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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2022

Segment Results and Reconciliations to GAAP

		Three Months Ended September 30, 2022
																						Adjustments
(Dollars in millions)		Federal Education Loans				Consumer Lending				Business Processing				Other				Total Core Earnings				Reclassi- fications				Additions/ (Subtractions)				Total Adjustments(1)				Total GAAP
Interest income:
Education loans		$	555			$	309			$	—			$	—			$	864			$	—			$	(2	)		$	(2	)		$	862
Cash and investments			9				3				—				7				19				—				—				—				19
Total interest income			564				312				—				7				883				—				(2	)			(2	)			881
Total interest expense			444				159				—				33				636				(1	)			6				5				641
Net interest income (loss)			120				153				—				(26	)			247				1				(8	)			(7	)			240
Less: provisions for loan losses			—				28				—				—				28				—				—				—				28
Net interest income (loss) after    provisions for loan losses			120				125				—				(26	)			219				1				(8	)			(7	)			212
Other income (loss):
Servicing revenue			21				3				—				—				24				—				—				—				24
Asset recovery and business    processing revenue			1				—				79				—				80				—				—				—				80
Other income (loss)			6				—				—				—				6				(1	)			41				40				46
Total other income (loss)			28				3				79				—				110				(1	)			41				40				150
Expenses:
Direct operating expenses			25				43				67				—				135				—				—				—				135
Unallocated shared services    expenses			—				—				—				59				59				—				—				—				59
Operating expenses			25				43				67				59				194				—				—				—				194
Goodwill and acquired intangible    asset impairment and    amortization			—				—				—				—				—				—				10				10				10
Restructuring/other reorganization    expenses			—				—				—				21				21				—				—				—				21
Total expenses			25				43				67				80				215				—				10				10				225
Income (loss) before income tax    expense (benefit)			123				85				12				(106	)			114				—				23				23				137
Income tax expense (benefit)(2)			29				20				3				(25	)			27				—				5				5				32
Net income (loss)		$	94			$	65			$	9			$	(81	)		$	87			$	—			$	18			$	18			$	105

⁽¹⁾  Core Earnings adjustments to GAAP:

		Three Months Ended September 30, 2022
(Dollars in millions)		Net Impact of Derivative Accounting				Net Impact of Goodwill and Acquired Intangibles				Total
Net interest income (loss) after provisions for loan losses		$	(7	)		$	—			$	(7	)
Total other income (loss)			40				—				40
Goodwill and acquired intangible asset impairment and amortization			—				10				10
Total Core Earnings adjustments to GAAP		$	33			$	(10	)			23
Income tax expense (benefit)											5
Net income (loss)										$	18

⁽²⁾  Income taxes are based on a percentage of net income before tax for the individual reportable segment.

		Three Months Ended September 30, 2021
																						Adjustments
(Dollars in millions)		Federal Education Loans				Consumer Lending				Business Processing				Other				Total Core Earnings				Reclassi- fications				Additions/ (Subtractions)				Total Adjustments(1)				Total GAAP
Interest income:
Education loans		$	353			$	291			$	—			$	—			$	644			$	25			$	(10	)		$	15			$	659
Cash and investments			—				1				—				—				1				—				—				—				1
Total interest income			353				292				—				—				645				25				(10	)			15				660
Total interest expense			202				129				—				15				346				(3	)			(17	)			(20	)			326
Net interest income (loss)			151				163				—				(15	)			299				28				7				35				334
Less: provisions for loan losses			—				22				—				—				22				—				—				—				22
Net interest income (loss) after    provisions for loan losses			151				141				—				(15	)			277				28				7				35				312
Other income (loss):
Servicing revenue			47				—				—				—				47				—				—				—				47
Asset recovery and business    processing revenue			13				—				122				—				135				—				—				—				135
Other income (loss)			1				—				—				2				3				(28	)			23				(5	)			(2	)
Losses on debt repurchases			—				—				—				(20	)			(20	)			—				—				—				(20	)
Total other income (loss)			61				—				122				(18	)			165				(28	)			23				(5	)			160
Expenses:
Direct operating expenses			53				45				87				—				185				—				—				—				185
Unallocated shared services    expenses			—				—				—				63				63				—				—				—				63
Operating expenses			53				45				87				63				248				—				—				—				248
Goodwill and acquired intangible    asset impairment and    amortization			—				—				—				—				—				—				4				4				4
Restructuring/other reorganization    expenses			—				—				—				—				—				—				—				—				—
Total expenses			53				45				87				63				248				—				4				4				252
Income (loss) before income tax    expense (benefit)			159				96				35				(96	)			194				—				26				26				220
Income tax expense (benefit)(2)			37				23				8				(23	)			45				—				2				2				47
Net income (loss)		$	122			$	73			$	27			$	(73	)		$	149			$	—			$	24			$	24			$	173

⁽¹⁾  Core Earnings adjustments to GAAP:

		Three Months Ended September 30, 2021
(Dollars in millions)		Net Impact of Derivative Accounting				Net Impact of Goodwill and Acquired Intangibles				Total
Net interest income (loss) after provisions for loan losses		$	35			$	—			$	35
Total other income (loss)			(5	)			—				(5	)
Goodwill and acquired intangible asset impairment and amortization			—				4				4
Total Core Earnings adjustments to GAAP		$	30			$	(4	)			26
Income tax expense (benefit)											2
Net income (loss)										$	24

⁽²⁾  Income taxes are based on a percentage of net income before tax for the individual reportable segment.

		Nine Months Ended September 30, 2022
																						Adjustments
(Dollars in millions)		Federal Education Loans				Consumer Lending				Business Processing				Other				Total Core Earnings				Reclassi- fications				Additions/ (Subtractions)				Total Adjustments(1)				Total GAAP
Interest income:
Education loans		$	1,298			$	862			$	—			$	—			$	2,160			$	23			$	(9	)		$	14			$	2,174
Cash and investments			12				5				—				8				25				—				—				—				25
Total interest income			1,310				867				—				8				2,185				23				(9	)			14				2,199
Total interest expense			905				421				—				65				1,391				3				(93	)			(90	)			1,301
Net interest income (loss)			405				446				—				(57	)			794				20				84				104				898
Less: provisions for loan losses			—				62				—				—				62				—				—				—				62
Net interest income (loss) after    provisions for loan losses			405				384				—				(57	)			732				20				84				104				836
Other income (loss):
Servicing revenue			51				9				—				—				60				—				—				—				60
Asset recovery and business    processing revenue			4				—				260				—				264				—				—				—				264
Other income (loss)			24				1				—				(3	)			22				(20	)			181				161				183
Total other income (loss)			79				10				260				(3	)			346				(20	)			181				161				507
Expenses:
Direct operating expenses			79				113				216				—				408				—				—				—				408
Unallocated shared services    expenses			—				—				—				180				180				—				—				—				180
Operating expenses			79				113				216				180				588				—				—				—				588
Goodwill and acquired intangible    asset impairment and amortization			—				—				—				—				—				—				17				17				17
Restructuring/other reorganization    expenses			—				—				—				25				25				—				—				—				25
Total expenses			79				113				216				205				613				—				17				17				630
Income (loss) before income tax    expense (benefit)			405				281				44				(265	)			465				—				248				248				713
Income tax expense (benefit)(2)			95				66				11				(63	)			109				—				64				64				173
Net income (loss)		$	310			$	215			$	33			$	(202	)		$	356			$	—			$	184			$	184			$	540

⁽¹⁾  Core Earnings adjustments to GAAP:

		Nine Months Ended September 30, 2022
(Dollars in millions)		Net Impact of Derivative Accounting				Net Impact of Goodwill and Acquired Intangibles				Total
Net interest income (loss) after provisions for loan losses		$	104			$	—			$	104
Total other income (loss)			161				—				161
Goodwill and acquired intangible asset impairment and amortization			—				17				17
Total Core Earnings adjustments to GAAP		$	265			$	(17	)			248
Income tax expense (benefit)											64
Net income (loss)										$	184

⁽²⁾ Income taxes are based on a percentage of net income before tax for the individual reportable segment.

		Nine Months Ended September 30, 2021
																						Adjustments
(Dollars in millions)		Federal Education Loans				Consumer Lending				Business Processing				Other				Total Core Earnings				Reclassi- fications				Additions/ (Subtractions)				Total Adjustments(1)				Total GAAP
Interest income:
Education loans		$	1,062			$	905			$	—			$	—			$	1,967			$	73			$	(29	)		$	44			$	2,011
Cash and investments			—				1				—				1				2				—				—				—				2
Total interest income			1,062				906				—				1				1,969				73				(29	)			44				2,013
Total interest expense			627				416				—				51				1,094				(6	)			(93	)			(99	)			995
Net interest income (loss)			435				490				—				(50	)			875				79				64				143				1,018
Less: provisions for loan losses			—				(66	)			—				—				(66	)			—				—				—				(66	)
Net interest income (loss) after    provisions for loan losses			435				556				—				(50	)			941				79				64				143				1,084
Other income (loss):
Servicing revenue			146				3				—				—				149				—				—				—				149
Asset recovery and business    processing revenue			39				—				377				—				416				—				—				—				416
Other income (loss)			3				1				—				5				9				(66	)			87				21				30
Gains on sales of loans			—				91				—				—				91				(13	)			—				(13	)			78
Losses on debt repurchases			—				—				—				(32	)			(32	)			—				—				—				(32	)
Total other income (loss)			188				95				377				(27	)			633				(79	)			87				8				641
Expenses:
Direct operating expenses			170				124				270				—				564				—				—				—				564
Unallocated shared services expenses			—				—				—				194				194				—				—				—				194
Operating expenses			170				124				270				194				758				—				—				—				758
Goodwill and acquired intangible    asset impairment and amortization			—				—				—				—				—				—				14				14				14
Restructuring/other reorganization    expenses			—				—				—				8				8				—				—				—				8
Total expenses			170				124				270				202				766				—				14				14				780
Income (loss) before income tax    expense (benefit)			453				527				107				(279	)			808				—				137				137				945
Income tax expense (benefit)(2)			107				123				25				(65	)			190				—				27				27				217
Net income (loss)		$	346			$	404			$	82			$	(214	)		$	618			$	—			$	110			$	110			$	728

⁽¹⁾  Core Earnings adjustments to GAAP:

		Nine Months Ended September 30, 2021
(Dollars in millions)		Net Impact of Derivative Accounting				Net Impact of Goodwill and Acquired Intangibles				Total
Net interest income (loss) after provisions for loan losses		$	143			$	—			$	143
Total other income (loss)			8				—				8
Goodwill and acquired intangible asset impairment and amortization			—				14				14
Total Core Earnings adjustments to GAAP		$	151			$	(14	)			137
Income tax expense (benefit)											27
Net income (loss)										$	110

⁽²⁾ Income taxes are based on a percentage of net income before tax for the individual reportable segment.

Core Earnings Adjustments to GAAP

11.   Segment Reporting (Continued)

Summary of Core Earnings Adjustments to GAAP

		Three Months Ended September 30,								Nine Months Ended September 30,
(Dollars in millions)		2022				2021				2022				2021
Core Earnings net income		$	87			$	149			$	356			$	618
Core Earnings adjustments to GAAP:
Net impact of derivative accounting(1)			33				30				265				151
Net impact of goodwill and acquired intangible   assets(2)			(10	)			(4	)			(17	)			(14	)
Net tax effect(3)			(5	)			(2	)			(64	)			(27	)
Total Core Earnings adjustments to GAAP			18				24				184				110
GAAP net income		$	105			$	173			$	540			$	728

⁽¹⁾ Derivative accounting: Core Earnings exclude periodic gains and losses that are caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP as well as the periodic mark-to-market gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. Under GAAP, for our derivatives that are held to maturity, the mark-to-market gain or loss over the life of the contract will equal $0 except for Floor Income Contracts where the mark-to-market gain will equal the amount for which we sold the contract. In our Core Earnings presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.

⁽²⁾ Goodwill and acquired intangible assets: Our Core Earnings exclude goodwill and intangible asset impairment and amortization of acquired intangible assets.

⁽³⁾ Net tax effect: Such tax effect is based upon our Core Earnings effective tax rate for the year.

Federal Education Loans [Member]

Asset Information for Loans Segment

The following table includes asset information for our Federal Education Loans segment.

(Dollars in millions)		September 30, 2022				December 31, 2021
FFELP Loans, net		$	46,891			$	52,641
Cash and investments(1)			2,059				2,071
Other			2,039				2,183
Total assets		$	50,989			$	56,895

⁽¹⁾  Includes restricted cash and investments.

Consumer Lending [Member]

Asset Information for Loans Segment

The following table includes asset information for our Consumer Lending segment

(Dollars in millions)		September 30, 2022				December 31, 2021
Private Education Loans, net		$	19,151			$	20,171
Cash and investments(1)			583				824
Other			549				815
Total assets		$	20,283			$	21,810

⁽¹⁾  Includes restricted cash and investments.

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+ References

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