Navient Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Navient second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. You will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Nathan Rutledge. Sir, please go ahead.

Thanks, Lawrence. Good morning and welcome to Navient's second quarter 2021 earnings call. With me today are Jack Raimondi, our CEO, and Joe Fisher, our CFO. After their prepared remarks, we will open up the call for questions. 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 the presentation. Actual results in the future may be materially different from those disclosed here. This could be due to a variety of factors, including, among other things, uncertainties associated with the severity, magnitude, and duration of the COVID-19 pandemic and the related economic impact. As reported previously, the work from home policies and travel restrictions that have been put in place have not negatively affected our ability to close our books and maintain our financial reporting systems. internal controls over financial reporting or disclosure controls and procedures. Listeners should refer to the discussion of those factors on the company's Form 10-K and other filings with the SEC. During this conference call, we will refer to non-GAAP financial measures, including core earnings, adjusted tangible equity ratio, and other various non-GAAP financial measures derived from core earnings. Our GAAP results and description of our non-GAAP financial measures with a full reconciliation to GAAP can be found in the second quarter 2021 supplemental earnings disclosure. This is posted on the investors page at Navient.com.

Thank you, and now I'll turn the call over to Jack. Thanks, Nathan. Good morning, everyone, and thank you for joining us today and for your interest in Navient. Our business model continues to deliver exceptional results for our clients, our teammates, and our investors. Each business segment this quarter exceeded expectations as we executed our business plan and created value. This quarter's results were driven by stable margins in our lending segments, strong demand for our private education loan products, and continued strength in delivering services to our state clients in our business processing solutions segments. In total, we earned $165 million in core net income and delivered adjusted core earnings per share of 98 cents, an increase of 8% over the year-ago quarter. We continue to focus our efforts on increasing loan originations, growing business processing revenue, and improving financing and operating efficiency. This quarter, we originated $1.3 billion in private education loans, up from a pandemic impacted $238 million in the year-ago quarter. We are also optimistic about demand for new in-school lending as peak season for this product is underway. As a result, we are committed to our forecast of at least $5.5 billion in combined refi and in-school originations in 2021. Demand for our business processing solutions also remains strong throughout the quarter. Revenue remained above expectations as our performance and efficiency allowed us to maintain our pandemic-related project assignments longer. These projects have also allowed us to broaden the awareness of our technology-enhanced capabilities with clients, and we continue to expect the revenue from our COVID-related work to decline significantly over the balance of the year as these projects come to an end. Our FELP and private education loan borrowers continue to show very strong payment performance as the economy reopens. Forbearance rates are at or near pre-pandemic levels, and delinquency rates remain near historic lows. While we continue to offer payment relief for customers experiencing financial difficulty, the request for this assistance continues to fall. Our reserves for loan losses include the current economic outlook and the potential impact from the wind down of the various stimulus programs. Net interest margins in our student loan portfolios have also contributed to our financial results. We continue to reduce interest expense through the execution of new funding facilities at lower costs. These new funding transactions include lower spreads, higher advance rates, and innovative designs that allow us to reduce both the cost of our facilities and the level of unsecured debt, our highest cost funding source in our portfolios. Our actions in this area have delivered hundreds of millions of interest savings in the last three years. We've also delivered operating efficiency gains through increased automation and incorporation of artificial intelligence. This focus on building technology-enabled solutions has allowed us to improve our customer experience, reduce costs, and improve outcomes. Our efforts to improve customer experience and our financing and operating efficiency remains a primary focus for us. Our exceptional financial results have generated the capital to exceed our targeted capital ratios ahead of forecast, deliver an attractive dividend and increase our original plan for share repurchases. This is yet another example of how we create and deliver value for our investors. The pandemic created a very volatile and challenging environment. Our business plan, team and infrastructure allowed Naviant to respond to our customers and clients with the support and services needed to navigate the constantly changing and challenging environment while maintaining our focus on growth. As I look to the second half of the year, I remain very optimistic that we will continue to deliver exceptional results for each of our stakeholders. Before I turn the call over to Joe for a detailed review of the quarter, I would like to thank my colleagues for their continued commitment, agility, and effort to service our customers and clients. Thank you. Thank you for your attention. And then I'll turn the call over to Joe.