雅虎香港財經 Navient Corporation (NASDAQ:NAVI) Q4 2023 Earnings Call Transcript
Navient Corporation (NASDAQ:NAVI) Q4 2023 Earnings Call Transcript January 31, 2024
Navient Corporation misses on earnings expectations. Reported EPS is $0.21 EPS, expectations were $0.77. NAVI isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to the Navient Strategy Update and Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jen Earyes, Vice President, Investor Relations. Please go ahead.
Jen Earyes: Hello, good morning and welcome to Navient's earnings call for the fourth quarter of 2023. With me today are David Yowan, Navient's CEO; Edward Bramson, Vice Chair of the Navient Board of Directors; and Joe Fisher, Navient's, CFO. Navient has a lot to share with you this morning and has posted two separate presentations that will be referred to during this call. Both are available on navient.com/investors. We will refer to a strategy update presentation, which you find posted on our website. Our in-depth review and strategy update discussion may take us past the half-hour. Following this update, Joe will discuss the fourth quarter results and outlook for 2024. He will refer to the fourth quarter 2023 presentation, which you will also find posted on navient.com/investors.
After the prepared remarks, we will open the call up for questions. 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 those factors in the discussion of them on the company's Form 10-K and other filings to 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 beginning on page 18 of Navient's fourth quarter 2023 earnings release, which is posted on our website. Thank you. And now I will turn the call over to Dave.
David Yowan: Thanks, Jen, good morning, everyone. Thank you for joining the call and for your interest in Navient. As you know, the Board and management began an in-depth review of our business a few months ago. It's been a rigorous and comprehensive process. I've asked Ed Bramson, Vice Chair of the Navient Board to join me this morning. Ed and I will describe the steps we're taking, the rationale and objectives and what they mean for Navient. After that, Joe will share our Q4 results and 2024 outlook. We will then open it up for Q&A. There are three actions that we're taking coming out of our in-depth review; outsourcing loan servicing, exploring strategic options for BPS, and reshaping our shared service infrastructure and corporate footprint.
At a high-level and in the near-term, these actions are intended to simplify our business, reduce our expense base and increase our financial and operating flexibility. Over the long-term, we believe these actions will increase the value shareholders derived from our loan portfolios and the returns we can achieve on our business-building investments. Let me turn to slide two of our strategy update. In May 2023, the executive team and the Board launched an in-depth review of our business to ensure we're on the right path for success and value-creation. This review is confirmed the changes are necessary for Navient to deliver its full value and potential. Our review included an extensive and intensive analysis of costs. We focused on the size, purpose and allocation of all costs by business unit and shared service activities like IT, as well as unallocated costs within our Corporate Other segment.
At the same time, we sought to benchmark and compare our costs of important activities including loan servicing to the cost of third-party providers. We analyzed our projected in-house servicing costs over the remaining life of our loan portfolio and compared it to third-party costs through a competitive RFP process. Our current costs were found to be comparable to third-party providers. But it was also clear that our in-house cost to service would not continue to be competitive with third-party costs as our legacy portfolio amortizes and our economies of scale begin to disappear. As a result, we've decided to transition to an outsourced servicing model. Once completed, this will create a variable cost structure for the servicing of our student loan portfolios and provide attractive unit economics across a wide range of servicing volume scenarios.
Through our competitive process, we selected MOHELA as our servicing partner. MOHELA is a leading provider of student loan servicing for government and commercial enterprises. We are committed to a seamless transition for our customers in a few months' time. Many of our servicing employees are expected to transfer along with this transaction. Now to our second strategic action. Our in-depth review highlighted that a significant part of our cost base and infrastructure is shared between loan servicing and BPS and especially within BPS' government services business. Both businesses involved many similar activities, such as call center operations, payment processing and omni-channel customer interactions, such as telephony or text, among others.
Given the earnings multiple, the market assigns to our shares, our BPS businesses do not receive the value assigned to comparable stand-alone businesses. This limits our ability to realize these businesses full potential and value, such as through larger investments in organic or inorganic growth, for example. Therefore, we are exploring strategic options for BPS, including but not limited to divestments with the goal of realizing the full value and potential of these businesses. We've engaged financial and legal advisers to help us with these efforts and we'll provide updates along the way. Pursuing divestments simultaneously with the decision outsource servicing maximizes the potential for shared cost reduction. We expect to be able to identify and more quickly eliminate stranded costs.
Third, we intend to reshape our shared services functions and corporate footprint to align with the needs of a more focused, flexible and streamlined company. We've identified opportunities and some of the steps that need to be taken are included in our 2024 outlook. The full scope and timing of these opportunities will depend on the progress of the outsourcing and potential divestiture transactions. These will define any transition services requirements as well as separation and stranded costs. If you look at our 2023 operating expenses, approximately $400 million, which is net of expected outsourced servicing expenses could be eliminated under a scenario in which we had already completed the three steps we're announcing today. That scenario would also not include BPS revenue under a full business divestiture scenario.
We expect to finalize all three actions during 2024. Their implementation is expected to be largely complete over the next 18 to 24 months. With that, let me turn it over to Ed.
Edward Bramson: Thank you, David. I think one of the things that David has spoken about that we're actually doing are relatively clear. But what we thought might be helpful today is that for the last 8, 9, 10 years, Navient has been in a steady state. You can predict more or less what it's going to do. And starting in 2025, it's going to be steady state again. So in the coming year is sort of transitional and you could think about it as a turnaround here. And the firm that I'm with invests principally in turnarounds, so we thought it might be helpful to provide some perspective on not just what we're doing, but why we're doing it. And David asked me, I think the word he actually used was delegated me to take you through it from that perspective.
So starting on page three, you could obviously say, well, why would the Board look at doing this now as opposed to in the future or having done it in the past. And if you look at the first bullet, it basically says that the share price since the spin-off in 2014 has gone down a little bit. It's not the worst you've ever seen. But I think the Board concluded that it's not a tremendous return for 10 years' work. So the question is, what do you do about it? And as David said, the first step was to do a really solid review of costs. And that project, and I've been involved in quite a few of these turnaround situations was one of the best interactions between Board and management that I've ever seen. So this is a unified approach, and I think it's very well done.
The basic issue it had to address is if you think about Navient compared to other companies, a very high proportion of our costs are allocated rather than directly attributable. And what that tends to mean in practice is you always spend a lot of time deciding which bucket the costs should go into, which doesn't leave much time to figure out whether you should have them or not. And this study has sort of broken through that and has provided a lot of useful data. Obviously, it helps with what Dave was talking about in cost reduction, but it also points you to what to do next with capital allocation or growth or whatever. And what is all sort of ends up saying is that for a turnaround, this is somewhat unusual situation. The likely cash that's going to be available in the next few years actually is higher in amount than our entire market cap.
So a lot of what the strategic plan will ultimately have to be about is how do you use that wisely. So I would like to take you through our thinking on that. If you go to page four. The major driver of our financial performance since the spin-off had to be the loans we inherited. At the time of the spin-off, there were about $135 billion of loans. And the intention was not to replace them. They were intended to run off. The intention was to do other things with them. And so we have made some efforts in that regard. We've actually generated about $9 billion of new loans. But I think over time and I've gone back and looked at some of the sell-side research, people were probably a little too optimistic about how soon you could start to get to the inflection point when new revenues grew faster than old ones declined.
And in reality, as you can see, we've had a runoff of about $90 billion of loans. We've added about $9 billion of new ones. So we might be on track to some inflection points in revenue, but it's not near term. So the inflections to focus on are the ones that David is talking about, which are inflections in earnings or shareholder value. And if you go to page five, I think this helps to put in perspective what we're focused on in the short run. The revenues coming down is not really the principal issue in us. The issue is the operating leverage that creates. And so during the period, as you can see, if you take net interest income, we've had a drop of about $1.1 billion on an annual basis. Our operating expenses have come down by $80 million.
There are lots of reasons and background for that, which I won't get into. But whereas the ratio that we're getting here is 15 to 1. Unfortunately, it's a negative ratio, and that's what David's dealing with right now. There's a second contributory issue that comes out of this, which we'll come back to a little bit later on, which is as we thought that the revenue inflection is coming fairly soon, has receded, you tend to get a reduction in the PE multiple, and we'll get into what the consequences of that are in just a second. And if you go to page six. During the period, we did make a lot of investments. We bought BPS, we bought Earnest and some other things. The biggest single investment we made was in share repurchases. And as you perhaps know, we have bought back since the spin-off of about 75% of our original shares outstanding.
And that program did what it was intended to do, which essentially was to maintain earnings per share. And the data in the table is a little bit messy. There's a difference between GAAP and core. But I think it's fair to say that if you looked at it, it's maintained earnings flat to slightly up. So it achieved what is intended to do. On the other hand, the problem we've had is because of the change in perception of strategy, the multiple has been coming down. So even though the earnings per share are flat to up, because of our decline in multiple, the share price has come down. That's an issue that we need to deal with as well, and we'll talk about that shortly. So with the joint project and board management done, what are the immediate priorities.
The first one is obviously to get your operating expenses down. And there are two elements to that. There's an obvious one, which is that the loan portfolio is, by and large, with one exception, are not designed to be replaced. So every dollar that you spend of overhead on them or other expenses connected with them, just comes out of the value of the portfolio. So our biggest single asset today is the loan portfolios. The less money you spend collecting them, everything else equal the better. I think the more subtle issue is that our major future asset is the businesses we're trying to grow. And in an allocated environment, as the legacy businesses shrink, their allocated costs get reallocated to new businesses, which are the ones you're trying to grow, which can't afford them.
So they had the effect of smothering that effort. So that needs to be dealt with. And I think the other thing, coming back to the rising cost of equity is this. If you accept that we're going to have a tremendous amount of cash relative to our market cap to either return to investors or invest over the next two, three years, it needs to be disciplined in how you think about it. So think about it this way. If we take $100 of cash and we put it into an investment and the mix a 10% return, that's $10. At our current multiple, that means market value of $70 for the $100 you put in. That's not viable, you can't do that. So you either have to return that money or come up with something better. So where it leaves you today, and hopefully, this will change is you need to make about a 15% return on equity to justify doing anything and if you do it's sort of a wash.
So that as a background, what we'd like to do on page eight. As David said and I think I said at the beginning, this is a strategy update, how to think about the strategy, it's not the strategy. But the strategy is going to be driven by what you have to work with. And on this page, we have the major components of the business. So the loan portfolios, we'll cover in a second. The other items we have, we have quite a large amount of unrestricted cash and we have two operating segments. We have Earnest and we have BPS. And both of those have some interesting aspects to and we'll cover a little bit in brief. If you go to page nine, this is the loan portfolio. Okay. So the first piece of the portfolio is our loan assets. And I think it's important to explain that on our balance sheet, these are consolidated, which makes it a bit difficult to track what they're really worth.
In reality, all the loans that almost all the loans that we have are securitized. They reside in trust against which those trusts have incurred some borrowing. So the real economic interest we have in the loan portfolio is what we get from those securitization trust. And that's a combination of future net interest income, servicing fees and the initial equity that we put in that comes back at the end when the trust is liquidated. So if you take those inflows, the table sort of puts together the things that you've seen before, but maybe not in one place. And what it essentially says is that the expected distributions to us from the trusts are about $13 billion. Against that, we finance it in part with unsecured debt, which is a little less than $6 billion.
So there's somewhere in the region of $7 billion to come in from those trust over time as we speak. And about half of that looks like it comes in, in the next five years. However, it does cost some money to get from there to what shareholders receive. And so if you want to maximize that value, you need to deal with loan servicing expense, corporate overhead and the interest on our liabilities. We think there are opportunities in all of those areas. And I think Dave is already lining out for you what they're in servicing and corporate overhead. The objective here is to give you a realistic view of what these things are worth. We need to be able to give you all the data which we don't have yet. So hopefully by the end of the year, we'll be able to line all of that out.
David covered the outsourcing. I just want to say briefly on page 11 what the environment and what the decision that created it is. When that negative was spun off, it had 12 million borrowers, Half of them were serviced for the education department, the other half were our loans. So as you move along probably 2/3 of the loans were financed for the education department, much larger infrastructure that we require for what we do today. So surprisingly, and this is a real complement to the management team. When you benchmark it, our servicing costs are very competitive today. The problem, as David said, as the base shrinks, they're going to get less competitive. So there is an option to go ahead and invest in a small and more flexible system to deal with that.
We think a more desirable option is outsourced to somebody who has scale. The expectation, therefore is not that we're going to save a lot of money on servicing in the short-term because we are competitive, but as the portfolio shrinks, the benefits become very large by making it variable. So that's the loan portfolio. On page 12, there's another item on restricted cash. And I think the way to look at this is it's not part of the loan portfolios, but it goes with it. And the reason we have all the cash you see on the charts here is that it's a liquidity buffer for the large loan maturities that we have coming up periodically. And so it's always been there. However, it's not always easy to get this out of the financials, it's unrestricted cash that's available for general corporate purposes and it belongs to the shareholders.
And as at the end of '23, that's about $7.50 a share of cash that belongs to the shareholders. In fact, if you look at some other liquid assets that we have in addition to cash, it's more like $10 a share. So if you think about that and if you think about the potential inflows from the loan portfolios, that's why I was saying earlier that even if you don't sell BPS, you're going to be having cash available for distributions or investments that's actually in the next few years, equal to more than our entire market cap. So obviously, the key to the situation is to do that wisely. So if you go to page 13, I think from what I said earlier, it's sort of obvious in which circumstances you would just return cash to shareholders. But here's an example of some things that are going on at Navient under the hood that perhaps aren't well highlighted.
So what I'm going to take is Earnest. And Earnest is something we bought five years ago or so. But the point is that it's a new brand to Navient. And it's customer-focused, and it's designed to focus on relationships. And what we mean by that is a relationship is something that causes a customer to come back for another product after he got the first work. The reason you want that is enables you to build attractive lifetime economics with customers. In that sense, it's distinct from the Navient brand. There's nothing wrong with the Navient brand, but it's a servicing brand. So the interaction you have with it is collecting a loan that might have been written by the education development or maybe it's one of our own ones. We do the best we can to treat you properly.
We try and be efficient and sympathetic to state necessary. But at the end of that relationship, you don't expect to see us again. So it's not the right sort of brand to build a business in the future. So Earnest has been going for a while, is now running at a bit less than $200 million a year of revenue. It's principally focused on education industry types of products at the moment. Our objective is to move that out into a broader set of product lines at some point in the future. But what we have today is a lending business which has generated essentially all our new loans in recent years, which is highly efficient and we'll tell you about it in a second. There's another part of our industry, which we're calling a financial counseling platform, really for lack of anything more imaginative to call it.
And in my own work in engineering, this would be the difference between saying what something is and what it does. So financial counseling is what it is. What it does is that it enables us to address a much broader base of customers than we have today to build our relationships potentially for the future and also to develop data for the sorts of things you might do next. But the management team at Earnest is quite a bit younger than some of the other management at Navient. And one of the things that they've done, I think, quite well is to resist some pressure to monetize this business too soon. So it does generate a little bit of revenue. But the way to think about it is it's all paid for within Earnest operating budget. So just quickly covering the brand point.
As we said, we're trying to target a certain kind of customer, trying to target them efficiently. What's on the page here is that Navient periodically does a brand health survey. There are 11 brands in here. One of them is Navient one of them is Earnest the other nine are competitive companies. And there are lots of attributes. We just picked some of them. But as you know, generally speaking, financial services companies are not super well-liked by their customers. But if you look at these attributes, what find is that Earnest and its dealings with people is perceived as being fair, is being ethical, being reliable. What is not perceived as is being aggressive or arrogant. So if you come back to the efficiency of acquiring customers, if you treat them properly, they come back and that's much cheaper than getting a new one.
So that's the point I think we will turn. So just to give you a bit of an insight into how our industry is doing. On the lending side, the principal thing it does is graduate loan refinancing at the moment. There's 5% to 10% of the in-school lending, but I don't think it's relevant to this discussion. It's not the only thing we want to do, but it's a good place to start and it pays the rent. The reason that's good is it aligns with the sorts of customers you want to get and the characteristics you want, and it's something we know how to do. It's been successful. Our market share in this field is either one or two for most of the last few years, and we've generated about $9 billion of loans here. It's also now quite profitable that went from a loss in 2020, about $8 million to making about $80 million pre-tax today.
The counseling platform, I think the point to make here is that over that time, it's grown fourfold, a bit more so. And so you are almost 2 million users. Earnest has probably 150,000 customers. So it's multiples of people that you have relationships with above those that you actually currently lend to you today. The reason that's important is that there may be future customers, but coming back to a point we made earlier, we're looking at product loan extensions. And the most economical way and least risky way of doing that is to test into those things, to do research, to try them out rather than commit hundreds of millions and find out it was a bad idea. And there's an industry celebrity who I have not met personally, who has, I think, a rather way of interesting way of describing consumer lending.
He says, people go into it with wide eyes and they come out with black eyes. So one of the principal values of this platform is to enable us to be judicious as we start to add new products. Then on Earnest itself, its business model, why is it distinct? We talked about the brand. But if you think about financial services, generally, it's very difficult to have a lower cost of funds than other people. Product differentiation is something people talk about, but at best, is fleeting. So neither of those are going to be advantages for us. So what Earnest is focused on is targeting customers who are efficient and then managing that process efficiently. So if you think about a lot of people in the industry generally talk about they say, well, our NIM will be better because we'll charge people more for the same product than other people will get or we'll fund it cheaper than other people can do or our cost of customer acquisition will be less.
All of those things are important, but what really counts is the end-to-end deficiencies. So taking a few data points there. Earnest is acquiring customers at an annualized cost of about 30 bps. And what that is, it's a little bit more than a percent to get one you keep in about four years. Another element of efficiency is that we're targeting more affluent customers. So the average balance at Earnest at the moment is about $50,000, which is almost three times what our legacy portfolio is. And in fact, that $50,000 is trending a little bit higher as we speak. And then the other point on here is the realized loss rate. And the 40 bps might sound attractive. It probably is helpful in generating NIM. But the more important point in an end-to-end analysis is all the people you don't chase, you don't have to worry about, you don't have to think about it every day, don't cost you money to manage.
And so in terms of efficiency, that's probably the major advantage of targeting those kinds of customers. Just to wrap up on this, because this sounds like a plug, and I have to say that it really isn't because we haven't decided firmly what to do with it or about it. But having said that, we talked earlier about operating leverage. And one of the great things about the project that the guys did is you were able to identify these points of leverage, you do this, you get that in various elements. So Earnest is an example, I think, of positive operating leverage because you have well-controlled costs and you have a growing revenue base. So to put that in context, if you look at Earnest from 2023 to the end of last year, its revenue increased by, I'm going to call it $125 million.
Its marketing expenses went up. But if you get more customers, you have to spend more money to get them. What's interesting though is that the other operating expenses went up by about $15 million. So that's a ratio of a little bit better than 8:1. And as you grow, that ratio actually gets better. So what this looks like to us is a classic example of online growth business economics. So it's probably something that you won't want to find a way to expand. So with that not to say that there aren't very interesting businesses within BPS. But that one, as you know, is subject to an analysis of strategic alternatives. So I'm going to turn it back to David, I'm going to get off now. And I'll delegate it back to him.
David Yowan: Great. Thanks, Ed. So turning to page 18, let me provide a brief review of our BPS businesses. These businesses operate in two distinct markets with separate operations. Several of the businesses within this group were acquisitions. Our Healthcare business goes to market under the Xtend brand. Xtend offers revenue cycle management services to health care providers and is relatively independent from the rest of Navient from an operational perspective. The government services and transportation businesses operate under several brands and provide a variety of services to federal, state and local governments, its operations share costs, infrastructure and corporate support with the rest of Navient, particularly loan servicing.
While we're at an early stage in exploring strategic options for this business, we will keep you updated as that process unfolds. Let me try to summarize on slide 19. We have identified and we're taking steps to significantly reduce the expense base and simplify the company. These actions are designed to increase the value of the cash flows from our loan portfolios and increase the returns and transparency around growth initiatives. The cash we have on hand, the enhanced cash flows from our loan portfolios and the proceeds of any divestiture of BPS combined could generate significant cash flows in excess of our current market cap over the next few years. We will invest that cash in activities that are expected to generate market value in excess of the invested cash.
Excess cash will be distributed to shareholders. Shortly following my transition from the Board to the role of CEO, I shared with you my initial impressions from inside the company, namely that Navient has a strong foundation of assets, capabilities and talent. I also said that we would undertake a rigorous review to identify ways in which that foundation can deliver more to shareholders. These actions are the first steps in delivering our full value and potential, and we look forward to providing updates on our progress. With that, I will now turn it over to Joe to review our Q4 results and provide our 2024 outlook.
Joe Fisher: Thank you, David, Ed and everyone on today's call for your interest in Navient. During my prepared remarks, I will review the fourth quarter and full year results for 2023. I will also provide more detailed guidance underlying our 2024 outlook for earnings per share of $2.10 to $2.30. Our 2024 outlook does not assume any of the strategic actions that we are announcing. It does not include potential benefits from the transition of servicing, any potential divestitures or any restructuring expenses related to these initiatives. This outlook also assumes a declining rate environment with four rate cuts. We will update our financial outlook throughout the year as these actions become clear. In 2023, we reported a fourth quarter GAAP EPS loss of $0.25, bringing our full year GAAP EPS to $1.85.
On a core basis, we delivered fourth quarter EPS of $0.21 and full year EPS of $2.45. The $0.21 includes a $0.49 reduction to EPS related to significant items in the quarter. Before I move on to the segments, I will provide further detail on two of these items. First, we have increased our accrual by $28 million in connection with the CFPB litigation bringing our total accrual to $73 million. We remain confident about the strength of our case, while open to finding a solution that is acceptable to all stakeholders in order to put this matter behind us. Second, in our private credit provision this quarter, we reserved $35 million due to internal policy changes we've made to meet new regulatory expectations related to school misconduct discharges on certain legacy private loans.
This increase reflects our assessment of the impact to the legacy portfolios, life of loan discharges from potential borrower claims. I'll now provide additional detail by segment, beginning with Federal Education Loans on slide four. The quarter's NIM of 86 basis points reflects the higher rate environment as floor income, including the amounts that were hedged continued to roll off in the second half of this year. We expect FFELP NIM to decline to the low 70s for 2024 due to our interest rate outlook of four cuts this year. Falling interest rate environment creates NIM pressure as our FFELP assets repriced more frequently than our liabilities. However, we do not forecast rates to fall far enough to reach a level where significant floor income is generated.
Our full year FFELP net interest income declined 8% to $480 million as the portfolio balance declined 13% to $38 billion. The full year FFELP NIM of 112 basis points was above our targeted range of 100 to 110 basis points provided at the beginning of the year. Credit metrics improved in our FFELP portfolio compared to the prior year and third quarter. The delinquency rate, forbearance rate and net charge-offs all declined from the prior year. Provision increased from the prior year as longer expected lives primarily driven by a greater percentage of borrowers and income-based repayment plans increases the projected amount of loan premium charged off in the future. The net charge-off rate of 19 basis points for the year was consistent with our expectations of 10 to 20 basis points for the full year.
Now let's turn to our Consumer Lending segment on slide five. Net interest margin was 291 basis points in the quarter and 304 basis points for the full year. This exceeded our original guidance of 280 to 290 basis points as we benefited from improved funding spreads. We anticipate that the consumer lending NIM will be in the low 300s for 2024. This includes projected new refi originations of $1 billion compared to $647 million in 2023. It also assumes projected growth of 10% in in-school originations. We expect the increase in refi originations to occur primarily in the back half of the year based on our outlook for a declining rate environment. Our consumer lending team is focused on generating high-quality loans with efficient acquisition costs and improved margins.
Credit metrics in our consumer lending portfolio performed as expected with delinquency rates, forbearance rates and charge-off rates relatively flat year-over-year. Our charge-off rate for full year 2023 of 1.5% was at the low end of our original guidance of 1.5% to 2%. Provision of $50 million is primarily driven by the changing regulatory expectations that I discussed earlier in my remarks. This is reflected in our change in allowance on slide six. At the end of 2023, our allowance for loan losses for our entire education loan portfolio is $1 billion. While much of our portfolio is amortizing, we reserved $5 million for FFELP loans during the quarter and $56 million during the year related to a projected extension in the life of the portfolio.
New origination volume contributed $4 million to the allowance in the quarter and $25 million for the full year. Continue to slide seven to review our Business Processing segment. Total revenue increased $11 million to $81 million in the quarter as revenue from our traditional BPS services increased $15 million or 23%, more than fully offsetting revenue associated with pandemic-related contracts from a year ago. The full year revenue of $321 million was comprised of $74 million in growth from traditional BPS services and well in excess of the long-term high single-digit growth that we see in the industry. Our full year EBITDA margin of 12% was driven by the onboarding of new government services contracts in the first half of the year. Our EBITDA margin of 15% in the quarter reflects the benefit from ongoing efficiency initiatives as we target high teens EBITDA margins for 2024.
Turning to our capital allocation and financing activity that is highlighted on slide eight. We continue to maintain disciplined asset liability and capital management strategies with 84% of our education loan portfolio funded to term and an adjusted tangible equity ratio of 8.2%. During the quarter, we issued $516 million of asset-backed securitizations and $500 million of unsecured debt. We also retired $850 million of maturities that were due in March of 2024. Our overall unsecured debt maturities declined by 16% to under $6 billion, the lowest levels in our history. In the year, we reduced our share count by 13% through the repurchase of 18 million shares. In total, we returned $388 million to shareholders through share repurchases and dividends.
We expect the adjusted tangible equity ratio to remain above 8% for 2024. Turning to expenses on slide nine. Total expenses for the year were $825 million. This includes $80 million of regulatory expense primarily related to accruals in connection with the CFPB matter. Operating expenses declined 32% in the Federal Education segment and 10% in the Corporate Other segment when adjusting for regulatory expenses. We achieved an efficiency ratio of 53% for the year, better than our original full year outlook of 55% to 58%. The strategic initiatives we are undertaking reflect our commitment to identify additional and more meaningful opportunities to reduce expenses. In closing, the full year results of $2.45 reflect the steps we have taken to achieve profitable growth, address regulatory matters and maintain strong capital while exploring alternative strategies to maximize cash flows and enhance value for shareholders.
Our full year 2024 outlook of $2.10 to $2.30 does not include the impact of strategic initiatives that Dave and Ed outlined occurring this year, though we are confident in our ability to execute on these initiatives. Before I close, I want to thank team Navient for their accomplishments this year and continued commitment to creating further value for all of our stakeholders. Thank you for your time, and I will now hand the call back to Dave.
David Yowan: Thanks, Joe. As I said at the outset, we had a lot to share this morning. While we pursue the actions we're announcing today, we remain focused on meeting the needs of our borrowers on growing our BPS businesses by delivering the services our customers and clients seek from us and with Earnest on growing loan originations and building engagement and deepening relationships. We will update you on our progress and call out the impacts within our 2024 results as needed. As they come into sharper focus by the second half of the year, we expect to be able to provide a revised outlook and our going-forward opportunities and plans. I also want to acknowledge and thank my colleagues across the organization who continue to serve our customers and clients.
The actions we are announcing today represent significant change. I know that as we navigate these changes, our team members will remain committed to servicing our customers and clients with distinction and care. With that, we're ready to move to Q&A.
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