Navient, a loan management, servicing and asset recovery company that services approximately $300 billion in student loans, released fourth-quarter and full-year 2015 financial results that include more than $900 million of new financings and $691 million repurchases of unsecured debt during the fourth quarter.
Total delinquency rates are at the lowest levels since 2005 for both Federally Guaranteed Student Loans (FFELP) and private education loans.
Navient acquires and finances FFELP loans. Core earnings for that segment were $74 million in the fourth quarter, compared with the year-ago quarter’s $85 million. This decrease mostly was the result of a $22 million decrease in net interest income due to a decline in the net interest margin. This was partially offset by a decline in expenses.
Full-year core earnings for this segment were $321 million compared with $299 million in 2014. This increase primarily was the result of a $33 million increase in servicing revenue and a $14 million decline in the provision for loan losses.
The company acquired $792 million of FFELP loans in the fourth quarter for a total of $3.7 billion of FFELP loans acquired during all of 2015. On Dec. 31, Navient held $96.5 billion of FFELP loans, compared with $104.5 billion of FFELP loans held on Dec. 31, 2014.
In its private education loans segment, Navient acquires, finances and services private education loans.
Core earnings for the segment were $56 million in the fourth quarter, compared with the year-ago quarter’s $92 million. The decrease is primarily the result of a $51 million decrease in net interest income due to a decline in the balance of the portfolio and the net interest margin and a $21 million loss on the sale of $178 million of loans, partially offset by an $18 million decline in the provision for loan losses.
Core earnings fourth-quarter 2015 private education loan portfolio results vs. fourth-quarter 2014 are as follows:
- Delinquencies of 90 days or more of 3.4% of loans in repayment, down from 3.8%.
- Total delinquencies of 7.2% of loans in repayment, down from 8.1%.
- Annualized charge-off rate of 2.3% of average loans in repayment, down from 2.5%.
- Net interest margin of 3.61%, down from 3.89%.
- Provision for private education loan losses of $110 million, down from $128 million.
For overall fourth-quarter results, GAAP net income was $286 million, compared with $263 million for the year-ago quarter. For 2015, GAAP net income was $997 million, compared with $1.1 billion for 2014.
"This quarter’s and full year’s results demonstrate that the foundation of our enterprise value remains intact and strong," said Jack Remondi, president and CEO. "Even with financial market turmoil, we continued to generate earnings and cash flow in-line with our expectations, allowing us to repurchase or retire over $2.3 billion in unsecured debt, acquire over $3.7 billion in loans and return $1.2 billion to shareholders through dividends and share repurchases in 2015. These capabilities remain in place as we begin 2016."
Core earnings for the quarter were $172 million, compared with $217 million for the year-ago quarter. The decrease is primarily the result of a $72 million reduction in net interest income, partially offset by a $23 million decline in provision for loan losses. Excluding expenses associated with regulatory-related costs, fourth-quarter 2015 and 2014 diluted core earnings per share were $0.49 and $0.54, respectively. Fourth-quarter 2015 and 2014 operating expenses included $7 million and $9 million of regulatory-related costs, respectively.
Core earnings for the year were $694 million, compared with $818 million for 2014. Excluding expenses associated with regulatory-related costs, 2015 and 2014 diluted core earnings per share were $1.85 and $2.10, respectively. Full-year 2015 and 2014 operating expenses included $19 million and $120 million of regulatory-related costs, respectively.
Navient’s business services segment includes revenue primarily from servicing and asset recovery activities.
Business services core earnings were $81 million in fourth-quarter 2015, compared with $95 million in the year-ago quarter. The decrease was primarily the result of an $8 million reduction in asset recovery revenue related to legislative reductions in certain fees earned as well as a decrease in education loan-related asset recovery volume.
Full-year core earnings for this segment were $338 million compared with $425 million in 2014. This decrease was primarily the result of a $93 million reduction in asset recovery revenue related to legislative reductions in certain fees earned and a $23 million increase in third-party servicing and conversion expenses related to an $8.5 billion FFELP loan acquisition in the fourth quarter of 2014.
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.
On Oct. 20, Navient completed the acquisition of Xtend Healthcare, a health care payments company based in Hendersonville, Tenn. 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 expands Navient’s asset recovery and business process outsourcing capabilities into the health care payments sector.