"Our Refunds solution exemplifies how we prioritize meeting institutions' and students' needs through product development," noted Brittany Hubbard, director of product strategy for Nelnet Campus Commerce. "For many institutions, processing student refunds is a time-consuming task. It's challenging to keep students informed about the status of their refund, resulting in an overwhelming number of 'where's my money' calls to the bursar's office. Nelnet Refunds offers a solution to automate this process while g ...

Core Insights - Nelnet reported Q3 CY2025 results that exceeded Wall Street's revenue expectations, with a year-on-year sales increase of 47.6% to $427.8 million and a GAAP profit of $2.94 per share, surpassing analysts' consensus estimates by 93.4% [1][2] Company Overview - Nelnet, established in the 1970s as a student loan servicer, has evolved to provide a range of services including student loan servicing, education technology, payment processing, and banking services while managing an education loan portfolio [3] Revenue Growth - The company achieved an annualized revenue growth of 9.9% over the last five years, which is slightly above the average for financial companies, indicating that its offerings resonate well with customers [4] - In the last two years, Nelnet's annualized revenue growth accelerated to 18%, surpassing its five-year trend, suggesting increased demand for its services [5] - The reported revenue of $427.8 million for this quarter not only reflects a remarkable year-on-year growth of 47.6% but also beats Wall Street's estimates by 15% [6]

Financial Performance - GAAP net income attributable to the company for Q3 2025 was $106.7 million, a significant increase from $2.4 million in Q3 2024, representing a growth of 4,367%[125] - Non-GAAP net income for Q3 2025 was $107.3 million, compared to $12.4 million in Q3 2024, reflecting a year-over-year increase of 765%[125] - The total net income before taxes for the company in the first nine months of 2025 was $480 million, compared to $150.1 million in the same period of 2024, indicating a growth of 219%[132] - Nelnet Bank reported a net income of $6.1 million in Q3 2025, recovering from a loss of $4.8 million in Q3 2024[132] - The company’s venture capital investments generated a net income of $33.5 million in Q3 2025, compared to $2.1 million in Q3 2024, marking a substantial increase[132] - Net income attributable to Nelnet, Inc. was $106.684 million for Q3 2025, compared to $2.388 million in Q3 2024, reflecting a significant increase[145] - Net income for Q3 2025 was $35,165 million, compared to a net loss of $3,457 million in Q3 2024, reflecting improved operational performance[151] - The before tax operating margin improved to 30.0% in Q3 2025 from (4.0)% in Q3 2024, indicating enhanced profitability[151] - For the nine months ended September 30, 2025, net income was $30.544 million, an increase from $33.409 million in the same period of 2024, reflecting a decrease of 2.6%[183] - For the nine months ended September 30, 2025, the net income was $125.76 million, compared to a net loss of $25.21 million for the same period in 2024[187] Revenue and Income Sources - The company recognized $32.9 million in non-recurring revenue in Q3 2025 from a contract modification with the Department of Education[136] - The company’s total revenue from its NDS segment was $46.3 million in Q3 2025, compared to a loss of $4.5 million in Q3 2024, indicating a strong recovery[132] - Total interest income for Q3 2025 was $205.96 million, a decrease from $240.48 million in Q3 2024, primarily due to a decrease in the average balance of loans[144] - LSS revenue for Q3 2025 was $151.05 million, up from $108.18 million in Q3 2024, indicating strong performance in the loan servicing segment[144] - Government loan servicing revenue reached $112,798 million in Q3 2025, up from $85,215 million in Q3 2024, attributed to increased loan servicing volume[152] - Private education and consumer loan servicing revenue rose to $24,293 million in Q3 2025, compared to $13,057 million in Q3 2024, reflecting growth in the loan portfolio[152] - Revenue from tuition payment plan services increased to $32.971 million in Q3 2025, up 4.1% from $31.659 million in Q3 2024[156] - Education technology services and payments revenue increased to $129.321 million in Q3 2025, up 9.6% from $118.179 million in Q3 2024[156] Expenses and Cost Management - Total operating expenses decreased to $225.736 million in Q3 2025 from $221.299 million in Q3 2024, primarily due to staff reductions in the LSS operating segment[145] - The company incurred total expenses of $294.872 million in Q3 2025, down from $322.635 million in Q3 2024[145] - Total operating expenses decreased to $108,710 million in Q3 2025 from $119,540 million in Q3 2024, due to cost-saving measures[150] - Salaries and benefits expenses decreased to $70,126 million in Q3 2025 from $76,820 million in Q3 2024, following staff reductions[150] - The company experienced an increase in salaries and benefits expenses, totaling $26.193 million for the three months ended September 30, 2025, compared to $23.852 million in 2024, reflecting an increase of 9.8%[186] Investments and Acquisitions - The company received cash proceeds of $410.9 million from the partial redemption of its investment in ALLO, resulting in a pre-tax gain of $175 million[135] - The company announced the acquisition of Finastra's Canadian student loan servicing business for approximately $93 million, expected to close in Q1 2026[139] - The company plans to use its liquidity to pursue strategic acquisitions, including a Canadian student loan servicing business for approximately $93 million, expected to close in Q1 2026[193] - The company has funded a total of $306.1 million in solar tax equity investments, with an additional commitment of $86.7 million, bringing the total commitment to $202.6 million[228] Loan Performance and Management - The company’s net interest income from its federally insured student loans remains a significant portion of its revenue, contributing to overall financial stability[123] - In Q3 2025, the company sold $203.3 million of consumer loans, resulting in a reversal of allowance for loan losses of $28.9 million, which increased income[137] - The loan portfolio in the AGM operating segment was $8.8 billion as of September 30, 2025, primarily consisting of federally insured loans[157] - Loan acquisitions in Q3 2025 totaled $1.586 billion, with a significant portion from consumer financing receivables[158] - AGM's allowance for loan losses showed a negative provision of $7.4 million for the three months ended September 30, 2025, compared to a provision of $11.9 million in the same period of 2024[170] - The allowance for loan losses and net charge-offs as a percentage of average loans will be detailed in the consolidated financial statements[175] Tax and Regulatory Matters - The effective tax rate for the year-to-date was 24.50% for the nine months ended September 30, 2025, with an expected range of 23% to 25% for the year ending December 31, 2025[145] - The effective tax rate for the three months ended September 30, 2025, was 24.4%, slightly up from 24.0% in the same period of 2024[180] Liquidity and Capital Management - As of September 30, 2025, the company's total sources of liquidity amounted to $1.66 billion, including $202.43 million in net cash and cash equivalents[191] - The company has a $495.0 million unsecured line of credit, with no amount outstanding as of September 30, 2025, available for future use[234] - Nelnet Bank's deposits are diversified, including retail, commercial, and institutional deposits, enhancing its liquidity position[226] - The company repurchased $377.6 million of its own debt during the third quarter of 2025, contributing to changes in investment interest income[183] Challenges and Future Outlook - The company continues to recognize loss reserves related to legacy solar construction contracts, with costs expected to be incurred for completion[145] - The company continues to face challenges with legacy construction contracts, recognizing loss reserves for costs to complete remaining projects[188] - The enactment of the One Big Beautiful Bill is expected to create opportunities for the company to expand its private education loan originations and acquisitions[190] - The company expects to recognize approximately $180 million in pre-tax income from current investments between October 1, 2025, and June 30, 2031[229]

Financial Performance - For Q3 2025, total interest income was $205,958,000, a decrease of 14.3% from $240,483,000 in Q3 2024[6] - Net interest income after provision for loan losses increased to $88,813,000, up 64.1% from $54,044,000 in Q3 2024[6] - Net income attributable to Nelnet, Inc. was $106,684,000, compared to $2,388,000 in Q3 2024, marking a significant turnaround[6] - The Company reported a basic and diluted earnings per share of $2.94 for Q3 2025, compared to $0.07 in Q3 2024[6] - GAAP net income attributable to Nelnet, Inc. for Q3 2025 was $106.7 million, compared to $2.4 million in Q3 2024, representing a significant increase[11] - Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments, was $107.3 million for Q3 2025, up from $12.4 million in Q3 2024[11] - Nelnet Bank generated a net income of $6.1 million in Q3 2025, recovering from a loss of $4.8 million in Q3 2024[17] Revenue Growth - Loan servicing and systems revenue rose to $151,052,000, reflecting a 39.5% increase compared to $108,175,000 in Q3 2024[6] - The Company’s solar construction revenue was $5,738,000 for Q3 2025, a significant increase from $1,259,000 in Q2 2025[6] - The Company recognized $32.9 million of non-recurring revenue in Q3 2025 from a government servicing contract modification[21] - Venture capital investments generated a pre-tax gain of $22.4 million during Q3 2025 due to an equity raise by an unaffiliated technology company[23] Assets and Liabilities - Total assets as of September 30, 2025, were $13,876,682,000, a slight increase from $13,777,753,000 as of December 31, 2024[7] - Total liabilities decreased to $10,289,987,000 from $10,478,636,000 as of December 31, 2024, indicating improved financial stability[7] Strategic Investments - The Company is actively expanding its private education and consumer loan portfolios as part of its growth strategy[9] - The Company continues to pursue strategic investments in areas such as renewable energy and venture capital to diversify its business[9] - The Company announced the acquisition of Finastra's Canadian student loan servicing business for approximately $93 million, expected to close in Q1 2026[24] Operating Expenses - Total operating expenses for the three months ended September 30, 2025, were $225,736, compared to $219,291 for the three months ended June 30, 2025[27][28] - Total expenses for the three months ended September 30, 2025, were $294,872, an increase from $285,318 for the three months ended June 30, 2025[27][28] - Total operating expenses for the nine months ended September 30, 2024, were $873.64 million, compared to $744.67 million in the previous year, reflecting an increase of 17.3%[31] Loan Performance - Nelnet sold $203.3 million of consumer loans in Q3 2025, resulting in a negative provision expense of $28.9 million[22] - The allowance for loan losses as a percentage of the ending loan balance for private education loans was 4.81% as of September 30, 2025, down from 5.02% as of December 31, 2024[39] - The company reported a negative provision for loan losses of $3,563 for the three months ended September 30, 2025, compared to a positive provision of $17,930 for the three months ended June 30, 2025[27][28] Other Income and Expenses - The company reported a net loss from solar investments of $10.88 million for the three months ended September 30, 2025, compared to a loss of $1.50 million in the previous quarter and a loss of $11.24 million in the same quarter of 2024[35] - Total other income for the three months ended September 30, 2025, was $35.73 million, compared to $22.98 million for the previous quarter and $15.71 million for the same quarter in 2024, reflecting a significant increase[35] Borrower Statistics - The number of government borrowers serviced as of September 30, 2025, was 12,387,665, down from 12,694,386 as of June 30, 2025[33] - The number of remote hosted borrowers increased to 2,839,493 as of September 30, 2025, compared to 2,056,358 as of June 30, 2025[33]

Core Insights - Nelnet Campus Commerce announced significant product updates and advancements in its roadmap following the 2025 Virtual Client Summit, emphasizing the ongoing momentum of Project Horizon, a multi-year initiative aimed at modernizing campus payment solutions [1][2]. Group 1: Event Overview - The 2025 Virtual Client Summit, held on October 16, 2025, attracted over 500 higher education professionals to discuss innovations and trends in higher education finance [2]. - Attendees had the opportunity to preview upcoming innovations from Project Horizon, which includes new capabilities developed in collaboration with colleges and universities [2]. Group 2: Project Horizon Details - Project Horizon represents a comprehensive transformation of Nelnet Campus Commerce's payment technology, support model, and client engagement strategy, focusing on control, flexibility, and integration [4]. - The initiative aims to enhance student success by reducing effort and removing barriers in payment processes [4][5]. Group 3: Key Innovations - Enhanced payment plans are being introduced to provide greater flexibility for institutions and students, aligning with individual financial needs [6]. - Nelnet Notify has been updated to deliver personalized, automated messages that improve engagement and ensure timely payments [6]. - Updates to the Scholarship Manager are designed to streamline scholarship workflows, automating award distribution amid rising financial pressures [6]. Group 4: Engagement and Support - Institutions are actively involved in shaping product design through advisory boards and early adopter programs, fostering a collaborative environment [7]. - The first new solution under Project Horizon, Nelnet Notify, is already operational, helping institutions send targeted payment communications [7]. - An adaptive service model has been introduced, featuring 24/7 domestic support and tailored strategic account reviews [7]. Group 5: Company Background - Nelnet Campus Commerce serves nearly 1,000 colleges and universities and over 8 million students across the U.S., providing integrated payment solutions validated to PCI Level 1 [8].

Core Insights - Nelnet, Inc. has announced an agreement to acquire Finastra's Canadian student loan servicing business, expected to close in Q1 2026, subject to customary conditions [1][2]. Company Overview - Nelnet is a diversified company focused on consumer lending, loan servicing, payments, and technology, primarily in the education sector, with over 6,700 associates [6]. - Finastra is a global leader in financial services software, serving over 8,000 customers, including 45 of the world's top 50 banks, across more than 130 countries [7]. Transaction Details - The acquisition will enhance Nelnet's capabilities in servicing student loans, as the Canadian business currently services loans for 2.4 million borrowers using proprietary technology [2]. - The Canadian operations will continue to be led by Susan Tersigni and will remain headquartered in Mississauga, Ontario, employing over 450 staff [4]. Strategic Alignment - The acquisition aligns with Finastra's strategy to focus on core strengths while partnering with an experienced player in the industry, ensuring continued growth for the student lending business [5]. - Nelnet's CEO expressed excitement about leveraging their financial strength and loan servicing experience to support the Canadian team's mission [3].

Core Viewpoint - Long-term dividend growth is more valuable than high initial dividend yields for investors seeking sustainable returns over a decade or more [2][12] Company Overview - Nelnet is primarily known for its role in student loan financing but has diversified its operations significantly since the enactment of the Affordable Care Act, which restricted private companies from financing undergraduate student loans [4][5] - The company is transitioning away from its student loan portfolio while acquiring residual loans, expecting to generate $1 billion in cash flow from these loans, with $100 million anticipated in the latter half of 2025 and annually from 2026 to 2030 [5] Financial Performance - Nelnet Bank, a new lending operation, generated $14 million in net interest income, while the legacy undergraduate student loan portfolio generated $50 million in net interest income last quarter [6] - The educational software and payments processing division generated $486 million in revenue and $117 million in operating income in 2024, providing substantial cash flow for dividend payments [8] Asset Valuation - Nelnet holds a 22% stake in the private start-up Hudl, which could be worth hundreds of millions if it goes public, adding significant value to Nelnet's market cap of $4.7 billion [9] Dividend Growth Strategy - The company has a history of consistent dividend growth, with a 11% annual increase in dividend per share from 2014 to 2024, and plans to continue this trend alongside share repurchases [12]

Core Insights - Nelnet Campus Commerce will host its annual Virtual Client Summit on October 16, 2025, aimed at fostering collaboration among over 1,000 client institutions in higher education payment technology [1][2] Group 1: Event Details - The summit will feature institution-led presentations, product updates from Nelnet, and insights into Project Horizon, a multi-year initiative to modernize student payment management [2][4] - The event is designed to facilitate collaboration and innovation, with a focus on how institutions are using Nelnet's platforms to enhance operational efficiency [3][4] Group 2: Project Horizon - Project Horizon aims to create a student-first, collaborative payment system that is flexible and responsive to the needs of higher education [3][5] - The initiative will incorporate AI to improve engagement and personalization in payment solutions, starting with tools like Notify [3][5] Group 3: Client Engagement - Nelnet Campus Commerce has over 1,000 colleges and universities utilizing its payment solutions, with more than 150 institutions involved in advisory boards and design partnerships [4][5] - The summit serves as both a milestone and a launchpad for future developments, emphasizing the importance of client feedback in shaping new features [4][5] Group 4: Company Overview - Nelnet Campus Commerce provides payment solutions for over 8 million students across the U.S., ensuring compliance with Payment Card Industry standards and integration with major enterprise resource planning systems [4][5] - The company focuses on creating unique and integrated payment experiences, including payment processing, disbursements, tuition payment plans, and online storefronts [4][5]

Core Insights - Nelnet Campus Commerce launched Notify, a communication platform aimed at enhancing outreach, relationships, and the billing and payment process for educational institutions [1][4] - Notify is designed to automate communication, ensuring messages are timely, accurate, and relevant, thereby reducing manual work for campus teams [2][3] - The platform addresses challenges faced by higher education institutions, allowing them to focus on building trust with students rather than logistical issues [3][4] Company Overview - Nelnet Campus Commerce serves nearly 1,000 colleges and universities and over 8 million students in the U.S., providing integrated payment solutions [5] - The company’s solutions are PCI Level 1 validated and compatible with major Enterprise Resource Planning (ERP) systems, facilitating various payment processes [5] - Nelnet Business Services, a division of Nelnet, Inc., offers payment technology and community management solutions for both higher education and K-12 institutions globally [6]

```markdown [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Nelnet's unaudited consolidated financial statements for Q2 2025, detailing balance sheets, income, equity, cash flows, and key notes [Consolidated Balance Sheets](index=3&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Consolidated Balance Sheet Highlights (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------------------ | :------------ | :---------------- | :----- | :------- | | Total assets | $13,711,088 | $13,777,753 | $(66,665) | -0.48% | | Loans and accrued interest receivable (net) | $10,155,483 | $9,992,744 | $162,739 | 1.63% | | Total cash and cash equivalents | $225,753 | $194,518 | $31,235 | 16.06% | | Total investments and notes receivable | $2,104,939 | $2,200,696 | $(95,757) | -4.35% | | Total liabilities | $10,228,395 | $10,478,636 | $(250,241) | -2.39% | | Bonds and notes payable | $7,903,561 | $8,309,797 | $(406,236) | -4.89% | | Bank deposits | $1,382,042 | $1,186,131 | $195,911 | 16.52% | | Total equity | $3,482,693 | $3,299,117 | $183,576 | 5.56% | | Retained earnings | $3,576,192 | $3,340,540 | $235,652 | 7.05% | [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated Statements of Income Highlights (Dollars in thousands, except share data) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Total interest income | $212,289 | $242,866 | -12.59% | $420,117 | $511,667 | -17.89% | | Interest expense | $132,854 | $176,459 | -24.60% | $257,968 | $371,039 | -30.59% | | Net interest income | $79,435 | $66,407 | 19.62% | $162,149 | $140,628 | 15.30% | | Provision for loan losses | $17,930 | $3,611 | 396.55% | $33,267 | $14,440 | 130.38% | | Net interest income after provision for loan losses | $61,505 | $62,796 | -2.06% | $128,882 | $126,188 | 2.13% | | Total other income (expense), net | $461,177 | $266,270 | 73.20% | $776,955 | $577,179 | 34.60% | | Total expenses | $285,318 | $270,638 | 5.43% | $562,333 | $551,002 | 2.06% | | Income before income taxes | $237,364 | $58,428 | 306.25% | $343,504 | $152,365 | 125.45% | | Net income | $177,854 | $43,675 | 307.25% | $258,983 | $114,429 | 126.32% | | Net income attributable to Nelnet, Inc. | $181,459 | $45,091 | 302.43% | $264,018 | $118,498 | 122.82% | | Earnings per common share (basic and diluted) | $4.97 | $1.23 | 304.07% | $7.24 | $3.22 | 124.84% | - The significant increase in Net income and EPS for both the three and six months ended June 30, 2025, was primarily driven by a **$175.0 million gain on partial redemption of ALLO investment**[11](index=11&type=chunk)[30](index=30&type=chunk)[120](index=120&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Consolidated Statements of Comprehensive Income (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $177,854 | $43,675 | $258,983 | $114,429 | | Other comprehensive (loss) income | $(1,779) | $6,216 | $(3,678) | $17,859 | | Comprehensive income | $176,075 | $49,891 | $255,305 | $132,288 | | Comprehensive income attributable to Nelnet, Inc. | $179,680 | $51,307 | $260,340 | $136,357 | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY) Key Changes in Shareholders' Equity (Dollars in thousands) | Item | June 30, 2025 (Balance) | March 31, 2025 (Balance) | Change (QoQ) | June 30, 2024 (Balance) | March 31, 2024 (Balance) | Change (QoQ) | | :------------------------------------------------ | :---------------------- | :----------------------- | :----------- | :---------------------- | :----------------------- | :----------- | | Retained earnings | $3,576,192 | $3,412,939 | $163,253 | $3,295,301 | $3,304,197 | $(8,896) | | Accumulated other comprehensive (loss) earnings, net | $(2,208) | $(429) | $(1,779) | $(2,260) | $(8,476) | $6,216 | | Total Nelnet, Inc. shareholders' equity | $3,574,983 | $3,363,009 | $211,974 | $3,220,022 | $3,235,720 | $(15,698) | | Noncontrolling interests | $(92,290) | $(56,514) | $(35,776) | $(74,039) | $(61,470) | $(12,569) | | Total equity | $3,482,693 | $3,363,009 | $119,684 | $3,220,022 | $3,235,720 | $(15,698) | [Consolidated Statements of Cash Flows](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Consolidated Statements of Cash Flows Highlights (Dollars in thousands) | Item | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :----------------------------- | :----------------------------- | :--------- | | Net cash provided by operating activities | $172,929 | $345,319 | -49.93% | | Net cash provided by investing activities | $709,828 | $1,823,622 | -61.08% | | Net cash used in financing activities | $(1,012,339) | $(2,250,942) | -55.03% | | Net decrease in cash, cash equivalents, and restricted cash | $(129,244) | $(82,088) | 57.45% | | Cash, cash equivalents, and restricted cash, end of period | $801,776 | $943,403 | -14.99% | - The decrease in net cash provided by operating activities was due to adjustments to net income for non-cash items, including the gain on partial redemption of ALLO investment, deferred income tax benefit, loan discount, and investment gains/losses, partially offset by an increase in net income and changes in derivative market value adjustments and provision for loan losses[177](index=177&type=chunk)[178](index=178&type=chunk) - Investing activities for the six months ended June 30, 2025, included **$410.9 million cash proceeds from the partial redemption of the ALLO investment**[176](index=176&type=chunk)[177](index=177&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Basis of Financial Reporting](index=10&type=section&id=1.%20Basis%20of%20Financial%20Reporting) - The unaudited consolidated financial statements for Nelnet, Inc. and subsidiaries as of June 30, 2025, and for the three and six months ended June 30, 2025 and 2024, are prepared on the same basis as the audited 2024 Annual Report and include all normal recurring adjustments necessary for fair presentation. Management's estimates and assumptions are used, and actual results may differ[27](index=27&type=chunk) [2. Partial Redemption of ALLO Investment](index=10&type=section&id=2.%20Partial%20Redemption%20of%20ALLO%20Investment) - In June 2025, Nelnet received **$410.9 million cash proceeds** from ALLO for the redemption of all its preferred membership interests and a portion of its voting membership interest, recognizing a pre-tax gain of **$175.0 million**[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Following the transaction, Nelnet's voting membership interest in ALLO decreased from **45% to 27%**, and it no longer holds preferred interests. The remaining voting interest is accounted for under the HLBV method with a carrying value of **$0**[31](index=31&type=chunk) - The contingent obligation to SDC related to future disposals of ALLO voting interests was reduced by **$4.9 million**, with a maximum remaining obligation of **$9 million** (down from **$35 million**)[32](index=32&type=chunk) [3. Loans and Accrued Interest Receivable and Allowance for Loan Losses](index=11&type=section&id=3.%20Loans%20and%20Accrued%20Interest%20Receivable%20and%20Allowance%20for%20Loan%20Losses) Loans and Accrued Interest Receivable (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Non-Nelnet Bank loans | $8,935,169 | $8,955,868 | $(20,699) | | Nelnet Bank loans | $827,641 | $644,597 | $183,044 | | Accrued interest receivable | $560,927 | $549,283 | $11,644 | | Allowance for loan losses | $(125,349) | $(114,890) | $(10,459) | | **Total (net)** | **$10,155,483** | **$9,992,744** | **$162,739** | Allowance for Loan Losses as % of Ending Loan Balance | Portfolio | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Non-Nelnet Bank: Federally insured loans | 0.57% | 0.59% | | Non-Nelnet Bank: Private education loans | 4.73% | 5.02% | | Non-Nelnet Bank: Consumer and other loans | 11.67% | 11.13% | | Nelnet Bank: Federally insured loans | 0.33% | — | | Nelnet Bank: Private education loans | 2.39% | 2.09% | | Nelnet Bank: Consumer and other loans | 4.68% | 3.77% | Annualized Net Charge-offs as % of Average Loans | Portfolio | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-Nelnet Bank: Federally insured loans | 0.16% | 0.22% | 0.14% | 0.19% | | Non-Nelnet Bank: Private education loans | 0.55% | 2.64% | 1.02% | 1.85% | | Non-Nelnet Bank: Consumer and other loans | 7.62% | 4.62% | 6.58% | 4.98% | | Nelnet Bank: Federally insured loans | 0.06% | — | 0.06% | — | | Nelnet Bank: Private education loans | 1.10% | 0.40% | 1.08% | 0.44% | | Nelnet Bank: Consumer and other loans | 1.71% | 7.44% | 1.49% | 7.66% | - Nelnet Bank's consumer and other loans saw a decrease in annualized net charge-offs due to a change in portfolio mix towards higher credit quality and exiting a high charge-off consumer loan program in December 2024[36](index=36&type=chunk) - In March 2025, the Company acquired ownership interests in certain trusts, consolidating **$646.9 million** of federally insured Stafford and consolidation loans and **$721.3 million** of bonds and notes payable[34](index=34&type=chunk) [4. Bonds and Notes Payable](index=19&type=section&id=4.%20Bonds%20and%20Notes%20Payable) Bonds and Notes Payable (Dollars in thousands) | Type | June 30, 2025 (Carrying amount) | December 31, 2024 (Carrying amount) | Change | | :------------------------------------------------ | :------------------------------ | :-------------------------------- | :----- | | Variable-rate bonds (FFELP securitizations) | $6,933,724 | $6,960,219 | $(26,495) | | Fixed-rate bonds (FFELP securitizations) | $324,392 | $346,359 | $(21,967) | | FFELP loan warehouse facilities | $553,313 | $853,165 | $(299,852) | | Consumer loan warehouse facilities | $68,026 | $90,000 | $(21,974) | | Private education loan asset-backed securitizations | $79,945 | $105,388 | $(25,443) | | Participation agreements | $2,051 | $3,320 | $(1,269) | | Discount on bonds and notes payable and debt issuance costs | $(57,890) | $(48,654) | $(9,236) | | **Total** | **$7,903,561** | **$8,309,797** | **$(406,236)** | - The Company has a **$495.0 million** unsecured line of credit, with no outstanding amount as of June 30, 2025, and the full amount available for future use[51](index=51&type=chunk) Debt Repurchases (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Purchase price | $(141,998) | $(4,199) | $(142,869) | $(4,199) | | Par value | $142,396 | $4,190 | $143,320 | $4,190 | | Gain (loss), net | $388 | $(9) | $439 | $(9) | - As of June 30, 2025, the Company holds **$238.8 million** (par value) of its own FFELP asset-backed securities, which are eliminated in consolidation but remain legally outstanding[53](index=53&type=chunk) [5. Derivative Financial Instruments](index=21&type=section&id=5.%20Derivative%20Financial%20Instruments) - Nelnet uses settled-to-market derivative financial instruments, including basis swaps and interest rate swaps, to manage interest rate risk. As of June 30, 2025, outstanding basis swaps totaled **$1.4 billion notional amount**, and interest rate swaps for floor income hedges totaled **$400 million notional amount**[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - Nelnet Bank uses non-centrally cleared derivative instruments as cash flow hedges for variable rate intercompany and third-party deposits. As of June 30, 2025, intercompany deposit hedges totaled **$195 million notional amount**, and third-party deposit hedges totaled **$50 million notional amount**[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) Derivative Market Value Adjustments and Settlements (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total settlements - income | $744 | $1,649 | $1,489 | $3,406 | | Total change in fair value - (expense) income | $(3,866) | $1,533 | $(10,190) | $9,497 | | **Derivative market value adjustments and derivative settlements, net - (expense) income** | **$(3,122)** | **$3,182** | **$(8,701)** | **$12,903** | [6. Investments and Notes Receivable](index=24&type=section&id=6.%20Investments%20and%20Notes%20Receivable) Total Investments and Notes Receivable (Dollars in thousands) | Category | June 30, 2025 (Fair value) | December 31, 2024 (Fair value) | Change | | :------------------------------------------------ | :--------------------------- | :----------------------------- | :----- | | Investments at fair value | $1,286,729 | $1,160,320 | $126,409 | | Other investments and notes receivable (not measured at fair value) | $818,210 | $1,040,376 | $(222,166) | | **Total** | **$2,104,939** | **$2,200,696** | **$(95,757)** | - The Company's investment in ALLO is now **$0** after the partial redemption in June 2025, which previously included **$225.6 million** in preferred membership interests and accrued return as of December 31, 2024[71](index=71&type=chunk)[73](index=73&type=chunk) - Solar investments, accounted for using the HLBV method, resulted in net losses of **$(1,502) thousand** and **$(1,046) thousand** for the three and six months ended June 30, 2025, respectively, excluding noncontrolling interests[72](index=72&type=chunk) - As of June 30, 2025, the gross unrealized loss on available-for-sale debt securities was **$22.7 million**, with **$534.6 million** in fair value of securities having unrealized losses. The Company intends and has the ability to retain these investments, and no credit losses were identified[76](index=76&type=chunk)[246](index=246&type=chunk) [7. Intangible Assets](index=28&type=section&id=7.%20Intangible%20Assets) Amortizable Intangible Assets, Net (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | Remaining Useful Life (months) | | :------------------------------------------------ | :------------ | :---------------- | :----------------------------- | | Customer relationships | $32,121 | $34,960 | 92 | | Trade name | $526 | $565 | 82 | | Computer software | $631 | $803 | 22 | | **Total amortizable intangible assets, net** | **$33,278** | **$36,328** | **90** | - Amortization expense for intangible assets was **$1.5 million** and **$3.1 million** for the three and six months ended June 30, 2025, respectively[78](index=78&type=chunk) [8. Goodwill](index=28&type=section&id=8.%20Goodwill) Goodwill by Reportable Operating Segment (Dollars in thousands) | Segment | Total Goodwill | | :-------------------------------- | :------------- | | Education Loan Servicing and Systems | $23,639 | | Education Technology Services and Payments | $92,507 | | Asset Generation and Management | $41,883 | | **Total** | **$158,029** | - Goodwill remained unchanged at **$158.0 million** as of June 30, 2025, and December 31, 2024[9](index=9&type=chunk) [9. Impairment Expense and Provision for Beneficial Interests](index=29&type=section&id=9.%20Impairment%20Expense%20and%20Provision%20for%20Beneficial%20Interests) Impairment Expense and Provision for Beneficial Interests (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Investments - beneficial interest in loan securitizations | $4,977 | $5,911 | $6,487 | $5,911 | | Leases, buildings, and associated improvements | $3,269 | — | $3,350 | — | | Property and equipment - solar facilities | $1,902 | $1,170 | $1,902 | $1,170 | | Investments - venture capital | $140 | $37 | $140 | $37 | | Other assets - solar inventory | — | $695 | — | $695 | | **Total** | **$10,288** | **$7,776** | **$11,879** | **$7,813** | - Impairment charges in Q2 2025 included **$3.3 million** for operating lease assets due to office space consolidation and **$1.9 million** for solar facility construction in progress due to a contract cancellation[82](index=82&type=chunk) - In April 2024, the Company discontinued residential solar operations, leading to non-cash impairment charges on certain solar facilities and inventory[83](index=83&type=chunk) [10. Bank Deposits](index=30&type=section&id=10.%20Bank%20Deposits) Nelnet Bank Interest-Bearing Deposits (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Retail and other savings | $1,092,175 | $916,475 | $175,700 | | Brokered CDs, net | $269,058 | $247,872 | $21,186 | | Retail and other CDs, net | $20,809 | $21,784 | $(975) | | **Total interest-bearing deposits** | **$1,382,042** | **$1,186,131** | **$195,911** | - Nelnet Bank held **$149.9 million** in intercompany deposits from Nelnet, Inc. and its subsidiaries as of June 30, 2025, which are eliminated for consolidated financial reporting[85](index=85&type=chunk) - Deposits exceeding FDIC insurance limits totaled **$44.3 million** as of June 30, 2025, primarily intercompany deposits[87](index=87&type=chunk) [11. Earnings per Common Share](index=31&type=section&id=11.%20Earnings%20per%20Common%20Share) Earnings Per Common Share (Basic and Diluted) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Nelnet, Inc. (Numerator) | $181,459 | $45,091 | $264,018 | $118,498 | | Weighted average common shares outstanding (Denominator) | 36,485,605 | 36,525,482 | 36,482,035 | 36,841,227 | | **Earnings per share - basic and diluted** | **$4.97** | **$1.23** | **$7.24** | **$3.22** | [12. Segment Reporting](index=32&type=section&id=12.%20Segment%20Reporting) - Nelnet's reportable segments include Loan Servicing and Systems (LSS), Education Technology Services and Payments (ETSP), Asset Generation and Management (AGM), and Nelnet Bank, all part of the Nelnet Financial Services (NFS) division. Other NFS activities and Corporate and Other Activities are also reported[121](index=121&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) Income Before Income Taxes by Reportable Segment (Dollars in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | LSS | $19,959 | $2,243 | $38,471 | $18,234 | | ETSP | $23,542 | $25,599 | $71,005 | $73,235 | | AGM | $27,393 | $24,310 | $57,226 | $58,055 | | Nelnet Bank | $(465) | $(3,718) | $1,487 | $(2,571) | | NFS other operating segments | $10,091 | $16,525 | $20,152 | $30,286 | | Corporate and Other Activities | $156,746 | $(6,531) | $154,970 | $(24,872) | | **Total Income before income taxes** | **$237,364** | **$58,428** | **$343,504** | **$152,365** | [13. Disaggregated Revenue](index=36&type=section&id=13.%20Disaggregated%20Revenue) Loan Servicing and Systems Revenue (Dollars in thousands) | Service Offering | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Government loan servicing | $85,737 | $87,014 | $173,100 | $192,490 | | Private education and consumer loan servicing | $22,733 | $12,959 | $45,426 | $25,577 | | FFELP loan servicing | $2,241 | $3,245 | $4,873 | $6,624 | | Software services | $9,452 | $4,879 | $16,444 | $9,420 | | Outsourced services | $561 | $955 | $1,622 | $2,141 | | **Total** | **$120,724** | **$109,052** | **$241,465** | **$236,252** | Education Technology Services and Payments Revenue (Dollars in thousands) | Service Offering | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tuition payment plan services | $36,013 | $34,164 | $76,085 | $73,043 | | Payment processing | $37,515 | $34,326 | $89,051 | $82,113 | | Education technology services | $44,481 | $47,205 | $100,177 | $103,227 | | Other | $175 | $1,214 | $202 | $2,066 | | **Total** | **$118,184** | **$116,909** | **$265,515** | **$260,449** | Other, Net Income (Expense) (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Investment activity, net | $8,852 | $217 | $14,012 | $(1,082) | | ALLO preferred return | $5,985 | $4,160 | $14,400 | $6,569 | | Borrower late fee income | $1,642 | $2,584 | $3,231 | $5,718 | | Investment advisory services (WRCM) | $1,504 | $1,524 | $2,977 | $3,033 | | Administration/sponsor fee income | $1,293 | $1,482 | $2,598 | $3,028 | | Loss from ALLO voting membership interest investment | — | — | — | $(10,693) | | (Loss) gain from solar investments, net | $(1,502) | $(2,610) | $(1,046) | $170 | | Other | $5,202 | $6,663 | $10,498 | $11,360 | | **Total Other, net** | **$22,976** | **$14,020** | **$46,670** | **$18,103** | [14. Reinsurance](index=37&type=section&id=14.%20Reinsurance) Reinsurance Premiums and Losses (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net premiums written | $38,882 | $20,714 | $73,439 | $36,158 | | Net premiums earned | $26,112 | $14,851 | $50,799 | $27,631 | | Reinsurance losses and underwriting expenses | $25,662 | $10,988 | $47,874 | $22,305 | | Loss reserve balance, net | $57,100 | $33,100 | $57,100 | $33,100 | - The increase in reinsurance premiums earned and associated losses/underwriting expenses was primarily due to an increase in overall property volume and new business[102](index=102&type=chunk)[166](index=166&type=chunk) [15. Major Customer](index=37&type=section&id=15.%20Major%20Customer) Government Loan Servicing Revenue (Dollars in thousands) | Period | Revenue | | :------------------------------- | :------ | | Three months ended June 30, 2025 | $85,737 | | Three months ended June 30, 2024 | $87,014 | | Six months ended June 30, 2025 | $173,100 | | Six months ended June 30, 2024 | $192,490 | - Nelnet Servicing was awarded a new Unified Servicing and Data Solution (USDS) contract by the Department of Education, effective April 2023, replacing the legacy contract. Servicing under the USDS contract went live on April 1, 2024[104](index=104&type=chunk)[105](index=105&type=chunk) - Revenue earned per-borrower under the new USDS contract is lower than under the legacy servicing contract. The Company expects a decrease in serviced borrowers through Q4 2025 due to transfers to a new remote hosted servicing customer and borrowers exiting the CARES forbearance period[105](index=105&type=chunk)[138](index=138&type=chunk) [16. Fair Value](index=38&type=section&id=16.%20Fair%20Value) Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Dollars in thousands) | Item | June 30, 2025 (Total) | December 31, 2024 (Total) | | :-------------------------------- | :-------------------- | :------------------------ | | Investments | $1,286,729 | $1,160,320 | | Derivative instruments (assets) | $402 | $3,232 | | Derivative instruments (liabilities) | $2,077 | $53 | - The Company's financial instruments are primarily measured at fair value using Level 2 inputs (observable inputs other than quoted prices). Loans receivable and beneficial interest in loan securitizations are classified as Level 3 (unobservable inputs)[108](index=108&type=chunk)[109](index=109&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=39&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion of Nelnet's Q2 2025 financial condition and results, covering consolidated and segment performance, and ALLO redemption impact [Overview](index=41&type=section&id=OVERVIEW) - Nelnet is a diversified hybrid holding company focused on consumer lending, loan servicing, payments, and technology, primarily in the education sector. It also invests in fiber communications (ALLO), venture capital, real estate, reinsurance, and renewable energy (solar)[115](index=115&type=chunk) Non-GAAP Net Income Attributable to Nelnet, Inc., Excluding Derivative Market Value Adjustments (Dollars in thousands, except share data) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income attributable to Nelnet, Inc. | $181,459 | $45,091 | $264,018 | $118,498 | | Realized and unrealized derivative market value adjustments | $3,866 | $(1,533) | $10,190 | $(9,497) | | Tax effect | $(928) | $368 | $(2,446) | $2,279 | | **Non-GAAP net income attributable to Nelnet, Inc.** | **$184,397** | **$43,926** | **$271,762** | **$111,280** | | Non-GAAP EPS | $5.05 | $1.20 | $7.45 | $3.02 | - The Company recognized a pre-tax gain of **$175.0 million** from the partial redemption of its ALLO investment on June 4, 2025[120](index=120&type=chunk) [Consolidated Results of Operations](index=44&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) Consolidated Operating Results Summary (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Loan interest | $172,104 | $202,129 | -14.85% | $338,543 | $418,853 | -19.20% | | Investment interest | $40,185 | $40,737 | -1.36% | $81,574 | $92,814 | -12.11% | | Net interest income | $79,435 | $66,407 | 19.62% | $162,149 | $140,628 | 15.30% | | Provision for loan losses | $17,930 | $3,611 | 396.55% | $33,267 | $14,440 | 130.38% | | LSS revenue | $120,724 | $109,052 | 10.70% | $241,465 | $236,252 | 2.21% | | ETSP revenue | $118,184 | $116,909 | 1.09% | $265,515 | $260,449 | 1.95% | | Reinsurance premiums earned | $26,112 | $14,851 | 75.83% | $50,799 | $27,631 | 83.85% | | Solar construction revenue | $1,259 | $9,694 | -87.01% | $5,254 | $23,420 | -77.56% | | Gain on partial redemption of ALLO investment | $175,044 | — | N/A | $175,044 | — | N/A | | Derivative market value adjustments, net | $(3,866) | $1,533 | -352.84% | $(10,190) | $9,497 | -207.30% | | Total operating expenses | $219,291 | $214,372 | 2.29% | $437,207 | $431,861 | 1.24% | | Impairment expense and provision for beneficial interests | $10,288 | $7,776 | 32.31% | $11,879 | $7,813 | 52.04% | | Net income attributable to Nelnet, Inc. | $181,459 | $45,091 | 302.43% | $264,018 | $118,498 | 122.82% | - Loan interest decreased due to lower average loan balances and gross yield. Interest expense decreased due to lower average debt outstanding and cost of funds, partially offset by increased deposit balances at Nelnet Bank[129](index=129&type=chunk)[130](index=130&type=chunk) - Solar construction revenue significantly decreased due to uncertain economic conditions and legislation impacting new projects, and NRE recognized **$12.9 million** in contract loss reserves for remaining legacy contracts[130](index=130&type=chunk)[171](index=171&type=chunk) - Salaries and benefits decreased primarily due to staff reductions in LSS in H2 2024 after government servicing contract enhancements. Depreciation and amortization decreased due to prior year impairment charges and reclassification of IT activities to other expenses[130](index=130&type=chunk) [LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS](index=48&type=section&id=LOAN%20SERVICING%20AND%20SYSTEMS%20OPERATING%20SEGMENT%20%E2%80%93%20RESULTS%20OF%20OPERATIONS) LSS segment profitability increased from higher private education and consumer loan servicing volumes and cost savings, despite lower government contract revenue LSS Servicing Volume (Dollars in millions, Number of borrowers) | Item | June 30, 2025 | June 30, 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Total servicing volume (dollars) | $516,093 | $523,750 | -1.46% | | Government servicing volume (dollars) | $465,689 | $489,298 | -4.79% | | Private and consumer servicing volume (dollars) | $38,018 | $19,876 | 91.28% | | Total servicing borrowers | 14,523,042 | 15,535,969 | -6.58% | | Remote hosted borrowers | 2,056,358 | 133,681 | 1438.90% | LSS Operating Results (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Loan servicing and systems revenue | $120,724 | $109,052 | 10.70% | $241,465 | $236,252 | 2.21% | | Salaries and benefits | $65,549 | $70,631 | -7.20% | $135,123 | $147,353 | -8.30% | | Income before income taxes | $19,959 | $2,243 | 789.83% | $38,471 | $18,234 | 110.99% | | Before tax operating margin | 16.0% | 1.9% | 742.11% | 15.4% | 7.3% | 110.96% | - Private education and consumer loan servicing revenue increased due to the conversion of Discover Financial Services and SoFi Lending Corp. loan portfolios in late 2024 and early 2025[138](index=138&type=chunk) - Software services revenue increased due to a new remote hosted servicing customer awarded a USDS contract, with further increases expected as more volume is transferred[138](index=138&type=chunk) [EDUCATION TECHNOLOGY SERVICES AND PAYMENTS OPERATING SEGMENT – RESULTS OF OPERATIONS](index=50&type=section&id=EDUCATION%20TECHNOLOGY%20SERVICES%20AND%20PAYMENTS%20OPERATING%20SEGMENT%20%E2%80%93%20RESULTS%20OF%20OPERATIONS) ETSP revenue grew in tuition payment plans and payment processing, but operating margin declined due to lower FACTS education services revenue and increased growth expenses ETSP Operating Results (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | YoY Change | Six months ended June 30, 2025 | Six months ended June 30, 2024 | YoY Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Education technology services and payments revenue | $118,184 | $116,909 | 1.09% | $265,515 | $260,449 | 1.95% | | Cost of services | $39,844 | $40,222 | -0.94% | $87,891 | $88,832 | -1.06% | | Salaries and benefits | $41,598 | $40,736 | 2.12% | $83,339 | $80,903 | 3.01% | | Income before income taxes | $23,542 | $25,599 | -8.03% | $71,005 | $73,235 | -3.05% | | Non-GAAP before tax operating margin, excluding net interest income | 23.1% | 25.9% | -10.81% | 33.0% | 34.8% | -5.17% | - Tuition payment plan services and payment processing revenue increased due to a higher number of payment plans and increased payment volumes in K-12 and higher education markets[141](index=141&type=chunk) - Education technology services revenue decreased due to the winding down of the EANS program funding for private schools, which ended on September 30, 2024. EANS revenue was **$0.1 million** in Q2 2025, down from **$8.8 million** in Q2 2024[141](index=141&type=chunk) [NELNET FINANCIAL SERVICES DIVISION - RESULTS OF OPERATIONS](index=52&type=section&id=NELNET%20FINANCIAL%20SERVICES%20DIVISION%20-%20RESULTS%20OF%20OPERATIONS) NFS division showed mixed results: AGM's loan acquisitions and spread offset by higher loan loss provisions, Nelnet Bank's significant growth, and varied performance in other segments [Asset Generation and Management Operating Segment](index=52&type=section&id=Asset%20Generation%20and%20Management%20Operating%20Segment) AGM Loan Portfolio Activity (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance as of March 31 / December 31 | $9,260,006 | $10,799,942 | $8,955,868 | $12,049,462 | | Loan acquisitions and originations | $143,129 | $195,279 | $975,715 | $276,009 | | Repayments, claims, capitalized interest, participations, and other, net | $(357,981) | $(375,982) | $(695,057) | $(726,478) | | Loans lost to external parties | $(67,571) | $(574,834) | $(127,037) | $(1,354,489) | | Loans sold | $(241) | $(133,788) | $(132,147) | $(333,887) | | Loans contributed to Nelnet Bank | $(42,173) | — | $(42,173) | — | | **Balance as of June 30** | **$8,935,169** | **$9,910,617** | **$8,935,169** | **$9,910,617** | - AGM's FFELP portfolio experienced accelerated run-off in late 2021 due to loan consolidations into the Federal Direct Loan Program, but prepayment rates have become more consistent with historical rates since August 2024[145](index=145&type=chunk)[189](index=189&type=chunk) AGM Core Loan Spread Analysis | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Variable loan yield, net | 6.80% | 7.42% | 6.65% | 7.34% | | Loan cost of funds - interest expense | (5.60)% | (6.50)% | (5.50)% | (6.50)% | | Variable loan spread | 1.21% | 0.93% | 1.16% | 0.85% | | Fixed rate floor income, net of settlements on derivatives | 0.06% | 0.05% | 0.07% | 0.05% | | **Core loan spread** | **1.27%** | **0.98%** | **1.23%** | **0.90%** | | Average balance of AGM's loans | $9,215,579 | $10,484,458 | $9,379,948 | $11,022,981 | | Average balance of AGM's debt outstanding | $8,439,800 | $10,168,761 | $8,445,716 | $10,778,080 | - Variable loan spread increased due to a higher proportion of loans funded with operating cash rather than debt. As of June 30, 2025, AGM had **$576.1 million** (par value) of unencumbered loans[153](index=153&type=chunk) AGM Net Income (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income taxes | $27,393 | $24,310 | $57,226 | $58,055 | | Net income | $20,801 | $18,475 | $43,461 | $44,122 | | Non-GAAP net income, excluding derivative market value adjustments | $22,446 | $17,764 | $47,991 | $39,074 | [Nelnet Bank Operating Segment](index=57&type=section&id=Nelnet%20Bank%20Operating%20Segment) Nelnet Bank Loan Portfolio Activity (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance as of March 31 / December 31 | $761,633 | $483,723 | $644,597 | $432,872 | | Loan acquisitions and originations | $58,567 | $84,388 | $203,166 | $157,949 | | Loans contributed from AGM | $42,173 | — | $42,173 | — | | **Balance as of June 30** | **$827,641** | **$542,351** | **$827,641** | **$542,351** | - Nelnet Bank's loan portfolio grew to **$827.6 million** as of June 30, 2025, including **$42.2 million** in private education loans contributed from AGM[157](index=157&type=chunk)[158](index=158&type=chunk) Nelnet Bank Average Balance Sheet and Net Interest Margin | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest-earning assets | $1,733,147 | $1,136,841 | $1,602,783 | $1,089,391 | | Total interest-bearing liabilities | $1,514,157 | $1,004,546 | $1,405,409 | $956,840 | | Net interest margin | 3.29% | 3.07% | 3.37% | 3.03% | Nelnet Bank Net Income (Loss) (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $14,066 | $8,464 | $26,456 | $16,031 | | Provision for loan losses | $6,797 | $7,836 | $9,123 | $12,210 | | Income (loss) before income taxes | $(465) | $(3,718) | $1,487 | $(2,571) | | Net (loss) income | $(364) | $(2,802) | $1,154 | $(1,914) | | Non-GAAP net income (loss), excluding derivative market value adjustments | $929 | $(3,256) | $4,368 | $(4,084) | [NFS Other Operating Segments](index=60&type=section&id=NFS%20Other%20Operating%20Segments) NFS Other Operating Segments Income (Loss) Before Income Taxes (Dollars in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | WRCM | $1,413 | $1,408 | $2,793 | $2,757 | | Nelnet Insurance Services | $(31) | $4,914 | $3,206 | $6,980 | | Real estate investments | $108 | $(2,046) | $(1,942) | $(4,088) | | Investment securities | $8,601 | $12,249 | $16,095 | $24,637 | | **Total** | **$10,091** | **$16,525** | **$20,152** | **$30,286** | - Nelnet Insurance Services saw increased reinsurance premiums and associated losses/underwriting expenses due to higher property volume and new business, but also adverse development in commercial auto programs[166](index=166&type=chunk) - Real estate investments recognized a realized gain of **$1.6 million** from a sale during Q2 2025[166](index=166&type=chunk) - Investment interest income and expense in investment securities decreased due to lower average balances of investment debt securities and debt outstanding, and a decrease in interest rates[166](index=166&type=chunk) [CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS](index=62&type=section&id=CORPORATE%20AND%20OTHER%20ACTIVITIES%20%E2%80%93%20RESULTS%20OF%20OPERATIONS) Corporate and Other Activities income before taxes significantly increased, driven by the **$175.0 million ALLO investment redemption gain**, offset by impairment charges and NRE contract loss reserves Corporate and Other Activities Income (Loss) Before Income Taxes (Dollars in thousands) | Activity | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Shared services | $(11,923) | $(9,056) | $(21,911) | $(19,101) | | Solar tax equity investments | $(1,892) | $(2,580) | $(686) | $(266) | | Nelnet Renewable Energy (NRE) | $(17,601) | $(4,752) | $(24,175) | $(8,788) | | ALLO investment | $185,236 | $3,940 | $193,651 | $(4,653) | | Venture capital investments | $1,340 | $3,417 | $5,560 | $2,711 | | Other | $1,586 | $2,500 | $2,531 | $5,225 | | Eliminations/reclassifications | $96 | — | $193 | — | | **Total** | **$156,746** | **$(6,531)** | **$154,970** | **$(24,872)** | - Shared services recognized a **$3.3 million** non-cash impairment charge related to operating lease assets due to office space consolidation[170](index=170&type=chunk) - Nelnet Renewable Energy (NRE) recognized **$12.9 million** in contract loss reserves in Q2 2025 for remaining legacy construction contracts, contributing to negative margins[171](index=171&type=chunk) - The ALLO investment segment recognized a **$175.0 million gain** in Q2 2025 from a partial redemption. Income from preferred membership interests was **$6.0 million** and **$14.4 million** for the three and six months ended June 30, 2025, respectively, but will cease as all preferred interests were redeemed[171](index=171&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=65&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Nelnet maintains strong liquidity for loan acquisitions, investments, and capital management, with the **$410.9 million** ALLO redemption cash used for debt reduction and share repurchases Sources of Liquidity as of June 30, 2025 (Dollars in thousands) | Item | Amount | | :------------------------------------------------ | :------- | | Net cash and cash equivalents | $209,012 | | Unencumbered AFS debt securities (investments) - at fair value | $169,384 | | Unencumbered federally insured, private, consumer, and other loans (Non-Nelnet Bank) - at par | $576,072 | | Unencumbered repurchased Nelnet issued asset-backed debt securities - at par | $238,840 | | Unused capacity on unsecured line of credit | $495,000 | | **Total Sources of liquidity** | **$1,688,308** | - The Company received **$410.9 million cash** from the partial redemption of its ALLO investment, primarily used to pay down third-party debt and repurchase asset-backed securities[176](index=176&type=chunk) - AGM expects approximately **$1.07 billion** in future undiscounted cash flows from its loan portfolio, including **$0.74 billion** of overcollateralization in asset-backed securitizations. This forecast assumes prepayment rates of **6%** for federally insured loans and **11-20%** for private education loans[181](index=181&type=chunk)[182](index=182&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - Nelnet Bank's leverage ratio of capital to total assets was **12.8%** as of June 30, 2025, meeting the FDIC's 'well capitalized' requirement of at least **12%**[211](index=211&type=chunk) - The Company is committed to funding an additional **$63.5 million** directly in solar tax equity investments and **$115.7 million** by syndication partners, totaling **$179.2 million**[212](index=212&type=chunk) - A new stock repurchase program was authorized on May 8, 2025, allowing repurchase of up to **five million shares** of Class A common stock over three years. As of June 30, 2025, **4,822,191 shares** remained authorized[217](index=217&type=chunk) - The Board declared a Q3 2025 cash dividend of **$0.30 per share**, payable September 16, 2025[220](index=220&type=chunk) [Critical Accounting Estimates](index=73&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Management identifies the allowance for loan losses as a critical accounting policy and estimate, requiring difficult and subjective judgments due to inherent uncertainties - There have been no material changes to the Company's critical accounting policy and estimate since December 31, 2024[223](index=223&type=chunk) [Recent Accounting Pronouncements](index=74&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) New FASB guidance on income tax disclosures (effective for year ending December 31, 2025) and enhanced expense disclosures (effective for fiscal years beginning after December 15, 2026) are being evaluated for their impact on consolidated financial statements - New FASB guidance on income tax disclosures (effective for year ending December 31, 2025) and enhanced expense disclosures (effective for fiscal years beginning after December 15, 2026) are being evaluated for their impact on consolidated financial statements[224](index=224&type=chunk)[225](index=225&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=74&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Nelnet is exposed to market risks, primarily interest rate risk, across its AGM and Nelnet Bank segments, as well as its investment portfolio. The Company actively manages these risks through various strategies, including derivative instruments and managing asset/liability mixes, to minimize the impact of interest rate fluctuations on earnings and fair values [Interest Rate Risk - AGM Operating Segment](index=74&type=section&id=Interest%20Rate%20Risk%20-%20AGM%20Operating%20Segment) AGM Loan Assets and Debt Instruments by Rate Characteristics (Dollars in thousands) | Category | June 30, 2025 (Dollars) | June 30, 2025 (Percent) | December 31, 2024 (Dollars) | December 31, 2024 (Percent) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Fixed-rate loan assets | $948,581 | 10.6% | $814,843 | 9.1% | | Variable-rate loan assets | $7,986,588 | 89.4% | $8,141,025 | 90.9% | | Fixed-rate debt instruments | $361,495 | 4.5% | $399,994 | 4.8% | | Variable-rate debt instruments | $7,599,856 | 95.5% | $7,958,357 | 95.2% | - AGM's primary market risk is from fluctuations in borrowing and lending rates. The Company earns 'floor income' when fixed borrower rates on FFELP loans exceed variable SAP rates, particularly on loans originated before April 1, 2006[228](index=228&type=chunk)[229](index=229&type=chunk) AGM Fixed Rate Floor Income, Net (Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fixed rate floor income, gross | $997 | $159 | $1,972 | $338 | | Derivative settlements | $427 | $1,193 | $855 | $2,383 | | **Fixed rate floor income, net** | **$1,424** | **$1,352** | **$2,827** | **$2,721** | - AGM uses basis swaps to match interest rate characteristics between student loan assets (indexed to 30-day average SOFR) and debt funding (indexed to 1-month or 3-month SOFR). As of June 30, 2025, notional amounts for basis swaps totaled **$1.4 billion**[236](index=236&type=chunk)[237](index=237&type=chunk) [Interest Rate Risk - Nelnet Bank](index=76&type=section&id=Interest%20Rate%20Risk%20-%20Nelnet%20Bank) Nelnet Bank Assets and Deposits by Rate Characteristics (Dollars in thousands) | Category | June 30, 2025 (Dollars) | June 30, 2025 (Percent) | December 31, 2024 (Dollars) | December 31, 2024 (Percent) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Total fixed-rate assets | $663,656 | 38.2% | $595,842 | 42.8% | | Total variable-rate assets | $1,072,715 | 61.8% | $795,852 | 57.2% | | Fixed-rate deposits | $469,123 | 30.6% | $449,706 | 35.8% | | Variable-rate deposits | $1,062,772 | 69.4% | $804,916 | 64.2% | - Nelnet Bank manages interest rate risk by monitoring rates, managing asset/liability maturity and repricing, and using derivative instruments to hedge variable rate deposit cash flows[240](index=240&type=chunk)[242](index=242&type=chunk) [Interest Rate and Market Risk - Investments](index=77&type=section&id=Interest%20Rate%20and%20Market%20Risk%20-%20Investments) Investment Interest Income and Debt Funding Costs (Excluding Nelnet Bank, Dollars in thousands) | Item | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Asset-backed securities available-for-sale (average balance) | $620,800 | $827,144 | $605,050 | $845,389 | | Interest income | $8,110 | $13,991 | $16,105 | $28,110 | | Average yields | 5.24% | 6.78% | 5.37% | 6.67% | | Debt funding asset-backed securities (average balance) | $100 | $123,390 | $100 | $132,192 | | Interest expense | $1 | $2,017 | $2 | $4,435 | | Average rates | 4.01% | 6.56% | 4.03% | 6.73% | - The Company's asset-backed investment securities portfolio has limited liquidity, and a significant loss could be incurred if sold prior to maturity. As of June 30, 2025, gross unrealized losses on available-for-sale debt securities totaled **$22.7 million**[246](index=246&type=chunk) [Consolidated Sensitivity Analysis](index=78&type=section&id=Consolidated%20Sensitivity%20Analysis) Consolidated Earnings Sensitivity to Interest Rate Changes (Dollars in thousands) | Scenario | Three months ended June 30, 2025 (Impact on Net Income before taxes) | Six months ended June 30, 2025 (Impact on Net Income before taxes) | | :-------------------------------- | :----------------------------------------------------------------- | :----------------------------------------------------------------- | | Increase of 100 basis points | $4,143 (1.7%) | $7,823 (2.3%) | | Increase of 300 basis points | $16,558 (7.0%) | $31,662 (9.2%) | | Decrease of 100 basis points | $(3,396) (-1.4%) | $(6,319) (-1.8%) | | Decrease of 300 basis points | $(7,848) (-3.3%) | $(14,433) (-4.2%) | [PART II. OTHER INFORMATION](index=77&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=77&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) No material changes from the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024[253](index=253&type=chunk) [ITEM 1A. RISK FACTORS](index=77&type=section&id=ITEM%201A.%20RISK%20FACTORS) A new risk factor highlights the adverse impact of the 'One Big Beautiful Bill' on Nelnet's solar tax equity investments and construction, accelerating tax credit expiration and leading NRE to explore strategic alternatives - The 'One Big Beautiful Bill,' enacted July 4, 2025, significantly reduces tax incentives for clean energy, accelerating the expiration and phasing out of commercial solar tax credits[255](index=255&type=chunk) - New 'foreign entity of concern' restrictions introduced by the Bill may adversely impact supply chain costs, availability, and compliance for solar projects[255](index=255&type=chunk) - Due to the Bill and rising construction costs, Nelnet Renewable Energy (NRE) accepted no new solar construction contracts in Q2 2025 and is exploring strategic alternatives, expecting adverse impacts on revenue[256](index=256&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=78&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The Company repurchased **183,554 Class A shares** for **$21.36 million** in Q2 2025, with a new program authorizing repurchase of up to **five million shares** over three years Class A Common Stock Repurchases (Q2 2025) | Period | Total shares purchased | Average price paid per share | | :-------------------- | :--------------------- | :--------------------------- | | April 1 - April 30, 2025 | 122 | $102.78 | | May 1 - May 31, 2025 | 52,395 | $117.00 | | June 1 - June 30, 2025 | 131,037 | $115.51 | | **Total** | **183,554** | **$115.93** | - On May 8, 2025, the Board authorized a new stock repurchase program for up to **five million shares** of Class A common stock over three years, replacing the prior program. As of June 30, 2025, **4,822,191 shares** remained authorized for repurchase[217](index=217&type=chunk)[260](index=260&type=chunk) [ITEM 5. OTHER INFORMATION](index=78&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section details Rule 10b5-1 trading plans and outlines dividend restrictions from financing agreements and regulatory requirements, which currently do not materially limit the Company's ability to pay dividends Rule 10b5-1 Trading Plans Adopted in Q2 2025 | Name and Title | Date of Adoption | Scheduled Expiration Date | Aggregate Number of Securities to Be Purchased or Sold | | :-------------------- | :--------------- | :------------------------ | :----------------------------------------------------- | | Thomas E. Henning, Director | 6/6/2025 | 10/5/2025 | Sale of an aggregate of 8,196 shares of Class A common stock | - Dividend payments are subject to restrictions from the unsecured line of credit, trust indentures, and regulatory requirements for Nelnet Bank and Nelnet Insurance Services. However, these provisions do not currently materially limit the Company's ability to pay dividends[258](index=258&type=chunk) [ITEM 6. EXHIBITS](index=81&type=section&id=ITEM%206.%20EXHIBITS) Exhibits include certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File) - Exhibits include certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[262](index=262&type=chunk) ```