Risk Factors Update Summary

• Provision for loan losses decreased by $128 million, primarily due to changes in net charge-off rates.
• Definitions for non-GAAP financial measures provided, excluding forward-looking reconciliations due to uncertainty.
• Loan modifications now include temporary interest rate reductions, forbearance, and term extensions, with $1.2 billion in interest rate reduction programs.
• Added the need to access funds held at banks and financial institutions to manage liquidity risk.
• Loans in forbearance decreased from 9% to 1% of loans in repayment and forbearance.
• Net interest income decreased by $34 million, driven by a paydown in the loan portfolio.
• Adjusted Tangible Equity Ratio decreased from 7.0% to 5.9% due to changes in equity and assets.
• Private Education Loans saw modifications reducing the weighted average contractual rate from 13.2% to 5.3%.
• Total net cash used in financing activities increased significantly from $7,334 to $10,047.
• The company announced strategic actions to simplify operations, reduce expenses, and enhance flexibility, including transitioning student loan servicing to MOHELA, exploring options for the business processing segment, and streamlining shared services infrastructure.
• Maturity date for senior unsecured notes extended from 2023 to 2024.
• Added a $23 million provision for loan losses related to a bankruptcy settlement.
• The total number of shares increased from 461 million to 463 million.
• Net charge-offs increased by $25 million, from $256 million to $281 million.
• Common dividends paid decreased from $400 to $78.
• Private Education Loan delinquencies greater than 90 days decreased by $114 million.
• Private Education Loan originations decreased from $1.7 billion in 2022 to $647 million in 2023 due to higher interest rates.
• Decrease in unrecognized tax benefits from $58.8 million to $50.7 million.
• Expected future recoveries on gross charge-offs decreased by $15 million, from $179 million to $164 million.
• Private Education Loans net of allowance decreased from $800 million to $617 million.
• Loan modifications in 2023 included $175 million in Interest Rate Reduction, $14 million in Combination Rate Reduction and Term Extension, and $83 million in More Than Insignificant Payment Delay.
• Transitioned interest on newly originated variable rate Private Education Loans to 30-day Average SOFR.
• Private Education Loan allowance for loan losses increased from $843 million to $1,074 million.
• Income taxes for individual reportable segment decreased from 219 to 166.
• Added potential basis risk and repricing risk with transition away from LIBOR.
• Cash, cash equivalents, restricted cash and restricted cash equivalents at the end of the period decreased from $4,807 to $2,793.
• The goodwill impairment testing annually resulted in writing off $8 million in goodwill in 2023.
• Net income decreased by $12 million in 2023, EBITDA decreased by $14 million, and revenue decreased by $83 million due to the wind-down of pandemic-related contracts.
• Net impact of goodwill and acquired intangible assets changed from (19) to (30).
• Increase in total assets from $43.5 billion to $48.5 billion.
• Private Education Loan provision for loan losses increased by $12 million, from $67 million to $79 million.
• Forbearance rate decreased to 12.4%, down by 4.4%.
• Expected future recoveries on previously fully charged-off loans decreased from $274 million to $226 million.
• Goodwill and acquired intangible assets, net decreased from $3,939 million to $3,854 million.
• Added the possibility of failure to implement strategic actions leading to business disruptions.
• Operating expenses decreased by $24 million in 2023, primarily due to a $73 million contingency loss accrual related to Consumer Financial Protection Bureau matters.
• Interest disbursements increased from $1,378 to $1,904.
• Total FFELP Loans in repayment decreased to 44,391, down by 3,681 loans.
• Ending total loans increased from $17,519 million to $19,525 million.
• Reduction in interest income from $2,977 million to $2,746 million.
• Secured borrowings for FFELP Loan securitizations decreased from $42.7 billion to $42.0 billion.
• Total liabilities increased from $67,818 million to $77,997 million.
• Unsecured debt decreased by $1 billion, from $9 billion to $8 billion.
• Total Core Earnings adjustments to GAAP decreased from 219 to 187.
• The total secured borrowings decreased from $60.4 billion to $57.6 billion.
• Income taxes paid decreased from $12 to $5.
• Allowance coverage of charge-offs increased from 2.1% to 3.0%.
• Net income decreased from $91 million to $78 million.
• Total unsecured borrowings decreased by $1 billion, from $8 billion to $7 billion.
• Total Private Education Loans in repayment increased to 20,284, up by 1,514 loans.
• Increase in interest expense from $468 million to $557 million.
• Provisions for loan losses increased by $140 million in 2023, with FFELP loan losses increasing from $0 to $56 million and Private Education Loan losses decreasing from $61 million to $67 million.
• Added the risk of disruptions in business due to dramatic cost reductions or failure to comply with regulatory standards.
• Common stock repurchased decreased from 400 million to 310 million.
• Net income decreased from $289 million to $187 million.
• Private Education Loans originated decreased from $2.0 billion to $1.0 billion.
• Total repurchases of common shares increased from 18.0 million in 2022 to 24.8 million in 2023, with a total of 34.4 million shares repurchased.
• Loans delinquent greater than 90 days for FFELP Loans decreased to 7.5%, down by 2%.
• The total derivative liabilities decreased from $255 million to $189 million.
• Added the risk of negative impact on business due to disruptions caused by service providers.
• Private Education Refinance Loan CPR decreased from 15% to 10%.
• Allowance as a percentage of ending total loan balance increased from 3.5% to 4.1%.
• Increase in total interest expense from $2,102 million to $2,497 million.
• The effective income tax rates for the current and year-ago periods were 27% and 22%, respectively, with the movement in the effective income tax rate primarily driven by facility lease terminations and the impairment reduction of a facility that was subsequently sold.
• Loans delinquent greater than 90 days increased from $2,112 to $3,288.
• Long-term borrowings increased from $61,026 million to $74,488 million.