 165 |
|
|
| 565 |
|
|
| 566 |
|
|
| 213 |
|
|
| 668 |
|
|
| 100 |
|
|
| 300 |
|
|
| 135 |
|
|
| 83 |
|
|
| 238 |
|
Total |
| $ | 1,651 |
|
| $ | 2,023 |
|
| $ | 1,909 |
|
| $ | 1,422 |
|
| $ | 2,131 |
|
| $ | 1,157 |
|
| $ | 1,970 |
|
| $ | 1,225 |
|
| $ | 1,067 |
|
| $ | 1,308 |
|
Sources of Additional Liquidity
Liquidity may also be available under our secured credit facilities. Maximum borrowing capacity under the FFELP Loan and Private Education Loan asset-backed commercial paper (ABCP) facilities will vary and be subject to each agreement’s borrowing conditions, including, among others, facility size, current usage and availability of qualifying collateral from unencumbered loans. The following tables detail the additional borrowing capacity of these facilities with maturity dates ranging from October 20222023 to April 2024.June 2025.
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
| ||||||
Ending Balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
FFELP Loan ABCP facilities |
| $ | 200 |
|
| $ | 546 |
|
| $ | 184 |
|
| $ | 28 |
|
| $ | 101 |
|
| $ | 185 |
|
Private Education Loan ABCP facilities |
|
| 2,203 |
|
|
| 2,235 |
|
|
| 2,597 |
|
|
| 1,983 |
|
|
| 1,248 |
|
|
| 2,184 |
|
Total |
| $ | 2,403 |
|
| $ | 2,781 |
|
| $ | 2,781 |
|
| $ | 2,011 |
|
| $ | 1,349 |
|
| $ | 2,369 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||||||||||
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||||||||
Average Balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FFELP Loan ABCP facilities |
| $ | 190 |
|
| $ | 441 |
|
| $ | 385 |
|
| $ | 404 |
|
| $ | 538 |
|
| $ | 68 |
|
| $ | 193 |
|
| $ | 337 |
|
| $ | 87 |
|
| $ | 360 |
|
Private Education Loan ABCP facilities |
|
| 2,186 |
|
|
| 2,419 |
|
|
| 2,143 |
|
|
| 2,147 |
|
|
| 2,328 |
|
|
| 1,888 |
|
|
| 1,556 |
|
|
| 2,018 |
|
|
| 1,681 |
|
|
| 2,128 |
|
Total |
| $ | 2,376 |
|
| $ | 2,860 |
|
| $ | 2,528 |
|
| $ | 2,551 |
|
| $ | 2,866 |
|
| $ | 1,956 |
|
| $ | 1,749 |
|
| $ | 2,355 |
|
| $ | 1,768 |
|
| $ | 2,488 |
|
At SeptemberJune 30, 2022,2023, we had a total of $4.3$3.6 billion of unencumbered tangible assets inclusive of those listed in the table above as sources of primary liquidity. Total unencumbered education loans comprised $2.0$1.4 billion principal of our unencumbered tangible assets of which $1.8$1.3 billion and $151$69 million related to Private Education Loans and FFELP Loans, respectively. In addition, as of SeptemberJune 30, 2022,2023, we had $5.1$5.3 billion of encumbered net assets (i.e., overcollateralization) in our various financing facilities (consolidated variable interest entities). Our secured financing facilities include Private Education Loan ABS Repurchase Facilities, which had $0.8$0.6 billion outstanding as of SeptemberJune 30, 2022.2023. These repurchase facilities are collateralized by the net assets in previously issued Private Education Loan ABS trusts and have had a cost of funds lower than that of a new unsecured debt issuance.
25
The following table reconciles encumbered and unencumbered assets and their net impact on total Tangible Equity.
(Dollars in billions) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Net assets of consolidated variable interest entities |
| $ | 3.5 |
|
|
| 3.7 |
|
Net assets of consolidated variable interest entities |
|
| 1.8 |
|
|
| 1.5 |
|
Tangible unencumbered assets(1) |
|
| 3.6 |
|
|
| 4.1 |
|
Senior unsecured debt |
|
| (6.5 | ) |
|
| (7.0 | ) |
Mark-to-market on unsecured hedged debt(2) |
|
| .2 |
|
|
| .3 |
|
Other liabilities, net |
|
| (.4 | ) |
|
| (.3 | ) |
Total Tangible Equity (3) |
| $ | 2.2 |
|
| $ | 2.3 |
|
(Dollars in billions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Net assets of consolidated variable interest entities (encumbered assets) — FFELP Loans |
| $ | 3.7 |
|
|
| 3.8 |
|
Net assets of consolidated variable interest entities (encumbered assets) — Private Education Loans |
|
| 1.4 |
|
|
| 1.7 |
|
Tangible unencumbered assets(1) |
|
| 4.3 |
|
|
| 4.5 |
|
Senior unsecured debt |
|
| (7.0 | ) |
|
| (7.0 | ) |
Mark-to-market on unsecured hedged debt(2) |
|
| .3 |
|
|
| (.3 | ) |
Other liabilities, net |
|
| (.5 | ) |
|
| (.8 | ) |
Total Tangible Equity (1) |
| $ | 2.2 |
|
| $ | 1.9 |
|
Borrowings |
|
|
|
|
Borrowings
Ending Balances
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||
(Dollars in millions) |
| Short |
|
| Long |
|
| Total |
|
| Short |
|
| Long |
|
| Total |
| ||||||
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Senior unsecured debt |
| $ | 1,156 |
|
| $ | 5,353 |
|
| $ | 6,509 |
|
| $ | 1,301 |
|
| $ | 5,711 |
|
| $ | 7,012 |
|
Total unsecured borrowings |
|
| 1,156 |
|
|
| 5,353 |
|
|
| 6,509 |
|
|
| 1,301 |
|
|
| 5,711 |
|
|
| 7,012 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
FFELP Loan securitizations |
|
| 64 |
|
|
| 38,293 |
|
|
| 38,357 |
|
|
| 76 |
|
|
| 42,675 |
|
|
| 42,751 |
|
Private Education Loan securitizations |
|
| 574 |
|
|
| 12,316 |
|
|
| 12,890 |
|
|
| 725 |
|
|
| 12,744 |
|
|
| 13,469 |
|
FFELP Loan ABCP facilities |
|
| 1,548 |
|
|
| 455 |
|
|
| 2,003 |
|
|
| 923 |
|
|
| 386 |
|
|
| 1,309 |
|
Private Education Loan ABCP facilities |
|
| 1,416 |
|
|
| 901 |
|
|
| 2,317 |
|
|
| 2,734 |
|
|
| — |
|
|
| 2,734 |
|
Other |
|
| 98 |
|
|
| 40 |
|
|
| 138 |
|
|
| 121 |
|
|
| — |
|
|
| 121 |
|
Total secured borrowings |
|
| 3,700 |
|
|
| 52,005 |
|
|
| 55,705 |
|
|
| 4,579 |
|
|
| 55,805 |
|
|
| 60,384 |
|
Core Earnings basis borrowings(1) |
|
| 4,856 |
|
|
| 57,358 |
|
|
| 62,214 |
|
|
| 5,880 |
|
|
| 61,516 |
|
|
| 67,396 |
|
Adjustment for GAAP accounting treatment |
|
| (18 | ) |
|
| (422 | ) |
|
| (440 | ) |
|
| (10 | ) |
|
| (490 | ) |
|
| (500 | ) |
GAAP basis borrowings |
| $ | 4,838 |
|
| $ | 56,936 |
|
| $ | 61,774 |
|
| $ | 5,870 |
|
| $ | 61,026 |
|
| $ | 66,896 |
|
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
(Dollars in millions) |
| Short Term |
|
| Long Term |
|
| Total |
|
| Short Term |
|
| Long Term |
|
| Total |
| ||||||
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured debt |
| $ | 1,299 |
|
| $ | 5,709 |
|
| $ | 7,008 |
|
| $ | — |
|
| $ | 7,014 |
|
| $ | 7,014 |
|
Total unsecured borrowings |
|
| 1,299 |
|
|
| 5,709 |
|
|
| 7,008 |
|
|
| — |
|
|
| 7,014 |
|
|
| 7,014 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loan securitizations |
|
| 83 |
|
|
| 45,358 |
|
|
| 45,441 |
|
|
| — |
|
|
| 51,841 |
|
|
| 51,841 |
|
Private Education Loan securitizations |
|
| 813 |
|
|
| 13,300 |
|
|
| 14,113 |
|
|
| 543 |
|
|
| 14,074 |
|
|
| 14,617 |
|
FFELP Loan ABCP facilities |
|
| 974 |
|
|
| 291 |
|
|
| 1,265 |
|
|
| 282 |
|
|
| 150 |
|
|
| 432 |
|
Private Education Loan ABCP facilities |
|
| 2,418 |
|
|
| — |
|
|
| 2,418 |
|
|
| 1,363 |
|
|
| 1,152 |
|
|
| 2,515 |
|
Other |
|
| 105 |
|
|
| — |
|
|
| 105 |
|
|
| 302 |
|
|
| — |
|
|
| 302 |
|
Total secured borrowings |
|
| 4,393 |
|
|
| 58,949 |
|
|
| 63,342 |
|
|
| 2,490 |
|
|
| 67,217 |
|
|
| 69,707 |
|
Core Earnings basis borrowings(1) |
|
| 5,692 |
|
|
| 64,658 |
|
|
| 70,350 |
|
|
| 2,490 |
|
|
| 74,231 |
|
|
| 76,721 |
|
Adjustment for GAAP accounting treatment |
|
| (15 | ) |
|
| (660 | ) |
|
| (675 | ) |
|
| — |
|
|
| 257 |
|
|
| 257 |
|
GAAP basis borrowings |
| $ | 5,677 |
|
| $ | 63,998 |
|
| $ | 69,675 |
|
| $ | 2,490 |
|
| $ | 74,488 |
|
| $ | 76,978 |
|
Average Balances
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||
(Dollars in millions) |
| Average |
|
| Average |
|
| Average |
|
| Average |
|
| Average |
|
| Average |
|
| Average |
|
| Average |
| ||||||||
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Senior unsecured debt |
| $ | 6,329 |
|
|
| 8.67 | % |
| $ | 7,008 |
|
|
| 4.83 | % |
| $ | 6,304 |
|
|
| 8.41 | % |
| $ | 7,012 |
|
|
| 4.56 | % |
Total unsecured borrowings |
|
| 6,329 |
|
|
| 8.67 |
|
|
| 7,008 |
|
|
| 4.83 |
|
|
| 6,304 |
|
|
| 8.41 |
|
|
| 7,012 |
|
|
| 4.56 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FFELP Loan securitizations |
|
| 39,131 |
|
|
| 5.71 |
|
|
| 48,744 |
|
|
| 1.88 |
|
|
| 40,248 |
|
|
| 5.42 |
|
|
| 49,643 |
|
|
| 1.59 |
|
Private Education Loan |
|
| 13,035 |
|
|
| 3.46 |
|
|
| 14,256 |
|
|
| 2.43 |
|
|
| 13,103 |
|
|
| 3.35 |
|
|
| 14,454 |
|
|
| 2.35 |
|
FFELP Loan ABCP facilities |
|
| 1,843 |
|
|
| 6.19 |
|
|
| 776 |
|
|
| 2.11 |
|
|
| 1,567 |
|
|
| 6.07 |
|
|
| 734 |
|
|
| 1.86 |
|
Private Education Loan |
|
| 2,438 |
|
|
| 6.81 |
|
|
| 2,673 |
|
|
| 2.42 |
|
|
| 2,632 |
|
| 6,51 |
|
|
| 2,585 |
|
|
| 2.17 |
| |
Other |
|
| 107 |
|
|
| 5.54 |
|
|
| 178 |
|
|
| 1.04 |
|
|
| 108 |
|
|
| 5.28 |
|
|
| 214 |
|
|
| .82 |
|
Total secured borrowings |
|
| 56,554 |
|
|
| 5.25 |
|
|
| 66,627 |
|
|
| 2.02 |
|
|
| 57,658 |
|
|
| 5.02 |
|
|
| 67,630 |
|
|
| 1.78 |
|
Core Earnings basis |
|
| 62,883 |
|
|
| 5.60 |
|
|
| 73,635 |
|
|
| 2.29 |
|
|
| 63,962 |
|
|
| 5.35 |
|
|
| 74,642 |
|
|
| 2.04 |
|
Adjustment for GAAP |
|
| — |
|
|
| .26 |
|
|
| — |
|
|
| (.27 | ) |
|
| — |
|
|
| .19 |
|
|
| — |
|
|
| (.26 | ) |
GAAP basis borrowings |
| $ | 62,883 |
|
|
| 5.86 | % |
| $ | 73,635 |
|
|
| 2.02 | % |
| $ | 63,962 |
|
|
| 5.54 | % |
| $ | 74,642 |
|
|
| 1.78 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
(Dollars in millions) |
| Average Balance |
|
| Average Rate |
|
| Average Balance |
|
| Average Rate |
|
| Average Balance |
|
| Average Rate |
|
| Average Balance |
|
| Average Rate |
| ||||||||
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured debt |
| $ | 7,007 |
|
|
| 6.08 | % |
| $ | 7,463 |
|
|
| 4.38 | % |
| $ | 7,010 |
|
|
| 5.07 | % |
| $ | 8,106 |
|
|
| 4.49 | % |
Total unsecured borrowings |
|
| 7,007 |
|
|
| 6.08 |
|
|
| 7,463 |
|
|
| 4.38 |
|
|
| 7,010 |
|
|
| 5.07 |
|
|
| 8,106 |
|
|
| 4.49 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loan securitizations |
|
| 46,615 |
|
|
| 3.37 |
|
|
| 53,281 |
|
|
| 1.24 |
|
|
| 48,623 |
|
|
| 2.16 |
|
|
| 54,108 |
|
|
| 1.26 |
|
Private Education Loan securitizations |
|
| 14,298 |
|
|
| 2.70 |
|
|
| 14,007 |
|
|
| 2.34 |
|
|
| 14,401 |
|
|
| 2.47 |
|
|
| 14,167 |
|
|
| 2.46 |
|
FFELP Loan ABCP facilities |
|
| 1,222 |
|
|
| 3.43 |
|
|
| 772 |
|
|
| 1.27 |
|
|
| 899 |
|
|
| 2.58 |
|
|
| 1,168 |
|
|
| 1.50 |
|
Private Education Loan ABCP facilities |
|
| 2,460 |
|
|
| 3.90 |
|
|
| 2,704 |
|
|
| 1.64 |
|
|
| 2,543 |
|
|
| 2.73 |
|
|
| 2,451 |
|
|
| 1.89 |
|
Other |
|
| 142 |
|
|
| 2.68 |
|
|
| 311 |
|
|
| .38 |
|
|
| 189 |
|
|
| 1.29 |
|
|
| 304 |
|
|
| .33 |
|
Total secured borrowings |
|
| 64,737 |
|
|
| 3.24 |
|
|
| 71,075 |
|
|
| 1.47 |
|
|
| 66,655 |
|
|
| 2.26 |
|
|
| 72,198 |
|
|
| 1.52 |
|
Core Earnings basis borrowings(1) |
|
| 71,744 |
|
|
| 3.52 |
|
|
| 78,538 |
|
|
| 1.75 |
|
|
| 73,665 |
|
|
| 2.52 |
|
|
| 80,304 |
|
|
| 1.82 |
|
Adjustment for GAAP accounting treatment |
|
| — |
|
|
| .02 |
|
|
| — |
|
|
| (.10 | ) |
|
| — |
|
|
| (.16 | ) |
|
| — |
|
|
| (.16 | ) |
GAAP basis borrowings |
| $ | 71,744 |
|
|
| 3.54 | % |
| $ | 78,538 |
|
|
| 1.65 | % |
| $ | 73,665 |
|
|
| 2.36 | % |
| $ | 80,304 |
|
|
| 1.66 | % |
26
|
|
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). A discussion of our critical accounting policies, which includes the allowance for loan losses, goodwill impairment assessment, and premium and discount amortization, and the impact of the SDR Plan on our accounting policies and estimates, can be found in our 20212022 Form 10-K. In the third quarter of 2022, our critical accounting estimates considered the current and potential negative impactSee "Federal Education Loans Segment – Federal Loan Forgiveness" for an update on the economy associated with the uncertainty in connection with historically high inflation and the increase in interest rates.
SDR Plan.
Impact of the Student Debt Relief (SDR) Plan on accounting policies and estimates
On August 24, 2022, the Biden-Harris Administration announced its Student Debt Relief (SDR) Plan that extends the repayment pause on ED held student loans through December 31, 2022 and provides up to $20,000 in one-time debt relief to income-qualified recipients with ED held student loans.
Following the initial announcement of the SDR Plan, ED provided more specific guidance on debt relief through its studentaid.gov website on September 29, 2022, which guidance was subsequently revised and published in the Federal Register on October 12, 2022. The studentaid.gov website currently provides the following guidance:
|
|
|
|
|
|
|
|
Based on this recent announcement, we estimate that borrowers holding approximately $600 million of the total $47 billion of FFELP Loans on our balance sheet as of September 30, 2022 have applied to have their loans consolidated with ED prior to the deadline established by the SDR Plan.
At this time, there is not a material impact on the Company’s accounting and related third-quarter results related to the SDR Plan as:
|
|
|
|
As a result, we do not expect there to be incremental consolidation activity in the future related to potential loan forgiveness under the SDR Plan. The Company’s current accounting policies and related estimates appropriately consider the impact of FFELP borrowers who applied to consolidate loans into the Direct Loan program in the third quarter, but the funding of such consolidations will not occur until after September 30, 2022.
If the SDR Plan was changed in the future to allow FFELP Loans to be directly forgiven and/or eliminates or alters the deadline for borrowers to apply to consolidate their FFELP Loans into the Direct Loan program to receive debt forgiveness, the impact to the Company would most likely be material due to increased prepayments on our FFELP Loan portfolio. Despite the significant uncertainty regarding the ultimate impact such SDR Plan changes may have to the Company, under GAAP, the Company would be required to calculate and account for its best estimate of the potential impact and record such estimate in its results. As it relates to estimating any potential impact to the Company, the Company does not have sufficient access to:
|
|
|
|
In addition to making estimates regarding these items, the Company would also have to estimate, amongst other items, the following:
|
|
|
|
|
|
These factors would result in significant subjectivity and uncertainty in any estimate recorded related to the potential impact, and, accordingly, actual results may differ significantly.
If the SDR Plan was changed in the future as discussed above, we anticipate that the principal components of the financial items whose recognition would be accelerated through net income as a result of materially increased loan consolidations and/or debt forgiveness would be the amortization of loan premiums and debt deferred financing fees through net interest income, which would reduce net income. These impacts would be partially offset by the benefit to net income from the release of the related allowance for loan losses through provision and revenue from the assessed but previously unrecognized fees that would be recognized in other income. The table below lists those items and their respective balances related to the FFELP Loans outstanding as of September 30, 2022:
(Dollars in millions) |
| As of 9/30/22 |
| |
Loan premium |
| $ | 419 |
|
Debt deferred financing fees |
|
| 328 |
|
Allowance for loan borrower benefits |
|
| (24 | ) |
Allowance for loan losses |
|
| (234 | ) |
Assessed but previously unrecognized fees |
|
| (122 | ) |
Servicing asset – off-balance sheet trusts |
|
| 2 |
|
Total net asset on balance sheet |
| $ | 369 |
|
In addition, the Company had $232 million of goodwill related to the FFELP business on its balance sheet. The goodwill could be impaired depending on unforeseen changes to the SDR Plan resulting in potential material debt forgiveness or loan consolidation activity.
Non-GAAP Financial Measures
In addition to financial results reported on a GAAP basis, Navient also provides certain performance measures which are non-GAAP financial measures. We present the following non-GAAP financial measures: (1) Core Earnings, (as well as Adjusted Core Earnings), (2) Tangible Equity (as well as the Adjusted Tangible Equity Ratio and Pro forma Adjusted Tangible Equity Ratio), (3) EBITDA for the Business Processing segment, and (4) Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off Loans. Definitions for the non-GAAP financial measures and reconciliations are provided below, except that reconciliations of forward-looking non-GAAP financial measures are not provided because the company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of certain items, including, but not limited to, the impact of any mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks.
1. Core Earnings
We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments.
Core Earnings are not a substitute for reported results under GAAP. We use Core Earnings to manage our business segments because Core Earnings reflect adjustments to GAAP financial results for two items, discussed below, that can create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that Core Earnings provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information because we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. When compared to GAAP results, the two items we remove to result in our Core Earnings presentations are:
| (1) Mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness; and (2) The accounting for goodwill and acquired intangible assets.
|
|
|
|
While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our Core Earnings basis of presentation does not. Core Earnings are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our Core Earnings presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon Core Earnings. Core Earnings results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our board of directors, credit rating agencies, lenders and investors to assess performance.
31
27
The following tables show our consolidated GAAP results, Core Earnings results (including for each reportable segment and our business as a wholesegment) along with the adjustments made to the income/expense items to reconcile the amountsconsolidated GAAP results to our reported GAAPthe Core Earnings results as required by GAAP and reported in “Note 1211 — Segment Reporting.”
|
| Three Months Ended June 30, 2023 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
| Adjustments |
|
|
|
|
| Reportable Segments |
| ||||||||||||||||||||||||
(Dollars in millions) |
| Total |
|
| Reclassi- |
|
| Additions/ |
|
| Total |
|
| Total |
|
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Education loans |
| $ | 1,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 721 |
|
| $ | 341 |
|
| $ | — |
|
| $ | — |
| ||||
Cash and investments |
|
| 36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 7 |
|
|
| — |
|
|
| 11 |
| ||||
Total interest income |
|
| 1,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 739 |
|
|
| 348 |
|
|
| — |
|
|
| 11 |
| ||||
Total interest expense |
|
| 919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 633 |
|
|
| 205 |
|
|
| — |
|
|
| 39 |
| ||||
Net interest income |
|
| 178 |
|
| $ | 4 |
|
| $ | 39 |
|
| $ | 43 |
|
| $ | 221 |
|
|
| 106 |
|
|
| 143 |
|
|
| — |
|
|
| (28 | ) |
Less: provisions for loan |
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
|
| 5 |
|
|
| 6 |
|
|
| — |
|
|
| — |
| |||
Net interest income |
|
| 167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101 |
|
|
| 137 |
|
|
| — |
|
|
| (28 | ) | ||||
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Servicing revenue |
|
| 16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13 |
|
|
| 3 |
|
|
| — |
|
|
| — |
| ||||
Asset recovery and |
|
| 83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| 83 |
|
|
| — |
| ||||
Other revenue |
|
| 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| — |
| ||||
Total other income |
|
| 129 |
|
|
| (4 | ) |
|
| (22 | ) |
|
| (26 | ) |
|
| 103 |
|
|
| 15 |
|
|
| 5 |
|
|
| 83 |
|
|
| — |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Direct operating |
|
| 135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 42 |
|
|
| 75 |
|
|
| — |
| ||||
Unallocated shared |
|
| 47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
| ||||
Operating expenses |
|
| 182 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 182 |
|
|
| 18 |
|
|
| 42 |
|
|
| 75 |
|
|
| 47 |
|
Goodwill and acquired |
|
| 3 |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Restructuring/other |
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
Total expenses |
|
| 200 |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| 197 |
|
|
| 18 |
|
|
| 42 |
|
|
| 75 |
|
|
| 62 |
|
Income (loss) before |
|
| 96 |
|
|
| — |
|
|
| 20 |
|
|
| 20 |
|
|
| 116 |
|
|
| 98 |
|
|
| 100 |
|
|
| 8 |
|
|
| (90 | ) |
Income tax expense |
|
| 30 |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| 28 |
|
|
| 22 |
|
|
| 25 |
|
|
| 2 |
|
|
| (21 | ) |
Net income (loss) |
| $ | 66 |
|
| $ | — |
|
| $ | 22 |
|
| $ | 22 |
|
| $ | 88 |
|
| $ | 76 |
|
| $ | 75 |
|
| $ | 6 |
|
| $ | (69 | ) |
|
| Three Months Ended September 30, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 555 |
|
| $ | 309 |
|
| $ | — |
|
| $ | — |
|
| $ | 864 |
|
| $ | — |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | 862 |
|
Cash and investments |
|
| 9 |
|
|
| 3 |
|
|
| — |
|
|
| 7 |
|
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
Total interest income |
|
| 564 |
|
|
| 312 |
|
|
| — |
|
|
| 7 |
|
|
| 883 |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| 881 |
|
Total interest expense |
|
| 444 |
|
|
| 159 |
|
|
| — |
|
|
| 33 |
|
|
| 636 |
|
|
| (1 | ) |
|
| 6 |
|
|
| 5 |
|
|
| 641 |
|
Net interest income (loss) |
|
| 120 |
|
|
| 153 |
|
|
| — |
|
|
| (26 | ) |
|
| 247 |
|
|
| 1 |
|
|
| (8 | ) |
|
| (7 | ) |
|
| 240 |
|
Less: provisions for loan losses |
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28 |
|
Net interest income (loss) after provisions for loan losses |
|
| 120 |
|
|
| 125 |
|
|
| — |
|
|
| (26 | ) |
|
| 219 |
|
|
| 1 |
|
|
| (8 | ) |
|
| (7 | ) |
|
| 212 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 21 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
Asset recovery and business processing revenue |
|
| 1 |
|
|
| — |
|
|
| 79 |
|
|
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
Other income (loss) |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| (1 | ) |
|
| 41 |
|
|
| 40 |
|
|
| 46 |
|
Total other income (loss) |
|
| 28 |
|
|
| 3 |
|
|
| 79 |
|
|
| — |
|
|
| 110 |
|
|
| (1 | ) |
|
| 41 |
|
|
| 40 |
|
|
| 150 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 25 |
|
|
| 43 |
|
|
| 67 |
|
|
| — |
|
|
| 135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 135 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
|
| 59 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
Operating expenses |
|
| 25 |
|
|
| 43 |
|
|
| 67 |
|
|
| 59 |
|
|
| 194 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10 |
|
|
| 10 |
|
|
| 10 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21 |
|
|
| 21 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21 |
|
Total expenses |
|
| 25 |
|
|
| 43 |
|
|
| 67 |
|
|
| 80 |
|
|
| 215 |
|
|
| — |
|
|
| 10 |
|
|
| 10 |
|
|
| 225 |
|
Income (loss) before income tax expense (benefit) |
|
| 123 |
|
|
| 85 |
|
|
| 12 |
|
|
| (106 | ) |
|
| 114 |
|
|
| — |
|
|
| 23 |
|
|
| 23 |
|
|
| 137 |
|
Income tax expense (benefit)(2) |
|
| 29 |
|
|
| 20 |
|
|
| 3 |
|
|
| (25 | ) |
|
| 27 |
|
|
| — |
|
|
| 5 |
|
|
| 5 |
|
|
| 32 |
|
Net income (loss) |
| $ | 94 |
|
| $ | 65 |
|
| $ | 9 |
|
| $ | (81 | ) |
| $ | 87 |
|
| $ | — |
|
| $ | 18 |
|
| $ | 18 |
|
| $ | 105 |
|
|
| Three Months Ended June 30, 2023 |
| |||||||||
(Dollars in millions) |
| Net Impact of |
|
| Net Impact of |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 43 |
|
| $ | — |
|
| $ | 43 |
|
Total other income (loss) |
|
| (26 | ) |
|
| — |
|
|
| (26 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
Total Core Earnings adjustments to GAAP |
| $ | 17 |
|
| $ | 3 |
|
|
| 20 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
| (2 | ) | ||
Net income (loss) |
|
|
|
|
|
|
| $ | 22 |
| ||
| (2) Income taxes are based on a percentage of net income before tax for the individual reportable segment. 28
(1) Core Earnings adjustments to GAAP:
(2) Income taxes are based on a percentage of net income before tax for the individual reportable segment. 29
(1) Core Earnings adjustments to GAAP:
(2) Income taxes are based on a percentage of net income before tax for the individual reportable segment. 30
(1) Core Earnings adjustments to GAAP:
(2) Income taxes are based on a percentage of net income before tax for the individual reportable segment. 31
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, 2022 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | (7 | ) |
| $ | — |
|
| $ | (7 | ) |
Total other income (loss) |
|
| 40 |
|
|
| — |
|
|
| 40 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 10 |
|
|
| 10 |
|
Total Core Earnings adjustments to GAAP |
| $ | 33 |
|
| $ | (10 | ) |
|
| 23 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 5 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 18 |
|
|
|
|
| Three Months Ended September 30, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 353 |
|
| $ | 291 |
|
| $ | — |
|
| $ | — |
|
| $ | 644 |
|
| $ | 25 |
|
| $ | (10 | ) |
| $ | 15 |
|
| $ | 659 |
|
Cash and investments |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Total interest income |
|
| 353 |
|
|
| 292 |
|
|
| — |
|
|
| — |
|
|
| 645 |
|
|
| 25 |
|
|
| (10 | ) |
|
| 15 |
|
|
| 660 |
|
Total interest expense |
|
| 202 |
|
|
| 129 |
|
|
| — |
|
|
| 15 |
|
|
| 346 |
|
|
| (3 | ) |
|
| (17 | ) |
|
| (20 | ) |
|
| 326 |
|
Net interest income (loss) |
|
| 151 |
|
|
| 163 |
|
|
| — |
|
|
| (15 | ) |
|
| 299 |
|
|
| 28 |
|
|
| 7 |
|
|
| 35 |
|
|
| 334 |
|
Less: provisions for loan losses |
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
Net interest income (loss) after provisions for loan losses |
|
| 151 |
|
|
| 141 |
|
|
| — |
|
|
| (15 | ) |
|
| 277 |
|
|
| 28 |
|
|
| 7 |
|
|
| 35 |
|
|
| 312 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
Asset recovery and business processing revenue |
|
| 13 |
|
|
| — |
|
|
| 122 |
|
|
| — |
|
|
| 135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 135 |
|
Other income (loss) |
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 3 |
|
|
| (28 | ) |
|
| 23 |
|
|
| (5 | ) |
|
| (2 | ) |
Losses on debt repurchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| (20 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
Total other income (loss) |
|
| 61 |
|
|
| — |
|
|
| 122 |
|
|
| (18 | ) |
|
| 165 |
|
|
| (28 | ) |
|
| 23 |
|
|
| (5 | ) |
|
| 160 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 53 |
|
|
| 45 |
|
|
| 87 |
|
|
| — |
|
|
| 185 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 185 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63 |
|
|
| 63 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63 |
|
Operating expenses |
|
| 53 |
|
|
| 45 |
|
|
| 87 |
|
|
| 63 |
|
|
| 248 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 248 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
|
| 4 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total expenses |
|
| 53 |
|
|
| 45 |
|
|
| 87 |
|
|
| 63 |
|
|
| 248 |
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
|
| 252 |
|
Income (loss) before income tax expense (benefit) |
|
| 159 |
|
|
| 96 |
|
|
| 35 |
|
|
| (96 | ) |
|
| 194 |
|
|
| — |
|
|
| 26 |
|
|
| 26 |
|
|
| 220 |
|
Income tax expense (benefit)(2) |
|
| 37 |
|
|
| 23 |
|
|
| 8 |
|
|
| (23 | ) |
|
| 45 |
|
|
| — |
|
|
| 2 |
|
|
| 2 |
|
|
| 47 |
|
Net income (loss) |
| $ | 122 |
|
| $ | 73 |
|
| $ | 27 |
|
| $ | (73 | ) |
| $ | 149 |
|
| $ | — |
|
| $ | 24 |
|
| $ | 24 |
|
| $ | 173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2021 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 35 |
|
| $ | — |
|
| $ | 35 |
|
Total other income (loss) |
|
| (5 | ) |
|
| — |
|
|
| (5 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 4 |
|
|
| 4 |
|
Total Core Earnings adjustments to GAAP |
| $ | 30 |
|
| $ | (4 | ) |
|
| 26 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 2 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 24 |
|
|
|
33
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 1,298 |
|
| $ | 862 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,160 |
|
| $ | 23 |
|
| $ | (9 | ) |
| $ | 14 |
|
| $ | 2,174 |
|
Cash and investments |
|
| 12 |
|
|
| 5 |
|
|
| — |
|
|
| 8 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Total interest income |
|
| 1,310 |
|
|
| 867 |
|
|
| — |
|
|
| 8 |
|
|
| 2,185 |
|
|
| 23 |
|
|
| (9 | ) |
|
| 14 |
|
|
| 2,199 |
|
Total interest expense |
|
| 905 |
|
|
| 421 |
|
|
| — |
|
|
| 65 |
|
|
| 1,391 |
|
|
| 3 |
|
|
| (93 | ) |
|
| (90 | ) |
|
| 1,301 |
|
Net interest income (loss) |
|
| 405 |
|
|
| 446 |
|
|
| — |
|
|
| (57 | ) |
|
| 794 |
|
|
| 20 |
|
|
| 84 |
|
|
| 104 |
|
|
| 898 |
|
Less: provisions for loan losses |
|
| — |
|
|
| 62 |
|
|
| — |
|
|
| — |
|
|
| 62 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 62 |
|
Net interest income (loss) after provisions for loan losses |
|
| 405 |
|
|
| 384 |
|
|
| — |
|
|
| (57 | ) |
|
| 732 |
|
|
| 20 |
|
|
| 84 |
|
|
| 104 |
|
|
| 836 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 51 |
|
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| 60 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60 |
|
Asset recovery and business processing revenue |
|
| 4 |
|
|
| — |
|
|
| 260 |
|
|
| — |
|
|
| 264 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 264 |
|
Other income (loss) |
|
| 24 |
|
|
| 1 |
|
|
| — |
|
|
| (3 | ) |
|
| 22 |
|
|
| (20 | ) |
|
| 181 |
|
|
| 161 |
|
|
| 183 |
|
Total other income (loss) |
|
| 79 |
|
|
| 10 |
|
|
| 260 |
|
|
| (3 | ) |
|
| 346 |
|
|
| (20 | ) |
|
| 181 |
|
|
| 161 |
|
|
| 507 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 79 |
|
|
| 113 |
|
|
| 216 |
|
|
| — |
|
|
| 408 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 408 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180 |
|
|
| 180 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180 |
|
Operating expenses |
|
| 79 |
|
|
| 113 |
|
|
| 216 |
|
|
| 180 |
|
|
| 588 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 588 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
|
| 17 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Total expenses |
|
| 79 |
|
|
| 113 |
|
|
| 216 |
|
|
| 205 |
|
|
| 613 |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
|
| 630 |
|
Income (loss) before income tax expense (benefit) |
|
| 405 |
|
|
| 281 |
|
|
| 44 |
|
|
| (265 | ) |
|
| 465 |
|
|
| — |
|
|
| 248 |
|
|
| 248 |
|
|
| 713 |
|
Income tax expense (benefit)(2) |
|
| 95 |
|
|
| 66 |
|
|
| 11 |
|
|
| (63 | ) |
|
| 109 |
|
|
| — |
|
|
| 64 |
|
|
| 64 |
|
|
| 173 |
|
Net income (loss) |
| $ | 310 |
|
| $ | 215 |
|
| $ | 33 |
|
| $ | (202 | ) |
| $ | 356 |
|
| $ | — |
|
| $ | 184 |
|
| $ | 184 |
|
| $ | 540 |
|
|
|
|
| Nine Months Ended September 30, 2022 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 104 |
|
| $ | — |
|
| $ | 104 |
|
Total other income (loss) |
|
| 161 |
|
|
| — |
|
|
| 161 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 17 |
|
|
| 17 |
|
Total Core Earnings adjustments to GAAP |
| $ | 265 |
|
| $ | (17 | ) |
|
| 248 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 64 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 184 |
|
|
|
|
| Nine Months Ended September 30, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 1,062 |
|
| $ | 905 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,967 |
|
| $ | 73 |
|
| $ | (29 | ) |
| $ | 44 |
|
| $ | 2,011 |
|
Cash and investments |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
Total interest income |
|
| 1,062 |
|
|
| 906 |
|
|
| — |
|
|
| 1 |
|
|
| 1,969 |
|
|
| 73 |
|
|
| (29 | ) |
|
| 44 |
|
|
| 2,013 |
|
Total interest expense |
|
| 627 |
|
|
| 416 |
|
|
| — |
|
|
| 51 |
|
|
| 1,094 |
|
|
| (6 | ) |
|
| (93 | ) |
|
| (99 | ) |
|
| 995 |
|
Net interest income (loss) |
|
| 435 |
|
|
| 490 |
|
|
| — |
|
|
| (50 | ) |
|
| 875 |
|
|
| 79 |
|
|
| 64 |
|
|
| 143 |
|
|
| 1,018 |
|
Less: provisions for loan losses |
|
| — |
|
|
| (66 | ) |
|
| — |
|
|
| — |
|
|
| (66 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (66 | ) |
Net interest income (loss) after provisions for loan losses |
|
| 435 |
|
|
| 556 |
|
|
| — |
|
|
| (50 | ) |
|
| 941 |
|
|
| 79 |
|
|
| 64 |
|
|
| 143 |
|
|
| 1,084 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 146 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
Asset recovery and business processing revenue |
|
| 39 |
|
|
| — |
|
|
| 377 |
|
|
| — |
|
|
| 416 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 416 |
|
Other income (loss) |
|
| 3 |
|
|
| 1 |
|
|
| — |
|
|
| 5 |
|
|
| 9 |
|
|
| (66 | ) |
|
| 87 |
|
|
| 21 |
|
|
| 30 |
|
Gains on sales of loans |
|
| — |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
|
| (13 | ) |
|
| — |
|
|
| (13 | ) |
|
| 78 |
|
Losses on debt repurchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32 | ) |
|
| (32 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32 | ) |
Total other income (loss) |
|
| 188 |
|
|
| 95 |
|
|
| 377 |
|
|
| (27 | ) |
|
| 633 |
|
|
| (79 | ) |
|
| 87 |
|
|
| 8 |
|
|
| 641 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 170 |
|
|
| 124 |
|
|
| 270 |
|
|
| — |
|
|
| 564 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
|
| 194 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
Operating expenses |
|
| 170 |
|
|
| 124 |
|
|
| 270 |
|
|
| 194 |
|
|
| 758 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 758 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14 |
|
|
| 14 |
|
|
| 14 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Total expenses |
|
| 170 |
|
|
| 124 |
|
|
| 270 |
|
|
| 202 |
|
|
| 766 |
|
|
| — |
|
|
| 14 |
|
|
| 14 |
|
|
| 780 |
|
Income (loss) before income tax expense (benefit) |
|
| 453 |
|
|
| 527 |
|
|
| 107 |
|
|
| (279 | ) |
|
| 808 |
|
|
| — |
|
|
| 137 |
|
|
| 137 |
|
|
| 945 |
|
Income tax expense (benefit)(2) |
|
| 107 |
|
|
| 123 |
|
|
| 25 |
|
|
| (65 | ) |
|
| 190 |
|
|
| — |
|
|
| 27 |
|
|
| 27 |
|
|
| 217 |
|
Net income (loss) |
| $ | 346 |
|
| $ | 404 |
|
| $ | 82 |
|
| $ | (214 | ) |
| $ | 618 |
|
| $ | — |
|
| $ | 110 |
|
| $ | 110 |
|
| $ | 728 |
|
|
|
|
| Nine Months Ended September 30, 2021 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 143 |
|
| $ | — |
|
| $ | 143 |
|
Total other income (loss) |
|
| 8 |
|
|
| — |
|
|
| 8 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 14 |
|
|
| 14 |
|
Total Core Earnings adjustments to GAAP |
| $ | 151 |
|
| $ | (14 | ) |
|
| 137 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 27 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 110 |
|
|
|
The following discussion summarizes the differences between GAAP and Core Earnings and GAAP net income and details each specific adjustment required to reconcile our GAAP earnings to our Core Earnings segment presentation to our GAAP earnings.presentation.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Core Earnings net income |
| $ | 87 |
|
| $ | 149 |
|
| $ | 356 |
|
| $ | 618 |
| ||||||||||||||||
GAAP net income |
| $ | 66 |
|
| $ | 180 |
|
| $ | 177 |
|
| $ | 435 |
| ||||||||||||||||
Core Earnings adjustments to GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net impact of derivative accounting |
|
| 33 |
|
|
| 30 |
|
|
| 265 |
|
|
| 151 |
|
|
| 17 |
|
|
| (72 | ) |
|
| 44 |
|
|
| (231 | ) |
Net impact of goodwill and acquired intangible assets |
|
| (10 | ) |
|
| (4 | ) |
|
| (17 | ) |
|
| (14 | ) |
|
| 3 |
|
|
| 3 |
|
|
| 5 |
|
|
| 7 |
|
Net income tax effect |
|
| (5 | ) |
|
| (2 | ) |
|
| (64 | ) |
|
| (27 | ) |
|
| 2 |
|
|
| 23 |
|
|
| (5 | ) |
|
| 58 |
|
Total Core Earnings adjustments to GAAP |
|
| 18 |
|
|
| 24 |
|
|
| 184 |
|
|
| 110 |
|
|
| 22 |
|
|
| (46 | ) |
|
| 44 |
|
|
| (166 | ) |
GAAP net income |
| $ | 105 |
|
| $ | 173 |
|
| $ | 540 |
|
| $ | 728 |
| ||||||||||||||||
Core Earnings net income |
| $ | 88 |
|
| $ | 134 |
|
| $ | 221 |
|
| $ | 269 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
(1) Derivative Accounting: Core Earnings exclude periodic gains and losses that are caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic mark-to-market gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. Under GAAP, for our derivatives that are held to maturity, the mark-to-market gain or loss over the life of the contract will equal $0 except for Floor Income Contracts, where the mark-to-market gain will equal the amount for which we originally sold the contract. In our Core Earnings presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. The gains and losses recorded in “Gains (losses) on derivative and hedging activities, net” and interest expense (for qualifying fair value hedges) are primarily caused by interest rate and foreign currency exchange rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not receiving hedge accounting treatment. We believe that our derivatives are effective economic hedges, and as such, are a critical element of our interest rate and foreign currency risk management strategy. However, some of our derivatives, primarily Floor Income Contracts, basis swaps and at times, certain other LIBOR swaps do not qualify for hedge accounting treatment and the stand-alone derivative is adjusted to fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item.
Our Floor Income Contracts are written options that must meet more stringent requirements than other hedging relationships to achieve hedge effectiveness. Specifically, our Floor Income Contracts do not qualify for hedge accounting treatment because the pay down of principal of the education loans underlying the Floor Income embedded in those education loans does not exactly match the change in the notional amount of our written Floor Income Contracts. Additionally, the term, the interest rate index, and the interest rate index reset frequency of the Floor Income Contract can be different than that of the education loans. Under derivative accounting treatment, the upfront contractual payment is deemed a liability and changes in fair value are recorded through income throughout the life of the contract. The change in the fair value of Floor Income Contracts is primarily caused by changing interest rates that cause the amount of Floor Income paid to the counterparties to vary. This is economically offset by the change in the amount of Floor Income earned on the underlying education loans but that offsetting change in fair value is not recognized. We believe the Floor Income Contracts are economic hedges because they effectively fix the amount of Floor Income earned over the contract period, thus eliminating the timing and uncertainty that changes in interest rates can have on Floor Income for that period. Therefore, for purposes of Core Earnings, we have removed the mark-to-market gains and losses related to these contracts and added back the amortization of the net contractual premiums received on the Floor Income Contracts. The amortization of the net contractual premiums received on the Floor Income Contracts for Core Earnings is reflected in education loan interest income. Under GAAP accounting, the premiums received on the Floor Income Contracts are recorded as revenue in the “gains (losses) on derivative and hedging activities, net” line item by the end of the contracts’ lives.
32
Basis swaps are used to convert floating rate debt from one floating interest rate index to another to better match the interest rate characteristics of the assets financed by that debt. We primarily use basis swaps to hedge our education loan assets that are primarily indexed to LIBOR or Prime. The accounting for derivatives requires that when using basis swaps, the change in the cash flows of the hedge effectively offset both the change in the cash flows of the asset and the change in the cash flows of the liability. Our basis swaps hedge variable interest rate risk; however, they generally do not meet this effectiveness test because the index of the swap does not exactly match the index of the hedged assets as required for hedge accounting treatment. Additionally, some of our FFELP Loans can earn interest at either a variable or a fixed interest rate depending on market interest rates and therefore swaps economically hedging these FFELP Loans do not meet the criteria for hedge accounting treatment. As a result, under GAAP, these swaps are recorded at fair value with changes in fair value reflected currently in the income statement.
The table below quantifies the adjustments for derivative accounting between GAAP and Core Earnings net income.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Core Earnings derivative adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Gains) losses on derivative and hedging activities, net, |
| $ | (26 | ) |
| $ | (22 | ) |
| $ | (17 | ) |
| $ | (120 | ) |
Plus: (Gains) losses on fair value hedging activity included |
|
| 37 |
|
|
| (50 | ) |
|
| 42 |
|
|
| (91 | ) |
Total (gains) losses in GAAP net income |
|
| 11 |
|
|
| (72 | ) |
|
| 25 |
|
|
| (211 | ) |
Plus: Reclassification of settlement income (expense) on |
|
| 4 |
|
|
| — |
|
|
| 16 |
|
|
| (19 | ) |
Mark-to-market (gains) losses on derivative and hedging |
|
| 15 |
|
|
| (72 | ) |
|
| 41 |
|
|
| (230 | ) |
Amortization of net premiums on Floor Income Contracts |
|
| 1 |
|
|
| 3 |
|
|
| 3 |
|
|
| 7 |
|
Other derivative accounting adjustments(3) |
|
| 1 |
|
|
| (3 | ) |
|
| — |
|
|
| (8 | ) |
Total net impact of derivative accounting |
| $ | 17 |
|
| $ | (72 | ) |
| $ | 44 |
|
| $ | (231 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Core Earnings derivative adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on derivative and hedging activities, net, included in other income |
| $ | 40 |
|
| $ | (5 | ) |
| $ | 161 |
|
| $ | 21 |
|
Plus: Gains (losses) on fair value hedging activity included in interest expense |
|
| (6 | ) |
|
| 10 |
|
|
| 85 |
|
|
| 71 |
|
Total gains (losses) in GAAP net income |
|
| 34 |
|
|
| 5 |
|
|
| 246 |
|
|
| 92 |
|
Plus: Reclassification of settlement expense (income) on derivative and hedging activities, net(1) |
|
| 1 |
|
|
| 28 |
|
|
| 20 |
|
|
| 66 |
|
Mark-to-market gains (losses) on derivative and hedging activities, net(2) |
|
| 35 |
|
|
| 33 |
|
|
| 266 |
|
|
| 158 |
|
Amortization of net premiums on Floor Income Contracts in net interest income for Core Earnings |
|
| (2 | ) |
|
| (10 | ) |
|
| (9 | ) |
|
| (30 | ) |
Other derivative accounting adjustments(3) |
|
| — |
|
|
| 7 |
|
|
| 8 |
|
|
| 23 |
|
Total net impact of derivative accounting |
| $ | 33 |
|
| $ | 30 |
|
| $ | 265 |
|
| $ | 151 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Reclassification of settlements on derivative and |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net settlement expense on Floor Income Contracts |
| $ | — |
|
| $ | (4 | ) |
| $ | — |
|
| $ | (23 | ) |
Net settlement income (expense) on interest rate |
|
| 4 |
|
|
| 4 |
|
|
| 16 |
|
|
| 4 |
|
Total reclassifications of settlement income |
| $ | 4 |
|
| $ | — |
|
| $ | 16 |
|
| $ | (19 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Fair value hedges |
| $ | 13 |
|
| $ | (10 | ) |
| $ | 16 |
|
| $ | (34 | ) |
Foreign currency hedges |
|
| 24 |
|
|
| (40 | ) |
|
| 26 |
|
|
| (57 | ) |
Floor Income Contracts |
|
| — |
|
|
| (9 | ) |
|
| — |
|
|
| (64 | ) |
Basis swaps |
|
| (3 | ) |
|
| 4 |
|
|
| — |
|
|
| 3 |
|
Other |
|
| (19 | ) |
|
| (17 | ) |
|
| (1 | ) |
|
| (78 | ) |
Total mark-to-market (gains) losses on derivative |
| $ | 15 |
|
| $ | (72 | ) |
| $ | 41 |
|
| $ | (230 | ) |
| (3) Other derivative accounting adjustments consist of adjustments related to certain terminated derivatives that did not receive hedge accounting treatment under GAAP but were economic hedges under Core Earnings and, as a result, such gains or losses are amortized into Core Earnings over the life of the hedged item. 33
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Reclassification of settlements on derivative and hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net settlement expense on Floor Income Contracts reclassified to net interest income |
| $ | — |
|
| $ | (25 | ) |
| $ | (23 | ) |
| $ | (73 | ) |
Net settlement income (expense) on interest rate swaps reclassified to net interest income |
|
| (1 | ) |
|
| (3 | ) |
|
| 3 |
|
|
| (6 | ) |
Net realized gains (losses) on terminated derivative contracts reclassified to other income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
Total reclassifications of settlements on derivative and hedging activities |
| $ | (1 | ) |
| $ | (28 | ) |
| $ | (20 | ) |
| $ | (66 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Floor Income Contracts |
| $ | — |
|
| $ | 23 |
|
| $ | 65 |
|
| $ | 81 |
|
Basis swaps |
|
| (3 | ) |
|
| 1 |
|
|
| (6 | ) |
|
| 5 |
|
Foreign currency hedges |
|
| (23 | ) |
|
| 3 |
|
|
| 34 |
|
|
| 48 |
|
Other |
|
| 61 |
|
|
| 6 |
|
|
| 173 |
|
|
| 24 |
|
Total mark-to-market gains (losses) on derivative and hedging activities, net |
| $ | 35 |
|
| $ | 33 |
|
| $ | 266 |
|
| $ | 158 |
|
|
|
Cumulative Impact of Derivative Accounting under GAAP compared to Core Earnings
As of SeptemberJune 30, 2022,2023, derivative accounting has increased GAAP equity by approximately $118$67 million as a result of cumulative net mark-to-market lossesgains (after tax) recognized under GAAP, but not in Core Earnings. The following table rolls forward the cumulative impact to GAAP equity due to these after-tax mark-to-market net gains and losses related to derivative accounting.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Beginning impact of derivative accounting on |
| $ | 81 |
|
| $ | (63 | ) |
| $ | 122 |
|
| $ | (299 | ) |
Net impact of net mark-to-market gains (losses) |
|
| (14 | ) |
|
| 102 |
|
|
| (55 | ) |
|
| 338 |
|
Ending impact of derivative accounting on |
| $ | 67 |
|
| $ | 39 |
|
| $ | 67 |
|
| $ | 39 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Beginning impact of derivative accounting on GAAP equity |
| $ | 39 |
|
| $ | (459 | ) |
| $ | (299 | ) |
| $ | (616 | ) |
Net impact of net mark-to-market gains (losses) under derivative accounting(1) |
|
| 79 |
|
|
| 42 |
|
|
| 417 |
|
|
| 199 |
|
Ending impact of derivative accounting on GAAP equity |
| $ | 118 |
|
| $ | (417 | ) |
| $ | 118 |
|
| $ | (417 | ) |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Total pre-tax net impact of derivative accounting |
| $ | (17 | ) |
| $ | 72 |
|
| $ | (44 | ) |
| $ | 231 |
|
Tax and other impacts of derivative accounting |
|
| 4 |
|
|
| (19 | ) |
|
| 11 |
|
|
| (56 | ) |
Change in mark-to-market gains (losses) on |
|
| (1 | ) |
|
| 49 |
|
|
| (22 | ) |
|
| 163 |
|
Net impact of net mark-to-market gains (losses) under |
| $ | (14 | ) |
| $ | 102 |
|
| $ | (55 | ) |
| $ | 338 |
|
| (2) See “Core Earnings derivative adjustments” table above. 34
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Total pre-tax net impact of derivative accounting recognized in net income(2) |
| $ | 33 |
|
| $ | 30 |
|
| $ | 265 |
|
| $ | 151 |
|
Tax and other impacts of derivative accounting adjustments |
|
| (8 | ) |
|
| (8 | ) |
|
| (65 | ) |
|
| (37 | ) |
Change in mark-to-market gains (losses) on derivatives, net of tax recognized in other comprehensive income |
|
| 54 |
|
|
| 20 |
|
|
| 217 |
|
|
| 85 |
|
Net impact of net mark-to-market gains (losses) under derivative accounting |
| $ | 79 |
|
| $ | 42 |
|
| $ | 417 |
|
| $ | 199 |
|
|
|
Hedging Embedded Floor Income
We use Floor Income Contracts, pay-fixed swaps and fixed rate debt to economically hedge embedded floor incomeFloor Income in our FFELP loans.Loans. Historically, we have used these instruments on a periodic basis and depending upon market conditions and pricing, we may enter into additional hedges in the future. Under GAAP, the Floor Income Contracts do not qualify for hedge accounting and the pay-fixed swaps are accounted for as cashflowcash flow hedges. The table below shows the amount of Hedgedhedged Floor Income that will be recognized in Core Earnings in future periods based on these hedge strategies.
(Dollars in millions) |
| June 30, 2023 |
|
| June 30, 2022 |
| ||
Total hedged Floor Income, net of tax(1)(2) |
| $ | 142 |
|
| $ | 255 |
|
(Dollars in millions) |
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Total hedged Floor Income, net of tax(1)(2) |
| $ | 224 |
|
| $ | 291 |
|
|
|
|
|
(2)Goodwill and Acquired Intangible Assets: Our Core Earnings exclude goodwill and intangible asset impairment and the amortization of acquired intangible assets. The following table summarizes the goodwill and acquired intangible asset adjustments.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Core Earnings goodwill and acquired intangible asset adjustments |
| $ | (10 | ) |
| $ | (4 | ) |
| $ | (17 | ) |
| $ | (14 | ) |
| $ | 3 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 7 |
|
Adjusted Core Earnings
Adjusted Core Earnings net income
35
2. Tangible Equity and Adjusted Core Earnings operating expenses exclude restructuring and regulatory-related expenses. Management excludes these expenses as it is one of the measures we review internally when making management decisions regarding our performance and how we allocate resources, as this presentation is a useful basis for management and investors to further analyze Core Earnings. We also refer to this information in our presentations with credit rating agencies, lenders and investors.
The following table summarizes these expenses which are excluded:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Restructuring/other reorganization expenses |
| $ | 21 |
|
| $ | — |
|
| $ | 25 |
|
| $ | 8 |
|
Regulatory-related expenses |
|
| 3 |
|
|
| 6 |
|
|
| 5 |
|
|
| 22 |
|
Total |
| $ | 24 |
|
| $ | 6 |
|
| $ | 30 |
|
| $ | 30 |
|
2. Adjusted Tangible Equity Ratio
Adjusted Tangible Equity Ratio measures the ratio of Navient’s Tangible Equity to its tangible assets. We adjust this ratio to exclude the assets and equity associated with our FFELP Loan portfolio because FFELP Loans are no longer originated and the FFELP Loan portfolio bears a 3% maximum loss exposure under the terms of the federal guaranty. Management believes that excluding this portfolio from the ratio enhances its usefulness to investors. Management uses this ratio, in addition to other metrics, for analysis and decision making related to capital allocation decisions. The Adjusted Tangible Equity Ratio is calculated as:
(Dollars in millions) |
| September 30, 2022 |
|
| September 30, 2021 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||
Navient Corporation's stockholders' equity |
| $ | 2,973 |
|
| $ | 2,723 |
|
| $ | 2,930 |
|
| $ | 2,927 |
|
Less: Goodwill and acquired intangible assets |
|
| 708 |
|
|
| 721 |
|
|
| 700 |
|
|
| 718 |
|
Tangible Equity |
|
| 2,265 |
|
|
| 2,002 |
|
|
| 2,230 |
|
|
| 2,209 |
|
Less: Equity held for FFELP Loans |
|
| 234 |
|
|
| 272 |
|
|
| 204 |
|
|
| 246 |
|
Adjusted Tangible Equity |
| $ | 2,031 |
|
| $ | 1,730 |
|
| $ | 2,026 |
|
| $ | 1,963 |
|
Divided by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total assets |
| $ | 73,625 |
|
| $ | 81,939 |
|
| $ | 65,598 |
|
| $ | 76,065 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Goodwill and acquired intangible assets |
|
| 708 |
|
|
| 721 |
|
|
| 700 |
|
|
| 718 |
|
FFELP Loans |
|
| 46,891 |
|
|
| 54,350 |
|
|
| 40,851 |
|
|
| 49,214 |
|
Adjusted tangible assets |
| $ | 26,026 |
|
| $ | 26,868 |
|
| $ | 24,047 |
|
| $ | 26,133 |
|
Adjusted Tangible Equity Ratio(1) |
|
| 7.8 | % |
|
| 6.4 | % | ||||||||
Adjusted Tangible Equity Ratio |
|
| 8.4 | % |
|
| 7.5 | % | ||||||||
|
|
(Dollars in millions) |
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Adjusted Tangible Equity (from above table) |
| $ | 2,031 |
|
| $ | 1,730 |
|
Plus: ending impact of derivative accounting on GAAP equity |
|
| (118 | ) |
|
| 417 |
|
Pro forma Adjusted Tangible Equity |
| $ | 1,913 |
|
| $ | 2,147 |
|
Divided by: adjusted tangible assets (from above table) |
| $ | 26,026 |
|
| $ | 26,868 |
|
Pro forma Adjusted Tangible Equity Ratio |
|
| 7.4 | % |
|
| 8.0 | % |
3. Earnings before Interest, Taxes, Depreciation and Amortization Expense (EBITDA)
This measures the operating performance of the Business Processing segment and is used by management and equity investors to monitor operating performance and determine the value of those businesses. EBITDA for the Business Processing segment is calculated as:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Pre-tax income |
| $ | 8 |
|
| $ | 13 |
|
| $ | 13 |
|
| $ | 31 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization expense(1) |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
EBITDA |
| $ | 8 |
|
| $ | 14 |
|
| $ | 14 |
|
| $ | 33 |
|
Divided by: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
| $ | 83 |
|
| $ | 87 |
|
| $ | 155 |
|
| $ | 181 |
|
EBITDA margin |
|
| 10 | % |
|
| 16 | % |
|
| 9 | % |
|
| 18 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Pre-tax income |
| $ | 12 |
|
| $ | 35 |
|
| $ | 44 |
|
| $ | 107 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense(1) |
|
| 1 |
|
|
| 3 |
|
|
| 2 |
|
|
| 6 |
|
EBITDA |
| $ | 13 |
|
| $ | 38 |
|
| $ | 46 |
|
| $ | 113 |
|
Divided by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
| $ | 79 |
|
| $ | 122 |
|
| $ | 260 |
|
| $ | 377 |
|
EBITDA margin |
|
| 16 | % |
|
| 31 | % |
|
| 18 | % |
|
| 30 | % |
36
|
|
4. Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off
Loans
The allowance for loan losses on the Private Education Loan portfolio used for the three credit metrics below excludes the expected future recoveries on previously fully charged-off loans to better reflect the current expected credit losses remaining in connection with the loans on balance sheet that have not charged off. That is, as of SeptemberJune 30, 2022,2023, the $1,132$919 million Private Education Loan allowance for loan losses excluding expected future recoveries on previously fully charged-off loans represents the current expected credit losses that remain in connection with the $20,003$17,732 million Private Education Loan portfolio. The $280$262 million of expected future recoveries on previously fully charged-off loans, which is collected over an average 15-year period, mechanically is a reduction to the overall allowance for loan losses. However, it is not related to the $20,003$17,732 million Private Education Loan portfolio on our balance sheet and, as a result, management excludes this impact to the allowance to better evaluate and assess our overall credit loss coverage on the Private Education Loan portfolio. We believe this provides a more meaningful and holistic view of the available credit loss coverage on our non-charged-off Private Education Loan portfolio. We believe this information is useful to our investors, lenders and rating agencies.
Allowance for Loan Losses Metrics – Private Education Loans
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Allowance at end of period (GAAP) |
| $ | 657 |
|
| $ | 921 |
|
| $ | 657 |
|
| $ | 921 |
|
Plus: expected future recoveries on previously fully |
|
| 262 |
|
|
| 312 |
|
|
| 262 |
|
|
| 312 |
|
Allowance at end of period excluding expected future |
| $ | 919 |
|
| $ | 1,233 |
|
| $ | 919 |
|
| $ | 1,233 |
|
Ending total loans |
| $ | 18,389 |
|
| $ | 20,589 |
|
| $ | 18,389 |
|
| $ | 20,589 |
|
Ending loans in repayment |
| $ | 17,720 |
|
| $ | 19,938 |
|
| $ | 17,720 |
|
| $ | 19,938 |
|
Net charge-offs |
| $ | 62 |
|
| $ | 70 |
|
| $ | 137 |
|
| $ | 139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance coverage of charge-offs (annualized): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GAAP |
|
| 2.6 |
|
|
| 3.3 |
|
|
| 2.4 |
|
|
| 3.3 |
|
Adjustment(1) |
|
| 1.1 |
|
|
| 1.1 |
|
|
| .9 |
|
|
| 1.1 |
|
Non-GAAP Financial Measure(1) |
|
| 3.7 |
|
|
| 4.4 |
|
|
| 3.3 |
|
|
| 4.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance as a percentage of the ending total loan |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GAAP |
|
| 3.6 | % |
|
| 4.5 | % |
|
| 3.6 | % |
|
| 4.5 | % |
Adjustment(1) |
|
| 1.4 |
|
|
| 1.5 |
|
|
| 1.4 |
|
|
| 1.5 |
|
Non-GAAP Financial Measure(1) |
|
| 5.0 | % |
|
| 6.0 | % |
|
| 5.0 | % |
|
| 6.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance as a percentage of the ending loans in |
|
|
|
|
|
|
|
|
|
|
|
| ||||
GAAP |
|
| 3.7 | % |
|
| 4.6 | % |
|
| 3.7 | % |
|
| 4.6 | % |
Adjustment(1) |
|
| 1.5 |
|
|
| 1.6 |
|
|
| 1.5 |
|
|
| 1.6 |
|
Non-GAAP Financial Measure(1) |
|
| 5.2 | % |
|
| 6.2 | % |
|
| 5.2 | % |
|
| 6.2 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Allowance at end of period (GAAP) |
| $ | 852 |
|
| $ | 980 |
|
| $ | 852 |
|
| $ | 980 |
|
Plus: expected future recoveries on previously fully charged-off loans |
|
| 280 |
|
|
| 397 |
|
|
| 280 |
|
|
| 397 |
|
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure) |
| $ | 1,132 |
|
| $ | 1,377 |
|
| $ | 1,132 |
|
| $ | 1,377 |
|
Ending total loans |
| $ | 20,003 |
|
| $ | 20,998 |
|
| $ | 20,003 |
|
| $ | 20,998 |
|
Ending loans in repayment |
| $ | 19,284 |
|
| $ | 19,795 |
|
| $ | 19,284 |
|
| $ | 19,795 |
|
Net charge-offs |
| $ | 129 |
|
| $ | 55 |
|
| $ | 268 |
|
| $ | 125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance coverage of charge-offs (annualized): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
| 1.7 |
|
|
| 4.5 |
|
|
| 2.4 |
|
|
| 5.9 |
|
Adjustment(1) |
|
| .5 |
|
|
| 1.8 |
|
|
| .8 |
|
|
| 2.4 |
|
Non-GAAP Financial Measure(1) |
|
| 2.2 |
|
|
| 6.3 |
|
|
| 3.2 |
|
|
| 8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as a percentage of the ending total loan balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
| 4.3 | % |
|
| 4.7 | % |
|
| 4.3 | % |
|
| 4.7 | % |
Adjustment(1) |
|
| 1.4 |
|
|
| 1.9 |
|
|
| 1.4 |
|
|
| 1.9 |
|
Non-GAAP Financial Measure(1) |
|
| 5.7 | % |
|
| 6.6 | % |
|
| 5.7 | % |
|
| 6.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as a percentage of the ending loans in repayment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
| 4.4 | % |
|
| 5.0 | % |
|
| 4.4 | % |
|
| 5.0 | % |
Adjustment(1) |
|
| 1.5 |
|
|
| 2.0 |
|
|
| 1.5 |
|
|
| 2.0 |
|
Non-GAAP Financial Measure(1) |
|
| 5.9 | % |
|
| 7.0 | % |
|
| 5.9 | % |
|
| 7.0 | % |
37
|
|
Legal Proceedings
For a discussion of legal matters as of SeptemberJune 30, 2022,2023, please refer to “Note 9 – Commitments and Contingencies”to our consolidated financial statements included in this report, which is incorporated into this item by reference.
Risk Factors
The risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 (the “Form 10-K”) should be considered together with information included in this Quarterly Report on Form 10-Q. For a discussion of our risk factors, please see the section entitled "Risk Factors" in our 2022 Form 10-K, as updated by the section entitled "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. These are not the only risks to which we are exposed. The following information amends and restates in its entirety the previously disclosed risk factor in our Form 10-K and our Form 10-Q for the second quarter ended June 30, 2022 relating to higher-than-anticipated increases in prepayment rates. Except for such additional information, we believe there have been no material changes from the risk factors previously disclosed in our Form 10-K and in the second quarter Form 10-Q.
Prepayments on our loans can materially impact our profitability, results of operations, financial condition, cash flows or future business prospects. Higher or lower prepayments can result from a variety of causes including borrower activity and changes in the education loan market as a result of market conditions, interest rate movements, loan forgiveness or other government sponsored initiatives.38
The rate at which borrowers prepay their loans can have a material impact on profitability, results of operations, financial condition, cash flows or future business prospects by affectingour net interest margin, the future cash flows from our loans including loans held by our securitization trusts. FFELP Loans and Private Education Loans may be voluntarily prepaid without penalty by the borrower, refinanced or consolidated with the borrower’s other loans through refinancing. Prepayment rates on education loans are subject to a variety of economic, political, competitive and other factors, including changes in our competitors’ business strategies, changes in interest rates, availability of alternative financings (including refinance and consolidations), legislative, executive and regulatory changes affecting the education loan market and the general economy. Refinance products offered by us, our competitors, and the Federal Government may increase the repayment rate on our FFELP Loans and Private Education Loans.
In particular, 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 also may increase or decrease the prepayment rates on education loans. For example, ED recently announced a set of policy changes and released proposed negotiated rulemaking proposals relating to the Defense to Repayment, interest capitalization rules, and Public Service Loan Forgiveness program under its Direct Loan program, which may result in an increase in consolidations of FFELP loans into Direct Loans (which results in the loan no longer being on our balance sheet). Prepayments on our loans may also decrease while programs or initiatives are discussed or rumored to be enacted in the future. On August 24, 2022, the Biden-Harris Administration announced its Student Debt Relief (SDR) Plan that extended the student loan repayment pause through December 31, 2022 and provides up to $20,000 in debt relief to certain income-qualified recipients of student loans held by ED. After several modifications, a final version of the SDR Plan was ultimately published in the Federal Register on October 12, 2022. While the SDR Plan currently provides that borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans, it also states that ED is assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by ED, including FFEL Program Loans and is discussing this with private lenders. If a broad-based student loan forgiveness plan or any policies or programs that encourage or require borrowers to consolidate their loans into Direct Loans held by ED is implemented, it will likely result in a significant increase in prepayments of our existing education loan portfolio and could materially and adversely impact our profitability, results of operations, financial condition, cash flows or future business prospects. We cannot predict what (if any) plans or policies regarding broad-based loan forgiveness or other related policies or programs will ultimately be implemented, the timing of when such plans or policies may be implemented, and/or the outcome of such actions.
FFELP Loans may also be repaid after default by the Guarantors of FFELP Loans. Conversely, borrowers might not choose to prepay their education loans, or the terms of their education loans may be extended as a result of grace periods, deferment periods, income-driven repayment plans, or other repayment terms or monthly payment amount modifications agreed to by the servicer, for example. FFELP Loan borrowers may be eligible for various existing income-based repayment programs under which borrowers can qualify for reduced or zero monthly payment or even debt forgiveness after a certain number of years of repayment.
Prolonged introductions of significant amounts of subsidized funding at below market interest rates — whether from federal or private sources — could increase the prepayment rates of our existing Private Education Loans and have a material adverse effect on our profitability, results of operations, financial condition, cash flows or future business prospects.
With respect to our securitization trusts when, as a result of unanticipated prepayment levels, education loans within a securitization trust amortize faster than originally contracted, the trust’s pool balance may decline at a rate faster than the prepayment rate assumed when the trust’s bonds were originally issued. If the trust’s pool balance declines faster than originally anticipated, in most of our securitization structures, the bonds issued by that trust will also be repaid faster than originally anticipated. In such cases, our net interest income may decrease and our future cash flows from the trust may similarly decline. Conversely, when education loans within a securitization trust amortize more slowly than originally contracted, the trust’s pool balance may decline more slowly than the prepayment rate assumed when the trust’s bonds were originally issued, and the bonds may be repaid more slowly than originally anticipated. In these cases, our net interest income increases and our future cash flows from the trust may increase. It is also possible, if the prepayment rate is especially slow and certain rights of the sellers or the servicer are not exercised or are insufficient or other action is not taken to counter the slower prepayment rate, the trust’s bonds may not be repaid by their legal final maturity date(s), which could result in an event of default under the underlying securitization agreements.
Quantitative and Qualitative Disclosures about Market Risk
LIBOR Transition
We continue to workOn June 30, 2023, the LIBOR administrator ceased publication (on a representative basis) of all USD LIBOR rates, including one-month and three-month LIBOR.
In preparation for the transition, we worked internally as well as with external parties to ensure an orderly transition from one-month and three-month LIBOR to an alternative benchmark rate by the June 30, 2023 transition date. We have established an internal LIBOR transition team whose purpose iswas to assess impacts, recommend plans and coordinate transition efforts among different business areas. Executive management and the LIBOR transition team provide quarterly reports to our Board of Directors. We have also established internal LIBOR working groups comprised of members from different business areas who meetmet regularly to assess specific business-level impacts and to implement operational changes necessary to effectuate a successful transition from LIBOR. In addition to our enterprise-wide efforts, we engageengaged with market participants, industry groups and regulators, including the Alternative Reference Rates Committee (the ARRC), to develop plans and documentation to facilitate the transition to an alternative benchmark rate.
We support the ARRC’s recommendationworked to replace LIBOR with the Secured Overnight Financing Rate (SOFR) and continue to complyalign with the ARRC’s recommended best practices for completing the transition from LIBOR. All our new variable rate Private Education Loans issued since December 2021 are indexed to SOFR. Also, as of December 31, 2021, we have ceased entering into any other new contracts that are indexed to LIBOR and, where practicable, have engaged with counterparties to modify certain existing contracts to transition the existing reference rate from LIBOR to SOFR. With respect to our legacy variable rate Private Education Loans and other financial contracts that reference USD LIBOR and contain fallbacks provisions that clearly specify a method for the transition from LIBOR, we plan to transitionsuccessfully transitioned such loans using such existing fallbacks. We have engaged with our IT vendors and impacted internal work groups to prepare and update our systems, procedures and processes to transition LIBOR-indexed contracts to SOFR. With respect to our financial instruments that do not include fallback provisions that clearly specify a method for the transition from LIBOR to an alternative benchmark rate, where practicable and commercially reasonable, we have made efforts to engage with customers, counterparties and investors to modify such instruments. Due to stringent noteholder consent requirements, it may be impracticable or impossiblewas not practicable to modify certain financial instruments like certain of our ABS. Further, the SAP formula for our FFELP Loans, which is indexed to one-month LIBOR, cannotwere not able to be modified without legislative action. Thus, in such instances, we may needneeded to rely on the New York state LIBOR legislation or the proposed federal legislation to transition to SOFR.
On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”)LIBOR Act) was signed into law. The LIBOR Act provides that for contracts that contain no fallback provision or contain fallback provisions that do not identify a specific USD LIBOR benchmark replacement (including the SAP formula for FFELP Loans), a benchmark replacement based on SOFR, as recommended by the Federal Reserve Bank of New York, will automatically replace the USD LIBOR benchmark in the contract after June 30, 2023. The recommended benchmark replacement will be based on the SOFR published byOn December 16, 2022, the Federal Reserve Bank of New York including any recommended spread adjustment andadopted a final rule that implements the LIBOR Act by identifying benchmark replacement conforming changes.rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. Following the enactment and implementation of the LIBOR Act, all of our financial instruments which are currently indexed to USD LIBOR have transitioned, or will transition, to SOFR by no later thanafter June 30, 2023. Specifically, after June 30, 2023, the SAP formula for FFELP Loans will transition to 30-day Average SOFR and our LIBOR-indexed FFELP ABS contracts that are subject to the LIBOR Act will transition to 30-day or 90-day Average SOFR. Our LIBOR-indexed Private Education Loan ABS contracts that are subject to the LIBOR Act will transition to 1-month or 3-month Term SOFR. Similarly, our LIBOR-indexed Private Education Loans will transition to 1-month or 3-month Term SOFR. Our LIBOR-indexed derivatives will transition to the Fallback Rate (SOFR) as defined in the ISDA 2020 IBOR Fallbacks Protocol published by the International Swaps and Derivatives Association, Inc. on October 23, 2020.
For a discussion of the risks related to the LIBOR transition, see “Risk Factors – Market, Funding & Liquidity Risk – The transition away from the LIBOR reference rate to an alternative reference ratethe Secured Overnight Financing Rate (SOFR) may create uncertainty in the capital markets and may negatively impact the value of existing LIBOR based financial instruments. Post transition alternative reference rates may perform significantly different than LIBOR”instruments and our financial results and business” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.10-K.
39
Interest Rate Sensitivity Analysis
Our interest rate risk management seeks to limit the impact of short-term movements in interest rates on our results of operations and financial position. The following tables summarize the potential effect on earnings over the next 12 months and the potential effect on fair values of balance sheet assets and liabilities at SeptemberJune 30, 20222023 and 2021,2022, based upon a sensitivity analysis performed by management assuming a hypothetical increase and decrease in market interest rates of 100 basis points. The earnings sensitivities assume an immediate increase and decrease in market interest rates of 100 basis points and are applied only to financial assets and liabilities, including hedging instruments, that existed at the balance sheet date and do not take into account any new assets, liabilities or hedging instruments that may arise over the next 12 months.
|
| As of September 30, 2022 |
|
| As of September 30, 2021 |
|
| As of June 30, 2023 |
|
| As of June 30, 2022 |
| ||||||||||||||||||||
|
| Impact on Annual Earnings If: |
|
| Impact on Annual Earnings If: |
|
| Impact on Annual Earnings If: |
|
| Impact on Annual Earnings If: |
| ||||||||||||||||||||
|
| Interest Rates |
|
| Interest Rates |
|
| Interest Rates |
|
| Interest Rates |
| ||||||||||||||||||||
(Dollars in millions, except per share amounts) |
| Increase 100 Basis Points |
|
| Decrease 100 Basis Points |
|
| Increase 100 Basis Points |
|
| Decrease 100 Basis Points |
|
| Increase |
|
| Decrease |
|
| Increase |
|
| Decrease |
| ||||||||
Effect on Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in pre-tax net income before mark-to -market gains (losses) on derivative and hedging activities(1) |
| $ | 53 |
|
| $ | (38 | ) |
| $ | (31 | ) |
| $ | 10 |
| ||||||||||||||||
Change in pre-tax net income before mark-to |
| $ | 40 |
|
| $ | 10 |
|
| $ | 38 |
|
| $ | (26 | ) | ||||||||||||||||
Mark-to-market gains (losses) on derivative and hedging activities |
|
| 22 |
|
|
| (22 | ) |
|
| 92 |
|
|
| (120 | ) |
|
| 24 |
|
|
| (25 | ) |
|
| 12 |
|
|
| (14 | ) |
Increase (decrease) in income before taxes |
| $ | 75 |
|
| $ | (60 | ) |
| $ | 61 |
|
| $ | (110 | ) |
| $ | 64 |
|
| $ | (15 | ) |
| $ | 50 |
|
| $ | (40 | ) |
Increase (decrease) in net income after taxes |
| $ | 58 |
|
| $ | (46 | ) |
| $ | 47 |
|
| $ | (85 | ) |
| $ | 49 |
|
| $ | (12 | ) |
| $ | 39 |
|
| $ | (31 | ) |
Increase (decrease) in diluted earnings per common share |
| $ | .42 |
|
| $ | (.34 | ) |
| $ | .29 |
|
| $ | (.52 | ) |
| $ | .40 |
|
| $ | (.09 | ) |
| $ | .27 |
|
| $ | (.21 | ) |
40
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| At September 30, 2022 |
| |||||||||||||||||
|
|
|
|
|
| Interest Rates: |
| |||||||||||||
|
|
|
|
|
| Change from Increase of 100 Basis Points |
|
| Change from Decrease of 100 Basis Points |
| ||||||||||
(Dollars in millions) |
| Fair Value |
|
| $ |
|
| % |
|
| $ |
|
| % |
| |||||
Effect on Fair Values: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education Loans |
| $ | 62,914 |
|
| $ | (81 | ) |
|
| — |
|
| $ | 119 |
|
|
| — |
|
Other earning assets |
|
| 4,088 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other assets |
|
| 3,495 |
|
|
| 47 |
|
|
| 1 |
|
|
| (42 | ) |
|
| (1 | ) |
Total assets gain/(loss) |
| $ | 70,497 |
|
| $ | (34 | ) |
|
| — | % |
| $ | 77 |
|
|
| — | % |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
| $ | 66,471 |
|
| $ | (256 | ) |
|
| — | % |
| $ | 276 |
|
|
| — | % |
Other liabilities |
|
| 977 |
|
|
| 141 |
|
|
| 14 |
|
|
| (144 | ) |
|
| (15 | ) |
Total liabilities (gain)/loss |
| $ | 67,448 |
|
| $ | (115 | ) |
|
| — | % |
| $ | 132 |
|
|
| — | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2021 |
| |||||||||||||||||
|
|
|
|
|
| Interest Rates: |
| |||||||||||||
|
|
|
|
|
| Change from Increase of 100 Basis Points |
|
| Change from Decrease of 100 Basis Points |
| ||||||||||
(Dollars in millions) |
| Fair Value |
|
| $ |
|
| % |
|
| $ |
|
| % |
| |||||
Effect on Fair Values: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education Loans |
| $ | 74,772 |
|
| $ | (279 | ) |
|
| — |
|
| $ | 432 |
|
|
| 1 | % |
Other earning assets |
|
| 3,845 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other assets |
|
| 3,948 |
|
|
| (124 | ) |
|
| (3 | ) |
|
| 263 |
|
|
| 7 |
|
Total assets gain/(loss) |
| $ | 82,565 |
|
| $ | (403 | ) |
|
| — | % |
| $ | 695 |
|
|
| 1 | % |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
| $ | 77,040 |
|
| $ | (356 | ) |
|
| — | % |
| $ | 386 |
|
|
| 1 | % |
Other liabilities |
|
| 1,019 |
|
|
| (40 | ) |
|
| (4 | ) |
|
| 193 |
|
|
| 19 |
|
Total liabilities (gain)/loss |
| $ | 78,059 |
|
| $ | (396 | ) |
|
| (1 | )% |
| $ | 579 |
|
|
| 1 | % |
A primary objective in our funding is to minimize our sensitivity to changing interest rates by generally funding our floating rate education loan portfolio with floating rate debt and our fixed rate education loan portfolio with fixed rate debt although we can have a mismatch at times. In addition, we can have a mismatch in the index (including the frequency of reset) of floating rate debt versus floating rate assets. In addition, due to the ability of some FFELP Loans to earn Floor Income, we can have a fixed versus floating mismatch in funding if the education loan earns at the fixed borrower rate and the funding remains floating. We use Floor Income Contracts, pay-fixed swaps and fixed rate debt to economically hedge embedded floor incomeFloor Income in our FFELP loans. Historically, we have used these instruments on a periodic basis and depending upon market conditions and pricing, we may enter into additional hedges in the future. The result of these hedging transactions is to fix the relative spread between the education loan asset rate and the variable rate liability.funding instrument rate.
In the preceding tables, under the scenario where interest rates increase or decrease by 100 basis points, the change in pre-tax net income before the mark-to-market gains (losses) on derivative and hedging activities is primarily due to the impact of (i) our unhedged FFELP Loans being in a fixed-rate mode due to Floor Income, while being funded with variable rate debt in low interest rate environments; (ii) certain FFELP fixed rate loans becoming variable interest rate loans when variable interest rates rise above a certain level (Special Allowance Payment of “SAP”). When these loans are funded with fixed rate debt (as we do for a portion of the portfolio to economically hedge Floor Income) we earn additional interest income when earning the higher variable rate that is in effect; and (iii) a portion of our variable rate assets being funded with fixed rate liabilities. Item (i) will generally cause income to decrease when interest rates increase and income to increase when interest rates decrease. Item (ii) and (iii) have the opposite effect. The changeschange due to the interest rate scenariosscenario where interest rates increase by 100 basis points in the current period areis primarily a result of itemsitem (ii) and (iii) having a more significant impact than item (i) primarily as a result of interest rates being significantly higher compared to the prior period. The changeschange due to the interest scenario where interest rates decrease by 100 basis points in the priorcurrent period areis primarily a result of item (i) having a more significant impact (specifically related to the annual reset floors in connection with a portion of the Stafford FFELP loan portfolio) than itemsitem (ii) and (iii) primarily as a result of interest rates being significantly higher compared to the prior period. The relative changes from the prior period are a result of interest rates being significantly lower at that time.in the prior period. In addition, item (iii) had more of an impact in the prior period due to a higher balance of variable rate assets being funded with fixed rate liabilities.
41
In the preceding tables, under the scenario where interest rates increase or decrease by 100 basis points, the change in mark-to-market gains (losses) on derivative and hedging activities in both periods is primarily due to (i) the notional amount and remaining term of our derivative portfolio and related hedged debt and (ii) the interest rate environment. In both periods, the mark-to-market gains (losses) are primarily related to derivatives that don’t qualify for hedge accounting that are used to economically hedge Floor Income as well as the origination of fixed rate Private Education Refinance loans. As a result of not qualifying for hedge accounting, there is not an offsetting mark- to-market of the hedged item in this analysis. The mark-to-market gains (losses) where interest rates increase and decrease 100 basis points are lower in 2022 than 2021 primarily as a result of an increased interest rate environment in 2022 and a decline in the notional amount of derivatives outstanding in connection with the decrease in the education loan portfolio over that time period.
In addition to interest rate risk addressed in the preceding tables, we are also exposed to risks related to foreign currency exchange rates. Foreign currency exchange risk is primarily the result of foreign currency denominated debt issued by us. When we issue foreign denominated corporate unsecured and securitization debt, our policy is to use cross currency interest rate swaps to swap all foreign currency denominated debt payments (fixed and floating) to USD LIBOR using a fixed exchange rate. In the tables above, there would be an immaterial impact on earnings if exchange rates were to decrease or increase, due to the terms of the hedging instrument and hedged items matching. The balance sheet interest-bearing liabilities would be affected by a change in exchange rates; however, the change would be materially offset by the cross-currency interest rate swaps in other assets or other liabilities. In certain economic environments, volatility in the spread between spot and forward foreign exchange rates has resulted in mark-to-market impacts to current period earnings which have not been factored into the above analysis. The earnings impact is noncash, and at maturity of the instruments the cumulative mark-to-market impact will be zero. Navient has not issued foreign currency denominated debt since 2008.
Asset and Liability Funding Gap
The tablestable below presentpresents our assets and liabilities (funding) arranged by underlying indices as of SeptemberJune 30, 2022. In the following GAAP presentation, the funding gap only2023. Management analyzes interest rate risk and in doing so includes all derivatives that are economically hedging our debt whether they qualify as effective hedges (those derivatives which are reflected in net interest margin, as opposed to those reflected inor not (Core Earnings basis). Accordingly, we present the “gains (losses)asset and liability funding gap on derivatives and hedging activities, net” line on the consolidated statements of income).a Core Earnings basis. The difference between the asset and the funding is the funding gap for the specified index. This represents our exposure to interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at different frequencies or may not move in the same direction or at the same magnitude.
Management analyzes
42
Index |
| Frequency of |
| Assets |
|
| Funding(1) |
|
| Funding |
| |||
3-month Treasury bill |
| weekly |
| $ | 2.1 |
|
| $ | — |
|
| $ | 2.1 |
|
3-month Treasury bill |
| annual |
|
| .1 |
|
|
| — |
|
|
| .1 |
|
Prime |
| annual |
|
| .1 |
|
|
| — |
|
|
| .1 |
|
Prime |
| quarterly |
|
| 1.1 |
|
|
| — |
|
|
| 1.1 |
|
Prime |
| monthly |
|
| 3.8 |
|
|
| — |
|
|
| 3.8 |
|
3-month LIBOR(2) |
| quarterly |
|
| .2 |
|
|
| 15.8 |
|
|
| (15.6 | ) |
1-month LIBOR(2) |
| monthly |
|
| 2.5 |
|
|
| 24.0 |
|
|
| (21.5 | ) |
1-month LIBOR(2) |
| daily |
|
| 38.5 |
|
|
| — |
|
|
| 38.5 |
|
SOFR(3) |
| various |
|
| .1 |
|
|
| .4 |
|
|
| (.3 | ) |
Non-Discrete reset(3)(4) |
| monthly |
|
| — |
|
|
| 4.8 |
|
|
| (4.8 | ) |
Non-Discrete reset(5) |
| daily/weekly |
|
| 3.4 |
|
|
| .1 |
|
|
| 3.3 |
|
Fixed Rate(6) |
|
|
|
| 13.8 |
|
|
| 20.6 |
|
|
| (6.8 | ) |
Total |
|
|
| $ | 65.7 |
|
| $ | 65.7 |
|
| $ | — |
|
GAAP Basis:
Index (Dollars in billions) |
| Frequency of Variable Resets |
| Assets |
|
| Funding(1) |
|
| Funding Gap |
| |||
3-month Treasury bill |
| weekly |
| $ | 2.4 |
|
| $ | — |
|
| $ | 2.4 |
|
3-month Treasury bill |
| annual |
|
| .2 |
|
|
| — |
|
|
| .2 |
|
Prime |
| annual |
|
| .2 |
|
|
| — |
|
|
| .2 |
|
Prime |
| quarterly |
|
| 1.3 |
|
|
| — |
|
|
| 1.3 |
|
Prime |
| monthly |
|
| 4.6 |
|
|
| — |
|
|
| 4.6 |
|
3-month LIBOR |
| quarterly |
|
| .3 |
|
|
| 20.1 |
|
|
| (19.8 | ) |
3-month LIBOR(2) |
| monthly |
|
| — |
|
|
| — |
|
|
| — |
|
3-month LIBOR(2) |
| daily |
|
| — |
|
|
| .1 |
|
|
| (.1 | ) |
1-month LIBOR |
| monthly |
|
| 3.0 |
|
|
| 28.0 |
|
|
| (25.0 | ) |
1-month LIBOR |
| daily |
|
| 44.2 |
|
|
| — |
|
|
| 44.2 |
|
SOFR(3) |
| various |
|
| .1 |
|
|
| .9 |
|
|
| (.8 | ) |
Non-Discrete reset(2)(4) |
| monthly |
|
| — |
|
|
| 4.0 |
|
|
| (4.0 | ) |
Non-Discrete reset(5) |
| daily/weekly |
|
| 4.0 |
|
|
| .1 |
|
|
| 3.9 |
|
Fixed Rate(6) |
|
|
|
| 13.3 |
|
|
| 20.4 |
|
|
| (7.1 | ) |
Total |
|
|
| $ | 73.6 |
|
| $ | 73.6 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Earnings Basis:
Index (Dollars in billions) |
| Frequency of Variable Resets |
| Assets |
|
| Funding(1) |
|
| Funding Gap |
| |||
3-month Treasury bill |
| weekly |
| $ | 2.4 |
|
| $ | — |
|
| $ | 2.4 |
|
3-month Treasury bill |
| annual |
|
| .2 |
|
|
| — |
|
|
| .2 |
|
Prime |
| annual |
|
| .2 |
|
|
| — |
|
|
| .2 |
|
Prime |
| quarterly |
|
| 1.3 |
|
|
| — |
|
|
| 1.3 |
|
Prime |
| monthly |
|
| 4.6 |
|
|
| — |
|
|
| 4.6 |
|
3-month LIBOR |
| quarterly |
|
| .3 |
|
|
| — |
|
|
| .3 |
|
3-month LIBOR(2) |
| monthly |
|
| — |
|
|
| — |
|
|
| — |
|
3-month LIBOR(2) |
| daily |
|
| — |
|
|
| — |
|
|
| — |
|
1-month LIBOR |
| monthly |
|
| 3.0 |
|
|
| 48.9 |
|
|
| (45.9 | ) |
1-month LIBOR |
| daily |
|
| 44.2 |
|
|
| — |
|
|
| 44.2 |
|
SOFR(3) |
| various |
|
| .1 |
|
|
| — |
|
|
| .1 |
|
Non-Discrete reset(2)(4) |
| monthly |
|
| — |
|
|
| 2.8 |
|
|
| (2.8 | ) |
Non-Discrete reset(5) |
| daily/weekly |
|
| 4.0 |
|
|
| .1 |
|
|
| 3.9 |
|
Fixed Rate(6) |
|
|
|
| 13.5 |
|
|
| 22.0 |
|
|
| (8.5 | ) |
Total |
|
|
| $ | 73.8 |
|
| $ | 73.8 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
We use interest rate swaps and other derivatives to achieve our risk management objectives. Our asset liability management strategy is to match assets with debt (in combination with derivatives) that have the same underlying index and reset frequency or, when economical, have interest rate characteristics that we believe are highly correlated. Interest earned on our FFELP Loans is primarily indexed to daily one-month LIBOR and our cost of funds is primarily indexed to rates other than daily one-month LIBOR. A source of variability in FFELP net interest income could also be Floor Income we earn on certain FFELP Loans. Pursuant to the terms of the FFELP, certain FFELP Loans can earn interest at the stated fixed rate of interest as underlying debt interest rate expense remains variable. We refer to this additional spread income as “Floor Income.” Floor Income can be volatile since it is dependent on interest rate levels. We frequently hedge this volatility to lock in the value of the Floor Income over the term of the contract. Interest earned on our Private Education Refinance Loans is generally fixed rate with the related cost of funds generally fixed rate as well. Interest earned on the remaining Private Education Loans is generally indexed to either one-month Prime or LIBOR rates and our cost of funds is primarily indexed to one-month or three-month LIBOR. The use of funding with index types and reset frequencies that are different from our assets exposes us to interest rate risk in the form of basis and repricing risk. This could result in our cost of funds not moving in the same direction or with the same magnitude as the yield on our assets. While we believe this risk is low, as all of these indices are short-term with rate movements that are highly correlated over a long period of time, market disruptions (which have occurred in prior years) can lead to a temporary divergence between indices resulting in a negative impact to our earnings.
earnings. See previous discussion at "Quantitative and Qualitative Disclosures about Market Risk – LIBOR Transition" regarding the transition of the LIBOR indexed instruments to SOFR after June 30, 2023.
43
Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchases
The following table provides information relating to our purchases of shares of our common stock in the three and six months ended SeptemberJune 30, 2022.2023.
(In millions, except per share data) |
| Total Number |
|
| Average Price |
|
| Total Number of |
|
| Approximate Dollar |
| ||||
Period: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
April 1 — April 30, 2023 |
|
| 1.5 |
|
| $ | 16.21 |
|
|
| 1.5 |
|
| $ | 491 |
|
May 1 — May 31, 2023 |
|
| 1.8 |
|
|
| 15.19 |
|
|
| 1.8 |
|
| $ | 463 |
|
June 1 — June 30, 2023 |
|
| 1.6 |
|
|
| 17.91 |
|
|
| 1.6 |
|
| $ | 435 |
|
Total second-quarter 2023 |
|
| 4.9 |
|
| $ | 16.38 |
|
|
| 4.9 |
|
|
|
| |
(In millions, except per share data) |
| Total Number of Shares Purchased(1) |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2) |
|
| Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs(2) |
| ||||
Period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1 — July 31, 2022 |
|
| 1.6 |
|
| $ | 15.21 |
|
|
| 1.6 |
|
| $ | 755 |
|
August 1 — August 31, 2022 |
|
| 2.3 |
|
|
| 16.34 |
|
|
| 2.3 |
|
| $ | 718 |
|
September 1 — September 30, 2022 |
|
| 2.4 |
|
|
| 14.09 |
|
|
| 2.4 |
|
| $ | 685 |
|
Total third-quarter 2022 |
|
| 6.3 |
|
| $ | 15.19 |
|
|
| 6.3 |
|
|
|
|
|
|
|
|
|
Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive and Principal Financial Officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of SeptemberJune 30, 2022.2023. Based on this evaluation, our Principal Executive and Principal Financial Officers concluded that, as of SeptemberJune 30, 2022,2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended SeptemberJune 30, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
44
Exhibits
31.1* | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of | |
| ||
31.2* | ||
| Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of | |
| ||
32.1** | ||
| ||
| ||
32.2** | ||
| ||
| ||
101.INS* | ||
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith ** Furnished herewith 45
|
|
|
|
Financial Statements
NAVIENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(Unaudited)
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
FFELP Loans (net of allowance for losses of $233 and $262, respectively) |
| $ | 46,891 |
|
| $ | 52,641 |
| ||||||||
Private Education Loans (net of allowance for losses of $852 and $1,009, respectively) |
|
| 19,151 |
|
|
| 20,171 |
| ||||||||
FFELP Loans (net of allowance for losses of $200 and $222, respectively) |
| $ | 40,851 |
|
| $ | 43,525 |
| ||||||||
Private Education Loans (net of allowance for losses of $657 and $800, |
|
| 17,732 |
|
|
| 18,725 |
| ||||||||
Investments |
|
|
|
|
|
|
|
|
|
| 158 |
|
|
| 167 |
|
Held-to-maturity |
|
| 62 |
|
|
| 74 |
| ||||||||
Other |
|
| 114 |
|
|
| 193 |
| ||||||||
Total investments |
|
| 176 |
|
|
| 267 |
| ||||||||
Cash and cash equivalents |
|
| 1,364 |
|
|
| 905 |
|
|
| 1,317 |
|
|
| 1,535 |
|
Restricted cash and cash equivalents |
|
| 2,548 |
|
|
| 2,673 |
|
|
| 1,951 |
|
|
| 3,272 |
|
Goodwill and acquired intangible assets, net |
|
| 708 |
|
|
| 725 |
|
|
| 700 |
|
|
| 705 |
|
Other assets |
|
| 2,787 |
|
|
| 3,223 |
|
|
| 2,889 |
|
|
| 2,866 |
|
Total assets |
| $ | 73,625 |
|
| $ | 80,605 |
|
| $ | 65,598 |
|
| $ | 70,795 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Short-term borrowings |
| $ | 5,677 |
|
| $ | 2,490 |
|
| $ | 4,838 |
|
| $ | 5,870 |
|
Long-term borrowings |
|
| 63,998 |
|
|
| 74,488 |
|
|
| 56,936 |
|
|
| 61,026 |
|
Other liabilities |
|
| 977 |
|
|
| 1,019 |
|
|
| 894 |
|
|
| 922 |
|
Total liabilities |
|
| 70,652 |
|
|
| 77,997 |
|
|
| 62,668 |
|
|
| 67,818 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Series A Junior Participating Preferred Stock, par value $0.20 per share; 2 million shares authorized at December 31, 2021; no shares issued or outstanding |
|
| — |
|
|
| — |
| ||||||||
Common stock, par value $0.01 per share, 1.125 billion shares authorized: 461 million and 459 million shares issued, respectively |
|
| 4 |
|
|
| 4 |
| ||||||||
Series A Junior Participating Preferred Stock, par value $0.20 per share; |
|
| — |
|
|
| — |
| ||||||||
Common stock, par value $0.01 per share, 1.125 billion shares authorized: |
|
| 4 |
|
|
| 4 |
| ||||||||
Additional paid-in capital |
|
| 3,309 |
|
|
| 3,282 |
|
|
| 3,343 |
|
|
| 3,313 |
|
Accumulated other comprehensive income (loss) (net of tax expense (benefit) of $28 and $(45), respectively) |
|
| 84 |
|
|
| (133 | ) | ||||||||
Accumulated other comprehensive income (net of tax expense |
|
| 65 |
|
|
| 87 |
| ||||||||
Retained earnings |
|
| 4,406 |
|
|
| 3,939 |
|
|
| 4,625 |
|
|
| 4,490 |
|
Total Navient Corporation stockholders’ equity before treasury stock |
|
| 7,803 |
|
|
| 7,092 |
| ||||||||
Less: Common stock held in treasury at cost: 325 million and 305 million shares, respectively |
|
| (4,830 | ) |
|
| (4,495 | ) | ||||||||
Total Navient Corporation stockholders’ equity |
|
| 2,973 |
|
|
| 2,597 |
| ||||||||
Noncontrolling interest |
|
| — |
|
|
| 11 |
| ||||||||
Total stockholders’ equity before treasury stock |
|
| 8,037 |
|
|
| 7,894 |
| ||||||||
Less: Common stock held in treasury at cost: 342 million and 331 million |
|
| (5,107 | ) |
|
| (4,917 | ) | ||||||||
Total equity |
|
| 2,973 |
|
|
| 2,608 |
|
|
| 2,930 |
|
|
| 2,977 |
|
Total liabilities and equity |
| $ | 73,625 |
|
| $ | 80,605 |
|
| $ | 65,598 |
|
| $ | 70,795 |
|
Supplemental information — assets and liabilities of consolidated variable interest entities:
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
FFELP Loans |
| $ | 46,753 |
|
| $ | 52,502 |
|
| $ | 40,782 |
|
| $ | 43,465 |
|
Private Education Loans |
|
| 17,358 |
|
|
| 18,147 |
|
|
| 16,397 |
|
|
| 17,207 |
|
Restricted cash |
|
| 2,511 |
|
|
| 2,649 |
|
|
| 1,924 |
|
|
| 3,233 |
|
Other assets, net |
|
| 1,396 |
|
|
| 1,522 |
|
|
| 1,560 |
|
|
| 1,356 |
|
Short-term borrowings |
|
| 4,288 |
|
|
| 2,188 |
|
|
| 3,602 |
|
|
| 4,458 |
|
Long-term borrowings |
|
| 58,587 |
|
|
| 67,107 |
|
|
| 51,804 |
|
|
| 55,598 |
|
Net assets of consolidated variable interest entities |
| $ | 5,143 |
|
| $ | 5,525 |
|
| $ | 5,257 |
|
| $ | 5,205 |
|
See accompanying notes to consolidated financial statements.
46
NAVIENT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
FFELP Loans |
| $ | 553 |
|
| $ | 368 |
|
| $ | 1,312 |
|
| $ | 1,106 |
|
| $ | 720 |
|
| $ | 410 |
|
| $ | 1,413 |
|
| $ | 759 |
|
Private Education Loans |
|
| 309 |
|
|
| 291 |
|
|
| 862 |
|
|
| 905 |
|
|
| 341 |
|
|
| 277 |
|
|
| 686 |
|
|
| 553 |
|
Cash and investments |
|
| 19 |
|
|
| 1 |
|
|
| 25 |
|
|
| 2 |
|
|
| 36 |
|
|
| 5 |
|
|
| 70 |
|
|
| 6 |
|
Total interest income |
|
| 881 |
|
|
| 660 |
|
|
| 2,199 |
|
|
| 2,013 |
|
|
| 1,097 |
|
|
| 692 |
|
|
| 2,169 |
|
|
| 1,318 |
|
Total interest expense |
|
| 641 |
|
|
| 326 |
|
|
| 1,301 |
|
|
| 995 |
|
|
| 919 |
|
|
| 371 |
|
|
| 1,756 |
|
|
| 660 |
|
Net interest income |
|
| 240 |
|
|
| 334 |
|
|
| 898 |
|
|
| 1,018 |
|
|
| 178 |
|
|
| 321 |
|
|
| 413 |
|
|
| 658 |
|
Less: provisions for loan losses |
|
| 28 |
|
|
| 22 |
|
|
| 62 |
|
|
| (66 | ) |
|
| 11 |
|
|
| 18 |
|
|
| (3 | ) |
|
| 34 |
|
Net interest income after provisions for loan losses |
|
| 212 |
|
|
| 312 |
|
|
| 836 |
|
|
| 1,084 |
|
|
| 167 |
|
|
| 303 |
|
|
| 416 |
|
|
| 624 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Servicing revenue |
|
| 24 |
|
|
| 47 |
|
|
| 60 |
|
|
| 149 |
|
|
| 16 |
|
|
| 17 |
|
|
| 33 |
|
|
| 36 |
|
Asset recovery and business processing revenue |
|
| 80 |
|
|
| 135 |
|
|
| 264 |
|
|
| 416 |
|
|
| 83 |
|
|
| 88 |
|
|
| 155 |
|
|
| 185 |
|
Other income |
|
| 6 |
|
|
| 3 |
|
|
| 22 |
|
|
| 9 |
| ||||||||||||||||
Gains on sales of loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 78 |
| ||||||||||||||||
Gains (losses) on debt repurchases |
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| (32 | ) | ||||||||||||||||
Other revenue |
|
| 4 |
|
|
| 7 |
|
|
| 11 |
|
|
| 16 |
| ||||||||||||||||
Gains (losses) on derivative and hedging activities, net |
|
| 40 |
|
|
| (5 | ) |
|
| 161 |
|
|
| 21 |
|
|
| 26 |
|
|
| 22 |
|
|
| 17 |
|
|
| 120 |
|
Total other income |
|
| 150 |
|
|
| 160 |
|
|
| 507 |
|
|
| 641 |
|
|
| 129 |
|
|
| 134 |
|
|
| 216 |
|
|
| 357 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Salaries and benefits |
|
| 106 |
|
|
| 141 |
|
|
| 337 |
|
|
| 433 |
|
|
| 98 |
|
|
| 110 |
|
|
| 203 |
|
|
| 231 |
|
Other operating expenses |
|
| 88 |
|
|
| 107 |
|
|
| 251 |
|
|
| 325 |
|
|
| 84 |
|
|
| 80 |
|
|
| 165 |
|
|
| 164 |
|
Total operating expenses |
|
| 194 |
|
|
| 248 |
|
|
| 588 |
|
|
| 758 |
|
|
| 182 |
|
|
| 190 |
|
|
| 368 |
|
|
| 395 |
|
Goodwill and acquired intangible asset impairment and amortization expense |
|
| 10 |
|
|
| 4 |
|
|
| 17 |
|
|
| 14 |
|
|
| 3 |
|
|
| 3 |
|
|
| 5 |
|
|
| 7 |
|
Restructuring/other reorganization expenses |
|
| 21 |
|
|
| — |
|
|
| 25 |
|
|
| 8 |
|
|
| 15 |
|
|
| — |
|
|
| 19 |
|
|
| 3 |
|
Total expenses |
|
| 225 |
|
|
| 252 |
|
|
| 630 |
|
|
| 780 |
|
|
| 200 |
|
|
| 193 |
|
|
| 392 |
|
|
| 405 |
|
Income before income tax expense |
|
| 137 |
|
|
| 220 |
|
|
| 713 |
|
|
| 945 |
|
|
| 96 |
|
|
| 244 |
|
|
| 240 |
|
|
| 576 |
|
Income tax expense |
|
| 32 |
|
|
| 47 |
|
|
| 173 |
|
|
| 217 |
|
|
| 30 |
|
|
| 64 |
|
|
| 63 |
|
|
| 141 |
|
Net income |
| $ | 105 |
|
| $ | 173 |
|
| $ | 540 |
|
| $ | 728 |
|
| $ | 66 |
|
| $ | 180 |
|
| $ | 177 |
|
| $ | 435 |
|
Basic earnings per common share |
| $ | .75 |
|
| $ | 1.05 |
|
| $ | 3.71 |
|
| $ | 4.20 |
|
| $ | .53 |
|
| $ | 1.23 |
|
| $ | 1.40 |
|
| $ | 2.93 |
|
Average common shares outstanding |
|
| 139 |
|
|
| 165 |
|
|
| 145 |
|
|
| 174 |
|
|
| 124 |
|
|
| 146 |
|
|
| 126 |
|
|
| 149 |
|
Diluted earnings per common share |
| $ | .75 |
|
| $ | 1.04 |
|
| $ | 3.67 |
|
| $ | 4.15 |
|
| $ | .52 |
|
| $ | 1.22 |
|
| $ | 1.39 |
|
| $ | 2.90 |
|
Average common and common equivalent shares outstanding |
|
| 141 |
|
|
| 167 |
|
|
| 147 |
|
|
| 176 |
|
|
| 125 |
|
|
| 147 |
|
|
| 128 |
|
|
| 150 |
|
Dividends per common share |
| $ | .16 |
|
| $ | .16 |
|
| $ | .48 |
|
| $ | .48 |
|
| $ | .16 |
|
| $ | .16 |
|
| $ | .32 |
|
| $ | .32 |
|
See accompanying notes to consolidated financial statements.
47
NAVIENT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income |
| $ | 66 |
|
| $ | 180 |
|
| $ | 177 |
|
| $ | 435 |
|
Net changes in cash flow hedges, net of taxes(1) |
|
| (1 | ) |
|
| 49 |
|
|
| (22 | ) |
|
| 163 |
|
Total comprehensive income |
| $ | 65 |
|
| $ | 229 |
|
| $ | 155 |
|
| $ | 598 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income |
| $ | 105 |
|
| $ | 173 |
|
| $ | 540 |
|
| $ | 728 |
|
Net changes in cash flow hedges, net of taxes(1) |
|
| 54 |
|
|
| 20 |
|
|
| 217 |
|
|
| 85 |
|
Total comprehensive income |
| $ | 159 |
|
| $ | 193 |
|
| $ | 757 |
|
| $ | 813 |
|
|
|
See accompanying notes to consolidated financial statements.
48
NAVIENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Common Stock Shares |
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common |
|
| Paid-In |
|
| Comprehensive |
|
| Retained |
|
| Treasury |
|
| Stockholders' |
|
| Noncontrolling |
|
| Total |
| ||||||||
|
| Issued |
|
| Treasury |
|
| Outstanding |
|
| Stock |
|
| Capital |
|
| Income (Loss) |
|
| Earnings |
|
| Stock |
|
| Equity |
|
| Interest |
|
| Equity |
| |||||||||||
Balance at June 30, 2021 |
|
| 458,044,687 |
|
|
| (290,204,499 | ) |
|
| 167,840,188 |
|
| $ | 4 |
|
| $ | 3,268 |
|
| $ | (209 | ) |
| $ | 3,828 |
|
| $ | (4,190 | ) |
| $ | 2,701 |
|
| $ | 11 |
|
| $ | 2,712 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 173 |
|
|
| — |
|
|
| 173 |
|
|
| — |
|
|
| 173 |
|
Other comprehensive income (loss), net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20 |
|
|
| — |
|
|
| — |
|
|
| 20 |
|
|
| — |
|
|
| 20 |
|
Total comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 193 |
|
|
| — |
|
|
| 193 |
|
Cash dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.16 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26 | ) |
|
| — |
|
|
| (26 | ) |
|
| — |
|
|
| (26 | ) |
Dividend equivalent units related to employee stock-based compensation plans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of common shares |
|
| 552,194 |
|
|
| — |
|
|
| 552,194 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Common stock repurchased |
|
| — |
|
|
| (7,002,852 | ) |
|
| (7,002,852 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (150 | ) |
|
| (150 | ) |
|
| — |
|
|
| (150 | ) |
Shares repurchased related to employee stock-based compensation plans |
|
| — |
|
|
| (217,158 | ) |
|
| (217,158 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Net activity in noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at September 30, 2021 |
|
| 458,596,881 |
|
|
| (297,424,509 | ) |
|
| 161,172,372 |
|
| $ | 4 |
|
| $ | 3,277 |
|
| $ | (189 | ) |
| $ | 3,975 |
|
| $ | (4,344 | ) |
| $ | 2,723 |
|
| $ | 11 |
|
| $ | 2,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022 |
|
| 461,013,036 |
|
|
| (319,134,333 | ) |
|
| 141,878,703 |
|
| $ | 4 |
|
| $ | 3,305 |
|
| $ | 30 |
|
| $ | 4,323 |
|
| $ | (4,735 | ) |
| $ | 2,927 |
|
| $ | — |
|
| $ | 2,927 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 105 |
|
|
| — |
|
|
| 105 |
|
|
| — |
|
|
| 105 |
|
Other comprehensive income (loss), net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| 54 |
|
|
| — |
|
|
| 54 |
|
Total comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 159 |
|
|
| — |
|
|
| 159 |
|
Cash dividends: |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.16 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| (22 | ) |
Dividend equivalent units related to employee stock-based compensation plans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of common shares |
|
| 3,165 |
|
|
| — |
|
|
| 3,165 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Common stock repurchased |
|
| — |
|
|
| (6,261,736 | ) |
|
| (6,261,736 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (95 | ) |
|
| (95 | ) |
|
| — |
|
|
| (95 | ) |
Shares repurchased related to employee stock-based compensation plans |
|
| — |
|
|
| (5,959 | ) |
|
| (5,959 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net activity in noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at September 30, 2022 |
|
| 461,016,201 |
|
|
| (325,402,028 | ) |
|
| 135,614,173 |
|
| $ | 4 |
|
| $ | 3,309 |
|
| $ | 84 |
|
| $ | 4,406 |
|
| $ | (4,830 | ) |
| $ | 2,973 |
|
| $ | — |
|
| $ | 2,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Common Stock Shares |
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Common |
|
| Paid-In |
|
| Comprehensive |
|
| Retained |
|
| Treasury |
|
| Stockholders' |
|
| Noncontrolling |
|
| Total |
| |||||||||||
|
| Issued |
|
| Treasury |
|
| Outstanding |
|
| Stock |
|
| Capital |
|
| Income (Loss) |
|
| Earnings |
|
| Stock |
|
| Equity |
|
| Interest |
|
| Equity |
| |||||||||||
Balance at March 31, 2022 |
|
| 460,989,285 |
|
|
| (312,244,634 | ) |
|
| 148,744,651 |
|
| $ | 4 |
|
| $ | 3,302 |
|
| $ | (19 | ) |
| $ | 4,167 |
|
| $ | (4,630 | ) |
| $ | 2,824 |
|
| $ | 6 |
|
| $ | 2,830 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180 |
|
|
| — |
|
|
| 180 |
|
|
| — |
|
|
| 180 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49 |
|
|
| — |
|
|
| — |
|
|
| 49 |
|
|
| — |
|
|
| 49 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 229 |
|
|
| — |
|
|
| 229 |
|
Cash dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Common stock ($.16 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23 | ) |
|
| — |
|
|
| (23 | ) |
|
| — |
|
|
| (23 | ) |
Dividend equivalent units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Issuance of common shares |
|
| 23,751 |
|
|
| — |
|
|
| 23,751 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Common stock repurchased |
|
| — |
|
|
| (6,885,804 | ) |
|
| (6,885,804 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (105 | ) |
|
| (105 | ) |
|
| — |
|
|
| (105 | ) |
Shares repurchased related to |
|
| — |
|
|
| (3,895 | ) |
|
| (3,895 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net activity in noncontrolling |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6 | ) |
|
| (6 | ) |
Balance at June 30, 2022 |
|
| 461,013,036 |
|
|
| (319,134,333 | ) |
|
| 141,878,703 |
|
| $ | 4 |
|
| $ | 3,305 |
|
| $ | 30 |
|
| $ | 4,323 |
|
| $ | (4,735 | ) |
| $ | 2,927 |
|
| $ | — |
|
| $ | 2,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at March 31, 2023 |
|
| 463,508,522 |
|
|
| (337,043,677 | ) |
|
| 126,464,845 |
|
| $ | 4 |
|
| $ | 3,335 |
|
| $ | 66 |
|
| $ | 4,579 |
|
| $ | (5,026 | ) |
| $ | 2,958 |
|
| $ | - |
|
| $ | 2,958 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 66 |
|
|
| — |
|
|
| 66 |
|
|
| — |
|
|
| 66 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 65 |
|
|
| — |
|
|
| 65 |
|
Cash dividends: |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Common stock ($.16 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
Dividend equivalent units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of common shares |
|
| 26,259 |
|
|
| — |
|
|
| 26,259 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| 8 |
|
Common stock repurchased |
|
| — |
|
|
| (4,886,411 | ) |
|
| (4,886,411 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (80 | ) |
|
| (80 | ) |
|
| — |
|
|
| (80 | ) |
Shares repurchased related to |
|
| — |
|
|
| (2,829 | ) |
|
| (2,829 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Balance at June 30, 2023 |
|
| 463,534,781 |
|
|
| (341,932,917 | ) |
|
| 121,601,864 |
|
| $ | 4 |
|
| $ | 3,343 |
|
| $ | 65 |
|
| $ | 4,625 |
|
| $ | (5,107 | ) |
| $ | 2,930 |
|
| $ | — |
|
| $ | 2,930 |
|
See accompanying notes to consolidated financial statements.
49
NAVIENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In millions, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Common Stock Shares |
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common |
|
| Paid-In |
|
| Comprehensive |
|
| Retained |
|
| Treasury |
|
| Stockholders' |
|
| Noncontrolling |
|
| Total |
| ||||||||
|
| Issued |
|
| Treasury |
|
| Outstanding |
|
| Stock |
|
| Capital |
|
| Income (Loss) |
|
| Earnings |
|
| Stock |
|
| Equity |
|
| Interest |
|
| Equity |
| |||||||||||
Balance at December 31, 2020 |
|
| 453,778,975 |
|
|
| (267,476,521 | ) |
|
| 186,302,454 |
|
| $ | 4 |
|
| $ | 3,226 |
|
| $ | (274 | ) |
| $ | 3,331 |
|
| $ | (3,854 | ) |
| $ | 2,433 |
|
| $ | 14 |
|
| $ | 2,447 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 728 |
|
|
| — |
|
|
| 728 |
|
|
| — |
|
|
| 728 |
|
Other comprehensive income (loss), net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 85 |
|
|
| — |
|
|
| — |
|
|
| 85 |
|
|
| — |
|
|
| 85 |
|
Total comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 813 |
|
|
| — |
|
|
| 813 |
|
Cash dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.48 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (82 | ) |
|
| — |
|
|
| (82 | ) |
|
| — |
|
|
| (82 | ) |
Dividend equivalent units related to employee stock-based compensation plans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Issuance of common shares |
|
| 4,817,906 |
|
|
| — |
|
|
| 4,817,906 |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| 34 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
|
| 17 |
|
Common stock repurchased |
|
| — |
|
|
| (26,935,592 | ) |
|
| (26,935,592 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (450 | ) |
|
| (450 | ) |
|
| — |
|
|
| (450 | ) |
Shares repurchased related to employee stock-based compensation plans |
|
| — |
|
|
| (3,012,396 | ) |
|
| (3,012,396 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (40 | ) |
|
| (40 | ) |
|
| — |
|
|
| (40 | ) |
Net activity in noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
Balance at September 30, 2021 |
|
| 458,596,881 |
|
|
| (297,424,509 | ) |
|
| 161,172,372 |
|
| $ | 4 |
|
| $ | 3,277 |
|
| $ | (189 | ) |
| $ | 3,975 |
|
| $ | (4,344 | ) |
| $ | 2,723 |
|
| $ | 11 |
|
| $ | 2,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
| 458,629,384 |
|
|
| (304,886,613 | ) |
|
| 153,742,771 |
|
| $ | 4 |
|
| $ | 3,282 |
|
| $ | (133 | ) |
| $ | 3,939 |
|
| $ | (4,495 | ) |
| $ | 2,597 |
|
| $ | 11 |
|
| $ | 2,608 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 540 |
|
|
| — |
|
|
| 540 |
|
|
| — |
|
|
| 540 |
|
Other comprehensive income (loss), net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 217 |
|
|
| — |
|
|
| — |
|
|
| 217 |
|
|
| — |
|
|
| 217 |
|
Total comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 757 |
|
|
| — |
|
|
| 757 |
|
Cash dividends: |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.48 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (69 | ) |
|
| — |
|
|
| (69 | ) |
|
| — |
|
|
| (69 | ) |
Dividend equivalent units related to employee stock-based compensation plans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Issuance of common shares |
|
| 2,386,817 |
|
|
| — |
|
|
| 2,386,817 |
|
|
| — |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| — |
|
|
| 11 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| 16 |
|
Common stock repurchased |
|
| — |
|
|
| (19,394,977 | ) |
|
| (19,394,977 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (315 | ) |
|
| (315 | ) |
|
| — |
|
|
| (315 | ) |
Shares repurchased related to employee stock-based compensation plans |
|
| — |
|
|
| (1,120,438 | ) |
|
| (1,120,438 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
Net activity in noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11 | ) |
|
| (11 | ) |
Balance at September 30, 2022 |
|
| 461,016,201 |
|
|
| (325,402,028 | ) |
|
| 135,614,173 |
|
| $ | 4 |
|
| $ | 3,309 |
|
| $ | 84 |
|
| $ | 4,406 |
|
| $ | (4,830 | ) |
| $ | 2,973 |
|
| $ | — |
|
| $ | 2,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Common Stock Shares |
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Common |
|
| Paid-In |
|
| Comprehensive |
|
| Retained |
|
| Treasury |
|
| Stockholders' |
|
| Noncontrolling |
|
| Total |
| |||||||||||
|
| Issued |
|
| Treasury |
|
| Outstanding |
|
| Stock |
|
| Capital |
|
| Income (Loss) |
|
| Earnings |
|
| Stock |
|
| Equity |
|
| Interest |
|
| Equity |
| |||||||||||
Balance at |
|
| 458,629,384 |
|
|
| (304,886,613 | ) |
|
| 153,742,771 |
|
| $ | 4 |
|
| $ | 3,282 |
|
| $ | (133 | ) |
| $ | 3,939 |
|
| $ | (4,495 | ) |
| $ | 2,597 |
|
| $ | 11 |
|
| $ | 2,608 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 435 |
|
|
| — |
|
|
| 435 |
|
|
| — |
|
|
| 435 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 163 |
|
|
| — |
|
|
| — |
|
|
| 163 |
|
|
| — |
|
|
| 163 |
|
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 598 |
|
|
| — |
|
|
| 598 |
|
Cash dividends: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Common stock ($.32 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (47 | ) |
|
| — |
|
|
| (47 | ) |
|
| — |
|
|
| (47 | ) |
Dividend equivalent units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Issuance of common shares |
|
| 2,383,652 |
|
|
| — |
|
|
| 2,383,652 |
|
|
| — |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| — |
|
|
| 11 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12 |
|
|
| — |
|
|
| 12 |
|
Common stock repurchased |
|
| — |
|
|
| (13,133,241 | ) |
|
| (13,133,241 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (220 | ) |
|
| (220 | ) |
|
| — |
|
|
| (220 | ) |
Shares repurchased related to |
|
| — |
|
|
| (1,114,479 | ) |
|
| (1,114,479 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
Net activity in noncontrolling |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11 | ) |
|
| (11 | ) |
Balance at June 30, 2022 |
|
| 461,013,036 |
|
|
| (319,134,333 | ) |
|
| 141,878,703 |
|
| $ | 4 |
|
| $ | 3,305 |
|
| $ | 30 |
|
| $ | 4,323 |
|
| $ | (4,735 | ) |
| $ | 2,927 |
|
| $ | — |
|
| $ | 2,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at |
|
| 461,087,590 |
|
|
| (330,878,152 | ) |
|
| 130,209,438 |
|
| $ | 4 |
|
| $ | 3,313 |
|
| $ | 87 |
|
| $ | 4,490 |
|
| $ | (4,917 | ) |
| $ | 2,977 |
|
| $ | — |
|
| $ | 2,977 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 177 |
|
|
| — |
|
|
| 177 |
|
|
| — |
|
|
| 177 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| (22 | ) |
Total comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 155 |
|
|
| — |
|
|
| 155 |
|
Cash dividends: |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Common stock ($.32 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (40 | ) |
|
| — |
|
|
| (40 | ) |
|
| — |
|
|
| (40 | ) |
Dividend equivalent units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Issuance of common shares |
|
| 2,447,191 |
|
|
| — |
|
|
| 2,447,191 |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 13 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
|
| 17 |
|
Common stock repurchased |
|
| — |
|
|
| (9,775,223 | ) |
|
| (9,775,223 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (165 | ) |
|
| (165 | ) |
|
| — |
|
|
| (165 | ) |
Shares repurchased related to |
|
| — |
|
|
| (1,279,542 | ) |
|
| (1,279,542 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24 | ) |
|
| (24 | ) |
|
| — |
|
|
| (24 | ) |
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Balance at June 30, 2023 |
|
| 463,534,781 |
|
|
| (341,932,917 | ) |
|
| 121,601,864 |
|
| $ | 4 |
|
| $ | 3,343 |
|
| $ | 65 |
|
| $ | 4,625 |
|
| $ | (5,107 | ) |
| $ | 2,930 |
|
| $ | — |
|
| $ | 2,930 |
|
See accompanying notes to consolidated financial statements.
50
NAVIENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income |
| $ | 540 |
|
| $ | 728 |
|
| $ | 177 |
|
| $ | 435 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
(Gains) on sales of education loans |
|
| — |
|
|
| (78 | ) | ||||||||
Losses on debt repurchases |
|
| — |
|
|
| 32 |
| ||||||||
Goodwill and acquired intangible asset impairment and amortization expense |
|
| 17 |
|
|
| 14 |
|
|
| 5 |
|
|
| 7 |
|
Stock-based compensation expense |
|
| 16 |
|
|
| 18 |
|
|
| 17 |
|
|
| 12 |
|
Mark-to-market (gains) losses on derivative and hedging activities, net |
|
| (607 | ) |
|
| (295 | ) |
|
| 41 |
|
|
| (465 | ) |
Provisions for loan losses |
|
| 62 |
|
|
| (66 | ) |
|
| (3 | ) |
|
| 34 |
|
(Decrease) increase in accrued interest receivable |
|
| (51 | ) |
|
| 88 |
| ||||||||
Increase (decrease) in accrued interest payable |
|
| 56 |
|
|
| (78 | ) | ||||||||
(Increase) decrease in accrued interest receivable |
|
| (69 | ) |
|
| 12 |
| ||||||||
(Decrease) increase in accrued interest payable |
|
| (7 | ) |
|
| 49 |
| ||||||||
Decrease in other assets |
|
| 334 |
|
|
| 92 |
|
|
| 81 |
|
|
| 256 |
|
(Decrease) increase in other liabilities |
|
| (269 | ) |
|
| 79 |
| ||||||||
Increase (decrease) in other liabilities |
|
| 2 |
|
|
| (310 | ) | ||||||||
Total adjustments |
|
| (442 | ) |
|
| (194 | ) |
|
| 67 |
|
|
| (405 | ) |
Net cash provided by operating activities |
|
| 98 |
|
|
| 534 |
|
|
| 244 |
|
|
| 30 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Education loans originated and acquired |
|
| (1,765 | ) |
|
| (4,708 | ) |
|
| (438 | ) |
|
| (1,516 | ) |
Proceeds from payments on education loans |
|
| 8,488 |
|
|
| 8,190 |
|
|
| 4,111 |
|
|
| 5,416 |
|
Proceeds from sales of education loans |
|
| — |
|
|
| 1,588 |
| ||||||||
Other investing activities, net |
|
| 89 |
|
|
| 43 |
|
|
| 1 |
|
|
| 56 |
|
Net cash provided by investing activities |
|
| 6,812 |
|
|
| 5,113 |
|
|
| 3,674 |
|
|
| 3,956 |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Borrowings collateralized by loans in trust - issued |
|
| 2,243 |
|
|
| 5,992 |
|
|
| 844 |
|
|
| 1,706 |
|
Borrowings collateralized by loans in trust - repaid |
|
| (9,225 | ) |
|
| (8,644 | ) |
|
| (5,837 | ) |
|
| (6,090 | ) |
Asset-backed commercial paper conduits, net |
|
| 735 |
|
|
| (1,723 | ) |
|
| 277 |
|
|
| 482 |
|
Long-term unsecured notes issued |
|
| — |
|
|
| 495 |
|
|
| 495 |
|
|
| — |
|
Long-term unsecured notes repaid |
|
| (15 | ) |
|
| (1,558 | ) |
|
| (1,002 | ) |
|
| (15 | ) |
Other financing activities, net |
|
| 70 |
|
|
| 97 |
|
|
| (29 | ) |
|
| 56 |
|
Common stock repurchased |
|
| (315 | ) |
|
| (450 | ) |
|
| (165 | ) |
|
| (220 | ) |
Common dividends paid |
|
| (69 | ) |
|
| (82 | ) |
|
| (40 | ) |
|
| (47 | ) |
Net cash used in financing activities |
|
| (6,576 | ) |
|
| (5,873 | ) |
|
| (5,457 | ) |
|
| (4,128 | ) |
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents |
|
| 334 |
|
|
| (226 | ) | ||||||||
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents |
|
| (1,539 | ) |
|
| (142 | ) | ||||||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period |
|
| 3,578 |
|
|
| 3,537 |
|
|
| 4,807 |
|
|
| 3,578 |
|
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period |
| $ | 3,912 |
|
| $ | 3,311 |
|
| $ | 3,268 |
|
| $ | 3,436 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash disbursements made (refunds received) for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest paid |
| $ | 1,208 |
|
| $ | 1,050 |
|
| $ | 1,688 |
|
| $ | 648 |
|
Income taxes paid |
| $ | 29 |
|
| $ | 144 |
|
| $ | 9 |
|
| $ | 27 |
|
Income taxes refunds received |
| $ | (6 | ) |
| $ | (9 | ) |
| $ | (2 | ) |
| $ | (5 | ) |
Noncash activity: |
|
|
|
|
|
|
|
| ||||||||
Investing activity - Held-to-maturity asset backed securities retained related to sales of education loans |
| $ | — |
|
| $ | 83 |
| ||||||||
Operating activity - Servicing assets recognized upon sales of education loans |
| $ | — |
|
| $ | 21 |
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,364 |
|
| $ | 1,050 |
|
| $ | 1,317 |
|
| $ | 976 |
|
Restricted cash and restricted cash equivalents |
|
| 2,548 |
|
|
| 2,261 |
|
|
| 1,951 |
|
|
| 2,460 |
|
Total cash, cash equivalents, restricted cash and restricted cash equivalents at end of period |
| $ | 3,912 |
|
| $ | 3,311 |
|
| $ | 3,268 |
|
| $ | 3,436 |
|
See accompanying notes to consolidated financial statements.
56
51
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
1.
1. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, consolidated financial statements of Navient have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of Navient and its majority-owned and controlled subsidiaries and those Variable Interest Entities (VIEs) for which we are the primary beneficiary, after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results for the year ending December 31, 20212022 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 20212022 (the 20212022 Form 10-K). Definitions for certain capitalized terms used but not otherwise defined in this Quarterly Report on Form 10-Q can be found in our 20212022 Form 10-K.
Recently Issued Accounting Pronouncements
Effective in 2020 and Forward
Rate Reform
In March 2020 (and as amended in December 2022), the FASB issued ASU No. 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional temporary relief for companies who are preparing for the discontinuation of interest rates indexed to the London Interbank Offered Rate (LIBOR). The ASU provides companies with guidance in the form of expedients and exceptions related to contract modifications and hedge accounting to ease the burden of and simplify the accounting associated with transitioning away from LIBOR. Modifications of qualifying contracts are accounted for as the continuation of an existing contract rather than as a new contract. Modifications of qualifying hedging relationships will not require discontinuation of the existing hedge accounting relationships. One-month and three-month LIBOR have been discontinued as of June 30, 2023. Our hedging instruments that were indexed to one-month and three-month LIBOR are now indexed to SOFR. There is $12 billion of debt as of June 30, 2023, that is in either a fair value or cash flow hedge relationship using LIBOR swaps. We used the hedge accounting expedients in this ASU when those swaps transitioned to SOFR. As a result, these hedges did not result in the discontinuation of the existing hedge accounting relationships.
Troubled Debt Restructurings
In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures,” which eliminates the troubled debt restructurings (TDRs) recognition and measurement guidance and instead requires an entity to evaluate whether the modification represents a new loan or a continuation of an existing loan. The ASU also enhances the disclosure requirements for certain modifications of receivables made to borrowers experiencing financial difficulty. This guidance iswas effective on January 1, 2023. Early adoption is permissible. The Company is currently assessingPrior to adopting this new guidance on January 1, 2023, as it relates to interest rate concessions granted as part of our Private Education Loan modification program, a discounted cash flow model was used to calculate the potential impactamount of interest forgiven for loans that were in the program and the present value of that interest rate concession was included as a part of the allowance for loan loss. This new guidance no longer allows the measurement and recognition of this amendment. element of our allowance for loan loss for new modifications that occur subsequent to January 1, 2023. As of December 31, 2022, the allowance for loan loss included $77 million related to this interest rate concession component of the allowance for loan loss. We elected to adopt this amendment using a prospective transition method which results in the $77 million releasing in 2023 and 2024 as the borrowers exit their current modification programs. $60 million of the $77 million was released in the six months ended June 30, 2023.
5752
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses
Allowance for Loan Losses MetricsRoll Forward
|
| Three Months Ended June 30, 2023 |
| |||||||||
(Dollars in millions) |
| FFELP |
|
| Private |
|
| Total |
| |||
Allowance at beginning of period |
| $ | 214 |
|
| $ | 706 |
|
| $ | 920 |
|
Total provision |
|
| 5 |
|
|
| 6 |
|
|
| 11 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
| |||
Gross charge-offs |
|
| (19 | ) |
|
| (73 | ) |
|
| (92 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 11 |
|
|
| 11 |
|
Net charge-offs(1) |
|
| (19 | ) |
|
| (62 | ) |
|
| (81 | ) |
Decrease in expected future recoveries on previously fully |
|
| — |
|
|
| 7 |
|
|
| 7 |
|
Allowance at end of period |
| $ | 200 |
|
| $ | 657 |
|
| $ | 857 |
|
Net charge-offs as a percentage of average loans in repayment |
|
| .22 | % |
|
| 1.39 | % |
|
|
| |
Ending total loans |
| $ | 41,051 |
|
| $ | 18,389 |
|
|
|
| |
Average loans in repayment |
| $ | 33,790 |
|
| $ | 17,990 |
|
|
|
| |
Ending loans in repayment |
| $ | 33,076 |
|
| $ | 17,720 |
|
|
|
| |
|
| Three Months Ended September 30, 2022 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| |||
Beginning balance |
| $ | 245 |
|
| $ | 921 |
|
| $ | 1,166 |
|
Total provision |
|
| — |
|
|
| 28 |
|
|
| 28 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
| (12 | ) |
|
| (118 | ) |
|
| (130 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Total(1) |
|
| (12 | ) |
|
| (99 | ) |
|
| (111 | ) |
Adjustment resulting from the change in charge-off rate(2) |
|
| — |
|
|
| (30 | ) |
|
| (30 | ) |
Net charge-offs |
|
| (12 | ) |
|
| (129 | ) |
|
| (141 | ) |
Decrease in expected future recoveries on previously fully charged-off loans(3) |
|
| — |
|
|
| 32 |
|
|
| 32 |
|
Allowance at end of period |
| $ | 233 |
|
| $ | 852 |
|
| $ | 1,085 |
|
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in charge-off rate (annualized) (2) |
|
| .12 | % |
|
| 2.01 | % |
|
|
|
|
Net adjustment resulting from the change in charge-off rate as a percentage of average loans in repayment (annualized)(2) |
|
| — | % |
|
| .60 | % |
|
|
|
|
Net charge-offs as a percentage of average loans in repayment (annualized) |
|
| .12 | % |
|
| 2.61 | % |
|
|
|
|
Ending total loans |
| $ | 47,124 |
|
| $ | 20,003 |
|
|
|
|
|
Average loans in repayment |
| $ | 39,573 |
|
| $ | 19,628 |
|
|
|
|
|
Ending loans in repayment |
| $ | 37,731 |
|
| $ | 19,284 |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Three Months Ended September 30, |
| |
(Dollars in millions) |
| 2022 |
| |
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 312 |
|
Expected future recoveries of current period defaults |
|
| 19 |
|
Recoveries (cash collected) |
|
| (14 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (37 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 280 |
|
Change in balance during period |
| $ | (32 | ) |
5853
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Three Months Ended June 30, 2022 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| |||
Allowance at beginning of period |
| $ | 255 |
|
| $ | 964 |
|
| $ | 1,219 |
|
Total provision |
|
| — |
|
|
| 18 |
|
|
| 18 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
| |||
Gross charge-offs |
|
| (10 | ) |
|
| (82 | ) |
|
| (92 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 12 |
|
|
| 12 |
|
Net charge-offs(1) |
|
| (10 | ) |
|
| (70 | ) |
|
| (80 | ) |
Decrease in expected future recoveries on previously fully |
|
| — |
|
|
| 9 |
|
|
| 9 |
|
Allowance at end of period |
| $ | 245 |
|
| $ | 921 |
|
| $ | 1,166 |
|
Net charge-offs as a percentage of average loans in repayment |
|
| .09 | % |
|
| 1.40 | % |
|
|
| |
Ending total loans |
| $ | 49,459 |
|
| $ | 20,589 |
|
|
|
| |
Average loans in repayment |
| $ | 42,163 |
|
| $ | 20,162 |
|
|
|
| |
Ending loans in repayment |
| $ | 41,168 |
|
| $ | 19,938 |
|
|
|
| |
|
| Three Months Ended June 30, |
| |
(Dollars in millions) |
| 2022 |
| |
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 321 |
|
Expected future recoveries of current period defaults |
|
| 12 |
|
Recoveries (cash collected) |
|
| (15 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (6 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 312 |
|
Change in balance during period |
| $ | (9 | ) |
|
| Three Months Ended September 30, 2021 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| |||
Beginning balance |
| $ | 277 |
|
| $ | 976 |
|
| $ | 1,253 |
|
Total provision |
|
| — |
|
|
| 22 |
|
|
| 22 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
| (8 | ) |
|
| (45 | ) |
|
| (53 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 6 |
|
|
| 6 |
|
Total(1) |
|
| (8 | ) |
|
| (39 | ) |
|
| (47 | ) |
Adjustment resulting from the change in charge-off rate(2) |
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
Net charge-offs |
|
| (8 | ) |
|
| (55 | ) |
|
| (63 | ) |
Decrease in expected future recoveries on previously fully charged-off loans(3) |
|
| — |
|
|
| 37 |
|
|
| 37 |
|
Allowance at end of period |
| $ | 269 |
|
| $ | 980 |
|
| $ | 1,249 |
|
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in charge-off rate (annualized)(2) |
|
| .07 | % |
|
| .77 | % |
|
|
|
|
Net adjustment resulting from the change in charge-off rate as a percentage of average loans in repayment (annualized)(2) |
|
| — | % |
|
| .33 | % |
|
|
|
|
Net charge-offs as a percentage of average loans in repayment (annualized) |
|
| .07 | % |
|
| 1.10 | % |
|
|
|
|
Ending total loans |
| $ | 54,619 |
|
| $ | 20,998 |
|
|
|
|
|
Average loans in repayment |
| $ | 45,201 |
|
| $ | 19,894 |
|
|
|
|
|
Ending loans in repayment |
| $ | 44,160 |
|
| $ | 19,795 |
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| |
(Dollars in millions) |
| 2021 |
| |
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 434 |
|
Expected future recoveries of current period defaults |
|
| 6 |
|
Recoveries (cash collected) |
|
| (22 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (21 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 397 |
|
Change in balance during period |
| $ | (37 | ) |
5954
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Six Months Ended June 30, 2023 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| |||
Allowance at beginning of period |
| $ | 222 |
|
| $ | 800 |
|
| $ | 1,022 |
|
Total provision |
|
| 15 |
|
|
| (18 | ) |
|
| (3 | ) |
Charge-offs: |
|
|
|
|
|
|
|
|
| |||
Gross charge-offs |
|
| (37 | ) |
|
| (161 | ) |
|
| (198 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 24 |
|
|
| 24 |
|
Net charge-offs(1) |
|
| (37 | ) |
|
| (137 | ) |
|
| (174 | ) |
Decrease in expected future recoveries on previously fully |
|
| — |
|
|
| 12 |
|
|
| 12 |
|
Allowance at end of period |
| $ | 200 |
|
| $ | 657 |
|
| $ | 857 |
|
Net charge-offs as a percentage of average loans in repayment |
|
| .22 | % |
|
| 1.51 | % |
|
|
| |
Ending total loans |
| $ | 41,051 |
|
| $ | 18,389 |
|
|
|
| |
Average loans in repayment |
| $ | 34,046 |
|
| $ | 18,270 |
|
|
|
| |
Ending loans in repayment |
| $ | 33,076 |
|
| $ | 17,720 |
|
|
|
| |
|
| Nine Months Ended September 30, 2022 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| |||
Beginning balance |
| $ | 262 |
|
| $ | 1,009 |
|
| $ | 1,271 |
|
Total provision |
|
| — |
|
|
| 62 |
|
|
| 62 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
| (29 | ) |
|
| (281 | ) |
|
| (310 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 43 |
|
|
| 43 |
|
Total(1) |
|
| (29 | ) |
|
| (238 | ) |
|
| (267 | ) |
Adjustment resulting from the change in charge-off rate(2) |
|
| — |
|
|
| (30 | ) |
|
| (30 | ) |
Net charge-offs |
|
| (29 | ) |
|
| (268 | ) |
|
| (297 | ) |
Decrease in expected future recoveries on previously fully charged-off loans(3) |
|
| — |
|
|
| 49 |
|
|
| 49 |
|
Allowance at end of period |
| $ | 233 |
|
| $ | 852 |
|
| $ | 1,085 |
|
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in charge-off rate (annualized)(2) |
|
| .09 | % |
|
| 1.59 | % |
|
|
|
|
Net adjustment resulting from the change in charge-off rate as a percentage of average loans in repayment (annualized)(2) |
|
| — | % |
|
| .20 | % |
|
|
|
|
Net charge-offs as a percentage of average loans in repayment (annualized) |
|
| .09 | % |
|
| 1.79 | % |
|
|
|
|
Ending total loans |
| $ | 47,124 |
|
| $ | 20,003 |
|
|
|
|
|
Average loans in repayment |
| $ | 41,793 |
|
| $ | 20,056 |
|
|
|
|
|
Ending loans in repayment |
| $ | 37,731 |
|
| $ | 19,284 |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Nine Months Ended September 30, |
| |
(Dollars in millions) |
| 2022 |
| |
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 329 |
|
Expected future recoveries of current period defaults |
|
| 43 |
|
Recoveries (cash collected) |
|
| (43 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (49 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 280 |
|
Change in balance during period |
| $ | (49 | ) |
60
55
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Six Months Ended June 30, 2022 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Total |
| |||
Allowance at beginning of period |
| $ | 262 |
|
| $ | 1,009 |
|
| $ | 1,271 |
|
Total provision |
|
| — |
|
|
| 34 |
|
|
| 34 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
| |||
Gross charge-offs |
|
| (17 | ) |
|
| (164 | ) |
|
| (181 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 25 |
|
|
| 25 |
|
Net charge-offs(1) |
|
| (17 | ) |
|
| (139 | ) |
|
| (156 | ) |
Decrease in expected future recoveries on previously fully |
|
| — |
|
|
| 17 |
|
|
| 17 |
|
Allowance at end of period |
| $ | 245 |
|
| $ | 921 |
|
| $ | 1,166 |
|
Net charge-offs as a percentage of average loans in repayment |
|
| .08 | % |
|
| 1.39 | % |
|
|
| |
Ending total loans |
| $ | 49,459 |
|
| $ | 20,589 |
|
|
|
| |
Average loans in repayment |
| $ | 42,922 |
|
| $ | 20,274 |
|
|
|
| |
Ending loans in repayment |
| $ | 41,168 |
|
| $ | 19,938 |
|
|
|
| |
|
| Nine Months Ended September 30, 2021 |
| |||||||||
(Dollars in millions) |
| FFELP Loans |
|
| Private Education Loans |
|
| Other Loans |
| |||
Beginning balance |
| $ | 288 |
|
| $ | 1,089 |
|
| $ | 1,377 |
|
Provision: |
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of allowance related to loan sales(1) |
|
| — |
|
|
| (107 | ) |
|
| (107 | ) |
Remaining provision |
|
| — |
|
|
| 41 |
|
|
| 41 |
|
Total provision |
|
| — |
|
|
| (66 | ) |
|
| (66 | ) |
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
| (19 | ) |
|
| (125 | ) |
|
| (144 | ) |
Expected future recoveries on current period gross charge-offs |
|
| — |
|
|
| 16 |
|
|
| 16 |
|
Total(2) |
|
| (19 | ) |
|
| (109 | ) |
|
| (128 | ) |
Adjustment resulting from the change in charge-off rate(3) |
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
Net charge-offs |
|
| (19 | ) |
|
| (125 | ) |
|
| (144 | ) |
Decrease in expected future recoveries on previously fully charged-off loans(4) |
|
| — |
|
|
| 82 |
|
|
| 82 |
|
Allowance at end of period |
| $ | 269 |
|
| $ | 980 |
|
| $ | 1,249 |
|
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in charge-off rate (annualized)(3) |
|
| .06 | % |
|
| .72 | % |
|
|
|
|
Net adjustment resulting from the change in charge-off rate as a percentage of average loans in repayment (annualized)(3) |
|
| — | % |
|
| .11 | % |
|
|
|
|
Net charge-offs as a percentage of average loans in repayment (annualized) |
|
| .06 | % |
|
| .83 | % |
|
|
|
|
Ending total loans |
| $ | 54,619 |
|
| $ | 20,998 |
|
|
|
|
|
Average loans in repayment |
| $ | 46,191 |
|
| $ | 20,145 |
|
|
|
|
|
Ending loans in repayment |
| $ | 44,160 |
|
| $ | 19,795 |
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |
(Dollars in millions) |
| 2021 |
| |
Beginning of period expected future recoveries on previously fully charged-off loans |
| $ | 479 |
|
Expected future recoveries of current period defaults |
|
| 16 |
|
Recoveries (cash collected) |
|
| (69 | ) |
Charge-offs (as a result of lower recovery expectations) |
|
| (29 | ) |
End of period expected future recoveries on previously fully charged-off loans |
| $ | 397 |
|
Change in balance during period |
| $ | (82 | ) |
6156
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses (Continued)
Troubled Debt RestructuringsKey Credit Quality Indicators
We assess and determine the collectability of our education loan portfolios by evaluating certain risk characteristics we refer to as key credit quality indicators. Key credit quality indicators are incorporated into the allowance for loan losses calculation.
FFELP Loans
FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default. The key credit quality indicators are loan status and loan type.
|
| FFELP Loan Delinquencies |
| |||||||||||||||||||||
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 1,659 |
|
|
|
|
| $ | 1,772 |
|
|
|
|
| $ | 2,064 |
|
|
|
| |||
Loans in forbearance(2) |
|
| 6,316 |
|
|
|
|
|
| 7,603 |
|
|
|
|
|
| 6,227 |
|
|
|
| |||
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans current |
|
| 27,756 |
|
|
| 83.9 | % |
|
| 29,004 |
|
|
| 84.4 | % |
|
| 34,627 |
|
|
| 84.1 | % |
Loans delinquent 31-60 days(3) |
|
| 1,596 |
|
|
| 4.8 |
|
|
| 1,247 |
|
|
| 3.6 |
|
|
| 2,163 |
|
|
| 5.3 |
|
Loans delinquent 61-90 days(3) |
|
| 1,013 |
|
|
| 3.1 |
|
|
| 833 |
|
|
| 2.4 |
|
|
| 1,323 |
|
|
| 3.2 |
|
Loans delinquent greater than 90 days(3) |
|
| 2,711 |
|
|
| 8.2 |
|
|
| 3,288 |
|
|
| 9.6 |
|
|
| 3,055 |
|
|
| 7.4 |
|
Total FFELP Loans in repayment |
|
| 33,076 |
|
|
| 100 | % |
|
| 34,372 |
|
|
| 100 | % |
|
| 41,168 |
|
|
| 100 | % |
Total FFELP Loans |
|
| 41,051 |
|
|
|
|
|
| 43,747 |
|
|
|
|
|
| 49,459 |
|
|
|
| |||
FFELP Loan allowance for losses |
|
| (200 | ) |
|
|
|
|
| (222 | ) |
|
|
|
|
| (245 | ) |
|
|
| |||
FFELP Loans, net |
| $ | 40,851 |
|
|
|
|
| $ | 43,525 |
|
|
|
|
| $ | 49,214 |
|
|
|
| |||
Percentage of FFELP Loans in repayment |
|
|
|
|
| 80.6 | % |
|
|
|
|
| 78.6 | % |
|
|
|
|
| 83.2 | % | |||
Delinquencies as a percentage of FFELP Loans in |
|
|
|
|
| 16.1 | % |
|
|
|
|
| 15.6 | % |
|
|
|
|
| 15.9 | % | |||
FFELP Loans in forbearance as a percentage of |
|
|
|
|
| 16.0 | % |
|
|
|
|
| 18.1 | % |
|
|
|
|
| 13.1 | % | |||
Loan type:
(Dollars in millions) |
| June 30, 2023 |
|
| June 30, 2022 |
|
| Change |
| |||
Stafford Loans |
| $ | 13,151 |
|
| $ | 15,538 |
|
| $ | (2,387 | ) |
Consolidation Loans |
|
| 23,956 |
|
|
| 29,396 |
|
|
| (5,440 | ) |
Rehab Loans |
|
| 3,944 |
|
|
| 4,525 |
|
|
| (581 | ) |
Total loans, gross |
| $ | 41,051 |
|
| $ | 49,459 |
|
| $ | (8,408 | ) |
57
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
Private Education Loans
The key credit quality indicators are credit scores (FICO scores), loan status, loan seasoning, certain loan modifications, the existence of a cosigner and school type. The FICO score is the higher of the borrower or co-borrower score and is updated at least every six months while school type is assessed at origination. The other Private Education Loan key quality indicators are updated quarterly.
|
| Private Education Loan Credit Quality Indicators by Origination Year |
| |||||||||||||||||||||||||||||
|
| June 30, 2023 |
| |||||||||||||||||||||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| Prior |
|
| Total |
|
| % of Total |
| ||||||||
Credit Quality |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FICO Scores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
640 and above |
| $ | 322 |
|
| $ | 1,698 |
|
| $ | 4,209 |
|
| $ | 1,367 |
|
| $ | 1,287 |
|
| $ | 7,851 |
|
| $ | 16,734 |
|
|
| 91 | % |
Below 640 |
|
| 4 |
|
|
| 50 |
|
|
| 100 |
|
|
| 26 |
|
|
| 43 |
|
|
| 1,432 |
|
|
| 1,655 |
|
|
| 9 |
|
Total |
| $ | 326 |
|
| $ | 1,748 |
|
| $ | 4,309 |
|
| $ | 1,393 |
|
| $ | 1,330 |
|
| $ | 9,283 |
|
| $ | 18,389 |
|
|
| 100 | % |
Loan Status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
In-school/grace/ |
| $ | 15 |
|
| $ | 69 |
|
| $ | 82 |
|
| $ | 22 |
|
| $ | 27 |
|
| $ | 454 |
|
| $ | 669 |
|
|
| 4 | % |
Current/90 days or |
|
| 311 |
|
|
| 1,673 |
|
|
| 4,218 |
|
|
| 1,367 |
|
|
| 1,297 |
|
|
| 8,503 |
|
|
| 17,369 |
|
|
| 94 |
|
Greater than 90 days |
|
| — |
|
|
| 6 |
|
|
| 9 |
|
|
| 4 |
|
|
| 6 |
|
|
| 326 |
|
|
| 351 |
|
|
| 2 |
|
Total |
| $ | 326 |
|
| $ | 1,748 |
|
| $ | 4,309 |
|
| $ | 1,393 |
|
| $ | 1,330 |
|
| $ | 9,283 |
|
| $ | 18,389 |
|
|
| 100 | % |
Seasoning(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
1-12 payments |
| $ | 312 |
|
| $ | 744 |
|
| $ | 49 |
|
| $ | 10 |
|
| $ | 6 |
|
| $ | 66 |
|
| $ | 1,187 |
|
|
| 6 | % |
13-24 payments |
|
| — |
|
|
| 950 |
|
|
| 3,021 |
|
|
| 23 |
|
|
| 18 |
|
|
| 77 |
|
|
| 4,089 |
|
|
| 22 |
|
25-36 payments |
|
| — |
|
|
| — |
|
|
| 1,188 |
|
|
| 819 |
|
|
| 58 |
|
|
| 142 |
|
|
| 2,207 |
|
|
| 12 |
|
37-48 payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 529 |
|
|
| 1,036 |
|
|
| 230 |
|
|
| 1,795 |
|
|
| 10 |
|
More than 48 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 198 |
|
|
| 8,572 |
|
|
| 8,770 |
|
|
| 48 |
|
Loans in-school/ |
|
| 14 |
|
|
| 54 |
|
|
| 51 |
|
|
| 12 |
|
|
| 14 |
|
|
| 196 |
|
|
| 341 |
|
|
| 2 |
|
Total |
| $ | 326 |
|
| $ | 1,748 |
|
| $ | 4,309 |
|
| $ | 1,393 |
|
| $ | 1,330 |
|
| $ | 9,283 |
|
| $ | 18,389 |
|
|
| 100 | % |
Certain Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Modified |
| $ | — |
|
| $ | 20 |
|
| $ | 102 |
|
| $ | 41 |
|
| $ | 75 |
|
| $ | 6,101 |
|
| $ | 6,339 |
|
|
| 34 | % |
Non-Modified |
|
| 326 |
|
|
| 1,728 |
|
|
| 4,207 |
|
|
| 1,352 |
|
|
| 1,255 |
|
|
| 3,182 |
|
|
| 12,050 |
|
|
| 66 |
|
Total |
| $ | 326 |
|
| $ | 1,748 |
|
| $ | 4,309 |
|
| $ | 1,393 |
|
| $ | 1,330 |
|
| $ | 9,283 |
|
| $ | 18,389 |
|
|
| 100 | % |
Cosigners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
With cosigner(3) |
| $ | 57 |
|
| $ | 187 |
|
| $ | 100 |
|
| $ | 25 |
|
| $ | 9 |
|
| $ | 5,647 |
|
| $ | 6,025 |
|
|
| 33 | % |
Without cosigner |
|
| 269 |
|
|
| 1,561 |
|
|
| 4,209 |
|
|
| 1,368 |
|
|
| 1,321 |
|
|
| 3,636 |
|
|
| 12,364 |
|
|
| 67 |
|
Total |
| $ | 326 |
|
| $ | 1,748 |
|
| $ | 4,309 |
|
| $ | 1,393 |
|
| $ | 1,330 |
|
| $ | 9,283 |
|
| $ | 18,389 |
|
|
| 100 | % |
School Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Not-for-profit |
| $ | 304 |
|
| $ | 1,654 |
|
| $ | 4,059 |
|
| $ | 1,331 |
|
| $ | 1,238 |
|
| $ | 7,809 |
|
| $ | 16,395 |
|
|
| 89 | % |
For-profit |
|
| 22 |
|
|
| 94 |
|
|
| 250 |
|
|
| 62 |
|
|
| 92 |
|
|
| 1,474 |
|
|
| 1,994 |
|
|
| 11 |
|
Total |
| $ | 326 |
|
| $ | 1,748 |
|
| $ | 4,309 |
|
| $ | 1,393 |
|
| $ | 1,330 |
|
| $ | 9,283 |
|
| $ | 18,389 |
|
|
| 100 | % |
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (657 | ) |
|
|
| |||||||
Total loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 17,732 |
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Charge-Offs |
| $ | — |
|
| $ | (3 | ) |
| $ | (5 | ) |
| $ | (2 | ) |
| $ | (4 | ) |
| $ | (123 | ) |
| $ | (137 | ) |
|
| 100 | % |
58
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Private Education Loan Credit Quality Indicators by Origination Year |
| |||||||||||||||||||||||||||||
|
| June 30, 2022 |
| |||||||||||||||||||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
| Total |
|
| % of Total |
| ||||||||
Credit Quality |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FICO Scores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
640 and above |
| $ | 1,307 |
|
| $ | 4,875 |
|
| $ | 1,672 |
|
| $ | 1,583 |
|
| $ | 587 |
|
| $ | 8,925 |
|
| $ | 18,949 |
|
|
| 92 | % |
Below 640 |
|
| 11 |
|
|
| 57 |
|
|
| 18 |
|
|
| 34 |
|
|
| 20 |
|
|
| 1,500 |
|
|
| 1,640 |
|
|
| 8 |
|
Total |
| $ | 1,318 |
|
| $ | 4,932 |
|
| $ | 1,690 |
|
| $ | 1,617 |
|
| $ | 607 |
|
| $ | 10,425 |
|
| $ | 20,589 |
|
|
| 100 | % |
Loan Status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
In-school/grace/ |
| $ | 18 |
|
| $ | 79 |
|
| $ | 29 |
|
| $ | 32 |
|
| $ | 13 |
|
| $ | 480 |
|
| $ | 651 |
|
|
| 3 | % |
Current/90 days or |
|
| 1,300 |
|
|
| 4,848 |
|
|
| 1,659 |
|
|
| 1,580 |
|
|
| 591 |
|
|
| 9,559 |
|
|
| 19,537 |
|
|
| 95 |
|
Greater than 90 days |
|
| — |
|
|
| 5 |
|
|
| 2 |
|
|
| 5 |
|
|
| 3 |
|
|
| 386 |
|
|
| 401 |
|
|
| 2 |
|
Total |
| $ | 1,318 |
|
| $ | 4,932 |
|
| $ | 1,690 |
|
| $ | 1,617 |
|
| $ | 607 |
|
| $ | 10,425 |
|
| $ | 20,589 |
|
|
| 100 | % |
Seasoning(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
1-12 payments |
| $ | 1,304 |
|
| $ | 3,452 |
|
| $ | 17 |
|
| $ | 15 |
|
| $ | 3 |
|
| $ | 105 |
|
| $ | 4,896 |
|
|
| 24 | % |
13-24 payments |
|
| — |
|
|
| 1,433 |
|
|
| 981 |
|
|
| 52 |
|
|
| 9 |
|
|
| 119 |
|
|
| 2,594 |
|
|
| 12 |
|
25-36 payments |
|
| — |
|
|
| — |
|
|
| 676 |
|
|
| 1,282 |
|
|
| 26 |
|
|
| 203 |
|
|
| 2,187 |
|
|
| 11 |
|
37-48 payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 251 |
|
|
| 437 |
|
|
| 330 |
|
|
| 1,018 |
|
|
| 5 |
|
More than 48 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 126 |
|
|
| 9,420 |
|
|
| 9,546 |
|
|
| 46 |
|
Loans in-school/ |
|
| 14 |
|
|
| 47 |
|
|
| 16 |
|
|
| 17 |
|
|
| 6 |
|
|
| 248 |
|
|
| 348 |
|
|
| 2 |
|
Total |
| $ | 1,318 |
|
| $ | 4,932 |
|
| $ | 1,690 |
|
| $ | 1,617 |
|
| $ | 607 |
|
| $ | 10,425 |
|
| $ | 20,589 |
|
|
| 100 | % |
Certain Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Modified |
| $ | 1 |
|
| $ | 24 |
|
| $ | 22 |
|
| $ | 54 |
|
| $ | 32 |
|
| $ | 6,830 |
|
| $ | 6,963 |
|
|
| 34 | % |
Non-Modified |
|
| 1,317 |
|
|
| 4,908 |
|
|
| 1,668 |
|
|
| 1,563 |
|
|
| 575 |
|
|
| 3,595 |
|
|
| 13,626 |
|
|
| 66 |
|
Total |
| $ | 1,318 |
|
| $ | 4,932 |
|
| $ | 1,690 |
|
| $ | 1,617 |
|
| $ | 607 |
|
| $ | 10,425 |
|
| $ | 20,589 |
|
|
| 100 | % |
Cosigners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
With cosigner(3) |
| $ | 19 |
|
| $ | 112 |
|
| $ | 29 |
|
| $ | 11 |
|
| $ | — |
|
| $ | 6,710 |
|
| $ | 6,881 |
|
|
| 33 | % |
Without cosigner |
|
| 1,299 |
|
|
| 4,820 |
|
|
| 1,661 |
|
|
| 1,606 |
|
|
| 607 |
|
|
| 3,715 |
|
|
| 13,708 |
|
|
| 67 |
|
Total |
| $ | 1,318 |
|
| $ | 4,932 |
|
| $ | 1,690 |
|
| $ | 1,617 |
|
| $ | 607 |
|
| $ | 10,425 |
|
| $ | 20,589 |
|
|
| 100 | % |
School Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Not-for-profit |
| $ | 1,237 |
|
| $ | 4,647 |
|
| $ | 1,615 |
|
| $ | 1,507 |
|
| $ | 558 |
|
| $ | 8,701 |
|
| $ | 18,265 |
|
|
| 89 | % |
For-profit |
|
| 81 |
|
|
| 285 |
|
|
| 75 |
|
|
| 110 |
|
|
| 49 |
|
|
| 1,724 |
|
|
| 2,324 |
|
|
| 11 |
|
Total |
| $ | 1,318 |
|
| $ | 4,932 |
|
| $ | 1,690 |
|
| $ | 1,617 |
|
| $ | 607 |
|
| $ | 10,425 |
|
| $ | 20,589 |
|
|
| 100 | % |
Allowance for loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (921 | ) |
|
|
| |||||||
Total loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 19,668 |
|
|
|
| |||||||
59
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Private Education Loan Delinquencies |
| |||||||||||||||||||||
|
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2022 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 341 |
|
|
|
|
| $ | 354 |
|
|
|
|
| $ | 348 |
|
|
|
| |||
Loans in forbearance(2) |
|
| 328 |
|
|
|
|
|
| 401 |
|
|
|
|
|
| 303 |
|
|
|
| |||
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans current |
|
| 16,942 |
|
|
| 95.6 | % |
|
| 17,838 |
|
|
| 95.0 | % |
|
| 19,116 |
|
|
| 95.9 | % |
Loans delinquent 31-60 days(3) |
|
| 276 |
|
|
| 1.6 |
|
|
| 335 |
|
|
| 1.8 |
|
|
| 269 |
|
|
| 1.3 |
|
Loans delinquent 61-90 days(3) |
|
| 151 |
|
|
| .8 |
|
|
| 186 |
|
|
| 1.0 |
|
|
| 152 |
|
|
| .8 |
|
Loans delinquent greater than 90 days(3) |
|
| 351 |
|
|
| 2.0 |
|
|
| 411 |
|
|
| 2.2 |
|
|
| 401 |
|
|
| 2.0 |
|
Total loans in repayment |
|
| 17,720 |
|
|
| 100 | % |
|
| 18,770 |
|
|
| 100 | % |
|
| 19,938 |
|
|
| 100 | % |
Total loans |
|
| 18,389 |
|
|
|
|
|
| 19,525 |
|
|
|
|
|
| 20,589 |
|
|
|
| |||
Allowance for losses |
|
| (657 | ) |
|
|
|
|
| (800 | ) |
|
|
|
|
| (921 | ) |
|
|
| |||
Loans, net |
| $ | 17,732 |
|
|
|
|
| $ | 18,725 |
|
|
|
|
| $ | 19,668 |
|
|
|
| |||
Percentage of loans in repayment |
|
|
|
|
| 96.4 | % |
|
|
|
|
| 96.1 | % |
|
|
|
|
| 96.8 | % | |||
Delinquencies as a percentage of loans in |
|
|
|
|
| 4.4 | % |
|
|
|
|
| 5.0 | % |
|
|
|
|
| 4.1 | % | |||
Loans in forbearance as a percentage of |
|
|
|
|
| 1.8 | % |
|
|
|
|
| 2.1 | % |
|
|
|
|
| 1.5 | % | |||
60
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
Loan Modifications to Borrowers Experiencing Financial Difficulty
We sometimes modifyadjust the terms of Private Education Loans for certain borrowers when we believe such changes will help our customers better manage their student loan obligations, achieve better outcomes and increase the collectability of the loans. These changes generally take the form of a temporary interest rate reduction, a temporary forbearance of payments, a temporary interest only payment, and a temporary interest rate reduction with a permanent extension of the loan term. The effect of modifications of loans for customersmade to borrowers who are experiencing financial difficulty.difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The model design predicts borrowers that will have financial difficulty in the future and require loan modification and increased life of loan default risk.
Under our current forbearance practices, temporary hardship forbearance of payments generally cannot exceed 12 months over the life of the loan. However, exceptions can be made in cases where borrowers have shown the ability to make a substantial number of monthly principal and interest payments and in those cases borrowers can be granted up to 24 months of hardship forbearance over the life of the loan. We offer other administrative forbearances (e.g., death and disability, bankruptcy, military service, and disaster forbearance) that are either required by law (such as the Servicemembers Civil Relief Act) or are considered separate from our active loss mitigation programs and therefore are not considered to be loan modifications requiring disclosure under ASU No. 2022-02.
FFELP loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim. Further, FFELP loan modification events are either legal entitlements subject to regulatory-driven eligibility criteria or addressed in the promissory note terms, so we do not consider these events as a component of our loan modification programs.
The following tables show the amortized cost basis as of June 30, 2023 of the loans to borrowers experiencing financial difficulty that were modified in the three and six months ended June 30, 2023.
|
| Loan Modifications Made to Borrowers Experiencing Financial Difficulty |
| |||||||||||||||||||||
|
| Three Months Ended June 30, 2023 |
| |||||||||||||||||||||
(Dollars in millions) |
| Interest Rate Reductions(1) |
|
| More Than an Insignificant Payment Delay (2) |
|
| Combination Rate Reduction and Term Extension |
| |||||||||||||||
Loan Type |
| Amortized Cost |
|
| % of Loan Type |
|
| Amortized Cost |
|
| % of Loan Type |
|
| Amortized Cost |
|
| % of Loan Type |
| ||||||
Private Education |
| $ | 548 |
|
|
| 3.0 | % |
| $ | 274 |
|
|
| 1.5 | % |
| $ | 45 |
|
|
| .2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Six Months Ended June 30, 2023 |
| |||||||||||||||||||||
(Dollars in millions) |
| Interest Rate Reductions(1) |
|
| More Than an Insignificant Payment Delay (2) |
|
| Combination Rate Reduction and Term Extension |
| |||||||||||||||
Loan Type |
| Amortized Cost |
|
| % of Loan Type |
|
| Amortized Cost |
|
| % of Loan Type |
|
| Amortized Cost |
|
| % of Loan Type |
| ||||||
Private Education |
| $ | 1,161 |
|
|
| 6.3 | % |
| $ | 539 |
|
|
| 2.9 | % |
| $ | 91 |
|
|
| .5 | % |
61
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
For those loans modified in the three and six months ended June 30, 2023, the following tables show the impact of such modification.
Three Months Ended June 30, 2023 | |||
Loan Type | Interest Rate Reductions | More Than an Insignificant Payment Delay | Combination Rate Reduction and Term Extension |
Private Education Loans | Reduced the weighted average contractual rate from 13.0% to 5.3% | Added an average 5 months to the remaining life of the loans | Added an average 8 years to the remaining life of the loans and reduced the weighted average contractual rate from |
Six Months Ended June 30, 2023 | |||
Loan Type | Interest Rate Reductions | More Than an Insignificant Payment Delay | Combination Rate Reduction and Term Extension |
Private Education Loans | Reduced the weighted average contractual rate from 12.9% to 5.1% | Added an average 6 months to the remaining life of the loans | Added an average 8 years to the remaining life of the loans and reduced the weighted average contractual rate from |
62
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
The following table provides the amount of loans whose borrowers were experiencing financial difficulty, were modified during the three and six months ended June 30, 2023 and subsequently had a payment default in the three and six months ended June 30, 2023. We define payment default as 60 days past due for purposes of this disclosure. We closely monitor performance of the loans to borrowers experiencing financial difficulty that are modified to understand the effectiveness of the modification efforts.
(Dollars in millions) |
|
|
|
|
|
|
|
|
| |||||||
|
| Three Months Ended June 30, 2023 |
|
| Six Months Ended June 30, 2023 |
| ||||||||||
Loan Type |
| Modified Loans |
|
| Payment Default (Par) |
|
| Modified Loans |
|
| Payment Default (Par) |
| ||||
Private Education Loans(1) |
| $ | 36 |
|
| $ | 37 |
|
| $ | 38 |
|
| $ | 39 |
|
The following table provides the performance and related loan status as of June 30, 2023 of loans that were modified in the six months ended June 30, 2023.
(Dollars in millions) |
|
|
|
|
| |
Loan Type: |
|
|
|
|
| |
Private Education Loans |
| Status |
| Payment status (Amortized Cost) |
| |
|
| Loans in School/Deferment |
| $ | 5 |
|
|
| Loans in Forbearance |
|
| 48 |
|
|
| Loans current |
|
| 1,646 |
|
|
| Loans delinquent 31 - 60 days |
|
| 51 |
|
|
| Loans delinquent 61 - 90 days |
|
| 21 |
|
|
| Loans delinquent greater than 90 days |
|
| 20 |
|
|
| Total Modified Loans |
| $ | 1,791 |
|
63
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
2. Allowance for Loan Losses (Continued)
Prior to our adoption of ASU 2022-02 on January 1, 2023, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. Certain Private Education Loans for which we have granted either a forbearance of greater than three months, an interest rate reduction or an extended repayment plan arewere classified as TDRs. Approximately 77% and 75% of the loans granted forbearance have qualified as a TDR loan at September 30, 2022 and December 31, 2021, respectively. The unpaid principal balance of TDR loans that were in an interest rate reduction program as of September 30, 2022 and December 31, 2021 was $900 million and $831 million, respectively.
The following table provides the amount of loans modified in the periodsperiod presented that resulted in a TDR. Additionally, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the current period within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2022 |
| ||||||
Modified loans |
| $ | 68 |
|
| $ | 40 |
|
| $ | 186 |
|
| $ | 109 |
|
| $ | 62 |
|
| $ | 117 |
|
Charge-offs |
| $ | 101 |
|
| $ | 37 |
|
| $ | 217 |
|
| $ | 90 |
|
| $ | 59 |
|
| $ | 115 |
|
Payment default |
| $ | 13 |
|
| $ | 6 |
|
| $ | 31 |
|
| $ | 15 |
|
| $ | 9 |
|
| $ | 18 |
|
6264
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses (Continued)
Key Credit Quality Indicators
We assess and determine the collectability of our education loan portfolios by evaluating certain risk characteristics we refer to as key credit quality indicators. Key credit quality indicators are incorporated into the allowance for loan losses calculation.
FFELP Loans
FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default. The key credit quality indicators are loan status and loan type.
|
| FFELP Loan Delinquencies |
| |||||||||||||||||||||
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 1,983 |
|
|
|
|
|
| $ | 2,220 |
|
|
|
|
|
| $ | 2,430 |
|
|
|
|
|
Loans in forbearance(2) |
|
| 7,410 |
|
|
|
|
|
|
| 6,292 |
|
|
|
|
|
|
| 8,029 |
|
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
| 30,720 |
|
|
| 81.4 | % |
|
| 39,679 |
|
|
| 89.4 | % |
|
| 40,404 |
|
|
| 91.5 | % |
Loans delinquent 31-60 days(3) |
|
| 1,917 |
|
|
| 5.1 |
|
|
| 1,696 |
|
|
| 3.8 |
|
|
| 1,181 |
|
|
| 2.7 |
|
Loans delinquent 61-90 days(3) |
|
| 1,291 |
|
|
| 3.4 |
|
|
| 904 |
|
|
| 2.0 |
|
|
| 665 |
|
|
| 1.5 |
|
Loans delinquent greater than 90 days(3) |
|
| 3,803 |
|
|
| 10.1 |
|
|
| 2,112 |
|
|
| 4.8 |
|
|
| 1,910 |
|
|
| 4.3 |
|
Total FFELP Loans in repayment |
|
| 37,731 |
|
|
| 100 | % |
|
| 44,391 |
|
|
| 100 | % |
|
| 44,160 |
|
|
| 100 | % |
Total FFELP Loans |
|
| 47,124 |
|
|
|
|
|
|
| 52,903 |
|
|
|
|
|
|
| 54,619 |
|
|
|
|
|
FFELP Loan allowance for losses |
|
| (233 | ) |
|
|
|
|
|
| (262 | ) |
|
|
|
|
|
| (269 | ) |
|
|
|
|
FFELP Loans, net |
| $ | 46,891 |
|
|
|
|
|
| $ | 52,641 |
|
|
|
|
|
| $ | 54,350 |
|
|
|
|
|
Percentage of FFELP Loans in repayment |
|
|
|
|
|
| 80.1 | % |
|
|
|
|
|
| 83.9 | % |
|
|
|
|
|
| 80.9 | % |
Delinquencies as a percentage of FFELP Loans in repayment |
|
|
|
|
|
| 18.6 | % |
|
|
|
|
|
| 10.6 | % |
|
|
|
|
|
| 8.5 | % |
FFELP Loans in forbearance as a percentage of loans in repayment and forbearance |
|
|
|
|
|
| 16.4 | % |
|
|
|
|
|
| 12.4 | % |
|
|
|
|
|
| 15.4 | % |
|
|
|
|
|
|
|
Loan type:
(Dollars in millions) |
| September 30, 2022 |
|
| September 30, 2021 |
|
| Change |
| |||
Stafford Loans |
| $ | 14,956 |
|
| $ | 16,719 |
|
| $ | (1,763 | ) |
Consolidation Loans |
|
| 27,766 |
|
|
| 33,143 |
|
|
| (5,377 | ) |
Rehab Loans |
|
| 4,402 |
|
|
| 4,757 |
|
|
| (355 | ) |
Total loans, gross |
| $ | 47,124 |
|
| $ | 54,619 |
|
| $ | (7,495 | ) |
3. Borrowings
The following table summarizes our borrowings.
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||
(Dollars in millions) |
| Short |
|
| Long |
|
| Total |
|
| Short |
|
| Long |
|
| Total |
| ||||||
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Senior unsecured debt(1) |
| $ | 1,156 |
|
| $ | 5,353 |
|
| $ | 6,509 |
|
| $ | 1,301 |
|
| $ | 5,711 |
|
| $ | 7,012 |
|
Total unsecured borrowings |
|
| 1,156 |
|
|
| 5,353 |
|
|
| 6,509 |
|
|
| 1,301 |
|
|
| 5,711 |
|
|
| 7,012 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
FFELP Loan securitizations(2)(3) |
|
| 64 |
|
|
| 38,293 |
|
|
| 38,357 |
|
|
| 76 |
|
|
| 42,675 |
|
|
| 42,751 |
|
Private Education Loan securitizations(4) |
|
| 574 |
|
|
| 12,316 |
|
|
| 12,890 |
|
|
| 725 |
|
|
| 12,744 |
|
|
| 13,469 |
|
FFELP Loan ABCP facilities |
|
| 1,548 |
|
|
| 455 |
|
|
| 2,003 |
|
|
| 923 |
|
|
| 386 |
|
|
| 1,309 |
|
Private Education Loan ABCP facilities |
|
| 1,416 |
|
|
| 901 |
|
|
| 2,317 |
|
|
| 2,734 |
|
|
| — |
|
|
| 2,734 |
|
Other(5) |
|
| 98 |
|
|
| 40 |
|
|
| 138 |
|
|
| 121 |
|
|
| — |
|
|
| 121 |
|
Total secured borrowings |
|
| 3,700 |
|
|
| 52,005 |
|
|
| 55,705 |
|
|
| 4,579 |
|
|
| 55,805 |
|
|
| 60,384 |
|
Total before hedge accounting adjustments |
|
| 4,856 |
|
|
| 57,358 |
|
|
| 62,214 |
|
|
| 5,880 |
|
|
| 61,516 |
|
|
| 67,396 |
|
Hedge accounting adjustments |
|
| (18 | ) |
|
| (422 | ) |
|
| (440 | ) |
|
| (10 | ) |
|
| (490 | ) |
|
| (500 | ) |
Total |
| $ | 4,838 |
|
| $ | 56,936 |
|
| $ | 61,774 |
|
| $ | 5,870 |
|
| $ | 61,026 |
|
| $ | 66,896 |
|
63
65
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
2. Allowance for Loan Losses (Continued)
Private Education Loans
The key credit quality indicators are credit scores (FICO scores), loan status, loan seasoning, whether a loan is a TDR, the existence of a cosigner and school type. The FICO score is the higher of the borrower or co-borrower score and is updated at least every six months while school type is assessed at origination. The other Private Education Loan key quality indicators are updated quarterly.
|
| Private Education Loan Credit Quality Indicators by Origination Year |
| |||||||||||||||||||||||||||||
|
| September 30, 2022 |
| |||||||||||||||||||||||||||||
(Dollars in millions) |
| September 30, 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
| Total |
|
| % of Total |
| ||||||||
Credit Quality Indicators |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Scores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
640 and above |
| $ | 1,503 |
|
| $ | 4,708 |
|
| $ | 1,593 |
|
| $ | 1,502 |
|
| $ | 556 |
|
| $ | 8,485 |
|
| $ | 18,347 |
|
|
| 92 | % |
Below 640 |
|
| 17 |
|
|
| 64 |
|
|
| 19 |
|
|
| 37 |
|
|
| 20 |
|
|
| 1,499 |
|
|
| 1,656 |
|
|
| 8 |
|
Total |
| $ | 1,520 |
|
| $ | 4,772 |
|
| $ | 1,612 |
|
| $ | 1,539 |
|
| $ | 576 |
|
| $ | 9,984 |
|
| $ | 20,003 |
|
|
| 100 | % |
Loan Status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-school/grace/ deferment/forbearance |
| $ | 31 |
|
| $ | 88 |
|
| $ | 28 |
|
| $ | 34 |
|
| $ | 13 |
|
| $ | 525 |
|
| $ | 719 |
|
|
| 4 | % |
Current/90 days or less delinquent |
|
| 1,488 |
|
|
| 4,678 |
|
|
| 1,582 |
|
|
| 1,499 |
|
|
| 560 |
|
|
| 9,083 |
|
|
| 18,890 |
|
|
| 94 |
|
Greater than 90 days delinquent |
|
| 1 |
|
|
| 6 |
|
|
| 2 |
|
|
| 6 |
|
|
| 3 |
|
|
| 376 |
|
|
| 394 |
|
|
| 2 |
|
Total |
| $ | 1,520 |
|
| $ | 4,772 |
|
| $ | 1,612 |
|
| $ | 1,539 |
|
| $ | 576 |
|
| $ | 9,984 |
|
| $ | 20,003 |
|
|
| 100 | % |
Seasoning(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-12 payments |
| $ | 1,499 |
|
| $ | 2,186 |
|
| $ | 14 |
|
| $ | 10 |
|
| $ | 2 |
|
| $ | 95 |
|
| $ | 3,806 |
|
|
| 19 | % |
13-24 payments |
|
| — |
|
|
| 2,534 |
|
|
| 736 |
|
|
| 39 |
|
|
| 8 |
|
|
| 102 |
|
|
| 3,419 |
|
| 17 |
| |
25-36 payments |
|
| — |
|
|
| — |
|
|
| 846 |
|
|
| 968 |
|
|
| 19 |
|
|
| 177 |
|
|
| 2,010 |
|
|
| 10 |
|
37-48 payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 503 |
|
|
| 287 |
|
|
| 293 |
|
|
| 1,083 |
|
| 5 |
| |
More than 48 payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 254 |
|
|
| 9,083 |
|
|
| 9,337 |
|
|
| 47 |
|
Loans in-school/ grace/deferment |
|
| 21 |
|
|
| 52 |
|
|
| 16 |
|
|
| 19 |
|
|
| 6 |
|
|
| 234 |
|
|
| 348 |
|
| 2 |
| |
Total |
| $ | 1,520 |
|
| $ | 4,772 |
|
| $ | 1,612 |
|
| $ | 1,539 |
|
| $ | 576 |
|
| $ | 9,984 |
|
| $ | 20,003 |
|
|
| 100 | % |
TDR Status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR |
| $ | 6 |
|
| $ | 48 |
|
| $ | 28 |
|
| $ | 62 |
|
| $ | 35 |
|
| $ | 6,617 |
|
| $ | 6,796 |
|
|
| 34 | % |
Non-TDR |
|
| 1,514 |
|
|
| 4,724 |
|
|
| 1,584 |
|
|
| 1,477 |
|
|
| 541 |
|
|
| 3,367 |
|
|
| 13,207 |
|
|
| 66 |
|
Total |
| $ | 1,520 |
|
| $ | 4,772 |
|
| $ | 1,612 |
|
| $ | 1,539 |
|
| $ | 576 |
|
| $ | 9,984 |
|
| $ | 20,003 |
|
|
| 100 | % |
Cosigners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With cosigner(2) |
| $ | 24 |
|
| $ | 109 |
|
| $ | 28 |
|
| $ | 11 |
|
| $ | — |
|
| $ | 6,425 |
|
| $ | 6,597 |
|
|
| 33 | % |
Without cosigner |
|
| 1,496 |
|
|
| 4,663 |
|
|
| 1,584 |
|
|
| 1,528 |
|
|
| 576 |
|
|
| 3,559 |
|
|
| 13,406 |
|
|
| 67 |
|
Total |
| $ | 1,520 |
|
| $ | 4,772 |
|
| $ | 1,612 |
|
| $ | 1,539 |
|
| $ | 576 |
|
| $ | 9,984 |
|
| $ | 20,003 |
|
|
| 100 | % |
School Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not-for-profit |
| $ | 1,427 |
|
| $ | 4,496 |
|
| $ | 1,541 |
|
| $ | 1,434 |
|
| $ | 529 |
|
| $ | 8,338 |
|
| $ | 17,765 |
|
|
| 89 | % |
For-profit |
|
| 93 |
|
|
| 276 |
|
|
| 71 |
|
|
| 105 |
|
|
| 47 |
|
|
| 1,646 |
|
|
| 2,238 |
|
|
| 11 |
|
Total |
| $ | 1,520 |
|
| $ | 4,772 |
|
| $ | 1,612 |
|
| $ | 1,539 |
|
| $ | 576 |
|
| $ | 9,984 |
|
| $ | 20,003 |
|
|
| 100 | % |
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (852 | ) |
|
|
|
|
Total loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 19,151 |
|
|
|
|
|
|
|
|
|
64
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Private Education Loan Credit Quality Indicators by Origination Year |
| |||||||||||||||||||||||||||||
|
| September 30, 2021 |
| |||||||||||||||||||||||||||||
(Dollars in millions) |
| September 30, 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
| Total |
|
| % of Total |
| ||||||||
Credit Quality Indicators |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Scores: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
640 and above |
| $ | 4,049 |
|
| $ | 2,228 |
|
| $ | 2,064 |
|
| $ | 762 |
|
| $ | 233 |
|
| $ | 10,021 |
|
| $ | 19,357 |
|
|
| 92 | % |
Below 640 |
|
| 28 |
|
|
| 10 |
|
|
| 33 |
|
|
| 20 |
|
|
| 8 |
|
|
| 1,542 |
|
|
| 1,641 |
|
|
| 8 |
|
Total |
| $ | 4,077 |
|
| $ | 2,238 |
|
| $ | 2,097 |
|
| $ | 782 |
|
| $ | 241 |
|
| $ | 11,563 |
|
| $ | 20,998 |
|
|
| 100 | % |
Loan Status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-school/grace/ deferment/forbearance |
| $ | 32 |
|
| $ | 34 |
|
| $ | 45 |
|
| $ | 19 |
|
| $ | 8 |
|
| $ | 1,065 |
|
| $ | 1,203 |
|
|
| 6 | % |
Current/90 days or less delinquent |
|
| 4,044 |
|
|
| 2,203 |
|
|
| 2,049 |
|
|
| 762 |
|
|
| 232 |
|
|
| 10,289 |
|
|
| 19,579 |
|
|
| 93 |
|
Greater than 90 days delinquent |
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
|
| 209 |
|
|
| 216 |
|
|
| 1 |
|
Total |
| $ | 4,077 |
|
| $ | 2,238 |
|
| $ | 2,097 |
|
| $ | 782 |
|
| $ | 241 |
|
| $ | 11,563 |
|
| $ | 20,998 |
|
|
| 100 | % |
Seasoning(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-12 payments |
| $ | 4,058 |
|
| $ | 1,017 |
|
| $ | 37 |
|
| $ | 5 |
|
| $ | 1 |
|
| $ | 142 |
|
| $ | 5,260 |
|
|
| 25 | % |
13-24 payments |
|
| — |
|
|
| 1,201 |
|
|
| 1,330 |
|
|
| 20 |
|
|
| 4 |
|
|
| 167 |
|
|
| 2,722 |
|
| 13 |
| |
25-36 payments |
|
| — |
|
|
| — |
|
|
| 709 |
|
|
| 385 |
|
|
| 12 |
|
|
| 273 |
|
|
| 1,379 |
|
|
| 7 |
|
37-48 payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 364 |
|
|
| 133 |
|
|
| 417 |
|
|
| 914 |
|
| 4 |
| |
More than 48 payments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 89 |
|
|
| 10,245 |
|
|
| 10,334 |
|
|
| 49 |
|
Loans in-school/ grace/deferment |
|
| 19 |
|
|
| 20 |
|
|
| 21 |
|
|
| 8 |
|
|
| 2 |
|
|
| 319 |
|
|
| 389 |
|
| 2 |
| |
Total |
| $ | 4,077 |
|
| $ | 2,238 |
|
| $ | 2,097 |
|
| $ | 782 |
|
| $ | 241 |
|
| $ | 11,563 |
|
| $ | 20,998 |
|
|
| 100 | % |
TDR Status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR |
| $ | 1 |
|
| $ | 5 |
|
| $ | 26 |
|
| $ | 27 |
|
| $ | 30 |
|
| $ | 7,323 |
|
| $ | 7,412 |
|
|
| 35 | % |
Non-TDR |
|
| 4,076 |
|
|
| 2,233 |
|
|
| 2,071 |
|
|
| 755 |
|
|
| 211 |
|
|
| 4,240 |
|
|
| 13,586 |
|
|
| 65 |
|
Total |
| $ | 4,077 |
|
| $ | 2,238 |
|
| $ | 2,097 |
|
| $ | 782 |
|
| $ | 241 |
|
| $ | 11,563 |
|
| $ | 20,998 |
|
|
| 100 | % |
Cosigners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With cosigner(2) |
| $ | 12 |
|
| $ | 34 |
|
| $ | 13 |
|
| $ | — |
|
| $ | 37 |
|
| $ | 7,560 |
|
| $ | 7,656 |
|
|
| 36 | % |
Without cosigner |
|
| 4,065 |
|
|
| 2,204 |
|
|
| 2,084 |
|
|
| 782 |
|
|
| 204 |
|
|
| 4,003 |
|
|
| 13,342 |
|
|
| 64 |
|
Total |
| $ | 4,077 |
|
| $ | 2,238 |
|
| $ | 2,097 |
|
| $ | 782 |
|
| $ | 241 |
|
| $ | 11,563 |
|
| $ | 20,998 |
|
|
| 100 | % |
School Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not-for-profit |
| $ | 3,850 |
|
| $ | 2,137 |
|
| $ | 1,957 |
|
| $ | 721 |
|
| $ | 231 |
|
| $ | 9,607 |
|
| $ | 18,503 |
|
|
| 88 | % |
For-profit |
|
| 227 |
|
|
| 101 |
|
|
| 140 |
|
|
| 61 |
|
|
| 10 |
|
|
| 1,956 |
|
|
| 2,495 |
|
|
| 12 |
|
Total |
| $ | 4,077 |
|
| $ | 2,238 |
|
| $ | 2,097 |
|
| $ | 782 |
|
| $ | 241 |
|
| $ | 11,563 |
|
| $ | 20,998 |
|
|
| 100 | % |
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (980 | ) |
|
|
|
|
Total loans, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 20,018 |
|
|
|
|
|
|
|
|
|
65
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Private Education Loan Delinquencies |
| |||||||||||||||||||||
|
| TDRs |
| |||||||||||||||||||||
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 164 |
|
|
|
|
|
| $ | 194 |
|
|
|
|
|
| $ | 210 |
|
|
|
|
|
Loans in forbearance(2) |
|
| 284 |
|
|
|
|
|
|
| 446 |
|
|
|
|
|
|
| 667 |
|
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
| 5,573 |
|
|
| 87.8 | % |
|
| 6,023 |
|
|
| 91.0 | % |
|
| 5,988 |
|
|
| 91.6 | % |
Loans delinquent 31-60 days(3) |
|
| 269 |
|
|
| 4.2 |
|
|
| 199 |
|
|
| 3.0 |
|
|
| 224 |
|
|
| 3.5 |
|
Loans delinquent 61-90 days(3) |
|
| 143 |
|
|
| 2.3 |
|
|
| 120 |
|
|
| 1.8 |
|
|
| 124 |
|
|
| 1.9 |
|
Loans delinquent greater than 90 days(3) |
|
| 363 |
|
|
| 5.7 |
|
|
| 274 |
|
|
| 4.2 |
|
|
| 198 |
|
|
| 3.0 |
|
Total TDR loans in repayment |
|
| 6,348 |
|
|
| 100 | % |
|
| 6,616 |
|
|
| 100 | % |
|
| 6,534 |
|
|
| 100 | % |
Total TDR loans |
|
| 6,796 |
|
|
|
|
|
|
| 7,256 |
|
|
|
|
|
|
| 7,411 |
|
|
|
|
|
TDR loans allowance for losses |
|
| (666 | ) |
|
|
|
|
|
| (829 | ) |
|
|
|
|
|
| (814 | ) |
|
|
|
|
TDR loans, net |
| $ | 6,130 |
|
|
|
|
|
| $ | 6,427 |
|
|
|
|
|
| $ | 6,597 |
|
|
|
|
|
Percentage of TDR loans in repayment |
|
|
|
|
|
| 93.4 | % |
|
|
|
|
|
| 91.2 | % |
|
|
|
|
|
| 88.2 | % |
Delinquencies as a percentage of TDR loans in repayment |
|
|
|
|
|
| 12.2 | % |
|
|
|
|
|
| 9.0 | % |
|
|
|
|
|
| 8.4 | % |
Loans in forbearance as a percentage of TDR loans in repayment and forbearance |
|
|
|
|
|
| 4.3 | % |
|
|
|
|
|
| 6.3 | % |
|
|
|
|
|
| 9.3 | % |
|
|
|
|
|
|
66
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
2. Allowance for Loan Losses (Continued)
|
| Private Education Loan Delinquencies |
| |||||||||||||||||||||
|
| Non-TDRs |
| |||||||||||||||||||||
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
| |||||||||||||||
(Dollars in millions) |
| Balance |
|
| % |
|
| Balance |
|
| % |
|
| Balance |
|
| % |
| ||||||
Loans in-school/grace/deferment(1) |
| $ | 184 |
|
|
|
|
|
| $ | 167 |
|
|
|
|
|
| $ | 179 |
|
|
|
|
|
Loans in forbearance(2) |
|
| 87 |
|
|
|
|
|
|
| 89 |
|
|
|
|
|
|
| 147 |
|
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
| 12,853 |
|
|
| 99.4 | % |
|
| 13,611 |
|
|
| 99.6 | % |
|
| 13,208 |
|
|
| 99.6 | % |
Loans delinquent 31-60 days(3) |
|
| 36 |
|
|
| .3 |
|
|
| 23 |
|
|
| .2 |
|
|
| 23 |
|
|
| .2 |
|
Loans delinquent 61-90 days(3) |
|
| 16 |
|
|
| .1 |
|
|
| 11 |
|
|
| .1 |
|
|
| 12 |
|
|
| .1 |
|
Loans delinquent greater than 90 days(3) |
|
| 31 |
|
|
| .2 |
|
|
| 23 |
|
|
| .1 |
|
|
| 18 |
|
|
| .1 |
|
Total non-TDR loans in repayment |
|
| 12,936 |
|
|
| 100 | % |
|
| 13,668 |
|
|
| 100 | % |
|
| 13,261 |
|
|
| 100 | % |
Total non-TDR loans |
|
| 13,207 |
|
|
|
|
|
|
| 13,924 |
|
|
|
|
|
|
| 13,587 |
|
|
|
|
|
Non-TDR loans allowance for losses |
|
| (186 | ) |
|
|
|
|
|
| (180 | ) |
|
|
|
|
|
| (166 | ) |
|
|
|
|
Non-TDR loans, net |
| $ | 13,021 |
|
|
|
|
|
| $ | 13,744 |
|
|
|
|
|
| $ | 13,421 |
|
|
|
|
|
Percentage of non-TDR loans in repayment |
|
|
|
|
|
| 97.9 | % |
|
|
|
|
|
| 98.2 | % |
|
|
|
|
|
| 97.6 | % |
Delinquencies as a percentage of non-TDR loans in repayment |
|
|
|
|
|
| .6 | % |
|
|
|
|
|
| .4 | % |
|
|
|
|
|
| .4 | % |
Loans in forbearance as a percentage of non-TDR loans in repayment and forbearance |
|
|
|
|
|
| .7 | % |
|
|
|
|
|
| .6 | % |
|
|
|
|
|
| 1.1 | % |
|
|
|
|
|
|
67
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
3. Borrowings
The following table summarizes our borrowings.
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
(Dollars in millions) |
| Short Term |
|
| Long Term |
|
| Total |
|
| Short Term |
|
| Long Term |
|
| Total |
| ||||||
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured debt(1) |
| $ | 1,299 |
|
| $ | 5,709 |
|
| $ | 7,008 |
|
| $ | — |
|
| $ | 7,014 |
|
| $ | 7,014 |
|
Total unsecured borrowings |
|
| 1,299 |
|
|
| 5,709 |
|
|
| 7,008 |
|
|
| — |
|
|
| 7,014 |
|
|
| 7,014 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loan securitizations(2)(3) |
|
| 83 |
|
|
| 45,358 |
|
|
| 45,441 |
|
|
| — |
|
|
| 51,841 |
|
|
| 51,841 |
|
Private Education Loan securitizations(4) |
|
| 813 |
|
|
| 13,300 |
|
|
| 14,113 |
|
|
| 543 |
|
|
| 14,074 |
|
|
| 14,617 |
|
FFELP Loan ABCP facilities |
|
| 974 |
|
|
| 291 |
|
|
| 1,265 |
|
|
| 282 |
|
|
| 150 |
|
|
| 432 |
|
Private Education Loan ABCP facilities |
|
| 2,418 |
|
|
| — |
|
|
| 2,418 |
|
|
| 1,363 |
|
|
| 1,152 |
|
|
| 2,515 |
|
Other(5) |
|
| 105 |
|
|
| — |
|
|
| 105 |
|
|
| 302 |
|
|
| — |
|
|
| 302 |
|
Total secured borrowings |
|
| 4,393 |
|
|
| 58,949 |
|
|
| 63,342 |
|
|
| 2,490 |
|
|
| 67,217 |
|
|
| 69,707 |
|
Total before hedge accounting adjustments |
|
| 5,692 |
|
|
| 64,658 |
|
|
| 70,350 |
|
|
| 2,490 |
|
|
| 74,231 |
|
|
| 76,721 |
|
Hedge accounting adjustments |
|
| (15 | ) |
|
| (660 | ) |
|
| (675 | ) |
|
| — |
|
|
| 257 |
|
|
| 257 |
|
Total |
| $ | 5,677 |
|
| $ | 63,998 |
|
| $ | 69,675 |
|
| $ | 2,490 |
|
| $ | 74,488 |
|
| $ | 76,978 |
|
|
|
|
|
|
|
|
|
|
|
68
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
3. Borrowings (Continued)
Variable Interest Entities
We consolidated the following financing VIEs as of SeptemberJune 30, 20222023 and December 31, 2021,2022, as we are the primary beneficiary. As a result, these VIEs are accounted for as secured borrowings.
|
| September 30, 2022 |
|
| June 30, 2023 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Debt Outstanding |
|
| Carrying Amount of Assets Securing Debt Outstanding |
|
| Debt Outstanding |
|
| Carrying Amount of Assets Securing |
| ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in millions) |
| Short Term |
|
| Long Term |
|
| Total |
|
| Loans |
|
| Cash |
|
| Other Assets |
|
| Total |
|
| Short |
|
| Long |
|
| Total |
|
| Loans |
|
| Cash |
|
| Other |
|
| Total |
| ||||||||||||||
Secured Borrowings — VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
FFELP Loan securitizations |
| $ | 83 |
|
| $ | 45,358 |
|
| $ | 45,441 |
|
| $ | 45,484 |
|
| $ | 2,029 |
|
| $ | 1,636 |
|
| $ | 49,149 |
|
| $ | 64 |
|
| $ | 38,293 |
|
| $ | 38,357 |
|
| $ | 38,757 |
|
| $ | 1,445 |
|
| $ | 1,579 |
|
| $ | 41,781 |
|
Private Education Loan securitizations |
|
| 813 |
|
|
| 13,300 |
|
|
| 14,113 |
|
|
| 14,739 |
|
|
| 371 |
|
|
| 100 |
|
|
| 15,210 |
|
|
| 574 |
|
|
| 12,316 |
|
|
| 12,890 |
|
|
| 13,833 |
|
|
| 365 |
|
|
| 98 |
|
|
| 14,296 |
|
FFELP Loan ABCP facilities |
|
| 974 |
|
|
| 291 |
|
|
| 1,265 |
|
|
| 1,269 |
|
|
| 27 |
|
|
| 43 |
|
|
| 1,339 |
|
|
| 1,548 |
|
|
| 455 |
|
|
| 2,003 |
|
|
| 2,025 |
|
|
| 37 |
|
|
| 75 |
|
|
| 2,137 |
|
Private Education Loan ABCP facilities |
|
| 2,418 |
|
|
| — |
|
|
| 2,418 |
|
|
| 2,619 |
|
|
| 84 |
|
|
| 26 |
|
|
| 2,729 |
|
|
| 1,416 |
|
|
| 901 |
|
|
| 2,317 |
|
|
| 2,564 |
|
|
| 77 |
|
|
| 44 |
|
|
| 2,685 |
|
Total before hedge accounting adjustments |
|
| 4,288 |
|
|
| 58,949 |
|
|
| 63,237 |
|
|
| 64,111 |
|
|
| 2,511 |
|
|
| 1,805 |
|
|
| 68,427 |
|
|
| 3,602 |
|
|
| 51,965 |
|
|
| 55,567 |
|
|
| 57,179 |
|
|
| 1,924 |
|
|
| 1,796 |
|
|
| 60,899 |
|
Hedge accounting adjustments |
|
| — |
|
|
| (362 | ) |
|
| (362 | ) |
|
| — |
|
|
| — |
|
|
| (409 | ) |
|
| (409 | ) |
|
| — |
|
|
| (161 | ) |
|
| (161 | ) |
|
| — |
|
|
| — |
|
|
| (236 | ) |
|
| (236 | ) |
Total |
| $ | 4,288 |
|
| $ | 58,587 |
|
| $ | 62,875 |
|
| $ | 64,111 |
|
| $ | 2,511 |
|
| $ | 1,396 |
|
| $ | 68,018 |
|
| $ | 3,602 |
|
| $ | 51,804 |
|
| $ | 55,406 |
|
| $ | 57,179 |
|
| $ | 1,924 |
|
| $ | 1,560 |
|
| $ | 60,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| December 31, 2022 |
| |||||||||||||||||||||||||
|
| Debt Outstanding |
|
| Carrying Amount of Assets Securing |
| ||||||||||||||||||||||
(Dollars in millions) |
| Short |
|
| Long |
|
| Total |
|
| Loans |
|
| Cash |
|
| Other |
|
| Total |
| |||||||
Secured Borrowings — VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
FFELP Loan securitizations |
| $ | 76 |
|
| $ | 42,675 |
|
| $ | 42,751 |
|
| $ | 42,148 |
|
| $ | 2,705 |
|
| $ | 1,544 |
|
| $ | 46,397 |
|
Private Education Loan securitizations |
|
| 725 |
|
|
| 12,744 |
|
|
| 13,469 |
|
|
| 14,168 |
|
|
| 367 |
|
|
| 105 |
|
|
| 14,640 |
|
FFELP Loan ABCP facilities |
|
| 923 |
|
|
| 386 |
|
|
| 1,309 |
|
|
| 1,317 |
|
|
| 39 |
|
|
| 44 |
|
|
| 1,400 |
|
Private Education Loan ABCP facilities |
|
| 2,734 |
|
|
| — |
|
|
| 2,734 |
|
|
| 3,039 |
|
|
| 122 |
|
|
| (81 | ) |
|
| 3,080 |
|
Total before hedge accounting |
|
| 4,458 |
|
|
| 55,805 |
|
|
| 60,263 |
|
|
| 60,672 |
|
|
| 3,233 |
|
|
| 1,612 |
|
|
| 65,517 |
|
Hedge accounting adjustments |
|
| — |
|
|
| (207 | ) |
|
| (207 | ) |
|
| — |
|
|
| — |
|
|
| (256 | ) |
|
| (256 | ) |
Total |
| $ | 4,458 |
|
| $ | 55,598 |
|
| $ | 60,056 |
|
| $ | 60,672 |
|
| $ | 3,233 |
|
| $ | 1,356 |
|
| $ | 65,261 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||
|
| Debt Outstanding |
|
| Carrying Amount of Assets Securing Debt Outstanding |
| ||||||||||||||||||||||
(Dollars in millions) |
| Short Term |
|
| Long Term |
|
| Total |
|
| Loans |
|
| Cash |
|
| Other Assets |
|
| Total |
| |||||||
Secured Borrowings — VIEs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loan securitizations |
| $ | — |
|
| $ | 51,841 |
|
| $ | 51,841 |
|
| $ | 52,066 |
|
| $ | 2,073 |
|
| $ | 1,520 |
|
| $ | 55,659 |
|
Private Education Loan securitizations |
|
| 543 |
|
|
| 14,074 |
|
|
| 14,617 |
|
|
| 15,506 |
|
|
| 505 |
|
|
| 150 |
|
|
| 16,161 |
|
FFELP Loan ABCP facilities |
|
| 282 |
|
|
| 150 |
|
|
| 432 |
|
|
| 436 |
|
|
| 8 |
|
|
| 15 |
|
|
| 459 |
|
Private Education Loan ABCP facilities |
|
| 1,363 |
|
|
| 1,152 |
|
|
| 2,515 |
|
|
| 2,641 |
|
|
| 63 |
|
|
| 32 |
|
|
| 2,736 |
|
Total before hedge accounting adjustments |
|
| 2,188 |
|
|
| 67,217 |
|
|
| 69,405 |
|
|
| 70,649 |
|
|
| 2,649 |
|
|
| 1,717 |
|
|
| 75,015 |
|
Hedge accounting adjustments |
|
| — |
|
|
| (110 | ) |
|
| (110 | ) |
|
| — |
|
|
| — |
|
|
| (195 | ) |
|
| (195 | ) |
Total |
| $ | 2,188 |
|
| $ | 67,107 |
|
| $ | 69,295 |
|
| $ | 70,649 |
|
| $ | 2,649 |
|
| $ | 1,522 |
|
| $ | 74,820 |
|
6966
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
4. Derivative Financial Instruments
Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments and their impact on net income and other comprehensive income.
Impact of Derivatives on Balance Sheet
|
|
|
| Cash Flow |
|
| Fair Value(3) |
|
| Trading |
|
| Total |
| ||||||||||||||||||||
(Dollars in millions) |
| Hedged Risk |
| Jun 30, 2023 |
|
| Dec 31, 2022 |
|
| Jun 30, 2023 |
|
| Dec 31, 2022 |
|
| Jun 30, 2023 |
|
| Dec 31, 2022 |
|
| Jun 30, 2023 |
|
| Dec 31, 2022 |
| ||||||||
Fair Values(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Derivative Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| Interest rate |
| $ | — |
|
| $ | — |
|
| $ | 53 |
|
| $ | 55 |
|
| $ | — |
|
| $ | 1 |
|
| $ | 53 |
|
| $ | 56 |
|
Cross-currency interest rate |
| Foreign currency and |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total derivative assets(2) |
|
|
|
| — |
|
|
| — |
|
|
| 53 |
|
|
| 55 |
|
|
| — |
|
|
| 1 |
|
|
| 53 |
|
|
| 56 |
|
Derivative Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| Interest rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (2 | ) |
|
| (5 | ) |
Floor Income Contracts |
| Interest rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cross-currency interest rate |
| Foreign currency and |
|
| — |
|
|
| — |
|
|
| (234 | ) |
|
| (253 | ) |
|
| — |
|
|
| — |
|
|
| (234 | ) |
|
| (253 | ) |
Total derivative liabilities(2) |
|
|
|
| — |
|
|
| — |
|
|
| (234 | ) |
|
| (255 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (236 | ) |
|
| (258 | ) |
Net total derivatives |
|
|
| $ | — |
|
| $ | — |
|
| $ | (181 | ) |
| $ | (200 | ) |
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (183 | ) |
| $ | (202 | ) |
|
|
|
| Cash Flow |
|
| Fair Value(3) |
|
| Trading |
|
| Total |
| ||||||||||||||||||||
(Dollars in millions) |
| Hedged Risk Exposure |
| Sep 30, 2022 |
|
| Dec 31, 2021 |
|
| Sep 30, 2022 |
|
| Dec 31, 2021 |
|
| Sep 30, 2022 |
|
| Dec 31, 2021 |
|
| Sep 30, 2022 |
|
| Dec 31, 2021 |
| ||||||||
Fair Values(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| Interest rate |
| $ | — |
|
| $ | — |
|
| $ | 56 |
|
| $ | 222 |
|
| $ | — |
|
| $ | 2 |
|
| $ | 56 |
|
| $ | 224 |
|
Cross-currency interest rate swaps |
| Foreign currency and interest rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total derivative assets(2) |
|
|
|
| — |
|
|
| — |
|
|
| 56 |
|
|
| 222 |
|
|
| — |
|
|
| 2 |
|
|
| 56 |
|
|
| 224 |
|
Derivative Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| Interest rate |
|
| — |
|
|
| — |
|
|
| (7 | ) |
|
| — |
|
|
| (2 | ) |
|
| (5 | ) |
|
| (9 | ) |
|
| (5 | ) |
Floor Income Contracts |
| Interest rate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65 | ) |
|
| — |
|
|
| (65 | ) |
Cross-currency interest rate swaps |
| Foreign currency and interest rate |
|
| — |
|
|
| — |
|
|
| (407 | ) |
|
| (190 | ) |
|
| — |
|
|
| — |
|
|
| (407 | ) |
|
| (190 | ) |
Total derivative liabilities(2) |
|
|
|
| — |
|
|
| — |
|
|
| (414 | ) |
|
| (190 | ) |
|
| (2 | ) |
|
| (70 | ) |
|
| (416 | ) |
|
| (260 | ) |
Net total derivatives |
|
|
| $ | — |
|
| $ | — |
|
| $ | (358 | ) |
| $ | 32 |
|
| $ | (2 | ) |
| $ | (68 | ) |
| $ | (360 | ) |
| $ | (36 | ) |
|
| Other Assets |
|
| Other Liabilities |
| ||||||||||
(Dollar in millions) |
| June 30, 2023 |
|
| December 31, 2022 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Gross position |
| $ | 53 |
|
| $ | 56 |
|
| $ | (236 | ) |
| $ | (258 | ) |
Impact of master netting agreements |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Derivative values with impact of master netting |
|
| 53 |
|
|
| 56 |
|
|
| (236 | ) |
|
| (258 | ) |
Cash collateral (held) pledged |
|
| (60 | ) |
|
| (80 | ) |
|
| 61 |
|
|
| 62 |
|
Net position |
| $ | (7 | ) |
| $ | (24 | ) |
| $ | (175 | ) |
| $ | (196 | ) |
|
|
|
|
|
| Other Assets |
|
| Other Liabilities |
| ||||||||||
(Dollar in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Gross position |
| $ | 56 |
|
| $ | 224 |
|
| $ | (416 | ) |
| $ | (260 | ) |
Impact of master netting agreements |
|
| — |
|
|
| (6 | ) |
|
| — |
|
|
| 6 |
|
Derivative values with impact of master netting agreements (as carried on balance sheet) |
|
| 56 |
|
|
| 218 |
|
|
| (416 | ) |
|
| (254 | ) |
Cash collateral (held) pledged |
|
| (62 | ) |
|
| (244 | ) |
|
| 69 |
|
|
| 147 |
|
Net position |
| $ | (6 | ) |
| $ | (26 | ) |
| $ | (347 | ) |
| $ | (107 | ) |
|
| As of June 30, 2023 |
|
| As of December 31, 2022 |
| ||||||||||
(Dollar in millions) |
| Carrying |
|
| Hedge Basis Adjustments |
|
| Carrying |
|
| Hedge Basis Adjustments |
| ||||
Short-term borrowings |
| $ | 1,131 |
|
| $ | (18 | ) |
| $ | 1,289 |
|
| $ | (10 | ) |
Long-term borrowings |
| $ | 5,772 |
|
| $ | (426 | ) |
| $ | 6,188 |
|
| $ | (494 | ) |
|
|
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||||||||||
(Dollar in millions) |
| Carrying Value |
|
| Hedge Basis Adjustments |
|
| Carrying Value |
|
| Hedge Basis Adjustments |
| ||||
Short-term borrowings |
| $ | 1,283 |
|
| $ | (15 | ) |
| $ | — |
|
| $ | — |
|
Long-term borrowings |
| $ | 6,102 |
|
| $ | (664 | ) |
| $ | 8,503 |
|
| $ | 252 |
|
70
67
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
4. Derivative Financial Instruments (Continued)
The above fair values include adjustments when necessary for counterparty credit risk for both when we are exposed to the counterparty, net of collateral postings, and when the counterparty is exposed to us, net of collateral postings. The net adjustments decreased the asset position at SeptemberJune 30, 20222023 and December 31, 20212022 by $8$4 million and $8$6 million, respectively. In addition, the above fair values reflect adjustments for illiquid derivatives as indicated by a wide bid/ask spread in the interest rate indices to which the derivatives are indexed. These adjustments decreased the overall net asset positions at SeptemberJune 30, 20222023 and December 31, 20212022 by $1$1 million and $2$1 million, respectively.
|
| Cash Flow |
|
| Fair Value |
|
| Trading |
|
| Total |
| ||||||||||||||||||||
(Dollars in billions) |
| Jun 30, 2023 |
|
| Dec 31, 2022 |
|
| Jun 30, 2023 |
|
| Dec 31, 2022 |
|
| Jun 30, 2023 |
|
| Dec 31, 2022 |
|
| Jun 30, 2023 |
|
| Dec 31, 2022 |
| ||||||||
Notional Values: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| $ | 4.8 |
|
| $ | 8.3 |
|
| $ | 5.7 |
|
| $ | 6.2 |
|
| $ | 1.7 |
|
| $ | 17.4 |
|
| $ | 12.2 |
|
| $ | 31.9 |
|
Floor Income Contracts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.0 |
|
|
| 6.0 |
|
|
| 3.0 |
|
|
| 6.0 |
|
Cross-currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| 1.7 |
|
|
| 1.8 |
|
|
| — |
|
|
| — |
|
|
| 1.7 |
|
|
| 1.8 |
|
Total derivatives |
| $ | 4.8 |
|
| $ | 8.3 |
|
| $ | 7.4 |
|
| $ | 8.0 |
|
| $ | 4.7 |
|
| $ | 23.4 |
|
| $ | 16.9 |
|
| $ | 39.7 |
|
|
| Cash Flow |
|
| Fair Value |
|
| Trading |
|
| Total |
| ||||||||||||||||||||
(Dollars in billions) |
| Sep 30, 2022 |
|
| Dec 31, 2021 |
|
| Sep 30, 2022 |
|
| Dec 31, 2021 |
|
| Sep 30, 2022 |
|
| Dec 31, 2021 |
|
| Sep 30, 2022 |
|
| Dec 31, 2021 |
| ||||||||
Notional Values: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| $ | 9.9 |
|
| $ | 12.1 |
|
| $ | 6.2 |
|
| $ | 6.2 |
|
| $ | 25.5 |
|
| $ | 28.4 |
|
| $ | 41.6 |
|
| $ | 46.7 |
|
Floor Income Contracts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6.0 |
|
|
| 12.5 |
|
|
| 6.0 |
|
|
| 12.5 |
|
Cross-currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| 1.9 |
|
|
| 2.1 |
|
|
| — |
|
|
| — |
|
|
| 1.9 |
|
|
| 2.1 |
|
Total derivatives |
| $ | 9.9 |
|
| $ | 12.1 |
|
| $ | 8.1 |
|
| $ | 8.3 |
|
| $ | 31.5 |
|
| $ | 40.9 |
|
| $ | 49.5 |
|
| $ | 61.3 |
|
Mark-to-Market
Mark-to-Market Impact of Derivatives on Statements of Income
|
| Total Gains (Losses) |
| |||||||||||||
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Fair Value Hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest Rate Swaps |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains (losses) recognized in net income on derivatives |
| $ | (80 | ) |
| $ | (148 | ) |
| $ | (1 | ) |
| $ | (437 | ) |
Gains (losses) recognized in net income on hedged items |
|
| 67 |
|
|
| 158 |
|
|
| (15 | ) |
|
| 471 |
|
Net fair value hedge ineffectiveness gains (losses) |
|
| (13 | ) |
|
| 10 |
|
|
| (16 | ) |
|
| 34 |
|
Cross currency interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains (losses) recognized in net income on derivatives |
|
| (10 | ) |
|
| (54 | ) |
|
| 19 |
|
|
| (89 | ) |
Gains (losses) recognized in net income on hedged items |
|
| (14 | ) |
|
| 94 |
|
|
| (45 | ) |
|
| 146 |
|
Net fair value hedge ineffectiveness gains (losses) |
|
| (24 | ) |
|
| 40 |
|
|
| (26 | ) |
|
| 57 |
|
Total fair value hedges(1)(2) |
|
| (37 | ) |
|
| 50 |
|
|
| (42 | ) |
|
| 91 |
|
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total cash flow hedges(2) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swaps |
|
| 26 |
|
|
| 17 |
|
|
| 17 |
|
|
| 80 |
|
Floor income contracts |
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 40 |
|
Cross currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total trading derivatives(3) |
|
| 26 |
|
|
| 22 |
|
|
| 17 |
|
|
| 120 |
|
Mark-to-market gains (losses) recognized |
| $ | (11 | ) |
| $ | 72 |
|
| $ | (25 | ) |
| $ | 211 |
|
|
| Total Gains (Losses) |
| |||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Fair Value Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in net income on derivatives |
| $ | (193 | ) |
| $ | (53 | ) |
| $ | (629 | ) |
| $ | (228 | ) |
Gains (losses) recognized in net income on hedged items |
|
| 210 |
|
|
| 60 |
|
|
| 680 |
|
|
| 251 |
|
Net fair value hedge ineffectiveness gains (losses) |
|
| 17 |
|
|
| 7 |
|
|
| 51 |
|
|
| 23 |
|
Cross currency interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in net income on derivatives |
|
| (127 | ) |
|
| (48 | ) |
|
| (217 | ) |
|
| 138 |
|
Gains (losses) recognized in net income on hedged items |
|
| 104 |
|
|
| 51 |
|
|
| 251 |
|
|
| (90 | ) |
Net fair value hedge ineffectiveness gains (losses) |
|
| (23 | ) |
|
| 3 |
|
|
| 34 |
|
|
| 48 |
|
Total fair value hedges(1)(2) |
|
| (6 | ) |
|
| 10 |
|
|
| 85 |
|
|
| 71 |
|
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash flow hedges(2) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Trading: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
| 40 |
|
|
| (2 | ) |
|
| 120 |
|
|
| 13 |
|
Floor income contracts |
|
| — |
|
|
| (3 | ) |
|
| 41 |
|
|
| 8 |
|
Cross currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total trading derivatives(3) |
|
| 40 |
|
|
| (5 | ) |
|
| 161 |
|
|
| 21 |
|
Mark-to-market gains (losses) recognized |
| $ | 34 |
|
| $ | 5 |
|
| $ | 246 |
|
| $ | 92 |
|
|
|
|
|
|
|
7168
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
4. Derivative Financial Instruments (Continued)
Impact of Derivatives on Other Comprehensive Income (Equity)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Total gains (losses) on cash flow hedges |
| $ | 18 |
|
| $ | 34 |
|
| $ | 15 |
|
| $ | 127 |
|
Reclassification adjustments for derivative (gains) losses |
|
| (19 | ) |
|
| 15 |
|
|
| (37 | ) |
|
| 36 |
|
Net changes in cash flow hedges, net of tax |
| $ | (1 | ) |
| $ | 49 |
|
| $ | (22 | ) |
| $ | 163 |
|
Collateral
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Total gains (losses) on cash flow hedges |
| $ | 52 |
|
| $ | (1 | ) |
| $ | 179 |
|
| $ | 21 |
|
Reclassification adjustments for derivative (gains) losses included in net income (interest expense)(1) |
|
| 2 |
|
|
| 21 |
|
|
| 38 |
|
|
| 64 |
|
Net changes in cash flow hedges, net of tax |
| $ | 54 |
|
| $ | 20 |
|
| $ | 217 |
|
| $ | 85 |
|
|
|
Collateral
The following table details collateral held and pledged related to derivative exposure between us and our derivative counterparties:
(Dollars in millions) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Collateral held: |
|
|
|
|
|
| ||
Cash (obligation to return cash collateral is recorded in short-term borrowings) |
| $ | 60 |
|
| $ | 80 |
|
Securities at fair value — corporate derivatives (not recorded in financial |
|
| — |
|
|
| — |
|
Securities at fair value — on-balance sheet securitization derivatives (not |
|
| — |
|
|
| — |
|
Total collateral held |
| $ | 60 |
|
| $ | 80 |
|
Derivative asset at fair value including accrued interest |
| $ | 60 |
|
| $ | 85 |
|
Collateral pledged to others: |
|
|
|
|
|
| ||
Cash (right to receive return of cash collateral is recorded in investments) |
| $ | 61 |
|
| $ | 62 |
|
Total collateral pledged |
| $ | 61 |
|
| $ | 62 |
|
Derivative liability at fair value including accrued interest and premium |
| $ | 243 |
|
| $ | 266 |
|
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Collateral held: |
|
|
|
|
|
|
|
|
Cash (obligation to return cash collateral is recorded in short-term borrowings) |
| $ | 62 |
|
| $ | 244 |
|
Securities at fair value — corporate derivatives (not recorded in financial statements)(1) |
|
| — |
|
|
| — |
|
Securities at fair value — on-balance sheet securitization derivatives (not recorded in financial statements)(2) |
|
| — |
|
|
| 1 |
|
Total collateral held |
| $ | 62 |
|
| $ | 245 |
|
Derivative asset at fair value including accrued interest |
| $ | 60 |
|
| $ | 242 |
|
Collateral pledged to others: |
|
|
|
|
|
|
|
|
Cash (right to receive return of cash collateral is recorded in investments) |
| $ | 69 |
|
| $ | 147 |
|
Total collateral pledged |
| $ | 69 |
|
| $ | 147 |
|
Derivative liability at fair value including accrued interest and premium receivable |
| $ | 419 |
|
| $ | 271 |
|
|
|
|
|
72
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
4. Derivative Financial Instruments (Continued)
Our corporate derivatives contain credit contingent features. At our current unsecured credit rating, we have fully collateralized our corporate derivative liability position (including accrued interest and net of premiums receivable) of $.5 million$0 with our counterparties. Downgrades in our unsecured credit rating would not result in any additional collateral requirements. Trust related derivatives do not contain credit contingent features related to our or the trusts’ credit ratings. At September 30, 2022 and December 31, 2021, we had a net positive exposure (derivative gain positions to us less collateral which has been posted by counterparties to us) related to Navient Corporation derivatives of $7 million and $9 million, respectively. The trusts are not required to post collateral to the counterparties. At September 30, 2022 and December 31, 2021, the net positive exposure on swaps in securitization trusts was $0 and $0, respectively.
The table below highlights credit exposure related to our derivative counterparties at SeptemberJune 30, 2022.2023.
(Dollars in millions) |
| Corporate |
|
| Securitization |
| ||
Exposure, net of collateral |
| $ | 5 |
|
| $ | — |
|
Percent of exposure to counterparties with credit ratings |
|
| 100 | % |
|
| — | % |
Percent of exposure to counterparties with credit ratings |
|
| — | % |
|
| — | % |
69
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
(Dollars in millions) |
| Corporate Contracts |
|
| Securitization Trust Contracts |
| ||
Exposure, net of collateral |
| $ | 7 |
|
| $ | — |
|
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3 |
|
| 100 | % |
|
| — | % |
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3 |
|
| — | % |
|
| — | % |
5. Other Assets
The following table provides the detail of our other assets.
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Accrued interest receivable |
| $ | 1,933 |
|
| $ | 1,881 |
|
| $ | 2,100 |
|
| $ | 2,031 |
|
Benefit and insurance-related investments |
|
| 450 |
|
|
| 462 |
|
|
| 456 |
|
|
| 452 |
|
Income tax asset, net |
|
| 145 |
|
|
| 369 |
|
|
| 84 |
|
|
| 132 |
|
Derivatives at fair value |
|
| 56 |
|
|
| 218 |
|
|
| 53 |
|
|
| 56 |
|
Accounts receivable |
|
| 91 |
|
|
| 159 |
|
|
| 94 |
|
|
| 83 |
|
Fixed assets |
|
| 77 |
|
|
| 95 |
|
|
| 68 |
|
|
| 74 |
|
Other |
|
| 35 |
|
|
| 39 |
|
|
| 34 |
|
|
| 38 |
|
Total |
| $ | 2,787 |
|
| $ | 3,223 |
|
| $ | 2,889 |
|
| $ | 2,866 |
|
7370
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
6. Stockholders’ Equity
The following table summarizes common share repurchases, issuances and dividends paid.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars and shares in millions, except per share amounts) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Common stock repurchased(1) |
|
| 4.9 |
|
|
| 6.9 |
|
|
| 9.8 |
|
|
| 13.1 |
|
Common stock repurchased (in dollars)(1) |
| $ | 80 |
|
| $ | 105 |
|
| $ | 165 |
|
| $ | 220 |
|
Average purchase price per share(1) |
| $ | 16.38 |
|
| $ | 15.26 |
|
| $ | 16.89 |
|
| $ | 16.76 |
|
Remaining common stock repurchase authority(1) |
| $ | 435 |
|
| $ | 780 |
|
| $ | 435 |
|
| $ | 780 |
|
Shares repurchased related to employee stock- |
|
| — |
|
|
| — |
|
|
| 1.3 |
|
|
| 1.1 |
|
Average purchase price per share(2) |
| $ | — |
|
| $ | — |
|
| $ | 18.43 |
|
| $ | 17.92 |
|
Common shares issued(3) |
|
| — |
|
|
| — |
|
|
| 2.4 |
|
|
| 2.4 |
|
Dividends paid |
| $ | 20 |
|
| $ | 23 |
|
| $ | 40 |
|
| $ | 47 |
|
Dividends per share |
| $ | .16 |
|
| $ | .16 |
|
| $ | .32 |
|
| $ | .32 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars and shares in millions, except per share amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Common stock repurchased(1) |
|
| 6.3 |
|
|
| 7.0 |
|
|
| 19.4 |
|
|
| 26.9 |
|
Common stock repurchased (in dollars)(1) |
| $ | 95 |
|
| $ | 150 |
|
| $ | 315 |
|
| $ | 450 |
|
Average purchase price per share(1) |
| $ | 15.19 |
|
| $ | 21.42 |
|
| $ | 16.25 |
|
| $ | 16.71 |
|
Remaining common stock repurchase authority(1) |
| $ | 685 |
|
| $ | 150 |
|
| $ | 685 |
|
| $ | 150 |
|
Shares repurchased related to employee stock- based compensation plans(2) |
|
| — |
|
|
| .2 |
|
|
| 1.1 |
|
|
| 3.0 |
|
Average purchase price per share(2) |
| $ | — |
|
| $ | 21.36 |
|
| $ | 17.91 |
|
| $ | 13.59 |
|
Common shares issued(3) |
|
| — |
|
|
| .6 |
|
|
| 2.4 |
|
|
| 4.8 |
|
Dividends paid |
| $ | 22 |
|
| $ | 26 |
|
| $ | 69 |
|
| $ | 82 |
|
Dividends per share |
| $ | .16 |
|
| $ | .16 |
|
| $ | .48 |
|
| $ | .48 |
|
|
|
|
|
|
|
The closing price of our common stock on SeptemberJune 30, 20222023 was $14.69.
$18.58.
74
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
7. Earnings (Loss) per Common Share
Basic earnings (loss) per common share (EPS) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations on a GAAP basis follows.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(In millions, except per share data) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 66 |
|
| $ | 180 |
|
| $ | 177 |
|
| $ | 435 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares used to compute basic EPS |
|
| 124 |
|
|
| 146 |
|
|
| 126 |
|
|
| 149 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Dilutive effect of stock options, restricted stock, |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
Dilutive potential common shares(2) |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
Weighted average shares used to compute |
|
| 125 |
|
|
| 147 |
|
|
| 128 |
|
|
| 150 |
|
Basic earnings per common share |
| $ | .53 |
|
| $ | 1.23 |
|
| $ | 1.40 |
|
| $ | 2.93 |
|
Diluted earnings per common share |
| $ | .52 |
|
| $ | 1.22 |
|
| $ | 1.39 |
|
| $ | 2.90 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(In millions, except per share data) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 105 |
|
| $ | 173 |
|
| $ | 540 |
|
| $ | 728 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to compute basic EPS |
|
| 139 |
|
|
| 165 |
|
|
| 145 |
|
|
| 174 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units, and Employee Stock Purchase Plan (ESPP)(1) |
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
Dilutive potential common shares(2) |
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
|
| 2 |
|
Weighted average shares used to compute diluted EPS |
|
| 141 |
|
|
| 167 |
|
|
| 147 |
|
|
| 176 |
|
Basic earnings per common share |
| $ | .75 |
|
| $ | 1.05 |
|
| $ | 3.71 |
|
| $ | 4.20 |
|
Diluted earnings per common share |
| $ | .75 |
|
| $ | 1.04 |
|
| $ | 3.67 |
|
| $ | 4.15 |
|
71
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
|
|
|
|
8. Fair Value Measurements
We use estimates of fair value in applying various accounting standards in our financial statements. We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. See “Note 11 – Fair Value Measurements”The fair value of the items discussed below are separately disclosed in our 2021 Form 10-K for a full discussion.this footnote.
During the three and ninesix months ended SeptemberJune 30, 2022,2023, there were no significant transfers of financial instruments between levels, or changes in our methodology used to value our financial instruments.
75
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
8.Fair Value Measurements (Continued)
The following table summarizes the valuation of our financial instruments that are marked-to-market on a recurring basis. During the thirdsecond quarters of 20222023 and 2021,2022, there were no significant transfers of financial instruments between levels.
|
| Fair Value Measurements on a Recurring Basis |
| |||||||||||||||||||||||||||||
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
(Dollars in millions) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Derivative instruments:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| 55 |
|
|
| 1 |
|
|
| 56 |
|
Cross-currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total derivative assets(2) |
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| 55 |
|
|
| 1 |
|
|
| 56 |
|
Total |
| $ | — |
|
| $ | 53 |
|
| $ | — |
|
| $ | 53 |
|
| $ | — |
|
| $ | 55 |
|
| $ | 1 |
|
| $ | 56 |
|
Liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Derivative instruments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps |
| $ | — |
|
| $ | — |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | — |
|
| $ | (2 | ) |
| $ | (3 | ) |
| $ | (5 | ) |
Floor Income Contracts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cross-currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| (234 | ) |
|
| (234 | ) |
|
| — |
|
|
| — |
|
|
| (253 | ) |
|
| (253 | ) |
Total derivative liabilities(2) |
|
| — |
|
|
| — |
|
|
| (236 | ) |
|
| (236 | ) |
|
| — |
|
|
| (2 | ) |
|
| (256 | ) |
|
| (258 | ) |
Total |
| $ | — |
|
| $ | — |
|
| $ | (236 | ) |
| $ | (236 | ) |
| $ | — |
|
| $ | (2 | ) |
| $ | (256 | ) |
| $ | (258 | ) |
|
| Fair Value Measurements on a Recurring Basis |
| |||||||||||||||||||||||||||||
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||
(Dollars in millions) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
| — |
|
|
| 56 |
|
|
| — |
|
|
| 56 |
|
|
| — |
|
|
| 223 |
|
|
| 1 |
|
|
| 224 |
|
Cross-currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total derivative assets(2) |
|
| — |
|
|
| 56 |
|
|
| — |
|
|
| 56 |
|
|
| — |
|
|
| 223 |
|
|
| 1 |
|
|
| 224 |
|
Total |
| $ | — |
|
| $ | 56 |
|
| $ | — |
|
| $ | 56 |
|
| $ | — |
|
| $ | 223 |
|
| $ | 1 |
|
| $ | 224 |
|
Liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| $ | — |
|
|
| (7 | ) |
| $ | (2 | ) |
| $ | (9 | ) |
| $ | — |
|
| $ | — |
|
| $ | (5 | ) |
| $ | (5 | ) |
Floor Income Contracts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65 | ) |
|
| — |
|
|
| (65 | ) |
Cross-currency interest rate swaps |
|
| — |
|
|
| — |
|
|
| (407 | ) |
|
| (407 | ) |
|
| — |
|
|
| — |
|
|
| (190 | ) |
|
| (190 | ) |
Total derivative liabilities(2) |
|
| — |
|
|
| (7 | ) |
|
| (409 | ) |
|
| (416 | ) |
|
| — |
|
|
| (65 | ) |
|
| (195 | ) |
|
| (260 | ) |
Total |
| $ | — |
|
| $ | (7 | ) |
| $ | (409 | ) |
| $ | (416 | ) |
| $ | — |
|
| $ | (65 | ) |
| $ | (195 | ) |
| $ | (260 | ) |
|
|
|
|
|
|
7672
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
8. Fair Value Measurements (Continued)
The following tables summarize the change in balance sheet carrying value associated with level 3 financial instruments carried at fair value on a recurring basis.
|
| Three Months Ended June 30, |
| |||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||
|
| Derivative instruments |
|
| Derivative instruments |
| ||||||||||||||||||||||||||
(Dollars in millions) |
| Interest |
|
| Cross |
|
| Other |
|
| Total |
|
| Interest |
|
| Cross |
|
| Other |
|
| Total |
| ||||||||
Balance, beginning of |
| $ | (2 | ) |
| $ | (224 | ) |
| $ | — |
|
| $ | (226 | ) |
| $ | (3 | ) |
| $ | (226 | ) |
| $ | — |
|
| $ | (229 | ) |
Total gains/(losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Included in earnings(1) |
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| (22 | ) |
|
| — |
|
|
| (62 | ) |
|
| — |
|
|
| (62 | ) |
Included in other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Settlements |
|
| — |
|
|
| 12 |
|
|
| — |
|
|
| 12 |
|
|
| — |
|
|
| 9 |
|
|
| — |
|
|
| 9 |
|
Transfers in and/or out |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance, end of period |
| $ | (2 | ) |
| $ | (234 | ) |
| $ | — |
|
| $ | (236 | ) |
| $ | (3 | ) |
| $ | (279 | ) |
| $ | — |
|
| $ | (282 | ) |
Change in mark-to- |
| $ | — |
|
| $ | (10 | ) |
| $ | — |
|
| $ | (10 | ) |
| $ | — |
|
| $ | (53 | ) |
| $ | — |
|
| $ | (53 | ) |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||
|
| Derivative instruments |
|
| Derivative instruments |
| ||||||||||||||||||||||||||
(Dollars in millions) |
| Interest |
|
| Cross |
|
| Other |
|
| Total |
|
| Interest |
|
| Cross |
|
| Other |
|
| Total |
| ||||||||
Balance, beginning of |
| $ | (2 | ) |
| $ | (253 | ) |
| $ | — |
|
| $ | (255 | ) |
| $ | (4 | ) |
| $ | (190 | ) |
| $ | — |
|
| $ | (194 | ) |
Total gains/(losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Included in earnings(1) |
|
| — |
|
|
| (6 | ) |
|
| — |
|
|
| (6 | ) |
|
| 1 |
|
|
| (103 | ) |
|
| — |
|
|
| (102 | ) |
Included in other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Settlements |
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 14 |
|
|
| — |
|
|
| 14 |
|
Transfers in and/or out |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance, end of |
| $ | (2 | ) |
| $ | (234 | ) |
| $ | — |
|
| $ | (236 | ) |
| $ | (3 | ) |
| $ | (279 | ) |
| $ | — |
|
| $ | (282 | ) |
Change in mark-to- |
| $ | — |
|
| $ | 19 |
|
| $ | — |
|
| $ | 19 |
|
| $ | 1 |
|
| $ | (89 | ) |
| $ | — |
|
| $ | (88 | ) |
|
| Three Months Ended September 30, |
| |||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||||||||
|
| Derivative instruments |
|
| Derivative instruments |
| ||||||||||||||||||||||||||
(Dollars in millions) |
| Interest Rate Swaps |
|
| Cross Currency Interest Rate Swaps |
|
| Other |
|
| Total Derivative Instruments |
|
| Interest Rate Swaps |
|
| Cross Currency Interest Rate Swaps |
|
| Other |
|
| Total Derivative Instruments |
| ||||||||
Balance, beginning of period |
| $ | (3 | ) |
| $ | (279 | ) |
| $ | — |
|
| $ | (282 | ) |
| $ | (6 | ) |
| $ | (108 | ) |
| $ | — |
|
| $ | (114 | ) |
Total gains/(losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings(1) |
|
| 1 |
|
|
| (141 | ) |
|
| — |
|
|
| (140 | ) |
|
| 1 |
|
|
| (53 | ) |
|
| — |
|
|
| (52 | ) |
Included in other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Settlements |
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
Transfers in and/or out of level 3 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance, end of period |
| $ | (2 | ) |
| $ | (407 | ) |
| $ | — |
|
| $ | (409 | ) |
| $ | (5 | ) |
| $ | (156 | ) |
| $ | — |
|
| $ | (161 | ) |
Change in mark-to-market gains/(losses) relating to instruments still held at the reporting date(2) |
| $ | 1 |
|
| $ | (128 | ) |
| $ | — |
|
| $ | (127 | ) |
| $ | 1 |
|
| $ | (48 | ) |
| $ | — |
|
| $ | (47 | ) |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Gains (losses) on derivative and hedging activities, net |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1 |
|
Interest expense |
|
| (22 | ) |
|
| (62 | ) |
|
| (6 | ) |
|
| (103 | ) |
Total |
| $ | (22 | ) |
| $ | (62 | ) |
| $ | (6 | ) |
| $ | (102 | ) |
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||||||||
|
| Derivative instruments |
|
| Derivative instruments |
| ||||||||||||||||||||||||||
(Dollars in millions) |
| Interest Rate Swaps |
|
| Cross Currency Interest Rate Swaps |
|
| Other |
|
| Total Derivative Instruments |
|
| Interest Rate Swaps |
|
| Cross Currency Interest Rate Swaps |
|
| Other |
|
| Total Derivative Instruments |
| ||||||||
Balance, beginning of period |
| $ | (4 | ) |
| $ | (190 | ) |
| $ | — |
|
| $ | (194 | ) |
| $ | (8 | ) |
| $ | (294 | ) |
| $ | — |
|
| $ | (302 | ) |
Total gains/(losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings(1) |
|
| 1 |
|
|
| (244 | ) |
|
| — |
|
|
| (243 | ) |
|
| 2 |
|
|
| 120 |
|
|
| — |
|
|
| 122 |
|
Included in other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Settlements |
|
| 1 |
|
|
| 27 |
|
|
| — |
|
|
| 28 |
|
|
| 1 |
|
|
| 18 |
|
|
| — |
|
|
| 19 |
|
Transfers in and/or out of level 3 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance, end of period |
| $ | (2 | ) |
| $ | (407 | ) |
| $ | — |
|
| $ | (409 | ) |
| $ | (5 | ) |
| $ | (156 | ) |
| $ | — |
|
| $ | (161 | ) |
Change in mark-to-market gains/(losses) relating to instruments still held at the reporting date(2) |
| $ | 1 |
|
| $ | (217 | ) |
| $ | — |
|
| $ | (216 | ) |
| $ | 2 |
|
| $ | (122 | ) |
| $ | — |
|
| $ | (120 | ) |
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Gains (losses) on derivative and hedging activities, net |
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 2 |
|
Interest expense |
|
| (141 | ) |
|
| (53 | ) |
|
| (244 | ) |
|
| 120 |
|
Total |
| $ | (140 | ) |
| $ | (52 | ) |
| $ | (243 | ) |
| $ | 122 |
|
|
|
7773
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
8. Fair Value Measurements (Continued)
The following table presents the significant inputs that are unobservable or from inactive markets used in the recurring valuations of the level 3 financial instruments detailed above.
(Dollars in millions) |
| Fair Value at June 30, 2023 |
|
| Valuation |
| Input |
| Range and | |
Derivatives |
|
|
|
|
|
|
|
|
| |
Prime/LIBOR basis swaps |
| $ | (2 | ) |
| Discounted cash flow |
| Constant Prepayment Rate |
| 10% |
|
|
|
|
|
|
| Bid/ask adjustment to |
| .08% | |
Cross-currency interest rate swaps |
|
| (234 | ) |
| Discounted cash flow |
| Constant Prepayment Rate |
| 5% |
Other |
|
| — |
|
|
|
|
|
|
|
Total |
| $ | (236 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(Dollars in millions) |
| Fair Value at September 30, 2022 |
|
| Valuation Technique |
| Input |
| Range and Weighted Average |
| ||
Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
Prime/LIBOR basis swaps |
| $ | (2 | ) |
| Discounted cash flow |
| Constant Prepayment Rate |
| 10% |
| |
|
|
|
|
|
|
|
| Bid/ask adjustment to discount rate |
| .08% |
| |
Cross-currency interest rate swaps |
|
| (407 | ) |
| Discounted cash flow |
| Constant Prepayment Rate |
| 5% |
| |
Other |
|
| — |
|
|
|
|
|
|
|
|
|
Total |
| $ | (409 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||
(Dollars in millions) |
| Fair Value |
|
| Carrying Value |
|
| Difference |
|
| Fair Value |
|
| Carrying Value |
|
| Difference |
|
| Fair |
|
| Carrying |
|
| Difference |
|
| Fair |
|
| Carrying |
|
| Difference |
| ||||||||||||
Earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
FFELP Loans |
| $ | 44,627 |
|
| $ | 46,891 |
|
| $ | (2,264 | ) |
| $ | 53,632 |
|
| $ | 52,641 |
|
| $ | 991 |
|
| $ | 39,250 |
|
| $ | 40,851 |
|
| $ | (1,601 | ) |
| $ | 41,426 |
|
| $ | 43,525 |
|
| $ | (2,099 | ) |
Private Education Loans |
|
| 18,287 |
|
|
| 19,151 |
|
|
| (864 | ) |
|
| 21,140 |
|
|
| 20,171 |
|
|
| 969 |
|
|
| 16,935 |
|
|
| 17,732 |
|
|
| (797 | ) |
|
| 17,880 |
|
|
| 18,725 |
|
|
| (845 | ) |
Cash and investments |
|
| 4,088 |
|
|
| 4,088 |
|
|
| — |
|
|
| 3,845 |
|
|
| 3,845 |
|
|
| — |
|
|
| 3,426 |
|
|
| 3,426 |
|
|
| — |
|
|
| 4,974 |
|
|
| 4,974 |
|
|
| — |
|
Total earning assets |
|
| 67,002 |
|
|
| 70,130 |
|
|
| (3,128 | ) |
|
| 78,617 |
|
|
| 76,657 |
|
|
| 1,960 |
|
|
| 59,611 |
|
|
| 62,009 |
|
|
| (2,398 | ) |
|
| 64,280 |
|
|
| 67,224 |
|
|
| (2,944 | ) |
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Short-term borrowings |
|
| 5,684 |
|
|
| 5,677 |
|
|
| (7 | ) |
|
| 2,492 |
|
|
| 2,490 |
|
|
| (2 | ) |
|
| 4,853 |
|
|
| 4,838 |
|
|
| (15 | ) |
|
| 5,879 |
|
|
| 5,870 |
|
|
| (9 | ) |
Long-term borrowings |
|
| 60,787 |
|
|
| 63,998 |
|
|
| 3,211 |
|
|
| 74,548 |
|
|
| 74,488 |
|
|
| (60 | ) |
|
| 54,082 |
|
|
| 56,936 |
|
|
| 2,854 |
|
|
| 57,652 |
|
|
| 61,026 |
|
|
| 3,374 |
|
Total interest-bearing liabilities |
|
| 66,471 |
|
|
| 69,675 |
|
|
| 3,204 |
|
|
| 77,040 |
|
|
| 76,978 |
|
|
| (62 | ) |
|
| 58,935 |
|
|
| 61,774 |
|
|
| 2,839 |
|
|
| 63,531 |
|
|
| 66,896 |
|
|
| 3,365 |
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Floor Income Contracts |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65 | ) |
|
| (65 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Interest rate swaps |
|
| 47 |
|
|
| 47 |
|
|
| — |
|
|
| 219 |
|
|
| 219 |
|
|
| — |
|
|
| 51 |
|
|
| 51 |
|
|
| — |
|
|
| 51 |
|
|
| 51 |
|
|
| — |
|
Cross-currency interest rate swaps |
|
| (407 | ) |
|
| (407 | ) |
|
| — |
|
|
| (190 | ) |
|
| (190 | ) |
|
| — |
|
|
| (234 | ) |
|
| (234 | ) |
|
| — |
|
|
| (253 | ) |
|
| (253 | ) |
|
| — |
|
Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Excess of net asset fair value over carrying value |
|
|
|
|
|
|
|
|
| $ | 76 |
|
|
|
|
|
|
|
|
|
| $ | 1,898 |
|
|
|
|
|
|
|
| $ | 441 |
|
|
|
|
|
|
|
| $ | 421 |
| ||||
7874
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
9. Commitments, Contingencies and ContingenciesGuarantees
Legal Proceedings
We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the normal course of business. We believe that these claims, lawsuits and other actions will not, individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations, except as otherwise disclosed. Most of these matters are claims including individual and class action lawsuits against our servicing or business processing subsidiaries alleging the violation of state or federal laws in connection with servicing or collection activities on their education loans and other debts.
In the ordinary course of our business, the Company and our subsidiaries and affiliates receive information and document requests and investigative demands from various entities including State Attorneys General, U.S. Attorneys, legislative committees, individual members of Congress and administrative agencies. These requests may be informational, regulatory or enforcement in nature and may relate to our business practices, the industries in which we operate, or companies with whom we conduct business. Generally, our practice has been and continues to be to cooperate with these bodies and to be responsive to any such requests.
The number of these inquiries and the volume of related information demands have normalized at elevated levels and therefore the Company must continue to increaseexpend time and therefore continue to increase the time, costs and resources we must dedicate to timely respond to these requests andwhich may, depending on their outcome, result in payments of restitution, fines and penalties.
Certain Cases
During the first quarter of 2016, Navient Corporation, certain Navient officers and directors, and the underwriters of certain Navient securities offerings were sued in three putative securities class action lawsuits filed on behalf of certain investors in Navient stock or Navient unsecured debt. These three cases, which were filed in the U.S. District Court for the District of Delaware, were consolidated by the District Court, with Lord Abbett Funds appointed as Lead Plaintiff. The caption of the consolidated case is Lord Abbett Affiliated Fund, Inc., et al. v. Navient Corporation, et al. Additionally, two putative class actions have been filed in the U.S. District Court for the District of New Jersey captioned Eli Pope v. Navient Corporation, John F. Remondi, Somsak Chivavibul and Christian Lown, and Melvin Gross v. Navient Corporation, John F. Remondi, Somsak Chivavibul and Christian M. Lown, both of whichallege violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The cases were consolidated by the Court in February 2018 under the caption In Re Navient Corporation Securities Litigation and the plaintiffs filed a consolidated amended complaint in April 2018. In the third quarter of 2021, the Company reached tentative agreements to settle both cases. The settlements, in which the Company and other defendants expressly deny any admission or concession of wrongdoing or fault, have received final court approval and are covered by insurance.
In January 2017, the Consumer Financial Protection Bureau (the CFPB) and Attorneys General for the State of Illinois and the State of Washington initiated civil actions naming Navient Corporation and several of its subsidiaries as defendants alleging violations of certain Federal and State consumer protection statutes, including the CFPA, FCRA, FDCPA and various state consumer protection laws. The Attorneys General for the States of Pennsylvania, California, Mississippi, and New Jersey also initiated actions against the Company and certain subsidiaries alleging violations of various state and federal consumer protection laws based upon similar alleged acts or failures to act. In addition to these matters, a number of lawsuits have been filed by nongovernmental parties or, in the future, may be filed by additional governmental or nongovernmental parties seeking damages or other remedies related to similar issues raised by the CFPB and the State Attorneys General. In January 2022, we entered into a series of Consent Judgment and Orders (the “Agreements”) with 40 State Attorneys General to resolve all matters in dispute related to the State Attorneys General cases as well as the related investigations, subpoenas, civil investigative demands and inquiries from various other state regulators. These Agreements do not resolve the litigation involving the Company and the CFPB. The Company has cancelled the loan balance of approximately 66,000 borrowers with qualifying Private Education Loans that were originated largely between 2002 and 2010 and later defaulted and charged off. The loans cancelled have aggregate outstanding balances of approximately $1.7 billion. The expense to the Company to cancel these loans was approximately $50 million which represents the amount of expected future recoveries of these charged-off loans on the balance sheet. In addition, the Company agreed to make a one-time payment of approximately $145 million to the states. In the fourth quarter of 2021 when such loss became probable, the Company recognized total regulatory expenses of approximately $205 million related to this matter.
79
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
9.Commitments and Contingencies (Continued)
As the Company has previously stated, we believe the allegations in the CFPB suit are false and that they improperly seek to impose penalties on Navient based on new, previously unannounced servicing standards applied retroactively against only one servicer. We therefore have denied these allegations and are vigorously defending against the allegations in that case. At this point in time, it is reasonably possible that a loss contingency exists; however, the Company is unable to anticipate the timing of a resolution or the impact that an adverse ruling in the CFPB case may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with this matter and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.
On April 12, 2023, the Company reached an agreement in principle (“Settlement”) with certain plaintiffs for a nationwide settlement of claims raised in the following bankruptcy adversary actions: Coyle v. Navient Solutions, LLC, No. 22-80018 (Bankr. W.D. Mich.); Homaidan v. SLM Corp., No. 1:17-ap-01085 (Bankr. E.D.N.Y.); Mazloom v. Navient Solutions, LLC, No. 20-80033-6 (Bankr. N.D.N.Y.); and Woodard v. Navient Solutions, LLC, No. 08-81442 (Bankr. D. Neb.) collectively referred to as the “Bankruptcy Cases.” This settlement in principle is subject, among other things, to final documentation and final court approval. Under the Settlement, Navient will forego the collection of defined balances for borrowers or co-borrowers of certain private loans — all of which were originated prior to our company separation — who have received a discharge in bankruptcy during the periods covered by the agreements. As a result, we recorded $23 million additional private loan provision for loan losses in the first quarter of 2023 related to the estimated future charge offs that are expected to occur. The Company has also agreed to fund settlement funds. It anticipates that any cash contribution it will be required to make to these funds will not exceed $44 million in the aggregate and will be fully covered by insurance. The net impact to operating expense for this element of the settlement for the first quarter of 2023 was $0 due to the accrual of the offsetting insurance reimbursements.
75
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
9. Commitments, Contingencies and Guarantees (Continued)
Regulatory Matters
The Company has been named as defendant in a number of putative class action cases alleging violations of various state and federal consumer protection laws including the Telephone Consumer Protection Act (TCPA), the Consumer Financial Protection Act of 2010 (CFPA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), in adversarial proceedings under the U.S. Bankruptcy Code, and various state consumer protection laws. At this point in time, the Company is unable to anticipate the timing of a resolution or the impact that these legal proceedings may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with these matters and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.
Regulatory Matters
In addition, Navient and its subsidiaries are subject to examination or regulation by various federal regulatory, state licensing or other regulatory agencies as part of its ordinary course of business including the SEC, CFPB, FFIEC and ED. Items or matters similar to or different from those described above may arise during the course of those examinations. We also routinely receive inquiries or requests from various regulatory entities or bodies or government agencies concerning our business or our assets. Generally, the Company endeavors to cooperate with each such inquiry or request. The Company has received separate CIDs or subpoenas from multiple State Attorneys General including for the District of Columbia, Kansas, Oregon, Colorado, New Jersey, New York and Indiana that are similar to the CIDs or subpoenas that preceded the lawsuits referenced above. Those CIDs and subpoenas have been resolved as part of the Company’s settlement with the State Attorneys General. Nevertheless, we have and, in the future, may receive additional CIDs or subpoenas and other inquiries from these or other Attorneys General with respect to similar or different matters.
Under the terms of the Separation and Distribution Agreement between the Company and SLM BankCo, Navient agreed to indemnify SLM BankCo for claims, actions, damages, losses or expenses that may arise from the conduct of activities of pre-Spin-Off SLM BankCo occurring prior to the Spin-Off other than those specifically excluded in that agreement. Also, as part of the Separation and Distribution Agreement, SLM BankCo agreed to indemnify Navient for certain claims, actions, damages, losses or expenses subject to the terms, conditions and limitations set forth in that agreement. As a result, subject to the terms, conditions and limitations set forth in that agreement, Navient agreed to indemnify and hold harmless Sallie Mae and its subsidiaries, including Sallie Mae Bank from liabilities arising out of the regulatory matters and CFPB and State Attorneys General lawsuits mentioned above. In addition, we asserted various claims for indemnification against Sallie Mae and Sallie Mae Bank for such specifically excluded items arising out of the CFPB and the State Attorneys General lawsuits if and to the extent any indemnified liabilities exist now or in the future. Navient has no reserves related to indemnification matters with SLM BankCo as of SeptemberJune 30, 2022.2023.
Contingencies
80
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
9.Commitments and Contingencies (Continued)
OIG Audit
The Office of the Inspector General (the OIG) of ED commenced an audit regarding Special Allowance Payments (SAP) on September 10, 2007. In September 2013, we received the final audit determination of Federal Student Aid (the Final Audit Determination) on the final audit report issued by the OIG in August 2009 related to this audit. The Final Audit Determination concurred with the final audit report issued by the OIG and instructed us to make adjustment to our government billing to reflect the policy determination. In August 2016, we filed our notice of appeal to the Administrative Actions and Appeals Service Group of ED, and a hearing was held in April 2017. In March 2019, the administrative law judge hearing the appeal affirmed the audit’s findings, holding the then-existing Dear Colleague letter relied upon by the Company and other industry participants was inconsistent with the statutory framework creating the SAP rules applicable to loans funded by certain types of debt obligations at issue. We appealed the administrative law judge’s decision to the Secretary of Education given Navient’s adherence to ED-issued guidance and the potential impact on participants in any ED program student loan servicers if such guidance is deemed unreliable and may not be relied upon. In January 2021, the Acting Secretary of Education upheld the decision of the administrative law judge. In March 2021, we filed a complaint for declaratory judgment in federal court seeking to set aside the Acting Secretary’s decision. We continue to believe that our SAP billing practices were proper, considering then-existing ED guidance and lack of applicable regulations. We filed a lawsuit in federal court challenging the Acting Secretary’s decision. That case is pending. The Company first established a reserve for this matter in 2014 and increased the reserve in 2020 in response to the decision by the Acting Secretary. We do not believe, at this time, that an adverse ruling will have a material effect on the Company as a whole.
Contingencies
In the ordinary course of business, we and our subsidiaries are defendants in or parties to pending and threatened legal actions and proceedings including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary damage are asserted against us and our subsidiaries. We and our subsidiaries are also subject to potential unasserted claims by third parties.
In the ordinary course of business, we and our subsidiaries are subject to regulatory examinations, information gathering requests, inquiries and investigations. In connection with formal and informal inquiries in these cases, we and our subsidiaries receive requests, subpoenas and orders for documents, testimony and information in connection with various aspects of our regulated activities.
We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.
In view of the inherent difficulty of predicting the outcome of litigation and regulatory matters, we may not be able to predict what the eventual outcome of the pending matters will be, what the timing or the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties, if any, related to each pending matter may be.
Based on current knowledge, reserves have been established for certain litigation, regulatory matters, and unasserted contract claims where the loss is both probable and estimable. Based on current knowledge, management does not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our consolidated financial position, liquidity, results of operations or cash flows, except as otherwise disclosed.disclosed.
8176
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
10. Revenue from Contracts with Customers Accounted for in Accordance with ASC 606
The following tables illustrate the disaggregation of revenue from contracts accounted for under ASC 606 with customers according to service type and client type by reportable operating segment.
Revenue by Service Type
|
| Three Months Ended September 30, |
|
| Three Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
| ||||||||||||
Federal Education Loan asset recovery services |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Government services |
|
| — |
|
|
| 47 |
|
|
| 47 |
|
|
| — |
|
|
| 75 |
|
|
| 75 |
|
|
| — |
|
|
| 52 |
|
|
| 52 |
|
|
| — |
|
|
| 53 |
|
|
| 53 |
|
Healthcare services |
|
| — |
|
|
| 32 |
|
|
| 32 |
|
|
| — |
|
|
| 47 |
|
|
| 47 |
|
|
| — |
|
|
| 31 |
|
|
| 31 |
|
|
| — |
|
|
| 34 |
|
|
| 34 |
|
Total |
| $ | — |
|
| $ | 79 |
|
| $ | 79 |
|
| $ | 5 |
|
| $ | 122 |
|
| $ | 127 |
|
| $ | — |
|
| $ | 83 |
|
| $ | 83 |
|
| $ | — |
|
| $ | 87 |
|
| $ | 87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
| ||||||||||||
Federal Education Loan asset recovery services |
| $ | 1 |
|
| $ | — |
|
| $ | 1 |
|
| $ | 14 |
|
| $ | — |
|
| $ | 14 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1 |
|
| $ | — |
|
| $ | 1 |
|
Government services |
|
| — |
|
|
| 149 |
|
|
| 149 |
|
|
| — |
|
|
| 204 |
|
|
| 204 |
|
|
| — |
|
|
| 92 |
|
|
| 92 |
|
|
| — |
|
|
| 102 |
|
|
| 102 |
|
Healthcare services |
|
| — |
|
|
| 111 |
|
|
| 111 |
|
|
| — |
|
|
| 173 |
|
|
| 173 |
|
|
| — |
|
|
| 63 |
|
|
| 63 |
|
|
| — |
|
|
| 79 |
|
|
| 79 |
|
Total |
| $ | 1 |
|
| $ | 260 |
|
| $ | 261 |
|
| $ | 14 |
|
| $ | 377 |
|
| $ | 391 |
|
| $ | — |
|
| $ | 155 |
|
| $ | 155 |
|
| $ | 1 |
|
| $ | 181 |
|
| $ | 182 |
|
82
77
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
10. Revenue from Contracts with Customers Accounted for in Accordance with ASC 606 (Continued)
Revenue by Client Type
|
| Three Months Ended September 30, |
|
| Three Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
| ||||||||||||
Federal government |
| $ | — |
|
| $ | 2 |
|
| $ | 2 |
|
| $ | — |
|
| $ | 4 |
|
| $ | 4 |
|
| $ | — |
|
| $ | 17 |
|
| $ | 17 |
|
| $ | — |
|
| $ | 2 |
|
| $ | 2 |
|
Guarantor agencies |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other institutions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
State and local government |
|
| — |
|
|
| 27 |
|
|
| 27 |
|
|
| — |
|
|
| 56 |
|
|
| 56 |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
|
| — |
|
|
| 35 |
|
|
| 35 |
|
Tolling authorities |
|
| — |
|
|
| 18 |
|
|
| 18 |
|
|
| — |
|
|
| 15 |
|
|
| 15 |
|
|
| — |
|
|
| 18 |
|
|
| 18 |
|
|
| — |
|
|
| 16 |
|
|
| 16 |
|
Hospitals and other healthcare providers |
|
| — |
|
|
| 32 |
|
|
| 32 |
|
|
| — |
|
|
| 47 |
|
|
| 47 |
|
|
| — |
|
|
| 31 |
|
|
| 31 |
|
|
| — |
|
|
| 34 |
|
|
| 34 |
|
Total |
| $ | — |
|
| $ | 79 |
|
| $ | 79 |
|
| $ | 5 |
|
| $ | 122 |
|
| $ | 127 |
|
| $ | — |
|
| $ | 83 |
|
| $ | 83 |
|
| $ | — |
|
| $ | 87 |
|
| $ | 87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
|
| Federal Education Loans |
|
| Business Processing |
|
| Total Revenue |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Federal government |
| $ | — |
|
| $ | 6 |
|
| $ | 6 |
|
| $ | 1 |
|
| $ | 18 |
|
| $ | 19 |
|
| $ | — |
|
| $ | 23 |
|
| $ | 23 |
|
| $ | — |
|
| $ | 4 |
|
| $ | 4 |
|
Guarantor agencies |
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| 13 |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Other institutions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
State and local government |
|
| — |
|
|
| 95 |
|
|
| 95 |
|
|
| — |
|
|
| 144 |
|
|
| 144 |
|
|
| — |
|
|
| 35 |
|
|
| 35 |
|
|
| — |
|
|
| 68 |
|
|
| 68 |
|
Tolling authorities |
|
| — |
|
|
| 48 |
|
|
| 48 |
|
|
| — |
|
|
| 42 |
|
|
| 42 |
|
|
| — |
|
|
| 34 |
|
|
| 34 |
|
|
| — |
|
|
| 30 |
|
|
| 30 |
|
Hospitals and other healthcare providers |
|
| — |
|
|
| 111 |
|
|
| 111 |
|
|
| — |
|
|
| 173 |
|
|
| 173 |
|
|
| — |
|
|
| 63 |
|
|
| 63 |
|
|
| — |
|
|
| 79 |
|
|
| 79 |
|
Total |
| $ | 1 |
|
| $ | 260 |
|
| $ | 261 |
|
| $ | 14 |
|
| $ | 377 |
|
| $ | 391 |
|
| $ | — |
|
| $ | 155 |
|
| $ | 155 |
|
| $ | 1 |
|
| $ | 181 |
|
| $ | 182 |
|
As of SeptemberJune 30, 2023 and June 30, 2022, and September 30, 2021, there was $76$82 million and $124$94 million respectively, of net accounts receivable related to these contracts. Navient had no material contract assets or contract liabilities.
8378
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
11. Segment Reporting
We monitor and assess our ongoing operations and results based on the following four reportable operating segments: Federal Education Loans, Consumer Lending, Business Processing and Other.
These segments meet the quantitative thresholds for reportable operating segments. Accordingly, the results of operations of these reportable operating segments are presented separately. The underlying operating segments are used by the Company’s chief operating decision maker to manage the business, review operating performance and allocate resources, and qualify to be aggregated as part of the primary reportable operating segments. As discussed further below, we measure the profitability of our operating segments based on Core Earnings net income. Accordingly, information regarding our reportable operating segments net income is provided on a Core Earnings basis.
Federal Education Loans Segment
Navient owns FFELP Loans and performs servicing and asset recovery services on this portfolio. We also service and perform asset recovery services on FFELP Loans owned by other institutions. Our servicing quality, data-driven strategies and omnichannel education about federal repayment options translate into positive results for the millions of borrowers we serve. We generate revenue primarily through net interest income on our FFELP Loans. This segment is expected to generate significant earningsLoans and cash flow over the remaining life of the portfolio.servicing-related fee income.
The following table includes asset information for our Federal Education Loans segment.
(Dollars in millions) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
FFELP Loans, net |
| $ | 40,851 |
|
| $ | 43,525 |
|
Cash and investments(1) |
|
| 1,484 |
|
|
| 2,746 |
|
Other |
|
| 2,147 |
|
|
| 2,229 |
|
Total assets |
| $ | 44,482 |
|
| $ | 48,500 |
|
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
FFELP Loans, net |
| $ | 46,891 |
|
| $ | 52,641 |
|
Cash and investments(1) |
|
| 2,059 |
|
|
| 2,071 |
|
Other |
|
| 2,039 |
|
|
| 2,183 |
|
Total assets |
| $ | 50,989 |
|
| $ | 56,895 |
|
|
|
Consumer Lending Segment
Navient owns, originates and services in-school and refinance Private Education Loans. "In-school" Private Education Loans are loans originally made to borrowers while they are attending school whereas "Refinance" Private Education Loans are loans where a borrower has refinanced their education loans. We generate revenue primarily through net interest income on our Private Education Loan portfolio.
Navient helps students and families through the going-to and paying-for-college journey. Our digital tools empower people to find grants and scholarships, compare financial aid offers and complete the FAFSA. Our Private Education Loans offer easy-to-understand payment options. After graduation, we offer student loan refinancing to help people simplify their repayment and earn a better rate. We believe our 50 years of experience, product design, digital marketing strategies, and origination and servicing platform provide a unique competitive advantage. We see meaningful growth opportunities in originating Private Education Loans to financially responsible consumers, generating attractive long-term, risk-adjusted returns. We generate revenue primarily through net interest income on our Private Education Loan portfolio.
The following table includes asset information for our Consumer Lending segmentsegment.
(Dollars in millions) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Private Education Loans, net |
| $ | 17,732 |
|
| $ | 18,725 |
|
Cash and investments(1) |
|
| 512 |
|
|
| 617 |
|
Other |
|
| 556 |
|
|
| 453 |
|
Total assets |
| $ | 18,800 |
|
| $ | 19,795 |
|
(Dollars in millions) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Private Education Loans, net |
| $ | 19,151 |
|
| $ | 20,171 |
|
Cash and investments(1) |
|
| 583 |
|
|
| 824 |
|
Other |
|
| 549 |
|
|
| 815 |
|
Total assets |
| $ | 20,283 |
|
| $ | 21,810 |
|
|
|
8479
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
11. Segment Reporting (Continued)
Business Processing Segment
Navient provides business processing solutions such as omnichannel contact center services, workflow processing, and revenue cycle optimization. We leverage the same expertise and intelligent tools we use to deliver successful results for portfolios we own. Our support enables our clients to ensure better serve their constituents,constituent outcomes, meet rapidly changing needs, improve technology, reduce operating expenses, manage risk and optimize revenue opportunities. Our clients include:
|
|
|
|
At SeptemberJune 30, 20222023 and December 31, 2021,2022, the Business Processing segment had total assets of $398$388 million and $397$390 million, respectively.
Other Segment
This segment consists of our corporate liquidity portfolio, gains and losses incurred on the repurchase of debt, unallocated expenses of shared services (which includes regulatory expenses) and restructuring/other reorganization expenses.
Unallocated shared services expenses are comprised of costs primarily related to information technology costs related to infrastructure and operations, stock-based compensation expense, accounting, finance, legal, compliance and risk management, regulatory-related expenses, human resources, certain executive management and the board of directors. Regulatory-related expenses include actual settlement amounts as well as third-party professional fees we incur in connection with such regulatory matters and are presented net of any insurance reimbursements for covered costs related to such matters.
At SeptemberJune 30, 20222023 and December 31, 2021,2022, the Other segment had total assets of $2.0$1.9 billion and $1.5$2.1 billion, respectively.
85
80
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
11. Segment Reporting (Continued)
Measure of Profitability
We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide Core Earnings disclosure in the notes to our consolidated financial statements for our business segments.
Core Earnings are not a substitute for reported results under GAAP. We use Core Earnings to manage our business segments because Core Earnings reflect adjustments to GAAP financial results for two items, discussed below, that can create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that Core Earnings provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information because we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. When compared to GAAP results, the two items we remove to result in our Core Earnings presentations are:
| 1. Mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness; and 2. The accounting for goodwill and acquired intangible assets.
|
|
|
|
While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our Core Earnings basis of presentation does not. Core Earnings are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our Core Earnings presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon Core Earnings. Core Earnings results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our board of directors, credit rating agencies, lenders and investors to assess performance.
8681
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
11. Segment Reporting (Continued)
Segment Results and Reconciliations to GAAP
|
| Three Months Ended June 30, 2023 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
| Adjustments |
|
|
|
|
| Reportable Segments |
| ||||||||||||||||||||||||
(Dollars in millions) |
| Total |
|
| Reclassi- |
|
| Additions/ |
|
| Total |
|
| Total |
|
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Education loans |
| $ | 1,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 721 |
|
| $ | 341 |
|
| $ | — |
|
| $ | — |
| ||||
Cash and investments |
|
| 36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 7 |
|
|
| — |
|
|
| 11 |
| ||||
Total interest income |
|
| 1,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 739 |
|
|
| 348 |
|
|
| — |
|
|
| 11 |
| ||||
Total interest expense |
|
| 919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 633 |
|
|
| 205 |
|
|
| — |
|
|
| 39 |
| ||||
Net interest income |
|
| 178 |
|
| $ | 4 |
|
| $ | 39 |
|
| $ | 43 |
|
| $ | 221 |
|
|
| 106 |
|
|
| 143 |
|
|
| — |
|
|
| (28 | ) |
Less: provisions for loan |
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
|
| 5 |
|
|
| 6 |
|
|
| — |
|
|
| — |
| |||
Net interest income |
|
| 167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101 |
|
|
| 137 |
|
|
| — |
|
|
| (28 | ) | ||||
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Servicing revenue |
|
| 16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13 |
|
|
| 3 |
|
|
| — |
|
|
| — |
| ||||
Asset recovery and |
|
| 83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| 83 |
|
|
| — |
| ||||
Other revenue |
|
| 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| — |
| ||||
Total other income |
|
| 129 |
|
|
| (4 | ) |
|
| (22 | ) |
|
| (26 | ) |
|
| 103 |
|
|
| 15 |
|
|
| 5 |
|
|
| 83 |
|
|
| — |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Direct operating |
|
| 135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 42 |
|
|
| 75 |
|
|
| — |
| ||||
Unallocated shared |
|
| 47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
| ||||
Operating expenses |
|
| 182 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 182 |
|
|
| 18 |
|
|
| 42 |
|
|
| 75 |
|
|
| 47 |
|
Goodwill and acquired |
|
| 3 |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Restructuring/other |
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
Total expenses |
|
| 200 |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| 197 |
|
|
| 18 |
|
|
| 42 |
|
|
| 75 |
|
|
| 62 |
|
Income (loss) before |
|
| 96 |
|
|
| — |
|
|
| 20 |
|
|
| 20 |
|
|
| 116 |
|
|
| 98 |
|
|
| 100 |
|
|
| 8 |
|
|
| (90 | ) |
Income tax expense |
|
| 30 |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| 28 |
|
|
| 22 |
|
|
| 25 |
|
|
| 2 |
|
|
| (21 | ) |
Net income (loss) |
| $ | 66 |
|
| $ | — |
|
| $ | 22 |
|
| $ | 22 |
|
| $ | 88 |
|
| $ | 76 |
|
| $ | 75 |
|
| $ | 6 |
|
| $ | (69 | ) |
|
| Three Months Ended September 30, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 555 |
|
| $ | 309 |
|
| $ | — |
|
| $ | — |
|
| $ | 864 |
|
| $ | — |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | 862 |
|
Cash and investments |
|
| 9 |
|
|
| 3 |
|
|
| — |
|
|
| 7 |
|
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
Total interest income |
|
| 564 |
|
|
| 312 |
|
|
| — |
|
|
| 7 |
|
|
| 883 |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| 881 |
|
Total interest expense |
|
| 444 |
|
|
| 159 |
|
|
| — |
|
|
| 33 |
|
|
| 636 |
|
|
| (1 | ) |
|
| 6 |
|
|
| 5 |
|
|
| 641 |
|
Net interest income (loss) |
|
| 120 |
|
|
| 153 |
|
|
| — |
|
|
| (26 | ) |
|
| 247 |
|
|
| 1 |
|
|
| (8 | ) |
|
| (7 | ) |
|
| 240 |
|
Less: provisions for loan losses |
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28 |
|
Net interest income (loss) after provisions for loan losses |
|
| 120 |
|
|
| 125 |
|
|
| — |
|
|
| (26 | ) |
|
| 219 |
|
|
| 1 |
|
|
| (8 | ) |
|
| (7 | ) |
|
| 212 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 21 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24 |
|
Asset recovery and business processing revenue |
|
| 1 |
|
|
| — |
|
|
| 79 |
|
|
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
Other income (loss) |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| (1 | ) |
|
| 41 |
|
|
| 40 |
|
|
| 46 |
|
Total other income (loss) |
|
| 28 |
|
|
| 3 |
|
|
| 79 |
|
|
| — |
|
|
| 110 |
|
|
| (1 | ) |
|
| 41 |
|
|
| 40 |
|
|
| 150 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 25 |
|
|
| 43 |
|
|
| 67 |
|
|
| — |
|
|
| 135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 135 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
|
| 59 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
Operating expenses |
|
| 25 |
|
|
| 43 |
|
|
| 67 |
|
|
| 59 |
|
|
| 194 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10 |
|
|
| 10 |
|
|
| 10 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21 |
|
|
| 21 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21 |
|
Total expenses |
|
| 25 |
|
|
| 43 |
|
|
| 67 |
|
|
| 80 |
|
|
| 215 |
|
|
| — |
|
|
| 10 |
|
|
| 10 |
|
|
| 225 |
|
Income (loss) before income tax expense (benefit) |
|
| 123 |
|
|
| 85 |
|
|
| 12 |
|
|
| (106 | ) |
|
| 114 |
|
|
| — |
|
|
| 23 |
|
|
| 23 |
|
|
| 137 |
|
Income tax expense (benefit)(2) |
|
| 29 |
|
|
| 20 |
|
|
| 3 |
|
|
| (25 | ) |
|
| 27 |
|
|
| — |
|
|
| 5 |
|
|
| 5 |
|
|
| 32 |
|
Net income (loss) |
| $ | 94 |
|
| $ | 65 |
|
| $ | 9 |
|
| $ | (81 | ) |
| $ | 87 |
|
| $ | — |
|
| $ | 18 |
|
| $ | 18 |
|
| $ | 105 |
|
|
| Three Months Ended June 30, 2023 |
| |||||||||
(Dollars in millions) |
| Net Impact of |
|
| Net Impact of |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 43 |
|
| $ | — |
|
| $ | 43 |
|
Total other income (loss) |
|
| (26 | ) |
|
| — |
|
|
| (26 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
Total Core Earnings adjustments to GAAP |
| $ | 17 |
|
| $ | 3 |
|
|
| 20 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
| (2 | ) | ||
Net income (loss) |
|
|
|
|
|
|
| $ | 22 |
| ||
|
|
|
| Three Months Ended September 30, 2022 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | (7 | ) |
| $ | — |
|
| $ | (7 | ) |
Total other income (loss) |
|
| 40 |
|
|
| — |
|
|
| 40 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 10 |
|
|
| 10 |
|
Total Core Earnings adjustments to GAAP |
| $ | 33 |
|
| $ | (10 | ) |
|
| 23 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 5 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 18 |
|
|
|
87
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
11. Segment Reporting (Continued)
|
| Three Months Ended September 30, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 353 |
|
| $ | 291 |
|
| $ | — |
|
| $ | — |
|
| $ | 644 |
|
| $ | 25 |
|
| $ | (10 | ) |
| $ | 15 |
|
| $ | 659 |
|
Cash and investments |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Total interest income |
|
| 353 |
|
|
| 292 |
|
|
| — |
|
|
| — |
|
|
| 645 |
|
|
| 25 |
|
|
| (10 | ) |
|
| 15 |
|
|
| 660 |
|
Total interest expense |
|
| 202 |
|
|
| 129 |
|
|
| — |
|
|
| 15 |
|
|
| 346 |
|
|
| (3 | ) |
|
| (17 | ) |
|
| (20 | ) |
|
| 326 |
|
Net interest income (loss) |
|
| 151 |
|
|
| 163 |
|
|
| — |
|
|
| (15 | ) |
|
| 299 |
|
|
| 28 |
|
|
| 7 |
|
|
| 35 |
|
|
| 334 |
|
Less: provisions for loan losses |
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
Net interest income (loss) after provisions for loan losses |
|
| 151 |
|
|
| 141 |
|
|
| — |
|
|
| (15 | ) |
|
| 277 |
|
|
| 28 |
|
|
| 7 |
|
|
| 35 |
|
|
| 312 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
Asset recovery and business processing revenue |
|
| 13 |
|
|
| — |
|
|
| 122 |
|
|
| — |
|
|
| 135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 135 |
|
Other income (loss) |
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 3 |
|
|
| (28 | ) |
|
| 23 |
|
|
| (5 | ) |
|
| (2 | ) |
Losses on debt repurchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| (20 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
Total other income (loss) |
|
| 61 |
|
|
| — |
|
|
| 122 |
|
|
| (18 | ) |
|
| 165 |
|
|
| (28 | ) |
|
| 23 |
|
|
| (5 | ) |
|
| 160 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 53 |
|
|
| 45 |
|
|
| 87 |
|
|
| — |
|
|
| 185 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 185 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63 |
|
|
| 63 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 63 |
|
Operating expenses |
|
| 53 |
|
|
| 45 |
|
|
| 87 |
|
|
| 63 |
|
|
| 248 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 248 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
|
| 4 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total expenses |
|
| 53 |
|
|
| 45 |
|
|
| 87 |
|
|
| 63 |
|
|
| 248 |
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
|
| 252 |
|
Income (loss) before income tax expense (benefit) |
|
| 159 |
|
|
| 96 |
|
|
| 35 |
|
|
| (96 | ) |
|
| 194 |
|
|
| — |
|
|
| 26 |
|
|
| 26 |
|
|
| 220 |
|
Income tax expense (benefit)(2) |
|
| 37 |
|
|
| 23 |
|
|
| 8 |
|
|
| (23 | ) |
|
| 45 |
|
|
| — |
|
|
| 2 |
|
|
| 2 |
|
|
| 47 |
|
Net income (loss) |
| $ | 122 |
|
| $ | 73 |
|
| $ | 27 |
|
| $ | (73 | ) |
| $ | 149 |
|
| $ | — |
|
| $ | 24 |
|
| $ | 24 |
|
| $ | 173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2021 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 35 |
|
| $ | — |
|
| $ | 35 |
|
Total other income (loss) |
|
| (5 | ) |
|
| — |
|
|
| (5 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 4 |
|
|
| 4 |
|
Total Core Earnings adjustments to GAAP |
| $ | 30 |
|
| $ | (4 | ) |
|
| 26 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 2 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 24 |
|
|
|
88
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at September 30, 2022 and for the three and nine months ended
September 30, 2022 and 2021 is unaudited)
11. Segment Reporting (Continued)
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 1,298 |
|
| $ | 862 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,160 |
|
| $ | 23 |
|
| $ | (9 | ) |
| $ | 14 |
|
| $ | 2,174 |
|
Cash and investments |
|
| 12 |
|
|
| 5 |
|
|
| — |
|
|
| 8 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Total interest income |
|
| 1,310 |
|
|
| 867 |
|
|
| — |
|
|
| 8 |
|
|
| 2,185 |
|
|
| 23 |
|
|
| (9 | ) |
|
| 14 |
|
|
| 2,199 |
|
Total interest expense |
|
| 905 |
|
|
| 421 |
|
|
| — |
|
|
| 65 |
|
|
| 1,391 |
|
|
| 3 |
|
|
| (93 | ) |
|
| (90 | ) |
|
| 1,301 |
|
Net interest income (loss) |
|
| 405 |
|
|
| 446 |
|
|
| — |
|
|
| (57 | ) |
|
| 794 |
|
|
| 20 |
|
|
| 84 |
|
|
| 104 |
|
|
| 898 |
|
Less: provisions for loan losses |
|
| — |
|
|
| 62 |
|
|
| — |
|
|
| — |
|
|
| 62 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 62 |
|
Net interest income (loss) after provisions for loan losses |
|
| 405 |
|
|
| 384 |
|
|
| — |
|
|
| (57 | ) |
|
| 732 |
|
|
| 20 |
|
|
| 84 |
|
|
| 104 |
|
|
| 836 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 51 |
|
|
| 9 |
|
|
| — |
|
|
| — |
|
|
| 60 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60 |
|
Asset recovery and business processing revenue |
|
| 4 |
|
|
| — |
|
|
| 260 |
|
|
| — |
|
|
| 264 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 264 |
|
Other income (loss) |
|
| 24 |
|
|
| 1 |
|
|
| — |
|
|
| (3 | ) |
|
| 22 |
|
|
| (20 | ) |
|
| 181 |
|
|
| 161 |
|
|
| 183 |
|
Total other income (loss) |
|
| 79 |
|
|
| 10 |
|
|
| 260 |
|
|
| (3 | ) |
|
| 346 |
|
|
| (20 | ) |
|
| 181 |
|
|
| 161 |
|
|
| 507 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 79 |
|
|
| 113 |
|
|
| 216 |
|
|
| — |
|
|
| 408 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 408 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180 |
|
|
| 180 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 180 |
|
Operating expenses |
|
| 79 |
|
|
| 113 |
|
|
| 216 |
|
|
| 180 |
|
|
| 588 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 588 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
|
| 17 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25 |
|
Total expenses |
|
| 79 |
|
|
| 113 |
|
|
| 216 |
|
|
| 205 |
|
|
| 613 |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
|
| 630 |
|
Income (loss) before income tax expense (benefit) |
|
| 405 |
|
|
| 281 |
|
|
| 44 |
|
|
| (265 | ) |
|
| 465 |
|
|
| — |
|
|
| 248 |
|
|
| 248 |
|
|
| 713 |
|
Income tax expense (benefit)(2) |
|
| 95 |
|
|
| 66 |
|
|
| 11 |
|
|
| (63 | ) |
|
| 109 |
|
|
| — |
|
|
| 64 |
|
|
| 64 |
|
|
| 173 |
|
Net income (loss) |
| $ | 310 |
|
| $ | 215 |
|
| $ | 33 |
|
| $ | (202 | ) |
| $ | 356 |
|
| $ | — |
|
| $ | 184 |
|
| $ | 184 |
|
| $ | 540 |
|
|
|
|
| Nine Months Ended September 30, 2022 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 104 |
|
| $ | — |
|
| $ | 104 |
|
Total other income (loss) |
|
| 161 |
|
|
| — |
|
|
| 161 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 17 |
|
|
| 17 |
|
Total Core Earnings adjustments to GAAP |
| $ | 265 |
|
| $ | (17 | ) |
|
| 248 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 64 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 184 |
|
(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.
8982
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
11. Segment Reporting (Continued)
|
| Three Months Ended June 30, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
| Adjustments |
|
|
|
|
| Reportable Segments |
| ||||||||||||||||||||||||
(Dollars in millions) |
| Total |
|
| Reclassi- |
|
| Additions/ |
|
| Total |
|
| Total |
|
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Education loans |
| $ | 687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 409 |
|
| $ | 277 |
|
| $ | — |
|
| $ | — |
| ||||
Cash and investments |
|
| 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
| ||||
Total interest income |
|
| 692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 412 |
|
|
| 278 |
|
|
| — |
|
|
| 1 |
| ||||
Total interest expense |
|
| 371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 266 |
|
|
| 136 |
|
|
| — |
|
|
| 18 |
| ||||
Net interest income (loss) |
|
| 321 |
|
| $ | — |
|
| $ | (50 | ) |
| $ | (50 | ) |
| $ | 271 |
|
|
| 146 |
|
|
| 142 |
|
|
| — |
|
|
| (17 | ) |
Less: provisions for loan |
|
| 18 |
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| — |
| |||
Net interest income (loss) |
|
| 303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 146 |
|
|
| 124 |
|
|
| — |
|
|
| (17 | ) | ||||
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Servicing revenue |
|
| 17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14 |
|
|
| 3 |
|
|
| — |
|
|
| — |
| ||||
Asset recovery and |
|
| 88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| — |
|
|
| 87 |
|
|
| — |
| ||||
Other revenue |
|
| 29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8 |
|
|
| 1 |
|
|
| — |
|
|
| (2 | ) | ||||
Total other income (loss) |
|
| 134 |
|
|
| — |
|
|
| (22 | ) |
|
| (22 | ) |
|
| 112 |
|
|
| 23 |
|
|
| 4 |
|
|
| 87 |
|
|
| (2 | ) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Direct operating |
|
| 134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25 |
|
|
| 35 |
|
|
| 74 |
|
|
| — |
| ||||
Unallocated shared |
|
| 56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 56 |
| ||||
Operating expenses |
|
| 190 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 190 |
|
|
| 25 |
|
|
| 35 |
|
|
| 74 |
|
|
| 56 |
|
Goodwill and acquired |
|
| 3 |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Restructuring/other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total expenses |
|
| 193 |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
|
| 190 |
|
|
| 25 |
|
|
| 35 |
|
|
| 74 |
|
|
| 56 |
|
Income (loss) before |
|
| 244 |
|
|
| — |
|
|
| (69 | ) |
|
| (69 | ) |
|
| 175 |
|
|
| 144 |
|
|
| 93 |
|
|
| 13 |
|
|
| (75 | ) |
Income tax expense |
|
| 64 |
|
|
| — |
|
|
| (23 | ) |
|
| (23 | ) |
|
| 41 |
|
|
| 34 |
|
|
| 22 |
|
|
| 3 |
|
|
| (18 | ) |
Net income (loss) |
| $ | 180 |
|
| $ | — |
|
| $ | (46 | ) |
| $ | (46 | ) |
| $ | 134 |
|
| $ | 110 |
|
| $ | 71 |
|
| $ | 10 |
|
| $ | (57 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Nine Months Ended September 30, 2021 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustments |
|
|
|
|
| |||||||||
(Dollars in millions) |
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
|
| Total Core Earnings |
|
| Reclassi- fications |
|
| Additions/ (Subtractions) |
|
| Total Adjustments(1) |
|
| Total GAAP |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
| $ | 1,062 |
|
| $ | 905 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,967 |
|
| $ | 73 |
|
| $ | (29 | ) |
| $ | 44 |
|
| $ | 2,011 |
|
Cash and investments |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
Total interest income |
|
| 1,062 |
|
|
| 906 |
|
|
| — |
|
|
| 1 |
|
|
| 1,969 |
|
|
| 73 |
|
|
| (29 | ) |
|
| 44 |
|
|
| 2,013 |
|
Total interest expense |
|
| 627 |
|
|
| 416 |
|
|
| — |
|
|
| 51 |
|
|
| 1,094 |
|
|
| (6 | ) |
|
| (93 | ) |
|
| (99 | ) |
|
| 995 |
|
Net interest income (loss) |
|
| 435 |
|
|
| 490 |
|
|
| — |
|
|
| (50 | ) |
|
| 875 |
|
|
| 79 |
|
|
| 64 |
|
|
| 143 |
|
|
| 1,018 |
|
Less: provisions for loan losses |
|
| — |
|
|
| (66 | ) |
|
| — |
|
|
| — |
|
|
| (66 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (66 | ) |
Net interest income (loss) after provisions for loan losses |
|
| 435 |
|
|
| 556 |
|
|
| — |
|
|
| (50 | ) |
|
| 941 |
|
|
| 79 |
|
|
| 64 |
|
|
| 143 |
|
|
| 1,084 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
| 146 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 149 |
|
Asset recovery and business processing revenue |
|
| 39 |
|
|
| — |
|
|
| 377 |
|
|
| — |
|
|
| 416 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 416 |
|
Other income (loss) |
|
| 3 |
|
|
| 1 |
|
|
| — |
|
|
| 5 |
|
|
| 9 |
|
|
| (66 | ) |
|
| 87 |
|
|
| 21 |
|
|
| 30 |
|
Gains on sales of loans |
|
| — |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
|
| (13 | ) |
|
| — |
|
|
| (13 | ) |
|
| 78 |
|
Losses on debt repurchases |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32 | ) |
|
| (32 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32 | ) |
Total other income (loss) |
|
| 188 |
|
|
| 95 |
|
|
| 377 |
|
|
| (27 | ) |
|
| 633 |
|
|
| (79 | ) |
|
| 87 |
|
|
| 8 |
|
|
| 641 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
| 170 |
|
|
| 124 |
|
|
| 270 |
|
|
| — |
|
|
| 564 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 564 |
|
Unallocated shared services expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
|
| 194 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
Operating expenses |
|
| 170 |
|
|
| 124 |
|
|
| 270 |
|
|
| 194 |
|
|
| 758 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 758 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14 |
|
|
| 14 |
|
|
| 14 |
|
Restructuring/other reorganization expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
Total expenses |
|
| 170 |
|
|
| 124 |
|
|
| 270 |
|
|
| 202 |
|
|
| 766 |
|
|
| — |
|
|
| 14 |
|
|
| 14 |
|
|
| 780 |
|
Income (loss) before income tax expense (benefit) |
|
| 453 |
|
|
| 527 |
|
|
| 107 |
|
|
| (279 | ) |
|
| 808 |
|
|
| — |
|
|
| 137 |
|
|
| 137 |
|
|
| 945 |
|
Income tax expense (benefit)(2) |
|
| 107 |
|
|
| 123 |
|
|
| 25 |
|
|
| (65 | ) |
|
| 190 |
|
|
| — |
|
|
| 27 |
|
|
| 27 |
|
|
| 217 |
|
Net income (loss) |
| $ | 346 |
|
| $ | 404 |
|
| $ | 82 |
|
| $ | (214 | ) |
| $ | 618 |
|
| $ | — |
|
| $ | 110 |
|
| $ | 110 |
|
| $ | 728 |
|
|
| Three Months Ended June 30, 2022 |
| |||||||||
(Dollars in millions) |
| Net Impact of |
|
| Net Impact of |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | (50 | ) |
| $ | — |
|
| $ | (50 | ) |
Total other income (loss) |
|
| (22 | ) |
|
| — |
|
|
| (22 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
Total Core Earnings adjustments to GAAP |
| $ | (72 | ) |
| $ | 3 |
|
|
| (69 | ) |
Income tax expense (benefit) |
|
|
|
|
|
|
|
| (23 | ) | ||
Net income (loss) |
|
|
|
|
|
|
| $ | (46 | ) | ||
|
|
|
| Nine Months Ended September 30, 2021 |
| |||||||||
(Dollars in millions) |
| Net Impact of Derivative Accounting |
|
| Net Impact of Goodwill and Acquired Intangibles |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 143 |
|
| $ | — |
|
| $ | 143 |
|
Total other income (loss) |
|
| 8 |
|
|
| — |
|
|
| 8 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| 14 |
|
|
| 14 |
|
Total Core Earnings adjustments to GAAP |
| $ | 151 |
|
| $ | (14 | ) |
|
| 137 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
| 27 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
| $ | 110 |
|
(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.
90
83
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at SeptemberJune 30, 20222023 and for the three and ninesix months ended
SeptemberJune 30, 20222023 and 20212022 is unaudited)
11. Segment Reporting (Continued)
|
| Six Months Ended June 30, 2023 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
| Adjustments |
|
|
|
|
| Reportable Segments |
| ||||||||||||||||||||||||
(Dollars in millions) |
| Total |
|
| Reclassi- |
|
| Additions/ |
|
| Total |
|
| Total |
|
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Education loans |
| $ | 2,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,416 |
|
| $ | 686 |
|
| $ | — |
|
| $ | — |
| ||||
Cash and investments |
|
| 70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38 |
|
|
| 13 |
|
|
| — |
|
|
| 19 |
| ||||
Total interest income |
|
| 2,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,454 |
|
|
| 699 |
|
|
| — |
|
|
| 19 |
| ||||
Total interest expense |
|
| 1,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,223 |
|
|
| 402 |
|
|
| — |
|
|
| 73 |
| ||||
Net interest income |
|
| 413 |
|
| $ | 16 |
|
| $ | 45 |
|
| $ | 61 |
|
| $ | 474 |
|
|
| 231 |
|
|
| 297 |
|
|
| — |
|
|
| (54 | ) |
Less: provisions for loan |
|
| (3 | ) |
|
|
|
|
|
|
|
|
|
|
| (3 | ) |
|
| 15 |
|
|
| (18 | ) |
|
| — |
|
|
| — |
| |||
Net interest income |
|
| 416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 216 |
|
|
| 315 |
|
|
| — |
|
|
| (54 | ) | ||||
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Servicing revenue |
|
| 33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27 |
|
|
| 6 |
|
|
| — |
|
|
| — |
| ||||
Asset recovery and |
|
| 155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| 155 |
|
|
| — |
| ||||
Other revenue |
|
| 28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7 |
|
|
| 1 |
|
|
| — |
|
|
| 3 |
| ||||
Total other income |
|
| 216 |
|
|
| (16 | ) |
|
| (1 | ) |
|
| (17 | ) |
|
| 199 |
|
|
| 34 |
|
|
| 7 |
|
|
| 155 |
|
|
| 3 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Direct operating |
|
| 259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38 |
|
|
| 79 |
|
|
| 142 |
|
|
| — |
| ||||
Unallocated shared |
|
| 109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 109 |
| ||||
Operating expenses |
|
| 368 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 368 |
|
|
| 38 |
|
|
| 79 |
|
|
| 142 |
|
|
| 109 |
|
Goodwill and acquired |
|
| 5 |
|
|
| — |
|
|
| (5 | ) |
|
| (5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Restructuring/other |
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
Total expenses |
|
| 392 |
|
|
| — |
|
|
| (5 | ) |
|
| (5 | ) |
|
| 387 |
|
|
| 38 |
|
|
| 79 |
|
|
| 142 |
|
|
| 128 |
|
Income (loss) before |
|
| 240 |
|
|
| — |
|
|
| 49 |
|
|
| 49 |
|
|
| 289 |
|
|
| 212 |
|
|
| 243 |
|
|
| 13 |
|
|
| (179 | ) |
Income tax expense |
|
| 63 |
|
|
| — |
|
|
| 5 |
|
|
| 5 |
|
|
| 68 |
|
|
| 50 |
|
|
| 58 |
|
|
| 3 |
|
|
| (43 | ) |
Net income (loss) |
| $ | 177 |
|
| $ | — |
|
| $ | 44 |
|
| $ | 44 |
|
| $ | 221 |
|
| $ | 162 |
|
| $ | 185 |
|
| $ | 10 |
|
| $ | (136 | ) |
|
| Six Months Ended June 30, 2023 |
| |||||||||
(Dollars in millions) |
| Net Impact of |
|
| Net Impact of |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | 61 |
|
| $ | — |
|
| $ | 61 |
|
Total other income (loss) |
|
| (17 | ) |
|
| — |
|
|
| (17 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| (5 | ) |
|
| (5 | ) |
Total Core Earnings adjustments to GAAP |
| $ | 44 |
|
| $ | 5 |
|
|
| 49 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
| 5 |
| ||
Net income (loss) |
|
|
|
|
|
|
| $ | 44 |
| ||
84
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
11. Segment Reporting (Continued)
|
| Six Months Ended June 30, 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
| Adjustments |
|
|
|
|
| Reportable Segments |
| ||||||||||||||||||||||||
(Dollars in millions) |
| Total |
|
| Reclassi- |
|
| Additions/ |
|
| Total |
|
| Total |
|
| Federal Education Loans |
|
| Consumer Lending |
|
| Business Processing |
|
| Other |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Education loans |
| $ | 1,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 743 |
|
| $ | 553 |
|
| $ | — |
|
| $ | — |
| ||||
Cash and investments |
|
| 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 2 |
|
|
| — |
|
|
| 1 |
| ||||
Total interest income |
|
| 1,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 746 |
|
|
| 555 |
|
|
| — |
|
|
| 1 |
| ||||
Total interest expense |
|
| 660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 461 |
|
|
| 262 |
|
|
| — |
|
|
| 32 |
| ||||
Net interest income |
|
| 658 |
|
| $ | (19 | ) |
| $ | (92 | ) |
| $ | (111 | ) |
| $ | 547 |
|
|
| 285 |
|
|
| 293 |
|
|
| — |
|
|
| (31 | ) |
Less: provisions for loan |
|
| 34 |
|
|
|
|
|
|
|
|
|
|
|
| 34 |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| — |
| |||
Net interest income |
|
| 624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 285 |
|
|
| 259 |
|
|
| — |
|
|
| (31 | ) | ||||
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Servicing revenue |
|
| 36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30 |
|
|
| 6 |
|
|
| — |
|
|
| — |
| ||||
Asset recovery and |
|
| 185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4 |
|
|
| — |
|
|
| 181 |
|
|
| — |
| ||||
Other revenue |
|
| 136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 1 |
|
|
| — |
|
|
| (3 | ) | ||||
Total other income |
|
| 357 |
|
|
| 19 |
|
|
| (139 | ) |
|
| (120 | ) |
|
| 237 |
|
|
| 52 |
|
|
| 7 |
|
|
| 181 |
|
|
| (3 | ) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Direct operating |
|
| 273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 54 |
|
|
| 69 |
|
|
| 150 |
|
|
| — |
| ||||
Unallocated shared |
|
| 122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 122 |
| ||||
Operating expenses |
|
| 395 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 395 |
|
|
| 54 |
|
|
| 69 |
|
|
| 150 |
|
|
| 122 |
|
Goodwill and acquired |
|
| 7 |
|
|
| — |
|
|
| (7 | ) |
|
| (7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Restructuring/other |
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
Total expenses |
|
| 405 |
|
|
| — |
|
|
| (7 | ) |
|
| (7 | ) |
|
| 398 |
|
|
| 54 |
|
|
| 69 |
|
|
| 150 |
|
|
| 125 |
|
Income (loss) before |
|
| 576 |
|
|
| — |
|
|
| (224 | ) |
|
| (224 | ) |
|
| 352 |
|
|
| 283 |
|
|
| 197 |
|
|
| 31 |
|
|
| (159 | ) |
Income tax expense |
|
| 141 |
|
|
| — |
|
|
| (58 | ) |
|
| (58 | ) |
|
| 83 |
|
|
| 67 |
|
|
| 47 |
|
|
| 7 |
|
|
| (38 | ) |
Net income (loss) |
| $ | 435 |
|
| $ | — |
|
| $ | (166 | ) |
| $ | (166 | ) |
| $ | 269 |
|
| $ | 216 |
|
| $ | 150 |
|
| $ | 24 |
|
| $ | (121 | ) |
|
| Six Months Ended June 30, 2022 |
| |||||||||
(Dollars in millions) |
| Net Impact of |
|
| Net Impact of |
|
| Total |
| |||
Net interest income (loss) after provisions for loan losses |
| $ | (111 | ) |
| $ | — |
|
| $ | (111 | ) |
Total other income (loss) |
|
| (120 | ) |
|
| — |
|
|
| (120 | ) |
Goodwill and acquired intangible asset impairment and amortization |
|
| — |
|
|
| (7 | ) |
|
| (7 | ) |
Total Core Earnings adjustments to GAAP |
| $ | (231 | ) |
| $ | 7 |
|
|
| (224 | ) |
Income tax expense (benefit) |
|
|
|
|
|
|
|
| (58 | ) | ||
Net income (loss) |
|
|
|
|
|
|
| $ | (166 | ) | ||
85
NAVIENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at June 30, 2023 and for the three and six months ended
June 30, 2023 and 2022 is unaudited)
11. Segment Reporting (Continued)
Summary of Core Earnings Adjustments to GAAP
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
GAAP net income |
| $ | 66 |
|
| $ | 180 |
|
| $ | 177 |
|
| $ | 435 |
|
Core Earnings adjustments to GAAP: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net impact of derivative accounting(1) |
|
| 17 |
|
|
| (72 | ) |
|
| 44 |
|
|
| (231 | ) |
Net impact of goodwill and acquired |
|
| 3 |
|
|
| 3 |
|
|
| 5 |
|
|
| 7 |
|
Net tax effect(3) |
|
| 2 |
|
|
| 23 |
|
|
| (5 | ) |
|
| 58 |
|
Total Core Earnings adjustments to GAAP |
|
| 22 |
|
|
| (46 | ) |
|
| 44 |
|
|
| (166 | ) |
Core Earnings net income |
| $ | 88 |
|
| $ | 134 |
|
| $ | 221 |
|
| $ | 269 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(Dollars in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Core Earnings net income |
| $ | 87 |
|
| $ | 149 |
|
| $ | 356 |
|
| $ | 618 |
|
Core Earnings adjustments to GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact of derivative accounting(1) |
|
| 33 |
|
|
| 30 |
|
|
| 265 |
|
|
| 151 |
|
Net impact of goodwill and acquired intangible assets(2) |
|
| (10 | ) |
|
| (4 | ) |
|
| (17 | ) |
|
| (14 | ) |
Net tax effect(3) |
|
| (5 | ) |
|
| (2 | ) |
|
| (64 | ) |
|
| (27 | ) |
Total Core Earnings adjustments to GAAP |
|
| 18 |
|
|
| 24 |
|
|
| 184 |
|
|
| 110 |
|
GAAP net income |
| $ | 105 |
|
| $ | 173 |
|
| $ | 540 |
|
| $ | 728 |
|
86 SIGNATURES |
|
|
|
|
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NAVIENT CORPORATION (Registrant) | ||
By: |
| |
Joe Fisher | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
Date: OctoberJuly 26, 20222023
87
APPENDIX A
form 10-Q cross-reference index
Page Number |
Part I. Financial Information | |||
Item 1. | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | |||
Item 4. | |||
Part II. Other Information | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | Defaults Upon Senior Securities | Not Applicable | |
Item 4. | Mine Safety Disclosures | Not Applicable | |
Item 5. | Other Information | Not Applicable | |
Item 6. | |||
9388