Navient Q4 2025 Navient Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Navient Corp Earnings Call
Earnings Conference call.
This call is being recorded.
Currently all participants are in a listen only mode.
Following the remarks, we will conduct a question and answer session.
Instructions will be provided at that time.
If anyone should require assistance during the call. Please press the star key followed by zero on your telephone keypad.
At this time I will turn the call over to Jenn areas Navient as head of Investor Relations. Please go ahead.
Hello, Good morning, and welcome to <unk> earnings call for the fourth quarter of 2025 with me today are David Gillan, Navient, and CEO and Steve Hover Navient and CFO at.
Speaker #2: The Navient Fourth Quarter 2025 earnings conference call. This call is being recorded. Currently, all participants are in a listen-only mode. Following the remarks, we will conduct a question-and-answer session.
After their prepared remarks, we will open up the call for question.
Speaker #2: Instructions will be provided at that time. If anyone should require assistance during the call, please press the star key followed by zero on your telephone keypad.
Today's discussion is accompanied by a presentation, which you can find on <unk> dot com slash investors.
Before we begin keep in mind, our discussion will contain predictions expectations forward looking statements and other information about our business that is based on management's current expectations as of the date of this presentation.
Speaker #2: At this time, I will turn the call over to Jen Earyes, Navient's Head of Investor Relations. Please go ahead.
Speaker #3: Hello, good morning, and welcome to Navient's earnings call for the fourth quarter of 2025. With me today are David Yowan, Navient CEO, and Steve Hauber, Director of the Prepared Remarks.
Actual results in the future may be materially different from those discussed here. This could be due to a variety of factors listeners should refer to the discussion of those factors on the Companys Form 10-K, and other filings with the SEC.
Speaker #3: We will open up the call for questions. Today's discussion is accompanied by a presentation, which you can find on Navient.com/investors. Before we begin, keep in mind our discussion will continue; expectations for looking statements and other information about our business that is based on management's current expectations as of the date of this presentation.
During this conference call, we will refer to non-GAAP financial measures, including core earnings adjusted tangible equity ratio and various other non-GAAP financial measures that are derived from core earnings.
Our GAAP results descriptions of our non-GAAP financial measures and a reconciliation of core earnings to GAAP results can be found in Navient fourth quarter 2025 earnings release, which is posted on our website.
Speaker #3: Actual results in the future may be materially different from those discussed here. This could be due to a variety of factors. Listeners should refer to the discussion of this factor in the company's Form 10-K and other filings with the SEC.
Thank you and now I will turn the call over to Dave.
Thanks, Jen good morning, everyone. Thank you for joining the call and for your interest in Navient.
Speaker #3: During this conference call, we will refer to non-GAAP financial measures, including core earnings, adjusted tangible equity ratio, and various other non-GAAP financial measures that are derived from core earnings.
First Joe Fisher, who is joining me this morning, I want to extend our sincere thanks to Joe for his dedicated service over 20, plus years and the solid foundation and team built.
Speaker #3: Our GAAP results, description of our non-GAAP financial measures, and the reconciliation of core earnings to GAAP results can be found in Navient's Fourth Quarter 2025 earnings release, which is posted on our website.
We wish Joe all the best in his next endeavor.
I'm also joined this morning by Steve Hover, who was appointed Chief Financial Officer earlier this month.
Speaker #3: Thank you. And now I will turn the call over to
Steve is also a 20 plus year veteran of the company and brings strong leadership and deep experience to the role.
Speaker #4: Thanks, Jen.
Speaker #4: Good morning, everyone. Thank you for joining Dave. the call and for your interest in Navient. First, Joe Fisher is joining me this morning. I want to extend our sincere thanks to Joe for his dedicated service over 20-plus years and the solid foundation and team he helped build.
He most recently served as our chief administrative officer.
Played a key role in managing our transformation and our expense reduction efforts.
Steve's appointment is part of a broader set of changes that better align our management structure with.
Speaker #4: We wish Joe. I'm also joined this morning by Steve Hauber, who was appointed Chief Financial Officer earlier this month. Steve is also a 20-plus-year veteran of the company and brings strong leadership and deep experience to the role.
With the business strategy for Ernest and Navient that we shared in November.
As we mentioned in November starting January one are in school lending business was transferred from <unk> to <unk>.
Consolidate our education activities.
Speaker #4: He most recently served as our Chief Administrative Officer and played a key role in managing our production efforts. Steve's appointment is part of a broader set of changes that better align our management structure with the business strategy for Earnest and Navient that we shared in November.
Which also includes the legacy felt and private loan portfolios.
This morning, we reported Q4 and full year results demonstrate our underlying ability to drive high quality loan growth while at the same time, reducing operating expenses.
Our reported results include an additional provision on a private legacy portfolio and.
Speaker #4: As we mentioned in November, starting January 1, our in-school lending business was transferred from Earnest to Navient to consolidate our education activities, which also include the legacy FFELP and private loan portfolios.
And restructuring costs largely related to our expense reduction initiatives.
During 2025, we effectively completed our phase one transformation within legacy Navient.
Speaker #4: This morning, we've reported Q4 and full-year results that demonstrate our underlying ability to drive high-quality loan growth while at the same time reducing operating expenses.
And we will exceed our 400 million.
Fence reduction objective.
These operating expense reductions increase our already substantial future life of loan cash flows by $2 billion cumulatively.
Speaker #4: Our reported results include an additional provision on our private legacy portfolio and restructuring costs largely related to our expense reduction initiatives. During 2025, we effectively completed our phase one transformation within legacy Navient and will exceed our $400 million expense reduction objective.
Providing increased financial flexibility and even greater levels of capital for new growth.
The benefits of our investments at Ernest and the expense reductions. We have achieved are reflected in the operating leverage within our 2026 outlook.
We expect that we can fund year on year loan growth of $1 5 billion.
Speaker #4: These operating expense reductions increase our already substantial future life of loan cash flows by $2 billion cumulatively. Providing increased financial flexibility and even greater levels of capital for new growth.
We're 60% with total expenses that are lower than last year by roughly 20%.
As set out in November we are operating with lower expenses and also with improved capital efficiency, which should enable us to finance our growth plans simply by utilizing the capital being released with the existing back book portfolio.
Speaker #4: The benefits of our investments at Earnest and the expense reductions we have achieved are reflected in the operating leverage within our 2026 outlook. We expect that we can fund $1.5 billion, or 60%, with total expenses that are lower than last year.
Ernest had its strongest quarter of the year more than doubling origination volume year over year, accompanied by high credit quality.
Speaker #4: At roughly 20%. As set out in November, we are operating with lower expenses and also with improved capital efficiency, which should enable us to finance our growth plans simply by utilizing the capital being released within an existing backbook portfolio.
Approximately $634 million and new refi loans.
This brings full year refi originations to $2 1 billion more than doubling volume from the prior year.
In school lending also had a great year originating its highest ever level of new loans of $401 million with.
Speaker #4: Earnest had its strongest quarter of the year, more than doubling origination volume year over year, accompanied by high credit quality, totaling approximately $634 million in new refinance.
With strong credit quality and margins.
Steve will take you through some more detailed statistics showing the continued momentum at Ernest the few minutes.
We continue to invest in capabilities that Ernest and important part of the executive changes we made earlier this month.
Speaker #4: This brings full-year refi originations to $2.1 billion, more than doubling volume from the prior year. In-school lending also had a great year, originating its highest-ever level of new loans at $401 million, with strong credit quality and margins.
The establishment of a vertically integrated CFO role at Ernest.
We're currently conducting a search for fintech experience to fill it.
The momentum at Ernest and the actions, we took in 2025 position us well going into the new year.
Speaker #4: Steve will take you through some more detailed statistics showing the continued momentum at earnest in a few minutes. We continue to invest in capabilities at earnest.
Turning to guidance for 2026, we're currently targeting total loan originations of $4 billion.
Speaker #4: An important part of the executive changes we made earlier this month was the establishment of a vertically integrated CFO role at earnest. We're currently conducting a search for fintech experience to fill it.
Which would represent growth of approximately 16% over 2025.
We expect refi and ensco lending growth of over 50%, each and less than $100 million for personal lending, while we continue our pilot program.
Speaker #4: The momentum at earnest and the position us well going into the new year. Turning to guidance for 2026, we're currently targeting total loan originations of $4 billion which would represent growth of approximately 60% over 2025.
As you see we took incremental provisions in the fourth quarter largely relating to the private legacy portfolio, which were loans loans originated more than a decade ago.
There were minimal additional provisions for felt or refi loans.
Speaker #4: We expect refi and in-school lending growth of over 50% each, and less than $100 million for personal lending while we continue our pilot program.
So this provision has a significant impact on our reported earnings per share.
On the life of loan cash we expect to receive from the legacy portfolios is immaterial.
Speaker #4: As you see, we took incremental provision in the fourth quarter largely relating to the private legacy portfolio which were loans originated more than a decade ago.
Steve will take you through these in more detail in just a minute.
We also continued to return capital to shareholders through share repurchases and dividends and expect to continue to do so in 2026.
Speaker #4: There were minimal additional provisions for FELP or refi loans. While this provision has a significant impact on reported earnings per share, the effect on the life alone cash we expect to receive from the legacy portfolios is immaterial.
With share repurchases being opportunistic as they were in 2025.
When I assumed the CEO role in 2023, the company had multiple business lines and products supported by our significant shared surface footprint capabilities and expenses.
Speaker #4: Steve will take you through these in more detail in just a minute. We also continue to return capital to shareholders through share purchases and dividends and expect to continue to do so in 2026, with share purchases being opportunistic as they were in 2025.
The executive organizational structure at that time reflected in operating company business model.
With multiple enterprise functional heads reporting into the CEO.
We have been migrating and expect to continue to migrate toward a holding company management structure with carefully managed and lower central costs.
Speaker #4: When I assumed the CEO role in 2023, the company had multiple business lines and products, supported by a significant shared service footprint of capabilities and expenses.
And Navient education finance activities for both managed directly more of the services needed to operate their respective business.
Speaker #4: The executive organizational structure at that time reflected an operating company business model. With multiple enterprise functional heads reporting into the CEO, we have been migrate toward a holding with carefully migrating and expect to continue to managed and lower central costs.
The organizational structure, we announced earlier this month.
Another step in this migration.
I'm very excited about <unk> and Ernest prospects for 2026, and we look forward to reporting on our achievements in the coming quarters.
Speaker #4: Navient's Earnest and Education Finance directly move more of the services needed to activities that will both manage and operate their respective businesses. The organizational structure we announced earlier this month is another step. I'm very excited about Navient and Earnest prospects for 2026, and we look forward to reporting on our achievements in the coming quarters.
With that I'll turn it over to Steve who will provide more detail on Q4 results and our 2026 outlook.
Thank you, Dave and thank you everyone for joining today's call.
I will review the fourth quarter and full year 2025 results and will provide our outlook for 2026.
During the fourth quarter, our actions to further reduce operating expenses.
Speaker #4: With that, I'll turn it over to Steve, who will discuss results and our 2026 outlook, and provide more detail on Q4.
Us to over deliver on the $400 million expense reduction target and our legacy activities established two years ago.
At the same time <unk> continued to demonstrate strong loan origination growth with its highest refi quarter of the year ending the year with total originations of $2 5 billion.
Speaker #2: Thank you, everyone, for joining today's call. Thank you, Dave, and thank you all. I will review the fourth quarter and full year 2025 results, and we'll provide our outlook for 2026.
We also provided for additional expected credit losses, and I'll, let private legacy portfolio and recorded restructuring costs related to our expense reduction efforts.
Speaker #2: During the fourth quarter, our actions to further reduce operating expenses position us to overdeliver on the $400 million expense reduction target and our legacy activities established two years ago.
In total core earnings per share for the fourth quarter were <unk>.
Speaker #2: same time, earnest continued to At the demonstrate strong loan origination growth with its highest refi quarter of the year, ending the year with total originations of $2.5 billion.
On a full year basis, we reported core loss per share of 35.
Let's turn to slide six where I will review <unk> loan origination growth in 2025.
Speaker #2: We also provided for additional expected credit losses in our private legacy portfolio and recorded restructuring costs related to our expense reduction efforts. In total, core earnings per share for the fourth quarter were $0.02.
Refi originations were $2 1 billion in 2025, which doubled the volume from the prior year.
Refi rate check volume measured as prospective refi customers completing a soft credit pool to receive a personalized rate quote increased nearly three times from 2024 to 2025.
Speaker #2: On a full-year basis, we reported core loss per share of $0.35. Let's turn to slide six, where I will review Earnest loan origination growth in 2025.
This growth demonstrates positive tailwind and strong demand for our refi product.
Speaker #2: Refi originations were $2.1 billion, double the volume from the prior year in 2025. Refi rate check volume, measured as prospective refi customers completing a soft credit pull to receive a personalized rate quote, increased nearly three times from 2024 to 2025.
We are generating demand and converting volume efficiently as you can see on the slide both sales and marketing and other operating expenses as a percentage of originations improved meaningfully year over year down, 29% and 35% respectively.
These efficiency gains are lowering our cost per dollar of volume and driving stronger operating leverage as we scale.
Speaker #2: This growth demonstrates positive tailwinds and strong demand for our refi product. We are generating demand and, as you can see on the slide, both sales and marketing and other operating expenses as a percentage of originations improved meaningfully year over year, down 29% and 35% respectively.
Capital efficiency is also improving.
As we shifted toward vertical securitization structures the amount of equity required to finance. These loans has declined materially.
To summarize the refi story in 2025 demand is improving we're efficiently converting that demand into high quality loan volume, we deliver a great customer experience and we're benefiting from both stronger operating leverage and improved capital efficiency.
Speaker #2: These efficiency gains are lowering our cost per dollar of volume and driving stronger operating leverage as we scale. Capital efficiency is also improving. As we shifted toward vertical securitization structures, the amount of equity required to finance these loans has declined materially.
In school originations also grew to $401 million in 2025, approximately half of which related to borrowers pursuing graduate degrees.
Speaker #2: To summarize the refi story in 2025, demand is improving, we're efficiently converting that demand into high-quality loan volume, we deliver a great customer experience, and we're benefiting from both stronger operating leverage and improved capital efficiency.
We remain focused on the 2000 2006 peak season, the expanded market opportunities and targeting strong growth in 2026.
We are approaching the graduate lending market expansion with discipline and strong momentum.
Our platform partnerships and underwriting discipline put us in a good position to serve our target customer segments with our highly rated products and customer experience.
Speaker #2: In-school originations also grew to $401 million in 2025, approximately half of which related to borrowers pursuing graduate degrees. We remain focused on the 2026 peak season, the expanded market opportunities, and targeting strong growth in 2026.
Slide seven provides similar loan origination growth information and compares to the fourth quarter of 2025 to the same quarter in the prior year.
Speaker #2: We are approaching the graduate lending market expansion with discipline and strong momentum. Our platform, partnerships, and underwriting discipline put us in a good position to serve our target customer segments with our highly rated products and customer experience.
We maintained our positive growth momentum in the fourth quarter with refi origination growth of two times improve.
Improving trajectory for our expense efficiency metrics and strong credit quality.
I will now cover segment financial results, beginning with the consumer lending segment on slide eight.
Speaker #2: Slide seven provides some loan origination growth information and compares the fourth quarter of 2025 to the same quarter in the prior year. We maintained our positive growth momentum in the fourth quarter, with refi origination growth of two times.
Fourth quarter, net income was $25 million compared to $37 million in the fourth quarter of 2024.
Consumer lending net interest income declined year over year, mostly due to lower outstanding balances and the product mix of the portfolio.
Speaker #2: Improving trajectory for our expense efficiency metrics and strong credit quality. I'll now cover segment financial results, beginning with the consumer lending segment on slide eight.
Looking forward, we expect consumer lending net interest income in 2026th to remain relatively stable compared to the back half of 'twenty five.
Speaker #2: Fourth quarter net income was $25 million, compared to $37 million in the fourth quarter of 2024. Consumer lending net interest income declined year over year, mostly due to lower outstanding balances and the product mix of the portfolio.
We expect new originations to outpace the amortization of the portfolio in 2026, leading to growth in our total outstanding balance of private loans.
Year over year expenses in the fourth quarter were down slightly as efficiency gains more than offset the expense impact.
Speaker #2: Looking forward, we expect consumer lending net interest income in 2026 to remain relatively stable compared to the back half of '25. We expect new originations to outpace the amortization of the portfolio in 2026, leading to growth in our total outstanding balance of private loans.
Our origination volume.
Moving to credit private charge off rates declined from $2 four 8% in the third quarter to $2 two 4% in the fourth quarter delinquency.
Delinquency rates increased in the third quarter to fourth quarter with 31, plus day delinquency rates, increasing from six 1% to six 3% and 91, plus delinquencies increasing from two 8% to two 9%.
Speaker #2: Year over year, expenses in the fourth quarter were down slightly, as efficiency gains more than offset the expense impact from higher origination volume. Moving to credit, private charge-off rates declined from 2.48% in the third quarter to 2.24% in the fourth quarter. Delinquency rates increased from the third quarter to the fourth quarter, with 31-plus day delinquency rates increasing from 6.1% to 6.3% and 91-plus delinquencies increasing from 2.8% to 2.9%.
We recorded provision of $43 million in the fourth quarter $9 million of which was related to new origination.
The remainder primarily reflects the weaker macroeconomic outlook and our response to fourth quarter delinquency trend largely within our legacy private loan portfolio.
Federal Education loans segment results are on slide nine.
Fourth quarter net income of $27 million was $8 million lower than the third quarter, mostly due to third quarter net interest income benefiting from the adoption of lower prepayment rate assumption.
Speaker #2: We recorded provision of $43 million in the fourth quarter, $9 million of which was related to new origination. That reflects the economic outlook and a response to fourth quarter delinquency trends, largely within our legacy private loan portfolio.
Comparing Q4 to the prior year quarter net income was $17 million higher than.
The increase reflects lower provision and the impact of decreasing interest rates on the different index reset on asset and debt.
Speaker #2: Federal education loan segment results are on slide nine. Fourth quarter net income of $27 million was $8 million lower than the third quarter. Net interest income benefited from the adoption of lower prepayment rate assumptions.
Additionally expenses in this segment were 20% lower facilitated by our variable cost structure from outsourcing the servicing of our portfolio.
Provision in the federal segment in the fourth quarter fell to $1 million. The total delinquency rate improved slightly from Q3 declining from 18, 1% 17, 5%, while the net charge off rate rose eight basis points to 23 basis points higher.
Speaker #2: Comparing Q4 to the prior year quarter, net income was $17 million higher. The increase reflects lower provision and the impact of decreasing interest rates on the different index resets on assets and debt.
A higher charge off rate in the quarter, primarily reflects loans to borrowers affected by 2020 for natural disasters that were written off in the quarter.
Speaker #2: Lower, facilitated by our 20% variable cost structure from outsourcing the servicing of our portfolio. Additionally, expenses in this segment were lower. Provision in the federal segment in the fourth quarter fell to $1 million.
Prepayments remained historically low at $225 million in the fourth quarter compared to $322 million, a year ago and over $1 billion two years ago.
Speaker #2: rate improved slightly from The total delinquency Q3, declining from 18.1% to 17.5%, while the net charge-off rate rose eight basis points to 23 basis points.
With the slow amortization of the <unk> loan portfolio, we expect relatively stable net interest income throughout 2026.
Speaker #2: The higher charge-off rate in the quarter primarily reflects loans to borrowers affected by 2024 natural disasters that were written off in the quarter. Self-prepayments remained historically low at $225 million in the fourth quarter, compared to $322 million a year ago and over $1 billion two years ago.
Unexpected macro event impacting the interest rate environment.
The allowance for loan loss, excluding expected future recoveries on previously charged off loans for our entire education loan portfolio at $707 million.
Which is highlighted on slide 10.
Speaker #2: With a slow amortization of the self-loan portfolio, we expect relatively stable net interest income throughout 2026. During unexpected macro events impacting the interest rate environment, the allowance for loan loss, excluding expected future recoveries on previously charged-off loans for our entire education loan portfolio, is $707 million.
Slide 11 shows the results from our business processing segment.
In October we completed our final obligations under the transition services agreement or TSA for our government services business.
The TSA revenues and expenses from this quarter represents the tail end of this activity totaled less than $1 million and are reported in the other segment.
Speaker #2: Which is highlighted on slide 10. Slide 11 shows the results from our business processing segment. In October, we completed our final obligations under the Transition Services Agreement, or TSA, for our government services business.
The earlier than expected completion of the TSA allowed us to begin our final push to remove remaining legacy shared expenses.
We will over deliver on our $400 million expense reduction target.
More detail on our total expenses can be found on slide 12.
Speaker #2: The TSA revenues and expenses for this quarter represent the tail end of this activity, told less than $1 million and are reported in the other segment.
We closed 2025 with fourth quarter total core operating expenses of $88 million a.
A 40% improvement compared to the fourth quarter of 2024.
Speaker #2: The earlier-than-expected completion of the TSA allowed us to begin our final push to remove remaining legacy shared expenses. We will overdeliver on our $400 million expense reduction target.
Restructuring expenses were $11 million in the quarter as we recognized charges related to our legacy structure and environment that will no longer be in our expense run rate.
This included $6 million of restructuring costs related to the earlier than expected retirement of significant components of our former technology infrastructure.
Speaker #2: expenses can be found on slide More detail on the total 12. We closed 2025 with fourth quarter total core operating expenses of $88 million.
Full year 2025, total expenses were $438 million.
Speaker #2: A 40% improvement compared to the fourth quarter of 2024. We're structuring expenses for $11 million in the quarter, as we recognize charges related to our legacy structure and environment that will no longer be in our expense run rate.
A decrease of close to 50% compared to 2023.
This decrease is the direct result of our focused and aggressive efforts to reduce our expense base through divesting the bps business.
Speaker #2: This included $6 million of restructuring costs related to the earlier-than-expected retirement of significant components of our former technology infrastructure. Full-year 2025 total expenses were $438 million.
Transitioning to our variable servicing expense structure and significantly reducing our corporate expenses.
As illustrated on Slide 12, this momentum is continuing into 2026.
Speaker #2: A decrease of close to 50% compared to 2023. This decrease is the direct result of our focused and aggressive efforts to reduce our expense base through divesting the BPS business, transitioning to a variable servicing expense structure, and significantly reducing our corporate expenses.
Let's turn to our capital allocation and financing activity and as highlighted on slide 13.
In the fourth quarter, we completed our fourth securitization of the year, bringing our total issuance in 2025 to nearly $2 2 billion.
<unk> term ABS financing.
We continue to see strong investor demand and achieved high effective cash advance rate when these financings.
Speaker #2: As illustrated on slide 12, this momentum is continuing into 2026. Let's turn to our capital allocation and financing activity that is highlighted on slide 13.
Our current cash and capital positions provide ample capacity to distribute capital and invest in strong loan origination growth.
Speaker #2: In the fourth quarter, we completed our fourth securitization of the year, bringing our total issuance in 2025 to nearly $2.2 billion of term ABS financing.
In the fourth quarter, we repurchased two 1 million shares at an average price of $12 67.
As our shares remain significantly below tangible book value.
Speaker #2: We continue to see strong investor demand and achieve high effective cash advance rate in these financings. Our current cash and capital positions provide ample capacity to distribute capital and invest in strong loan origination growth.
In total we returned $41 million to shareholders through share repurchases and dividends, while maintaining a strong balance sheet with an adjusted tangible equity ratio of nine 1%.
Speaker #2: In the fourth quarter, we repurchased 2.1 million shares at an average price of $12.67, as our shares remain significantly below tangible book value. In total, we returned $41 million to shareholders through share repurchases and dividends, while maintaining a strong balance sheet with an adjusted tangible equity ratio of 9.1%.
Slide 14 provides our outlook for full year 2026, we are targeting total loan originations of $4 billion.
With growth rates over 50% for both our refi and in school loan products, we expect to achieve this growth while reaping the benefits of our investments and capabilities in earnest and our legacy expense reduction effort.
Specifically, we expect expenses in 2026 or $350 million, which is $88 million lower than 2025 total expenses.
Speaker #2: Slide 14 provides our outlook for full year 2026. We are targeting total loan originations of $4 billion, with growth rates over 50% for both our refi and school loan products.
Our outlook for full year 2026 core EPS is a range of 65 to 80.
Speaker #2: We expect to achieve this growth while reaping the benefits of our investments and capabilities at Earnest, and our legacy expense reduction efforts. Specifically, in 2026, expenses are projected at $350 million, which is $88 million lower than 2025 total expenses.
This range is net of a 35 to <unk> 40 per share impact due to upfront seasonal charges and operating expenses related to our expected $1 $5 billion year over year increase in loan origination.
As I wrap up my comments I want to express my appreciation to Joe for his years of valuable contributions to the company.
Speaker #2: Our outlook for full year 2026 core EPS is a range of $0.65 to $0.80. This range is net of a $0.35 to $0.40 per share impact due to upfront CESL charges and operating expenses related to our expected $1.5 billion year over year increase in loan originations.
I'd also like to thank the Navient team for their continued dedication throughout our strategic transformation. Thank you for your time and I will now open the call for any questions.
If you have a question at this time, please press star one on your telephone keypad.
Speaker #2: As I wrap up my comments, I want to express my appreciation to Joe Fisher for his years of valuable contributions to the company. I'd also like to thank the Navient team for their continued dedication throughout our strategic transformation.
If your question has been answered you may remove yourself from the queue by pressing star two.
So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Additionally.
Additionally, we ask that you please limit yourself to one question and one follow up.
Speaker #2: Thank you for your time, and I will now open the call for any questions.
Speaker #1: If you have a question at this time, please press star one on your telephone keypad. If your question has been answered, you may remove yourself from the queue by pressing star two.
We'll take our first question from Bill Ryan with Seaport Research partners.
Good morning, Dave and congratulations Steve.
First question is on the credit metrics of the private legacy portfolio.
Speaker #1: So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Additionally, we ask that you please limit yourself to one question and one follow-up.
Obviously, a big question among investors, it's about reserve adequacy and Theres been some deterioration since you took the charge in the third quarter.
Speaker #1: We'll take our first question from Bill Ryan with Seaport.
Could you maybe walk us through what you saw over the course of the quarter that prompted you to bump up the reserve rates are build the reserves.
Speaker #2: Good morning, Dave, and congratulations, Steve. First question is on the credit metrics of the private legacy portfolio. Obviously, a big question among investors is about reserve adequacy, and there's been some deterioration since you took the charge in the third quarter.
But that portfolio in the provision.
And some idea of what the ending reserve rate on the legacy portfolio is and I have one follow up.
Hey, Bill good morning, Thanks for your comments.
Speaker #2: Could you maybe walk us through what you saw over the course of the quarter that rates or built the reserves for that portfolio provision, and give us some idea?
Let me start out by providing some context.
What we've seen in the.
Across our portfolios over the last few quarters and the actions that we've taken to respond to those.
Speaker #2: What the ending reserve rate on the legacy portfolio is—and I have one follow-up.
If you go back to the third quarter, we conducted a comprehensive review of the assumptions underlying the life of loan cash flows for our legacy portfolios.
Speaker #3: Yeah, hey Bill, good morning. Thanks for your comments. Let me start out by providing some context of the what we've seen in across our actions that we've taken to respond to those.
Did that would be made assumption changes around the level of prepayments that were seeing in both self portfolio and the private legacy portfolios those assumptions extended the life of the portfolios significantly in some cases.
Speaker #3: If you go back, we conducted a comprehensive review of the assumptions underlying the life-alone cash flows for our legacy portfolios. And when we did that, we made assumption changes around the level of prepayments that we're seeing in both the FFELP portfolio and the private legacy portfolios.
We also looked at.
The default and delinquency experiences that we've had over the preceding recent history and we've made some adjustments based on what we had seen there about the life of loan cash flows.
Speaker #3: Those assumptions impacted the portfolios significantly in some cases. We also looked at the default and delinquency experiences that we've had over the preceding recent history, and we made some adjustments based on what we had seen there about the life-alone cash flows.
We also made some assumption changes about future financings that impact the periodicity and the amount of the life of loan cash flows. So we did that all in the third quarter and cumulatively in an isolation from everything else that was going on in the portfolio.
Those assumption changes increased our expected life of loan cash flows by a little less than $200 million.
Speaker #3: We also made some assumption changes about future financing that impact the periodicity and the amount of the life alone cash flows. So we did that all in the third quarter, and cumulatively, and in isolation from everything else that was going on in the portfolio, those assumption changes increased our expected life alone cash flows by a little less than $200 million.
We went into the fourth quarter.
The recording that you see there really reflects two things one is there was a deterioration of further deterioration in the macroeconomic scenario.
<unk> deterioration impacts all portfolios and <unk>.
<unk> represents about 20% of the back book provision that we're taking this quarter.
Speaker #3: As we went into the fourth quarter, the recording that you see there really reflects two things. One is, there was a deterioration, or further deterioration, in the macroeconomic scenario.
The rest of the back book provision is almost exclusively focused in related to the private legacy portfolio. These are loans originated more than a decade ago, where we did see the sequential increases in delinquency rates that Steve described for you.
Speaker #3: That deterioration impacts all portfolios and represents about 20% of the backbook provision that we're taking this quarter. The rest of the backbook provision is almost exclusively focused on and related to the private legacy portfolio.
<unk> rates are in the consumer lending segment, which includes private legacy refi and in score as well.
If you.
Speaker #3: These are loans originated where we did see the sequential increases in delinquency rates that Steve described for you. Those delinquency rates are in the consumer lending segment, which includes private legacy refi, and in-school as well.
Look into the segments there the delinquency increases were almost exclusively focused in private legacy until our provision expense responds to what we saw in the fourth quarter.
With what we think is an appropriate provision.
Steve can talk about the <unk>.
Speaker #3: If you look into the segments there, the delinquency increases were almost exclusively focused in Private Legacy. And so, our provision expense responds to what we quarter.
This quarter, our reserve levels, which is the second part of your question.
Yes on the reserve coverage, we ended the year in the mid 3% range I think the way to think about that clearly that reserve coverage will shift over time as the mix of our portfolio for private changes with more of the portfolio centered around refi and so.
Speaker #3: Saw in the fourth, with what we think is an appropriate provision. I think Steve can talk about the end-of-quarter reserve levels, which is the second part of your—
When you think about the three 5% at the blend is similar to what <unk> was saying as we look at the statistics in the consumer lending segment. Similarly, you have that blend and mix issue with the refi and legacy.
Speaker #3: question. Yeah, on
Speaker #2: The reserve coverage—we ended the year in the mid-3% range. I think the way to think about that clearly is that reserve coverage will shift over time as the mix of our portfolio for private changes.
Three to three 5%.
The amount we were at at year end.
Speaker #2: With more of the portfolio centered around refi, and so when you think about the 3.5%, it's a blend similar to what Dave was saying.
I think if you look today.
Bill over half of the private legacy portfolio is we thought that percentage given we're originating and we're rolling off is only going to increase each year and so.
Speaker #2: As we look at the statistics and the consumer lending segment, similarly, you have that blend and mix issue with the refi and legacy. The three and a half percent, the amount we're at at year-end.
Reserve ratios et cetera are migrating more towards.
Represented about the refi portfolio and less of private legacy.
Speaker #3: I think if you look today, Bill, over half of the private legacy portfolio is refi, originating in what we're rolling off is only going to increase into the future.
Segment.
Okay. Thank you for that and one <unk>.
Follow up more of an accounting related question.
Obviously.
Speaker #3: And so NIM reserve ratios, et cetera, are migrating more towards the representative of the refi portfolio and less of private legacy on a segment basis.
The 4 billion origination is above the consensus I believe it's somewhere between three four and $3 5 billion.
And you noted that.
The growth investments included the expected seasonal charges youre out looking for a fintech type CFO.
Speaker #2: Okay, thank you for that. And one follow-up, more of an accounting-related question. Obviously, the $4 billion origination is above the consensus—I believe it's somewhere between $3.4 and $3.5 billion.
<unk> been any internal discussion or thought about the use of fair value accounting.
That would kind of like alleviate some of the pressures.
That you are facing as it relates to the seasonal tax and puts you on a level playing field with several of your peers that have already adopted that accounting.
Speaker #2: And you noted that the growth investments included the expected CISL charges. You're out looking for a fintech-type CFO. Has there been any internal discussion or thought about the use of fair value accounting?
Methodology.
Yes.
Bill we're certainly.
Looking at others in the space.
We utilized a fair value accounting were not ready to.
Speaker #2: Obviously, that would kind of alleviate some of the pressures that you're facing as it relates to the CISL tax, and puts you on a level playing field with several of your peers that have already adopted that accounting methodology.
Now.
Certainly at this point in time, but it's certainly something that's on our radar screen is what I would say.
Okay. Thank you.
Thank you we'll take our next question from Jeff Adelson with Morgan Stanley. Your line is open. Please go ahead.
Speaker #3: Yeah, Bill, we're certainly looking at others in the space that have utilized fair value accounting. We're not ready to announce that, certainly, at this point in time, but it's certainly something that's on our radar screen, is what I would say.
Yeah, Hey, good morning, Thanks for taking my questions.
It's nice to see the origination guide and you know you make reference to this.
Speaker #3: say. Okay.
Speaker #2: Thank
Additional one 5 billion I guess I'm, just curious with given.
Speaker #2: you. Thank you.
Given the opportunity you've got ahead I know you are still maybe piloting in the personal loan space here, but you do have.
Speaker #1: We'll take our next question from Jeff Adelson with Morgan Stanley. Your line is open. Please go
Speaker #1: ahead.
This nice Pos opportunity ahead Im curious if number one you have.
Speaker #4: Yeah, hey, good morning. Thanks for taking my—
Speaker #4: questions. It's nice got this additional one and a half billion. I guess I'm just curious with given the opportunity you've got ahead. I know you're still maybe piloting in the personal loan space here.
Continue to do any work or any findings you can share with us on what you think that plus opportunity could be for you ultimately maybe on an annual basis.
Just in light of the acceleration in originations and a cost opportunity.
Speaker #4: This nice plus opportunity ahead. I'm curious if, number one, you do have one, you've continued to do any work or any findings you can share with us on what you think that plus opportunity could be for you ultimately, maybe on an annual basis.
Still do have this run off overall in the portfolio from a legacy in adult book, just kind of curious like how you are thinking about eventually returning to <unk>.
Positive loan growth positive topline growth and how long that might take at this point in your view.
Speaker #4: And just in light of the acceleration in originations, and that plus opportunity, you still do have this runoff overall in the portfolio from the legacy and the FELT book.
Yes. Thanks for the question, Jeff There is a lot there I'll try to address.
Parts of the book.
Personal loan.
Launch we did.
Speaker #4: Just kind of curious how you're thinking about eventually returning to positive loan growth, positive top-line growth, and how long that might take at this point in your—
Managed to cross sell launch in the fourth quarter.
We've also begun to.
Go outside our existing customer base, we're very much it's too early to call or share any results from that other than to say that we are.
Speaker #4: view.
Speaker #3: Yeah, thanks for the question, Jeff. There's a
Speaker #3: There’s a lot there. I'll try to address all parts of that. Look, the personal loan launch we did managed to cross-sell launch in the fourth quarter.
Achieving the testing and learning that we set out in the initial launch.
And we're encouraged by the initial results.
Even if we address are.
Speaker #3: We've also begun to go outside our existing customer base. We're very much—it's too early to call or share any results from that, other than to say that we're achieving the testing and learning that we set out in the initial launch, and we're encouraged by the initial results.
Less than $100 million that we've talked about it's still going to be a pilot year for us in 2026, and so it's not going to impact our financials.
In any meaningful way in 2026.
Plus opportunity we sized that for 2006.
Speaker #3: Even if we address our less than $100 million that we've talked about, it's still going to be a pilot year for us in 2026.
In the November presentation at around $3 billion.
I would say that 2000 <unk> is clearly a transition and I think youre seeing this from others in the industry as well I think there is.
Speaker #3: And so it's not going to impact our financials in any meaningful way in 2026. The plus opportunity besides that for '26 in the November presentation at around $3 billion I would say that '26 is clearly your transition, and I think you're seeing this from others in the industry as well.
A high degree of variability and uncertainty about exactly how that how long that transition period is going to be and exactly what the market opportunity are we are very excited and confident about our ability to grow that book of business at more than 50% in 2026, and we are very.
Speaker #3: I think there's a high degree of variability and uncertainty about exactly how that how long that transition period is going to be, and exactly what the market opportunity are.
<unk> focused on that.
In terms of the runoff in the mix I think Steve provided.
So mentioned an interesting comment is.
Remarks, I don't know this for sure but it may be the first time in a while but the balances in the private legacy portfolio actually is going to be stable year over year. So we're originating loans that is more than offsetting.
Speaker #3: We're very excited and confident about our ability to grow that book of business at more than 50% in 2026, and we're very focused on that.
Speaker #3: In terms of the runoff and the mix, I think Steve provided an interesting comment in his remarks. I don't know this for sure, but it may be the first time in a while.
<unk>.
The run off of private legacy another portfolio as well that's been a long time coming.
I'm sure you can appreciate in the loan book.
Are projecting and targeting for this year, which we have a lot of momentum you can see in the fourth quarter. It was our.
Speaker #3: But the balance in the private legacy portfolio is actually going to be stable year over year. So we're originating loans that is more than offsetting the runoff of private legacy and other portfolios as well.
Our best quarter ever at <unk>, one of the things.
For the year.
One of the things that we are seeing is an increased interest from federal borrowers to refinance.
Speaker #3: That's been a long time coming. As I'm sure you can appreciate, in the loan growth that we are projecting and targeting for this year, we have a lot of momentum.
To the.
November presentation as well in the appendix we showed some of the interest rates that are associated with.
Speaker #3: You can see in the fourth quarter was our best quarter ever at earnest. One of the things for the year one of the things that we are seeing is an.
Federal lending over the last few years.
Opportunities for customers flow or their rates and for us to make high quality loans.
Continue to see that into January and so were.
Speaker #3: Borrowers to refinance. If you go to the November presentation as well, in the appendix we showed some of the interest rates that are associated with federal lending over the last few years.
Very optimistic and confident about our ability to continue the momentum on that loan growth in that product.
Okay, Great and maybe you could just touch on that.
Any of the early conversations you've been having.
Speaker #3: For customers to lower their rates, there's opportunities and for us to make high-quality loans. We continue to see that into January, and so we're very optimistic and confident about our ability to continue the momentum on that loan growth in that particular product.
With some institutions regarding.
Some more formal.
A whole loan sale our flow programs I know you are already executing on the securitization strategy in a more capital light manner, but just any sort of.
Expectations around potential for promoting sales from here.
Speaker #2: Okay, great. And maybe you could just touch on any of the early conversations you've been having with some institutions regarding some more formal whole loan sale or flow programs.
Yes.
I think we.
We've said consistently and so I'll continue to say that we feel like we have.
Number of opportunities channels for us to distribute loans, both the loans that we're making today as well as any potential expanded opportunities that we can.
Speaker #2: I know you're already strategy in a more capitalized manner, but just any executing on the securitization sort of expectations around potential for loan sales from here?
Fine as we leverage the platform at Ernest.
Speaker #3: Yeah, look, I think we've said consistently, and so I'll continue to say that we feel like we have a number of opportunities—channels for us to distribute loans, both the loans that we're making today as well as any potential expanded opportunities that we can leverage the platform at Earnest.
Right now and you can see this in the slides.
<unk> referred to.
Organizations in 2025 for us for an incredibly for us are incredibly capital efficient way for us to finance.
The production of refi in school as well the initial equity requirement is lower by a significant percentage and as a.
Speaker #3: Right now, and you can see this in the slides that Steve referred to, securitizations in 2025 for us were an incredibly for us, an incredibly capital-efficient way for us to finance the production of refi and in-school as well.
Just a fraction of what the legacy portfolio is required in terms of equity capital.
Unsecured capital and so given the economics of securitization and our ability to finance them. That's why we've continued to.
Speaker #3: The initial equity requirement is lower by a significant percentage and is just a fraction of what the legacy portfolio has required in terms of equity capital and unsecured capital, and so, given the economics of securitization and our ability to finance them, that's why we've continued to hold strategy, and that's why our target is to continue to have that.
Throughout 2025 have a make and hold strategy and that's why our target is to continue to have that.
Relative.
The economics of securitization and loan sales slowed in has changed.
Okay.
We identify origination opportunities.
Does that have a better source of capital to the securitization market that we have and we feel confident in our ability to pivot and take advantage of the opportunities that those different financings.
Speaker #3: If we relative economics of securitization and loan sales and flow business change if the we identify origination opportunities that have a better source of capital than the securitization market that we have, then we feel confident in our ability to pivot and take advantage of the opportunities that those different financings
Is that.
Okay, great. Thank you guys.
Thank you we'll take our next question from Terry MA with Barclays. Your line is open. Please go ahead.
Hey, Thank you good morning, I wanted to talk about credit you guys. So far have highlighted just the delinquency trends in the legacy book.
Speaker #3: present.
Speaker #2: guys.
<unk> talked about the reserve associated with that but when I look at the private refi book. There is also a noticeable uptick in delinquencies. There for 90 day delinquencies is about 20 basis points year over year. It looks like it drove the bulk of the dollar increase in 90 day delinquencies for the total book, So maybe just kind of talk about.
Speaker #1: Thank open. Please go you. Okay, great. We'll take our next question.
Speaker #1: ahead.
Speaker #4: Hey, thank you. Good morning. I—
Speaker #4: Want to talk about credit. You guys so far have highlighted just the thank you, book. Delinquency trends in the legacy—kind of talked about the reserve associated with that.
Speaker #4: But when I look at the private refi book, there's also a noticeable uptick in delinquencies there for points year over year. It looks like it 90-day delinquencies is about 20 basis drove the bulk of the dollar increase in 90-day delinquencies for the total book.
What youre seeing there with respect to credit performance and then since you're kind of leaning into originations. There maybe just talk about reserve adequacy and trying to like direction of travel for <unk>.
Credit metrics for the private refi book.
Speaker #4: So maybe just kind of talk about what you're seeing there with respect to credit performance, and then since you're kind of leaning into originations there, maybe just talk about reserve adequacy and kind of like direction of travel for credit metrics for the private refi
Speaker #4: So maybe just kind of talk about what you're seeing there with respect to credit performance, and then, since you're kind of leaning into originations there, maybe just talk about reserve adequacy and kind of the direction of travel for credit metrics for the private refi book.
Yeah. Thanks, Terry I think in terms of refi and what we're seeing we are seeing did see slight uptick in delinquency levels from year end and from last quarter, we feel really good about our overall position with three five.
What we see there of course is on an absolute basis very low delinquency rates.
Speaker #3: Yeah, thanks, Terry. I think in terms of refi and what we're seeing, we are seeing densely slight uptick in delinquency levels from year-end and from last quarter.
We've seen signs and have expectations that that will improve as we move forward here.
Speaker #3: We feel really good about our overall position with refi. What we see there, of course, is on an absolute basis, it's very low delinquency rates.
Also important to reference on refi would be the high quality of the loans that we originated in 2020.
2025, which is also what we saw in 2024.
Speaker #3: We've seen signs and have expectations that that will improve as we move forward here. I think also important to reference on refi would be the high quality of the loans that we originated in 2020.
So we're feeling good about that.
And in terms of the reserve levels for refi that was part of when we did our review back in the third quarter, we did make adjustments to refi to add to the reserve levels there.
Speaker #3: 2025, which is also what we saw in 2024. And so we're feeling good about that. And in terms of the reserve levels for refi, that was part of when we did our review back in the third quarter. We did make adjustments to refi to add to the reserve levels there.
Mostly I feel good about that being the right level of reserves going forward for refi and still thinking about that refi booked in on a life of loan basis below 2% in terms of lifetime losses.
Got it thank you and then.
Maybe just on the origination outlook I may have missed it but you called out 50% upside for our increase in school originations.
Speaker #3: Modestly feel good about that being the right level of reserves going forward for book being on a life-alone basis below 2% in terms of lifetime.
Your business there is kind of outgrown the overall growth of the market the last two years, but as to the.
Speaker #3: losses. Got it.
Speaker #2: Thank you. And then maybe just on the origination outlook, I may have missed it, but you called out 50% upside for or increase in in-school originations.
Material step up are you seeing so what's driving the incremental opportunity is there something changing and competitive dynamics are you just kind of going after the market more aggressively. Thank you.
Speaker #2: Your business there has kind of outgrown the overall growth in the market the last two years. But as to the material step up, are you seeing what's driving the incremental opportunity?
Yes so.
We were coming off 2025 was the best year.
We've had earnings call since we entered that marketplace.
Speaker #2: Is there something changing in competitive dynamics, or are you just kind of going after the market more aggressively? Thank you.
Five or six years ago. So we have a lot more.
Mentioned in that space.
Good just based on the organic customers that we serve.
And obviously be.
Additional opportunity from Grad, plus even if we're in a transition year, which 2026 years gives us confidence that we can accelerate the growth rates in that particular product and that's why you see the 50% increase there.
Got it thank you.
Yeah.
Yes.
Thank you we'll take our next question from Rick Shane with Jpmorgan. Your line is open. Please go ahead.
Good morning, everybody.
A couple of things.
I guess, it's all related.
<unk>.
We expect to grow deposit book in 2006, and you have about 525 million in maturities on the debt side.
David Yowan: So we can accelerate the growth rates in that particular product. That's why you see the, you know, the 50% increase there.
[Analyst 1]: So we can accelerate the growth rates in that particular product. That's why you see the, you know, the 50% increase there.
Over the last decade do you guys have been very disciplined about.
Jen Earyes: Got it. Thank you.
[Analyst 2]: Got it. Thank you.
Operator: Thank you. We'll take our next question from Rick Shane with J.P. Morgan. Your line is open. Please go ahead.
Operator: Thank you. We'll take our next question from Rick Shane with J.P. Morgan. Your line is open. Please go ahead.
Returning capital to equity holder using cash flows to return capital to equity holders.
<unk> consistently paying down debt.
Rick Shane: Good morning, everybody. A couple things, I guess it's all related. You expect to grow the private book in 2026. You have about $525 million in maturities on the debt side, and very disciplined about returning capital to equity holders using cash flows to return capital to equity holders and consistently paying down debt. As the strategy transitions and you start to at least grow the private book, you talk about being opportunistic in terms of equity repurchases. What does that look like? Obviously, you're trading at a huge discount to tangible book, assuming yesterday's close. So opportunistic seems to be there today. Should we expect sort of consistent purchases in 2026, with the levels we saw in 2025?
Rick Shane: Good morning, everybody. A couple things, I guess it's all related. You expect to grow the private book in 2026. You have about $525 million in maturities on the debt side, and very disciplined about returning capital to equity holders using cash flows to return capital to equity holders and consistently paying down debt. As the strategy transitions and you start to at least grow the private book, you talk about being opportunistic in terms of equity repurchases. What does that look like? Obviously, you're trading at a huge discount to tangible book, assuming yesterday's close. So opportunistic seems to be there today. Should we expect sort of consistent purchases in 2026, with the levels we saw in 2025?
Danny.
Strategy transitions and you start to at least grow the private book.
And talk about being opportunistic in terms of equity repurchases, what does that look like obviously, you're trading at a huge discount to tangible book.
Assuming yesterdays close.
We're opportunistic.
Seems to be there today should we expect sort of a consistent purchases in 2006 with the levels. We saw in 'twenty five.
Yes, Thanks, Mike.
We're not signaling any change in the way, we're thinking about share repurchases.
Summarized it well in terms of what we've.
<unk> been doing from a capital management perspective.
One thing I would say is that as you think about 2006. When you think about the share authorization that we received from our board last December in the fourth quarter, which was a $100 million.
As the share count is.
Come down significantly over the years.
David Yowan: Yeah. Thanks, Rick. Look, we're not signaling any change in the way we're thinking about share purchases. I think you summarized it well in terms of what we've been doing from a capital management perspective. The one thing I would say is that as you think about 2026, and you think about the share authorization that we received from our board last December in Q4, which was $100 million, as the share count has come down significantly over the years, the amount of share purchases has declined as well overall. The opportunistic is, in fact, based in part on the valuation of the shares, and we continue to believe that the discount to tangible book value provides an opportunity for us to repurchase.
[Analyst 1]: Yeah. Thanks, Rick. Look, we're not signaling any change in the way we're thinking about share purchases. I think you summarized it well in terms of what we've been doing from a capital management perspective. The one thing I would say is that as you think about 2026, and you think about the share authorization that we received from our board last December in Q4, which was $100 million, as the share count has come down significantly over the years, the amount of share purchases has declined as well overall. The opportunistic is, in fact, based in part on the valuation of the shares, and we continue to believe that the discount to tangible book value provides an opportunity for us to repurchase.
The amount of share repurchases has declined as well overall the opportunistic is in fact.
Based in part on the valuation of the shares and we continue to believe that the discount to tangible book value provides an opportunity.
For us to repurchase so same strategy.
Scaled to the size of the share repurchase authorization that you saw which is scale.
To the overall size of our market cap and shares outstanding.
Got it okay I appreciate that.
I would be remiss not to congratulate Steve on also.
Equally importantly, not to thank Joe for all of his conversations and help over the years as well. So thank you guys. Congratulations.
Thank you Rick.
David Yowan: So same strategy scaled to the size of the share repurchase authorization that you saw, which is scaled to the, you know, to the overall size of market cap and shares outstanding in the company.
So same strategy scaled to the size of the share repurchase authorization that you saw, which is scaled to the, you know, to the overall size of market cap and shares outstanding in the company.
And once again, if you would like to ask a question. Please press star and one on your keypad now.
We'll take our next question from Caroline later with Bank of America. Your line is open. Please go ahead.
Rick Shane: Got it. Okay, I appreciate that. And I would be remiss not to congratulate Steve, and also, equally importantly, not to thank Joe for all of his conversations and help over the years as well. So thank you, guys, and congratulations.
Rick Shane: Got it. Okay, I appreciate that. And I would be remiss not to congratulate Steve, and also, equally importantly, not to thank Joe for all of his conversations and help over the years as well. So thank you, guys, and congratulations.
Been doing from a capital management perspective. The one thing I would say is that if you think about '26 and you think about the share authorization that we, uh, received from our Board last, uh, December in the fourth quarter, which was $100 million, the, as the share count has, uh, come down significantly over the years, the, uh, the amount of share purchases has declined as well. Overall, the opportunistic is, in fact, uh, based in part on the valuation of the shares and we continue to believe that the discount to tangible book value provides an opportunity, uh, for us to repurchase. So the strategy is scaled to the size of the share purchase authorization that you saw, which is scaled to the, uh, you know, to the overall size of, uh, market cap and shares outstanding in the company,
Caroline Your line is open. Please proceed with your question.
David Yowan: Thank you, Rick.
[Analyst 1]: Thank you, Rick.
Got it. Okay, I appreciate that. And, and, uh, I would be remiss not to congratulate Stephen. Also, uh, equally importantly, not to thank Joe for all of his, uh, conversations and help over the years as well. So thank you, guys, and congratulations.
Oh, Hey, sorry about that and so the guidance does that reflect our current outlook and so what are the macro assumptions underpinning the guidance because typically in terms of unemployment rate and then also in terms of interest rates thinking about refi volumes next year.
Thank you.
Operator: Once again, if you would like to ask a question, please press star and one on your keypad now. We'll take our next question from Caroline Lott with Bank of America. Your line is open. Please go ahead. Caroline, your line is open. Please proceed with your question.
Operator: Once again, if you would like to ask a question, please press star and one on your keypad now. We'll take our next question from Caroline Lott with Bank of America. Your line is open. Please go ahead. Caroline, your line is open. Please proceed with your question.
And once again, if you would like to ask a question, please press star and 1 on your keypad now.
Hi.
Yeah.
Caroline Thanks for the question look I don't have them right in front of me, but you can think of those as really like the blue chip consensus for unemployment and interest rates.
We'll take our next question, from Caroline Lau with Bank of America. Your line is open, please go ahead.
We don't have an in house economists, so we're relying as many firms do.
[Analyst] (Bank of America): Oh, hey, sorry about that. So the guidance slide says it reflects the current outlook. So what are the macro assumptions underpinning the guide, specifically in terms of unemployment rate, and then also in terms of interest rates, thinking about refi volumes next year or this year, sorry?
Caroline Lott: Oh, hey, sorry about that. So the guidance slide says it reflects the current outlook. So what are the macro assumptions underpinning the guide, specifically in terms of unemployment rate, and then also in terms of interest rates, thinking about refi volumes next year or this year, sorry?
Some of the providers of those scenarios in our Gen. Two.
Those to you offline, but it's really a consensus macroeconomic.
Assumption for next year.
Caroline, your line is open. Please proceed with your question. Hey, sorry about that. Um, so the guidance slide says it reflects the current Outlook. Um so what are the macros functions underpinning? The guides specifically in terms of unemployment rate and then also in terms of interest rates thinking about recycling next year,
Okay. Thanks.
For this year. Sorry.
David Yowan: Caroline, thanks for the question. Look, they're, I don't have them right in front of me, but you can think of those as really like the Blue Chip consensus for unemployment and interest rates. You know, we don't have an in-house economist, so we're relying, as many firms do, on some of the providers of those scenarios. And I'll have Jen provide those to you offline, but it's really a consensus macroeconomic assumption for next year.
Yes.
[Analyst 1]: Caroline, thanks for the question. Look, they're, I don't have them right in front of me, but you can think of those as really like the Blue Chip consensus for unemployment and interest rates. You know, we don't have an in-house economist, so we're relying, as many firms do, on some of the providers of those scenarios. And I'll have Jen provide those to you offline, but it's really a consensus macroeconomic assumption for next year.
Thank you.
Our next question from Sanjay Zach Ronnie with Keybanc your.
Your line is open. Please go ahead.
Thank you good morning.
So let me go back to the deterioration in the private legacy portfolio I'm, just curious like what exactly is driving deterioration on loans that were originated a decade ago and I'm just curious like is it that those.
Um, Caroline. Thanks for the question, look there. Um, I don't have the right in front of me but you could think of those is really like the the blue chipped in census for unemployment and interest rates. You know, we don't have an in-house Economist. So we're relying as many firms to on some of the providers of those scenarios. I know. Jim could provide those to you offline. But it's really a consensus uh macroeconomic.
[Analyst] (Bank of America): Okay, thanks.
Caroline Lott: Okay, thanks.
Uh, assumption for for next year.
David Yowan: Yep.
[Analyst 1]: Yep.
<unk> are those consumers are now seeing job loss I mean, what's the what's the driver of the higher delinquencies there.
Okay, thanks.
Yep.
Operator: Thank you. We'll take our next question from Sanjay Sakhrani with KBW. Your line is open. Please go ahead.
Operator: Thank you. We'll take our next question from Sanjay Sakhrani with KBW. Your line is open. Please go ahead.
Yeah. Thanks, Sanjay I think it's probably important for us to zoom out a bit and.
Jen Earyes: Thank you. Good morning. Can we go back to the deterioration in the private legacy portfolio? I'm just curious, like, what exactly is driving deterioration on loans that were originated a decade ago? And I'm just curious, like, is it that those students or those consumers are now seeing job loss? I mean, what's the driver of the higher delinquencies there?
Sanjay Sakhrani: Thank you. Good morning. Can we go back to the deterioration in the private legacy portfolio? I'm just curious, like, what exactly is driving deterioration on loans that were originated a decade ago? And I'm just curious, like, is it that those students or those consumers are now seeing job loss? I mean, what's the driver of the higher delinquencies there?
Thank you. We'll take our next question from Sanjay sakrani with KBW. Your line is open, please go ahead.
Some of what Dave was talking about earlier, when we did our third quarter review.
Our our private legacy portfolio, which as you know was originated more than a decade ago.
It's a portfolio that has gone through some cycles and so clearly there is.
Strong component of that portfolio has been making payments consistently you have other other borrowers who have struggled at times and we've been there to help them with payment programs and the like as we manage through things. We go over that over the course of the year is clearly going through the pandemic. The pandemic relief cycle that returned to repayment cycle with many of the borrowers having better.
Thank you. Good morning. Um, can we go back to the deterioration in the private Legacy portfolio? I'm just curious, like, what exactly is, um, driving deterioration on loans that were originated a decade ago? And I'm just curious, like, is it that those, um, students or those consumers are now seeing
Job loss. I mean, what's the driver of the higher delinquencies there?
David Yowan: Yeah. Thanks, Sanjay. I think it's probably important for us to zoom out a bit and some of what Dave was talking about earlier when we did our third quarter review. Our private legacy portfolio, which, as you know, was originated more than a decade ago, it's, it's a portfolio that has gone through some cycles, and so clearly there's a strong component of that portfolio that's been making payments consistently. You have other borrowers who have struggled at times, and we've been there to help them with payment programs and the like, as we manage through things. We go over the course of the years, clearly going through the pandemic, the pandemic relief cycle, the return to repayment cycle, with many of these borrowers having federal loans as well. You know, it's put them through some changes, and some challenges there.
[Analyst 1]: Yeah. Thanks, Sanjay. I think it's probably important for us to zoom out a bit and some of what Dave was talking about earlier when we did our third quarter review. Our private legacy portfolio, which, as you know, was originated more than a decade ago, it's, it's a portfolio that has gone through some cycles, and so clearly there's a strong component of that portfolio that's been making payments consistently. You have other borrowers who have struggled at times, and we've been there to help them with payment programs and the like, as we manage through things. We go over the course of the years, clearly going through the pandemic, the pandemic relief cycle, the return to repayment cycle, with many of these borrowers having federal loans as well. You know, it's put them through some changes, and some challenges there.
<unk> loans as well, it's put them through some changes.
And some challenges there.
Important for us to zoom out a bit. And um some of what Dave was talking about earlier when we did our third quarter review, um, our our private Legacy portfolio which as you know, was originated more than a decade ago.
What we're seeing here is that the performance quarter to quarter, even though it slipped we're seeing positive momentum in terms of those borrowers getting on track and heading into 2026, we're optimistic that that will.
It's, um, it's a portfolio that has gone through some cycles. And so, clearly, there's a strong component of that portfolio that's been making payments consistently. You have other borrowers who have
And that those trends will improve I think in terms of really what's affecting borrowers I mean, clearly there's a variety of factors, including those I mentioned is often macroeconomic factors inflation and the like but I would say in terms of how we're sizing it up in general.
Yes, I think it's just important to remember kind of the cycle. They went through and now that we're past a lot of that.
David Yowan: I think what we're seeing here is that the performance quarter to quarter, even though it's slipped, we're seeing positive momentum in terms of those borrowers getting on track and heading into 2026. We're optimistic that that will, that those trends will improve. I think in terms of, you know, really what's affecting borrowers, I mean, clearly there's a variety of factors, including those I mentioned. There's also macroeconomic factors, inflation and the like. But I'd say in terms of, you know, just how we're sizing it up in general, yeah, I think it's just important to remember kind of the cycle they went through, and now that we're past a lot of that, kind of the positive momentum that we expect to see going forward.
I think what we're seeing here is that the performance quarter to quarter, even though it's slipped, we're seeing positive momentum in terms of those borrowers getting on track and heading into 2026. We're optimistic that that will, that those trends will improve. I think in terms of, you know, really what's affecting borrowers, I mean, clearly there's a variety of factors, including those I mentioned. There's also macroeconomic factors, inflation and the like. But I'd say in terms of, you know, just how we're sizing it up in general, yeah, I think it's just important to remember kind of the cycle they went through, and now that we're past a lot of that, kind of the positive momentum that we expect to see going forward.
The positive momentum that we expect to see going forward.
Okay, Great and then.
I know you guys.
It didn't really like kind of given a whole lot on the outlook for NIM and provisions I'm. Just curious as we think about those other components for 2020 is there any way to contextualize sort of the path for NIM.
Because there's a little bit weaker than we had anticipated for both developing consumer lending and then that obviously kind of what's being baked into provisions given some of the delinquency trends and the growth differences that you talked about.
Jen Earyes: ... Okay, great. And then, I know you guys didn't really, like, kind of give a whole lot on the outlook for NIM and provisions. I'm just curious, as we think about those other components for 2026, is there any way to contextualize sort of the path for NIM? Because it was a little bit weaker than we had anticipated, for both FFELP and consumer lending. And then obviously, kind of what's being baked into provisions, given some of the delinquency trends and the growth differences that you talked about.
Sanjay Sakhrani: ... Okay, great. And then, I know you guys didn't really, like, kind of give a whole lot on the outlook for NIM and provisions. I'm just curious, as we think about those other components for 2026, is there any way to contextualize sort of the path for NIM? Because it was a little bit weaker than we had anticipated, for both FFELP and consumer lending. And then obviously, kind of what's being baked into provisions, given some of the delinquency trends and the growth differences that you talked about.
Struggle that time and we've been there to help them with payment programs. And the like, if we manage through things, we go over over the course of the years, clearly going through the pandemic, the pandemic relief, cycle, that returned to repayment cycle with many of these borrowers, having Federal loans as well. You know it's put them through some changes um and some challenges there. I think what we're seeing here is that the performance quarter to quarter even though it's slipped, we're seeing positive momentum in terms of those borrowers uh getting on track and heading into 2026, we're optimistic that that will. Um but those Trends will improve I think in terms of, you know, really what's affecting borrowers. I mean clearly there's a variety of factors including those I mentioned there's also a macroeconomic factors inflation and the like but I'd say in terms of, you know, just how we're sizing it up in general. Um, you know, I think it's just important to, to remember, kind of the cycle they went through and now that we're past a lot of that, um, kind of the the, the positive momentum that we expect to see going forward.
Yeah. So first on the NIM side of things for <unk>.
<unk> portfolio, we're expecting a relatively stable NIM, given the slowdown and the prepayment of the self loans, so year over year I'd expect that to be relatively consistent in terms of the private or the consumer lending side.
The.
What we saw in the second half of 2025 is a good barometer for 2026 and clearly what we're seeing there is with the portfolio remaining stable or increasing slightly in 2026, that's a positive the mix of the portfolio towards more refi.
Okay, great. And then, um, I know you guys, uh, didn't really, like, kind of give a whole lot on the outlook for NIM and provisions. I'm just curious, as we think about those other components for 2026, is there any way to contextualize sort of the path for NIM? Uh, because it was a little bit weaker than we had anticipated, uh, for both self and consumer lending. And then obviously, kind of what's being baked into provisions, given some of the delinquency trends and, and the growth differences that you talked about.
David Yowan: Yeah. So first, on the NIM side of things, for the FFELP portfolio, we're expecting, you know, relatively stable NIM, you know, given the slowdown in the prepayment of the FFELP loans. So year-over-year, I'd expect that to be relatively consistent. In terms of the private or the consumer lending side, the second half of 2025 is a good barometer for 2026. And clearly, what we're seeing there is, you know, with the portfolio remaining stable or increasing slightly in 2026, that's a positive. The mix of the portfolio towards more refi is goes the other way in terms of overall margin. So it's, I'd say it's a relatively stable outlook there as well. In terms of provision, what's in the forecast here is provision on new originations.
[Analyst 1]: Yeah. So first, on the NIM side of things, for the FFELP portfolio, we're expecting, you know, relatively stable NIM, you know, given the slowdown in the prepayment of the FFELP loans. So year-over-year, I'd expect that to be relatively consistent. In terms of the private or the consumer lending side, the second half of 2025 is a good barometer for 2026. And clearly, what we're seeing there is, you know, with the portfolio remaining stable or increasing slightly in 2026, that's a positive. The mix of the portfolio towards more refi is goes the other way in terms of overall margin. So it's, I'd say it's a relatively stable outlook there as well. In terms of provision, what's in the forecast here is provision on new originations.
It goes the other way in terms of overall margin. So I would say, it's a relatively stable outlook there as well in terms of provision lessening the forecast here is provision on new originations.
And.
Obviously, our reserve levels that we have at the end of the year, what we expect going forward that really that that's what the provisioning entails for 2026.
Got it alright, thank you very much I appreciate it.
Thank you we'll take our next question from Mark Devries with Deutsche Bank. Your line is open. Please go ahead.
Yeah. So first on the Nim side of things, um, for the salt portfolio, we're expecting, you know, relatively stable them, you know, given the slowdown in the prepayment of of the self loans. So year-over-year, I'd expect that to be relatively consistent in terms of the the private or the consumer lending side. Um, the second half of of 2025 is a good barometer for 2026 in. Clearly what we're seeing there is, you know, with the portfolio remaining stable or or increasing slightly in 2026. That's a a positive the mix of the portfolio towards more refi. Um, is is uh, you know, goes the other way in terms of overall margin. So it's a
Yes. Thank you.
As we look out to 2027 should we expect the same level.
David Yowan: And, you know, obviously, our reserve levels that we have at the end of the year are what we expect going forward. So really, that's what the provision entails for 2026.
And, you know, obviously, our reserve levels that we have at the end of the year are what we expect going forward. So really, that's what the provision entails for 2026.
Of net incremental growth investments, which you called out is laying on.
On the 26 earnings expectations by 35% to 40 cents a share or does that is that.
Jen Earyes: Got it. All right. Thank you very much. Appreciate it.
Sanjay Sakhrani: Got it. All right. Thank you very much. Appreciate it.
You know, I say it's a relatively stable Outlook there as well in terms of provision. What's in the forecast here is provisioned on new originations um and you know, obviously our our Reserve levels that we have at the end of the year, what we expect going forward? So really that, that's what the provision entails for 2026.
That kind of trail off.
Got it. All right. Thank you very much. Appreciate it.
Hey, Mark Thanks for the question look we're focused at the moment on 26 and trying to execute against that I think if you go back to the November strategy presentation.
Operator: Thank you. We'll take our next question from Mark DeVries with Deutsche Bank. Your line is open. Please go ahead.
Operator: Thank you. We'll take our next question from Mark DeVries with Deutsche Bank. Your line is open. Please go ahead.
Thank you. We'll take our next question from Mark Deise with Deutsche Bank. Your line is open—please go ahead.
Mark DeVries: Yeah, thank you. As we look out to 2027, should we expect the same level of net incremental growth investments, which you called out as weighing on the 2026 earnings expectations by $0.35 to $0.40 a share, or does that – is that gonna trail off?
Mark DeVries: Yeah, thank you. As we look out to 2027, should we expect the same level of net incremental growth investments, which you called out as weighing on the 2026 earnings expectations by $0.35 to $0.40 a share, or does that – is that gonna trail off?
Ernest is now.
Very focused on.
Some.
Some.
Products that have particularly high growth rates.
Hi, addressable Tam.
Personal loan product is it going to be in pilot in 2026.
Yeah. Thank you. Um, is we look out to 2027? Should we expect the same level of of net incremental growth Investments? Would you call that is laying on the on the 26th? Earnings Expectations by 35 to 40 cents? A share, or does that is that kind of Trail off?
David Yowan: Hey, Mark, thanks for the question. Look, we're focused at the moment on 26 and trying to execute against that. I think if you go back to the November strategy presentation, you know, Earnest is now very focused on some products that have particularly high growth rates, high addressable TAMs. The personal loan product is gonna be in pilot in 2026. And you know, we're encouraged by the opportunities there and trying to test and learn and make sure we can understand where we can best take advantage of that highly addressable TAM. You know, the refi market has, every year, there's federal loans that are being made in significant amounts that add to the addressable TAM in that market, and the expansion of the Grad PLUS opportunity.
[Analyst 1]: Hey, Mark, thanks for the question. Look, we're focused at the moment on 26 and trying to execute against that. I think if you go back to the November strategy presentation, you know, Earnest is now very focused on some products that have particularly high growth rates, high addressable TAMs. The personal loan product is gonna be in pilot in 2026. And you know, we're encouraged by the opportunities there and trying to test and learn and make sure we can understand where we can best take advantage of that highly addressable TAM. You know, the refi market has, every year, there's federal loans that are being made in significant amounts that add to the addressable TAM in that market, and the expansion of the Grad PLUS opportunity.
And.
We're encouraged by the opportunities there and trying to test and learn and make sure. We can understand where we can best take advantage of that highway addressable Tam.
The refi market has.
Every year Theres federal loans that are being made in significant amounts.
Add to the addressable Tam in that market.
And the expansion of the Grad plus opportunities. So there is lots of room for growth. We're not here to give a 2027 outlook, but if you just look at those.
Uh, hey Mark, thank you for the question. Look, we're focused at the moment on '26 and trying to execute against that. I think if you go back to the November strategy presentation, you know, Earnest is now, uh, very focused on some, uh, some products that have particularly high growth rates, high addressable TAMs. Uh, the personal loan product is, uh, going to be in pilot in 2026.
Products that we have.
The addressable market.
<unk>.
Market market expansion opportunities, we think are our large and sustainable as well so I'd sort of leave it at that for 2020.
Okay fair enough. Thank you.
David Yowan: So there's lots of room for growth. We're not here to give a 2027 outlook, but if you just look at those three products that we have, the addressable market and the market expansion opportunities, you know, we think are large and sustainable as well. So I'd sort of leave it at that for 2027.
So there's lots of room for growth. We're not here to give a 2027 outlook, but if you just look at those three products that we have, the addressable market and the market expansion opportunities, you know, we think are large and sustainable as well. So I'd sort of leave it at that for 2027.
Thank you at this time there are no further questions in queue.
I would now like to turn it back to Jan area for closing remarks.
Thanks, Angela and thank you everybody for joining today's call. Please contact me. If you have any follow up questions. This concludes today's call.
Thank you this brings us to the end of today's meeting we appreciate your time and participation.
Mark DeVries: Okay, fair enough. Thank you.
Mark DeVries: Okay, fair enough. Thank you.
So, I sort of leave it at that for 2027.
Okay, fair enough. Thank you.
Operator: Thank you. At this time, there are no further questions in queue. I would now like to turn it back to Jen Earyes for closing remarks.
Operator: Thank you. At this time, there are no further questions in queue. I would now like to turn it back to Jen Earyes for closing remarks.
Thank you. At this time, there are no further questions in queue.
Jen Earyes: Thanks, Angela, and thank you everybody for joining today's call. Please contact me if you have any follow-up questions. This concludes today's call.
[Analyst 2]: Thanks, Angela, and thank you everybody for joining today's call. Please contact me if you have any follow-up questions. This concludes today's call.
I would now like to turn it back to Jen areas for closing remarks.
Thanks, Angela. And thank you, everybody, for joining today's call. Please contact me if you have any follow-up questions. This concludes today's call.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Thank you. This brings us end of today's meeting. We appreciate your time and participation. You may now disconnect
