
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)