Executive Summary

Q2 2025 delivered mixed results: GAAP net income of $14M ($0.13 EPS) and Core Earnings of $21M ($0.20 EPS), with segment NIMs improving in FFELP and compressing in Consumer; EPS and revenue missed Street consensus, driven by higher loss provisions and the absence of Business Processing revenues post-divestiture .
Federal Education Loans posted net income of $30M and a 0.70% segment NIM on sharply lower prepayments; Consumer Lending net income fell to $26M as provisions rose and net interest income declined with portfolio paydown, although refi originations more than doubled YoY .
Management emphasized momentum in loan origination (“over $1B year-to-date”) and cost reductions from strategic actions; transition service agreements are expected to mostly complete by year-end 2025 .
Consensus vs actual: EPS $0.20 vs $0.27 est; revenue $119M vs $154M est (Street-defined revenue), highlighting a near-term sentiment headwind until credit trends and refi-driven growth normalize*.

What Went Well and What Went Wrong

What Went Well
- “Our second quarter results show strong momentum in loan origination growth, with over $1 billion in originations so far this year – nearly double the first half of last year” — David Yowan, CEO .
- FFELP segment NIM rose to 0.70% as prepayments collapsed (Q2’25: $228M vs $2.5B YoY), reducing premium amortization and lifting net interest income .
- Capital and funding actions: adjusted tangible equity ratio at 9.8%, $24M share repurchases, $16M common dividends, and successful issuance of $500M unsecured and $536M ABS, preserving flexibility .
What Went Wrong
- EPS and revenue missed consensus; GAAP net income fell YoY to $14M (from $36M) and Core EPS to $0.20 (from $0.29), as provisions for loan losses rose to $37M vs $14M in Q2’24* .
- Consumer Lending NII declined $31M YoY on portfolio paydown and reserving for accrued interest on >90-day delinquent loans; segment NIM compressed to 2.32% (2.89% YoY) .
- Business Processing revenues are now absent following divestitures; operating expenses remain elevated by $13M of transition services (partially offset by $14M “Other” revenue), with TSAs to mostly finish by end-2025 .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
GAAP Net Income ($USD Millions)	$36	$(2)	$14
GAAP Diluted EPS ($)	$0.32	$(0.02)	$0.13
Core Earnings Net Income ($USD Millions)	$33	$26	$21
Core Diluted EPS ($)	$0.29	$0.25	$0.20
FFELP Segment NIM (%)	0.36%	0.61%	0.70%
Consumer Segment NIM (%)	2.89%	2.76%	2.32%

Segment breakdown (Core Earnings basis):

Segment	Metric	Q2 2024	Q1 2025	Q2 2025
Federal Education Loans	Total Revenue ($M)	$52	$51	$57
Federal Education Loans	Net Income ($M)	$28	$24	$30
Consumer Lending	Total Revenue ($M)	$113	$94	$69
Consumer Lending	Net Income ($M)	$60	$46	$26

Key operating KPIs:

KPI	Q2 2024	Q1 2025	Q2 2025
FFELP Prepayments ($USD Millions)	$2,500	$256	$228
Private Education Loan Originations ($USD Millions)	$278	$508	$500
Refinance Loan Originations ($USD Millions)	$222	$470	$443
In-school Loan Originations ($USD Millions)	$56	$38	$57
Consumer >90-day Delinquency Rate (%)	2.2%	2.6%	3.0%
FFELP >90-day Delinquency Rate (%)	7.0%	10.2%	10.1%
Private Loan Forbearance Rate (%)	1.8%	1.8%	1.6%

SPGI Street-defined revenue and EPS (consensus vs actual):

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue Consensus Mean ($USD Millions)	158.0	162.8	154.3
Revenue Actual ($USD Millions)	233.0	126.0	119.0
Primary EPS Consensus Mean ($)	0.429	0.199	0.268
Primary EPS Actual ($)	0.29	0.25	0.20
Values retrieved from S&P Global.*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Consumer Lending NIM	FY 2025	270–280 bps (Q4/Q1 commentary)	No formal update in 8-K; implied tracking in range	Maintained
FFELP Segment NIM	FY 2025	45–60 bps (Q4 guidance)	No formal update in 8-K; Q2 at 70 bps on low prepayments	Positive trend vs range
Loan Originations (Private)	FY 2025	~$1.8B (Q1 call target)	~$2.2B (Q2 call commentary)	Raised
Core EPS	FY 2025	$1.00–$1.20 (Q4/Q1)	~$0.95–$1.05 (Q2 call commentary)	Lowered
Common Dividend/Share	Q3 2025	$0.16 (prior quarterly rate)	$0.16 declared for Q3’25	Maintained

Notes: No formal guidance was furnished in the Q2 8-K; current guidance items attributed to the earnings call are sourced from third-party transcript providers and should be cross-checked with the company’s posted materials.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24 and Q1’25)	Current Period (Q2’25)	Trend
Grad PLUS reform / private TAM expansion	Management highlighted proposals to eliminate Grad PLUS and reduce forgiveness; positioned for graduate segment	Call commentary points to substantial opportunity in grad market and broader federal changes (Street sources)	Growing focus; potential upside catalyst
Interest rates & FFELP prepayments	Expect lower prepayments; FFELP NIM guided 45–60 bps; cuts could add floor income over time	Prepayments fell sharply; FFELP NIM at 70 bps; hedged floor income runway noted	Positive for FFELP NIM near term
Expense reduction & TSAs	Target ~$400M expense reductions vs 2023 shared/servicing; ~50% removal by end-2025; TSAs run into early 2026	Q2 shows $13M TSA opex and $14M TSA revenue; mostly complete by year-end 2025	Progressing to plan
Origination growth (Earnest)	Doubling refi volume; target ~$1.8B 2025 originations; mid-teens ROE framework	H1 originations >$1B; Q2 refi $443M; Street cites raised full-year originations	Accelerating
Regulatory/legal backdrop	CFPB settlement headwinds absorbed; legacy recovery rate updates in 2024	Provision increases reflect macro and delinquency dynamics; weaker recoveries on legacy charged-off pools	Neutral-to-negative near term

Management Commentary

“Our second quarter results show strong momentum in loan origination growth, with over $1 billion in originations so far this year – nearly double the first half of last year… We are demonstrating our capabilities and capacity both to grow meaningfully across our product set and to reduce our expense base.” — David Yowan, CEO .
FFELP segment drivers: “Net interest income increased… due to a decrease in premium amortization as a result of the significant decline in prepayments from $2.5 billion… to $228 million” .
Consumer segment credit: Provision included $7M for originations and $22M general reserve build reflecting higher delinquencies and weaker forecasted macro metrics .

Q&A Highlights

Graduate market opportunity: Management reiterated the graduate cohort focus and capacity to capture expanded opportunities if Grad PLUS reforms materialize (prior calls; Street sources confirm ongoing emphasis) .
NIM outlook: Expected FFELP NIM at the high end near term with potential rate-cut lag effects later; Consumer NIM guided to mid-270s bps range (Q1 call) .
Reserves and delinquency: Elevated provisions tied to higher delinquencies; management “appropriately” building reserves and monitoring trends (Q1 call) .
Capital allocation: Opportunistic buybacks balanced against growth investment; repurchases continue at discounts to tangible book (Q4/Q1 call) .

Estimates Context

Q2 2025 EPS and revenue missed consensus: EPS $0.20 vs $0.27 est; revenue $119M vs $154M est; consensus based on 9 EPS and 4 revenue estimates*.
Implications: Models likely reduce near-term EPS for higher provisions and modest Consumer NIM, while raising origination trajectory assumptions given H1 momentum*.
Values retrieved from S&P Global.*

Key Takeaways for Investors

Near-term sentiment likely weighed by the EPS/revenue miss and elevated loss provisions; the sharp drop in FFELP prepayments is materially supportive of NIM and cash flow durability .
Earnest-driven origination growth is accelerating (H1 >$1B; Q2 refi $443M) and could be a re-rating catalyst, particularly if Grad PLUS reforms expand private TAM; focus on graduate cohort positions NAVI well .
Expense-reduction plan and TSA run-off are tracking; watch quarterly opex/TSA mix and the adjusted tangible equity ratio (now 9.8%) as capital flexibility for both buybacks and growth remains intact .
For modeling: assume FFELP NIM benefits from lower premium amortization; Consumer NIM mid-270s bps near term, with provision normalization contingent on delinquency trends .
Guidance signals (per call sources) suggest higher originations and a narrower EPS range; confirm against company slides/IR to calibrate position sizing ahead of policy developments .
Dividend continuity ($0.16) and opportunistic repurchases at discounts provide return-of-capital support; monitor authorization usage vs growth opportunities .

Footnotes:
*Values retrieved from S&P Global.

NAVIENT CORP (NAVI)·Q2 2025 Earnings Summary