NAVIENT CORP (NAVI)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Selected Historical Financial Information and Ratios

(1)
Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures – Core Earnings.”

7

The Quarter in Review

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also include this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments. See “Non-GAAP Financial Measures — Core Earnings” for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.

Second-quarter 2026 GAAP net income was $25 million ($0.26 diluted earnings per share), compared with net income of $14 million ($0.13 diluted earnings per share) for the year-ago quarter. See “Results of Operations — GAAP Comparison of Second-Quarter 2026 Results with Second-Quarter 2025” for a discussion of the primary contributors to the change in GAAP earnings between periods.

Second-quarter 2026 Core Earnings net income was $27 million ($0.29 diluted Core Earnings per share), compared with $21 million ($0.20 diluted Core Earnings per share) for the year-ago quarter. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.

Financial highlights of second-quarter 2026 include:

Consumer Lending segment:

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Net income of $27 million.

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Net interest margin of 2.26%.

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Originated $815 million of Private Education Loans, a 63% increase from a year ago.

Federal Education Loans segment:

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Net income of $26 million.

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Net interest margin of 0.68%.

Capital, funding and liquidity:

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GAAP equity-to-asset ratio of 5.1% and adjusted tangible equity ratio(1) of 9.0%.

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Repurchased $2 million of common shares.

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Paid $15 million in common stock dividends.

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Issued $500 million of unsecured debt and $1.3 billion of asset-backed securities.

Operating Expenses:

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Incurred operating expenses of $82 million.

(1)
Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”

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Results of Operations

GAAP Income Statements (Unaudited)

9

GAAP Comparison of Second-Quarter 2026 Results with Second-Quarter 2025

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

For the three months ended June 30, 2026, net income was $25 million, or $0.26 diluted earnings per common share, compared with net income of $14 million, or $0.13 diluted earnings per common share, for the year-ago period.

The primary contributors to the change in net income are as follows:

• Net interest income decreased by $6 million primarily due to the paydown of the FFELP portfolio and the Private Education Loan portfolio's changing product mix with Refinance Loans increasing as a percentage of the portfolio. The Refinance Loan portfolio earns a lower net interest margin compared to the non-refinance portfolio, due to lower expected credit losses, which reduces the overall net interest margin.

• Provisions for loan losses decreased $11 million from $37 million to $26 million.

○ The provision for Private Loan losses decreased $11 million from $29 million to $18 million.

○ The provision for FFELP Loan losses remained unchanged at $8 million.

The provision for Private Loan losses of $18 million in the current period included $14 million associated with loan originations and $23 million related to a general reserve build primarily as a result of portfolio performance trends. While credit performance improved on a sequential basis during the quarter, delinquency and default levels in the Private Education Loan portfolio remain elevated. This was partially offset by a $19 million decrease as a result of classifying $528 million of loans as held for sale as of June 30, 2026. When loans are classified as held for sale the corresponding allowance for loan losses is reversed through provision for loan losses and such loans are carried at the lower of fair value or cost basis. These loans are carried at their cost basis as of June 30, 2026. The provision of $29 million in the year-ago quarter included $7 million associated with loan originations and $22 million related to a general reserve build primarily as a result of an increase in delinquency balances as well as a weakening in the forecasted macroeconomic metrics used to estimate expected losses.

The provision for FFELP Loan losses of $8 million in the current period was primarily the result of increased charge-offs due to prior disaster forbearance volume, as well as the continued extension of the portfolio. The provision of $8 million in the year-ago quarter was primarily the result of an increase in delinquency balances.

• Other income decreased $2 million primarily related to a $13 million decrease in transition services revenue we had earned related to our various strategic initiatives. The transition services related to the outsourcing of loan servicing and the sale of our healthcare services business ended in May 2025. The transition services related to the sale of our government services business ended in October 2025. This $13 million decrease was partially offset by a $12 million gain on an investment in the current period.

• Net gains on derivative and hedging activities increased $6 million due primarily to interest rate fluctuations. Valuations of derivative instruments fluctuate based upon ma

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-K. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Forward-Looking and Cautionary Statements” and “Risk Factors” in this Form 10-K.

The objective of this discussion and analysis is to allow investors to view the Company from management’s perspective. Accordingly, we provide the reader with narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity and cash flows. The discussion that follows is primarily focused on 2025 versus 2024 results. Discussion and analysis of 2024 results compared to 2023 is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the year ended December 31, 2024 as filed with the SEC on February 27, 2025, which is incorporated herein by reference.

Selected Historical Financial Information and Ratios

(1)
Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures – Core Earnings.”

11

The Year in Review

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also include this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments. See “Non-GAAP Financial Measures — Core Earnings” for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.

2025 GAAP net loss was $80 million ($0.81 diluted loss per share), compared with net income of $131 million ($1.18 diluted earnings per share) in 2024. See “Results of Operations — GAAP Comparison of 2025 Results with 2024” for a discussion of the primary contributors to the change in GAAP earnings between periods.

2025 Core Earnings net loss was $35 million ($0.35 diluted Core Earnings loss per share), compared with Core Earnings net income of $221 million ($2.00 diluted Core Earnings per share) in 2024. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.

2025 GAAP and Core Earnings results included the following significant items:

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$280 million provision for loan losses ($249 million for Consumer Lending and $31 million for FFELP). Of the $280 million, $41 million relates to originations with the remaining $239 million primarily associated with elevated delinquency balances, our forecasted macroeconomic outlook as well as the extension of the FFELP portfolio.

•
$11 million net benefit to net interest income from a decrease in prepayment rate assumptions ($18 million of additional net interest income from the FFELP Loan portfolio partially offset by a $7 million reduction in the Private Education Loan portfolio).

•
$25 million of regulatory and restructuring expenses.

Financial highlights of 2025 include:

Consumer Lending segment:

•
Net income of $20 million.

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Net interest margin of 2.49%.

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Originated $2.5 billion of Private Education Loans, a 77% increase compared to 2024.

Federal Education Loans segment:

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Net income of $115 million.

•
Net interest margin of 0.69%.

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FFELP Loan prepayments of $977 million compared to $5.4 billion in 2024.

Business Processing segment:

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Navient ceased providing Business Processing segment services after the sale in February 2025 of its government services business.

Capital, funding and liquidity:

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GAAP equity-to-asset ratio of 4.9% and adjusted tangible equity ratio(1) of 9.1%.

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Repurchased $111 million of common shares.

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Paid $63 million in common stock dividends.

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Issued $2.2 billion of asset-backed securities.

(1) Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”

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Operating Expenses:

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Incurred operating expenses of $421 million, of which $30 million was in connection with transition services we provided related to our various strategic initiatives. There was $33 million of revenue recognized in Other revenue related to these services.

The transition services related to the outsourcing of loan servicing and the sale of our healthcare services

business ended in May 2025 and as of October 2025 we had no further obligations to provide transition

services for our government services business.

Results of Operations

GAAP Income Statements

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GAAP Comparison of 2025 Results with 2024

For the year ended December 31, 2025, net loss was $80 million, or $0.81 diluted loss per common share, compared with net income of $131 million, or $1.18 diluted earnings per common share, for the year-ago period.

The primary contributors to the change in net income (lo

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