Navient (NAVI) 22 Jul 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Navient Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. It is now my pleasure to turn the call over to your host, Mr. Fisher. Joe Mr. is floor yours. the Fisher,

Morris, you, morning questions. remarks, XXXX Remondi, we welcome Acting Ted Navient's will open call Good quarter Thank our After earnings for prepared and Jack and second are call. to today and the Celia. With their Controller our up CEO, CFO. me

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

systems, our magnitude, related reporting to that include, maintain pandemic our others, uncertainties put our restrictions been these have reporting and ability controls place impact. risks economic factors did of Navient, For affect the and work and books procedures. and travel and among disclosure policies negatively COVID-XX controls from the internal home the not over the close in and financial duration or The severity, financial associated with

you. reconciliation description During core we call on Investors second to Jack. quarter A non-GAAP disclosure. now, is this earnings, earnings will turn This measures And results Thank call, core I'll page and posted earnings. the a found conference to our our measures, in the we refer to the at full call GAAP be GAAP of can XXXX over navient.com. supplemental

Thank joining your you in us for today Joe. for Thanks, interest good morning, and Navient. everyone. And

where been our earnings call. to welcome Navient an like outstanding Morris Ted since finance I team. today's with of start, to I would Before member has been he's XXXX Ted

expert addition to CECL. two CFO, role derivative in he's Joe of resident our he's also said, accounting acting favorite and my our policies, controller and accounting As of in his

and the see I to team. finance tremendous rest on Ted sorry – – of well Chris have I confidence wish are him in the move we While and

welcome ongoing continues COVID-XX to Ted. The present So, crisis new challenges.

disruptions work continues to responded. produce in while have customers next, clients Our their seen we financial health. And what and have lives, as comes significant to uncertainty and it

We provided options. other forbearances of and relief borrowers have to relief in through payment need millions

In responded serve. We have consumer marketing and environment, and pricing. credit we the demand meet and we set a about retained protection response the attorneys and and increase our for private with to ability absorb to in relief crisis our proud can, home. new XX% we reduce needs we to keep effort of as many In an actively and teammates states our We capital. team, and state how the education on to together to contract took reserves services worked the general to our safe, our campaigns from work our loans to uncertain who our continue liquidity action. those decisive are hand for increased losses, extremely unemployment claims uniform of allow to team agencies loan of such nationwide. And those of assisting surge I'm provide immediately

our diversity dedication Our this These quality. to business to allowed our quickly, to and results quarter. safely, and the infrastructure work steps, strength has outstanding client happen this strategy, and and disruption service focus with technology and delivered move skills and allowed no our efficiently our productively and team, the team of of

loan per There the debt in sales rose gains to adjusted share XX% no similar from included repurchases. For year-ago The the core quarter, gains period quarter and year-ago $X.XX. earnings were this $X.XX over quarter.

color Ted favorable improving flexibility me business credit interest demand new will let quarter the our $XX and over on processing quarter. add financial income, efficiency. million the continued rates details Low first, our $XX performance, refi interest Net rate environment, provide increase a results But the that by on operational were more for from to year-ago the particularly increased a a proactive services, Later, and July million interest quarter, rate our results. focus nearly portion strong loan Our driven X. meet income highlights the this of to on very favorable portfolio. and of portfolio on increased strategy, environment our resets significant operating short-term each some primarily floor the due

loans rate in annual falling forbearances not earlier and of was to strong month, repayments X% XX% next reset the response quarter. The this repeat with Credit decreases income by the in balance XX. meaningful reset delinquencies, rate at to million on due provided part the will floor $XX saw of the granted With in relief COVID. disaster earned delinquency performance XX-day loans to June

We borrowers are year. exit from forbearances this earlier just disaster beginning granted see to

portfolio, program We have to that our return of requested $X.X forbearance them. successfully has has data-driven they the before repayment. to levels borrower where implemented assist an customers relief inform loan forbearance in extensive, outreach available to billion not additional the options payment and exited peak are private Since

date, for been has this strong change. prepared performance to we credit are to While

provision reserves level Our absorb a significant are for loan of able very losses. resulting losses to and

our significantly in For portfolio XX% experienced cover loan we in private example, above years. legacy loan our levels recent would what loss portfolio, have at XX% June new and cumulative XX, of in our defaults FFELP over reserve over

to reported I our uncertain quarter, environment, reduced for we spend in response last products. loan the As economic refi marketing

originate in high expect With $X.X the quarter. million billion return hurdles. billion As the second to efforts, loans value both we've the of in approximately funding restarted $XXX consistent new with fell refi quality, our in credit quarter $X first half high originations visibility from in XXXX, and costs, improved and a to in result, marketing

for prepare upcoming product. the lending to with year continued also have in-school We our academic

experienced fall last that lower While positive enrollment we students overall and our targeted early to campus, demand high in with the significant on results crisis. in In our is to the and valuable attractive reductions are and due business transaction likely the to year volume levels clients from design and lead ROEs fewer due teens. will features are most segment, product confident to an BPS

patient vehicles or to toll using at visits fewer and roads due example, there hospitals parking were COVID concerns. For fell

BPS to new operational of including team win was able our to unemployment our help expertise processing clients to use respond contracts number contact tracing incremental a flexibility COVID Our needs, services. and to processing and

were our provide ability to basis. real Importantly, to technical we a and able people demonstrate adapt capabilities close time experienced to on and

the to led been quarter. new million response extremely revenue clients feedback satisfying. rapid Our their The customers in and $XX these from nearly in has

current management One of our expense been crisis not efforts reduced has top the ongoing our and has here. priorities

area, are service. in at delivering this industry-leading outstanding continuously improving while we still While we have consistently operated efficiency,

examine expense of from operating costs result item customers and reduce the a efforts, to eliminate improve waste, quarter million we while quarter to every As our to this these expenses efficiency, delivering service clients. total fell and year-ago and continue to excellent XX% $XXX

dividends Finally, shareholders adoption in made in our returned to $XX progress million by we improving last ratio of decline capital quarter's and tangible meaningful CECL. the caused from

ratio we provide ratio equity X.X% Adding this back X.X% the to easily up planned in improved that tangible earnings mark-to-market hedge at and on to from at to XXXX. XX, June increase the will our would Expected and capital derivatives our dividend support floor income at of the June losses return temporary balance employed adjusted Our ability XX. cumulative to complete X% March XX.

reported from this I position During financial our earnings entering of a that strength. and last call, company crisis our was substantial operational

results of strengths. the quarter are Our this product these

gratifying an work credit as model react teammates $X.XX they Notably, enabled return our clients, core and to infrastructure build delivered to in needs our time, equity. and This between value expenses. confirms performance, for our the business with plan year. seeing, for are more of safer our forecast $X.XX a XX% assuming the early is lower ability of and technology full-year ability extremely these rates we value levels us the our be franchise, results Our report on were strong And At operations allowed to to and growth of net share and similar this of from to interest remains Combined, a and stakeholders. areas remain performance income, credit our in the strategic confident and our consistent of and the $X we to basis of accomplished the critical spreads pivot to quickly results that at we customers interest earnings are and XXXX. with all balance delivered and home, earnings the of expect they need. outlook

look it's Finally, dedication interest, Thank extraordinary the product questions you. work after your of details and to team. the forward appreciate on of an Ted more I I provides and quarter. Ted? the your hard

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

our core on section. by accounting. earnings million operating on and liquidity X, improved to $XXX which During COVID-XX on business. from mark-to-market $X.XX to quarter adjusted second related my loans; impacted COVID-XX; excluding XX%; strong of referencing quarter found GAAP include: the company's be the impact will provide in be results Starting of website prepared XXXX call highlights remarks, color on of Investors the the key pandemic will Delivered I for the EPS I presentation can slide or million and adjusted by position; reduced $X.XX; X.X% losses our provided the of equity tangible refinance increased additional the over cumulative cents payment X borrowers ratio and immediate to relief on derivative after originated EPS expenses X% private negative our review

both On with FFELP the in Loans Education private our continued beginning grant portfolio, reporting segment to need. to and forbearance move disaster slide X. Federal we on to those related Let's

June impacted peak payment lower rate loan are the statuses. quarter-end that provide XX.X% began to at X.X%. portfolio forbearances we by Today, down COVID-XX, XX% our seeing XX, borrowers increased XXX XX.X%, transition and to to points as to on paying rates basis are those which is our to we delinquency FFELP back from than As decreased of relief forbearance

led each in million overall floor While interest interest which X and year. drop XX% increase unhedged XX in $X the favorable in increasing interest to continued rate interest amortize, loans, quarter. The segment's driven margin the that earned the of year-ago to QX. unhedged QX increase was In interest continues largely rates July net was floor began accelerated income the a net income annually for the the with improved quarter, in by billion on resulted half in rates which to less points reset contributed $XXX This basis income. environment than to XX quarter, the of from quarter the that the of little portfolio into significant on basis second margin, a points net

portfolio do XX margin year should on Given for the to not rates we basis interest point floor are interest raising The additional margin we environment, the net income floor result, as interest current continue reset full unhedged be portion outlook through our end anticipate to mid current annual rate our positively expectations low of earning XXXX. of for in our the a interest portfolio. And range. impact to FFELP the net

In addition, year-over-year. XX% operating expenses declined

statuses. the and to X seen rate Now, forbearance our saw that fall not lending relief requested at hundred forbearance the transition the seen our X.X% begins we to have segment. successfully to on following let's exited that additional decline can at points turn In borrowers quarter-end. portfolio quarter, mentioned forbearance this have additional on to to and as slide payment Recently, as continue available. be Jack peak we repayment Trajectory page basis have XX.X% consumer options usage of the forbearance

to million. to X% XX% $XX XX% fell and declined rate delinquency by charge-offs Our

feel of beginning quarter, our we points actual the based significant volatility until for April $XX As normalized the Net of high are on with are on the delinquencies well-seasoned income adequately increased balance, with percentage and in from given driven borrowers prime which that margin natural was the net year-over-year decreased stability those environment in forbearance, as quality lows, than quarter. transition education the to portfolio. from rate confident and March LIBOR. portfolio. a these both the not interest returned loan historic out that with and $X up due reserved, from was a economic our interest X.X%, offsetting expectations X.X% we expense by Absent allowance prior in since to the charge-offs loans rates in was million, repayment and amortization interest legacy our resulted we margin increase of the deterioration provision dislocation has of an in here, credit increase better basis in XXXX. our In private million combined expect charge-offs more XXX earn occurred funded the refinance and of levels. The The increase assets net the and that our to in rates in of

loans. $XXX education refinance During the quarter, originated of we high-quality million

activities marketing this indicated, have decline intentional we we decreased As to capital stemming our due uncertainty COVID-XX. as from was market

the in increase originate updated ABS a year. We more also in plan to originations ABS seeing expect originations the result, the new and of costs monthly stable We're reflect funding we cost the now market. as of for in on market. improving the the funds $X increase second billion And to and pricing half to

In portfolio. addition, our expenses growing operating remained year-over-year flat while

continue review to to healthcare transaction-related Business quarter, placements Let's services In our ago, revenue slide to cycle year the significantly X second management government we lower activity a of result saw and segment. Processing economic to compared in both as due slower COVID-XX. the

the a provide XX% experienced BPS clients quarter. are increase total to services. who unemployed residents to tracing colleagues first We opportunities and in in needed state have from transition help who contact are hundreds with new revenue support of increase our These benefits to accessing to working contributed the

our Now, let's activity. XX, financing highlights turn which to slide

quarter, backed quarter. by an basis days refi ago, term were private quality as tighter million points additional transactions issued in recover. investor demand During $XXX ABS. the XX began the in of billion ABS loans education resulted to second similar spreads education second refi than Strong overall we $X.X that of high markets we term Two priced private

loans. we facility quarter-end, education private capacity had extended extended of total warehouse FFELP our loan At XXXX, we a XXXX education and capacity $X facilities for facility. expanded loans education addition, and private private facility for million to in In $XXX a additional funding billion our in refinance FFELP to

cash. is of In primary addition, liquidity, billion billion of $X.X we which had $X.X

derivatives the adjusted equity June As mark-to-market ended an by shareholders' a mark-to-market XX a The primarily quarter X.X%. losses floors. one-sided to million we the very $XXX derivative cumulative as position. ended quarter tangible We equity on in strong ratio related with to of accounting of and liquidity losses related reduced result, is hedging negative

marks several years. the in will have zero we to mature past, as reverse discussed negative the contracts Importantly, these hedge as the next over

tangible temporary these our X%. equity mark-to-market adjusted Excluding losses, is ratio

per GAAP the $XXX in share second We turn quarter $XXX of per or second XX. the income results compared of net $X.XX XXXX. recorded to share on $X.XX GAAP or slide Let's net of quarter income million million

highlight the generated by and cash summary, in education for the quickly for well-seasoned the strong at call and achieve provided open levels including that the and confident Assuming with our the customers' workforce portfolio. spreads the quality the unprecedented this remainder interest basis now and of strength we performance remain we're results our we needs clients' rates quarter both can loan feel commitment that questions. resiliency In similar today credit results times. early I and remains seeing, guidance to consistent for will these solutions high provide of year, and up the flow timely our

Instructions]. [Operator

of Your Stephens. Vincent question line from first comes Caintic the from

morning, Good this result guys. a thanks. Hey, And great quarter.

the I interest and investor a affecting is questions get mismatch how loans in think securitizations. the funding could the Maybe the more then cash wanted in talk also, ask income your lack – of on that some Thank how about versus First, work. near flows you. about to between detail forbearance flows about we the term. forbeared the and that And about of cash should you worry about

Sure.

both we So, and borrowers – and we we disaster those we a loan defer options response the forbearance to immediately in COVID our allowed applied to what to private offered our payments call program crisis, through our portfolios. FFELP

required many of slides XX when later. outlooks little days deck saw they are people shows, payment a – one the economic starting bit exits and are Their clear. significant increase as someone a is recede first in shared, as We're make a Ted we to to a now due As is the payment. forbearance, investor starting demand in more to for become just

second it just relatively a interest small. starting we're size those pleased net seeing loan overwhelming make a successfully So, are we're and scheduled see of this more An those a starting doesn't to But come majority, and FFELP far. dates we're for August. perspective, due From or sample in, both the portfolio income is and around accrual. somewhere payments. interest private what is very dates their still month see actually to forbearance XX% into and We'll the half in payment so our payment and due making borrowers loan of early more, change the by

although think they is cash we enough to a be excess cash making continue back and a on is payments, liquidity the during trusts trust, that interest to on no mentioned we right? servicing flow, as despite of more is in costs, FFELP more accruals borrower out in terms loans the that. example increase securitization accrue meaning of side were So, Ted component sufficient on [Technical not so there process than I and that build in those flowing We have cash flow reduction private certainly sweep is the reported. to all still both Difficulty]. into liquidity equation cash cash impact an interest that, are income and this the coming From a interest of a on than to And to perspective, there cover company, build the our to continue if able payments portion have bonds, forbearance the able the of significant that flow the

the Thank you. great. And Okay, income. on another floor then, just follow-up

So, was that quarter. this nice jump a

you. in kind how simply that of help should loans year? point So, XX reset rest rates. wondering to we the year, from of Thank any maybe continue point keeping just is we XX of and think when the that on about the if other the for the Just taking benchmark rest the the benefit, sensitivities basis it then basis and the think about out benefit

$XX income right. annual for think third That goes million was Sure. away quarter. of to the you're component, floor Overall, related Yeah. quarter. I that the And

as So, that. it's as simple

As the about the floors, far in as earning quarter unhedged, fixed well. they million as were $XX

not relatively one-month you there's at So, curve. not XX are balance, points, forward decline being from as but if around third expected be but we very the basis that's consistent, would today, just a the as significant Obviously, look for to the LIBOR of expect to that to years several natural far you year, fourth quarter. go that's rates Where next this continue. when

in million far that's the think fair it as to I look out at comes as beginning floor So, component $XX quarter. far third the a there way as as the

Okay, great. much. very you Thank

of comes from Your Sanjay the KBW. question next from Sakhrani line

Good Thanks. that just maybe on a you Good Ted, follow-up results. comment made. morning. last

be environment rate if to the Just expect FFELP clear, stay the so NIM to mid-XXs. sort should in here change doesn't we the materially, of

just the Just wanted the you maybe year. segment explain of be then, And that. could driving clear decline lending consumer the expected for to what's to rest talk with that. about some margin, Maybe

absolutely. Sure,

reset funded to to some So, four related that on up page $XX one-month to XXs million the mid FFELP quarter, give monthly. It's that NIM updated – if lose When additional do expect you a in quarter, low started third FFELP the NIM moving first is at second by when offsetting we the your one-month it's to benefit we for annual LIBOR reset. quarter, to in you that Partially resets pick rates worth LIBOR on side, of floor. where move point, that, daily you you the the for remember, when X.XX% you see year. be guidance, the

quarter. the first the of third quarter. little a in rest of the back compressed bit We was in back got that in margin second the get the quarter. We So, that

third XX there offsetting when quarter go there. that's far quarter XXs the staying the there do when to math the the income year-to-date in in partially and try what's as floor from you to as you second So, decline

funding side. down. assets first as decline the as what On was but side, the the pretty as in this far four a year the came the a the sequential as private There the significant was for first prime NIM the of private far reset there, in quarter. occurred That you're benefit the as first quarter, not the in quarters, benefit LIBOR as on again, opposite quarter did kind seeing far

growth the some that in rest contributing the the get of four portfolio. it just to you second sequentially back the quarter. the quarter third the is the get across refi natural of in back You in decline and quarters, Also obviously,

obviously that's Although a lower. much adjusted it a losses has risk NIM because are lower great return,

NIM. there the So, becomes that that loans of we the portfolio had going some forbearance. just move decreases then, second on other And to quarter larger a percentage overall items in naturally when the

Some of of loans out those moved the program. modification

loans those XX-day that in forbearance into relief were And it some went some delinquent reserve. our on resulted of and

we a of XX-day Just reserving like policy have financial most institutions, interest.

loans third of and out modification on the moved fourth and be as some there's build we as program. quarter, loans reserve forbearance, XX-day have So, going back to also into we'll to come some going the

bring kind NIM that So, down quarters are those four of across there. the elements your all

that. Jack, I'm can Okay, of from how Navient. for you a to have but maybe it how the decided positioning through then, assume I perfect. your curious you just helps, away market. competitors And private positions you're couple just move walk loan that us think

Yeah.

one several can So, the this area to – our high prospects origination Certainly, the think that like in-school the abilities market. we attractive teens. the reasons of we are in we returns asset reasons why in particularly generate enter there's and

on materially space. and in from of that when servicing can predictions help And the can your pick that tremendous insight up us leaving the believe credit plans of find with portfolio has terms we portfolios we also loan able do of we've in losses to they people private know been afford. we to terms by and we're rates the equation. point, to customers modeling reduce that for see true operations, that side our loss working We this servicing, got payment in But

product the required required, maintained can sheet be the because tax CECL bank that's a balance combination a capital equity that the portfolio. be of capital the to of I the on is think on this difficult and

estimates. our that upside creates do space. I believe opportunity And so, that's But from this for original overall. will see And potential you an in fewer us banks

you. Thank Right.

of DeVries comes line from Your Barclays. Mark next question the from

of decision also, a move exit kind timing platform? to the you in contract? of about your it's those contract. Ed about the servicing the for And And mentioned, Department you've Can breakeven the off accounts talk to past,

should taken we of much about out? that versus how much the and cost that how can variable fixed how So, fixed business, think supporting is be

Sure.

that to in had terms could the in services were program, believe transferred only history efficient federal we've servicing about not successful. a very we they risk loans, been So, and to lower that. for our They player long than we but driven conditions student that continuing and to this from we We've us effectively not too terms be – and long, bring be federal this a and where for loans historically believe the to and had significantly our offer we the of servicer been under in but and conditions And reasonable, obviously, everybody the student to space. did we've our a insight, have only provide at Unfortunately, able loan were effective everybody. talked XX% to that very we a data player, much this make letter to strategies, also that are be but not terms being department the lower on they approximately cost important allow default rates department service, we interested received rates below else. we processes

turn department platforms generation to the exist servicing today was begins award. new it That off I to what's EPS of decision. was that to itself software the in decision, was that the down. loans called award and should hard disappointing, by next is contract just cancelled once So, move going or to The guess, department contract be reissued. not say, the hard – kicks I decision but But a a it

servicing months. of that loans timing are that be So, back That's transferred entity move that actually the to office there. center, move see those determined operations They until call it XX to loans another is operations we guessing, the timing. would cannot unlikely but XX I'd the and issue in next seems the unclear. is system

the just expenses, versus then, that Okay, got how your it. business on much of are And on fixed? expenses variable

Yep.

infrastructure to a was variable of One that to our cost effectively of fixed now a convert we year-and-a-half almost the decisions was big which made platform, sell us and a set structure. rate ago for

we certainly like So, majority something associated our with are the are components management transferred manage off of of terms platforms. when that. servicing and those easily our accounts loan variable. have if costs facilities, think fixed some But we We can of some this now of things vast overhead expenses in and is

Okay, that's helpful. And to on thoughts it'd of then, here. stock your kind updated nice just to your get repurchase appetite Jack,

additional to income. significant and here negatives do So, caused – been by And revenue we price But some But, we floor of the the obviously, of a share it's million local of federal it massive disruption some January, approximately entities that and for of $XX $X well, like the had of been started forecasts that as today. reduced were stock talked also than despite by have there COVID. a a and we agencies, expect benefits price stock have price state we of see per think year like look in looks support expecting what later $X a been resiliency that price that it see to puts of mid-teens. takes. a return entities, about today there's in well earnings would the and were lot When more we fee at the obviously, this our stock the worth. low stock low we'll When the has we environment teens. earnings We has company, our what and trading $X work et share number rate environment, the today that. below we shows cetera, to the certainly think that governments, today an back processing We of transportation of earnings forecasts of the

Okay, thanks.

the of with from comes Rick question Morgan. J.P. line next Your Shane

sort for my that to forbearance are you the that current investors. taking when come about Thanks are helpful the the that of in I also, rolling in And rare your relate bit today. very you loans loans think on forbearance off about that can appreciate – currently rate delinquent, I to we little how and rates? questions And you am are guys. provide think the it's to payment you I curious, are this to how expect Hey, loans, as reserves forbearance. migrate morning. mind, if loans if think loans categories of XX% And loans experience effort That's wouldn't more that and the off reserve different three a guidance. the

loan under that CECL, on life loans. required – portfolio over we the the So, losses we remaining the are life would the of to remaining incur the estimate of

crisis years repayment have stress we're to to This terms can to borrowers But experience – expect XX little them see use in or help that to data able expect how apply bit to can experience different. a recovery manage of who and programs We what is obviously we that understand process. alternative experience of through that here. we

for clearly. to economic that forecast have the of made we what contraction rates, Clearly, process, take be models able through to Our CECL unemployment we're that employed into in we've life economy we economy, losses. consideration not – And maybe the expect in output. or growth loan

rest think assumptions We to the forbearances, exiting made a portfolio. who as as we COVID-related be borrowers for have set the as are conservative what well losses of will of

We are heartened by a things. few

highly seasoned. is portfolio Our

of a So, other the we at being customers where borrowers and have have through the practices on repayment of economy and equation, that, non-COVID said, and I if are losses able stress, losses. of June so portfolio bear during well. in to being expectations position losses in these and impacted. medical are offices that negatively we kinds to make are look we are very have office, period, dentist are said, we be in particularly think recent cover of closed, to for been, think apply who rates significant We of loss have The seen economic backwards we we area. cumulative been of out in can financial way now an at where able those – what we XX% some look huge like our field our absorb as years, the crisis, our XX the amount don't but the those continue I Maybe those borrowers the those of the what so excellent either this of would legacy a reserves private portfolio. customers at our financial get the what to we see were segments resiliency look reopen, borrowers loan forms we to – can to at medical see lot the side number where employed of most to absorb look been of able we more a borrowers is ending and stress, on periods been that expect payments. are losses that today related to where legacy the exception perform look we're in as of current we've types And starting And

portfolios look in other I at ratio, a consumer rate when loan think that's and the marketplace. pretty particularly you coverage extraordinary

a CECL interesting because reserve a helpful. a be I quarter better bottoms-up With of for of that's assuming the if in both. how little And really that you it's a from you those bit portfolio bottoms-up you exercise probably we're of look us at top-down that more terms loans of Jack, ways described perspective, exercise and some understand think than it's rates, really can a a in help on modeling combination modeling forbearance, would helpful. the

loan The status. model is built by

statistic. of side reopened, the particularly our some we're their in look relief periods, on what in X%, for forbearance the the equation, So, to But payment shut. example, looking that's practices and world, saw, customers we what loans. And and it range. build. themselves make who borrowers rates bottoms-up of Private at their is more a as able were while percentage FFELP those customers the for were are of portfolio, But a dentist in payments our practices those to reestablish continue of their X% are

portfolio, and delinquent, of strong the So, up improve to meaning look past in you performance continue very of dollar one delinquency how loans if – look at rates at you we at are feel not those portion even day are to we're look due, each of numbers that the the the balance day. fell, zero you date, days like

well-known use case, a Analytics other would by guess I Moody's modeling a that's I do said, worst we what financial of obviously Jack a used like institutions. And here, for many to follow-up just model we other say, baseline, on our And is companies, which weighting case. best

Our Jack said, weighting allowance the bottoms-up puts like case. between right a approach. is now just baseline and worst it And

and correlated that's So, GDP. status such as attributes unemployment highly loan economic to one of attributes, is the

loans for of performance would previous a forbearance, XX the experience that we So, in expectation on years how unemployment GDP, based and they have. based perform are of there's on specific those the

it. Got

you Okay. That's guys. Thank helpful, very both.

Your comes from Leon of next line Omega question Family. Cooperman the from

a good Congratulations morning. quarter. on Good

I you one really power. Let your business, your me care normalized don't earnings? care guys at do you earning I view much about earnings. ask any recurring When about year's look what you, is

about performance, said, businesses. and quarter. Processing there tolls, pause Business remarks We that terms process also – a transactional that to income had look quarter, for for I won we takes you prepared activity our a hospitals. we contingency the credit when our reductions, fee So, agencies as COVID-related helping revenue highlights we mentioned, in of lot and puts had asset of do this asked we parking, but income the number this think that I our some Service Lee, at I But helping we federal work us And contracts as recovery on spent talking are of other floor overall our numbers. of the

your of maybe knowledge all to you $X.XX little to heading then In more earnings a much what different typical is XXXX, are? normal a $X.XX year in normally that. earner are? do $X.XX, have basis this of $X a what look than recurring takes, The you're is solid $X.XX, earned those a This the do I'm year. think we you the understand everything, you But questions. earnings you think series because that? all do think $X.XX, normalized bit year. I have, you this $X.XX, puts inflated and – You you think What or at $X.XX, less question when than of

earnings the puts our and because think reflect I No, sure of – what for take. earnings year I power our this this Thank you. think is is

So, we're a earner? $X

portfolio, of consideration, have our year. legacy into our about to a is come XX% you take that But which vast majority Lee, earnings the from amortizing

to So, that you have bake into the process.

I'm what asked, Well, I'm unutilized didn't is What a really your is authorization your was What earner. assuming the The a buybacks? type the myself $X.XX it? regarding you're solid question intention answer. different direction. is you and heading status to of that

the at we this beginning allocate of about $XXX million acquire share estimated $XXX to So, about year, that we million would or repurchases.

the We We how that shake plan. economic second disaster wanted the we did second no the environment portfolio. would see that it see our have the quarter confirm expect paused and forbearances million to out $XX we in repurchases customers We are under about share to able as in that we in performance to exit as the quarter. remaining

the we As I year, sometime in shareholders said return expect through to of our distributions, half. this capital in complete my second our balance would comments, to planned the

is which vote, not my cast you. just me surprise Let to going

know yield $X.XX your trading. $X.XX. I last X.X% didn't You bid, checked. was a $X.XX That's at offer said where you a It's stock

on XX% worth can recurrently book you more than earn If value. your book, you're over

I think, book $XX.XX. Your value, is

it the And would – a But which in being stock should I accretive the more very you uncertainty, was to say the a view. on that mispriced. ago, XXs stock back to when repurchase, you and way your than the mistake. and we're cheap retire is years was on of the in and I buy discount of or understand based aggressive. distribution being a currently I run-off worth when the but the more it's which can business when value clearly, yield not book, making very where think been, you is be – better. the book you Well, wrong you $XX a market thought is your to as I book virus were Five So, about remaining at questioned upon is low find you it find ever a X.XX% was serious way should buying returns

put if So, I congratulations fashion. that, more selling aggressive to worthwhile my sold it's say. would got just a all less at trade. the fully But off I worth Even would a something what of to they're that buy worth, on it's some you reactivate into assets a that's half That's in vote I than quarter.

Thank you.

of High from Mark comes from the of question line Bank Hammond next America Your Yield.

Ted Jack, Hi, you. Thank and Joe.

same the flow virtually increased for XQ next five basically rationalize is, then, it XXXX cash the slide So, earnings see I no then that and compared that right? produced how then with of actual cash had years, forbearance? on company's from and flow the Is the flow And cash use expectations. I year-to-date that that slide in no the and XX, the if you virtually deck, change change that slide

delay cash forbearance not flows, in in are flows. and a So, takes. puts And is many cash delay temporary there a permanent

cash on higher recalculated are portfolio numbers net that based be five more that for quarter characteristics time. expectations the in would minuses interest pushing these each and margins will portfolio, some accrue years case, the our next, and flows floor So, higher into But payment incurring, income re-estimated flows. we the of back we're have margins, out over this

expect here, of estimates happen our do we of floor they forbearance, all would to best those of factors cost et – reflect So, income, cetera. what funds, including

change if Got it, Jack. no Yeah, great for investors. credit no, there's that's

unsecured negative or Navient? you the for Fitch ranks be allocation to the Would low priorities and rating, rating for and just give Moody's that capital where importance a both overall of On credit a BB with sense Moody's me from Fitch able are BB outlooks. and on

our that I the ratings the strength the of we environments over reflect years sheet able and really I performance unsecured have flows. have some last consistency sheet that And the those debt we think down, pay our obviously the balances really and imply. cash a XX to challenging our continue through to view in are balance a be we to predictability of stronger think managing So, balance than the

of predictable between to see mix expectations flow exists Your COVID private because a cash because material about, and that that federal comment any level great and despite the portfolio not in of that's earlier flows, cash the it's has seasoning very changes we're expected and there. performance seeing our

sure ability issue marketplace both that we the economic our in all debt I for So, sheet, have service think our business value in stakeholders, Difficulty] we and and to means of all yeah, we're unsecured that and run competently that we our that. able unsecured [Technical the to balance reflects to that types environment, run create able make be to performance

Got me. it. from one last The

you XXXX, segment, can Regarding for the of CECL for allowance your year, rate that's the as the consumer is for of loan give second end the losses built the a for next quarter? in that charge-off sense into assumption

unmatched would for not provide volatility expectations, – we occur. portfolio do the at loss as annual XX% in we is in time, both periodic of the to probably So, loss although consumer on our of extremely much might are, guidance and in on CECL we're life legacy as lending on loan there's more absorb process, make at prepared loss terms high ability but cumulative estimates where space. well under And and this point say, the expectations to XX%, our XXXX what losses that

Joe. Ted great. good. right, Thanks, very All That's and Jack,

Instructions]. [Operator

from Hecht question line next of the Jefferies. from comes Your John

And for all and the of on I'm quarter. been details asked Congratulations good Most my questions a curious. answered. here. guys. have thanks Morning,

I'm I think that BPS tracing might could long we in segment, ramp might that over thing to enable guess, So, how services. you that adapted – up? some temporary the do quickly be the you you interested you're circumstances. in capabilities the capabilities be quickly what is, understand getting But those given revenue term? a And from and what have resources I used

Yeah.

COVID Obviously, of our for clients. that's question. created think a I needs new great many

process. days very, was running with showed what and to we step and segment quickly claims. use really of instances, We were requested In assistance item are And make kind were they resolved being very them unemployment able capabilities predict through and that volume or systems be so. insurance ways take them some up call to help our help to able flows, do up triage process really outbound in four within can to calls, first the is that into of the analytics to calls, to be accounts, and our inbound there. need The a ability three quickly and centers

that, win these demonstrated arrangements skills, we that analytics some our demonstrated processing longer-term of insurance of I would and is some operational capabilities demand would hopeful value the skills, we will clients. that with what hope come the are demonstrated as think we unemployment the that Obviously, here longer these contact we've at apply be declining lines BPS time down skills these dramatically. Remember, that We that would rapidly no businesses the same other hope would we had COVID were can we businesses. tracing but required, that were same of in those space. ramping others to up,

revenue of And we're in a services driving. of Our processing. continued as do now businesses income that. demand hospitals, so is a parking example, will XX%, on, these to us XX% those struck, some for processing just to pause, these businesses, not original be fee also of revenues We patient plus work in for their and is from turned When not don't We're saw types result that that function even related basically the then, hospitals That produce the people revenue from contracts our and Many dramatically. visits for doing do XX%, starting COVID COVID-related higher any expecting federal asked quarter. aren't back of the work. who not toll transactions. for were declines COVID third declined

that. Appreciate color. helpful very that's Okay,

status insight you the fall with to volume? affect question of the is, produce kind guess, back I guess, outlook Second college? And to details your any guys refinancing for that COVID development guess, people for ability I even does of or, of of does going volume? I loan matter to do the respect have,

types two businesses. So, of different

offer of repayment refi their of that, the their side and credit are evaluate some career, high environment more lower have of right That makes we're to openings by flow attractive we on impacted going their able working consistency cash have don't be rate performance, certainly, we the performance of history, multiple the of or in now. what's strong expect portfolio them who we're levels borrowers track business rates. And already to of low record on and demonstrated a graduated, free business, able equation, customers stickiness for then, On to because with school years or not. employment that in that terms

equation, enrollment demand to for that question the would On financing by impacted of side be the no there's in-school levels. overall expect we

be in-school, We starting expenses, exceed loan will seeing, as who first-time expect we relatively year. flows to just or for a expenses we obviously, room year. on But our we're And of time students expectations confident enrollment will well. so for private based reduced very upcoming freshmen board borrowers small and segment be this living academic in modest but levels space, down And capturing for July, and what not And point or are hit expectations. this to are campus, this application have we're this in the we in on that in expect we arena. that modest student at we're be

early Okay, should cycle. final we be policy monitoring thank you. Is then it kind getting from we're an into a on question that on And at for to any that? noted side either perspective of this is have me there too is, election deeper point perspective anything or

their what in all. of see and do borrowers much we space challenge in our others been that, loan debt biggest portfolios investment the has while And the got from some that are easily have this one education and and think policies that. are to fits manage size I our value higher see more too struggle, in able experiences student

portfolio FFELP continue look side. make and the the during COVID that private payments of on or what are interruption can saw see we without able You who just at to have to the customers balance we

solution, that not all solutions considers treat costs. one the best probably So, customers the same is when the particularly

there's thrown on. lot be extremely relief and tend the proposals of think concepts out harder of high-level So, here of associated And and to options. those with a sticker execute that then price I to in kind terms are large

come the what equation. see different the realities costs lot oftentimes, talk, in right see now, think I we'll significantly of of of happens. ideas into there's things And So, a forth. But and are flowing the a down when implementation lot road we back that

Yep.

the very perspective. Thanks much. Appreciate Okay.

Your from Credit from Suisse. Moshe the line next question Orenbuch of comes

direction, guess, higher of first, were Great. would things. really of? have we A Thanks, I there that that couple good driven one-time this on or lower, should in quarter. Jack. be aware expenses expenses, Anything either that

we at technology consumer asset have that lending our servicing expenses like were if build there's some of equation, corporate in a a decline. function, origination down better really drive you cause space. our for at deliver across And doing that ratios, BPS, just Moshe, and in-school overall, the but saw revenue-related efficiency out that to functions. in kind the us recovery all said. opportunities operating some were expenses and in would and technology, levels through efficiencies But was board. anything for volume. of our look recovery this flat items same we're automation, really we work where time lower expenses we in seen we to continuously that the our not look We sides team help capabilities certainly, as that as We on of was our I can – operating improve we is continue the overhead to definitely only where The areas Well, asset here. examining even our definitely decrease really to area AI, seek expenses, But service maintain

a of a but contributor So, operating efficiency example activities, of are this is a good quarter's combination results, here. I think,

up recovery from some the the refi half, like would other all equal, And things but obviously, of revenue stepping you'd rebound, business add? second get much, business much things we in should how and the kind how that back expect like

originated suspending hurt most capitalized hit item to as under getting really marketing our spend like dollars those accounting loan. line end So, operating rules because refi, of doesn't expense up or the

similar out gets not we to But our do of it the entities. – spread and it. one obviously the and different to net third kind books, time. we work overall, for of parties levels example, – are is on manage expenses grossed expense That balance we we're we for of the farm we quarter year. those Under would interest our that for effectively rules, there's expense no But, associated that businesses, that, didn't internally So, revenue and federal asset to is recognized with numbers the will right, both that income through happen see do up guaranty accounting as match then on this expect over you of side agencies, recovery question if the equation, our an definitely operating BPS example. continue if this be doing

Okay. Thanks. Thanks, Jack.

the bit XX% little you the ratio, been harsh I of rebuilding got a of I fact kind $X cap, talk the agencies capital of least the capital about you've same required that that's S&P, charge. private guess. as by amortizing business the at derivatives much of and kind if kind treatment at pretty loans. to second guess market Just And ratio them one the the rating has capital, half, to by struck of of I'm who in least expect loans, your your capital legacy and the multiply billion to that a refi the post you've capital according your the CECL pretty refi you that originate treats implications,

in kind about the of what money places, is little feels that? Because of should said of given just feels there be should kind think I other had guess. like a how so, bunch there's for a we just Lee where it looking more – it trading, And like earlier, kind of echoing stock

ROEs. space. So, our in at I That's implications variety loans we We can are did last a capital business ways. that mid-teen model, the We on generate being through of and at businesses that different we We here. an look to year. not we that point hear capital your based manage that and long-term we allocation the attraction allocating variety versus it a business capital look think can of opportunities. originate And when

that and stable. that monetized quarter, the value gain. a something outlook may believe for in we today's portfolio do of to best us to that be place But saw the some would by attractive look in credit that booking more It selling those becomes year-ago You refi the marketplace. like opportunity of loans we as an not be

can to both And think dividend done is share things do. think ultimately, generating against of and our franchise that generating or have combination looking I an But, deliver highly return to can one companies what they where And business we balance that's ongoing releasing and continuously are I there's shareholders. the our – more that's And value. of that really that long-term with a create valued they through capability releasing do. we're programs. that – can repurchase amortizing significant and capital amount So,

All right, thank you.

Your final of from line Citi. from Cyganovich Arren comes question the

Could expectations about Thanks. production levels, the earlier be in-school comment modest will production what refi amount. that said I you In for the you a answered second think on your half? in be would

$X said we billion. Yes,

comfortable I need at out to it. you share comfortable kind last And that about to to see have feel what – at then, do at feel X%, that more higher complete want that of guess, purchases to sending tangible rise pro you got point or to that of forma capital? is Okay, with you level equity adjusted the level

no. No,

X% I that us. the think is the the is number right on of said today portfolio we've based for mix –

Thank Okay. All you. right.

time, will closing and for remarks. any Fisher now gentlemen, I back at call to turn Mr. the Ladies Joe this

I'd if Thank you, or have call. follow-up any contact for concludes like you Please to Celia. thank This on Rutledge, me everyone colleague, today's us joining call. today's Nathan other my questions.

participation time. this you at thank gentlemen, you today's disconnect and please conclude and your that for does conference. We Ladies ask this