Navient Reports Third-Quarter 2015 Financial Results

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