Good morning, and welcome to the Navient First Quarter 2026 Earnings Conference Call. This call is being recorded. At this time, I will turn the call over to Jen Earyes, Head of Investor Relations.

Hello, good morning, and welcome to Navient's earnings call for the first quarter of 2026. With me today are David Yowan, Navient's CEO; and Steve Hauber, Navient's CFO. After the prepared remarks, 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 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. 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 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 various other non-GAAP financial measures that are derived from core earnings. Our GAAP results, description of our non-GAAP financial measures and a reconciliation of core earnings to GAAP results can be found in Navient's first quarter 2026 earnings release, which is posted on our website. 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. This morning, we reported Q1 results that demonstrate continued momentum in our ability to deliver high-quality loan growth while maintaining expense discipline. Our reported results are in line with the full year outlook we provided in January, and that's a strong start towards achieving those targets. Overall, this quarter reinforces the strength of our platform, driving consistent growth, improving efficiency and delivering strong credit performance. Total originations grew over 60% year-over-year. Refinance loan originations grew 65% year-over-year, marking our 10th consecutive quarter of growth, driven by continued strength in demand generation and our ability to capture that demand. At the same time, we're seeing that volume growth come through more efficiently as we scale our loan production. Marketing and other operating costs continue to improve as a percentage of originations. Thirdly, credit quality strengthened with Q1 refi originations having an average FICO of 775. We're seeing continued strength in demand from borrowers with established credit and employment histories. Together, these outcomes demonstrate the effectiveness and scalability of our platform, enabling us to grow efficiently while delivering stronger credit performance. In-school lending had a solid quarter, originating $40 million of new loans with strong credit quality and margins. This performance and the peak season preparation we are doing increases our confidence in capturing the on-strategy opportunities in graduate lending contained in our outlook. Operating expense levels compared to the year ago period reflect the actions we've taken to eliminate costs and significantly reduce our expense base. With the Phase 1 strategic actions in our rearview mirror, the final expenses associated with our wind-down activities were incurred this quarter. We saw sequential improvement in credit performance across all of our private portfolios. Delinquency rates in private legacy improved from year-end, but continue to run above long-term historical trends. Steve will take you through these and other parts of our results in greater detail in a few minutes. We repurchased $23 million of shares during the quarter as we view the share price that prevailed for the quarter as an opportunity to repurchase shares at a greater discount to book value. We are mindful of a more volatile macro and geopolitical environment and are monitoring it closely. We have the flexibility to adjust quickly as and if conditions evolve. The successful completion of the strategic initiatives and the accompanying expense reduction targets that were announced in January 2024 are a natural time for me to step out of the CEO role. Ed Bramson will step into the CEO role in a few weeks' time. I'm proud of what's been achieved and grateful for the commitment of the many colleagues who accomplished it. The actions we have completed create the foundation for a more strategically focused, flexible and efficient organization to support future growth. Ed has been heavily involved in the development of our strategies and initiatives. I look forward to continuing to guide and support management as I remain on the Board. With that, I will turn it over to Steve, who will provide more detail on Q1 results.

Thank you, Dave, and thanks to everyone for joining today's call. As Dave highlighted, our results for the quarter were in line with our 2026 outlook and included strong contributions across the business. I'll provide additional detail on first quarter results, beginning on Slide 3. In the first quarter, we recognized core earnings per share of $0.20. We delivered these results while driving strong originations growth and maintaining strict expense discipline. Credit trends also improved with lower delinquency rates across our private and FFELP portfolios. Turning to Slide 4. Earnest continued its robust refinance loan origination growth in the first quarter. Refinance originations were $778 million, up 65% year-over-year and on pace with our 2026 target. We drove this growth through strong demand generation and engagement with rate check volume up 62% year-over-year. We are also seeing continued strength in credit with new loan average FICO increasing to 775, underscoring the quality of borrowers we are attracting. Slide 5 highlights our in-school lending growth. In-school originations were $40 million in the first quarter, consistent with our plan. We are well positioned for the upcoming peak season and the expected expansion of the in-school graduate addressable market, a customer segment that we know well. Slide 6 provides our Consumer Lending segment results. First quarter net income was $35 million, reflecting the mix shift toward more refi loans in the portfolio and the impact of rate changes from different index resets across the segment's assets and debt. That same mix shift also drove net growth in our private portfolio with outstanding balances increasing approximately $200 million quarter-over-quarter as refi and in-school originations outpaced portfolio paydowns. Consumer lending expenses in the first quarter were $39 million. This represents a $4 million increase compared to the prior year quarter, primarily reflecting marketing and other expenses associated with the growth of our lending businesses. Credit trends were favorable in the quarter with private charge-off rates declining from 2.26% in the fourth quarter to 1.91% in the first quarter. Delinquency rates also improved quarter-over-quarter with 31-plus day delinquency rates decreasing from 6.3% to 5.5% and 91-plus day delinquencies decreasing from 2.9% to 2.5%. We recorded a provision of $18 million in the first quarter, $11 million of which was related to new originations. While the improvement in year-to-date credit performance is encouraging, private legacy delinquency and charge-off rates continue to run above our longer-term historical levels. Federal Education Loan segment results are on Slide 7. First quarter net income was $22 million, slightly down from $24 million a year ago. Portfolio paydown reduced net interest income by $3 million, which is offset by a $3 million reduction in expenses. This offset highlights the impact of our cost reduction efforts, including the variable cost benefits from outsourcing servicing. Provision in the Federal segment in the first quarter was $9 million, and the net charge-off rate increased to 29 basis points. These largely reflect loans to borrowers affected by 2024 natural disasters that were written off in the first quarter. The bulk of the impact from this cohort is now behind us and delinquency rates improved significantly during the quarter. The 31-day plus delinquency rate improved from 17.5% to 15.2%, while the 91-day plus delinquency rate improved from 10.0% to 8.5%. The allowance for loan loss, excluding expected future recoveries on previously charged-off loans for our entire loan portfolio is $645 million, which is highlighted on Slide 8. Operating expense results are on Slide 9. First quarter total core operating expenses were $89 million, a 30% improvement compared to the first quarter of 2025. First quarter expenses were consistent with our plan for the quarter and the $350 million expense outlook for the year. Capital allocation and financing activity is highlighted on Slide 10. In the first quarter, we completed our first securitization of the year, $683 million in bonds backed by high-quality recently originated refinanced loans. We continue to see strong investor demand for our refi-backed notes, and we are achieving attractive pricing and a high effective cash advance rate. Additionally, last week, we priced our first in-school securitization of the year. The $550 million transaction was significantly oversubscribed, executed at favorable pricing and will release warehouse capacity in advance of our peak in-school lending season. The strong investor reception on both our refinance and in-school deals demonstrates investor confidence in the quality of the assets we are generating. The in-school transaction underscores the resilience of our funding programs to provide cost-effective financings in uncertain market conditions. Turning to our cash and capital positions. We have ample capacity to invest in attractive loan originations and distribute capital. In the first quarter, we repurchased 2.3 million shares at an average price of $9.91 as our shares remain significantly below tangible book value. In total, we returned $38 million to shareholders through share repurchases and dividends. Our adjusted tangible equity ratio remained above our long-term target at 8.9% and demonstrates our commitment to a strong and resilient balance sheet. In summary, our first quarter performance was a solid start to 2026 and keeps us on track with our outlook for the year. While we remain mindful of macro and geopolitical volatility, we are encouraged by the progress we're making and the momentum we are building as we execute on the opportunities ahead. As I wrap up, I want to thank the Navient team for their contributions this quarter and their continued dedication throughout our strategic transformation. Thank you for your time, and I'll now open the call for questions.

Operator Instructions. We'll take our first question from Bill Ryan with Seaport Research Partners.

First question just related to the credit numbers that you highlighted in the prepared remarks. You had very nice improvement in the private portfolio. I think it was down 80 basis points in delinquencies quarter-over-quarter, 90 basis points year-over-year. Yet you also kind of talked about it still kind of underperforming relative to past patterns. So are we now at a new base level at which we could expect to see normal seasonal credit trends develop? Or do you think there's additional room for at least some improvement from this point forward? And the second part of that related to it is, does the provision or the allowance level today capture sort of the underperformance that you're currently seeing? And I have one follow-up.

On the first question, we did see significant improvement in delinquencies across our portfolios. We are still above our historical levels, and we do believe we will see future improvement, so continued improvement along the lines of what we saw in the first quarter. We are not yet at the level we expect to be at and expect further improvement from this point forward. In terms of reserve levels, they do reflect that expectation going forward.

And just one follow-up on the loan originations. The origination mix right now is about 50-50 grad, undergrad. And just kind of thinking about it on the in-school side. And looking forward, obviously, July 1 opens up some new opportunities. Is that mix going to be doing kind of back of the envelope math, it seems like it might move to like 70-30 grad, undergrad starting in the third quarter. Is that the right way to think about it? And has there been any additional thoughts on the change in the funding for the incremental grad loans that are going to be put on the balance sheet?

We're maintaining our outlook for the year in terms of total originations for in-school. We view peak season as the third quarter, and we're really in that peak period, particularly given the changes to Grad PLUS. We're in active discussions with financial aid offices that are trying to determine, especially at the graduate level, how they will fill the gap for students between lending that previously came from the federal government and what will now be supplied by private lenders. We're encouraged by those conversations and remain confident in our established products and our ability to deliver a customer experience tailored to graduate needs. The first quarter is not part of peak season, but we disbursed almost four times the amount we certified in the first quarter, which was $40 million, so we have a substantial footprint in that marketplace. I would expect the graduate percentage of our volume to be higher than in prior years, though everyone, including competitors we're encountering in this space, is still in a bit of a learning and wait-and-see mode about what the actual volume and mix will look like.

And we'll go next to Jeff Adelson with Morgan Stanley.

Maybe just to follow up on the last question. I guess just as we all sort of try to grapple with what the opportunity is here in the graduate market and who has the right to win here. Is there any sort of like early learnings or early market research you've done in terms of what you think your share of this new market could look like? I know I think you pointed in prior quarters to having 20% of the graduate market. Just kind of curious based on the work you've done and some of the efforts around marketing and product development that gives you some more confidence around what you'd be able to get there?

Jeff, let me just give you a couple of examples of the experience we've had and not that it's unique to us. One example I would give is there are more than a handful of graduate schools that provide degrees that we've traditionally funded. So professional degrees, for example, that have only relied on Grad PLUS for funding. There are a number of schools that don't even have a preferred lending list coming into this. That allows somebody like us to get in on the ground floor with those kinds of institutions, explain our product offering, explain the customer service that we have, and show them our ability to surprise and delight students with the ease of applying and the flexibility of our products. It's one example of a lot of work that we're doing to try to educate people about what we have to offer them. I would say that early signs are there's certainly a keen interest coming in because of the elimination of Grad PLUS, which we all knew. We're seeing that. We're seeing others compete alongside us, and we continue to be confident about what we bring to the table and look forward to reporting our results in the third quarter.

And we'll go next to Caroline Latta with Bank of America.

How should we think about the cadence of OpEx through the year? Should we expect it to be more front half loaded as you guys prep for Grad PLUS?

On OpEx throughout the quarters, I think the way to think about that is: first of all, in the first quarter, as Dave mentioned, we incurred the final remaining expenses related to our transformation and completion of Phase 1. So the first quarter includes about $5 million of wind-down costs that we do not expect to recur. For the rest of the quarters, the third quarter will probably be the highest operating expense quarter compared with the others, given the origination activity we expect for in-school that quarter. We're feeling good about how it all fits together and our ability to hit the $350 million target we set for the year.

And then maybe just a similar question on originations. Should we expect Q2 originations to be similar to Q1 and then we'll see the bump in the back half?

I think that's a fair way to approach Q2 and Q1 being very similar. We would expect to see in-school tick up some in Q2 compared to Q1. But really, I think the meaningful difference gets to the Q3 where you see the majority of our in-school originations in that quarter.

And we'll take our next question from Ryan Shelley with Bank of America.

First one here, I know it's still very early days, but can you give us any update or any learnings you've had on some of the trials you've had on the personal loan front? And I have one more, I'll follow up back with.

So as we indicated, this year and certainly the beginning of the year is a testing and learning phase for us on personal lending. We did go live in the fourth quarter in our existing base in some tests that we're conducting. We went live in the first quarter with a sample of prospects. We're testing different product offerings, different ways to create demand, different ways to pull that demand through the conversion. We're testing our credit and fraud capabilities in this process as well. And I'd say at this point, we're pleased with the learnings that we have. It's too soon to give an update on any of the results, which are very immaterial at this point in time. But we're very pleased with the learnings that we're making in that product and following along the path that we laid out last November.

And then just one more quick one on funding throughout the year. So you have an unsecured maturity coming up here in June. Originations are projected to be up 50% year-over-year. So my question is just any color you can give us around funding where you think the most attractive cost of capital is at the moment would be much appreciated.

I had a little trouble hearing the question, but I think it related to how we're feeling about both unsecured funding and the unsecured maturity coming up in June, which we have the liquidity and plan to address. For the upcoming peak season and our lending, I'm feeling really good about our ability to fund those. We've had a lot of success with our ABS securitizations and have a clear path ahead for funding this year.

Operator instructions. We'll take a follow-up question from Bill Ryan with Seaport Research Partners.

Thanks for taking my follow-up. I didn't think I'd cycle through this quickly, but I know there's quite a few competing calls this morning. I take a step back at a higher level, just kind of ask this question. So stock price is kind of around $9 a share. And if you start to look at it and you kind of value the FFELP portfolio, it looks like basically, you're paying the price today of what the FFELP portfolio value is worth on a present value basis in runoff. And the optionality is on the lending business where some people might say the optionality is actually on the FFELP portfolio, more value in the lending business. But either way, it looks like on an intrinsic value basis, the stock price is well below probably what the end of the day price should be. And just kind of throwing it out there, it seems like there's an opportunity or could be at some point for more of a strategic type maneuver. And I'm just kind of curious how you're thinking about that in terms of the stock price in relation to what the intrinsic value of the company might really be worth.

We certainly agree that the stock price does not reflect the company's intrinsic value. Our share repurchases this quarter and over the past year were designed to help shareholders capture that value by buying back stock we believe is undervalued. I'd say two things. First, we're very focused on our strategy and executing our plan. Second, we're always evaluating ways to enhance the firm's value. You can be assured we're considering all options to bring the share price more in line with the company's intrinsic value and growth prospects.

Operator, are you on?

Yes. At this time, there are no further questions in queue. I'd like to turn the call back over to Jen Earyes for closing remarks.

Thanks, Erica. Before we conclude, I want to note that beginning next quarter, our earnings calls will take place after market close. And for the second quarter of 2026 earnings call, the date will be adjusted from our historical cadence. We'll share the specific date and time for the next call when we announce our earnings release schedule in July. Thank you for joining today's call. Please contact me as you have follow-up questions. This concludes today's call. Thank you.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.