Private Education Loan Charge-Offs Decline
$31 Million from Prior Quarter
Repurchases $175 Million of Common Shares
during the Quarter
Completes Conversion of $4.9 Billion of FFELP
Loans
Acquires Xtend, a Health Care
Payments Company
WILMINGTON, Del., Oct. 20, 2015 (GLOBE NEWSWIRE) -- Navient
(Nasdaq:NAVI) today released third-quarter 2015 financial results
that include a decline in private education loan charge-offs of $31
million from the prior quarter, common share repurchases of $175
million and the completed conversion of $4.9 billion of FFELP loans
to Navient’s servicing system.
“This quarter delivers solid performance on a number of fronts,
including reduced private credit charge-offs and the successful
conversion of nearly $5 billion in FFELP loans onto our servicing
platform,” said Jack Remondi, president and CEO, Navient. “We also
repurchased 12.1 million shares in the quarter through our stock
repurchase program, announced cleanup call provisions on seven ABS
trusts and provided investors with additional data on the usage of
repayment plans. Our market-leading performance in federal loan
default prevention continues with a 38 percent lower cohort default
rate. Consistent with our strategy to leverage our core
capabilities, we’ve expanded our asset recovery and business
services to the attractive health care payments sector. We
remain focused on creating value for our shareholders and are
working aggressively to capture the opportunity presented by
today’s markets.”
For the third-quarter 2015, GAAP net income was $237 million
($0.63 diluted earnings per share), compared with $359 million
($0.85 diluted earnings per share) for the year-ago
quarter.
Core earnings for the quarter were $174 million ($0.47 diluted
earnings per share), compared with $218 million ($0.52 diluted
earnings per share) for the year-ago quarter. The decrease is
primarily the result of a $69 million reduction in net interest
income. Third-quarter 2015 operating expenses totaled $228 million,
including $8 million ($0.01 diluted earnings per share) of
regulatory-related costs and $11 million ($0.02 diluted earnings
per share) of one-time conversion costs to move $4.9 billion of
FFELP loans to our servicing system.
Navient reports core earnings because management makes its
financial decisions based on such measures. The changes in GAAP net
income are impacted by the same core earnings items discussed
below, as well as changes in net income attributable to
(1) the financial results attributable to the operations of
the consumer banking business prior to the April 30, 2014
spin-off of Navient from SLM Corporation, and related restructuring
and reorganization expense incurred in connection with the
spin-off, (2) unrealized, mark-to-market gains/losses on
derivatives and (3) goodwill and acquired intangible asset
amortization and impairment. These items are recognized in GAAP
results but have not been included in core earnings results.
Third-quarter 2015 GAAP results included gains of $108 million from
derivative accounting treatment that are excluded from core
earnings results, compared with gains of $226 million in the
year-ago period. See “Differences between Core Earnings and GAAP”
for a complete reconciliation between GAAP net income and core
earnings.
Federally Guaranteed Student Loans (FFELP)
In its FFELP loans segment, Navient acquires and finances FFELP
loans.
Core earnings for the segment were $70 million in third-quarter
2015, compared with the year-ago quarter’s $79 million. This
decrease was primarily the result of a $28 million decrease in net
interest income due to a decline in the net interest margin. This
was partially offset by a decline in expenses.
The company acquired $1.1 billion of FFELP loans in the
third-quarter 2015 for a total of $2.9 billion of FFELP loans
acquired year to date. At Sept. 30, 2015, Navient held
$98.5 billion of FFELP loans, compared with $97.7 billion of
FFELP loans held at Sept. 30, 2014.
Private Education Loans
In its private education loans segment, Navient acquires,
finances and services private education loans.
Core earnings for the segment were $77 million in third-quarter
2015, compared with the year-ago quarter’s $98 million. This
decrease is primarily the result of a $42 million decrease in net
interest income due to a decline in the balance of the portfolio
and the net interest margin.
Core earnings third-quarter 2015 private education loan
portfolio results vs. third-quarter 2014 are as follows:
- Delinquencies of 90 days or more of 3.4 percent of loans in
repayment, unchanged from the year-ago quarter.
- Total delinquencies of 7.4 percent of loans in repayment, down
from 7.9 percent.
- Annualized charge-off rate of 2.3 percent of average loans in
repayment, unchanged from the year-ago quarter.
- Net interest margin of 3.77 percent, down from 3.96
percent.
- Provision for private education loan losses of $117 million,
down from $130 million.
At Sept. 30, 2015, Navient held $27.3 billion of
private education loans, compared with $30.5 billion of private
education loans held at Sept. 30, 2014.
Business Services
Navient’s business services segment includes revenue primarily
from servicing and asset recovery activities.
Business services core earnings were $79 million in
third-quarter 2015, compared with $85 million in the year-ago
quarter. The decrease in core earnings was primarily the result of
$11 million of one-time conversion costs to move $4.9 billion of
FFELP loans to our servicing system.
The company services student loans for more than 12 million
customers, including 6.3 million customers on behalf of the
U.S. Department of Education (ED).
Subsequent to quarter end, Navient acquired Xtend Healthcare, a
health care payments company based in Hendersonville, Tenn, with
the transaction closing earlier today. The firm provides health
insurance claims billing and account resolution, as well as patient
billing and customer service to more than 130 hospitals. The
acquisition leverages Navient’s asset recovery and business process
outsourcing capabilities into the attractive health care payments
sector.
Operating Expenses
Third-quarter 2015 core earnings operating expenses were $228
million, compared with $195 million in the year-ago quarter. This
$33 million increase over the year-ago quarter was primarily due to
operating costs related to Gila LLC, which was acquired in
first-quarter 2015, incremental third-party servicing expenses
related to an $8.5 billion loan acquisition in fourth-quarter 2014
(including $11 million of one-time conversion costs to move $4.9
billion of FFELP loans to our servicing system) and $8 million in
regulatory-related costs.
Funding and Liquidity
During the third-quarter 2015, Navient issued $700 million in
private education loan asset-backed securities (ABS) and funded
cleanup call options related to seven FFELP ABS trusts and $852
million of bonds through conduit facilities. Additionally, the
company amended the transaction agreements for 16 Navient-sponsored
securitization trusts backed by federally guaranteed student loans.
The amendments give Navient the option (in addition to the existing
10 percent cleanup call option) to purchase trust student loans
aggregating up to 10 percent of the trust’s initial pool
balance.
Shareholder Distributions
In the third-quarter 2015, Navient paid a common stock dividend
of $0.16 per share.
Navient repurchased 12.1 million shares of common stock for
$175 million in the third quarter of 2015. The shares were
repurchased under the company’s January 2015 share repurchase
program which authorizes up to $1 billion of share repurchases. As
of Sept. 30, 2015, the remaining repurchase authority was $225
million. Navient repurchased 9.5 million shares of common
stock for $167 million in the year-ago quarter.
Navient reports financial results on a GAAP basis and also
provides certain core earnings performance measures. The difference
between the company’s core earnings and GAAP results for the
periods presented were attributable to (1) the financial
results attributable to the operations of the consumer banking
business prior to the spin-off of Navient from SLM Corporation on
April 30, 2014, and related restructuring and reorganization
expense incurred in connection with the spin-off, including the
restructuring initiated in the second quarter of 2015,
(2) unrealized, mark-to-market gains/losses on derivatives and
(3) goodwill and acquired intangible asset amortization and
impairment. These items are recognized in GAAP but have not been
included in core earnings results. Navient provides core earnings
measures because this is what management uses when making
management decisions regarding the company’s performance and the
allocation of corporate resources. In addition, Navient’s equity
investors, credit rating agencies and debt capital providers use
these core earnings measures to monitor the company’s business
performance. See “‘Core Earnings’ — Definition and Limitations” for
a further discussion and a complete reconciliation between GAAP net
income and core earnings.
Definitions for capitalized terms in this release can be found
in Navient’s Annual Report on Form 10-K for the year ended
December 31, 2014 (filed with the SEC on February 27,
2015). Certain reclassifications have been made to the balances as
of and for the three and nine months ended Sept. 30, 2014, to
be consistent with classifications adopted for 2015, and had no
effect on net income, total assets or total liabilities.
Navient will host an earnings conference call tomorrow,
Oct. 21, at 8 a.m. EDT. Navient executives will be on hand to
discuss various highlights of the quarter and to answer questions
related to the company’s performance. To participate, join a live
audio webcast at navient.com/investors or dial 855-838-4156 (USA
and Canada) or dial 267-751-3600 (international) and use access
code 52405925 starting at 7:45 a.m. EDT.
Presentation slides for the conference call, as well as
additional information about the company’s loan portfolios,
operating segments and other details, may be accessed at
www.navient.com/investors under the webcasts tab.
A replay of the conference call will be available approximately
two hours after the call’s conclusion through Nov. 4 at
navient.com/investors or by dialing 855-859-2056 (USA and Canada)
or 404-537-3406 (international) with access code 52405925.
This press release contains “forward-looking statements”
and information based on management’s current expectations as of
the date of this release. Statements that are not
historical facts, including statements about the company’s beliefs,
opinions or expectations and statements that assume or are
dependent upon future events, are forward-looking statements.
Forward-looking statements are subject to risks, uncertainties,
assumptions and other factors that may cause actual results to be
materially different from those reflected in such forward-looking
statements. These factors include, among others, the risks and
uncertainties set forth in Item 1A “Risk Factors” and
elsewhere in Navient’s Annual Report on Form 10-K for the year
ended Dec. 31, 2014 and subsequent filings with the Securities and
Exchange Commission; increases in financing costs; limits on
liquidity; increases in costs associated with compliance with laws
and regulations; changes in accounting standards and the impact of
related changes in significant accounting estimates; any adverse
outcomes in any significant litigation to which the company is a
party; credit risk associated with the company’s exposure to third
parties, including counterparties to the company’s derivative
transactions; risks inherent in the government contracting
environment, including the possible loss of government contracts
and potential civil and criminal penalties as a result of
governmental investigations or audits; and changes in the terms of
student loans and the educational credit marketplace (including
changes resulting from new laws and the implementation of existing
laws). The company could also be affected by, among other things:
changes in its funding costs and availability; reductions to its
credit ratings or the credit ratings of the United States of
America; failures of its operating systems or infrastructure, or
those of third-party vendors; risks related to cybersecurity
including the potential disruption of its systems or potential
disclosure of confidential customer information; damage to its
reputation; failures to successfully implement cost-cutting
initiatives and adverse effects of such initiatives on its
business; failures or delays in the planned conversion to Navient’s
servicing platform of the Wells Fargo portfolio of FFELP loans or
any other FFELP or private education loan portfolio acquisitions;
risks associated with restructuring initiatives; risks associated
with the April 30, 2014 separation of Navient and SLM
Corporation into two distinct, publicly traded companies, including
failure to achieve the expected benefits of the separation; changes
in the demand for educational financing or in financing preferences
of lenders, educational institutions, students and their families;
changes in law and regulations with respect to the student lending
business and financial institutions generally; increased
competition including from banks, other consumer lenders and other
loan servicers; the creditworthiness of its customers; changes in
the general interest rate environment, including the rate
relationships among relevant money-market instruments and those of
its earning assets versus its funding arrangements; changes in
general economic conditions; the company’s ability to successfully
effectuate any acquisitions and other strategic initiatives; and
changes in the demand for debt management services. The preparation
of the company’s consolidated financial statements also requires
management to make certain estimates and assumptions including
estimates and assumptions about future events. These estimates or
assumptions may prove to be incorrect. All forward-looking
statements contained in this release are qualified by these
cautionary statements and are made only as of the date of this
release. The company does not undertake any obligation to update or
revise these forward-looking statements to conform the statement to
actual results or changes in its expectations.
About Navient
As the nation’s leading loan management, servicing and asset
recovery company, Navient (Nasdaq: NAVI) helps customers navigate
the path to financial success. Servicing more than $300 billion in
student loans, the company supports the educational and economic
achievements of more than 12 million Americans. A growing
number of government and higher education clients rely on Navient
for proven solutions to meet their financial goals. Learn more at
navient.com.
Spin-Off of Navient
On April 30, 2014, the spin-off of Navient from SLM
Corporation (the “Spin-Off”) was completed and Navient became an
independent, publicly traded company focused on loan management,
servicing and asset recovery. The separation was completed through
the distribution of 100 percent of the outstanding shares of
Navient common stock, on the basis of one share of Navient common
stock for each share of SLM Corporation common stock. SLM
Corporation continues operation as a separate publicly traded
company and includes Sallie Mae Bank, its Private Education Loan
originations business and the Private Education Loans the bank held
at the time of the separation.
Due to the relative significance of Navient to SLM Corporation
prior to the Spin-Off, for financial reporting purposes, Navient is
treated as the “accounting spinnor” and therefore is the
“accounting successor” to SLM Corporation as constituted prior to
the Spin-Off, notwithstanding the legal form of the Spin-Off. Since
Navient is the accounting successor, the historical financial
statements of SLM Corporation prior to the Spin-Off, are the
historical financial statements of Navient. As a result, the GAAP
financial results reported in this earnings release include the
historical financial results of SLM Corporation prior to the
Spin-Off on April 30, 2014 (i.e., such consolidated results
include both the loan management, servicing and asset recovery
business (Navient) and the consumer banking business (“SLM
BankCo”)) and reflect the deemed distribution of SLM BankCo to SLM
Corporation’s stockholders on April 30, 2014. See “‘Core
Earnings’ — Definitions and Limitations” for a discussion of the
exclusion of the pre-Spin-Off financial results of the consumer
banking business from our “Core Earnings” results.
Selected Historical Financial Information and
Ratios |
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended |
|
Nine Months
Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(In millions, except per
share data) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
GAAP Basis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to Navient Corporation |
$ |
237 |
|
|
$ |
182 |
|
|
$ |
359 |
|
|
$ |
711 |
|
|
$ |
885 |
|
Diluted
earnings per common share attributable to Navient Corporation |
$ |
.63 |
|
|
$ |
.47 |
|
|
$ |
.85 |
|
|
$ |
1.83 |
|
|
$ |
2.05 |
|
Weighted
average shares used to compute diluted earnings per share |
|
375 |
|
|
|
387 |
|
|
|
423 |
|
|
|
389 |
|
|
|
429 |
|
Net
interest margin, FFELP Loans |
|
1.20 |
% |
|
|
1.19 |
% |
|
|
1.32 |
% |
|
|
1.21 |
% |
|
|
1.30 |
% |
Net
interest margin, Private Education Loans |
|
3.68 |
% |
|
|
3.52 |
% |
|
|
3.91 |
% |
|
|
3.64 |
% |
|
|
4.13 |
% |
Return
on assets |
|
.70 |
% |
|
|
.53 |
% |
|
|
1.05 |
% |
|
|
.69 |
% |
|
|
.83 |
% |
Ending
FFELP Loans, net |
$ |
98,468 |
|
|
$ |
100,264 |
|
|
$ |
97,707 |
|
|
$ |
98,468 |
|
|
$ |
97,707 |
|
Ending
Private Education Loans, net |
|
27,323 |
|
|
|
28,107 |
|
|
|
30,476 |
|
|
|
27,323 |
|
|
|
30,476 |
|
Ending
total student loans, net |
$ |
125,791 |
|
|
$ |
128,371 |
|
|
$ |
128,183 |
|
|
$ |
125,791 |
|
|
$ |
128,183 |
|
Average
FFELP Loans |
$ |
99,367 |
|
|
$ |
101,305 |
|
|
$ |
98,736 |
|
|
$ |
101,415 |
|
|
$ |
101,113 |
|
Average
Private Education Loans |
|
28,383 |
|
|
|
29,207 |
|
|
|
31,179 |
|
|
|
29,225 |
|
|
|
34,617 |
|
Average
total student loans |
$ |
127,750 |
|
|
$ |
130,512 |
|
|
$ |
129,915 |
|
|
$ |
130,640 |
|
|
$ |
135,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
“Core Earnings”
Basis(1) |
|
|
|
|
|
|
|
|
|
Net
income attributable to Navient Corporation |
$ |
174 |
|
|
$ |
154 |
|
|
$ |
218 |
|
|
$ |
523 |
|
|
$ |
601 |
|
Diluted
earnings per common share attributable to Navient Corporation |
$ |
.47 |
|
|
$ |
.40 |
|
|
$ |
.52 |
|
|
$ |
1.34 |
|
|
$ |
1.40 |
|
Weighted
average shares used to compute diluted earnings per share |
|
375 |
|
|
|
387 |
|
|
|
423 |
|
|
|
389 |
|
|
|
429 |
|
Net
interest margin, FFELP Loans |
|
.81 |
% |
|
|
.81 |
% |
|
|
.93 |
% |
|
|
.83 |
% |
|
|
.89 |
% |
Net
interest margin, Private Education Loans |
|
3.77 |
% |
|
|
3.55 |
% |
|
|
3.96 |
% |
|
|
3.68 |
% |
|
|
3.96 |
% |
Return
on assets |
|
.52 |
% |
|
|
.45 |
% |
|
|
.64 |
% |
|
|
.51 |
% |
|
|
.58 |
% |
Ending
FFELP Loans, net |
$ |
98,468 |
|
|
$ |
100,264 |
|
|
$ |
97,707 |
|
|
$ |
98,468 |
|
|
$ |
97,707 |
|
Ending
Private Education Loans, net |
|
27,323 |
|
|
|
28,107 |
|
|
|
30,476 |
|
|
|
27,323 |
|
|
|
30,476 |
|
Ending
total student loans, net |
$ |
125,791 |
|
|
$ |
128,371 |
|
|
$ |
128,183 |
|
|
$ |
125,791 |
|
|
$ |
128,183 |
|
Average
FFELP Loans |
$ |
99,367 |
|
|
$ |
101,305 |
|
|
$ |
98,736 |
|
|
$ |
101,415 |
|
|
$ |
100,498 |
|
Average
Private Education Loans |
|
28,383 |
|
|
|
29,207 |
|
|
|
31,179 |
|
|
|
29,225 |
|
|
|
31,369 |
|
Average
total student loans |
$ |
127,750 |
|
|
$ |
130,512 |
|
|
$ |
129,915 |
|
|
$ |
130,640 |
|
|
$ |
131,867 |
|
(1) “Core Earnings” are non-GAAP
financial measures and do not represent a comprehensive basis of
accounting. For a greater explanation of “Core Earnings,” see the
section titled “‘Core Earnings’ — Definition and Limitations” and
subsequent sections.
FFELP
Loan Segment Performance Metrics — “Core
Earnings” |
|
|
|
Quarters
Ended |
|
Nine Months
Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in
millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
FFELP
Loan spread |
|
.90 |
% |
|
|
.91 |
% |
|
|
1.02 |
% |
|
|
.92 |
% |
|
|
.98 |
% |
Net
interest margin |
|
.81 |
% |
|
|
.81 |
% |
|
|
.93 |
% |
|
|
.83 |
% |
|
|
.89 |
% |
Provision for loan losses |
$ |
7 |
|
|
$ |
7 |
|
|
$ |
10 |
|
|
$ |
19 |
|
|
$ |
30 |
|
Charge-offs |
$ |
12 |
|
|
$ |
9 |
|
|
$ |
14 |
|
|
$ |
28 |
|
|
$ |
51 |
|
Charge-off rate |
|
.06 |
% |
|
|
.05 |
% |
|
|
.08 |
% |
|
|
.05 |
% |
|
|
.09 |
% |
Total
delinquency rate |
|
15.9 |
% |
|
|
15.8 |
% |
|
|
15.1 |
% |
|
|
15.9 |
% |
|
|
15.1 |
% |
Greater
than 90-day delinquency rate |
|
8.5 |
% |
|
|
8.4 |
% |
|
|
7.6 |
% |
|
|
8.5 |
% |
|
|
7.6 |
% |
Forbearance rate |
|
14.7 |
% |
|
|
15.9 |
% |
|
|
16.8 |
% |
|
|
14.7 |
% |
|
|
16.8 |
% |
Private Education Loan Segment Performance Metrics — “Core
Earnings” |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended |
|
Nine Months
Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in
millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Private
Education Loan spread |
|
3.88 |
% |
|
|
3.66 |
% |
|
|
4.06 |
% |
|
|
3.81 |
% |
|
|
4.05 |
% |
Net
interest margin |
|
3.77 |
% |
|
|
3.55 |
% |
|
|
3.96 |
% |
|
|
3.68 |
% |
|
|
3.96 |
% |
Provision for loan losses |
$ |
117 |
|
|
$ |
191 |
|
|
$ |
130 |
|
|
$ |
428 |
|
|
$ |
411 |
|
|
|
|
|
|
|
|
|
|
|
Net
adjustment resulting from the change in the charge-off
rate(1) |
$ |
— |
|
|
$ |
330 |
|
|
$ |
— |
|
|
$ |
330 |
|
|
$ |
— |
|
Net
charge-offs remaining |
|
148 |
|
|
|
179 |
|
|
|
158 |
|
|
|
517 |
|
|
|
543 |
|
|
|
|
|
|
|
|
|
|
|
Total
net charge-offs |
$ |
148 |
|
|
$ |
509 |
|
|
$ |
158 |
|
|
$ |
847 |
|
|
$ |
543 |
|
|
|
|
|
|
|
|
|
|
|
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)(1) |
|
2.3 |
% |
|
|
2.7 |
% |
|
|
2.3 |
% |
|
|
2.6 |
% |
|
|
2.7 |
% |
Net
adjustment resulting from the change in the charge-off rate as a
percentage of average loans in repayment
(annualized)(1) |
|
— |
% |
|
|
5.1 |
% |
|
|
— |
% |
|
|
1.7 |
% |
|
|
— |
% |
Total
delinquency rate |
|
7.4 |
% |
|
|
6.8 |
% |
|
|
7.9 |
% |
|
|
7.4 |
% |
|
|
7.9 |
% |
Greater
than 90-day delinquency rate |
|
3.4 |
% |
|
|
3.3 |
% |
|
|
3.4 |
% |
|
|
3.4 |
% |
|
|
3.4 |
% |
Forbearance rate |
|
4.0 |
% |
|
|
3.7 |
% |
|
|
4.4 |
% |
|
|
4.0 |
% |
|
|
4.4 |
% |
Loans in
repayment with more than 12 payments made |
|
93.8 |
% |
|
|
93.0 |
% |
|
|
90.5 |
% |
|
|
93.8 |
% |
|
|
90.5 |
% |
Cosigner
rate |
|
65 |
% |
|
|
65 |
% |
|
|
64 |
% |
|
|
65 |
% |
|
|
64 |
% |
Average
FICO |
|
718 |
|
|
|
719 |
|
|
|
718 |
|
|
|
718 |
|
|
|
718 |
|
(1) In the second quarter of 2015, the
portion of the loan amount charged off at default increased from 73
percent to 79 percent. This did not impact the provision for loan
losses as previously this had been reserved through the allowance
for loan losses. This change resulted in a $330 million reduction
to the balance of the receivable for partially charged-off
loans.
Business Services Segment Performance Metrics — “Core
Earnings” |
|
|
|
|
|
|
|
As
of |
|
September 30, |
|
June 30, |
|
September 30, |
(Dollars in
billions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
Number
of accounts serviced for ED (in millions) |
|
6.3 |
|
|
|
6.1 |
|
|
|
6.1 |
|
Total
federal loans serviced |
$ |
289 |
|
|
$ |
281 |
|
|
$ |
277 |
|
Contingent collections receivables inventory: |
|
|
|
|
|
Student loans |
$ |
10.6 |
|
|
$ |
11.0 |
|
|
$ |
13.3 |
|
Other |
|
15.2 |
|
|
|
9.1 |
|
|
|
2.7 |
|
|
|
|
|
|
|
Total
contingent collections receivables inventory |
$ |
25.8 |
|
|
$ |
20.1 |
|
|
$ |
16.0 |
|
|
|
|
|
|
|
Results of Operations
We present the results of operations below first on a
consolidated basis in accordance with GAAP. Following our
discussion of consolidated earnings results on a GAAP basis, we
present our results on a segment basis. We have four business
segments: FFELP Loans, Private Education Loans, Business Services
and Other. Since these segments operate in distinct business
environments and we manage and evaluate the financial performance
of these segments using non-GAAP financial measures, these segments
are presented on a “Core Earnings” basis (see “‘Core Earnings’ —
Definition and Limitations”).
GAAP Statements of Income
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015 |
|
September 30, 2015 |
|
|
|
|
|
|
|
vs. |
|
vs. |
|
|
|
|
|
|
|
June 30 2015 |
|
September 30, 2014 |
|
|
|
|
|
|
|
Increase |
|
Increase |
|
Quarters Ended |
|
(Decrease) |
|
(Decrease) |
|
September 30, |
|
June 30, |
|
September 30, |
|
|
(In millions,
except per share data) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
$ |
|
% |
|
$ |
|
% |
Interest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loans |
$ |
630 |
|
|
$ |
626 |
|
|
$ |
638 |
|
|
$ |
4 |
|
|
|
1 |
% |
|
$ |
(8 |
) |
|
|
(1 |
)% |
Private Education Loans |
|
444 |
|
|
|
434 |
|
|
|
490 |
|
|
|
10 |
|
|
|
2 |
|
|
|
(46 |
) |
|
|
(9 |
) |
Other loans |
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
(1 |
) |
|
|
(50 |
) |
|
|
(1 |
) |
|
|
(50 |
) |
Cash and investments |
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income |
|
1,077 |
|
|
|
1,064 |
|
|
|
1,132 |
|
|
|
13 |
|
|
|
1 |
|
|
|
(55 |
) |
|
|
(5 |
) |
Total
interest expense |
|
524 |
|
|
|
515 |
|
|
|
508 |
|
|
|
9 |
|
|
|
2 |
|
|
|
16 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income |
|
553 |
|
|
|
549 |
|
|
|
624 |
|
|
|
4 |
|
|
|
1 |
|
|
|
(71 |
) |
|
|
(11 |
) |
Less:
provisions for loan losses |
|
123 |
|
|
|
198 |
|
|
|
140 |
|
|
|
(75 |
) |
|
|
(38 |
) |
|
|
(17 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income after provisions for loan losses |
|
430 |
|
|
|
351 |
|
|
|
484 |
|
|
|
79 |
|
|
|
23 |
|
|
|
(54 |
) |
|
|
(11 |
) |
Other
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
— |
|
|
|
7 |
|
|
|
— |
|
|
|
(7 |
) |
|
|
(100 |
) |
|
|
—
|
|
|
|
— |
|
Gains (losses) on derivative and
hedging activities, net |
|
20 |
|
|
|
(18 |
) |
|
|
108 |
|
|
|
38 |
|
|
|
211 |
|
|
|
(88 |
) |
|
|
(81 |
) |
Servicing revenue |
|
76 |
|
|
|
106 |
|
|
|
81 |
|
|
|
(30 |
) |
|
|
(28 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
Asset recovery revenue |
|
85 |
|
|
|
99 |
|
|
|
65 |
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
20 |
|
|
|
31 |
|
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other income |
|
— |
|
|
|
7 |
|
|
|
34 |
|
|
|
(7 |
) |
|
|
(100 |
) |
|
|
(34 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
181 |
|
|
|
201 |
|
|
|
288 |
|
|
|
(20 |
) |
|
|
(10 |
) |
|
|
(107 |
) |
|
|
(37 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
228 |
|
|
|
225 |
|
|
|
195 |
|
|
|
3 |
|
|
|
1 |
|
|
|
33 |
|
|
|
17 |
|
Goodwill and acquired intangible
asset impairment and amortization expense |
|
3 |
|
|
|
3 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
50 |
|
Restructuring and other
reorganization expenses |
|
— |
|
|
|
29 |
|
|
|
14 |
|
|
|
(29 |
) |
|
|
(100 |
) |
|
|
(14 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
231 |
|
|
|
257 |
|
|
|
211 |
|
|
|
(26 |
) |
|
|
(10 |
) |
|
|
20 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations, before income tax expense |
|
380 |
|
|
|
295 |
|
|
|
561 |
|
|
|
85 |
|
|
|
29 |
|
|
|
(181 |
) |
|
|
(32 |
) |
Income
tax expense |
|
144 |
|
|
|
113 |
|
|
|
200 |
|
|
|
31 |
|
|
|
27 |
|
|
|
(56 |
) |
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations |
|
236 |
|
|
|
182 |
|
|
|
361 |
|
|
|
54 |
|
|
|
30 |
|
|
|
(125 |
) |
|
|
(35 |
) |
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
1 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
100 |
|
|
|
3 |
|
|
|
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
237 |
|
|
|
182 |
|
|
|
359 |
|
|
|
55 |
|
|
|
30 |
|
|
|
(122 |
) |
|
|
(34 |
) |
Less:
net loss attributable to noncontrolling interest |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Navient
Corporation |
|
237 |
|
|
|
182 |
|
|
|
359 |
|
|
|
55 |
|
|
|
30 |
|
|
|
(122 |
) |
|
|
(34 |
) |
Preferred stock dividends |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to Navient Corporation common stock |
$ |
237 |
|
|
$ |
182 |
|
|
$ |
359 |
|
|
$ |
55 |
|
|
|
30 |
% |
|
$ |
(122 |
) |
|
|
(34 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to Navient
Corporation |
$ |
.64 |
|
|
$ |
.48 |
|
|
$ |
.87 |
|
|
$ |
.16 |
|
|
|
33 |
% |
|
$ |
(.23 |
) |
|
|
(26 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share attributable to Navient
Corporation |
$ |
.63 |
|
|
$ |
.47 |
|
|
$ |
.85 |
|
|
$ |
.16 |
|
|
|
34 |
% |
|
$ |
(.22 |
) |
|
|
(26 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share attributable to Navient Corporation |
$ |
.16 |
|
|
$ |
.16 |
|
|
$ |
.15 |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
.01 |
|
|
|
7 |
% |
GAAP Statements of Income
(Unaudited) |
|
|
|
Nine Months Ended |
|
Increase |
|
September 30, |
|
(Decrease) |
|
|
|
|
|
|
|
|
(In millions, except per
share data) |
|
2015 |
|
|
|
2014 |
|
|
$ |
|
% |
Interest
income: |
|
|
|
|
|
|
|
FFELP Loans |
$ |
1,892 |
|
|
$ |
1,916 |
|
|
$ |
(24 |
) |
|
|
(1 |
)% |
Private Education Loans |
|
1,335 |
|
|
|
1,673 |
|
|
|
(338 |
) |
|
|
(20 |
) |
Other loans |
|
5 |
|
|
|
7 |
|
|
|
(2 |
) |
|
|
(29 |
) |
Cash and investments |
|
6 |
|
|
|
7 |
|
|
|
(1 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
Total
interest income |
|
3,238 |
|
|
|
3,603 |
|
|
|
(365 |
) |
|
|
(10 |
) |
Total
interest expense |
|
1,553 |
|
|
|
1,550 |
|
|
|
3 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Net
interest income |
|
1,685 |
|
|
|
2,053 |
|
|
|
(368 |
) |
|
|
(18 |
) |
Less:
provisions for loan losses |
|
446 |
|
|
|
490 |
|
|
|
(44 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
Net
interest income after provisions for loan losses |
|
1,239 |
|
|
|
1,563 |
|
|
|
(324 |
) |
|
|
(21 |
) |
Other
income (loss): |
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
12 |
|
|
|
— |
|
|
|
12 |
|
|
|
100 |
|
Gains (losses) on derivative and
hedging activities, net |
|
73 |
|
|
|
161 |
|
|
|
(88 |
) |
|
|
(55 |
) |
Servicing revenue |
|
258 |
|
|
|
217 |
|
|
|
41 |
|
|
|
19 |
|
Asset recovery revenue |
|
273 |
|
|
|
308 |
|
|
|
(35 |
) |
|
|
(11 |
) |
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other income |
|
15 |
|
|
|
49 |
|
|
|
(34 |
) |
|
|
(69 |
) |
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
631 |
|
|
|
735 |
|
|
|
(104 |
) |
|
|
(14 |
) |
Expenses: |
|
|
|
|
|
|
|
Operating expenses |
|
683 |
|
|
|
773 |
|
|
|
(90 |
) |
|
|
(12 |
) |
Goodwill and acquired intangible
asset impairment and amortization expense |
|
7 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
Restructuring and other
reorganization expenses |
|
32 |
|
|
|
102 |
|
|
|
(70 |
) |
|
|
(69 |
) |
|
|
|
|
|
|
|
|
Total
expenses |
|
722 |
|
|
|
882 |
|
|
|
(160 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
Income
from continuing operations, before income tax expense |
|
1,148 |
|
|
|
1,416 |
|
|
|
(268 |
) |
|
|
(19 |
) |
Income
tax expense |
|
438 |
|
|
|
530 |
|
|
|
(92 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
Net
income from continuing operations |
|
710 |
|
|
|
886 |
|
|
|
(176 |
) |
|
|
(20 |
) |
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
1 |
|
|
|
(1 |
) |
|
|
2 |
|
|
|
200 |
|
|
|
|
|
|
|
|
|
Net income |
|
711 |
|
|
|
885 |
|
|
|
(174 |
) |
|
|
(20 |
) |
Less:
net loss attributable to noncontrolling interest |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Net income attributable to Navient
Corporation |
|
711 |
|
|
|
885 |
|
|
|
(174 |
) |
|
|
(20 |
) |
Preferred stock dividends |
|
— |
|
|
|
6 |
|
|
|
(6 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
Net
income attributable to Navient Corporation common stock |
$ |
711 |
|
|
$ |
879 |
|
|
$ |
(168 |
) |
|
|
(19 |
)% |
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to Navient
Corporation |
$ |
1.86 |
|
|
$ |
2.09 |
|
|
$ |
(.23 |
) |
|
|
(11 |
)% |
|
|
|
|
|
|
|
|
Diluted earnings per common share
attributable to Navient Corporation |
$ |
1.83 |
|
|
$ |
2.05 |
|
|
$ |
(.22 |
) |
|
|
(11 |
)% |
|
|
|
|
|
|
|
|
Dividends per common share attributable to Navient Corporation |
$ |
.48 |
|
|
$ |
.45 |
|
|
$ |
.03 |
|
|
|
7 |
% |
GAAP Balance Sheet
(Unaudited) |
|
|
|
September 30, |
|
June
30, |
|
September
30, |
(In millions,
except share and per share data) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
Assets |
|
|
|
|
|
FFELP
Loans (net of allowance for losses of $84, $89 and $92,
respectively) |
$ |
98,468 |
|
|
$ |
100,264 |
|
|
$ |
97,707 |
|
Private
Education Loans (net of allowance for losses of $1,505, $1,533
and $1,959, respectively) |
|
27,323 |
|
|
|
28,107 |
|
|
|
30,476 |
|
Cash and
investments |
|
1,990 |
|
|
|
2,257 |
|
|
|
2,564 |
|
Restricted cash and investments |
|
4,296 |
|
|
|
3,950 |
|
|
|
3,683 |
|
Goodwill
and acquired intangible assets, net |
|
544 |
|
|
|
546 |
|
|
|
371 |
|
Other
assets |
|
5,045 |
|
|
|
5,096 |
|
|
|
5,544 |
|
|
|
|
|
|
|
Total
assets |
$ |
137,666 |
|
|
$ |
140,220 |
|
|
$ |
140,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Short-term borrowings |
$ |
2,816 |
|
|
$ |
2,951 |
|
|
$ |
5,994 |
|
Long-term borrowings |
|
128,293 |
|
|
|
130,387 |
|
|
|
127,669 |
|
Other
liabilities |
|
2,670 |
|
|
|
2,949 |
|
|
|
2,526 |
|
|
|
|
|
|
|
Total
liabilities |
|
133,779 |
|
|
|
136,287 |
|
|
|
136,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Common
stock, par value $0.01 per share; 1.125 billion shares authorized:
430 million, 430 million and 425 million shares,
respectively, issued |
|
4 |
|
|
|
4 |
|
|
|
4 |
|
Additional paid-in capital |
|
2,964 |
|
|
|
2,954 |
|
|
|
2,880 |
|
Accumulated other comprehensive income (loss), net of tax expense
(benefit) |
|
(82 |
) |
|
|
(26 |
) |
|
|
8 |
|
Retained
earnings |
|
2,251 |
|
|
|
2,072 |
|
|
|
1,521 |
|
|
|
|
|
|
|
Total
Navient Corporation stockholders’ equity before treasury stock |
|
5,137 |
|
|
|
5,004 |
|
|
|
4,413 |
|
Less:
Common stock held in treasury: 68 million, 56 million and
15 million shares, respectively |
|
(1,254 |
) |
|
|
(1,075 |
) |
|
|
(257 |
) |
|
|
|
|
|
|
Total
Navient Corporation stockholders’ equity |
|
3,883 |
|
|
|
3,929 |
|
|
|
4,156 |
|
Noncontrolling interest |
|
4 |
|
|
|
4 |
|
|
|
— |
|
|
|
|
|
|
|
Total
equity |
|
3,887 |
|
|
|
3,933 |
|
|
|
4,156 |
|
|
|
|
|
|
|
Total
liabilities and equity |
$ |
137,666 |
|
|
$ |
140,220 |
|
|
$ |
140,345 |
|
Consolidated Earnings Summary — GAAP
basis
Three Months Ended September 30, 2015 Compared with
Three Months Ended September 30, 2014
For the three months ended September 30, 2015, net income
was $237 million, or $0.63 diluted earnings per common share,
compared with net income of $359 million, or $0.85 diluted earnings
per common share, for the three months ended September 30,
2014. The decrease in net income was primarily due to a $71 million
decline in net interest income, an $88 million decrease in net
gains on derivative and hedging activities, a $34 million decrease
in other income and a $33 million increase in operating expenses.
This was partially offset by a $17 million decrease in the
provision for loan losses, a $20 million increase in asset recovery
revenue and a $14 million decrease in restructuring and other
reorganization expenses.
The primary contributors to each of the identified drivers of
changes in net income for the current quarter compared with the
year-ago quarter are as follows:
- Net interest income decreased by $71 million, primarily due to
a reduction in Private Education Loan net interest income resulting
from a decline in the loan balance and net interest margin, as well
as a reduction in the net interest margin on the FFELP
Loans.
- Provisions for loan losses decreased $17 million primarily as a
result of the overall improvement in Private Education Loans’
credit quality, delinquency and charge-off trends leading to
decreases in expected future charge-offs.
- Net gains on derivative and hedging activities decreased $88
million. The primary factors affecting the change were interest
rate and foreign currency fluctuations, which primarily affected
the valuations of our Floor Income Contracts, basis swaps and
foreign currency hedges during each period. Valuations of
derivative instruments fluctuate based upon many factors including
changes in interest rates, credit risk, foreign currency
fluctuations and other market factors. As a result, net gains and
losses on derivative and hedging activities may continue to vary
significantly in future periods.
- Asset recovery revenue increased $20 million primarily as
a result of higher asset recovery volume and revenue from Gila LLC,
acquired in first-quarter 2015.
- Other income decreased $34 million primarily due to a reduction
in foreign currency translation gains. The foreign currency
translation gains relate to a portion of our foreign currency
denominated debt that does not receive hedge accounting treatment.
These gains were partially offset by the “gains (losses) on
derivative and hedging activities, net” line item on the income
statement related to the derivatives used to economically hedge
these debt instruments.
- Operating expenses increased $33 million. This increase was
primarily due to operating costs related to Gila LLC, which was
acquired in first-quarter 2015, incremental third-party servicing
expenses related to an $8.5 billion loan acquisition in
fourth-quarter 2014 (including $11 million of one-time conversion
costs to move $4.9 billion of FFELP Loans to our servicing system),
and increased regulatory-related costs.
- Restructuring and other reorganization expenses decreased from
$14 million in the year-ago quarter to $0 million. The year-ago
quarter’s expenses were primarily related to third-party costs
incurred in connection with the Spin-Off.
We repurchased 12.1 million shares and 9.5 million
shares of our common stock during the three months ended
September 30, 2015 and 2014, respectively, as part of our
common share repurchase program. Primarily as a result of ongoing
common share repurchases, our average outstanding diluted shares
decreased by 48 million common shares from the year-ago
quarter.
Nine Months Ended September 30, 2015 Compared with
Nine Months Ended September 30, 2014
For the nine months ended September 30, 2015, net income
was $711 million, or $1.83 diluted earnings per common share,
compared with net income of $885 million, or $2.05 diluted earnings
per common share, for the nine months ended September 30,
2014. The decrease in net income was primarily due to a $368
million decline in net interest income, an $88 million decrease in
net gains on derivative and hedging activities, a $35 million
decrease in asset recovery revenue and a $34 million decrease in
other income. This was partially offset by a $44 million decrease
in the provision for loan losses, a $41 million increase in
servicing revenue, a $90 million decrease in operating expenses and
a $70 million decrease in restructuring and other reorganization
expenses.
The primary contributors to each of the identified drivers of
changes in net income for the current nine-month period compared
with the year-ago nine-month period are as follows:
- Net interest income decreased by $368 million, of which $186
million related to the deemed distribution of SLM BankCo on
April 30, 2014. Also contributing to the decrease was a
reduction in Private Education Loan net interest income due to a
decline in the loan balance and net interest margin, as well as a
reduction in the net interest margin on the FFELP Loans.
- Provisions for loan losses declined $44 million, of which $49
million related to the deemed distribution of SLM BankCo on
April 30, 2014, partially offset by an increase to the Private
Education Loan provision as a result of an increase in the amount
of loans exiting deferment status in 2014 over prior years and
those loans experiencing unfavorable credit trends compared to
loans that exited deferment in prior years. This issue resulted in
the second-quarter 2015 Private Education Loan provision being
elevated at $191 million versus $117 million for third-quarter 2015
and $120 million for first-quarter 2015.
- Net gains on derivative and hedging activities decreased $88
million. The primary factors affecting the change were interest
rate and foreign currency fluctuations, which primarily affected
the valuations of our Floor Income Contracts, basis swaps and
foreign currency hedges during each period. Valuations of
derivative instruments fluctuate based upon many factors including
changes in interest rates, credit risk, foreign currency
fluctuations and other market factors. As a result, net gains and
losses on derivative and hedging activities may continue to vary
significantly in future periods.
- Servicing revenue increased $41 million primarily as a result
of increasing our recovery expectation on previously assessed late
fees, as well as a general increase in third-party servicing
revenue, primarily related to servicing for ED.
- Asset recovery revenue decreased $35 million primarily as
a result of the Bipartisan Budget Act (the “Budget Act”) enacted on
December 26, 2013 and effective on July 1, 2014, which
reduced the amount paid to Guarantor agencies for defaulted FFELP
Loans that are rehabilitated. This legislative reduction in fees
represents $78 million of the decrease in asset recovery revenue.
This reduction was partially offset by higher asset recovery volume
and revenue from Gila LLC, acquired in first-quarter
2015.
- Other income decreased $34 million due in part to a reduction
in foreign currency translation gains. The foreign currency
translation gains relate to a portion of our foreign currency
denominated debt that does not receive hedge accounting treatment.
These gains were partially offset by the “gains (losses) on
derivative and hedging activities, net” line item on the income
statement related to the derivatives used to economically hedge
these debt instruments.
- In the first quarter of 2014, we recorded $103 million of
expenses related to the settlement of regulatory matters. Excluding
these expenses, operating expenses increased $13 million. This
increase was primarily due to operating costs related to Gila LLC,
which was acquired in first-quarter 2015, incremental third-party
servicing expenses related to an $8.5 billion loan acquisition in
fourth-quarter 2014 (including $11 million of one-time conversion
costs to move $4.9 billion of FFELP Loans to our servicing system),
and increased regulatory-related costs. This was partially
offset by $63 million related to the deemed distribution of SLM
BankCo on April 30, 2014.
- Restructuring and other reorganization expenses decreased $70
million, from $102 million to $32 million. The year-ago period’s
expenses were primarily related to third-party costs incurred in
connection with the Spin-Off. During the prior quarter, the Company
launched a restructuring initiative to simplify and streamline its
management structure post-Spin-Off to improve the operating
efficiency and effectiveness of the organization, and as a result
recorded $29 million of restructuring expense primarily related to
expected severance and other related costs.
We repurchased 41.9 million shares and 21.7 million
shares of our common stock during the nine months ended
September 30, 2015 and 2014, respectively, as part of our
common share repurchase program. Primarily as a result of ongoing
common share repurchases, our average outstanding diluted shares
decreased by 40 million common shares from the year-ago
period.
“Core Earnings” — Definition and
Limitations
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 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 each business segment
because “Core Earnings” reflect adjustments to GAAP financial
results for three items, discussed below, that are either related
to the Spin-Off or 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 three items we remove to result in our “Core Earnings”
presentations are:
1. The financial results attributable to the operations of SLM
BankCo prior to the Spin-Off and related restructuring and
reorganization expense incurred in connection with the Spin-Off,
including the restructuring expenses related to the restructuring
initiative launched in second-quarter 2015 to simplify and
streamline the Company’s management structure post-Spin-Off. For
GAAP purposes, Navient reflected the deemed distribution of SLM
BankCo on April 30, 2014. For “Core Earnings,” we exclude the
consumer banking business as if it had never been a part of
Navient’s historical results prior to the deemed distribution of
SLM BankCo on April 30, 2014;
2. Unrealized 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
3. 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.
|
Quarter
Ended September 30, 2015 |
|
|
|
Private |
|
|
|
|
|
|
|
Total |
|
Adjustments |
|
|
|
FFELP |
|
Education |
|
Business |
|
|
|
|
|
“Core |
|
|
|
Additions/ |
|
Total |
|
Total |
(Dollars
in millions) |
Loans |
|
Loans |
|
Services |
|
Other |
|
Eliminations(1) |
|
Earnings” |
|
Reclassifications |
|
(Subtractions) |
|
Adjustments(2) |
|
GAAP |
Interest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans |
$ |
526 |
|
|
$ |
444 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
970 |
|
|
$ |
164 |
|
|
$ |
(60 |
) |
|
$ |
104 |
|
|
$ |
1,074 |
|
Other loans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Cash and investments |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income |
|
528 |
|
|
|
444 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
973 |
|
|
|
164 |
|
|
|
(60 |
) |
|
|
104 |
|
|
|
1,077 |
|
Total
interest expense |
|
317 |
|
|
|
170 |
|
|
|
— |
|
|
|
26 |
|
|
|
— |
|
|
|
513 |
|
|
|
11 |
|
|
|
— |
|
|
|
11 |
|
|
|
524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) |
|
211 |
|
|
|
274 |
|
|
|
— |
|
|
|
(25 |
) |
|
|
— |
|
|
|
460 |
|
|
|
153 |
|
|
|
(60 |
) |
|
|
93 |
|
|
|
553 |
|
Less:
provisions for loan losses |
|
7 |
|
|
|
117 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
123 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) after provisions for loan losses |
|
204 |
|
|
|
157 |
|
|
|
— |
|
|
|
(24 |
) |
|
|
— |
|
|
|
337 |
|
|
|
153 |
|
|
|
(60 |
) |
|
|
93 |
|
|
|
430 |
|
Other
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Servicing revenue |
|
16 |
|
|
|
5 |
|
|
|
161 |
|
|
|
— |
|
|
|
(106 |
) |
|
|
76 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
76 |
|
Asset recovery revenue |
|
— |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
85 |
|
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other income (loss) |
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
5 |
|
|
|
(153 |
) |
|
|
168 |
|
|
|
15 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
16 |
|
|
|
5 |
|
|
|
248 |
|
|
|
3 |
|
|
|
(106 |
) |
|
|
166 |
|
|
|
(153 |
) |
|
|
168 |
|
|
|
15 |
|
|
|
181 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
109 |
|
|
|
39 |
|
|
|
123 |
|
|
|
9 |
|
|
|
(106 |
) |
|
|
174 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
174 |
|
Overhead expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
54 |
|
|
|
— |
|
|
|
54 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
109 |
|
|
|
39 |
|
|
|
123 |
|
|
|
63 |
|
|
|
(106 |
) |
|
|
228 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
228 |
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Restructuring and other
reorganization expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
109 |
|
|
|
39 |
|
|
|
123 |
|
|
|
63 |
|
|
|
(106 |
) |
|
|
228 |
|
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
|
|
231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations, before income tax expense
(benefit) |
|
111 |
|
|
|
123 |
|
|
|
125 |
|
|
|
(84 |
) |
|
|
— |
|
|
|
275 |
|
|
|
— |
|
|
|
105 |
|
|
|
105 |
|
|
|
380 |
|
Income
tax expense (benefit)(3) |
|
41 |
|
|
|
46 |
|
|
|
46 |
|
|
|
(31 |
) |
|
|
— |
|
|
|
102 |
|
|
|
— |
|
|
|
42 |
|
|
|
42 |
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations |
|
70 |
|
|
|
77 |
|
|
|
79 |
|
|
|
(53 |
) |
|
|
— |
|
|
|
173 |
|
|
|
— |
|
|
|
63 |
|
|
|
63 |
|
|
|
236 |
|
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
$ |
70 |
|
|
$ |
77 |
|
|
$ |
79 |
|
|
$ |
(52 |
) |
|
$ |
— |
|
|
$ |
174 |
|
|
$ |
— |
|
|
$ |
63 |
|
|
$ |
63 |
|
|
$ |
237 |
|
(1) The eliminations in servicing revenue
and direct operating expense represent the elimination of
intercompany servicing revenue where the Business Services segment
performs the loan servicing function for the FFELP Loans
segment.
(2) “Core Earnings” adjustments to
GAAP:
|
Quarter
Ended September 30, 2015 |
|
Net Impact from |
|
Net Impact of |
|
Net Impact of |
|
|
|
Spin-Off of |
|
Derivative |
|
Acquired |
|
|
(Dollars in millions) |
SLM BankCo |
|
Accounting |
|
Intangibles |
|
Total |
Net interest income after
provisions for loan losses |
$
— |
|
$ |
93 |
|
|
$ |
— |
|
|
$ |
93 |
|
Total other income (loss) |
— |
|
|
15 |
|
|
|
— |
|
|
|
15 |
|
Operating expenses |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Goodwill and acquired intangible
asset impairment and amortization |
— |
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
Restructuring and other
reorganization expenses |
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total “Core Earnings” adjustments
to GAAP |
$ — |
|
$ |
108 |
|
|
$ |
(3 |
) |
|
|
105 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
$ |
63 |
|
|
|
|
|
|
|
|
|
(3) Income taxes are based on a
percentage of net income before tax for the individual reportable
segment.
|
Quarter Ended June 30, 2015 |
|
|
Private |
|
|
|
|
|
|
|
Total |
|
Adjustments |
|
|
|
FFELP |
|
Education |
|
Business |
|
|
|
|
|
“Core |
|
|
|
Additions/ |
|
Total |
|
Total |
(Dollars in
millions) |
Loans |
|
Loans |
|
Services |
|
Other |
|
Eliminations(1) |
|
Earnings” |
|
Reclassifications |
|
(Subtractions) |
|
Adjustments(2) |
|
GAAP |
Interest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans |
$ |
522 |
|
|
$ |
434 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
956 |
|
|
$ |
163 |
|
|
$ |
(59 |
) |
|
$ |
104 |
|
|
$ |
1,060 |
|
Other loans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Cash and investments |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income |
|
523 |
|
|
|
434 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
960 |
|
|
|
163 |
|
|
|
(59 |
) |
|
|
104 |
|
|
|
1,064 |
|
Total
interest expense |
|
309 |
|
|
|
171 |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
|
|
508 |
|
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) |
|
214 |
|
|
|
263 |
|
|
|
— |
|
|
|
(25 |
) |
|
|
— |
|
|
|
452 |
|
|
|
156 |
|
|
|
(59 |
) |
|
|
97 |
|
|
|
549 |
|
Less:
provisions for loan losses |
|
7 |
|
|
|
191 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
198 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) after provisions for loan losses |
|
207 |
|
|
|
72 |
|
|
|
— |
|
|
|
(25 |
) |
|
|
— |
|
|
|
254 |
|
|
|
156 |
|
|
|
(59 |
) |
|
|
97 |
|
|
|
351 |
|
Other
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Servicing revenue |
|
45 |
|
|
|
6 |
|
|
|
163 |
|
|
|
— |
|
|
|
(108 |
) |
|
|
106 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
106 |
|
Asset recovery revenue |
|
— |
|
|
|
— |
|
|
|
99 |
|
|
|
— |
|
|
|
— |
|
|
|
99 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
99 |
|
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other income (loss) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
(156 |
) |
|
|
142 |
|
|
|
(14 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
52 |
|
|
|
6 |
|
|
|
262 |
|
|
|
3 |
|
|
|
(108 |
) |
|
|
215 |
|
|
|
(156 |
) |
|
|
142 |
|
|
|
(14 |
) |
|
|
201 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
112 |
|
|
|
43 |
|
|
|
117 |
|
|
|
6 |
|
|
|
(108 |
) |
|
|
170 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
170 |
|
Overhead expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
|
|
— |
|
|
|
55 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
112 |
|
|
|
43 |
|
|
|
117 |
|
|
|
61 |
|
|
|
(108 |
) |
|
|
225 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
225 |
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Restructuring and other
reorganization expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29 |
|
|
|
29 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
112 |
|
|
|
43 |
|
|
|
117 |
|
|
|
61 |
|
|
|
(108 |
) |
|
|
225 |
|
|
|
— |
|
|
|
32 |
|
|
|
32 |
|
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations, before income tax expense
(benefit) |
|
147 |
|
|
|
35 |
|
|
|
145 |
|
|
|
(83 |
) |
|
|
— |
|
|
|
244 |
|
|
|
— |
|
|
|
51 |
|
|
|
51 |
|
|
|
295 |
|
Income
tax expense (benefit)(3) |
|
54 |
|
|
|
13 |
|
|
|
54 |
|
|
|
(31 |
) |
|
|
— |
|
|
|
90 |
|
|
|
— |
|
|
|
23 |
|
|
|
23 |
|
|
|
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations |
|
93 |
|
|
|
22 |
|
|
|
91 |
|
|
|
(52 |
) |
|
|
— |
|
|
|
154 |
|
|
|
— |
|
|
|
28 |
|
|
|
28 |
|
|
|
182 |
|
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
$ |
93 |
|
|
$ |
22 |
|
|
$ |
91 |
|
|
$ |
(52 |
) |
|
$ |
— |
|
|
$ |
154 |
|
|
$ |
— |
|
|
$ |
28 |
|
|
$ |
28 |
|
|
$ |
182 |
|
(1) The eliminations in servicing revenue
and direct operating expense represent the elimination of
intercompany servicing revenue where the Business Services segment
performs the loan servicing function for the FFELP Loans
segment.
(2) “Core Earnings” adjustments to GAAP:
|
Quarter
Ended June 30, 2015 |
|
Net Impact from |
|
Net Impact of |
|
Net Impact of |
|
|
|
Spin-Off of |
|
Derivative |
|
Acquired |
|
|
(Dollars
in millions) |
SLM BankCo |
|
Accounting |
|
Intangibles |
|
Total |
Net interest income after
provisions for loan losses |
$ |
— |
|
|
$ |
97 |
|
|
$ |
— |
|
|
$ |
97 |
|
Total other income |
|
— |
|
|
|
(14 |
) |
|
|
— |
|
|
|
(14 |
) |
Operating expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
Restructuring and other
reorganization expenses |
|
29 |
|
|
|
— |
|
|
|
— |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
Total “Core Earnings” adjustments
to GAAP |
$ |
(29 |
) |
|
$ |
83 |
|
|
$ |
(3 |
) |
|
|
51 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
$ |
28 |
|
(3) Income taxes are based on a
percentage of net income before tax for the individual reportable
segment.
|
Quarter
Ended September 30, 2014 |
|
|
Private |
|
|
|
|
|
|
|
Total |
|
Adjustments |
|
|
|
FFELP |
|
Education |
|
Business |
|
|
|
|
|
“Core |
|
|
|
Additions/ |
|
Total |
|
Total |
(Dollars in millions) |
Loans |
|
Loans |
|
Services |
|
Other |
|
Eliminations(1) |
|
Earnings” |
|
Reclassifications |
|
(Subtractions) |
|
Adjustments(2) |
|
GAAP |
Interest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans |
$ |
531 |
|
|
$ |
490 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,021 |
|
|
$ |
167 |
|
|
$ |
(60 |
) |
|
$ |
107 |
|
|
$ |
1,128 |
|
Other loans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Cash and investments |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income |
|
532 |
|
|
|
490 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
1,025 |
|
|
|
167 |
|
|
|
(60 |
) |
|
|
107 |
|
|
|
1,132 |
|
Total
interest expense |
|
293 |
|
|
|
174 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
496 |
|
|
|
10 |
|
|
|
2 |
|
|
|
12 |
|
|
|
508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) |
|
239 |
|
|
|
316 |
|
|
|
— |
|
|
|
(26 |
) |
|
|
— |
|
|
|
529 |
|
|
|
157 |
|
|
|
(62 |
) |
|
|
95 |
|
|
|
624 |
|
Less:
provisions for loan losses |
|
10 |
|
|
|
130 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
140 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) after provisions for loan losses |
|
229 |
|
|
|
186 |
|
|
|
— |
|
|
|
(26 |
) |
|
|
— |
|
|
|
389 |
|
|
|
157 |
|
|
|
(62 |
) |
|
|
95 |
|
|
|
484 |
|
Other
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Servicing revenue |
|
16 |
|
|
|
10 |
|
|
|
167 |
|
|
|
— |
|
|
|
(112 |
) |
|
|
81 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
81 |
|
Asset recovery revenue |
|
— |
|
|
|
— |
|
|
|
65 |
|
|
|
— |
|
|
|
— |
|
|
|
65 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
65 |
|
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other income (loss) |
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
8 |
|
|
|
— |
|
|
|
11 |
|
|
|
(157 |
) |
|
|
288 |
|
|
|
131 |
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
16 |
|
|
|
10 |
|
|
|
235 |
|
|
|
8 |
|
|
|
(112 |
) |
|
|
157 |
|
|
|
(157 |
) |
|
|
288 |
|
|
|
131 |
|
|
|
288 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
118 |
|
|
|
40 |
|
|
|
98 |
|
|
|
3 |
|
|
|
(112 |
) |
|
|
147 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
147 |
|
Overhead expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
118 |
|
|
|
40 |
|
|
|
98 |
|
|
|
51 |
|
|
|
(112 |
) |
|
|
195 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
195 |
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Restructuring and other
reorganization expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14 |
|
|
|
14 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
118 |
|
|
|
40 |
|
|
|
98 |
|
|
|
51 |
|
|
|
(112 |
) |
|
|
195 |
|
|
|
— |
|
|
|
16 |
|
|
|
16 |
|
|
|
211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations, before income tax expense
(benefit) |
|
127 |
|
|
|
156 |
|
|
|
137 |
|
|
|
(69 |
) |
|
|
— |
|
|
|
351 |
|
|
|
— |
|
|
|
210 |
|
|
|
210 |
|
|
|
561 |
|
Income
tax expense (benefit)(3) |
|
48 |
|
|
|
58 |
|
|
|
50 |
|
|
|
(25 |
) |
|
|
— |
|
|
|
131 |
|
|
|
— |
|
|
|
69 |
|
|
|
69 |
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations |
|
79 |
|
|
|
98 |
|
|
|
87 |
|
|
|
(44 |
) |
|
|
— |
|
|
|
220 |
|
|
|
— |
|
|
|
141 |
|
|
|
141 |
|
|
|
361 |
|
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
$ |
79 |
|
|
$ |
98 |
|
|
$ |
85 |
|
|
$ |
(44 |
) |
|
$ |
— |
|
|
$ |
218 |
|
|
$ |
— |
|
|
$ |
141 |
|
|
$ |
141 |
|
|
$ |
359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The eliminations in servicing revenue
and direct operating expense represent the elimination of
intercompany servicing revenue where the Business Services segment
performs the loan servicing function for the FFELP Loans
segment.
(2) “Core Earnings” adjustments to GAAP:
|
Quarter
Ended September 30, 2014 |
|
Net Impact from |
|
Net Impact of |
|
Net Impact of |
|
|
|
Spin-Off of |
|
Derivative |
|
Acquired |
|
|
(Dollars
in millions) |
SLM BankCo |
|
Accounting |
|
Intangibles |
|
Total |
|
|
|
|
|
|
|
|
Net interest income after
provisions for loan losses |
$ |
— |
|
|
$ |
95 |
|
|
$
|
— |
|
|
$ |
95 |
|
Total other income |
|
— |
|
|
|
131 |
|
|
|
— |
|
|
|
131 |
|
Operating expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
Restructuring and other
reorganization expenses |
|
14 |
|
|
|
— |
|
|
|
— |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Total “Core Earnings” adjustments
to GAAP |
$ |
(14 |
) |
|
$ |
226 |
|
|
$ |
(2 |
) |
|
|
210 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
69 |
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
$ |
141 |
|
(3) Income taxes are based on a
percentage of net income before tax for the individual reportable
segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
2015 |
|
|
|
Private |
|
|
|
|
|
|
|
Total |
|
Adjustments |
|
|
FFELP |
|
Education |
|
Business |
|
|
|
|
|
“Core |
|
|
|
Additions/ |
|
Total |
|
Total |
|
Loans |
|
Loans |
|
Services |
|
Other |
|
Eliminations(1) |
|
Earnings” |
|
Reclassifications |
|
(Subtractions) |
|
Adjustments(2) |
|
GAAP |
(Dollars in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans |
$ |
1,581 |
|
|
$ |
1,335 |
|
|
$ |
— |
|
|
$ |
|
— |
|
|
|
$ |
— |
|
|
$ |
2,916 |
|
|
$ |
|
489 |
|
|
|
$ |
|
(178 |
) |
|
|
$ |
311 |
|
|
$ |
3,227 |
|
Other loans |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
5 |
|
|
|
|
— |
|
|
|
5 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
5 |
|
Cash and investments |
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
|
1 |
|
|
|
|
— |
|
|
|
6 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income |
|
1,586 |
|
|
|
1,335 |
|
|
|
— |
|
|
|
|
6 |
|
|
|
|
— |
|
|
|
2,927 |
|
|
|
|
489 |
|
|
|
|
|
(178 |
) |
|
|
|
311 |
|
|
|
3,238 |
|
Total
interest expense |
|
928 |
|
|
|
514 |
|
|
|
— |
|
|
|
|
84 |
|
|
|
|
— |
|
|
|
1,526 |
|
|
|
|
27 |
|
|
|
|
|
— |
|
|
|
|
27 |
|
|
|
1,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) |
|
658 |
|
|
|
821 |
|
|
|
— |
|
|
|
|
(78 |
) |
|
|
|
— |
|
|
|
1,401 |
|
|
|
|
462 |
|
|
|
|
|
(178 |
) |
|
|
|
284 |
|
|
|
1,685 |
|
Less:
provisions for loan losses |
|
19 |
|
|
|
428 |
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
— |
|
|
|
446 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) after provisions for loan losses |
|
639 |
|
|
|
393 |
|
|
|
— |
|
|
|
|
(77 |
) |
|
|
|
— |
|
|
|
955 |
|
|
|
|
462 |
|
|
|
|
|
(178 |
) |
|
|
|
284 |
|
|
|
1,239 |
|
Other
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
12 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
12 |
|
Servicing revenue |
|
78 |
|
|
|
17 |
|
|
|
487 |
|
|
|
|
— |
|
|
|
|
(324 |
) |
|
|
258 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
258 |
|
Asset recovery revenue |
|
— |
|
|
|
— |
|
|
|
273 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
273 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
273 |
|
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Other income (loss) |
|
— |
|
|
|
— |
|
|
|
4 |
|
|
|
|
11 |
|
|
|
|
— |
|
|
|
15 |
|
|
|
|
(462 |
) |
|
|
|
|
535 |
|
|
|
|
73 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
90 |
|
|
|
17 |
|
|
|
764 |
|
|
|
|
11 |
|
|
|
|
(324 |
) |
|
|
558 |
|
|
|
|
(462 |
) |
|
|
|
|
535 |
|
|
|
|
73 |
|
|
|
631 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
336 |
|
|
|
127 |
|
|
|
355 |
|
|
|
|
20 |
|
|
|
|
(324 |
) |
|
|
514 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
514 |
|
Overhead expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
169 |
|
|
|
|
— |
|
|
|
169 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
336 |
|
|
|
127 |
|
|
|
355 |
|
|
|
|
189 |
|
|
|
|
(324 |
) |
|
|
683 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
683 |
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
7 |
|
Restructuring and other
reorganization expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
32 |
|
|
|
|
32 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
336 |
|
|
|
127 |
|
|
|
355 |
|
|
|
|
189 |
|
|
|
|
(324 |
) |
|
|
683 |
|
|
|
|
— |
|
|
|
|
|
39 |
|
|
|
|
39 |
|
|
|
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations, before income tax expense
(benefit) |
|
393 |
|
|
|
283 |
|
|
|
409 |
|
|
|
|
(255 |
) |
|
|
|
— |
|
|
|
830 |
|
|
|
|
— |
|
|
|
|
|
318 |
|
|
|
|
318 |
|
|
|
1,148 |
|
Income
tax expense (benefit)(3) |
|
146 |
|
|
|
105 |
|
|
|
152 |
|
|
|
|
(95 |
) |
|
|
|
— |
|
|
|
308 |
|
|
|
|
— |
|
|
|
|
|
130 |
|
|
|
|
130 |
|
|
|
438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations |
|
247 |
|
|
|
178 |
|
|
|
257 |
|
|
|
|
(160 |
) |
|
|
|
— |
|
|
|
522 |
|
|
|
|
— |
|
|
|
|
|
188 |
|
|
|
|
188 |
|
|
|
710 |
|
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
1 |
|
|
|
|
— |
|
|
|
1 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
$ |
247 |
|
|
$ |
178 |
|
|
$ |
257 |
|
|
$ |
|
(159 |
) |
|
|
$ |
— |
|
|
$ |
523 |
|
|
$ |
|
— |
|
|
|
$ |
|
188 |
|
|
|
$ |
188 |
|
|
$ |
711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The eliminations in servicing revenue
and direct operating expense represent the elimination of
intercompany servicing revenue where the Business Services segment
performs the loan servicing function for the FFELP Loans
segment.
(2) “Core Earnings” adjustments to
GAAP:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
2015 |
|
|
Net Impact from |
|
Net Impact of |
|
Net Impact of |
|
|
|
|
Spin-Off of |
|
Derivative |
|
Acquired |
|
|
(Dollars in
millions) |
SLM BankCo |
|
Accounting |
|
Intangibles |
|
Total |
Net interest income after provisions for loan losses |
$ |
— |
|
|
$ |
284 |
|
|
$ |
— |
|
|
$ |
284 |
|
Total other income |
|
— |
|
|
|
73 |
|
|
|
— |
|
|
|
73 |
|
Operating expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Goodwill and acquired intangible asset impairment and
amortization |
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
7 |
|
Restructuring and other reorganization expenses |
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
Total “Core Earnings” adjustments to GAAP |
$ |
(32 |
) |
|
$ |
357 |
|
|
$ |
(7 |
) |
|
|
318 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
|
|
|
|
$ |
188 |
|
|
|
|
|
|
|
|
|
|
(3) Income taxes are based on a
percentage of net income before tax for the individual reportable
segment.
|
Nine Months Ended September 30,
2014 |
|
|
|
Private |
|
|
|
|
|
|
|
Total |
|
Adjustments |
|
|
|
FFELP |
|
Education |
|
Business |
|
|
|
|
|
“Core |
|
|
Additions/ |
|
Total |
|
Total |
(Dollars in
millions) |
Loans |
|
Loans |
|
Services |
|
Other |
|
Eliminations(1) |
|
Earnings” |
|
Reclassifications |
|
(Subtractions) |
|
Adjustments(2) |
|
GAAP |
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Student loans |
$ |
1,564 |
|
|
$ |
1,475 |
|
|
$ |
|
— |
|
|
|
$ |
|
— |
|
|
|
$ |
— |
|
|
$ |
|
3,039 |
|
|
|
$ |
|
532 |
|
|
|
$ |
|
18 |
|
|
|
$ |
550 |
|
|
$ |
|
3,589 |
|
|
Other loans |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
7 |
|
|
|
|
— |
|
|
|
|
7 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
7 |
|
|
Cash and investments |
|
3 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
3 |
|
|
|
|
— |
|
|
|
|
6 |
|
|
|
|
|
— |
|
|
|
|
|
1 |
|
|
|
|
1 |
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest income |
|
1,567 |
|
|
|
1,475 |
|
|
|
|
— |
|
|
|
|
|
10 |
|
|
|
|
— |
|
|
|
|
3,052 |
|
|
|
|
|
532 |
|
|
|
|
|
19 |
|
|
|
|
551 |
|
|
|
|
3,603 |
|
|
Total
interest expense |
|
871 |
|
|
|
532 |
|
|
|
|
— |
|
|
|
|
|
84 |
|
|
|
|
— |
|
|
|
|
1,487 |
|
|
|
|
|
32 |
|
|
|
|
|
31 |
|
|
|
|
63 |
|
|
|
|
1,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) |
|
696 |
|
|
|
943 |
|
|
|
|
— |
|
|
|
|
|
(74 |
) |
|
|
|
— |
|
|
|
|
1,565 |
|
|
|
|
|
500 |
|
|
|
|
|
(12 |
) |
|
|
|
488 |
|
|
|
|
2,053 |
|
|
Less:
provisions for loan losses |
|
30 |
|
|
|
411 |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
441 |
|
|
|
|
|
— |
|
|
|
|
|
49 |
|
|
|
|
49 |
|
|
|
|
490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income (loss) after provisions for loan losses |
|
666 |
|
|
|
532 |
|
|
|
|
— |
|
|
|
|
|
(74 |
) |
|
|
|
— |
|
|
|
|
1,124 |
|
|
|
|
|
500 |
|
|
|
|
|
(61 |
) |
|
|
|
439 |
|
|
|
|
1,563 |
|
|
Other
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of loans and
investments |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
Servicing revenue |
|
42 |
|
|
|
18 |
|
|
|
|
502 |
|
|
|
|
|
— |
|
|
|
|
(345 |
) |
|
|
|
217 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
217 |
|
|
Asset recovery revenue |
|
— |
|
|
|
— |
|
|
|
|
308 |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
308 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
308 |
|
|
Gains on debt repurchases |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
Other income (loss) |
|
— |
|
|
|
— |
|
|
|
|
4 |
|
|
|
|
|
19 |
|
|
|
|
— |
|
|
|
|
23 |
|
|
|
|
|
(500 |
) |
|
|
|
|
687 |
|
|
|
|
187 |
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (loss) |
|
42 |
|
|
|
18 |
|
|
|
|
814 |
|
|
|
|
|
19 |
|
|
|
|
(345 |
) |
|
|
|
548 |
|
|
|
|
|
(500 |
) |
|
|
|
|
687 |
|
|
|
|
187 |
|
|
|
|
735 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating expenses |
|
363 |
|
|
|
138 |
|
|
|
|
286 |
|
|
|
|
|
118 |
|
|
|
|
(345 |
) |
|
|
|
560 |
|
|
|
|
|
— |
|
|
|
|
|
35 |
|
|
|
|
35 |
|
|
|
|
595 |
|
|
Overhead expenses |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
149 |
|
|
|
|
— |
|
|
|
|
149 |
|
|
|
|
|
— |
|
|
|
|
|
29 |
|
|
|
|
29 |
|
|
|
|
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
363 |
|
|
|
138 |
|
|
|
|
286 |
|
|
|
|
|
267 |
|
|
|
|
(345 |
) |
|
|
|
709 |
|
|
|
|
|
— |
|
|
|
|
|
64 |
|
|
|
|
64 |
|
|
|
|
773 |
|
|
Goodwill and acquired intangible
asset impairment and amortization |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
7 |
|
|
|
|
7 |
|
|
|
|
7 |
|
|
Restructuring and other
reorganization expenses |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
102 |
|
|
|
|
102 |
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses |
|
363 |
|
|
|
138 |
|
|
|
|
286 |
|
|
|
|
|
267 |
|
|
|
|
(345 |
) |
|
|
|
709 |
|
|
|
|
|
— |
|
|
|
|
|
173 |
|
|
|
|
173 |
|
|
|
|
882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations, before income tax expense
(benefit) |
|
345 |
|
|
|
412 |
|
|
|
|
528 |
|
|
|
|
|
(322 |
) |
|
|
|
— |
|
|
|
|
963 |
|
|
|
|
|
— |
|
|
|
|
|
453 |
|
|
|
|
453 |
|
|
|
|
1,416 |
|
|
Income
tax expense (benefit)(3) |
|
131 |
|
|
|
153 |
|
|
|
|
197 |
|
|
|
|
|
(120 |
) |
|
|
|
— |
|
|
|
|
361 |
|
|
|
|
|
— |
|
|
|
|
|
169 |
|
|
|
|
169 |
|
|
|
|
530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations |
|
214 |
|
|
|
259 |
|
|
|
|
331 |
|
|
|
|
|
(202 |
) |
|
|
|
— |
|
|
|
|
602 |
|
|
|
|
|
— |
|
|
|
|
|
284 |
|
|
|
|
284 |
|
|
|
|
886 |
|
|
Income
(loss) from discontinued operations, net of tax expense
(benefit) |
|
— |
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
214 |
|
|
$ |
259 |
|
|
$ |
|
330 |
|
|
|
$ |
|
(202 |
) |
|
|
$ |
— |
|
|
$ |
|
601 |
|
|
|
$ |
|
— |
|
|
|
$ |
|
284 |
|
|
|
$ |
284 |
|
|
$ |
|
885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The eliminations in servicing revenue
and direct operating expense represent the elimination of
intercompany servicing revenue where the Business Services segment
performs the loan servicing function for the FFELP Loans
segment.
(2) “Core Earnings” adjustments to
GAAP:
|
|
Nine Months Ended September 30,
2014 |
|
|
Net Impact from |
|
Net Impact of |
|
Net Impact of |
|
|
|
|
Spin-Off of |
|
Derivative |
|
Acquired |
|
|
(Dollars in millions) |
|
SLM BankCo |
|
Accounting |
|
Intangibles |
|
Total |
Net interest income after provisions for loan losses |
$ |
137 |
|
|
$ |
302 |
|
|
$ — |
|
$ |
439 |
|
Total other income |
|
14 |
|
|
|
173 |
|
|
— |
|
|
187 |
|
Operating expenses |
|
64 |
|
|
— |
|
— |
|
|
64 |
|
Goodwill and acquired intangible asset impairment and
amortization |
— |
|
— |
|
|
7 |
|
|
|
7 |
|
Restructuring and other reorganization expenses |
|
102 |
|
|
— |
|
— |
|
|
102 |
|
|
|
|
|
|
|
|
|
|
Total “Core Earnings” adjustments to GAAP |
$ |
(15 |
) |
|
$ |
475 |
|
|
$ |
(7 |
) |
|
|
453 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
169 |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
|
|
|
|
$ |
284 |
|
|
|
|
|
|
|
|
|
|
(3) Income taxes are based on a
percentage of net income before tax for the individual reportable
segment.
Differences between “Core Earnings” and
GAAP
The following discussion summarizes the differences between
“Core Earnings” and GAAP net income and details each specific
adjustment required to reconcile our “Core Earnings” segment
presentation to our GAAP earnings.
|
|
Quarters Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
|
|
2015 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
“Core Earnings” net income
attributable to Navient Corporation |
$ |
|
174 |
|
|
|
$ |
|
154 |
|
|
|
$ |
|
218 |
|
|
|
$ |
|
523 |
|
|
|
$ |
|
601 |
|
|
“Core Earnings” adjustments to GAAP: |
|
|
|
|
|
|
|
Net impact of the removal of SLM BankCo’s operations and
related restructuring and reorganization expense in connection with
the Spin-Off |
|
|
— |
|
|
|
|
|
(29 |
) |
|
|
|
|
(14 |
) |
|
|
|
|
(32 |
) |
|
|
|
|
(15 |
) |
|
Net impact of derivative accounting |
|
|
108 |
|
|
|
|
|
83 |
|
|
|
|
|
226 |
|
|
|
|
|
357 |
|
|
|
|
|
475 |
|
|
Net impact of goodwill and acquired intangible assets |
|
|
(3 |
) |
|
|
|
|
(3 |
) |
|
|
|
|
(2 |
) |
|
|
|
|
(7 |
) |
|
|
|
|
(7 |
) |
|
Net tax effect |
|
|
(42 |
) |
|
|
|
|
(23 |
) |
|
|
|
|
(69 |
) |
|
|
|
|
(130 |
) |
|
|
|
|
(169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total “Core Earnings” adjustments to GAAP |
|
|
63 |
|
|
|
|
|
28 |
|
|
|
|
|
141 |
|
|
|
|
|
188 |
|
|
|
|
|
284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income attributable to
Navient Corporation |
$ |
|
237 |
|
|
|
$ |
|
182 |
|
|
|
$ |
|
359 |
|
|
|
$ |
|
711 |
|
|
|
$ |
|
885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) SLM BankCo’s operations and
related restructuring and reorganization expense in connection with
the Spin-Off: On April 30, 2014, the Spin-Off of
Navient from SLM Corporation was completed and Navient is now an
independent, publicly-traded company. Due to the relative
significance of Navient to SLM Corporation prior to the Spin-Off,
among other factors, for financial reporting purposes Navient is
treated as the “accounting spinnor” and therefore is the
“accounting successor” to SLM Corporation as constituted prior to
the Spin-Off, notwithstanding the legal form of the Spin-Off. Since
Navient is treated for accounting purposes as the “accounting
spinnor,” the GAAP financial statements of Navient reflect the
deemed distribution of SLM BankCo to SLM BankCo’s stockholders on
April 30, 2014.
For “Core Earnings,” we have assumed the consumer banking
business (SLM BankCo) was never a part of Navient’s historical
results prior to the deemed distribution of SLM BankCo on
April 30, 2014 and we have removed the restructuring and
reorganization expense incurred in connection with the Spin-Off,
including the restructuring initiated in second-quarter 2015.
Excluding these items provides management with a useful basis from
which to better evaluate results from ongoing operations against
results from prior periods. The adjustment relates to the exclusion
of the consumer banking business and represents the operations,
assets, liabilities and equity of SLM BankCo, which is comprised of
Sallie Mae Bank, Upromise Rewards, the Insurance Business, and the
Private Education Loan origination functions. Included in these
amounts are also certain general corporate overhead expenses
related to the consumer banking business. General corporate
overhead consists of costs primarily associated with accounting,
finance, legal, human resources, certain information technology
costs, stock compensation, and executive management and the board
of directors. These costs were generally allocated to the consumer
banking business based on the proportionate level of effort
provided to the consumer banking business relative to SLM
Corporation using a relevant allocation driver (e.g., in proportion
to the number of employees by function that were being transferred
to SLM BankCo as opposed to remaining at Navient). All intercompany
transactions between SLM BankCo and Navient have been eliminated.
In addition, all prior preferred stock dividends have been removed
as SLM BankCo succeeded SLM Corporation as the issuer of the
preferred stock in connection with the Spin-Off.
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
2015 |
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
SLM
BankCo net income, before income tax expense |
$
— |
|
$ — |
|
$ — |
|
$ — |
|
$ |
|
87 |
|
|
Restructuring and reorganization expense in connection with the
Spin-Off |
— |
|
|
|
(29 |
) |
|
|
|
|
(14 |
) |
|
|
|
|
(32 |
) |
|
|
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
net impact, before income tax expense |
$ — |
|
$ |
|
(29 |
) |
|
|
$ |
|
(14 |
) |
|
|
$ |
|
(32 |
) |
|
|
$ |
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
(2) Derivative
Accounting: “Core Earnings” exclude periodic unrealized
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 unrealized gains and losses
that are a result of ineffectiveness recognized related to
effective hedges under GAAP. These unrealized gains and losses
occur in our FFELP Loans, Private Education Loans and Other
business segments. Under GAAP, for our derivatives that are held to
maturity, the cumulative net unrealized gain or loss over the life
of the contract will equal $0 except for Floor Income Contracts,
where the cumulative unrealized gain will equal the amount for
which we 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 table below quantifies the adjustments for derivative
accounting between GAAP and “Core Earnings” net income.
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
|
“Core Earnings” derivative adjustments: |
|
|
|
|
|
|
|
|
|
|
Gains
(losses) on derivative and hedging activities, net, included in
other income |
$ |
20 |
|
|
$ |
(18 |
) |
|
$ |
108 |
|
|
$ |
73 |
|
|
$ |
161 |
|
|
Plus:
Realized losses on derivative and hedging activities,
net(1) |
|
153 |
|
|
|
156 |
|
|
|
157 |
|
|
|
462 |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on derivative and hedging activities, |
|
173 |
|
|
|
138 |
|
|
|
265 |
|
|
|
535 |
|
|
|
661 |
|
|
net(2) |
|
|
|
|
|
|
|
|
|
|
Amortization of net premiums on Floor Income Contracts in net
interest income for “Core Earnings” |
|
(60 |
) |
|
|
(59 |
) |
|
|
(60 |
) |
|
|
(178 |
) |
|
|
(195 |
) |
|
Other
derivative accounting adjustments(3) |
|
(5 |
) |
|
|
4 |
|
|
|
21 |
|
|
— |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net impact of derivative accounting(4) |
$ |
108 |
|
|
$ |
83 |
|
|
$ |
226 |
|
|
$ |
357 |
|
|
$ |
475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) See “Reclassification of Realized
Gains (Losses) on Derivative and Hedging Activities” below for a
detailed breakdown of the components of realized losses on
derivative and hedging activities.
(2) “Unrealized gains on derivative and
hedging activities, net” comprises the following unrealized
mark-to-market gains (losses):
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Floor
Income Contracts |
$ |
69 |
|
|
$ |
171 |
|
|
$ |
195 |
|
|
$ |
312 |
|
|
$ |
508 |
|
Basis
swaps |
|
40 |
|
|
|
6 |
|
|
|
(9 |
) |
|
|
46 |
|
|
|
3 |
|
Foreign
currency hedges |
|
36 |
|
|
|
(43 |
) |
|
|
58 |
|
|
|
138 |
|
|
|
72 |
|
Other |
|
28 |
|
|
|
4 |
|
|
|
21 |
|
|
|
39 |
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
Total
unrealized gains on derivative and hedging activities, net |
$ |
173 |
|
|
$ |
138 |
|
|
$ |
265 |
|
|
$ |
535 |
|
|
$ |
661 |
|
|
|
|
|
|
|
|
|
|
|
(3) Other derivative accounting
adjustments consist of adjustments related to: (1) foreign
currency denominated debt that is adjusted to spot foreign exchange
rates for GAAP where such adjustments are reversed for “Core
Earnings” and (2) 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.
(4) Negative amounts are subtracted from
“Core Earnings” net income to arrive at GAAP net income and
positive amounts are added to “Core Earnings” net income to arrive
at GAAP net income.
Reclassification of Realized Gains (Losses) on Derivative
and Hedging Activities
Derivative accounting requires net settlement income/expense on
derivatives and realized gains/losses related to derivative
dispositions (collectively referred to as “realized gains (losses)
on derivative and hedging activities”) that do not qualify as
hedges to be recorded in a separate income statement line item
below net interest income. Under our “Core Earnings” presentation,
these gains and losses are reclassified to the income statement
line item of the economically hedged item. For our “Core Earnings”
net interest margin, this would primarily include:
(a) reclassifying the net settlement amounts related to our
Floor Income Contracts to student loan interest income; and
(b) reclassifying the net settlement amounts related to
certain of our basis swaps to debt interest expense. The table
below summarizes the realized losses on derivative and hedging
activities and the associated reclassification on a “Core Earnings”
basis.
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Reclassification of realized gains (losses) on
derivative and hedging activities: |
|
|
|
|
|
|
Net
settlement expense on Floor Income Contracts reclassified to net
interest income |
$ |
(164 |
) |
|
$ |
(163 |
) |
|
$ |
(167 |
) |
|
$ |
(489 |
) |
|
$ |
(532 |
) |
Net
settlement income on interest rate swaps reclassified to net
interest income |
|
11 |
|
|
|
7 |
|
|
|
10 |
|
|
|
27 |
|
|
|
32 |
|
Net
realized gains on terminated derivative contracts reclassified to
other income |
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
Total
reclassifications of realized losses on derivative and hedging
activities |
$ |
(153 |
) |
|
$ |
(156 |
) |
|
$ |
(157 |
) |
|
$ |
(462 |
) |
|
$ |
(500 |
) |
|
|
|
|
|
|
|
|
|
|
Cumulative Impact of Derivative Accounting under GAAP
compared to “Core Earnings”
As of September 30, 2015, derivative accounting has reduced
GAAP equity by approximately $429 million as a result of
cumulative net unrealized losses (after tax) recognized under GAAP,
but not in “Core Earnings.” The following table rolls forward the
cumulative impact to GAAP equity due to these unrealized after tax
net losses related to derivative accounting.
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Beginning impact of derivative accounting on GAAP equity |
$ |
(443 |
) |
|
$ |
(505 |
) |
|
$ |
(760 |
) |
|
$ |
(553 |
) |
|
$ |
(926 |
) |
Net
impact of net unrealized gains (losses) under derivative
accounting(1) |
|
14 |
|
|
|
62 |
|
|
|
143 |
|
|
|
124 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
|
Ending
impact of derivative accounting on GAAP equity |
$ |
(429 |
) |
|
$ |
(443 |
) |
|
$ |
(617 |
) |
|
$ |
(429 |
) |
|
$ |
(617 |
) |
|
|
|
|
|
|
|
|
|
|
(1) Net impact of net unrealized gains
(losses) under derivative accounting is composed of the
following:
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in
millions) |
|
|
2015 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
Total
pre-tax net impact of derivative accounting recognized in net
income(a) |
$ |
|
108 |
|
|
|
$ |
|
83 |
|
|
|
$ |
|
226 |
|
|
|
$ |
|
357 |
|
|
|
$ |
|
475 |
|
|
Tax
impact of derivative accounting adjustment recognized in net
income |
|
|
(38 |
) |
|
|
|
|
(31 |
) |
|
|
|
|
(83 |
) |
|
|
|
|
(142 |
) |
|
|
|
|
(159
|
)
|
|
Change
in unrealized gains (losses) on derivatives, net of tax recognized
in other comprehensive income |
|
|
(56 |
) |
|
|
|
|
10 |
|
|
|
— |
|
|
|
(91 |
) |
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
impact of net unrealized gains (losses) under derivative |
$ |
|
14 |
|
|
|
$ |
|
62 |
|
|
|
$ |
|
143 |
|
|
|
$ |
|
124 |
|
|
|
$ |
|
309 |
|
|
accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See “‘Core Earnings’ derivative
adjustments” table above.
Hedging FFELP Loan Embedded Floor Income
Net Floor premiums received on Floor Income Contracts that have
not been amortized into “Core Earnings” as of the respective
period-ends are presented in the table below. These net premiums
will be recognized in “Core Earnings” in future periods and are
presented net of tax. As of September 30, 2015, the remaining
amortization term of the net floor premiums was approximately 4.3
years for existing contracts. Historically, we have sold Floor
Income Contracts on a periodic basis and depending upon market
conditions and pricing, we may enter into additional Floor Income
Contracts in the future. The balance of unamortized Floor Income
Contracts will increase as we sell new contracts and decline due to
the amortization of existing contracts.
In addition to using Floor Income Contracts, we also use pay
fixed interest rate swaps to hedge the embedded Floor Income within
FFELP Loans. These interest rate swaps qualify as GAAP hedges and
are accounted for as cash flow hedges of variable rate debt. For
GAAP, gains and losses on the effective portion of these hedges are
recorded in accumulated other comprehensive income and gains and
losses on the ineffective portion are recorded immediately to
earnings. Hedged Floor Income from these cash flow hedges that has
not been recognized into “Core Earnings” and GAAP as of the
respective period-ends is presented in the table below. This hedged
Floor Income will be recognized in “Core Earnings” and GAAP in
future periods and is presented net of tax. As of
September 30, 2015, the hedged period is from April 2016
through December 2019. Historically, we have used pay fixed
interest rate swaps on a periodic basis to hedge embedded Floor
Income and depending upon market conditions and pricing, we may
enter into swaps in the future. The balance of unrecognized hedged
Floor Income will increase as we enter into new swaps and decline
as revenue is recognized.
|
|
|
|
|
|
|
September 30, |
|
June 30, |
|
September 30, |
(Dollars in millions) |
|
|
2015 |
|
|
|
|
2015 |
|
|
|
2014 |
|
Unamortized net Floor premiums (net of tax) |
$ |
|
(183 |
) |
|
|
$ |
(220 |
) |
|
$ |
(236 |
) |
Unrecognized hedged Floor Income related to pay fixed interest rate
swaps (net of tax) |
|
|
(342 |
) |
|
|
|
(342 |
) |
|
— |
|
|
|
|
|
|
Total(1) |
$ |
|
(525 |
) |
|
|
$ |
(562 |
) |
|
$ |
(236 |
) |
|
|
|
|
|
|
(1) $(833) million, $(892) million and $(374)
million on a pre-tax basis as of September 30, 2015, June 30,
2015 and September 30, 2014, respectively.
3) 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.
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
“Core
Earnings” goodwill and acquired intangible asset
adjustments(1) |
$ |
(3 |
) |
|
$ |
(3 |
) |
|
$ |
(2 |
) |
|
$ |
(7 |
) |
|
$ |
(7 |
) |
|
|
(1) Negative amounts are subtracted from
“Core Earnings” net income to arrive at GAAP net income.
Financial Condition
This section provides additional information regarding the
credit quality and performance indicators related to our Private
Education Loan portfolio.
Private Education Loan Portfolio
Performance
Private Education Loan Delinquencies and Forbearance — GAAP
and “Core Earnings” Basis
|
September 30, |
|
June 30, |
|
September 30, |
|
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
(Dollars in
millions) |
Balance |
|
% |
|
Balance |
|
% |
|
Balance |
|
% |
Loans
in-school/grace/deferment(1) |
$ |
|
2,335 |
|
|
|
|
|
$ |
|
2,439 |
|
|
|
|
|
$ |
|
3,436 |
|
|
|
|
Loans in
forbearance(2) |
|
|
1,046 |
|
|
|
|
|
|
|
998 |
|
|
|
|
|
|
|
1,258 |
|
|
|
|
Loans in
repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
|
23,258 |
|
|
|
|
92.6 |
% |
|
|
|
24,100 |
|
|
|
|
93.2 |
% |
|
|
|
24,963 |
|
|
|
|
92.1 |
% |
Loans delinquent 31-60
days(3) |
|
|
589 |
|
|
|
|
2.4 |
|
|
|
|
544 |
|
|
|
|
2.1 |
|
|
|
|
732 |
|
|
|
|
2.7 |
|
Loans delinquent 61-90
days(3) |
|
|
403 |
|
|
|
|
1.6 |
|
|
|
|
369 |
|
|
|
|
1.4 |
|
|
|
|
468 |
|
|
|
|
1.8 |
|
Loans delinquent greater than 90
days(3) |
|
|
854 |
|
|
|
|
3.4 |
|
|
|
|
852 |
|
|
|
|
3.3 |
|
|
|
|
929 |
|
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Private Education Loans in repayment |
|
|
25,104 |
|
|
|
|
100 |
% |
|
|
|
25,865 |
|
|
|
|
100 |
% |
|
|
|
27,092 |
|
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Private Education Loans, gross |
|
|
28,485 |
|
|
|
|
|
|
|
29,302 |
|
|
|
|
|
|
|
31,786 |
|
|
|
|
Private
Education Loan unamortized discount |
|
|
(549 |
) |
|
|
|
|
|
|
(564 |
) |
|
|
|
|
|
|
(604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Private Education Loans |
|
|
27,936 |
|
|
|
|
|
|
|
28,738 |
|
|
|
|
|
|
|
31,182 |
|
|
|
|
Private
Education Loan receivable for partially charged-off loans |
|
|
892 |
|
|
|
|
|
|
|
902 |
|
|
|
|
|
|
|
1,253 |
|
|
|
|
Private
Education Loan allowance for losses |
|
|
(1,505 |
) |
|
|
|
|
|
|
(1,533 |
) |
|
|
|
|
|
|
(1,959 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
Education Loans, net |
$ |
|
27,323 |
|
|
|
|
|
$ |
|
28,107 |
|
|
|
|
|
$ |
|
30,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Private Education Loans in repayment |
|
|
|
|
|
|
|
88.1 |
% |
|
|
|
|
88.3 |
% |
|
|
|
|
85.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Delinquencies as a percentage of Private Education Loans in
repayment |
|
|
|
|
|
|
|
7.4 |
% |
|
|
|
|
6.8 |
% |
|
|
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loans in
forbearance as a percentage of loans in repayment and
forbearance |
|
|
|
|
|
|
|
4.0 |
% |
|
|
|
|
3.7 |
% |
|
|
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loans in
repayment with more than 12 payments made |
|
|
|
|
|
|
|
93.8 |
% |
|
|
|
|
93.0 |
% |
|
|
|
|
90.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Cosigner
rate |
|
|
|
65 |
% |
|
|
|
|
65 |
% |
|
|
|
|
64 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Average
FICO |
|
|
|
718 |
|
|
|
|
|
719 |
|
|
|
|
|
718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Deferment includes customers who have
returned to school or are engaged in other permitted educational
activities and are not yet required to make payments on the loans,
e.g., residency periods for medical students or a grace period for
bar exam preparation.
(2) Loans for customers who have
requested extension of grace period generally during employment
transition or who have temporarily ceased making full payments due
to hardship or other factors, consistent with established loan
program servicing policies and procedures.
(3) The period of delinquency is based on
the number of days scheduled payments are contractually past
due.
Allowance for Private Education Loan Losses — GAAP
Basis
|
Quarters Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
(Dollars in millions) |
|
|
2015 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
Allowance at beginning of period |
$ |
|
1,533 |
|
|
|
$ |
|
1,849 |
|
|
|
$ |
|
1,983 |
|
|
|
$ |
|
1,916 |
|
|
|
$ |
|
2,097 |
|
|
|
Provision for Private Education Loan losses |
|
|
117 |
|
|
|
|
|
191 |
|
|
|
|
|
130 |
|
|
|
|
|
428 |
|
|
|
|
|
460 |
|
|
|
Net
adjustment resulting from the change in the charge-off
rate(1) |
— |
|
|
|
(330 |
) |
|
|
— |
|
|
|
(330 |
) |
|
|
— |
|
Net
charge-offs remaining(2) |
|
|
(148 |
) |
|
|
|
|
(179 |
) |
|
|
|
|
(158 |
) |
|
|
|
|
(517 |
) |
|
|
|
|
(543 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs |
|
|
(148 |
) |
|
|
|
|
(509 |
) |
|
|
|
|
(158 |
) |
|
|
|
|
(847 |
) |
|
|
|
|
(543 |
) |
|
|
Reclassification of interest reserve(3) |
|
|
3 |
|
|
|
|
|
2 |
|
|
|
|
|
4 |
|
|
|
|
|
8 |
|
|
|
|
|
14 |
|
|
|
Distribution of SLM BankCo |
— |
|
— |
|
— |
|
— |
|
|
|
(69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance at end of period |
$ |
|
1,505 |
|
|
|
$ |
|
1,533 |
|
|
|
$ |
|
1,959 |
|
|
|
$ |
|
1,505 |
|
|
|
$ |
|
1,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)(1) |
|
|
2.3 |
|
% |
|
|
|
2.7 |
|
% |
|
|
|
2.3 |
|
% |
|
|
|
2.6 |
|
% |
|
|
|
2.5 |
|
% |
|
Net
adjustment resulting from the change in the charge-off rate as a
percentage of average loans in repayment
(annualized)(1) |
— % |
|
|
|
5.1 |
|
% |
|
— % |
|
|
|
1.7 |
|
% |
|
— % |
|
Average
coverage of net charge-offs, excluding the net adjustment resulting
from the change in the charge-off rate
(annualized)(1) |
|
|
2.6 |
|
|
|
|
|
2.1 |
|
|
|
|
|
3.1 |
|
|
|
|
|
2.2 |
|
|
|
|
|
2.7 |
|
|
|
Allowance as a percentage of the ending total loan balance |
|
|
5.1 |
|
% |
|
|
|
5.1 |
|
% |
|
|
|
5.9 |
|
% |
|
|
|
5.1 |
|
% |
|
|
|
5.9 |
|
% |
|
Allowance as a percentage of ending loans in repayment |
|
|
6.0 |
|
% |
|
|
|
5.9 |
|
% |
|
|
|
7.2 |
|
% |
|
|
|
6.0 |
|
% |
|
|
|
7.2 |
|
% |
|
Ending
total loans(4) |
$ |
|
29,377 |
|
|
|
$ |
|
30,204 |
|
|
|
$ |
|
33,039 |
|
|
|
$ |
|
29,377 |
|
|
|
$ |
|
33,039 |
|
|
|
Average
loans in repayment |
$ |
|
25,546 |
|
|
|
$ |
|
26,122 |
|
|
|
$ |
|
27,228 |
|
|
|
$ |
|
26,100 |
|
|
|
$ |
|
29,065 |
|
|
|
Ending
loans in repayment |
$ |
|
25,104 |
|
|
|
$ |
|
25,865 |
|
|
|
$ |
|
27,092 |
|
|
|
$ |
|
25,104 |
|
|
|
$ |
|
27,092 |
|
|
|
|
|
(1) In the second quarter of 2015, the
portion of the loan amount charged off at default increased from 73
percent to 79 percent. This did not impact the provision for loan
losses as previously this had been reserved through the allowance
for loan losses. This change resulted in a $330 million reduction
to the balance of the receivable for partially charged-off
loans.
(2) Charge-offs are reported net of
expected recoveries. The expected recovery amount is transferred to
the receivable for partially charged-off loan balance. Charge-offs
include charge-offs against the receivable for partially
charged-off loans which represents the difference between what was
expected to be collected and any shortfalls in what was actually
collected in the period. See “Receivable for Partially Charged-Off
Private Education Loans” for further discussion.
(3) Represents the additional allowance
related to the amount of uncollectible interest reserved within
interest income that is transferred in the period to the allowance
for loan losses when interest is capitalized to a loan’s principal
balance.
(4) Ending total loans represents gross
Private Education Loans, plus the receivable for partially
charged-off loans.
Allowance for Private Education Loan Losses — “Core
Earnings” Basis
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
|
2015 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
Allowance at beginning of period |
$ |
|
1,533 |
|
|
|
$ |
|
1,849 |
|
|
|
$ |
|
1,983 |
|
|
|
$ |
|
1,916 |
|
|
|
$ |
|
2,035 |
|
|
Provision for Private Education Loan losses |
|
|
117 |
|
|
|
|
|
191 |
|
|
|
|
|
130 |
|
|
|
|
|
428 |
|
|
|
|
|
411 |
|
|
Net
adjustment resulting from the change in the charge-off
rate(1) |
— |
|
|
|
(330 |
) |
|
|
— |
|
|
|
(330 |
) |
|
|
— |
Net
charge-offs remaining(2) |
|
|
(148 |
) |
|
|
|
|
(179 |
) |
|
|
|
|
(158 |
) |
|
|
|
|
(517 |
) |
|
|
|
|
(543 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
net charge-offs |
|
|
(148 |
) |
|
|
|
|
(509 |
) |
|
|
|
|
(158 |
) |
|
|
|
|
(847 |
) |
|
|
|
|
(543 |
) |
|
Reclassification of interest reserve(3) |
|
|
3 |
|
|
|
|
|
2 |
|
|
|
|
|
4 |
|
|
|
|
|
8 |
|
|
|
|
|
14 |
|
|
Loan
sales and other transactions |
— |
|
— |
|
— |
|
— |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance at end of period |
$ |
|
1,505 |
|
|
|
$ |
|
1,533 |
|
|
|
$ |
|
1,959 |
|
|
|
$ |
|
1,505 |
|
|
|
$ |
|
1,959 |
|
|
|
|
|
|
|
|
|
|
|
|
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)(1) |
|
|
2.3 |
|
% |
|
|
|
2.7 |
|
% |
|
|
|
2.3 |
|
% |
|
|
|
2.6 |
|
% |
|
|
|
2.7 |
|
% |
Net
adjustment resulting from the change in the charge-off rate as a
percentage of average loans in repayment
(annualized)(1) |
— % |
|
|
|
5.1 |
|
% |
|
— % |
|
|
|
1.7 |
|
% |
|
— % |
Average
coverage of net charge-offs, excluding the net adjustment resulting
from the change in the charge-off rate
(annualized)(1) |
|
|
2.6 |
|
|
|
|
|
2.1 |
|
|
|
|
|
3.1 |
|
|
|
|
|
2.2 |
|
|
|
|
|
2.7 |
|
|
Allowance as a percentage of the ending total loan balance |
|
|
5.1 |
|
% |
|
|
|
5.1 |
|
% |
|
|
|
5.9 |
|
% |
|
|
|
5.1 |
|
% |
|
|
|
5.9 |
|
% |
Allowance as a percentage of ending loans in repayment |
|
|
6.0 |
|
% |
|
|
|
5.9 |
|
% |
|
|
|
7.2 |
|
% |
|
|
|
6.0 |
|
% |
|
|
|
7.2 |
|
% |
Ending
total loans(4) |
$ |
|
29,377 |
|
|
|
$ |
|
30,204 |
|
|
|
$ |
|
33,039 |
|
|
|
$ |
|
29,377 |
|
|
|
$ |
|
33,039 |
|
|
Average
loans in repayment |
$ |
|
25,546 |
|
|
|
$ |
|
26,122 |
|
|
|
$ |
|
27,228 |
|
|
|
$ |
|
26,100 |
|
|
|
$ |
|
27,151 |
|
|
Ending
loans in repayment |
$ |
|
25,104 |
|
|
|
$ |
|
25,865 |
|
|
|
$ |
|
27,092 |
|
|
|
$ |
|
25,104 |
|
|
|
$ |
|
27,092 |
|
|
(1) In the second quarter of 2015, the
portion of the loan amount charged off at default increased from 73
percent to 79 percent. This did not impact the provision for loan
losses as previously this had been reserved through the allowance
for loan losses. This change resulted in a $330 million reduction
to the balance of the receivable for partially charged-off
loans.
(2) Charge-offs are reported net of
expected recoveries. The expected recovery amount is transferred to
the receivable for partially charged-off loan balance. Charge-offs
include charge-offs against the receivable for partially
charged-off loans which represents the difference between what was
expected to be collected and any shortfalls in what was actually
collected in the period. See “Receivable for Partially Charged-Off
Private Education Loans” for further discussion.
(3) Represents the additional allowance
related to the amount of uncollectible interest reserved within
interest income that is transferred in the period to the allowance
for loan losses when interest is capitalized to a loan’s principal
balance.
(4) Ending total loans represents gross
Private Education Loans, plus the receivable for partially
charged-off loans.
In establishing the allowance for Private Education Loan losses
as of September 30, 2015, we considered several factors with
respect to our Private Education Loan portfolio. On a “Core
Earnings” basis, total loans delinquent (as a percentage of loans
in repayment) have decreased to 7.4 percent from 7.9 percent
in the year-ago quarter. Loans greater than 90 days delinquent
(as a percentage of loans in repayment) remained unchanged at 3.4
percent. The “Core Earnings” charge-off rate remained
unchanged at 2.3 percent. Loans in forbearance (as a percentage of
loans in repayment and forbearance) decreased to 4.0 percent from
4.4 percent in the year-ago quarter.
The Private Education Loan provision for loan losses on a “Core
Earnings” basis was $117 million in the third quarter of 2015, down
$13 million from the third quarter of 2014. This decrease in
provision is primarily a result of the overall improvement in
Private Education Loans’ credit quality, delinquency and charge-off
trends leading to decreases in expected future
charge-offs.
The Private Education Loan provision for loan losses on a “Core
Earnings” basis was $428 million in the nine months ended September
30, 2015, up $17 million from the year-ago period. This increase in
provision is primarily the result of an increase in the amount of
loans exiting deferment status in 2014 over prior years and those
loans experiencing unfavorable credit trends compared to loans that
exited deferment in prior years. This segment of borrowers returned
to school during the recession, deferred payment on their existing
loans, and exited deferment status in 2014. This issue resulted in
the second-quarter 2015 provision being elevated at $191 million
versus $117 million for third-quarter 2015 and $120 million for
first-quarter 2015. The remainder of the portfolio continues
to perform as expected and is experiencing positive credit
trends.
Receivable for Partially Charged-Off Private Education
Loans
At the end of each month, for loans that are 212 days past
due, we charge off the estimated loss of a defaulted loan balance.
Actual recoveries are applied against the remaining loan balance
that was not charged off. We refer to this remaining loan balance
as the “receivable for partially charged-off loans.” If actual
periodic recoveries are less than expected, the difference is
immediately charged off through the allowance for Private Education
Loan losses with an offsetting reduction in the receivable for
partially charged-off Private Education 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 financial crisis, which
began in 2007, impacted our collections on defaulted loans and as a
result, Private Education Loans which defaulted from 2007 through
March 31, 2015, experienced collection performance below our
pre-financial crisis experience. As a result, until we gained
enough data and experience to determine the long-term, post-default
recovery rate of 21 percent in second-quarter 2015, we established
a reserve for potential shortfalls in recoveries. In the second
quarter of 2015, the portion of the loan amount charged off at
default increased from 73 percent to 79 percent. This did not
impact the provision for loan losses as previously this had been
reserved through the allowance for loan losses. This change
resulted in a $330 million reduction to the balance of the
receivable for partially charged-off loans. We no longer expect to
have significant periodic recovery shortfalls as a result of this
change; however, it is possible we may continue to experience such
shortfalls.
The following table summarizes the activity in the receivable
for partially charged-off Private Education Loans (GAAP-basis and
“Core Earnings”-basis are the same).
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
|
2015 |
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
2014 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
Receivable at beginning of period |
$ |
|
902 |
|
|
|
$ |
|
|
1,236 |
|
|
|
|
$ |
|
1,269 |
|
|
|
$ |
|
1,245 |
|
|
|
$ |
|
1,313 |
|
|
Expected
future recoveries of current period defaults(1) |
|
|
38 |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
51 |
|
|
|
|
|
147 |
|
|
|
|
|
175 |
|
|
Recoveries(2) |
|
|
(48 |
) |
|
|
|
|
|
(50 |
|
) |
|
|
|
|
(48 |
) |
|
|
|
|
(151 |
) |
|
|
|
|
(167 |
) |
|
Net
adjustment resulting from the change in the charge-off
rate(3) |
— |
|
|
|
|
(330 |
|
) |
|
|
— |
|
|
|
(330 |
) |
|
|
— |
Net
charge-offs remaining(3) |
— |
|
— |
|
|
|
(19 |
) |
|
|
|
|
(19 |
) |
|
|
|
|
(68 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
net charge-offs |
— |
|
|
|
|
(330 |
) |
|
|
|
|
|
(19 |
) |
|
|
|
|
(349 |
) |
|
|
|
|
(68 |
) |
|
|
|
|
|
|
|
|
|
|
|
Receivable at end of period |
|
|
892 |
|
|
|
|
|
|
902 |
|
|
|
|
|
|
1,253 |
|
|
|
|
|
892 |
|
|
|
|
|
1,253 |
|
|
Allowance for estimated recovery shortfalls(4) |
— |
|
— |
|
|
|
(392 |
) |
|
|
— |
|
|
|
(392 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
receivable at end of period |
$ |
|
892 |
|
|
|
$ |
|
|
902 |
|
|
|
|
$ |
|
861 |
|
|
|
$ |
|
892 |
|
|
|
$ |
|
861 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents the difference between the
defaulted loan balance and our estimate of the amount to be
collected in the future.
(2) Current period cash collections.
(3) Prior to second-quarter 2015,
charge-offs represent the current period recovery shortfall — the
difference between what was expected to be collected and what was
actually collected. In the second quarter of 2015, the portion of
the loan amount charged off at default increased from 73 percent to
79 percent. This change resulted in a $330 million reduction to the
balance of the receivable for partially charged-off loans. These
amounts are included in total charge-offs as reported in the
“Allowance for Private Education Loan Losses” table.
(4) The allowance for estimated recovery
shortfalls of the receivable for partially charged-off Private
Education Loans is a component of the $2.0 billion overall
allowance for Private Education Loan losses as of September 30,
2014. This component of the allowance was removed in the second
quarter of 2015 due to the increase in the charge-off rate
discussed above.
Liquidity and Capital Resources
We expect to fund our ongoing liquidity needs, including the
repayment of $1.2 billion of senior unsecured notes that
mature in the next twelve months, primarily through our current
cash and investment portfolio, the predictable operating cash flows
provided by operating activities, the repayment of principal on
unencumbered student loan assets, and the distributions from our
securitization trusts (including servicing fees which are priority
payments within the trusts). We may also draw down on our secured
FFELP Loan and Private Education Loan facilities, issue term
asset-backed securities (“ABS”) or issue additional unsecured
debt.
We no longer originate Private Education Loans or FFELP Loans
and therefore no longer have liquidity requirements for new
originations, but we will continue to opportunistically purchase
Private Education Loan and FFELP Loan portfolios from others.
Sources of Liquidity and Available Capacity
Ending Balances
|
September 30, |
|
June 30, |
|
September 30, |
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
Sources of primary liquidity: |
|
|
|
|
|
Total unrestricted cash and liquid
investments |
$ |
1,310 |
|
|
$ |
1,619 |
|
|
$ |
1,950 |
|
Unencumbered FFELP Loans |
|
1,175 |
|
|
|
1,046 |
|
|
|
1,682 |
|
|
|
|
|
|
|
Total GAAP and “Core Earnings”
basis |
$ |
2,485 |
|
|
$ |
2,665 |
|
|
$ |
3,632 |
|
|
|
|
|
|
|
Average Balances
|
Quarters Ended |
|
Nine Months Ended |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in millions) |
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Sources of primary liquidity: |
|
|
|
|
|
|
|
|
|
Total unrestricted cash and liquid
investments |
$ |
1,473 |
|
|
$ |
1,441 |
|
|
$ |
1,958 |
|
|
$ |
1,576 |
|
|
$ |
2,041 |
|
Unencumbered FFELP Loans |
|
1,253 |
|
|
|
1,594 |
|
|
|
1,859 |
|
|
|
1,623 |
|
|
|
1,795 |
|
|
|
|
|
|
|
|
|
|
|
Total “Core Earnings” basis |
|
2,726 |
|
|
|
3,035 |
|
|
|
3,817 |
|
|
|
3,199 |
|
|
|
3,836 |
|
SLM BankCo(1) |
— |
|
— |
|
— |
|
— |
|
|
1,306 |
|
|
|
|
|
|
|
|
|
|
|
Total GAAP basis |
$ |
2,726 |
|
|
$ |
3,035 |
|
|
$ |
3,817 |
|
|
$ |
3,199 |
|
|
$ |
5,142 |
|
|
|
|
|
|
|
|
|
|
|
(1) For the nine months ended
September 30, 2014, includes $690 million of cash and $616
million of FFELP Loans.
Liquidity may also be available under secured credit facilities
to the extent we have eligible collateral and capacity available.
Maximum borrowing capacity under the FFELP Loan–other 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 FFELP
Loans. As of September 30, 2015, June 30, 2015 and
September 30, 2014, the maximum additional capacity under
these facilities was $10.1 billion, $11.5 billion and $11.0
billion, respectively. For the three months ended September 30,
2015, June 30, 2015 and September 30, 2014, the average
maximum additional capacity under these facilities was $11.0
billion, $12.2 billion and $10.8 billion, respectively.
For the nine months ended September 30, 2015 and 2014, the
average maximum additional capacity under these facilities was
$12.0 billion and $11.6 billion, respectively.
In addition to the FFELP Loan–other facilities, liquidity may
also be available from our Private Education Loan asset-backed
commercial paper facility (“ABCP”). This facility provides
liquidity for Private Education Loan acquisitions and for the
refinancing of loans presently on our balance sheet or in other
short-term facilities. The maximum capacity under this
facility is $1 billion and it matures in June 2016. At
September 30, 2015, the available capacity under this facility
was $242 million.
We also hold a number of other unencumbered assets, consisting
primarily of Private Education Loans and other assets. Total
unencumbered student loans comprised $5.2 billion of our
unencumbered assets of which $4.0 billion and
$1.2 billion related to Private Education Loans and FFELP
Loans, respectively. At September 30, 2015, we had a total of
$9.9 billion of unencumbered assets inclusive of those
described above as sources of primary liquidity and exclusive of
goodwill and acquired intangible assets.
For further discussion of our various sources of liquidity, our
continued access to the ABS market, our asset-backed financing
facilities, and our issuance of unsecured debt, see “Note 6 —
Borrowings” in our Annual Report on Form 10-K for the year ended
December 31, 2014.
The following table reconciles encumbered and unencumbered
assets and their net impact on GAAP total tangible equity.
|
September 30, |
|
June 30, |
|
September 30, |
(Dollars in billions) |
|
|
2015 |
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
|
|
Net
assets of consolidated variable interest entities (encumbered
assets) — FFELP Loans |
$ |
|
5.0 |
|
|
|
$ |
|
4.9 |
|
|
|
$ |
|
4.4 |
|
|
Net
assets of consolidated variable interest entities (encumbered
assets) — Private Education Loans |
|
|
6.5 |
|
|
|
|
|
6.3 |
|
|
|
|
|
6.5 |
|
|
Tangible
unencumbered assets(1) |
|
|
9.9 |
|
|
|
|
|
10.8 |
|
|
|
|
|
12.9 |
|
|
Senior
unsecured debt |
|
|
(15.8 |
) |
|
|
|
|
(16.2 |
) |
|
|
|
|
(17.4 |
) |
|
Mark-to-market on unsecured hedged debt(2) |
|
|
(1.0 |
) |
|
|
|
|
(.7 |
) |
|
|
|
|
(.8 |
) |
|
Other
liabilities, net |
|
|
(1.3 |
) |
|
|
|
|
(1.7 |
) |
|
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
Total tangible equity — GAAP
Basis |
$ |
|
3.3 |
|
|
|
$ |
|
3.4 |
|
|
|
$ |
|
3.8 |
|
|
|
|
|
|
|
|
(1) Excludes goodwill and acquired
intangible assets.
(2) At September 30, 2015, June 30, 2015
and September 30, 2014, there were $881 million, $675 million
and $654 million, respectively, of net gains on derivatives
hedging this debt in unencumbered assets, which partially offset
these losses.
Contact:
Media:
Patricia Nash Christel, 302-283-4076, patricia.christel@navient.com
Investors: Joe Fisher, 302-283-4075, joe.fisher@navient.com
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