NAVI - Earnings call transcript Q4 2021

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Operator

Good day. And thank you for standing by. Welcome to the Navient Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. advised conference be being Please Instructions] that is today's recorded. [Operator the now Head to like would conference of to Relations. Rutledge, I Nathan hand over today, your Investor speaker ahead. go Please

Nathan Rutledge

quarter are Jack for up our morning, to and After Thanks, our Joe the questions. Remondi, call. we their Deborah. today Navient's call prepared CEO; Good remarks, fourth me With XXXX Fisher, welcome CFO. and earnings open will

future about statements our discussion may factors company's our SEC. that Before the we Form Actual of could and contain expectations, management's variety factors. other This and in be results information Listeners filings of XX-K of should and on on here. the begin, other the materially with based will forward-looking those from discussed as refer the business predictions, the is mind, in expectations due of a this keep those current be to date to different presentation. discussion

– conference various to this non-GAAP During other earnings. will derived earnings, measures, financial and including refer financial measures non-GAAP from the tangible ratio core core call adjusted equity call, we

results quarter reconciliation disclosure. is our GAAP call with navient.com. at posted now turn be to and the And to I'll description the full and financial earnings the measures over Our GAAP and GAAP non-GAAP a in found page Investors can XXXX reconciliation - supplemental fourth results of on This Thank you. Jack.

Jack Remondi

joining for challenges. morning, us few opportunities Thanks, interest and with significant thank that Navient. for today a along Nathan. Good year XXXX some presented everyone. you And in your was a

and returns demonstrated positioning our beyond. simplified success, a determination outstanding and and ability XXXX attractive derisked and to In for to continued financial Our both delivered company growth. responded agility, well results, and sustainable with XXXX, business, deliver we us

in successfully for existing needs. resources, customer hiring pandemic to temporary student to and to representatives, customers This We the responded achieved programs, Education education business largest third-party. both of loan options are of derisk Consumer ongoing forbearance country. that This analytics provide service then ROE with continued to ready our payment example, the and a Department data and of reduced and originated net major expense our in a millions making increase, to processing objective seamless the simplify constructive lender Federal a we leveraged repayment. pre-COVID retraining and contract Federal with Loans, rates attractive to efficiency servicing assisted execute included solutions loans, we private thousands XX% financings in a Navient hundreds and return a solution $X billion across the our mates. For to in below Lending, X,XXX pandemic-related delinquency and In ongoing improve and performance the employment ensured to technology-enabled Private levels. team to provided transfer And are capacity address to our interest business for interest of platform Loan our providing improve new department portfolios, transition Education for loan clients. XXX margin. for transactions the we and We relief Today, servicing on who borrowers, our

at expensive our example, business gain capturing For significant reliance not and a Navient. reducing sell opportunity delivering loans, and an our both on opportunities across identified older diverse portfolio we of an most our source. to is funding unique Recognizing

growth continue return capital businesses our value delivering creating in with to - We shareholders, and investors. cash for flows, invest and these in continue same XXXX our excess are to our maximize and to deploying strategy skills

to This our and as all execution we Joe I year our ever. earnings provide the our share, of where $X.XX performance XXXX While XX% exceeded highlights year, the complete for most above a core XXXX It describe per results. will financial full year goals. quarter and successful the was drove would adjusted in

loan New extended loan after pause as direct and to XXXX the already was billion, payment even in several as times. mentioned, Federal year XX% the interest being full $X by in originations increased, place for

this are generating volume and efficiently profitably. We

also has rebound also performance high achieving overall very programs strong. economy satisfaction customer scores. numerous helped the are consumers in have We position. Credit The financial strengthen and their stimulus been

fact, delinquency credit losses rates. loan In below our forbearance pre-pandemic as private are levels, well and

to Our learn multi-channel options customers evaluate negative and approach to avoid default. our help of and the their and communication about delinquency consequences continues

progress in risk our significant We reducing also and profile. business simplifying made our

a department, we Department and challenging completed to contracts. that no contributor our And we mates. The a risk change. performance borrowers business growing for for political to and solution the was we small revenue, employment of Education was smooth developed a of profile First, was team ongoing millions this the transfer while longer ensured strong for transition unlikely of delivered our presented

also to it reduces focus, addition In our and simplifying risk. materially business our operating

matters Following all X began more and significant lawsuits than and These this, consumed resolution have and years we expense. state announced the ago investigations. resources of of the

these is we process made. evidence Unfortunately, outcome years, and the was remains and knew examination lengthy process no This the the claims exhaustive be During to and discovery theories legal substantiate the and identified case. costly. to the

pursue our a resolve defense end. simplifies Closing this and decision in net to cases the Our business. is positive expense manner it and significant we eliminates to cases would to these time our these incur the

for programs supported active and also a we cost the And yielding training, strong Navient employee team identical in in was with team of military proud XXXX, long-term support, & created Boys further based resource platform, our our America. Clubs Board and These employee two another base variable partnership CPB thousands is remains flexible more our significantly also through the sale work communities of awards. mark cost including optimization. and we a efficient and of of for servicing locations, set increases recognition of business. to national technology have development on members and Throughout milestones committed our structure Together is efficiency other new actions and leadership Girls with loan We're with active local a organizations, hours the management diversity groups, of engagement. virtually we received among along, have the and claims outstanding, it national vigorous significant our action, which defense. to remain in much While

As the be excited to full turn value. able are to New focus we Year, we our begin to creating

our We to in will originate maximize capital originations value high quality, an of is cash high at In grow over revenue, increase with products processing return least Consumer XXXX. XX% and flows, $X still operating grow to in-school refi business loan efficiency excess and and loans, Lending, billion goal investors. improve

over XXXX, in revenue acquisition our with COVID XX% year. Year. confident into at a the costs and normal rates our And with have just expect a in as committed remain remain we of totaled and to at performance. operational revenue grow in application lower-than-market growth several work virtually years. better-than-market next loans, to the market share, driven volume, our design, project to our credit to to small BPS ended product clients for work similar in This we more our last ability XXXX. Our continue opportunity New project return flow to all double-digit deploy scale and carryover revenue targets by And traditional underwriting $XXX million and grow attractive significant BPS, see capital refi expertise at ROEs. in-school we both in significant We In profitability

been with may states partnerships reputation we accelerated projects have While are municipal not. short and potential. key BPS and term, have clients the the relevance, growth built relationships These COVID

to generation Our returned be the capital, BPS in billion fourth million business by through retention and will leverages in balance part our shareholders projected remains Board capital support approved in the margin, generate $XXX sufficient our capabilities the income. fee $X The quarter. dividend. XXXX attractive share first as to our our to repurchases the priority businesses our On platform and of and asset authorization growth light of

the maintenance colleagues supports Our their to capital thank more while ability sheet, like capital balance credit team a generation my results to I our across returning XXXX meaningful Navient shareholders. be of growth to pleased and and contributions. would with support strong our couldn't for ratings

high reduce services strong on our Our simplify effort reflect and model and high intentional risk. and focus to customers clients quality, to our business value XXXX our and an results delivering commitment

I'll to now over continue questions it delivered And deliver turn in cash I'm look maximize And originations strong year. to call I'm to of success return the BPS even growth as forward created investors Joe? of ability our recognition new satisfying this Our call. revenue see and to flow, your more us. and value. to confident capture appreciation. investor the price grow And excess and in after to identify year later the ability sustainable ahead I opportunities share Joe. and particularly was opportunities excited to clear earnings loan we of the about capital

Joe Fisher

everyone to call you interest thank Thank your you, Jack. Navient. And today's for on in

presentation, year-end the on results prepared fourth will can will referencing remarks, I in earnings my for I and XXXX. website call be the which be section. the company's Investors During found review quarter the

turn I to I and of of success quarterly that and The strong thousands by the of to and our up the the to Team like would exceeded who highlights XX%. across year full quarter people dedication the Before our Navient. the EPS results year, for hard contributed work guidance acknowledge all business original make lines

five, million EPS and and beyond. of include and demonstrated early. the for while income XXXX to with we of X%. as adjusted year our repurchase GAAP adjusted levels equity education results of EBITDA Key margin full BPS total billion; the positioned loss billion losses core As repurchases for and year are core of loans, to platform we a economic and favorable targets, leverage year $X.XX took the of result full this $X.X $X.XX increased million, quarter returning fourth include in beginning full year achieving our the We from adjusted of unsecured bringing EPS exceeding of while well $X.XX EPS high full of $XX advantage net originated our target quarter tangible GAAP capabilities, on $XXX to originations $X.XX. X.X%, year, teen EPS current year through consistent quarter XXXX, fourth retire a and a debt and our to shareholders private quarter slide to of and in opportunity effort dividends ratio $X.XX, agility $X to for $X.XX improved debt EPS highlights the our

Net from Loans interest for year. reporting, segment Education to move and was full basis decreased year Federal slide six. points Let's to ago the margin points XX the basis with quarter on X unchanged beginning

XXXX. We rates be margin the be XX.X%, expect FFELP pre-pandemic below in delinquency charge-offs remain interest low for continued to XX.X% of total with of to trends forbearance and levels, levels. historically credit while the or at mid-XXs net at

of increase was transfer agreement, for services for pertain $XX quarter. through by Education million this agreement, October a in the and This in XXXX revenue This offsetting that a we incur services that the solely transition. of $XX Federal million of revenue points. Fee resulted Loans result attributable was servicing FFELP of we declined expenses transition in servicing this in expectation a basis below Department loans. offset third primarily our segment transfer by will income XX segment contract. $XX from is to now Outside Our decline was the charge-offs payments remain for million Education for our receive other which provided our to the revenue

and from X% reversal let's of $XX that a as million quarter. billion education loan ago the of In for our the was $XXX total sales the $X.X $X.X of million of turn we gains billion of in originated Lending grew earlier that contributed year Consumer quarter, seven result loans. The modestly down a and It slide Now occurred private portfolio total losses. allowance year loan segment. a to from third this

billion Act, that XX% me, multiple Xst, year, year X% private compared $X the the continue provide we XXXX. CARES increase of of was education to accomplished though billion The extensions we a borrowers to full For of interest $X.X for even originated May a loans ago. through saw excuse

$XXX of a made compared to billion year students partner, $X ago. included $XX Our of were in-school our These loans million institutions. loans banking not-for-profit to million attending originations through private education entirely

XXXX for Act billion May this $X that year. expires the of CARES Xst of guidance assumes origination total Our on

the lower stated significant The see tailwind first current the and to of even their as the the X% refi a ends rise. volumes origination be backdrop on higher expect moratorium until from as rates the borrowers delay to We original refinancing moved for should half expiration of the in origination rate. loans decisions year after rates extension

loan for reserve we reminder, a As at origination. losses

XXX our basis So we dollar original new X%. of we to target approximately every reserve exceeded of The year margin of XXX points. XXX for X.XX%, net and for in-school refi reserve points full new interest originations, basis originations,

This quarter's increase late-stage NIM occur to forbearance. interest the reserve lower result expected ago, delinquencies that borrowers as of exited a primarily XXX in basis than a was for year is of points as

Our assumes of guidance full mix legacy points compared our year greater of margin private book. basis XXXX a net refi to XXX interest to product XXX our

transition borrowers trends pre-pandemic below back historically As rates delinquency exceed charge-offs credit to our continued at total low levels. to repayment, levels with expectations, and

While to benefits XXXX. various continued impact to reflects end improve, the occurred payment economic allowance relief recently that to from the and related the in conditions forecasted currently are of our negative the end stimulus potential uncertainty or May to portfolio

feel As adequately high losses borrowers reserved expected that confident given continued our are the quality we for well-seasoned life and to of transition to we repayment, of portfolio. credit the loan

leverage pandemic-related positive see to revenue existing our from exceeding support to the of Processing in eight Business the full review EBITDA platform to XX% ability technology-enabled year of quarter slide our in infrastructure and increase the This to targets a to to quarter, services. In segment. our contributed ago our continue XX% fourth continued we total agility results increase year, high-teen the and states a for while margins. Let's

revenues anticipate calls, normalized will we the of contracts as XXXX more BPS decrease segment discussed traditional services for expiration the that to in on As returned prior growth. pandemic-related

For EBITDA high-teen at XXXX, revenues with margins. $XXX targeting least we are million, of

and activity highlighted that turn to financing allocation nine. our on capital slide Let's is

by unsecured Over the months, last reduced XX debt our we outstanding balance XX%.

our of existing funds expense primary and These While for totaling our debt transactions ABS, maturities debt, and reducing two in issued unsecured for have of billion losses. remains $X.X funding all no during billion we source transactions of reduced the of lowered $XX interest unsecured resulting issuance million year our repurchased of as cost XXXX. our repurchase $X.XX needs we and future

billion $X FFELP private During billion issued refinanced the loan of of we ABS fourth quarter, $X ABS. and

XX For $XX transactions. through issued billion year, the nearly we full of ABS

in growth private demand from increased the our loan new high these of manage we portfolio, we quality investors As see to education continue transactions.

reduced XXXX year, through shareholders price, reduce the to our by share share of to ratio returning outstanding we the million share and planned At XX%. During XX% repurchases increasing repurchases through adjusted equity by will XX $XXX shares, of our million count for X.X%. share while our our count repurchase dividends tangible today's $XXX million

business. have highlight Before turning efforts taken derisk to would the XXXX slide like for on that simplify outlook our to to XX, and I we the

Education a an various our and state quarter, we During with quarter. third-party, real estate to reserve servicing general million reached the to the their transferred in resulting agreements the disclosed of attorneys contract restructuring charge Department previously litigation in $XX reduced investigations, footprint, and

Our the the to target original continued XX% us an efficiencies overall of to compared ratio simplify business focus year for XX%. allowed improving on efficiency our to of while efforts achieve

overall growth primarily Our a larger targeted XXXX XX% efficiency for is the a ratio of of result businesses proportion our of and contributing expenses. revenue

high per earnings XXXX mid to equity to are on teens. share $X return core the guidance targeted in adjusted with $X.XX, providing We of

costs, outlook with expectation interest basis each from planned four no sales, XX rate the loan rising assumes million rate occurring excludes share hikes and $XXX of Our gains of environment, regulatory reflects and a repurchases. quarter of points restructuring

to year targets, financial in GAAP results of and of questions. demonstrated look where XX. net full for returns technology to increased $XXX strengthened education and recorded meaningful year steps In are share of accomplishments can business. our growth. sustainable grow will for having Turning our And and as simplify your and here. continued portfolio, of $XXX we net to per our GAAP or $X.XX slide leveraged loan our now Deborah, positioned income took Deborah? we some call forward We're of with to the to time. I summary, all year the original questions. $X.XX proud open for XXXX shareholders, well the XXXX. success million this We Thank the Deborah? per a to you BPS, exceeded capital was you am open value infrastructure on lines or difficulties technical significant share I million compared income

Operator

from Instructions] And Sanjay the with question [Operator first your KBW. comes Sakhrani of line

Sanjay Sakhrani

morning. Thanks, good

year. guess question, on good a You productive I first guys rate Joe, the interest have sensitivity. had

But in the timing figured How sort You rates rates. rate know guys that hikes. there between mentioned I think rate of into your and are short-term NIM have we hikes, as you factoring four those is some about of long-term you expectations? differences

Joe Fisher

Yeah.

FFELP year, here So to I And think is one impacts a of one typically is the those one evenly on little so side bit that equation or private four thing hikes and and continue of daily, on to over is quarter. month the as focus FFELP rate reset our we're how occurring what we the And there's where the LIBOR earning in about think assets is on determines resetting of each are how the distributed majority funding side. that both that it lag. a the

benefit So a benefit, then there's to floor you terms with that there going impacting asset you're on lose going rise income. but in faster obviously, of the some you're rise of pick get side, somewhat if to that rates up a it as of

between So range. where in mid-XXs our are compared felt comfortable projections year, where the to overall, last we that's

from curve, standpoint, So the from income would made year, about here over the floor some of decisions asset taken the place. we and income off financing side lose as based we've but as the a of $XX the floor that that rate course expectations activities current we've in million we'd anticipate, of on would well we that the benefit

year, So that will over last the that. offset

mid-XXs rate with the given forecasted we feel the So range that's hikes. why comfortable

Sanjay Sakhrani

Okay.

Joe Fisher

And then from very spread to a side, the we're adjust quick private on perspective.

you're rise, environment. rates competitors upward in going at So more recently, some we factor and rates you've rising see to as we're to the the seen rate rates as us, adjust and - look

Sanjay Sakhrani

if question now question a I from getting have my Okay, stronger, been follow-up I've potentially a environment affects guess feel investors, or like composed. you guys the of Obviously, some out then getting bank great. your competitors charter, curious your a just is I'm of lot the gotten And competitive guidance going strength good it suggests there. continued feel way you're you pretty currently

So maybe just Jack. could you that, on elaborate that

Jack Remondi

Sure.

with the able efficiently just So than we really any and is given large competing small a on against new particular, And by sheet, charter. could has a - see been years, more you on obtaining equation over bank low But competitor side the difference I were certainly, to to Mae as this our very Sallie would none charters, a in product have institutions efficiency risk markets. in and the funding significant and our don't note, Navient been second we, leverage bank the the bank of that profile. product, a balance securitization credit really refi

our those really the see in what the to you'll running in XX% expect transactions, - that in the portfolio a is factors runs look is losses industry in competitors so performance have at And us And space. would customer last about is product far point half just about most that saw. to look And positives we then generated on of combination I to equation And run of at much we of those a than continue. we you XXXX - those our credit this on think competition efficient our that decrease our about space. half that believe in growth than more side the And the are industry further new - running - I consistently average. compared cost don't outperform incur the of allows you We we to the the credit to if than average. at acquire or originations a ABS make also

Sanjay Sakhrani

you. Thank

Operator

comes Cyganovich question from Arren line of next with Citi. your the And

Arren Cyganovich

formed that lot mentioned pandemic you talk with And bit and municipalities Jack, is your for XXXX work. of your of during XX% states you're just types relationships you've of be in the work of maybe the of off some BPS then growing might the a that conversations I little just to what types in clarify terms additional with Thanks. a revenue having expectation? about want of base And BPS. you

Jack Remondi

Sure.

states So resources been the additional providing able work of people I with a here to just about is volume we've not higher to think been answer do of calls.

think ourselves or we've been things I improve and that insight outcome some to distinguish – is other for to or the that analytics able one efficiency compared of of we've states been vendors dramatically and to work able the outcomes. that where provide the

where submit So our that their one clients, we rate during repeatedly at of larger of that all in claims to contracts of as were example, you volume unemployment greater we everybody ours. than result a number for on were ended working And insurance vendors that, the XX% running a client were us pandemic, else different that declining, know, and in our space. alongside ended was vendors to told about as or efficiency other - the a - ahead of contracts their respond

so type think And that's I value the we're that of an produce. of example able to

services states excited now can effort, the to And conversations And bring to as of value-added that - fact, how and in effectiveness. benefits pretty table the return happening, those efficiency and more opportunities so to we insight, we're those of are, some to and improved it's normalized are they that about in space. capture a the looking continue

growth side Joe. the of from of BPS the equation, terms In the

Joe Fisher

Yes.

referencing. Jack was numbers So the

that So pandemic-related of of $XXX that revenues was services. year, million this had related we million the of $XXX roughly to around

out fully bit here then equation, and businesses that that of more have contracts not February. take a on some - that the lag little in are the recovered, not So growth the ending plus of of yet pandemic of traditional XX% had January

So that, of that at and $XXX of pandemic-related their assumes no million dates additional there's all and contracts contracts. assumption those at that our stated expiration revenues, least

Arren Cyganovich

nice maturities, plans the do or if secondarily, reducing have to for prior 'XX pieces you none Got 'XX, those it's - terms What you in are in any, larger of it. maturity? fairly Thanks. some your 'XX. but have And then and

Joe Fisher

that of within in we you're for So that referencing. reducing don't that projected XXXX guidance have maturity plans our any XXXX

been that we've of us in at If buy a ahead carry to we'll cash, reduce past, to well. you've that As of there's us advantage can for the in time. opportunistic. if seen do cost where that versus look discount, marketplace pockets the as Or we have we done there's a

our . losses. XXXX not does current So forecast repurchase assume for debt

Jack Remondi

Thank incur of think when we that incur to do through that, just types to into in do do are debt types for losses them Got I - periods. future those of important economically reemphasize generated, transactions it. those - it's on and losses recapture you. now enter because it's the those it's there's attractive us repurchase and lower interest expense

Operator

line your Shane And JPMorgan. next question from with comes Rick of the

Rick Shane

Guys, thanks question. for taking my

Just I the talk growth I off was to when be the confused. we million a I it, a on clear, thought is number? so about got then little XX% that $XXX but little BPO, had the I confused? really

Joe Fisher

Yeah.

into business going as that at think can XXXX, forward, long we're that Going looking term, I grow a double-digits. this forward

that's XX%, you think appropriate out as So about year. the

So this is 'XX and beyond.

Rick Shane

Got it.

inflection Consumer we segment But then And look think there where well - is understood. sheet, FFELP to to the when point see will what's do and -- as the balance sheet starting to will Look, When where just frame? the Lending growth start the think think business do we grow? balance the second time both I'm the well. when obviously, we about question. at that and is continues the you portfolio of modestly runoff Okay. the shrink

Jack Remondi

portfolio. the I the of obviously, Well, FFELP that side is equation, to additions think, no on there real

to rate. a steady going amortize is portfolio that fairly on so And

to that few of over think been as the the ago. time I course very things business that the flow and higher we've is forecast able indicated would have successfully of generate levels do amortizes portfolio margins of years really a significantly just the in cash one than our maintain

Lending would portfolio, completed actually this increased but On first the loan for the have portfolio were that the sales private the year on Consumer side, our in quarter.

continue seeing there's portfolio an actually private But given has refi sales. do - in So a believe changing in contribution for than The portfolio, we little opportunity portfolio, that is as net balances think loan earnings legacy growing, in to I we the size. to grow credit its fact, interest see super the profile, bit that lower you're - are book. that margins loan except prime of

Rick Shane

think understood I clearly, the FFELP as with And inflection we more - is as lending? rates the you consumer it. terms move to that to in-school when this of consolidate in year Got move But about growth on on-campus, segment, higher the really side. are accelerating the incentives and

Jack Remondi

to and ability end really higher of that of value taken side the the the side. quality, on see I of that support credit probably of to trying very about And being it's and address on two. degree our of in in some in-school a We the side, degree the think that marketplace is focus space a of marketplace. both opportunities interesting our debt seen lending in-school the in refi concerns very, strong you've this in that equation the Well, college combination side the and the is that in in on the where as the

students where very high completion. graduation schools So are and high they we're who value of attending added have on as a focused result rates

we helpful - appreciate the families. better that appreciate and to of parents greater really and help how between our information a so kind support of payments students period overall being and We to can to to in-school as programs joint them the here to making look provide more affordable and are repayment and reduce the And also allows these students students product products during at that the designed finance effectively this have venture the a and the insight the cost families. the

student is there's that portfolio with if the help pause the direct interest their and borrower On outstanding the no can't zero. equation, we a them expense question or interest direct charging of the loan reduced on rate X% the refi - side reduce loans a demand. the It's government

of those rate, that's return - once loans be when take the moratorium to borrowers expect programs encourage And we interest once to rate. that and to as statutory mentioned, we so to of Joe X% the advantage the would lifted is that that And borrowers been to that able offer our pay them expense interest and loans product beginning. thousands dollars has off That's value-add since of in focus their and, will equally XXXX, And refinance XXXX. their save focus in it the faster. it allow be the the debt, important, in been

Rick Shane

model. just Got then out it. our tie question helps And us because last it

You number earnings of of million. show a core a $XX loss

You of show an core million. $XXX number adjusted

million Because, restructuring this of on You missing those again, numbers? -- million What's that $XXX tax expenses. say numbers, those rate regulatory that's or bit of that? excludes a there's three X there's - connecting a and little $XXX the walk the

Joe Fisher

Yes.

long referring the our you rate terms is are the So disconnect so XX.X% to, number. of that that term think as deductible, numbers tax that just overall, But where we as that's in not part tax was guidance. of just of when about

So going of about is tax $X forward, guidance to our $X.XX using think XX.X% just a rate. here

Rick Shane

Understood. And trying the this rate was adjustment quarter? tie out, about the on to tax just XX% I'm

Joe Fisher

think that's yes. roughly true, I

Rick Shane

Thank guys. Okay. you,

Operator

Moshe with And question of from your comes the next Suisse. line Orenbuch Credit

Moshe Orenbuch

a of about of of I rate. from price? Great, the terms little thanks. the end mean a much at not both mix talk at you Maybe they've of of comments the for of the charging, financial can margin lowest, of on raise into kind How Earnest that lower piece kind the forecast competitive lower is just the been side. you've bit business on it had really kind dominant rates talk is on standpoint? now your in being and really and it, I was you it of it hoping fixed a the kind about do but able end, private the got competitors seems to to refinance that think that the been least tie

Joe Fisher

just refi book. XX%. So if XX% think under just we're year, our just you our a shift, about last about product of from mix under This represented year,

driver the of year - as end half is of this end we the our of that look for large and with a beyond year So of and CARES into that the Act second mix. or means expected what

mix I that more that is the our So say driver about talking something been through as it's for guidance. would just comes that, quarters we've several here. here that of And

that an high back coming into to impact normalized the feel the more before you'll that [indiscernible] delinquencies mix the offsetting we But the saw you quality reserve here. borrowers is as that of And quarter, to this that, those the refinance of that that be XX-day of moved. originating confident enter somewhat, as For down again, going levels. level that's see something we're repayment, bucket elevated against loans

Moshe Orenbuch

the That's Joe, maybe that's there XX very But from refi the on was legacy loans I'm delinquency right? and going low, getting past the it. not private the portfolio. due, the - total because maybe just all portfolio days on impact not

Joe Fisher

for Correct. talking But about company... the NIM overall the when

Moshe Orenbuch

from something, I on about NIM, decline basis - XX XX% you're of refinance trying Correct. - mean that I XXX, arithmetically if how works? if talking about understand kind about mix mean average right, talking mean, NIM had impact actually points than I'm the that in legacy on shift larger just words, a you're and Maybe you "normal" your in would right? of excuse private me, to help I that lower the right? guess has be NIM, case, actually even to the a would portfolio, you other the the because from the that If on NIM that's

Jack Remondi

do Jack, - this Moshe. I Well, think is

think interest they to rates. payment options, going one that of of delinquent as relief the status, at forbearance I into virtually higher relief borrowers the - on was few the were is portfolio reserve remember things were nonexistent COVID offered because as the in loans

get came a is reserve right? whatever our borrowers zero to initial As of to more the an that. delinquency those what's what XXXX is that was to in there. from interest level normalized normalized in of drives programs back be would build-up the So to getting going environment step unusual, But and returned end repayment, - rates a you

Moshe Orenbuch

with saying points that and Isn't basis the that mix just on margin a X% right? point to XX drop, shift arithmetic? there. average a talking on point a just XX bring you're you about I'm XX, XX the has right that be margin if down to I'm Jack, got zero

Jack Remondi

add, was of earlier some higher the had impact the the that this factors margins the combination the that Well, a selling you side of mean the it just it's particularly assets… when a is related - in of also has. it's And life sold this. I it into and well of year, I shorter as that the risk so legacy it's and other we of average And that, some would of some legacy we're than - component the our piece go into comes of higher loans But declining equation. that is portfolio, the that portfolio know, of – combination the it's the

Moshe Orenbuch

We'll right. All take it offline…

Jack Remondi

So there's as movement on legacy well. side the

Moshe Orenbuch

you. Got

Operator

And your next question comes from Mark DeVries with Barclays.

Mark DeVries

kind your Yeah, of or hikes to number upside, rate you the the follow-up talk more hikes if of just than NIM. sensitivity what downside get guidance on question Could expected? the thank you. I about is fewer a had you of FFELP the

Joe Fisher

Sure.

the are the So curve shape to forecasted in. the if are of rate way going of the rate then hikes less expecting, year, over we again, on what were expectations it's and the the more have hikes, the that course

if So then as again, flat income at floor the loss where from to that, ultimately, those benefit. see is million our focus see question -- the get certainly those does don't I year. assumes The what on these continues and month hedge I asset maintain we quoted expectations If of hikes a earlier, perspective we low would whether I $XX not one relatively just over think, you LIBOR. would, LIBOR occur, income and that would of you levels, four But you rate that resets. are, and floor

beyond. say upside so the from sensitivity And in or us high million putting $XX terms on potential in standpoint, XXs is really I'd your of a that back

Mark DeVries

looks - recapture try and originations as you look what just on a XXXX from XXXX, in-school of And to as you to new students? then those we how kind Great. how should like expect first-time ramp. Any on Okay. to much market and question color the then borrowers at was

Joe Fisher

which as the were so for talked the originations, originations I borrowers. of in-school of first-time the primary about of terms our driver loans from XX% is our a third on In or over source primary quarter, the little year,

Mark DeVries

got you. Thank Okay, it.

Operator

Hecht Your the Instructions] from with of next question line John Jefferies. [Operator comes

John Hecht

Thanks very Hey, questions. much my guys. taking for

the payment Going services. business back to

distributed top category And recovery-related that -- that business? of in rate, year? asset the the on the going of be million So servicing-related that, of what's $XXX then kind over pandemic-related run rate evenly expiring the in contracts that course of revenues revenues and also, is to run the year? of over some Or did

Joe Fisher

Sure.

February you pandemic-related have the are occurring. little dates benefit So in do a a as there of from and that January is bit expiration contracts

in first those of So not contracts. in call $XXX do the any million, million that, that probably if compared you're in terms future terms see quarter benefit it, we of quarters to a $XX extensions $XX million of range to in

to are revenues you Or of well? as just looking you In servicing terms Education at forward, BPS? the referring Federal are going Loan segment the

John Hecht

and Yeah. The the federal the stuff have as because recovery additional servicing revenue of million, revenue on $XXX BPS, top asset you well? guys

Joe Fisher

Right.

solely side. I characterize this is solely to is education point. the loans FFELP federal that on And the So would at related servicing

or to just that amortization going of the but portfolio, All how to just that's a moving natural way thumb amortize, decline. of proxy the how - down continues else revenue that FFELP it. the FFELP run and So some as of portfolios rule is as general being equal, there's to portfolio that's a decent although pieces, it's

John Hecht

Okay.

the just So of then what lower activity? that And FFELP about $XX recovery of move asset will servicing kind with portfolio. million revenue linearly

Joe Fisher

that's of line in well that number fair item. recovery say terms would as asset in a that I

federal that at So the this terms portfolio, in of all again, education it's - FFELP-related. point, is

that million amortization million. So runs would from that the it $XX quarter, just, a saw, again, modeling last of perspective, was you it $XX forward, that I FFELP. say going assume alongside

John Hecht

the second question Okay. And to is Maximus. transfer then

I I mentioned, about and $XX that of guys quarter. we compensation think, adjustments to think the long fourth And payments, Like think, how going do what last? in related million forward? offsetting that does You

Joe Fisher

Yeah.

expenses the as fourth vast relates of in the the occurred the quarter So majority it here to TSA.

in fourth occurred was transfer quarter. of and forward So the going that - the the employees that

$XX million year. actually full the for use number decent fairly a So is to that

million, $XX as $XX full aspects of going the certain expectations would But just of just to exit that XXXX million and the down. fourth be million. to TSA, agreement, for for to our $XX is that the clear, you run related So year be quarter then

John Hecht

And we is other where do that get that? Or in income?

Joe Fisher

in other is income. That

that So about talked where that you the income. I from quarter is to servicing the in saw income third other shift

John Hecht

up, go as loans And - you're there of private during Okay. Is what question a Or just period refresh me year rates do then it? time immediately just does reset it some - with how final to reset it is reset? allowed benchmark? the is

Joe Fisher

originations for new For our... or

John Hecht

the private loan generally portfolio. but speaking, -- For for

Joe Fisher

Yes.

- quarterly but monthly for it the will be securitization, portfolio, So it typically depends the either that on or resets.

John Hecht

much. very Okay, great. Thank guys you,

Operator

line comes the next of Ryan Seaport Bill your question with from And Research.

Bill Ryan

my Thanks questions. morning. for taking Good

$X expected first about volume, the think, up about, following talked on a increase Just to XX% I you billion.

kind between relation payment And in of relative break impacting question, see what you consolidation the beyond expecting the are holiday it two? rates if you that do that the If in-school, extended and you then growth May X, apart is between overall how to number?

Jack Remondi

we are vast made borrowers. - on loans in first of we're as Joe And rates, were this time starting mentioned, small because base. growth majority a our in-school Bill, to significantly So the expecting higher lending, the we off year primarily

add year serialization first-time we year. this process loans made the to new through academic and next finance expect So we borrowers a off the as we then grow of

X% lower last year. we demonstrated still by interest place out And simply And even - distinct population were there for rate. rate from $X on though refinancing book as to hikes trying focusing to reduce we from refi we're year, was well. rate - market with a with So we'll return increase loans continuing the students overall, billion interest X% XXX% would that We're, of that four obviously, in in obviously, the growth consideration But the expand the as over of private was and end some full as forecasting that an $X the XX% the billion. rate May. - to able If in that I loans, our benefit at demand in continue of into And by that rate think a takes happen, or in is business. more the XXXX, said, of of doesn't of side ending where a student XX% a it grow segment we was originations total, and the equation. on assumption originations, - that and exist to those pointed to

Bill Ryan

Okay. question. follow-up One just

bit a holder. got You be little sounds of December. activist-type in shareholder, new of like sort might that more It obviously, an a

extraction. history, expedite say, attempts just at there's value to, Looking your been let's previous the

year you think Thanks. the job you been shareholder. that curious more be I'm What's as good You a little sale. are it dialogue more of bit Or they like -- last kind the of did at normal them? new you're do Is the viewing activist? with loan it a very shareholder? viewing with a might of kind how

Jack Remondi

difference big the think is it's I percentage-holding Well, shareholder. large a very

shareholders what and date, value. to change And We'll we to been running how that think dialogue very of would I So positive view be them. to work this would are all business, are expect XXXX. to see of But and here. going very work we we points We constructive, can over don't it's we we think have have kind evolves -- look we see that time. into explain deliver why the to we able how but understand their with how to with with, like create similar

Bill Ryan

you. Thank

Operator

your with question from of And America. Bank of comes next the Qiu line [ph] Shane

Unidentified Analyst

guys. Hey. Good morning,

you debt would more opportunistic be whether the the You just trading back on that maturities par? kind bonds could in market. near premiums on below be comment term of open of focused mentioned or are buying that longer-dated Could in you that trading

Joe Fisher

into very of on focus position us curve. So typically, point, a our in and this we end what are cash confident the where we going today the is you've At seen feel of beyond. 'XX front from terms and

that bonds opportunities at been. you that the beyond and front I perspective, last there from XXXX. yes, look we'll if focus look bought So has buy that, maturing the in just our on we've that's years, also traditionally would where if But to is are say, back X end,

willing here, our to schedule. we're the managing what So who's on that attractive at it as are to at, we just look maturity that cash are flows looking depends opportunities trade the to And us. levels really what at

position opportunity we'll that if we there's So this presents going why today, of in that. into like repurchases have is XXXX. going in we're a 'XX. into itself, years great past, much take But an debt advantage don't XXXX, forecasted year That any on

Unidentified Analyst

CFPB ratings to given ongoing wanted downgraded COVID, this question, you follow-up guys a of guess potentially were With get and have I And kind whether ratings. your you you just share then context get that on I case to back year. by just S&P. And mentioned the the and your repurchases goals of touch just BB guys wanted thoughts resolution the million to on you S&P have at to a $XXX would credit

Joe Fisher

Yeah.

that I positive we we much have like those constructive a feel think rated So rating dialogue Certainly, and where should the agencies. companies, with we we relationship higher be are. than

done year, great putting, specifically derisking matters I us. think the as of job we've this company I AG a behind mentioned, the

the look best of at ever and in going if have been 'XX. seen now, has several over we're Navient pointed into rating positions one what right XXXX you - as last So the agencies years, we've our been profile. to - the it probably maturity We're we've

been from the the you agencies. off has any that dialogue see that table, the So of in taken and don't

now? we've the points we in businesses. that. other think is growth visibility do the demonstrating into What and made that years past look other like just color I of they've from our got great X The

of argument that So as again, well. taken off from the we've table perspective, that

than a into the should notch something ratio, we that adjusted us, of something that's that where RAC their For talk are. ratio equity ratio. we tangible quantitatively, factors referenced, rated we you RAC X%. our S&P, It's again, as - about be And higher

in outlook So share are factors least have year. that million positive ourselves from we the of of a that today. planned this ratings for potential upgrade we repurchases feel towards positioning $XXX done moving for a a And and at where job good we've we

Unidentified Analyst

Thank Great. you.

Operator

are queue the there further questions at no time. in And this

So turn to I would Nathan Rutledge. call back the over to like

Nathan Rutledge

concludes thank like We'd other any follow-up us Please Deborah. today's Thanks, to This have for if me you Bye. today's joining contact call. everyone on questions. call.

Operator

participation. today's and call. does conclude this Ladies Thank your you gentlemen, conference for

your disconnect now may You lines.

Navient (NAVI) 26 Jan 222021 Q4 Earnings call transcript