8-K
NELNET INC (NNI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 8, 2025
NELNET, INC.
(Exact name of registrant as specified in its charter)
| Nebraska | 001-31924 | 84-0748903 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 121 South 13th Street, Suite 100 | ||
| --- | --- | --- |
| Lincoln, | Nebraska | 68508 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code (402) 458-2370
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock, Par Value $0.01 per Share | NNI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On May 8, 2025, Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended March 31, 2025. A copy of the press release is furnished as Exhibit 99.1 to this report. In addition, a copy of the supplemental financial information for the quarter ended March 31, 2025, which was made available on the Company's website at www.nelnetinvestors.com on May 8, 2025 in connection with the press release, is furnished as Exhibit 99.2 to this report.
The above information and Exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall such information and Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. In addition, information on the Company's website is not incorporated by reference into this report and should not be considered part of this report.
Certain statements contained in the exhibits furnished with this report may be considered forward looking in nature and are subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated, estimated, or expected. Among the key risks and uncertainties that may have a direct bearing on the Company's future operating results, performance, or financial condition expressed or implied by the forward-looking statements are the matters discussed in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 27, 2025. Although the Company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are furnished as part of this report:
| Exhibit<br><br>No. | Description |
|---|---|
| 99.1 | Press Release dated May 8, 2025 - "Nelnet Reports First Quarter 2025 Results" |
| 99.2 | Supplemental Financial Information for the Quarter Ended March 31, 2025 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and included as Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: May 8, 2025
NELNET, INC.
By: /s/ JAMES D. KRUGER
Name: James D. Kruger
Title: Chief Financial Officer
Document
Nelnet Reports First Quarter 2025 Results
LINCOLN, Neb., May 8, 2025 - Nelnet (NYSE: NNI) today reported GAAP net income of $82.6 million, or $2.26 per share, for the first quarter of 2025, compared with GAAP net income of $73.4 million, or $1.98 per share, for the same period a year ago.
Net income, excluding derivative market value adjustments1, was $87.4 million, or $2.39 per share, for the first quarter of 2025, compared with $67.4 million, or $1.81 per share, for the same period in 2024.
“We’re pleased with Nelnet’s strong operating results to kick off 2025,” said Jeff Noordhoek, chief executive officer of Nelnet. “In a challenging and uncertain economic environment, all our core businesses are performing well and contributing to this momentum. We enhanced our already strong capital and liquidity positions, allowing us to be ready to strategically invest in opportunities that we believe will drive long-term success and value creation.”
Nelnet has four reportable operating segments, earning interest income on loans in its Asset Generation and Management (AGM) and Nelnet Bank segments, both part of the company's Nelnet Financial Services (NFS) division, and fee-based revenue in its Loan Servicing and Systems (referred to as Nelnet Diversified Services (NDS)) and Education Technology Services and Payments (referred to as Nelnet Business Services (NBS)) segments. Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate Activities.
Asset Generation and Management
The AGM operating segment reported loan and investment net interest income of $52.9 million during the first quarter of 2025, compared with $40.6 million for the same period a year ago. The increase in 2025 was due to an increase in loan spread2, but was partially offset by the expected runoff of the Federal Family Education Loan Program (FFELP) loan portfolio. The average balance of loans outstanding decreased from $11.6 billion for the first quarter of 2024 to $9.5 billion for the same period in 2025.
AGM recognized a provision for loan losses in the first quarter of 2025 of $13.0 million ($9.9 million after tax), compared with $6.5 million ($4.9 million after tax) in the first quarter of 2024. Provision for loan losses was primarily impacted by establishing an initial allowance for loans acquired during the period. During the first quarter of 2025, AGM acquired $832.6 million of loans, including $702.8 million of FFELP loans.
In addition, AGM recognized a loss of $3.8 million ($2.9 million after tax) related to changes in the fair value of derivative instruments that do not qualify for hedge accounting, compared with income of $5.7 million ($4.3 million after tax) for the same period in 2024. AGM recognized net income after tax of $22.7 million for the three months ended March 31, 2025, compared with $25.6 million for the same period in 2024.
Nelnet Bank
As of March 31, 2025, Nelnet Bank had a $761.6 million and $872.2 million loan and investment portfolio, respectively, and total deposits, including intercompany deposits, of $1.38 billion. Nelnet Bank reported loan and investment net interest income of $12.4 million during the first quarter of 2025, compared with $7.6 million for the same period a year ago. The increase in 2025 was due to an increase in the loan and investment portfolio and net interest margin.
Nelnet Bank recognized a provision for loan losses in the first quarter of 2025 of $2.3 million ($1.7 million after tax), compared with $4.4 million ($3.3 million after tax) in the first quarter of 2024. In addition, Nelnet Bank recognized a loss of $2.5 million ($1.9 million after tax) related to changes in the fair value of derivative instruments that do not qualify for hedge accounting, compared with income of $2.3 million ($1.7 million after tax) for the same period in 2024.
Nelnet Bank recognized net income after tax for the quarter ended March 31, 2025 of $1.5 million, compared with $0.9 million for the same period in 2024.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was $120.7 million for the first quarter of 2025, compared with $127.2 million for the same period in 2024. On April 1, 2024, the company began to earn revenue under its new Unified Servicing and Data Solution (USDS) contract which replaced its legacy student loan servicing contract with the Department of Education
1 Net income, excluding derivative market value adjustments, is a non-GAAP measure. See "Non-GAAP Performance Measures" at the end of this press release and the "Non-GAAP Disclosures" section below for explanatory information and reconciliations of GAAP to non-GAAP financial information.
2 Loan spread represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets.
(Department). Revenue earned under the USDS contract on a per borrower blended basis is lower than the legacy contract. The decrease in revenue from the government servicing contract was partially offset by an increase in private education loan servicing revenue. Private and consumer loan servicing revenue increased to $22.7 million for the three months ended March 31, 2025, compared with $12.6 million for the same period in 2024, as a result of the conversion of Discover Financial Services and SoFi Lending Corp. loan portfolios during the fourth quarter of 2024 and first quarter of 2025.
As of March 31, 2025, the company was servicing $542.3 billion in government-owned, FFELP, private education, and consumer loans for 15.6 million borrowers, compared with $532.2 billion in servicing volume for 15.9 million borrowers as of March 31, 2024.
The Loan Servicing and Systems segment reported net income after tax of $14.1 million for the three months ended March 31, 2025, compared with $12.2 million for the same period in 2024.
Education Technology Services and Payments
For the first quarter of 2025, revenue from the Education Technology Services and Payments operating segment was $147.3 million, an increase from $143.5 million for the same period in 2024. Revenue less direct costs to provide services for the first quarter of 2025 was $99.3 million, compared with $94.9 million for the same period in 2024.
Net income after tax for the Education Technology Services and Payments segment was $36.1 million for the three months ended March 31, 2025, compared with $36.2 million for the same period in 2024.
This segment is subject to seasonal fluctuations. Based on the timing of when revenue is recognized and when expenses are incurred, revenue and operating margin are higher in the first quarter compared with the remainder of the year.
Corporate Activities
Included in Corporate Activities are the operating results of the company's 45 percent voting membership interest in ALLO Holdings LLC, a holding company for ALLO Communications LLC (ALLO). During the first quarter of 2024, the company recognized a loss on its ALLO voting membership interest investment of $10.7 million ($8.1 million after tax). The company has no remaining carrying value related to this investment in ALLO. Accordingly, no losses were recognized on this investment in the first quarter of 2025, and absent additional voting membership equity contributions, the company will not recognize future losses on this investment.
As previously announced in April 2025, Nelnet entered into an agreement with ALLO pursuant to which ALLO will redeem certain of its membership interests from Nelnet. Upon closing, Nelnet expects to receive aggregate cash proceeds of approximately $410 million from ALLO for these redemptions and recognize a pre-tax gain of approximately $175 million. The transaction is expected to close in late May 2025, subject to customary closing conditions. Immediately following the closing of the transaction, Nelnet will not own any preferred membership interests of ALLO, but will maintain a significant voting equity investment in ALLO. Nelnet’s ownership of ALLO will decrease from 45% to approximately 26%.
Board of Directors Declares Second Quarter Dividend and Authorizes New Stock Repurchase Program
The Nelnet Board of Directors declared a second-quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.28 per share. The dividend will be paid on June 16, 2025, to shareholders of record at the close of business on June 2, 2025.
In addition, the Board of Directors has authorized a new stock repurchase program to purchase up to five million shares of the company's Class A common stock during the three-year period ending May 8, 2028. The five million shares authorized under the new program includes the remaining unpurchased shares from the prior repurchase program, which expires on May 8, 2025. Shares may be repurchased under the new program from time to time in the open market or private transactions (including with related parties), and the timing and amount of repurchases will depend on market conditions, share prices, trading volumes, and other factors, including compliance with credit agreements and securities laws.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of federal securities laws. The words “anticipate,” “assume," "believe,” “continue,” “could,” "ensure," “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” "scheduled," “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements. These statements are based on management's current expectations as of the date of this release and are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by
such forward-looking statements. Such risks and uncertainties include, but are not limited to: risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the company under existing and future servicing contracts with the Department, risks related to unfavorable contract modifications or interpretations, risks related to consistently meeting service requirements to avoid the assessment of performance penalties, and risks related to the company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, FFEL Program, private education, and consumer loans; loan portfolio risks such as credit risk, prepayment risk, interest rate basis and repricing risk, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans; financing and liquidity risks, including risks of changes in the interest rate environment; risks from changes in the terms of education loans and in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets; risks related to a breach of or failure in the company's operational or information systems or infrastructure, or those of third-party vendors, including disclosure of confidential or personal information and/or damage to reputation resulting from cyber breaches; risks related to use of artificial intelligence; uncertainties inherent in forecasting future cash flows from student loan assets, including investment interests therein, and related asset-backed securitizations; risks related to the ability of Nelnet Bank to achieve its business objectives and effectively deploy loan and deposit strategies and achieve expected market penetration; risks related to the expected benefits to the company from its continuing investment in ALLO and Hudl, and risks related to solar tax equity investments, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities; risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom) including venture capital and real estate investments, reinsurance, acquisitions, solar construction, and other activities (including risks associated with errors that occasionally occur in converting loan servicing portfolios to a new servicing platform), including activities that are intended to diversify the company both within and outside of its historical core education-related businesses; risks and uncertainties associated with climate change; risks from changes in economic conditions and consumer behavior; risks related to the company's ability to adapt to technological change; risks related to the exclusive forum provisions in the company's articles of incorporation; risks related to the company's executive chairman's ability to control matters related to the company through voting rights; risks related to related party transactions; risks related to natural disasters, terrorist activities, or international hostilities; and risks and uncertainties associated with litigation matters and maintaining compliance with the extensive regulatory requirements applicable to the company's businesses, including changes to the regulatory environment from the change in presidential administration, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the company's consolidated financial statements.
For more information, see the "Risk Factors" sections and other cautionary discussions of risks and uncertainties included in documents filed or furnished by the company with the Securities and Exchange Commission. All forward-looking statements in this release are as of the date of this release. Although the company may voluntarily update or revise its forward-looking statements from time to time to reflect actual results or changes in the company's expectations, the company disclaims any commitment to do so except as required by law.
Non-GAAP Performance Measures
The company prepares its financial statements and presents its financial results in accordance with U.S. GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. Reconciliations of GAAP to non-GAAP financial information, and a discussion of why the company believes providing this additional information is useful to investors, is provided in the "Non-GAAP Disclosures" section below.
Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)
| Three months ended | |||||
|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | (1) | ||
| Interest income: | |||||
| Loan interest | $ | 166,439 | 178,434 | 216,724 | |
| Investment interest | 41,389 | 42,815 | 52,078 | ||
| Total interest income | 207,828 | 221,249 | 268,802 | ||
| Interest expense on bonds and notes payable and bank deposits | 125,114 | 141,170 | 194,580 | ||
| Net interest income | 82,714 | 80,079 | 74,222 | ||
| Less provision for loan losses | 15,337 | 22,057 | 10,828 | ||
| Net interest income after provision for loan losses | 67,377 | 58,022 | 63,394 | ||
| Other income (expense): | |||||
| Loan servicing and systems revenue | 120,741 | 137,981 | 127,201 | ||
| Education technology services and payments revenue | 147,330 | 108,335 | 143,539 | ||
| Reinsurance premiums earned | 24,687 | 18,673 | 12,780 | ||
| Solar construction revenue | 3,995 | 13,828 | 13,726 | ||
| Other, net | 23,694 | 27,794 | 4,082 | ||
| Gain (loss) on sale of loans, net | 909 | 42 | (141) | ||
| Derivative market value adjustments and derivative settlements, net | (5,578) | 14,879 | 9,721 | ||
| Total other income (expense), net | 315,778 | 321,532 | 310,908 | ||
| Cost of services and expenses: | |||||
| Loan servicing contract fulfillment and acquisition costs | 1,633 | 1,497 | — | ||
| Cost to provide education technology services and payments | 48,047 | 38,658 | 48,610 | ||
| Cost to provide solar construction services | 7,828 | 28,558 | 14,229 | ||
| Total cost of services | 57,508 | 68,713 | 62,839 | ||
| Salaries and benefits | 138,223 | 147,229 | 143,875 | ||
| Depreciation and amortization | 9,255 | 12,544 | 16,769 | ||
| Reinsurance losses and underwriting expenses | 22,212 | 16,180 | 11,317 | ||
| Other expenses | 48,226 | 50,681 | 45,528 | ||
| Total operating expenses | 217,916 | 226,634 | 217,489 | ||
| Impairment expense and provision for beneficial interests | 1,591 | 5,764 | 37 | ||
| Total expenses | 277,015 | 301,111 | 280,365 | ||
| Income before income taxes | 106,140 | 78,443 | 93,937 | ||
| Income tax expense | (25,010) | (15,016) | (23,181) | ||
| Net income | 81,130 | 63,427 | 70,756 | ||
| Net loss (gain) attributable to noncontrolling interests | 1,430 | (268) | 2,652 | ||
| Net income attributable to Nelnet, Inc. | $ | 82,560 | 63,159 | 73,408 | |
| Earnings per common share: | |||||
| Net income attributable to Nelnet, Inc. shareholders - basic and diluted | $ | 2.26 | 1.73 | 1.98 | |
| Weighted average common shares outstanding - basic and diluted | 36,478,426 | 36,461,513 | 37,156,971 |
(1) During the second quarter of 2024, the company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the March 31, 2025 presentation. Refer to the company's quarterly report on Form 10-Q for the three months ended March 31, 2025 that was filed with the Securities and Exchange Commission on May 8, 2025 for additional information.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
| As of | As of | As of | |||
|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | (1) | ||
| Assets: | |||||
| Loans and accrued interest receivable, net | $ | 10,422,704 | 9,992,744 | 11,829,078 | |
| Cash, cash equivalents, and investments | 2,523,067 | 2,395,214 | 2,112,999 | ||
| Restricted cash | 611,610 | 736,502 | 761,141 | ||
| Goodwill and intangible assets, net | 192,832 | 194,357 | 200,699 | ||
| Other assets | 441,745 | 458,936 | 470,295 | ||
| Total assets | $ | 14,191,958 | 13,777,753 | 15,374,212 | |
| Liabilities: | |||||
| Bonds and notes payable | $ | 8,656,157 | 8,309,797 | 10,582,513 | |
| Bank deposits | 1,313,407 | 1,186,131 | 802,061 | ||
| Other liabilities | 859,385 | 982,708 | 753,918 | ||
| Total liabilities | 10,828,949 | 10,478,636 | 12,138,492 | ||
| Equity: | |||||
| Total Nelnet, Inc. shareholders' equity | 3,419,523 | 3,349,762 | 3,297,190 | ||
| Noncontrolling interests | (56,514) | (50,645) | (61,470) | ||
| Total equity | 3,363,009 | 3,299,117 | 3,235,720 | ||
| Total liabilities and equity | $ | 14,191,958 | 13,777,753 | 15,374,212 |
(1) During the second quarter of 2024, the company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the March 31, 2025 presentation. Refer to the company's quarterly report on Form 10-Q for the three months ended March 31, 2025 that was filed with the Securities and Exchange Commission on May 8, 2025 for additional information.
Contacts:
Media, Ben Kiser, 402.458.3024, or Investors, Phil Morgan, 402.458.3038, both of Nelnet, Inc.
Non-GAAP Disclosures
(Dollars in thousands, except share data)
(unaudited)
Non-GAAP financial measures disclosed by management are meant to provide additional information and insight relative to business trends to investors and, in certain cases, to present financial information as measured by rating agencies and other users of financial information. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies. The company reports this non-GAAP information because the company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.
Net income, excluding derivative market value adjustments
| Three months ended March 31, | |||
|---|---|---|---|
| 2025 | 2024 | ||
| GAAP net income attributable to Nelnet, Inc. | $ | 82,560 | 73,408 |
| Realized and unrealized derivative market value adjustments (a) | 6,324 | (7,964) | |
| Tax effect (b) | (1,519) | 1,911 | |
| Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $ | 87,365 | 67,355 |
| Earnings per share: | |||
| GAAP net income attributable to Nelnet, Inc. | $ | 2.26 | 1.98 |
| Realized and unrealized derivative market value adjustments (a) | 0.17 | (0.22) | |
| Tax effect (b) | (0.04) | 0.05 | |
| Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $ | 2.39 | 1.81 |
(a) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. "Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the company's derivative instruments based on their contractual terms.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. Management has structured all of the company’s derivative transactions with the intent that each is economically effective; however, the company’s derivative instruments do not qualify for hedge accounting in the consolidated financial statements. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.
The company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations. Accordingly, the company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the company’s performance and in presentations with credit rating agencies, lenders, and investors
(b) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.
Document
For Release: May 8, 2025
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the first quarter 2025
(All dollars are in thousands, except per share amounts, unless otherwise noted)
The following information should be read in connection with Nelnet, Inc.'s (the “Company's”) press release for first quarter 2025 earnings, dated May 8, 2025, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (the "Q1 2025 10-Q Quarterly Report").
Forward-looking and cautionary statements
This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “continue,” “could,” “ensure,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “scheduled,” “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.
The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report"), and include such risks and uncertainties as:
•risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and future servicing contracts with the U.S. Department of Education (the "Department"), risks related to unfavorable contract modifications or interpretations, risks related to consistently meeting service requirements to avoid the assessment of performance penalties, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or FFELP), private education, and consumer loans;
•loan portfolio risks such as credit risk, prepayment risk, interest rate basis and repricing risk, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans;
•financing and liquidity risks, including risks of changes in the interest rate environment;
•risks from changes in the terms of education loans and in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets;
•risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including disclosure of confidential or personal information and/or damage to reputation resulting from cyber breaches;
•risks related to use of artificial intelligence;
•uncertainties inherent in forecasting future cash flows from student loan assets, including investment interests therein, and related asset-backed securitizations;
•risks related to the ability of Nelnet Bank to achieve its business objectives and effectively deploy loan and deposit strategies and achieve expected market penetration;
•risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to solar tax equity investments, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;
•risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom) including venture capital and real estate investments, reinsurance, acquisitions, solar construction, and other activities (including risks associated with errors that occasionally occur in converting loan servicing portfolios to a new servicing platform), including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;
•risks and uncertainties associated with climate change; and
•risks and uncertainties associated with litigation matters and maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, including changes to the regulatory environment from the change in presidential administration, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company’s consolidated financial statements.
All forward-looking statements contained in this report are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by law.
Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)
| Three months ended | |||||
|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | (1) | ||
| Interest income: | |||||
| Loan interest | $ | 166,439 | 178,434 | 216,724 | |
| Investment interest | 41,389 | 42,815 | 52,078 | ||
| Total interest income | 207,828 | 221,249 | 268,802 | ||
| Interest expense on bonds and notes payable and bank deposits | 125,114 | 141,170 | 194,580 | ||
| Net interest income | 82,714 | 80,079 | 74,222 | ||
| Less provision for loan losses | 15,337 | 22,057 | 10,828 | ||
| Net interest income after provision for loan losses | 67,377 | 58,022 | 63,394 | ||
| Other income (expense): | |||||
| Loan servicing and systems revenue | 120,741 | 137,981 | 127,201 | ||
| Education technology services and payments revenue | 147,330 | 108,335 | 143,539 | ||
| Reinsurance premiums earned | 24,687 | 18,673 | 12,780 | ||
| Solar construction revenue | 3,995 | 13,828 | 13,726 | ||
| Other, net | 23,694 | 27,794 | 4,082 | ||
| Gain (loss) on sale of loans, net | 909 | 42 | (141) | ||
| Derivative settlements, net | 746 | 1,087 | 1,757 | ||
| Derivative market value adjustments, net | (6,324) | 13,792 | 7,964 | ||
| Total other income (expense), net | 315,778 | 321,532 | 310,908 | ||
| Cost of services and expenses: | |||||
| Loan servicing contract fulfillment and acquisition costs | 1,633 | 1,497 | — | ||
| Cost to provide education technology services and payments | 48,047 | 38,658 | 48,610 | ||
| Cost to provide solar construction services | 7,828 | 28,558 | 14,229 | ||
| Total cost of services | 57,508 | 68,713 | 62,839 | ||
| Salaries and benefits | 138,223 | 147,229 | 143,875 | ||
| Depreciation and amortization | 9,255 | 12,544 | 16,769 | ||
| Reinsurance losses and underwriting expenses | 22,212 | 16,180 | 11,317 | ||
| Other expenses | 48,226 | 50,681 | 45,528 | ||
| Total operating expenses | 217,916 | 226,634 | 217,489 | ||
| Impairment expense and provision for beneficial interests | 1,591 | 5,764 | 37 | ||
| Total expenses | 277,015 | 301,111 | 280,365 | ||
| Income before income taxes | 106,140 | 78,443 | 93,937 | ||
| Income tax expense | (25,010) | (15,016) | (23,181) | ||
| Net income | 81,130 | 63,427 | 70,756 | ||
| Net loss (gain) attributable to noncontrolling interests | 1,430 | (268) | 2,652 | ||
| Net income attributable to Nelnet, Inc. | $ | 82,560 | 63,159 | 73,408 | |
| Earnings per common share: | |||||
| Net income attributable to Nelnet, Inc. shareholders - basic and diluted | $ | 2.26 | 1.73 | 1.98 | |
| Weighted average common shares outstanding - basic and diluted | 36,478,426 | 36,461,513 | 37,156,971 |
(1) During the second quarter of 2024, the Company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the March 31, 2025 presentation. Refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2025 that was filed with the Securities and Exchange Commission on May 8, 2025 for additional information.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
| As of | As of | As of | |||
|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | (1) | ||
| Assets: | |||||
| Loans and accrued interest receivable, net | $ | 10,422,704 | 9,992,744 | 11,829,078 | |
| Cash, cash equivalents, and investments | 2,523,067 | 2,395,214 | 2,112,999 | ||
| Restricted cash | 611,610 | 736,502 | 761,141 | ||
| Goodwill and intangible assets, net | 192,832 | 194,357 | 200,699 | ||
| Other assets | 441,745 | 458,936 | 470,295 | ||
| Total assets | $ | 14,191,958 | 13,777,753 | 15,374,212 | |
| Liabilities: | |||||
| Bonds and notes payable | $ | 8,656,157 | 8,309,797 | 10,582,513 | |
| Bank deposits | 1,313,407 | 1,186,131 | 802,061 | ||
| Other liabilities | 859,385 | 982,708 | 753,918 | ||
| Total liabilities | 10,828,949 | 10,478,636 | 12,138,492 | ||
| Equity: | |||||
| Total Nelnet, Inc. shareholders' equity | 3,419,523 | 3,349,762 | 3,297,190 | ||
| Noncontrolling interests | (56,514) | (50,645) | (61,470) | ||
| Total equity | 3,363,009 | 3,299,117 | 3,235,720 | ||
| Total liabilities and equity | $ | 14,191,958 | 13,777,753 | 15,374,212 |
(1) During the second quarter of 2024, the Company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the March 31, 2025 presentation. Refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2025 that was filed with the Securities and Exchange Commission on May 8, 2025 for additional information.
Overview
The Company is a diversified hybrid holding company with primary businesses being consumer lending, loan servicing, payments, and technology – with many of these businesses serving customers in the education space. The largest operating businesses engage in loan servicing and education technology services and payments. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes and manages investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in a fiber communications company (ALLO), early-stage and emerging growth companies (venture capital investments), real estate, reinsurance, and renewable energy (solar). In the Nelnet Financial Services division, which includes Nelnet Bank, the Company is also actively expanding its private education, consumer, and other loan portfolios.
Reclassification and Immaterial Error Corrections
During the second quarter of 2024, the Company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the March 31, 2025 presentation. Refer to the Company's quarterly report on Form 10-Q for the three months ended March 31, 2025 that was filed with the Securities and Exchange Commission on May 8, 2025 for additional information.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
The Company prepares its financial statements and presents its financial results in accordance with GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. A reconciliation of the Company's GAAP net income to Non-GAAP net income excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, are provided below.
| Three months ended | ||||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| GAAP net income attributable to Nelnet, Inc. | $ | 82,560 | 63,159 | 73,408 |
| Realized and unrealized derivative market value adjustments (a) | 6,324 | (13,792) | (7,964) | |
| Tax effect (b) | (1,519) | 3,310 | 1,911 | |
| Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $ | 87,365 | 52,677 | 67,355 |
| Earnings per share: | ||||
| GAAP net income attributable to Nelnet, Inc. | $ | 2.26 | 1.73 | 1.98 |
| Realized and unrealized derivative market value adjustments (a) | 0.17 | (0.38) | (0.22) | |
| Tax effect (b) | (0.04) | 0.09 | 0.05 | |
| Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments | $ | 2.39 | 1.44 | 1.81 |
(a) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. "Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the respective period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. Management has structured all of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting in the consolidated financial statements. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the Company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.
The Company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations. Accordingly, the Company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the Company’s performance and in presentations with credit rating agencies, lenders, and investors. Consequently, the Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management and represents what earnings would have been had these derivatives qualified for hedge accounting. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.
(b) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.
Recent Developments - Partial Redemption of ALLO Investment
Nelnet has both a voting and preferred membership interest investment in ALLO. On April 18, 2025, ALLO executed a financing transaction that will result in gross proceeds to ALLO of $500 million (the “Financing”). In conjunction with the Financing, on April 18, 2025, Nelnet, ALLO, and certain other ALLO investors entered into a Membership Unit Redemption Agreement (the “Redemption Agreement”) pursuant to which ALLO will redeem certain of its membership interests from certain investors in ALLO, including Nelnet (the “Transaction”).
As part of the Transaction, ALLO will redeem all of Nelnet's outstanding preferred membership interests, including the preferred return accrued on such membership interests as of the closing date. In addition, ALLO will redeem a portion of Nelnet’s voting membership interest of ALLO. The Transaction is expected to close in late May 2025, subject to customary closing conditions.
Upon closing, Nelnet expects to receive aggregate cash proceeds of approximately $410 million from ALLO for these redemptions and recognize a pre-tax gain of approximately $175 million.
Immediately following the closing of the Transaction, Nelnet will not own any preferred membership interests of ALLO, but will maintain a significant voting equity investment in ALLO. Nelnet’s ownership of ALLO will decrease from 45% to approximately 26%. Nelnet will continue to account for its remaining voting membership interest of ALLO under the Hypothetical Liquidation at Book Value (HLBV) method of accounting, with the carrying value of such interest remaining at $0 as of the closing date of the Transaction.
Operating Segments
The Company's reportable operating segments are described in note 1 of the notes to consolidated financial statements included in the 2024 Annual Report. They include:
•Loan Servicing and Systems (LSS) - referred to as Nelnet Diversified Services (NDS)
•Education Technology Services and Payments (ETSP) - referred to as Nelnet Business Services (NBS)
•Asset Generation and Management (AGM), part of the Nelnet Financial Services (NFS) division
•Nelnet Bank, part of the NFS division
The Company earns fee-based revenue through its NDS and NBS reportable operating segments. The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, through its AGM reportable operating segment. This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes. The Company actively works to maximize the amount and timing of cash flows generated from its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow. Nelnet Bank operates as an internet industrial bank franchise focused on the private education and unsecured consumer loan markets, with a home office in Salt Lake City, Utah. Other operating segments included in the NFS division include the Company's U.S. Securities and Exchange Commission (SEC)-registered investment advisor subsidiary, property and casualty reinsurance activities, investment activities in real estate, and investment debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments.
Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities ("Corporate"). Corporate also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions, certain investment activities including its investment in ALLO, early-stage and emerging growth companies (venture capital investments), and solar tax equity investments, the operating results of the Company's solar engineering, procurement, and construction business, and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services. In addition, Corporate includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.
The information below presents the operating results (net income (loss) before taxes) for each of the Company's reportable and certain other operating segments reconciled to the consolidated financial statements for the three months ended March 31, 2025 and 2024.
| Three months ended March 31, | Certain Items Impacting Comparability<br>(All dollar amounts below are pre-tax) | ||||
|---|---|---|---|---|---|
| 2025 | 2024 | ||||
| NDS | $ | 18,512 | 15,990 | •An increase in before tax operating margin due to an increase in private education and consumer loan servicing volume and a decrease in total expenses obtained through cost-saving measures. This was partially offset by a decrease in government loan servicing revenue due to lower revenue earned on a per borrower blended basis under the new government servicing contract (which the Company began recognizing revenue under on April 1, 2024). | |
| NBS | 47,462 | 47,635 | •ETSP revenue increased to $147.3 million for the three months ended March 31, 2025 compared with $143.5 million for the same period in 2024. However, NBS experienced a decrease in before tax operating margin due to a decrease in FACTS education services revenue and an increase in operating expenses to support the growth in the customer base and investments in the development of new technologies. Net income and before tax operating margin will continue to be impacted by these items throughout 2025 compared with 2024. | ||
| Nelnet Financial Services division: | |||||
| AGM | 29,834 | 33,743 | •The recognition of $13.0 million and $6.5 million in provision for loan losses for the three months ended March 31, 2025 and 2024, respectively. Increase was due to an increase of loan acquisitions in the first quarter of 2025.<br><br>•A decrease of $9.1 million in investment interest income for the three months ended March 31, 2025 compared with the same period in 2024, due to a decrease of interest earned on restricted cash driven by lower balances and a decrease in interest rates and a decrease of interest income from beneficial interest investments.<br><br>•A net loss of $3.8 million and net income of $5.7 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three months ended March 31, 2025 and 2024, respectively.<br><br>•An increase in net loan interest income of $16.6 million for the three months ended March 31, 2025 compared with the same period in 2024, due to an increase in loan spread driven by an increase in consumer loans funded with operating cash (versus funded with debt), partially offset by a decrease in the average balance of loans. | ||
| Nelnet Bank | 1,952 | 1,147 | •An increase of $4.8 million in net interest income for the three months ended March 31, 2025 compared with the same period in 2024 due to an increase in the average balance of loans and investments and an increase in net interest margin.<br><br>•A net loss of $2.5 million and net income of $2.3 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three months ended March 31, 2025 and 2024, respectively.<br><br>•The recognition of $2.3 million and $4.4 million of provision for loan losses for the three months ended March 31, 2025 and 2024, respectively. | ||
| NFS other operating segments | 10,060 | 13,762 | •Net interest income earned on investment debt securities (primarily student loan and other asset-backed securities) was $6.8 million for the three months ended March 31, 2025 compared with $12.2 million for the same period in 2024. | ||
| Corporate: | |||||
| Unallocated corporate costs | (9,988) | (10,045) | |||
| Solar tax equity investments | 1,205 | 2,314 | •Includes operating results of the Company's tax equity investments in renewable energy solar partnerships. The Company accounts for these investments under the HLBV method of accounting, which commonly results in accelerated losses in the initial years of the investment. In the periods presented, these HLBV net losses are offset by gains recognized from sales of certain investments at the end of the contractual agreement (typically five years). These losses are also offset by revenue earned by the Company related to management, consulting, and performance fees provided on tax equity investments made by third parties. Due to the recognition pattern (accelerated losses in initial years and gains upon sale at the end of the contractual agreement), these investments may create volatility in earnings.<br><br>•Due to the Company's management and control of each of these partnerships, such partnerships that invest in tax equity investments are consolidated on the Company's consolidated financial statements, with the third-party co-investor's portion being presented as non-controlling interests. | ||
| Nelnet Renewable Energy - solar construction | (6,575) | (4,037) | •Since the acquisition of GRNE Solar in 2022, the Company has incurred low and, in some cases, negative margins on certain legacy solar construction projects. The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024. Uncertain economic conditions have impacted the costs to complete existing construction contracts and new construction projects being initiated which may continue to negatively impact margins and revenue, respectively, in future periods. | ||
| ALLO investment | 8,416 | (8,593) | •The recognition of no loss in the three months ended March 31, 2025 compared with a loss of $10.7 million for the same period in 2024 related to the Company's ALLO voting membership interest investment. The loss recognized in the first quarter of 2024 reduced the Company's carrying value of its voting membership interest to $0. Absent additional equity contributions with respect to ALLO's voting membership interest, the Company will not recognize additional losses for its voting membership interest in ALLO.<br><br>•The recognition of income of $8.4 million on the Company's preferred membership interests in ALLO for the three months ended March 31, 2025 compared with $2.4 million for the same period in 2024. | ||
| Venture capital investments | 4,220 | (704) | •Includes operating results of the Company's venture capital investments. During the first quarter of 2025, the Company recognized income, net of losses, of $2.1 million from equity method investees, $1.7 million related to the periodic adjustment of certain fund investments to their respective fair value, and $0.6 million on certain measurement alternative investments as a result of observable price changes. | ||
| --- | --- | --- | --- | --- | |
| Other corporate activities | 946 | 2,723 | |||
| Eliminations/reclassifications | 97 | — | |||
| Net income before taxes | 106,140 | 93,937 | |||
| Income tax expense | (25,010) | (23,181) | |||
| Net loss attributable to noncontrolling interests | 1,430 | 2,652 | •The majority of noncontrolling interests represents losses attributed to noncontrolling membership interests related to the Company’s solar tax equity investments. | ||
| Net income | $ | 82,560 | 73,408 |
Segment Reporting
The following tables present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.
| Three months ended March 31, 2025 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Reportable Segments | Reconciling Items | |||||||||
| Loan Servicing and Systems | Education Technology Services and Payments | Asset<br>Generation and<br>Management | Nelnet Bank | Total Reportable Segments | NFS Other Operating Segments | Corporate and Other Activities | Eliminations/ Reclassifications | Total | ||
| Interest income: | ||||||||||
| Loan interest | $ | — | — | 154,469 | 11,971 | 166,440 | — | — | — | 166,439 |
| Investment interest | 721 | 6,939 | 12,769 | 12,496 | 32,925 | 8,820 | 2,312 | (2,669) | 41,389 | |
| Total interest income | 721 | 6,939 | 167,238 | 24,467 | 199,365 | 8,820 | 2,312 | (2,669) | 207,828 | |
| Interest expense | — | — | 114,303 | 12,077 | 126,380 | 770 | 633 | (2,669) | 125,114 | |
| Net interest income | 721 | 6,939 | 52,935 | 12,390 | 72,985 | 8,050 | 1,679 | — | 82,714 | |
| Less provision for loan losses | — | — | 13,012 | 2,325 | 15,337 | — | — | — | 15,337 | |
| Net interest income after provision for loan losses | 721 | 6,939 | 39,923 | 10,065 | 57,648 | 8,050 | 1,679 | — | 67,377 | |
| Other income (expense): | ||||||||||
| LSS revenue | 120,741 | — | — | — | 120,741 | — | — | — | 120,741 | |
| Intersegment revenue | 5,684 | 64 | — | — | 5,748 | — | — | (5,748) | — | |
| ETSP revenue | — | 147,330 | — | — | 147,330 | — | — | — | 147,330 | |
| Reinsurance premiums earned | — | — | — | — | — | 24,687 | — | — | 24,687 | |
| Solar construction revenue | — | — | — | — | — | — | 3,995 | — | 3,995 | |
| Other, net | 112 | — | 3,995 | 142 | 4,249 | 1,110 | 18,238 | 97 | 23,694 | |
| Gain (loss) on sale of loans, net | — | — | 909 | — | 909 | — | — | — | 909 | |
| Derivative settlements, net | — | — | 582 | 164 | 746 | — | — | — | 746 | |
| Derivative market value adjustments, net | — | — | (3,795) | (2,529) | (6,324) | — | — | — | (6,324) | |
| Total other income (expense), net | 126,537 | 147,394 | 1,691 | (2,223) | 273,399 | 25,797 | 22,233 | (5,651) | 315,778 | |
| Cost of services and expenses: | ||||||||||
| Total cost of services | 1,633 | 48,047 | — | — | 49,680 | — | 7,828 | — | 57,508 | |
| Salaries and benefits | 69,574 | 41,741 | 1,221 | 2,816 | 115,352 | 478 | 22,496 | (104) | 138,223 | |
| Depreciation and amortization | 2,654 | 2,430 | — | 339 | 5,423 | — | 3,833 | — | 9,255 | |
| Reinsurance losses and underwriting expenses | — | — | — | — | — | 22,212 | — | — | 22,212 | |
| Postage expense | 7,575 | 7,575 | (7,575) | — | ||||||
| Servicing fees | 6,911 | 667 | 7,578 | (7,578) | — | |||||
| Other expenses | 10,832 | 9,048 | 888 | 1,358 | 22,126 | 772 | 15,586 | 9,741 | 48,226 | |
| Intersegment expenses, net | 16,478 | 5,605 | 1,250 | 710 | 24,043 | 244 | (24,055) | (232) | — | |
| Total operating expenses | 107,113 | 58,824 | 10,270 | 5,890 | 182,097 | 23,706 | 17,860 | (5,748) | 217,916 | |
| Impairment expense and provision for beneficial interests | — | — | 1,510 | — | 1,510 | 81 | — | — | 1,591 | |
| Total expenses | 108,746 | 106,871 | 11,780 | 5,890 | 233,287 | 23,787 | 25,688 | (5,748) | 277,015 | |
| Income (loss) before income taxes | 18,512 | 47,462 | 29,834 | 1,952 | 97,760 | 10,060 | (1,776) | 97 | 106,140 | |
| Income tax (expense) benefit | (4,443) | (11,402) | (7,156) | (434) | (23,435) | (2,385) | 810 | — | (25,010) | |
| Net income (loss) | 14,069 | 36,060 | 22,678 | 1,518 | 74,325 | 7,675 | (966) | 97 | 81,130 | |
| Net loss (income) attributable to noncontrolling interests | — | 45 | (17) | — | 28 | (124) | 1,623 | (97) | 1,430 | |
| Net income (loss) attributable to Nelnet, Inc. | $ | 14,069 | 36,105 | 22,661 | 1,518 | 74,353 | 7,551 | 657 | — | 82,560 |
| Three months ended December 31, 2024 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reportable Segments | Reconciling Items | |||||||||
| Loan Servicing and Systems | Education Technology Services and Payments | Asset<br>Generation and<br>Management | Nelnet Bank | Total Reportable Segments | NFS Other Operating Segments | Corporate and Other Activities | Eliminations/ Reclassifications | Total | ||
| Interest income: | ||||||||||
| Loan interest | $ | — | — | 165,210 | 13,224 | 178,434 | — | — | — | 178,434 |
| Investment interest | 831 | 6,576 | 13,789 | 12,691 | 33,887 | 10,447 | 2,207 | (3,726) | 42,815 | |
| Total interest income | 831 | 6,576 | 178,999 | 25,915 | 212,321 | 10,447 | 2,207 | (3,726) | 221,249 | |
| Interest expense | — | — | 130,668 | 12,987 | 143,655 | 1,568 | (327) | (3,726) | 141,170 | |
| Net interest income | 831 | 6,576 | 48,331 | 12,928 | 68,666 | 8,879 | 2,534 | — | 80,079 | |
| Less provision for loan losses | — | — | 13,493 | 8,564 | 22,057 | — | — | — | 22,057 | |
| Net interest income after provision for loan losses | 831 | 6,576 | 34,838 | 4,364 | 46,609 | 8,879 | 2,534 | — | 58,022 | |
| Other income (expense): | ||||||||||
| LSS revenue | 137,981 | — | — | — | 137,981 | — | — | — | 137,981 | |
| Intersegment revenue | 6,073 | 55 | — | — | 6,128 | — | — | (6,128) | — | |
| ETSP revenue | — | 108,335 | — | — | 108,335 | — | — | — | 108,335 | |
| Reinsurance premiums earned | — | — | — | — | — | 18,673 | — | — | 18,673 | |
| Solar construction revenue | — | — | — | — | — | — | 13,828 | — | 13,828 | |
| Other, net | 684 | — | 4,640 | 960 | 6,284 | 1,549 | 19,884 | 77 | 27,794 | |
| Gain (loss) on sale of loans, net | — | — | 42 | — | 42 | — | — | — | 42 | |
| Derivative settlements, net | — | — | 860 | 227 | 1,087 | — | — | — | 1,087 | |
| Derivative market value adjustments, net | — | — | 8,297 | 5,495 | 13,792 | — | — | — | 13,792 | |
| Total other income (expense), net | 144,738 | 108,390 | 13,839 | 6,682 | 273,649 | 20,222 | 33,712 | (6,051) | 321,532 | |
| Cost of services and expenses: | ||||||||||
| Total cost of services | 1,497 | 38,658 | — | — | 40,155 | — | 28,558 | — | 68,713 | |
| Salaries and benefits | 76,194 | 42,760 | 1,255 | 2,631 | 122,840 | 457 | 23,989 | (57) | 147,229 | |
| Depreciation and amortization | 4,171 | 2,519 | — | 338 | 7,028 | — | 5,516 | — | 12,544 | |
| Reinsurance losses and underwriting expenses | — | — | — | — | — | 16,180 | — | — | 16,180 | |
| Postage expense | 8,470 | 8,470 | (8,470) | — | ||||||
| Servicing fees | 7,087 | 662 | 7,749 | (7,749) | — | |||||
| Other expenses | 12,163 | 8,509 | 936 | 1,396 | 23,004 | 882 | 16,220 | 10,575 | 50,681 | |
| Intersegment expenses, net | 15,528 | 4,669 | 1,281 | 632 | 22,110 | 188 | (21,871) | (427) | — | |
| Total operating expenses | 116,526 | 58,457 | 10,559 | 5,659 | 191,201 | 17,707 | 23,854 | (6,128) | 226,634 | |
| Impairment expense and provision for beneficial interests | 736 | — | 4,628 | — | 5,364 | — | 400 | — | 5,764 | |
| Total expenses | 118,759 | 97,115 | 15,187 | 5,659 | 236,720 | 17,707 | 52,812 | (6,128) | 301,111 | |
| Income (loss) before income taxes | 26,810 | 17,851 | 33,490 | 5,387 | 83,538 | 11,394 | (16,566) | 77 | 78,443 | |
| Income tax (expense) benefit | (6,434) | (4,298) | (8,038) | (1,222) | (19,992) | (2,711) | 7,688 | — | (15,016) | |
| Net income (loss) | 20,376 | 13,553 | 25,452 | 4,165 | 63,546 | 8,683 | (8,878) | 77 | 63,427 | |
| Net loss (income) attributable to noncontrolling interests | — | 57 | — | — | 57 | (97) | (151) | (77) | (268) | |
| Net income (loss) attributable to Nelnet, Inc. | $ | 20,376 | 13,610 | 25,452 | 4,165 | 63,603 | 8,586 | (9,029) | — | 63,159 |
| Three months ended March 31, 2024 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reportable Segments | Reconciling Items | |||||||||
| Loan Servicing and Systems | Education Technology Services and Payments | Asset<br>Generation and<br>Management | Nelnet Bank | Total Reportable Segments | NFS Other Operating Segments | Corporate and Other Activities | Eliminations/ Reclassifications | Total | ||
| Interest income: | ||||||||||
| Loan interest | $ | — | — | 209,628 | 7,096 | 216,724 | — | — | — | 216,724 |
| Investment interest | 1,894 | 7,866 | 21,835 | 9,968 | 41,563 | 15,616 | 3,815 | (8,915) | 52,078 | |
| Total interest income | 1,894 | 7,866 | 231,463 | 17,064 | 258,287 | 15,616 | 3,815 | (8,915) | 268,802 | |
| Interest expense | — | — | 190,905 | 9,497 | 200,402 | 2,418 | 676 | (8,915) | 194,580 | |
| Net interest income | 1,894 | 7,866 | 40,558 | 7,567 | 57,885 | 13,198 | 3,139 | — | 74,222 | |
| Less provision for loan losses | — | — | 6,455 | 4,373 | 10,828 | — | — | — | 10,828 | |
| Net interest income after provision for loan losses | 1,894 | 7,866 | 34,103 | 3,194 | 47,057 | 13,198 | 3,139 | — | 63,394 | |
| Other income (expense): | ||||||||||
| LSS revenue | 127,201 | — | — | — | 127,201 | — | — | — | 127,201 | |
| Intersegment revenue | 6,886 | 49 | — | — | 6,935 | — | — | (6,935) | — | |
| ETSP revenue | — | 143,539 | — | — | 143,539 | — | — | — | 143,539 | |
| Reinsurance premiums earned | — | — | — | — | — | 12,780 | — | — | 12,780 | |
| Solar construction revenue | — | — | — | — | — | — | 13,726 | — | 13,726 | |
| Other, net | 710 | — | 4,983 | 375 | 6,068 | 161 | (2,147) | — | 4,082 | |
| Gain (loss) on sale of loans, net | — | — | (141) | — | (141) | — | — | — | (141) | |
| Derivative settlements, net | — | — | 1,555 | 202 | 1,757 | — | — | — | 1,757 | |
| Derivative market value adjustments, net | — | — | 5,706 | 2,258 | 7,964 | — | — | — | 7,964 | |
| Total other income (expense), net | 134,797 | 143,588 | 12,103 | 2,835 | 293,323 | 12,941 | 11,579 | (6,935) | 310,908 | |
| Cost of services and expenses: | ||||||||||
| Total cost of services | — | 48,610 | — | — | 48,610 | — | 14,229 | — | 62,839 | |
| Salaries and benefits | 76,722 | 40,167 | 1,195 | 2,721 | 120,805 | 358 | 23,521 | (807) | 143,875 | |
| Depreciation and amortization | 5,109 | 2,683 | — | 260 | 8,052 | — | 8,716 | — | 16,769 | |
| Reinsurance losses and underwriting expenses | — | — | — | — | — | 11,317 | — | — | 11,317 | |
| Postage expense | 10,605 | 10,605 | (10,605) | — | ||||||
| Servicing fees | 8,951 | 233 | 9,184 | (9,184) | — | |||||
| Other expenses | 8,933 | 7,558 | 1,109 | 1,111 | 18,711 | 485 | 13,402 | 12,931 | 45,528 | |
| Intersegment expenses, net | 19,332 | 4,801 | 1,208 | 557 | 25,898 | 217 | (26,845) | 730 | — | |
| Total operating expenses | 120,701 | 55,209 | 12,463 | 4,882 | 193,255 | 12,377 | 18,794 | (6,935) | 217,489 | |
| Impairment expense and provision for beneficial interests | — | — | — | — | — | — | 37 | — | 37 | |
| Total expenses | 120,701 | 103,819 | 12,463 | 4,882 | 241,865 | 12,377 | 33,060 | (6,935) | 280,365 | |
| Income (loss) before income taxes | 15,990 | 47,635 | 33,743 | 1,147 | 98,515 | 13,762 | (18,342) | — | 93,937 | |
| Income tax (expense) benefit | (3,838) | (11,435) | (8,099) | (259) | (23,631) | (3,274) | 3,723 | — | (23,181) | |
| Net income (loss) | 12,152 | 36,200 | 25,644 | 888 | 74,884 | 10,488 | (14,619) | — | 70,756 | |
| Net loss (income) attributable to noncontrolling interests | — | 17 | — | — | 17 | (120) | 2,755 | — | 2,652 | |
| Net income (loss) attributable to Nelnet, Inc. | $ | 12,152 | 36,217 | 25,644 | 888 | 74,901 | 10,368 | (11,864) | — | 73,408 |
Loan Servicing and Systems Revenue
The following table presents disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.
| Three months ended | ||||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| Government loan servicing (a) | $ | 87,358 | 103,217 | 105,474 |
| Private education and consumer loan servicing (b) | 22,696 | 24,819 | 12,620 | |
| FFELP loan servicing | 2,633 | 2,642 | 3,380 | |
| Software services | 6,992 | 6,415 | 4,541 | |
| Outsourced services | 1,062 | 888 | 1,186 | |
| Loan servicing and systems revenue | $ | 120,741 | 137,981 | 127,201 |
(a) Three months ended December 31, 2024 included $10.9 million of non-recurring revenue related to a settlement regarding certain inflation provisions included in the Company's legacy servicing contract.
(b) Three months ended December 31, 2024 included $4.0 million of non-recurring revenue related to conversion activity.
Loan Servicing Volumes
| As of | |||||||
|---|---|---|---|---|---|---|---|
| March 31,<br>2025 | December 31,<br>2024 | September 30,<br>2024 | June 30,<br>2024 | March 31,<br>2024 | December 31,<br>2023 | ||
| Servicing volume (dollars in millions): | |||||||
| Government | $ | 482,786 | 489,877 | 492,142 | 489,298 | 495,409 | 494,691 |
| FFELP | 12,826 | 13,260 | 13,745 | 14,576 | 15,783 | 17,462 | |
| Private and consumer | 46,728 | 29,226 | 20,666 | 19,876 | 21,015 | 20,493 | |
| Total | $ | 542,340 | 532,363 | 526,553 | 523,750 | 532,207 | 532,646 |
| Number of servicing borrowers: | |||||||
| Government | 13,453,127 | 14,049,550 | 14,114,468 | 14,096,152 | 14,328,013 | 14,503,057 | |
| FFELP | 524,421 | 549,861 | 574,979 | 610,745 | 656,814 | 725,866 | |
| Private and consumer | 1,645,423 | 1,168,293 | 851,747 | 829,072 | 882,256 | 894,703 | |
| Total | 15,622,971 | 15,767,704 | 15,541,194 | 15,535,969 | 15,867,083 | 16,123,626 | |
| Number of remote hosted borrowers: | 1,427,800 | 842,200 | 662,075 | 133,681 | 65,295 | 70,580 |
Education Technology Services and Payments Revenue
The following table presents disaggregated revenue by servicing offering for the Education Technology Services and Payments operating segment.
| Three months ended | ||||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| Tuition payment plan services | $ | 40,072 | 31,149 | 38,880 |
| Payment processing | 51,536 | 41,117 | 47,786 | |
| Education technology services | 55,695 | 35,759 | 56,021 | |
| Other | 27 | 310 | 852 | |
| Education technology services and payments revenue | $ | 147,330 | 108,335 | 143,539 |
This segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year. Based on the timing of revenue recognition and when expenses are incurred, revenue and before tax operating margin are higher in the first quarter compared with the remainder of the year.
Other Income (Expense)
The following table presents the components of "other, net" in "other income (expense)" on the consolidated statements of income:
| Three months ended | ||||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| ALLO preferred return | $ | 8,416 | 6,133 | 2,409 |
| Investment activity, net | 5,161 | 4,989 | (1,298) | |
| Borrower late fee income | 1,587 | 1,369 | 3,133 | |
| Investment advisory services (WRCM) | 1,473 | 1,508 | 1,508 | |
| Administration/sponsor fee income | 1,305 | 1,375 | 1,546 | |
| Gain from solar investments, net (a) | 456 | 4,559 | 2,780 | |
| Loss from ALLO voting membership interest investment | — | — | (10,693) | |
| Other | 5,296 | 7,861 | 4,697 | |
| Other, net | $ | 23,694 | 27,794 | 4,082 |
(a) The Company accounts for its solar investments using the HLBV method of accounting. For the majority of the Company’s solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. The following table presents (i) the Company's recognized HLBV losses and gains recognized from sales of certain investments at the end of the contractual agreement (typically five years), which include losses and gains attributable to third-party noncontrolling interest investors (syndication partners), included in “other, net” in "other income (expense)" on the consolidated statements of income, (ii) solar net losses and gains attributed to noncontrolling interest investors included in “net loss attributable to noncontrolling interests” on the consolidated statements of income, and (iii) the Company's recognized net gain excluding amounts attributed to noncontrolling interest investors (such amount reflecting the before tax net income impact of such solar tax equity investments to the Company).
| Three months ended | ||||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| Losses from HLBV accounting (gross) | $ | (2,616) | (6,530) | (1,427) |
| Gains from sales (gross) | 3,072 | 11,089 | 4,207 | |
| Gains from solar investments, net | 456 | 4,559 | 2,780 | |
| Less: (losses) gains attributable to noncontrolling members, net | (1,046) | 970 | (1,641) | |
| Net gain, excluding amounts attributed to noncontrolling interest investors | $ | 1,502 | 3,589 | 4,421 |
Derivative Settlements
The following table summarizes the components of "derivative settlements, net" included in the consolidated statements of income.
| Three months ended | ||||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| Basis swaps | $ | 153 | 156 | 365 |
| Interest rate swaps - floor income hedges | 429 | 704 | 1,190 | |
| Interest rate swaps - Nelnet Bank | 164 | 227 | 202 | |
| Total derivative settlements - income | $ | 746 | 1,087 | 1,757 |
Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable and allowance for loan losses consisted of the following:
| As of | As of | As of | ||
|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||
| Non-Nelnet Bank: | ||||
| Federally insured loans: | ||||
| Stafford and other | $ | 2,102,961 | 2,108,960 | 2,546,852 |
| Consolidation | 6,567,323 | 6,279,604 | 7,836,200 | |
| Total | 8,670,284 | 8,388,564 | 10,383,052 | |
| Private education loans | 208,507 | 221,744 | 261,582 | |
| Consumer and other loans | 381,215 | 345,560 | 155,308 | |
| Non-Nelnet Bank loans | 9,260,006 | 8,955,868 | 10,799,942 | |
| Nelnet Bank: | ||||
| Federally insured loans: | ||||
| Stafford and other | 10,336 | — | — | |
| Consolidation | 99,851 | — | — | |
| Total | 110,187 | — | — | |
| Private education loans | 489,451 | 482,445 | 364,766 | |
| Consumer and other loans | 161,995 | 162,152 | 118,957 | |
| Nelnet Bank loans | 761,633 | 644,597 | 483,723 | |
| Accrued interest receivable | 566,275 | 549,283 | 684,095 | |
| Loan discount and deferred lender fees, net of unamortized loan premiums and deferred origination costs | (45,134) | (42,114) | (32,674) | |
| Allowance for loan losses: | ||||
| Non-Nelnet Bank: | ||||
| Federally insured loans | (48,906) | (49,091) | (61,723) | |
| Private education loans | (10,394) | (11,130) | (14,736) | |
| Consumer and other loans | (43,904) | (38,468) | (18,761) | |
| Non-Nelnet Bank allowance for loan losses | (103,204) | (98,689) | (95,220) | |
| Nelnet Bank: | ||||
| Federally insured loans | (362) | — | — | |
| Private education loans | (9,893) | (10,086) | (3,660) | |
| Consumer and other loans | (6,617) | (6,115) | (7,128) | |
| Nelnet Bank allowance for loan losses | (16,872) | (16,201) | (10,788) | |
| $ | 10,422,704 | 9,992,744 | 11,829,078 |
The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "other investments and notes receivable, net" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2025, the Company’s ownership correlates to approximately $1.82 billion of loans included in these securitizations. The loans held in these securitizations are not included in the above table. Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment interest" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.
The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.
| As of | As of | As of | ||||
|---|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||
| Non-Nelnet Bank: | ||||||
| Federally insured loans (a) | 0.56 | % | 0.59 | % | 0.59 | % |
| Private education loans | 4.98 | % | 5.02 | % | 5.63 | % |
| Consumer and other loans | 11.52 | % | 11.13 | % | 12.08 | % |
| Nelnet Bank: | ||||||
| Federally insured loans (a) | 0.33 | % | — | — | ||
| Private education loans | 2.02 | % | 2.09 | % | 1.00 | % |
| Consumer and other loans | 4.08 | % | 3.77 | % | 5.99 | % |
(a) The allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 20.2%, 20.6%, and 21.7% as of March 31, 2025, December 31, 2024, and March 31, 2024, respectively, and for Nelnet Bank was 16.3% as of March 31, 2025.
Loan Activity - Non-Nelnet Bank
The following table sets forth the activity of the Company's AGM (Non-Nelnet Bank) loan portfolios:
| FFELP | Private | Consumer and other | Total | ||
|---|---|---|---|---|---|
| Three months ended March 31, 2025 | |||||
| Balance as of December 31, 2024 | $ | 8,388,564 | 221,744 | 345,560 | 8,955,868 |
| Loan acquisitions | 702,800 | — | 129,787 | 832,587 | |
| Repayments, claims, capitalized interest, participations, and other, net | (230,558) | (12,535) | (93,984) | (337,077) | |
| Loans lost to external parties | (58,764) | (702) | — | (59,466) | |
| Loans sold | (131,758) | — | (148) | (131,906) | |
| Balance as of March 31, 2025 | $ | 8,670,284 | 208,507 | 381,215 | 9,260,006 |
| Three months ended December 31, 2024 | |||||
| Balance as of September 30, 2024 | $ | 9,070,742 | 234,295 | 244,552 | 9,549,589 |
| Loan acquisitions | 2,000 | — | 194,333 | 196,333 | |
| Repayments, claims, capitalized interest, participations, and other, net | (248,071) | (11,005) | (80,677) | (339,753) | |
| Loans lost to external parties | (57,208) | (1,546) | — | (58,754) | |
| Loans sold | (378,899) | — | (12,648) | (391,547) | |
| Balance as of December 31, 2024 | $ | 8,388,564 | 221,744 | 345,560 | 8,955,868 |
| Three months ended March 31, 2024 | |||||
| Balance as of December 31, 2023 | $ | 11,686,207 | 277,320 | 85,935 | 12,049,462 |
| Loan acquisitions | — | — | 80,730 | 80,730 | |
| Repayments, claims, capitalized interest, participations, and other, net | (324,953) | (14,591) | (10,952) | (350,496) | |
| Loans lost to external parties | (778,508) | (1,147) | — | (779,655) | |
| Loans sold | (199,694) | — | (405) | (200,099) | |
| Balance as of March 31, 2024 | $ | 10,383,052 | 261,582 | 155,308 | 10,799,942 |
Beginning in late 2021, the Company experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the CARES Act payment pause on Department held loans and the initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under various programs. However, the Company has experienced a significant decrease in FFELP borrowers consolidating their loans into the Federal Direct Loan Program since August 2024 that has resulted in prepayment rates on the Company’s FFELP portfolio being more consistent with longer-term historical rates.
Loan Spread Analysis - Non-Nelnet Bank
The following table analyzes the loan spread on AGM’s (Non-Nelnet Bank) portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets.
| Three months ended | |||||||
|---|---|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |||||
| Variable loan yield, gross | 7.43 | % | 7.85 | % | 7.99 | % | |
| Consolidation rebate fees | (0.79) | (0.80) | (0.80) | ||||
| Premium and deferred origination costs amortization, net of discount accretion | (0.13) | (0.08) | 0.09 | ||||
| Variable loan yield, net | 6.51 | 6.97 | 7.28 | ||||
| Loan cost of funds - interest expense | (5.39) | (5.86) | (6.50) | ||||
| Loan cost of funds - derivative settlements (a) (b) | 0.01 | 0.01 | 0.01 | ||||
| Variable loan spread | 1.13 | 1.12 | 0.79 | ||||
| Fixed rate floor income, gross | 0.04 | 0.03 | 0.01 | ||||
| Fixed rate floor income - derivative settlements (a) (c) | 0.02 | 0.03 | 0.04 | ||||
| Fixed rate floor income, net of settlements on derivatives | 0.06 | 0.06 | 0.05 | ||||
| Core loan spread | 1.19 | % | 1.18 | % | 0.84 | % | |
| Average balance of AGM's loans | $ | 9,544,317 | 9,403,661 | 11,561,504 | |||
| Average balance of AGM's debt outstanding | 8,451,699 | 8,654,618 | 11,387,400 |
(a) Derivative settlements represent the cash paid or received during the respective period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms. Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income. The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the Company’s net interest income (loan spread) as presented in this table. The Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance. See "Derivative Settlements" included in this supplement for the net settlement activity recognized by the Company for each type of derivative for the periods presented in the table.
A reconciliation of core loan spread, which includes the impact of derivative settlements on loan spread, to loan spread without derivative settlements follows.
| Three months ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||
| Core loan spread | 1.19 | % | 1.18 | % | 0.84 | % |
| Derivative settlements (basis swaps) | (0.01) | (0.01) | (0.01) | |||
| Derivative settlements (fixed rate floor income) | (0.02) | (0.03) | (0.04) | |||
| Loan spread | 1.16 | % | 1.14 | % | 0.79 | % |
(b) Derivative settlements consist of net settlements received related to the Company’s basis swaps.
(c) Derivative settlements consist of net settlements received related to the Company’s floor income interest rate swaps.
Loan Activity - Nelnet Bank
The following table sets forth the activity of Nelnet Bank's loan portfolios:
| FFELP | Private | Consumer and other | Total | ||
|---|---|---|---|---|---|
| Three months ended March 31, 2025 | |||||
| Balance as of December 31, 2024 | $ | — | 482,445 | 162,152 | 644,597 |
| Loan acquisitions and originations | 111,002 | 29,041 | 4,555 | 144,598 | |
| Repayments | (815) | (22,035) | (4,712) | (27,562) | |
| Balance as of March 31, 2025 | $ | 110,187 | 489,451 | 161,995 | 761,633 |
| Three months ended December 31, 2024 | |||||
| Balance as of September 30, 2024 | $ | — | 352,654 | 207,218 | 559,872 |
| Loan acquisitions and originations | — | 151,966 | 34,268 | 186,234 | |
| Repayments | — | (22,175) | (14,246) | (36,421) | |
| Loans sold to AGM | — | — | (65,088) | (65,088) | |
| Balance as of December 31, 2024 | $ | — | 482,445 | 162,152 | 644,597 |
| Three months ended March 31, 2024 | |||||
| Balance as of December 31, 2023 | $ | — | 360,520 | 72,352 | 432,872 |
| Loan acquisitions and originations | — | 16,715 | 56,847 | 73,562 | |
| Repayments | — | (12,469) | (10,242) | (22,711) | |
| Balance as of March 31, 2024 | $ | — | 364,766 | 118,957 | 483,723 |
Average Balance Sheet - Nelnet Bank
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities for Nelnet Bank.
| Three months ended (a) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||
| Balance | Rate | Balance | Rate | Balance | Rate | |||||||
| Average assets | ||||||||||||
| Federally insured student loans | $ | 25,621 | 6.55 | % | $ | — | — | % | $ | — | — | % |
| Private education loans | 489,211 | 6.10 | 482,380 | 6.41 | 366,858 | 4.28 | ||||||
| Consumer and other loans | 162,602 | 10.47 | 194,105 | 11.17 | 97,136 | 13.23 | ||||||
| Cash and investments | 793,537 | 6.39 | 713,497 | 7.08 | 577,947 | 6.94 | ||||||
| Total interest-earning assets | 1,470,971 | 6.75 | % | 1,389,982 | 7.42 | % | 1,041,941 | 6.59 | % | |||
| Non-interest-earning assets | 14,646 | 19,592 | 12,767 | |||||||||
| Total assets | $ | 1,485,617 | $ | 1,409,574 | $ | 1,054,708 | ||||||
| Average liabilities and equity | ||||||||||||
| Brokered deposits | $ | 249,259 | 1.95 | % | 248,497 | 1.95 | % | $ | 204,651 | 1.39 | % | |
| Intercompany deposits | 72,836 | 3.41 | 107,866 | 3.92 | 160,349 | 4.90 | ||||||
| Retail and other deposits | 962,954 | 4.21 | 854,323 | 4.59 | 544,136 | 4.90 | ||||||
| Federal funds purchased and other borrowed money | 10,404 | 4.69 | 24,532 | 10.02 | — | — | ||||||
| Total interest-bearing liabilities | 1,295,453 | 3.73 | % | 1,235,218 | 4.11 | % | 909,136 | 4.11 | % | |||
| Non-interest-bearing liabilities | 8,602 | 8,347 | 8,477 | |||||||||
| Equity | 181,562 | 166,009 | 137,095 | |||||||||
| Total liabilities and equity | $ | 1,485,617 | $ | 1,409,574 | $ | 1,054,708 | ||||||
| Net interest margin | 3.46 | % | 3.76 | % | 3.00 | % |
(a) Calculated using average daily balances.
16