Navient Corporation (NASDAQ:NAVI) Q2 2016 Earnings Conference Call - Final Transcript

Jul 20, 2016 • 08:00 am ET

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Navient Corporation (NASDAQ:NAVI) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning. My name is Corina and I will be your conference operator today. At this time, I would like to welcome everyone to the Navient Second Quarter 2016 Earnings Conference Call (Operator Instructions) Thank you. Mr. Joe Fisher, you may begin your conference.

Executive
Joe Fisher

Thank you, Corina. Good morning and welcome to Navient's 2016 second-quarter earnings call. With me today are Jack Remondi, our CEO and Somsak Chivavibul, our CFO. After their prepared remarks, we will open up the call for questions.

(Forward-Looking Cautionary Statements) During this conference call, we will refer to non-GAAP measures, we call our core earnings. A description of core earnings, a full reconciliation to GAAP measures and our GAAP results can be found in the second-quarter 2016 supplemental earnings disclosure. This is posted on the Investor's page at navient.com.

Thank you, and now I will turn the call over to Jack.

Executive
Jack Remondi

Thanks Joe. Good morning everyone and thank you for joining us today. I'm happy to share my thoughts on this quarter's results which are quite good and are a tangible example of the value our Company can create. I'll take the next few minutes to provide some color on our performance this quarter, the progress we have made on new funding and discuss new business opportunities we are seeing including the Department of Education servicing contract.

Our financial results this quarter were very good and better than planned. They reflect the efforts we have made in credit, funding, and operating efficiency. The result, we earned an adjusted $0.48 in core earnings for the quarter. Key contributors included private credit loan performance, revenue growth in our non-education business services and operating expense control.

While the rhetoric implies student loan delinquencies and defaults are rising, I'm happy to report our customers are continuing to experience very different and positive trends. While some borrowers are struggling, overall delinquency and default rates for the federal and private loans we service are at some of the lowest levels since before the financial crisis.

For example, for federal loans we service, we track the performance of recent graduates six months after they first enter repayment following their grace period. For the class of 2015, 7% of borrowers were more than 90 days past due after six months in repayment, three times lower than the class of 2010. It's also 22% lower than the class of 2014. This is very good news. I'd also encourage those who are having difficulty making payments to contact us. We have solutions that can help.

For our private loan portfolio, charge-offs this quarter totaled $127 million, 29% lower than the year-ago quarter. We saw a similar improvement in loans more than 90 days past due. The balance here declined by 22% to $668 million at quarter end.

Our charge-off in 90-plus delinquency rates fell to 2.2% and 2.9% respectively, the lowest level since before the financial crisis. As a result of this steady and significant improvement in credit performance, our provision for private loan losses this