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Nelnet(NNI) - 2025 Q2 - Quarterly Results
NelnetNelnet(US:NNI)2025-08-06 20:17

Introduction and Cautionary Statements This section sets the context for the financial report and outlines forward-looking statements and associated risks Report Context This report provides supplemental financial information for Nelnet, Inc. for the second quarter of 2025, intended to be read in conjunction with the company's Q2 2025 earnings press release and Quarterly Report on Form 10-Q - Supplemental financial information for Nelnet, Inc. for the second quarter 20251 - To be read in connection with the Company's press release for second quarter 2025 earnings and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 20251 Forward-Looking and Cautionary Statements The report contains forward-looking statements based on management's current expectations, which are inherently subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. The company disclaims any commitment to update these statements except as legally required - This report contains forward-looking statements and information based on management's current expectations2 - Statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause actual results and performance to be materially different3 - The Company disclaims any commitment to voluntarily update or revise its prior forward-looking statements except as required by law4 Identification of Forward-Looking Statements Explains how forward-looking statements are identified through non-historical facts and specific terminology - Forward-looking statements are identified by non-historical facts, statements about future financial condition, results of operations, economic performance, management's plans and objectives, and words like 'anticipate,' 'expect,' 'will,' and 'should.'2 Basis and Risks of Forward-Looking Statements Details the foundation and inherent risks of forward-looking statements, referencing risk factor sections - Statements are based on management's experience, perception of historical trends, current conditions, and expected future developments3 - Risks and uncertainties are set forth in the 'Risk Factors' sections of the Company's Annual Report on Form 10-K for 2024 and the Q2 2025 10-Q Quarterly Report3 Specific Risk Factors Outlines various specific risks impacting the company's operations and financial performance across multiple business areas - Risks related to student loan servicing, including maintaining volumes, contract modifications, and service requirements5 - Loan portfolio risks such as credit risk, prepayment risk, interest rate basis and repricing risk, and use of derivatives5 - Risks from changes in education loan terms, laws, regulations, government programs, and budgets5 - Risks related to operational or information systems breaches, use of artificial intelligence, and uncertainties in forecasting cash flows from student loan assets5 - Risks related to Nelnet Bank's business objectives, solar tax equity investments, and other strategic investments (venture capital, real estate, reinsurance, acquisitions)5 - Risks and uncertainties associated with litigation matters, regulatory compliance, and climate change5 Consolidated Financial Statements Presents Nelnet's consolidated statements of income and condensed consolidated balance sheets for key periods Consolidated Statements of Income Nelnet, Inc. reported substantial growth in net income attributable to Nelnet, Inc. for both the three and six months ended June 30, 2025, primarily driven by a significant gain on partial redemption of an ALLO investment. Total interest income decreased, but net interest income increased due to a larger decrease in interest expense. Provision for loan losses saw a notable increase Consolidated Statements of Income Highlights (Dollars in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Total interest income | $212,289 | $242,866 | -12.59% | $420,117 | $511,667 | -17.70% | | Interest expense | $132,854 | $176,459 | -24.71% | $257,968 | $371,039 | -30.47% | | Net interest income | $79,435 | $66,407 | +19.62% | $162,149 | $140,628 | +15.30% | | Provision for loan losses | $17,930 | $3,611 | +396.54% | $33,267 | $14,440 | +130.38% | | Total other income (expense), net | $461,177 | $266,270 | +73.21% | $776,955 | $577,179 | +34.60% | | Income before income taxes | $237,364 | $58,428 | +306.25% | $343,504 | $152,365 | +125.45% | | 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% | - A gain on partial redemption of ALLO investment of $175,044 thousand was recognized in the three and six months ended June 30, 20256 Condensed Consolidated Balance Sheets As of June 30, 2025, Nelnet's total assets slightly decreased compared to December 31, 2024, and significantly compared to June 30, 2024, primarily due to reductions in restricted cash and loans and accrued interest receivable. Total liabilities also decreased, while Nelnet, Inc. shareholders' equity increased Condensed Consolidated Balance Sheets Highlights (Dollars in thousands) | Metric | As of June 30, 2025 | As of Dec 31, 2024 | Change (vs. Dec 31, 2024) | As of June 30, 2024 | Change (vs. June 30, 2024) | | :---------------------------------- | :------------------ | :----------------- | :------------------------ | :------------------ | :------------------------- | | Loans and accrued interest receivable, net | $10,155,483 | $9,992,744 | +1.63% | $10,939,519 | -7.17% | | Cash, cash equivalents, and investments | $2,330,692 | $2,395,214 | -2.70% | $2,092,269 | +11.40% | | Restricted cash | $576,023 | $736,502 | -21.80% | $797,925 | -27.79% | | Total assets | $13,711,088 | $13,777,753 | -0.48% | $14,501,193 | -5.45% | | Bonds and notes payable | $7,903,561 | $8,309,797 | -4.90% | $9,567,708 | -17.39% | | Bank deposits | $1,382,042 | $1,186,131 | +16.52% | $890,472 | +55.20% | | Total liabilities | $10,228,395 | $10,478,636 | -2.39% | $11,281,171 | -9.33% | | Total Nelnet, Inc. shareholders' equity | $3,574,983 | $3,349,762 | +6.72% | $3,294,061 | +8.53% | Company Overview and Business Segments Provides an overview of Nelnet's diversified business model and its various operating segments Company Overview Nelnet is a diversified hybrid holding company primarily engaged in consumer lending, loan servicing, payments, and technology, with a strong focus on the education sector. The company also diversifies its investments into areas like fiber communications (ALLO), venture capital, real estate, reinsurance, and renewable energy (solar), and is actively expanding its private education and consumer loan portfolios through Nelnet Bank - Nelnet is a diversified hybrid holding company with primary businesses in consumer lending, loan servicing, payments, and technology, largely serving the education space9 - A significant portion of revenue is net interest income from a portfolio of federally insured student loans9 - Investments include a fiber communications company (ALLO), early-stage and emerging growth companies (venture capital), real estate, reinsurance, and renewable energy (solar)9 - Nelnet Bank is actively expanding its private education, consumer, and other loan portfolios9 Non-GAAP Financial Measures Nelnet provides non-GAAP financial information, specifically net income excluding derivative market value adjustments, to offer investors a clearer view of its operating results and performance. These adjustments, which do not qualify for hedge accounting, can introduce significant period-to-period volatility due to market factors, making the non-GAAP measure useful for comparability - The Company provides non-GAAP financial information related to specific items management believes are important in evaluating operating results and performance10 - Derivative market value adjustments are excluded due to their volatility, which affects period-to-period comparability of results of operations13 - Management utilizes operating results excluding these items for comparability purposes when making decisions and in presentations to stakeholders13 Reconciliation of GAAP to Non-GAAP Net Income Provides a detailed reconciliation between GAAP and non-GAAP net income, highlighting derivative adjustments GAAP to Non-GAAP Net Income Reconciliation (Dollars in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------------------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | GAAP net income attributable to Nelnet, Inc. | $181,459 | $45,091 | +302.43% | $264,018 | $118,498 | +122.82% | | Realized and unrealized derivative market value adjustments (a) | $3,866 | $(1,533) | N/A | $10,190 | $(9,497) | N/A | | Tax effect (b) | $(928) | $368 | N/A | $(2,446) | $2,279 | N/A | | Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $184,397 | $43,926 | +319.78% | $271,762 | $111,280 | +144.23% | | GAAP earnings per share | $4.97 | $1.23 | +304.07% | $7.24 | $3.22 | +124.84% | | Non-GAAP earnings per share | $5.05 | $1.20 | +320.83% | $7.45 | $3.02 | +146.69% | Explanation of Derivative Market Value Adjustments Clarifies the nature and accounting treatment of derivative market value adjustments not qualifying for hedge accounting - Derivative market value adjustments include both realized and unrealized gains and losses from changes in fair values of derivatives that do not qualify for hedge accounting under GAAP11 - Changes in fair value for derivatives not qualifying for hedge accounting are reported in current period earnings without considering the corresponding change in fair value of the hedged item12 Rationale for Non-GAAP Presentation Justifies the use of non-GAAP measures for better operational and performance evaluation due to derivative volatility - Management believes these point-in-time estimates of asset and liability values related to derivative instruments are subject to volatility due to timing and market factors beyond management's control13 - Non-GAAP information provides additional operational and performance indicators closely assessed by management and represents what earnings would have been had these derivatives qualified for hedge accounting13 Recent Developments Nelnet completed a partial redemption of its ALLO investment on June 4, 2025, receiving $410.9 million in cash proceeds and recognizing a pre-tax gain of $175.0 million. Following this transaction, Nelnet no longer holds preferred membership interests but retains a significant 27% voting equity interest in ALLO, with a carrying value of $0 - On June 4, 2025, Nelnet redeemed a portion of its voting membership interests and all outstanding preferred membership interests in ALLO15 - Received cash proceeds of $410.9 million and recognized a pre-tax gain of $175.0 million from the transaction15 - Nelnet's ownership of voting membership interest in ALLO decreased from 45% to 27%, with the carrying value of such interest remaining at $015 Operating Segments Description Nelnet's reportable operating segments include Loan Servicing and Systems (NDS), Education Technology Services and Payments (NBS), Asset Generation and Management (AGM), and Nelnet Bank. Other business activities and unallocated corporate functions are grouped under Corporate and Other Activities - Reportable operating segments are Loan Servicing and Systems (NDS), Education Technology Services and Payments (NBS), Asset Generation and Management (AGM), and Nelnet Bank1618 - NDS and NBS earn fee-based revenue, while AGM earns net interest income on its FFELP loan portfolio16 - Nelnet Bank operates as an internet industrial bank focused on private education and unsecured consumer loan markets16 Reportable Operating Segments Lists Nelnet's primary reportable operating segments: LSS, ETSP, AGM, and Nelnet Bank - Loan Servicing and Systems (LSS), referred to as Nelnet Diversified Services (NDS)18 - Education Technology Services and Payments (ETSP), referred to as Nelnet Business Services (NBS)18 - Asset Generation and Management (AGM), part of the Nelnet Financial Services (NFS) division18 - Nelnet Bank, part of the NFS division18 Corporate and Other Activities Describes components grouped under corporate and other unallocated activities, including investments and overhead - Includes interest income on corporate cash balances and interest expense on unsecured corporate related debt transactions17 - Encompasses certain investment activities, including ALLO, venture capital investments, and solar tax equity investments17 - Includes operating results of the Company's solar engineering, procurement, and construction business17 - Covers corporate costs and overhead functions not allocated to operating segments, such as executive management and investments in innovation17 Segment Performance Analysis Analyzes the financial performance of Nelnet's individual operating segments, including income before taxes Segment Operating Results (Net Income (Loss) Before Taxes) Nelnet's segments exhibited varied performance. NDS significantly increased operating margin due to higher private education loan servicing and cost savings. NBS saw increased revenue but decreased operating margin due to higher expenses and lower FACTS education services revenue. AGM's income before taxes increased for Q2 2025 but slightly decreased for the six-month period, impacted by increased loan loss provisions and derivative adjustments. Nelnet Bank improved significantly, moving from a loss to income before taxes, driven by increased net interest income. Corporate activities were heavily influenced by the ALLO investment gain Segment Income (Loss) Before Taxes (Dollars in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | NDS | $19,959 | $2,243 | +789.83% | $38,471 | $18,234 | +110.99% | | NBS | $23,542 | $25,599 | -8.03% | $71,005 | $73,235 | -3.05% | | AGM | $27,393 | $24,310 | +12.68% | $57,226 | $58,055 | -1.43% | | Nelnet Bank | $(465) | $(3,718) | +87.50% | $1,487 | $(2,571) | +157.84% | | NFS other operating segments | $10,091 | $16,525 | -39.06% | $20,152 | $30,286 | -33.49% | | Corporate: ALLO investment | $185,236 | $3,940 | +4601.42% | $193,651 | $(4,653) | N/A | | Corporate: Nelnet Renewable Energy - solar construction | $(17,601) | $(4,752) | +270.42% | $(24,175) | $(8,788) | +175.10% | - NDS operating margin increased due to higher private education and consumer loan servicing volume and cost-saving measures, partially offset by lower revenue from the new government servicing contract20 - NBS experienced a decrease in before-tax operating margin due to lower FACTS education services revenue and increased operating expenses to support customer growth and new technology investments20 - AGM's results were impacted by increased provision for loan losses due to loan acquisitions and derivative market value adjustments20 - Nelnet Bank's net interest income increased due to higher average loan and investment balances and an improved net interest margin20 - Corporate activities were significantly boosted by the $175.0 million gain on partial redemption of the ALLO investment21 - Nelnet Renewable Energy (NRE) recognized $12.9 million in contract loss reserves for remaining legacy construction contracts and faced adverse impacts from uncertain economic conditions on new projects21 Three Months Ended June 30, 2025 Presents the income (loss) before taxes for each segment for the second quarter of 2025 Income (Loss) Before Taxes by Segment (Q2 2025, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $19,959 | | Education Technology Services and Payments (ETSP) | $23,542 | | Asset Generation and Management (AGM) | $27,393 | | Nelnet Bank | $(465) | | NFS Other Operating Segments | $10,091 | | Corporate and Other Activities | $156,746 | | Total | $237,364 | Three Months Ended March 31, 2025 Presents the income (loss) before taxes for each segment for the first quarter of 2025 Income (Loss) Before Taxes by Segment (Q1 2025, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $18,512 | | Education Technology Services and Payments (ETSP) | $47,462 | | Asset Generation and Management (AGM) | $29,834 | | Nelnet Bank | $1,952 | | NFS Other Operating Segments | $10,060 | | Corporate and Other Activities | $(1,776) | | Total | $106,140 | Three Months Ended June 30, 2024 Presents the income (loss) before taxes for each segment for the second quarter of 2024 Income (Loss) Before Taxes by Segment (Q2 2024, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $2,243 | | Education Technology Services and Payments (ETSP) | $25,599 | | Asset Generation and Management (AGM) | $24,310 | | Nelnet Bank | $(3,718) | | NFS Other Operating Segments | $16,525 | | Corporate and Other Activities | $(6,531) | | Total | $58,428 | Six Months Ended June 30, 2025 Presents the income (loss) before taxes for each segment for the first half of 2025 Income (Loss) Before Taxes by Segment (H1 2025, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $38,471 | | Education Technology Services and Payments (ETSP) | $71,005 | | Asset Generation and Management (AGM) | $57,226 | | Nelnet Bank | $1,487 | | NFS Other Operating Segments | $20,152 | | Corporate and Other Activities | $154,970 | | Total | $343,504 | Six Months Ended June 30, 2024 Presents the income (loss) before taxes for each segment for the first half of 2024 Income (Loss) Before Taxes by Segment (H1 2024, Dollars in thousands) | Segment | Income (Loss) Before Taxes | | :-------------------------------- | :------------------------- | | Loan Servicing and Systems (LSS) | $18,234 | | Education Technology Services and Payments (ETSP) | $73,235 | | Asset Generation and Management (AGM) | $58,055 | | Nelnet Bank | $(2,571) | | NFS Other Operating Segments | $30,286 | | Corporate and Other Activities | $(24,872) | | Total | $152,365 | Detailed Revenue and Loan Portfolio Analysis Provides an in-depth analysis of Nelnet's revenue streams and loan portfolio performance Loan Servicing and Systems (LSS) Revenue LSS revenue increased to $120.72 million for Q2 2025, up from $109.05 million in Q2 2024, and to $241.47 million for H1 2025, up from $236.25 million in H1 2024. This growth was primarily driven by significant increases in private education and consumer loan servicing revenue and software services revenue, offsetting a decrease in government loan servicing revenue Loan Servicing and Systems Revenue (Dollars in thousands) | Service Offering | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Government loan servicing | $85,737 | $87,014 | -1.47% | $173,100 | $192,490 | -10.07% | | Private education and consumer loan servicing | $22,733 | $12,959 | +75.42% | $45,426 | $25,577 | +77.69% | | FFELP loan servicing | $2,241 | $3,245 | -30.94% | $4,873 | $6,624 | -26.43% | | Software services | $9,452 | $4,879 | +93.74% | $16,444 | $9,420 | +74.56% | | Outsourced services | $561 | $955 | -41.26% | $1,622 | $2,141 | -24.24% | | Total LSS revenue | $120,724 | $109,052 | +10.70% | $241,465 | $236,252 | +2.21% | Loan Servicing Volumes Total servicing volume decreased to $516.09 billion as of June 30, 2025, from $523.75 billion a year prior, primarily due to a reduction in government and FFELP loan servicing volumes. Conversely, private and consumer loan servicing volume saw a significant increase. The total number of servicing borrowers also decreased, but remote hosted borrowers experienced substantial growth Loan Servicing Volumes (dollars in millions) | Servicing Volume (dollars in millions) | As of June 30, 2025 | As of June 30, 2024 | Change (YoY) | | :------------------------------------- | :------------------ | :------------------ | :------------ | | Government | $465,689 | $489,298 | -4.83% | | FFELP | $12,386 | $14,576 | -15.02% | | Private and consumer | $38,018 | $19,876 | +91.28% | | Total | $516,093 | $523,750 | -1.46% | Number of Servicing Borrowers | Number of Servicing Borrowers | As of June 30, 2025 | As of June 30, 2024 | Change (YoY) | | :---------------------------- | :------------------ | :------------------ | :------------ | | Government | 12,694,386 | 14,096,152 | -9.94% | | FFELP | 502,205 | 610,745 | -17.77% | | Private and consumer | 1,326,451 | 829,072 | +60.00% | | Total | 14,523,042 | 15,535,969 | -6.58% | - Number of remote hosted borrowers increased significantly to 2,056,358 as of June 30, 2025, from 133,681 as of June 30, 202428 Education Technology Services and Payments (ETSP) Revenue ETSP revenue increased slightly to $118.18 million for Q2 2025 from $116.91 million in Q2 2024, and to $265.52 million for H1 2025 from $260.45 million in H1 2024. Payment processing revenue saw notable growth, while education technology services revenue decreased. The business is subject to seasonal fluctuations, with higher revenue and operating margin typically in the first quarter Education Technology Services and Payments Revenue (Dollars in thousands) | Service Offering | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Tuition payment plan services | $36,013 | $34,164 | +5.41% | $76,085 | $73,043 | +4.16% | | Payment processing | $37,515 | $34,326 | +9.29% | $89,051 | $82,113 | +8.45% | | Education technology services | $44,481 | $47,205 | -5.77% | $100,177 | $103,227 | -2.95% | | Other | $175 | $1,214 | -85.58% | $202 | $2,066 | -90.22% | | Total ETSP revenue | $118,184 | $116,909 | +1.09% | $265,515 | $260,449 | +1.95% | - This segment is subject to seasonal fluctuations, with revenue and before-tax operating margin typically higher in the first quarter compared to the remainder of the year29 Other Income (Expense) Components Nelnet's 'other, net' income significantly increased to $22.98 million for Q2 2025 from $14.02 million in Q2 2024, and to $46.67 million for H1 2025 from $18.10 million in H1 2024. This growth was primarily driven by increased investment activity and ALLO preferred return, despite a decrease in borrower late fee income Components of 'Other, net' Income (Dollars in thousands) | Component | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Investment activity, net | $8,852 | $217 | +3979.26% | $14,012 | $(1,082) | N/A | | ALLO preferred return | $5,985 | $4,160 | +43.87% | $14,400 | $6,569 | +119.21% | | Borrower late fee income | $1,642 | $2,584 | -36.45% | $3,231 | $5,718 | -43.49% | | (Loss) gain from solar investments, net | $(1,502) | $(2,610) | +42.45% | $(1,046) | $170 | N/A | | Total Other, net | $22,976 | $14,020 | +63.88% | $46,670 | $18,103 | +157.81% | Solar Investments Accounting Explains the accounting method for solar investments and presents related net gains or losses - The Company accounts for its solar investments using the Hypothetical Liquidation at Book Value (HLBV) method, which typically results in accelerated losses in the initial years of investment30 Net Gain (Loss) from Solar Investments (excluding noncontrolling interests, Dollars in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------------------------------------------- | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | (Losses) gains from solar investments, net | $(1,502) | $(2,610) | +42.45% | $(1,046) | $170 | N/A | | Net gain (loss), excluding amounts attributed to noncontrolling interest investors | $1,657 | $(2,618) | N/A | $3,158 | $1,803 | +75.15% | Derivative Settlements Total derivative settlements, net, decreased to $0.74 million for Q2 2025 from $1.65 million in Q2 2024, and to $1.49 million for H1 2025 from $3.41 million in H1 2024. This reduction reflects lower income from basis swaps and interest rate swaps, which do not qualify for hedge accounting Derivative Settlements, Net (Dollars in thousands) | Component | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Basis swaps | $154 | $249 | -38.15% | $307 | $614 | -50.00% | | Interest rate swaps - floor income hedges | $427 | $1,193 | -64.19% | $855 | $2,383 | -64.04% | | Interest rate swaps - intercompany deposits | $163 | $207 | -21.26% | $327 | $409 | -20.10% | | Total derivative settlements - income | $744 | $1,649 | -54.99% | $1,489 | $3,406 | -56.30% | Loan Portfolio and Allowance for Loan Losses As of June 30, 2025, Nelnet's total loans and accrued interest receivable, net, were $10.16 billion, a slight increase from December 31, 2024, but a decrease from June 30, 2024. Nelnet Bank's loan portfolio significantly grew, including new federally insured loans. The total allowance for loan losses increased, with varying percentages across different loan types and segments Loans and Accrued Interest Receivable, Net (Dollars in thousands) | Loan Type | As of June 30, 2025 | As of Dec 31, 2024 | Change (vs. Dec 31, 2024) | As of June 30, 2024 | Change (vs. June 30, 2024) | | :------------------------------------ | :------------------ | :----------------- | :------------------------ | :------------------ | :------------------------- | | Non-Nelnet Bank loans | $8,935,169 | $8,955,868 | -0.23% | $9,910,617 | -9.84% | | Nelnet Bank loans | $827,641 | $644,597 | +28.39% | $542,351 | +52.60% | | Total Loans and Accrued Interest Receivable, net | $10,155,483 | $9,992,744 | +1.63% | $10,939,519 | -7.17% | - Nelnet Bank's loan portfolio includes $106,555 thousand in federally insured loans as of June 30, 2025, which were not present in prior periods32 - The Asset Generation and Management operating segment (Non-Nelnet Bank) contributed $42.2 million of private education loans to Nelnet Bank during the second quarter of 202532 Loans and Accrued Interest Receivable Breakdown Provides a detailed breakdown of loans and accrued interest receivable by type and segment Loans and Accrued Interest Receivable by Type (Dollars in thousands, as of June 30, 2025) | Loan Type | Non-Nelnet Bank | Nelnet Bank | | :-------------------------- | :-------------- | :---------- | | Federally insured loans: | | | | Stafford and other | $2,039,136 | $10,040 | | Consolidation | $6,327,949 | $96,515 | | Private education loans | $156,614 | $516,663 | | Consumer and other loans | $411,470 | $204,423 | Allowance for Loan Losses as Percentage of Loan Balance Details the allowance for loan losses as a percentage of ending loan balances across different loan portfolios Allowance for Loan Losses as % of Ending Loan Balance (As of June 30, 2025) | Loan Portfolio | Non-Nelnet Bank | Nelnet Bank | | :---------------------------- | :-------------- | :---------- | | Federally insured loans | 0.57% | 0.33% | | Private education loans | 4.73% | 2.39% | | Consumer and other loans | 11.67% | 4.68% | - The allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty was 20.4% for non-Nelnet Bank and 16.5% for Nelnet Bank as of June 30, 202534 Loan Activity - Non-Nelnet Bank (AGM) For the six months ended June 30, 2025, AGM's total loan balance decreased slightly to $8.94 billion from $8.96 billion at year-end 2024. This period saw $975.7 million in loan acquisitions, but was offset by $695.1 million in repayments, $127.0 million in loans lost to external parties, $132.1 million in loans sold, and $42.2 million in loans contributed to Nelnet Bank. The accelerated run-off of the FFELP portfolio has significantly decreased since August 2024 Non-Nelnet Bank (AGM) Loan Activity (Six months ended June 30, 2025, Dollars in thousands) | Activity | FFELP | Private | Consumer and other | Total | | :---------------------------------------------------- | :---------- | :-------- | :----------------- | :---------- | | Balance as of December 31, 2024 | $8,388,564 | $221,744 | $345,560 | $8,955,868 | | Loan acquisitions | $703,425 | — | $272,290 | $975,715 | | Repayments, claims, capitalized interest, participations, and other, net | $(467,370) | $(21,455) | $(206,232) | $(695,057) | | Loans lost to external parties | $(125,535) | $(1,502) | — | $(127,037) | | Loans sold | $(131,999) | — | $(148) | $(132,147) | | Loans contributed to Nelnet Bank | — | $(42,173) | — | $(42,173) | | Balance as of June 30, 2025 | $8,367,085 | $156,614 | $411,470 | $8,935,169 | - The accelerated run-off of the FFELP portfolio due to consolidation into Federal Direct Loan Program loans has significantly decreased since August 2024, with prepayment rates returning to longer-term historical rates36 Loan Spread Analysis - Non-Nelnet Bank (AGM) AGM's core loan spread increased to 1.27% for Q2 2025 from 0.98% in Q2 2024, and to 1.23% for H1 2025 from 0.90% in H1 2024. This improvement was driven by a higher variable loan yield and lower loan cost of funds, despite a decrease in the average balance of AGM's loans and debt outstanding. Management considers derivative settlements when evaluating loan spread Non-Nelnet Bank (AGM) Loan Spread Analysis | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Variable loan yield, net | 6.80% | 7.42% | -0.62 pp | 6.65% | 7.34% | -0.69 pp | | Loan cost of funds - interest expense | (5.60)% | (6.50)% | +0.90 pp | (5.50)% | (6.50)% | +1.00 pp | | Variable loan spread | 1.21% | 0.93% | +0.28 pp | 1.16% | 0.85% | +0.31 pp | | Core loan spread | 1.27% | 0.98% | +0.29 pp | 1.23% | 0.90% | +0.33 pp | | Average balance of AGM's loans | $9,215,579 | $10,484,458 | -12.10% | $9,379,948 | $11,022,981 | -14.91% | - Management believes derivative settlements should be evaluated with the Company's net interest income (loan spread) as part of its overall risk management strategy to reduce interest rate volatility37 Loan Activity - Nelnet Bank Nelnet Bank's total loan portfolio significantly increased to $827.64 million as of June 30, 2025, from $542.35 million a year prior. This growth was driven by $203.17 million in loan acquisitions and originations and $42.17 million in loans contributed from AGM during the first half of 2025 Nelnet Bank Loan Activity (Six months ended June 30, 2025, Dollars in thousands) | Activity | FFELP | Private | Consumer and other | Total | | :------------------------------------ | :---------- | :-------- | :----------------- | :---------- | | Balance as of December 31, 2024 | — | $482,445 | $162,152 | $644,597 | | Loan acquisitions and originations | $111,040 | $37,396 | $54,730 | $203,166 | | Repayments | $(4,485) | $(45,351) | $(12,459) | $(62,295) | | Loans contributed from AGM | — | $(42,173) | — | $42,173 | | Balance as of June 30, 2025 | $106,555 | $516,663 | $204,423 | $827,641 | Average Balance Sheet and Net Interest Margin - Nelnet Bank Nelnet Bank's total interest-earning assets grew to an average of $1.73 billion for Q2 2025, up from $1.14 billion in Q2 2024. The net interest margin increased to 3.29% for Q2 2025 from 3.07% in Q2 2024, and to 3.37% for H1 2025 from 3.03% in H1 2024, driven by growth in private education and consumer loans and an increase in net interest margin Nelnet Bank Average Interest-Earning Assets and Liabilities (Dollars in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :------------ | :--------------------------- | :--------------------------- | :------------ | | Average interest earning assets | $1,733,147 | $1,136,841 | +52.46% | $1,602,783 | $1,089,391 | +47.13% | | Average interest bearing liabilities | $1,514,157 | $1,004,546 | +50.73% | $1,405,409 | $956,840 | +46.88% | | Net interest margin | 3.29% | 3.07% | +0.22 pp | 3.37% | 3.03% | +0.34 pp | - Nelnet Bank experienced an increase of $5.6 million and $10.4 million in net interest income for the three and six months ended June 30, 2025, respectively, compared with the same periods in 2024, due to an increase in the average balance of loans and investments and an increase in net interest margin20