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What changed in NELNET INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NELNET INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+718 added−799 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in NELNET INC's 2024 10-K

718 paragraphs added · 799 removed · 503 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

127 edited+46 added−50 removed64 unchanged
Biggest changeCorporate Governmental bodies in the United States and abroad have adopted, or are considering the adoption of, data privacy laws and regulations that include requirements with respect to nonpublic personal information such as data minimization, purpose limitation, transparency, accountability, integrity, and confidentiality.
Biggest changeThe Company must also comply with any additional financial security requirements set by the UID. • Annual Reporting and Audits – The Company must submit annual financial reports, including independently audited financial statements, actuarial opinions, and regulatory compliance filings to the UID. • Examinations and Compliance Reviews – The UID conducts periodic financial and operational examinations, generally every three to five years, to ensure compliance with statutory solvency, risk management, and corporate governance standards. 17 Corporate Governmental bodies in the United States and abroad have adopted, or are considering the adoption of, data privacy laws and regulations that include requirements with respect to nonpublic personal information such as data minimization, purpose limitation, transparency, accountability, integrity, and confidentiality.
Additionally, as the Company is indirectly subject to FERPA, it may not permit the transfer of any personally identifiable information to another party other than in a manner in which an 15 educational institution may properly disclose it. A breach of this prohibition could result in a five-year suspension of the Company's access to the related client’s records.
Additionally, as the Company is indirectly subject to FERPA, it may not permit the transfer of any personally identifiable information to another party other than in a manner in which an educational institution may properly disclose it. A breach of this prohibition could result in a five-year suspension of the Company's access to the related client’s records.
Financial Management - FACTS is the market leader in education financial management with services in the following categories: • Tuition Management • Grant & Aid • Advanced Accounting • Incidental Billing • Payment Forms • FACTS Giving K-12 educational institutions contract with the Company to administer tuition payment plans that allow families to make recurring payments generally over six to 12 months.
Financial Management - FACTS is the market leader in educational financial management with services in the following categories: • Tuition Management • Grant & Aid • Advanced Accounting • Incidental Billing • Payment Forms • FACTS Giving K-12 educational institutions contract with the Company to administer tuition payment plans that allow families to make recurring payments generally over six to 12 months.
The CFPB has authority to prevent unfair, deceptive, or abusive acts or 14 practices and to ensure that all consumers have access to fair, transparent, and competitive markets for consumer financial products and services. The CFPB’s scrutiny of financial services has impacted industry participants’ approach to their services, including how the Company interacts with consumers.
The CFPB has authority to prevent unfair, deceptive, or abusive acts or practices and to ensure that all consumers have access to fair, transparent, and competitive markets for consumer financial products and services. The CFPB’s scrutiny of financial services has impacted industry participants’ approach to their services, including how the Company interacts with consumers.
The Company has segmented its private education loan servicing on a distinct platform, created specifically to meet the needs of private education student loan borrowers, their families, the schools they attend, and the lenders who serve them. This ensures access to specialized teams with a dedicated focus on servicing these borrowers.
The Company has segmented its private 5 education loan servicing on a distinct platform, created specifically to meet the needs of private education student loan borrowers, their families, the schools they attend, and the lenders who serve them. This ensures access to specialized teams with a dedicated focus on servicing these borrowers.
This expansion has been accomplished through internal growth and innovation as well as business and certain investment acquisitions. The Company is also actively expanding its private education, consumer, and other loan portfolios, or investment interests therein, and as part of this strategy launched Nelnet Bank in 2020.
This expansion has been accomplished through internal growth and innovation as well as business and certain investment acquisitions. The Company is also actively expanding its private education and consumer loan portfolios, or investment interests therein, and as part of this strategy launched Nelnet Bank in 2020.
The Company's Corporate Governance Guidelines, Audit Committee Charter, People Development and Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Risk and Finance Committee Charter, and Compliance Committee Charter are also posted on its investor relations website. Information on the Company's websites is not incorporated by reference into this report and should not be considered part of this report. 19
The Company's Corporate Governance Guidelines, Audit Committee Charter, People Development and Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Risk and Finance Committee Charter, and Compliance Committee Charter are also posted on its investor relations website. Information on the Company's websites is not incorporated by reference into this report and should not be considered part of this report.
FFIEC is a formal interagency body of the U.S. government empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Federal Reserve Banks, the FDIC, and the CFPB, and to make recommendations to promote uniformity in the supervision of financial institutions.
FFIEC is a formal interagency body of the U.S. government empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Federal Reserve 14 Banks, the FDIC, and the CFPB, and to make recommendations to promote uniformity in the supervision of financial institutions.
For example, in the United States, certain of the Company’s operating segments and their financial institution clients are within the corresponding capacities in which they operate, subject to the FTC’s and the federal banking regulators’ privacy and information safeguarding requirements under the GLBA.
For example, in the United States, certain of the Company’s operating segments and their financial institution clients are within the corresponding capacities in which they operate, subject to the FTC’s, CFPB’s, and the federal banking regulators’ privacy and information safeguarding requirements under the GLBA.
Additionally, the Company may earn payment processing revenue when families make tuition payments. Nelnet Billing & Payments allows schools to send automated bills for tuition and fees, housing, parking, and other campus service offerings and allows students to safely make online payments from anywhere.
Additionally, the Company may earn payment processing revenue when students make tuition payments. Nelnet Billing & Payments allows schools to send automated bills for tuition and fees, housing, parking, and other campus service offerings and allows students to safely make online payments from anywhere.
The GLBA requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables customers to opt out of the disclosing institution’s ability to share information with third parties 16 under certain circumstances.
The GLBA requires certain financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables customers to opt out of the disclosing institution’s ability to share information with third parties under certain circumstances.
The Company’s real estate portfolio includes commercial properties, including office space, industrial, multifamily, and mixed-use properties. Investment portfolio - debt securities The Company invests excess cash in debt securities, primarily student loan and other asset-backed securities.
The Company’s real estate portfolio includes commercial properties, including office space, industrial, multifamily, and mixed-use properties. 10 Investment portfolio - debt securities The Company invests excess cash in debt securities, primarily student loan and other asset-backed securities.
Securities and Exchange Commission (SEC)-registered investment advisor subsidiary • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and causality policies • The operating results of the Company’s investment activities in real estate • The operating results of the Company’s investment debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments Asset Generation and Management AGM includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank).
Securities and Exchange Commission (SEC)-registered investment advisor subsidiary • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and casualty policies • The operating results of the Company’s investment activities in real estate • The operating results of the Company’s investment in debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments Asset Generation and Management AGM includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank).
The GLBA, under the Safeguards Rule, further requires financial institutions to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information.
The GLBA, under the Safeguards Rule, further requires financial institutions to implement a comprehensive information security program that includes administrative, technical, and physical safeguards designed to ensure the security and confidentiality of customer records and information.
FACTS NBS uses the FACTS brand in the K-12 private and faith-based markets. FACTS provides solutions that elevate the K-12 education experience for school administrators, teachers, and families.
FACTS NBS uses the FACTS brand in the K-12 private and faith-based education markets. FACTS provides solutions that elevate the K-12 educational experience for school administrators, teachers, and families.
These regulations are designed to ensure students have convenient access to their Title IV funds, do not incur unreasonable fees, and are not led to believe they must open a financial account to receive such funds. On September 14, 2023, the CFPB issued an industry and markets report specific to tuition payment plans in higher education.
These regulations are designed to ensure students have convenient access to their Title IV funds, do not incur unreasonable fees, and are not led to believe they must open a financial account to receive such funds. In September 2023, the CFPB issued an industry and markets report specific to tuition payment plans in higher education.
Some of the more significant federal laws and regulations include: • The Higher Education Act, which establishes financial responsibility and administrative capability requirements that govern all third-party servicers of federally insured student loans • The Telephone Consumer Protection Act (TCPA), which governs communication methods that may be used to contact customers 13 • The Truth-In-Lending Act (TILA) and Regulation Z, which govern disclosures of credit terms to consumer borrowers • The Fair Credit Reporting Act (FCRA) and Regulation V, which govern the use and provision of information to consumer reporting agencies • The Equal Credit Opportunity Act (ECOA) and Regulation B, which prohibit discrimination on the basis of race, creed, or other prohibited factors in extending credit • The Servicemembers Civil Relief Act (SCRA), which applies to all debts incurred prior to commencement of active military service and limits the amount of interest, including certain fees or charges that are related to the obligation or liability • The Military Lending Act (MLA), which protects active-duty members of the military, their spouses, and their dependents from certain lending practices • The Electronic Funds Transfer Act (EFTA) and Regulation E, which protect individual consumers engaged in electronic fund transfers (EFTs) • The Gramm-Leach-Bliley Act (GLBA) and Regulation P, which govern a financial institution’s treatment of nonpublic personal information about consumers and require that an institution, under certain circumstances, notify consumers about its privacy policies and practices • The California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), which enhances the privacy rights and consumer protection for residents of California • The Federal Bankruptcy laws Title 11 of the U.S.
Some of the more significant federal laws and regulations include: • The Higher Education Act, which establishes financial responsibility and administrative capability requirements that govern all third-party servicers of federally insured student loans • The Telephone Consumer Protection Act (TCPA), which governs communication methods that may be used to contact customers • The Truth-In-Lending Act (TILA) and Regulation Z, which govern disclosures of credit terms to consumer borrowers • The Fair Credit Reporting Act (FCRA) and Regulation V, which govern the use and provision of information to consumer reporting agencies • The Equal Credit Opportunity Act (ECOA) and Regulation B, which prohibit discrimination on the basis of race, creed, or other prohibited factors in extending credit • The Servicemembers Civil Relief Act (SCRA), which applies to all debts incurred prior to commencement of active military service and limits the amount of interest, including certain fees or charges that are related to the obligation or liability • The Military Lending Act (MLA), which protects active-duty members of the military, their spouses, and their dependents from certain lending practices 13 • The Electronic Funds Transfer Act (EFTA) and Regulation E, which protect individual consumers engaged in electronic fund transfers (EFTs) • The Gramm-Leach-Bliley Act (GLBA) and Regulation P, which govern a financial institution’s treatment of nonpublic personal information about consumers and require that an institution, under certain circumstances, notify consumers about its privacy policies and practices • The Federal Bankruptcy laws Title 11 of the U.S.
The Company also makes 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, and renewable energy (solar).
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).
Code, which provides for the reduction or elimination of certain debts • The Electronic Signatures in Global and National Commerce Act (ESIGN), which allows the use of electronic records if the consumer has affirmatively consented to such use and has not withdrawn such consent • Laws prohibiting unfair, deceptive, or abusive acts or practices (UDAAP) • Anti-Money Laundering (AML) laws and regulations designed to detect and prevent money laundering and terrorist financing • Regulations administered and enforced by the Office of Foreign Assets Control (OFAC), which is a U.S. government agency that administers and enforces economic and trade sanctions • Various laws, regulations, and standards that govern government contractors As a student loan servicer for the federal government and for financial institutions, including the Company’s FFELP student loan portfolio, the Company is subject to the Higher Education Act (HEA) and related laws, rules, regulations, and policies.
Code, which provides for the reduction or elimination of certain debts • The Electronic Signatures in Global and National Commerce Act (ESIGN), which allows the use of electronic records if the consumer has affirmatively consented to such use and has not withdrawn such consent • Laws prohibiting unfair, deceptive, or abusive acts or practices (UDAAP) • Anti-Money Laundering (AML) laws and regulations designed to detect and prevent money laundering and terrorist financing • Regulations administered and enforced by the Office of Foreign Assets Control (OFAC), which is a U.S. government agency that administers and enforces economic and trade sanctions • Privacy regulations that enhance privacy rights and consumer protection in various states • Various laws, regulations, and standards that govern government contractors As a student loan servicer for the federal government and for financial institutions, including the Company’s FFELP student loan portfolio, the Company is subject to the Higher Education Act (HEA) and related laws, rules, regulations, and policies.
Talent, development, and training The Company’s talent strategy is focused on attracting the best talent from a diverse range of sources, recognizing and rewarding associates for their performance, and continually developing, engaging, and retaining associates. The Company is committed to the continued development of its people.
Talent, development, and training The Company’s talent strategy is focused on attracting the best talent from a broad range of sources, recognizing and rewarding associates for their performance, and continually developing, engaging, and retaining associates. The Company is committed to the continued development of its people.
(parent company) and its subsidiaries and include a pledged deposit of $40.0 million from Nelnet, Inc., as required under a Capital and Liquidity Maintenance Agreement with the Federal Deposit Insurance Corporation (FDIC), deposits required for intercompany transactions, operating deposits, and NBS custodial deposits consisting of tuition payments collected which are subsequently remitted to the appropriate school.
(parent company) and its subsidiaries and include a pledged deposit of $40.0 million from Nelnet, Inc., as required under a Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating deposits, and NBS custodial deposits consisting of tuition payments collected which are subsequently remitted to the appropriate school.
These investments provide a federal income tax credit under the Internal Revenue Code, equaling 30% to 40% of the eligible project cost, with the tax credit available when the project is placed-in-service. The Company is then allowed to reduce its tax estimates paid to the U.S. Treasury based on the credits earned.
These investments provide a federal income tax credit under the Internal Revenue Code, currently equaling 30% to 70% of the eligible project cost, with the tax credit available when the project is placed in service. The Company is then allowed to reduce its tax estimates paid to the U.S. Treasury based on the credits earned.
The Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations of state law. Most states also have statutes that prohibit unfair and deceptive practices.
The Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations of state laws. Most states also have statutes that prohibit unfair and deceptive practices.
In addition, the Company maintains a separate anonymous portal for any associate concerns about the Company's financial reporting, internal controls, and related matters. Available Information The Company's internet website address is www.nelnet.com, and the Company's investor relations website address is www.nelnetinvestors.com.
In addition, the Company maintains a separate anonymous portal for any associate concerns about the Company's financial reporting, internal controls, and related matters. 19 Available Information The Company's internet website address is www.nelnetinc.com and the Company's investor relations website address is www.nelnetinvestors.com.
As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2023, the Company's ownership correlates to approximately $1.76 billion of loans included in these securitizations. Nelnet Bank Nelnet Bank operates as an internet industrial bank franchise with a home office in Salt Lake City, Utah.
As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2024, the Company's ownership correlates to approximately $1.97 billion of loans included in these securitizations. Nelnet Bank Nelnet Bank operates as an internet industrial bank franchise with a home office in Salt Lake City, Utah.
Competitive pay, benefits, and wellness The general compensation philosophy of the Company, as an organization that values the long-term success of its shareholders, customers, and associates, is that the Company will pay fair, competitive, and equitable compensation designed to encourage focus on the long-term performance objectives of the Company and is differentiated based on both the individual’s performance and the performance of his or her respective business segment.
Competitive pay, benefits, and wellness The general compensation philosophy of the Company, as an organization that values the long-term success of its shareholders, customers, and associates, is that the Company will pay fair, competitive, and equitable compensation designed to encourage focus on the long-term performance objectives of the Company and is differentiated based on both the individual’s performance and the performance of their respective business segment.
Hudl is a leading sports performance analysis company, and its software provides more than 230,000 teams across 40 sports and in 150 countries the insights to be more competitive. David S. Graff, a member of the Company’s Board of Directors, is a co-founder, the chief executive officer, and a director of Hudl.
Hudl is a leading sports performance analysis company, and its software provides more than 300,000 teams across more than 40 sports and in 180 countries the insights to be more competitive. David S. Graff, a member of the Company’s Board of Directors, is a co-founder, the chief executive officer, and a director of Hudl.
In addition, data security and breach incident response continues to be a focus for policymakers at the federal and state levels.
In addition, data security and breach incident response continue to be a focus for policymakers at the federal and state levels.
These software systems have been adapted so they can be offered as hosted servicing software solutions that can be used by third parties for guaranty servicing and to service various types of student loans, including Federal Direct Loan Program and FFEL Program 5 loans.
The servicing software systems provided to third parties have been adapted so they can be offered as hosted servicing software solutions that can be used by third parties for guaranty servicing and to service various types of student loans, including Federal Direct Loan Program and FFEL Program loans.
WRCM earns annual management fees of 10 basis points to 25 basis points for asset-backed securities under management and a share of the gains from the sale of securities or securities being called prior to the full contractual maturity for which it provides advisory services. WRCM earns annual management fees of five basis points for Nelnet stock under management.
WRCM earns annual management fees of 10 basis points to 25 basis points for asset-backed securities under management (management fees) and a share of the gains from the sale of securities or securities being called prior to the full contractual maturity for which it provides advisory services (performance fees).
Tuition Management – Higher education institutions contract with the Company to administer tuition payment plans that allow the student and family to make recurring payments on either a semester or annual basis. The Company earns tuition payment plan services revenue by collecting a fee from either the student or family to administer the plan.
Tuition Management – Higher education institutions contract with the Company to administer tuition payment plans that allow students to make recurring payments on either a semester or annual basis. The Company earns tuition payment plan services revenue by collecting a fee from the student or school to administer the plan.
This report builds on other recent work by the CFPB including reports on financial products and services offered by colleges or in college settings and recent supervisory examinations of institutional student lenders. Based on the CFPB’s focus, the higher education industry may be required to make changes to their product offerings and disclosures.
According to the CFPB, this report built on other work by the CFPB including reports on financial products and services offered by colleges or in college settings and recent supervisory examinations of institutional student lenders. Based on the CFPB’s focus, higher education institutions may be required to make changes to their product offerings and disclosures.
As of December 31, 2023, WRCM had $3.3 billion in assets under management for third-party customers, consisting of student loan asset-backed securities ($2.6 billion) and Nelnet stock ($0.7 billion) - primarily shares of Class B common stock. WRCM's core assets under management are FFELP asset-backed securities.
As of December 31, 2024, WRCM had $3.1 billion in assets under management for third-party customers, consisting of student loan asset-backed securities ($2.4 billion) and Nelnet stock ($0.7 billion) - primarily shares of Class B common stock. WRCM's core assets under management are FFELP asset-backed securities.
NDS believes the investments it has made to scale its systems and to create a secure infrastructure to support the Department's servicing volume and requirements increase its competitive advantage as a long-term partner in the loan servicing market.
We believe the investments NDS has made to scale its systems and to create a secure infrastructure to support the Department's servicing volume and requirements increase its competitive advantage as a long-term partner in the loan servicing market.
One EANS award period ended September 30, 2023 and the final EANS award period ends September 30, 2024, which will have a significant adverse impact to education technology services revenue in future periods. Nelnet Campus Commerce NBS uses the Nelnet Campus Commerce brand to offer payment technologies to higher education institutions.
One EANS award period ended on September 30, 2023 and the final EANS award period ended on September 30, 2024, which will have an adverse impact to education technology services revenue in future periods. Nelnet Campus Commerce NBS uses the Nelnet Campus Commerce brand to offer payment technologies to higher education institutions.
School Management - The Company’s school management solutions include the following products: • Student Information System (SIS) • Family App • Parent Alert • Application & Enrollment • School Site FACTS SIS automates the flow of information between school administrators, teachers, and parents and includes administrative processes such as scheduling, cafeteria management, attendance, and grade book management.
Education Technology - The Company’s education technology solutions include the following products: • Student Information System (SIS) • Family App • Parent Alert • Application & Enrollment • School Site • Learning Management • Teacher Observance & Assessment FACTS SIS automates the flow of information between school administrators, teachers, and parents and includes administrative processes such as scheduling, cafeteria management, attendance, and grade book management.
Included in NFS’s debt securities portfolio are certain of the Company’s own asset-backed securities (bonds and notes payable) that were issued to finance student loans that the Company repurchased in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company’s consolidated financial statements.
Included in NFS’s debt securities portfolio are $97.5 million (par value) of the Company’s own asset-backed securities (bonds and notes payable) that were issued to finance student loans that the Company repurchased in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company’s consolidated financial statements.
The Company raised and invested a total of $94.5 million during 2023 on behalf of its co-investors. Due to the management and control of each of these investment partnerships, such partnerships that invest in tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s portion being presented as noncontrolling interests.
The Company invested a total of $77.0 million during 2024 on behalf of its co-investors. Due to the management and control of each of these investment partnerships, such partnerships that invest in tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s portion being presented as noncontrolling interests.
Loan Servicing and Systems (LSS) • Referred to as Nelnet Diversified Services (NDS) • Focuses on student and consumer loan servicing, loan servicing-related technology solutions, and outsourcing business services • Includes the brands Nelnet Diversified Solutions, Nelnet Loan Servicing, Nelnet Servicing, Firstmark Services, Sloan Servicing, GreatNet, and Nelnet Government Services Education Technology Services and Payments (ETSP) • Referred to as Nelnet Business Services (NBS) • NBS provides education and payment technology and services for K-12 schools, higher education institutions, churches, and businesses in the United States and internationally • Includes the divisions of FACTS, Nelnet Campus Commerce, Nelnet Payment Services, and Nelnet International Asset Generation and Management (AGM) • Included in the Nelnet Financial Services (NFS) division • Includes the acquisition and management of student and other loan assets, including investment interests therein Nelnet Bank • Included in the Nelnet Financial Services (NFS) division • Internet Utah-chartered industrial bank focused on the private education and unsecured consumer loan markets The NFS division has other operating segments that are not reportable as further described below under “Nelnet Financial Services - NFS Other Operating Segments.” All 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." A more detailed description of each of the Company’s operating segments and Corporate and Other Activities is provided below. 3 Loan Servicing and Systems The primary service offerings of this operating segment include: • Servicing federally owned student loans for the Department • Servicing FFELP loans • Servicing private education and consumer loans • Providing backup servicing for FFELP, private education, and consumer loans • Providing student loan servicing software and other information technology products and services • Providing outsourced services including call center, processing, and technology services As of December 31, 2023, the Company serviced $532.6 billion of loans for 16.1 million borrowers.
Loan Servicing and Systems (LSS) - referred to as Nelnet Diversified Services (NDS) • Focuses on student and consumer loan servicing, loan servicing-related technology solutions, and outsourcing business services • Includes the brands Nelnet Diversified Solutions, Nelnet Loan Servicing, Nelnet Servicing, Firstmark Services, Sloan Servicing, and Nelnet Government Services Education Technology Services and Payments (ETSP) - referred to as Nelnet Business Services (NBS) • NBS provides education and payment technology and services for K-12 schools, higher education institutions, churches, and businesses in the United States and internationally • Includes the divisions of FACTS, Nelnet Campus Commerce, Nelnet Payment Services, and Nelnet International Asset Generation and Management (AGM), part of the Nelnet Financial Services (NFS) division • Focused on comprehensive asset management including strategic asset investing, asset allocation, risk management, and performance monitoring within a diverse portfolio • Includes the acquisition and management of student and other loan assets, including investment interests therein Nelnet Bank, part of the Nelnet Financial Services (NFS) division • Internet Utah-chartered industrial bank focused on the private education and unsecured consumer loan markets The NFS division has other operating segments that are not reportable as further described below under “Nelnet Financial Services - NFS Other Operating Segments.” All 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." A more detailed description of each of the Company’s operating segments and Corporate and Other Activities is provided below. 3 Loan Servicing and Systems The primary service offerings of this operating segment include: • Servicing federally owned student loans for the Department • Servicing FFELP loans • Servicing private education and consumer loans • Providing backup servicing for FFELP, private education, and consumer loans • Providing student loan servicing software and other information technology products and services • Providing outsourced services including contact center, processing, and administrative services As of December 31, 2024, the Company serviced $532.4 billion of loans for 15.8 million borrowers.
These costs are allocated to each operating segment based on estimated use of such activities and services • Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs • The operating results of Nelnet Renewable Energy, which include solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar construction and development • The operating results of certain of the Company’s investment activities, including its investment in ALLO and early-stage and emerging growth companies (venture capital investments) • Interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions • Other product and service offerings that are not considered reportable operating segments Nelnet Renewable Energy As of December 31, 2023, the Company has invested a total of $271.9 million (which excludes $198.8 million syndicated to third-party investors) in tax equity investments in renewable energy solar partnerships to support the development and operations of solar projects throughout the country.
These costs are allocated to each operating segment based on estimated use of such activities and services • Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs • The operating results of solar tax equity investments made by the Company and administrative and management services provided by the Company on solar tax equity investments made by third parties • The operating results of Nelnet Renewable Energy, the Company’s solar engineering, procurement, and construction business • The operating results of certain of the Company’s investment activities, including its investment in ALLO and early-stage and emerging growth companies (venture capital investments) • Interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions • Other product and service offerings that are not considered reportable operating segments 11 Solar Tax Equity Investments As of December 31, 2024, the Company has invested a total of $314.8 million and its third-party investors have invested $271.4 million in tax equity investments that remain outstanding in renewable energy solar partnerships that support the development and operations of solar projects throughout the country.
After that period, the contractual agreements typically provide for the Company’s interest in the projects to be purchased in an exit at the fair market value of the discounted forecasted future cash flows allocable to the Company.
After that period, the contractual agreements typically provide for the Company’s entire interest in the projects to be sold at the fair market value of the discounted forecasted future cash flows allocable to the Company.
The results of the survey were an overall engagement score of 74 out of 100, which was slightly better than the survey provider’s industry benchmark. The Company’s management team collected all the feedback and is focusing on making associate-suggested changes so the Company becomes an even better place to work.
In 2023, the Company conducted an associate culture survey, the results of which were an overall engagement score of 74 out of 100, which was slightly better than the survey provider’s industry benchmark. The Company’s management team collected all the feedback and continues to focus on making associate-suggested changes so the Company becomes an even better place to work.
As of December 31, 2023, ALLO had approximately $715 million of debt outstanding, an increase from approximately $340 million as of December 31, 2022. ALLO plans to continue to increase market share and revenue in its existing markets and plans to expand to additional communities.
As of December 31, 2024, ALLO had approximately $1.14 billion of debt outstanding, an increase from approximately $715 million as of December 31, 2023. ALLO plans to continue to increase market share and revenue in its existing markets and plans to expand to additional communities.
The Company earns a monthly fee from its remote hosting customers for each loan or unique borrower on the Company's platform, with a minimum monthly charge for most contracts. As of December 31, 2023 and 2022, 0.1 million and 6.1 million borrowers, respectively, were hosted on the Company's hosted servicing software solution platforms.
The Company earns a monthly fee from its remote hosting customers for each loan or unique borrower on the Company's platform, with a minimum monthly charge for most contracts. As of December 31, 2024, 0.8 million borrowers were hosted on the Company's hosted servicing software solution platforms.
Nelnet Bank extends consumer loans to borrowers in all 50 states plus the District of Columbia. As of December 31, 2023, Nelnet Bank’s loan portfolio was $432.9 million. 10 Deposits Nelnet Bank’s deposits are interest-bearing and consist of brokered certificates of deposit (CDs), retail and other savings deposits and CDs, and intercompany deposits.
Nelnet Bank extends consumer loans to borrowers in all 50 states plus the District of Columbia. As of December 31, 2024, Nelnet Bank’s loan portfolio was $644.6 million. Deposits Nelnet Bank’s deposits are interest-bearing and primarily consist of brokered certificates of deposit (CDs), retail and other savings deposits and CDs, and intercompany deposits.
Investments - real estate As of December 31, 2023, the Company has approximately 40 real estate investments across the United States with a carrying value of $103.8 million. For the majority of its real estate investments, the Company partners with a third-party co-investor that (i) has asset-specific and/or geographic expertise of the underlying property and (ii) manages the day-to-day operations.
Investments - real estate As of December 31, 2024, the Company had approximately 45 real estate investments across the United States with a carrying value of $131.7 million. For the majority of its real estate investments, the Company partners with a third-party co-investor that (i) has asset-specific and/or geographic expertise of the underlying property and (ii) manages the day-to-day operations.
Loans consist of federally insured student (originated under the FFEL Program), private education, consumer, and other loans, including investment interests therein. As of December 31, 2023, AGM's loan portfolio was $12.0 billion. Substantially all of AGM’s loan portfolio (97.0% as of December 31, 2023) is federally insured.
Loans consist of federally insured student (originated under the FFEL Program), private education, consumer, and other loans, including investment interests therein. As of December 31, 2024, AGM's loan portfolio was $9.0 billion. Substantially all of AGM’s loan portfolio (93.7% as of December 31, 2024) is federally insured.
In April 2023, Nelnet Servicing received a contract award from the Department, pursuant to which it was selected to provide continued servicing capabilities for the Department’s student aid recipients under a new Unified Servicing and Data Solution (USDS) contract (the “New Government Servicing Contract”) which will replace the existing legacy Department student loan servicing contract.
In April 2023, Nelnet Servicing received a contract award from the Department, pursuant to which it was selected to provide continued servicing capabilities for the Department’s student aid recipients under a new Unified Servicing and Data Solution (USDS) contract which replaced its legacy Department student loan servicing contract.
As of December 31, 2023, the Company had a $11.7 billion FFELP loan portfolio. Interest income on the Company's existing FFELP loan portfolio will decline over time as the portfolio is paid down. To reduce its reliance on interest income from FFELP loans, the Company has expanded its services and products.
As of December 31, 2024, the Company had an $8.4 billion FFELP loan portfolio. Interest income on the Company's existing FFELP loan portfolio will decline over time as the portfolio is paid down. To reduce its reliance on interest income from FFELP loans, the Company has expanded its services and products.
Nelnet Checkout streamlines all payments through one system and provides a common make-a-payment experience. The Company earns hosting, per transaction, and credit card processing fees for its integrated commerce solutions. Credit card processing fees are included in payment processing revenue. Nelnet Payment Services NBS uses the Nelnet Payment Services brand to provide secure payment processing technology.
Nelnet Checkout streamlines all payments through one system and provides a common make-a-payment experience. The Company earns hosting, per transaction, and credit card processing fees for its integrated commerce solutions. Credit card processing fees are included in payment processing revenue.
Nelnet Campus Commerce offers the following products: • Tuition Management • Integrated Commerce Nelnet Campus Commerce provides service for over 1,000 colleges and universities worldwide and serves over 8 million students and families. Nelnet Campus Commerce generated $129 million and $113 million in revenue for the years ended December 31, 2023 and 2022, respectively.
Nelnet Campus Commerce offers the following products: • Tuition Management • Integrated Commerce 7 Nelnet Campus Commerce provides service for nearly 1,000 colleges and universities and serves over 8 million students. Nelnet Campus Commerce generated $141 million and $129 million in revenue for the years ended December 31, 2024 and 2023, respectively.
In the higher education market, the Company targets business offices at colleges and universities. In this market, the primary competition is from a relatively small number of campus commerce and tuition payment providers, as well as solutions developed in-house by colleges and universities.
In this market, the primary competition is from a relatively small number of campus commerce and tuition payment providers, as well as solutions developed in-house by colleges and universities.
In addition, TCPA lawsuits have asserted putative class action claims. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (CFPB), which has broad authority to regulate a wide range of consumer financial products and services. The Company's student loan servicing business is subject to CFPB supervision and oversight authority.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (CFPB), which has broad authority to regulate a wide range of consumer financial products and services. The Company's student loan servicing business is subject to CFPB supervision and oversight authority.
During 2023, the Company’s two Department remote hosted servicing borrowers, representing 6.0 million borrowers as of December 31, 2022, were transferred to other servicers. These transfer decisions were not based on the Company’s performance.
During 2023, the Company’s two Department remote hosted servicing borrowers, representing 6.0 million borrowers as of December 31, 2022, were transferred to other servicers.
Some of the more significant laws and regulations applicable to Nelnet Bank include: • Regulation W and Federal Reserve Act Sections 23A and 23B, which prevents losses to a bank resulting from affiliate engagement and transfer of a bank’s federal deposit insurance safety net to an affiliate • Community Reinvestment Act, which encourages depository institutions to help meet the credit needs of the communities in which they operate • Federal Trade Commission (FTC) Act, which prevents unfair or deceptive acts or practices and ensures consumer privacy (including the Telephone Sales Rule, FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, and FTC Policy Statement Regarding Advertising Substantiation) • Regulation O, which places limits and conditions on credit extensions that a bank can offer to its executive officers, principal shareholders, directors, and related interests • Right to Financial Privacy Act, which establishes specific procedures that government authorities must follow when requesting a customer’s financial records from a bank or other financial institution • BSA/AML, which specifies the Bank’s commitment to compliance with the Bank Secrecy Act, Anti-Money Laundering (BSA/AML) laws and regulations, including the USA PATRIOT Act, that were enacted to require financial institutions in the United States to assist U.S. government agencies with detecting and preventing money laundering and terrorist financing Regulation D, the Truth in Savings Act (reserve requirements), and Regulation DD (disclosure of deposit terms to customers) will be applicable to Nelnet Bank once consumer deposit products are launched, which is tentatively scheduled for the third quarter of 2024.
Some of the more significant laws and regulations applicable to Nelnet Bank include: • Regulation W and Federal Reserve Act Sections 23A and 23B, which is designed to prevent losses to a bank resulting from affiliate engagement and transfer of a bank’s federal deposit insurance safety net to an affiliate • Community Reinvestment Act, which encourages depository institutions to help meet the credit needs of the communities in which they operate • Federal Trade Commission (FTC) Act, which prevents unfair or deceptive acts or practices and ensures consumer privacy (including the Telephone Sales Rule, FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, and FTC Policy Statement Regarding Advertising Substantiation) • Regulation O, which places limits and conditions on credit extensions that a bank can offer to its executive officers, principal shareholders, directors, and related interests • Right to Financial Privacy Act, which establishes specific procedures that government authorities must follow when requesting a customer’s financial records from a bank or other financial institution • BSA/AML, which requires the Bank’s compliance with the Bank Secrecy Act, Anti-Money Laundering (BSA/AML) laws and regulations, including the USA PATRIOT Act, which were enacted to require financial institutions in the United States to assist U.S. government agencies with detecting and preventing money laundering and terrorist financing • Regulation D, which establishes requirements for depository institutions regarding reserve requirements • Regulation DD, which requires depository institutions to provide clear and accurate disclosures about the terms, fees, and interest rates of deposit accounts to help consumers make informed decisions and compare financial products effectively Nelnet Bank's deposits are insured by the FDIC up to the applicable legal limits under the Deposit Insurance Fund (DIF).
The New Government Servicing Contract has a five year base period, with 2 two-year and 1 one-year possible extensions. The Department’s total loan servicing volume of more than 40 million existing borrowers will be allocated by the Department to Nelnet Servicing and four other third-party servicers that were awarded a USDS contract.
The USDS contract has a five-year base period (through April 2028), with 2 two-year and 1 one-year possible extensions. The Department’s total loan servicing volume of existing borrowers was allocated by the Department to Nelnet Servicing and four other third-party servicers that were awarded a USDS contract.
As of December 31, 2023, ALLO served more than 109,000 residential customers and had almost 49,000 business lines, increases from more than 90,000 and nearly 41,000 as of December 31, 2022, respectively. For the year ended December 31, 2023, ALLO recognized approximately $150 million in revenue. ALLO uses debt to fund a portion of its operations and capital needs.
As of December 31, 2024, ALLO served approximately 135,000 residential customers and had approximately 61,000 business lines, increases from approximately 109,000 and approximately 49,000 as of December 31, 2023, respectively. For the year ended December 31, 2024, ALLO recognized approximately $190 million in revenue. ALLO uses debt to fund a portion of its operations and capital needs.
The Company provides a comprehensive benefits package, opportunities for retirement savings, and a robust wellness program. The holistic wellness program focuses on four pillars: personal, professional, physical, and financial well-being. Culture, values, and ethics The Company believes acting ethically and responsibly is the right thing to do, and embraces core values of open, honest communication in work environments.
The Company provides a comprehensive benefits package, opportunities for retirement savings, and a robust wellness program. Culture, values, and ethics The Company believes acting ethically and responsibly is the right thing to do, and it embraces core values of open, honest communication in work environments.
As of December 31, 2023, the par value and fair value of the Company’s debt securities held in the NFS division, including its own asset backed securities, was $905.1 million and $828.5 million, respectively. The Company has entered into repurchase agreements (debt), the proceeds of which are collateralized by the asset-backed securities (bond investments).
As of December 31, 2024, the par value and fair value of the Company’s debt securities held in the NFS division, including its own asset backed securities, was $546.4 million and $505.7 million, respectively. Historically, the Company has entered into repurchase agreements (debt), the proceeds of which are collateralized by a portion of the asset-backed securities (bond investments).
In addition to the credits, the Company structures the investments to receive quarterly distributions of cash from the operating earnings of the solar project for a period of at least five years (so the tax credits are not recaptured).
In addition to the credits, the Company structures the investments to receive quarterly distributions of cash from the operating earnings of the solar project for a period of at least five years after the project is placed in service.
As a consolidated subsidiary of the Company, the Bank’s assets, liabilities, results of operations, and cash flows are reflected in the Company’s consolidated financial statements, and the industrial bank charter allows the Company to maintain its other diversified business offerings. Loans Nelnet Bank serves a niche market, with a concentration in the private education and unsecured consumer loan markets.
As a consolidated subsidiary of the Company, the Bank’s assets, liabilities, results of operations, and cash flows are reflected in the Company’s consolidated financial statements, and the industrial bank charter allows the Company to maintain its other diversified business offerings.
The Company’s giving solution is a comprehensive donation platform that streamlines donor communications, organizes donor information, and provides access to data analysis and reporting. The Company earns subscription fees and payment processing revenues for these services.
Payment Forms allows schools to create forms for event registrations and permissions coupled with an automated way to collect payments. The Company’s giving solution is a comprehensive donation platform that streamlines donor communications, organizes donor information, and provides access to data analysis and reporting. The Company earns subscription fees and payment processing revenues for these services.
Accordingly, WRCM is beginning to transition away from FFELP asset-backed securities to additional asset-backed asset classes (consumer and collateralized loan obligations).
As new FFELP loans are not being originated, WRCM is beginning to transition away from FFELP asset-backed securities to additional asset-backed asset classes (consumer and collateralized loan obligations).
In addition to the reportable operating segments of AGM and Nelnet Bank being part of the NFS division, NFS’s other operating segments that are not reportable (that were previously included in Corporate and Other Activities) include: • The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S.
NFS includes the reportable operating segments of AGM and Nelnet Bank. NFS’s other operating segments that are not reportable include: • The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S.
The Company owns many copyright-protected works, including its various computer system codes and displays, websites, and marketing materials. The Company also has trade secret rights to many of its processes and strategies and its software product designs.
The Company believes its Marks have developed and continue to develop strong brand-name recognition in the industry and the consumer marketplace. The Company owns many copyright-protected works, including its various computer system codes and displays, websites, and marketing materials. The Company also has trade secret rights to many of its processes and strategies and its software product designs.
The Company has executed an agreement with a third-party servicer awarded a USDS contract with the Department to license its servicing software to such entity and the Company will earn remote hosted servicing revenue from this new customer when USDS goes live, which is anticipated to be in the second quarter of 2024.
However, the Company has executed an agreement with a third-party servicer that was awarded a USDS contract with the Department to license its servicing software to such entity and the Company began earning remote hosted servicing revenue from this new customer during the second quarter of 2024.
The Company’s grant and aid assessment service helps K-12 schools evaluate and determine the amount of financial aid to disburse to the families it serves. The Company earns service revenue by charging a fee for grant and aid applications processed.
The Company’s grant and aid assessment service helps K-12 schools evaluate and determine the amount of financial aid to disburse to the families it serves.
Retail and other savings deposits include deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trusts (STFIT), and commercial and institutional CDs. The intercompany deposits are deposits from Nelnet, Inc.
Retail and other savings deposits include deposits from Educational 529 College Savings plans, Health Savings plans, retirement savings plans, Short Term Federal Investment Trust (STFIT), commercial and consumer savings, and Federal Deposit Insurance Corporation (FDIC) sweep deposits. The intercompany deposits are deposits from Nelnet, Inc.
These services provide continuous advanced learning and professional development while helping private schools identify and attain equitable participation in Title I and Title II federal education programs under the Every Student Succeeds Act (ESSA).
These services provide continuous advanced learning and professional development while helping private schools identify and attain equitable participation in Title I and Title II federal education programs under the Every Student Succeeds Act (ESSA). Federal pandemic-related funds under the Emergency Assistance to Non-Public Schools (EANS) program provided funding for these learning management solutions.
Nelnet International offers the following products: • Integrated Commerce • Financial Management • School Management Nelnet International provides its services and technology to schools in 64 countries, with the largest concentrations in Australia, New Zealand, and the Asia-Pacific region. Nelnet International generated $8 million and $7 million in revenue for the years ended December 31, 2023 and 2022, respectively.
Nelnet International provides its services and technology to approximately 675 schools in 69 countries, with the largest concentrations in Australia, New Zealand, and the Asia-Pacific region. Nelnet International generated $9 million and $8 million in revenue for the years ended December 31, 2024 and 2023, respectively.
The Company earns subscription fees and per transaction revenues for providing these services. Competition The Company is the largest provider of tuition management and financial needs assessment services to the private and faith-based K-12 market in the United States. Competitors include financial institutions, tuition management providers, financial needs assessment providers, accounting firms, and a myriad of software companies.
Competition The Company is the largest provider of tuition management and financial needs assessment services to the private and faith-based K-12 market in the United States. Competitors include financial institutions, tuition management providers, financial needs assessment providers, accounting firms, and a myriad of software companies. In the higher education market, the Company targets business offices at colleges and universities.
As such, the Company is actively acquiring private education, consumer, and other loans, or investment interests therein (see below under “Beneficial interest in loan securitizations”), and plans to expand these portfolios. During 2023, the Company purchased $556.1 million of private education, consumer, and other non-FFELP loans.
As such, the Company is actively acquiring consumer and other non-FFELP loans or investment interests therein (see below under “Beneficial interest in loan securitizations”) and plans to expand these portfolios. During 2024, the Company purchased $599.5 million of consumer and other non-FFELP loans. AGM's competition for the purchase of loan portfolios includes banks, hedge funds, and other finance companies.
Providing outsourced services including call center, processing, and technology services NDS provides business process outsourcing primarily specializing in contact center management. The contact center solutions and services include taking inbound calls, helping with outreach campaigns and sales, and interacting with customers through multi-channels. Processing services include application processing and verification, payment processing, credit dispute, and account management services.
The contact center solutions and services include taking inbound calls, helping with outreach campaigns and sales, and interacting with customers through multi-channels. Processing services include application processing and verification, payment processing, credit dispute, and account management services. As of December 31, 2024, NDS provided business process outsourcing to 37 customers.
Currently, Nelnet Bank offers refinance private education loan options to borrowers that have higher priced private education and/or federal student loan debt and in-school private education loans to students attending higher education institutions. Unsecured consumer loans consist of home improvement loans and refinance loans for consumers to consolidate credit card and other general-purpose debt.
Currently, Nelnet Bank offers refinance private education loan options to borrowers that have higher priced private education and/or federal student loan debt and in-school private education loans to students attending higher education institutions.
Servicing FFELP loans NDS services AGM’s FFELP student loan portfolio and the portfolios of third parties. The loan servicing activities include loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence 4 procedures, funds management reconciliations, and claim processing.
Servicing FFELP loans NDS services AGM’s FFELP student loan portfolio, as well as the portfolios of 93 third-party servicing customers as of December 31, 2024. The loan servicing activities include loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliations, and claim processing. The Company uses proprietary systems to manage the servicing process.
Nelnet Payment Services supports and provides payment processing services, including credit card and electronic transfers, to the other divisions of NBS and Nelnet in addition to other third-party industries and software platforms across the United States. Nelnet Payment Services offers mobile, in-person, and online solutions for customers to collect, process, and view credit card and Automated Clearing House (ACH) payments.
Nelnet Payment Services Nelnet Payment Services supports and provides secure payment processing services, including credit card and electronic transfers, to the other divisions of NBS and Nelnet in addition to other third-party industries and software platforms across the United States.
The Company also provides payment technologies and payment services for software platforms, businesses, and nonprofits beyond the K-12 and higher education space. As a service provider that takes payment instructions from institutions and their constituents and sends them to bank partners, the Company is directly or indirectly subject to a variety of federal and state laws and regulations.
The Company anticipates additional states adopting similar laws. Education Technology Services and Payments As a service provider that takes payment instructions from institutions and their constituents and sends them to bank partners, the Company is directly or indirectly subject to a variety of federal and state laws and regulations.
Strategic talent reviews and succession planning occur on a planned cadence annually across all business areas. The executive team convenes meetings with senior leadership and the board of directors to review top enterprise talent.
Strategic talent reviews and succession planning occur on a planned cadence annually across all business areas. The executive team convenes meetings with senior leadership and the board of directors to review top enterprise talent. Nelnet’s Associate Experience team offers programs like resource groups, mentoring, and educational topics that support our core value of creating a great workplace.
As an originator of private education and consumer loans, Nelnet Bank is subject to federal and state consumer protection, privacy, and related laws and regulations. In addition to having to comply with the majority of laws and regulations addressed in the Loan Servicing and Systems section, there are additional laws and regulations Nelnet Bank must follow.
In addition to having to comply with the majority of laws and regulations addressed in the Loan Servicing and Systems section, there are additional laws and regulations Nelnet Bank must follow. Nelnet, Inc.
Employee recruitment, engagement, and retention The Company works diligently to attract the best talent from a diverse range of sources that are expected to meet the current and future demands of its businesses, and has established relationships with trade schools, universities, professional associations, and industry groups to proactively attract talent. 17 In 2023, the Company conducted an associate culture survey using a leading outside firm that specializes in employee engagement.
The Company is not involved in any material disputes with any of its associates, and the Company believes that relations with its associates are good. 18 Employee recruitment, engagement, and retention The Company works diligently to attract the best talent from a broad range of sources that are expected to meet the current and future demands of its businesses, and has established relationships with trade schools, universities, professional associations, and industry groups to proactively attract talent.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSustained higher FFEL Program loan prepayments and/or a significant increase in FFEL Program loan prepayments could have a material adverse impact in future periods on net interest income in our AGM segment, FFELP servicing revenue in our LSS segment, investment advisory services revenue earned by WRCM on FFELP loan asset-backed securities under management, and interest income earned on our FFELP loan asset-backed securities investments.
Biggest changeNew or modified Government programs or policies may lead to increased call volumes and have a negative effect on the level of service we are able to provide. 21 Sustained higher prepayment levels and/or a significant increase in prepayment levels could have a material adverse effect on our revenues, cash flows, profitability, and business outlook, and, as a result, could have a material adverse effect on our business, financial condition, or results of operations, including net interest income in our AGM segment, FFELP servicing revenue in our LSS segment, investment advisory services revenue earned by WRCM on FFELP loan asset-backed securities under management, and interest income earned on our FFELP loan asset-backed securities investments.
Loan Portfolio Our loan portfolios, and investment interests therein, are subject to prepayment risk, credit risk, and certain risks related to interest rates, and the derivatives we use to manage interest rate risks, each of which could reduce the expected cash flows and earnings on our portfolios.
Loan Portfolio Our loan portfolios, and investment interests therein, are subject to credit risk, prepayment risk, and certain risks related to interest rates, and the derivatives we use to manage interest rate risks, each of which could reduce the expected cash flows and earnings on our portfolios.
The failure to safeguard the privacy of personal information could result in significant legal and reputational harm. We are subject to complex and evolving laws and regulations, both inside and outside of the U.S., governing the privacy and protection of personal information of individuals.
Failure to safeguard the privacy of personal information could result in significant legal and reputational harm. We are subject to complex and evolving laws and regulations, both inside and outside of the U.S., governing the privacy and protection of personal information of individuals.
Our articles of incorporation provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, a specifically designated Nebraska state court located in Lincoln, Nebraska (or, if that court does not have jurisdiction, the federal district court for the District of Nebraska located in Lincoln, Nebraska) will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf or in the right of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or our shareholders; (iii) any action asserting a claim arising under any provision of the Nebraska Model Business Corporation Act or our articles of incorporation or bylaws (as each may be amended from time to time); or (iv) any action asserting a claim governed by the internal affairs doctrine.
Our articles of incorporation provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, a specifically designated Nebraska state court located in Lincoln, Nebraska (or, if that court does not have jurisdiction, the federal district court for the District of Nebraska located in Lincoln, Nebraska) will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf or in the right of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or our shareholders; (iii) any action asserting a claim arising under any provision of the Nebraska Model Business Corporation Act or our articles of 33 incorporation or bylaws (as each may be amended from time to time); or (iv) any action asserting a claim governed by the internal affairs doctrine.
In addition, due to lack of Federal government appropriations the Department may modify its cost under existing contracts with its servicers and accordingly reduce servicers’ required servicing activities, and such modifications could adversely impact the Company’s servicing revenue and operating results, as well as the level of service we are able to provide, that may result in additional scrutiny from federal and state government regulatory agencies and reputation damage.
In addition, due to lack of Federal government appropriations the Department may modify its cost under existing contracts with its servicers and accordingly reduce servicers’ required servicing activities, and such modifications could adversely impact the Company’s servicing revenue and operating results, as well as the level of 24 service we are able to provide, that may result in additional scrutiny from federal and state government regulatory agencies and reputation damage.
Cyberattack techniques change frequently, generally increase in sophistication, often are not recognized until launched, sometimes go undetected even when successful, and originate from a wide variety of sources, including organized crime, hackers, terrorists, activists, disgruntled customers or consumers, unapproved use of artificial intelligence or machine learning, and hostile foreign governments.
Also, cyberattack techniques change frequently, generally increase in sophistication, often are not recognized until launched, sometimes go undetected even when successful, and originate from a wide variety of sources, including organized crime, hackers, terrorists, activists, disgruntled customers or consumers, unapproved use of artificial intelligence or machine learning, and hostile foreign governments.
Our failure to successfully manage acquisitions or investments, or successfully integrate acquisitions, could have a material adverse effect on our businesses, financial condition, or results of operations. Our significant investments in ALLO and Hudl are subject to a number of risks, including macroeconomic conditions, competition, political and regulatory requirements, technology advancements, cybersecurity threats, and retention of key personnel.
Our failure to successfully manage acquisitions or investments, or successfully integrate acquisitions, could have a material adverse effect on our businesses, financial condition, or results of operations. 31 Our significant investments in ALLO and Hudl are subject to a number of risks, including macroeconomic conditions, competition, political and regulatory requirements, technology advancements, cybersecurity threats, and retention of key personnel.
If defaults are higher than management's current estimate, future cash flows and investment interest income (earnings) from these securitizations would be adversely impacted. In addition, the value of the current investment balance may not be recoverable, resulting in an adverse impact to our operating results.
If defaults are higher than management's current estimate, future cash flows and investment interest income 20 (earnings) from these securitizations would be adversely impacted. In addition, the value of the current investment balance may not be recoverable, resulting in an adverse impact to our operating results.
Our third-party service providers may be vulnerable to damage or interruption from natural disasters, power loss, cyberattacks, telecommunications failures, geopolitical 28 disruption, breakdowns or failures of their systems, employee negligence or misconduct, supply chain disruptions, acts of terrorism, and similar events.
Our third-party service providers may be vulnerable to damage or interruption from natural disasters, power loss, cyberattacks, telecommunications failures, geopolitical disruption, breakdowns or failures of their systems, employee negligence or misconduct, supply chain disruptions, acts of terrorism, and similar events.
In addition, our interest rate risk management activities could expose us to substantial mark-to-market losses if interest rates move in a materially different way than was expected based on the environment when the derivatives were entered into.
In addition, our interest rate risk 22 management activities could expose us to substantial mark-to-market losses if interest rates move in a materially different way than was expected based on the environment when the derivatives were entered into.
If we are subjected to significant fines, or loss of insurance or guarantees on a material number of FFELP loans, or if we lose our ability to service FFELP loans, it could have a material adverse impact on our business, financial condition, or results of operations.
If we are subjected to significant fines, or loss of insurance or guarantees on a material number of 28 FFELP loans, or if we lose our ability to service FFELP loans, it could have a material adverse impact on our business, financial condition, or results of operations.
Concerns about the effectiveness of our measures to safeguard personal information and abide by privacy preferences, or even the perception that those measures are inadequate, could cause the loss of existing or potential customers and thereby reduce our revenue.
Concerns about the effectiveness of our measures to safeguard personal information and abide by privacy preferences, or even the perception that those measures are inadequate, could cause the loss of existing or potential customers and thereby reduce our 29 revenue.
The operating results of any of our investments, 31 including ALLO and Hudl, could impact the valuation on our financial statements of our investments in them, and we may not be able to fully monetize these investments without a liquidation event.
The operating results of any of our investments, including ALLO and Hudl, could impact the valuation on our financial statements of our investments in them, and we may not be able to fully monetize these investments without a liquidation event.
We cannot predict specifically when and where such events 23 will occur, or the full nature and extent thereof, and our resiliency planning may not be sufficient to mitigate the adverse consequences of such events.
We cannot predict specifically when and where such events will occur, or the full nature and extent thereof, and our resiliency planning may not be sufficient to mitigate the adverse consequences of such events.
Any reductions or modifications to, or the elimination or adverse interpretation of, governmental regulations or incentives that support renewable energy, or the imposition of taxes, tariffs, or other assessments on renewable energy or renewable energy equipment, could negatively impact this business unit.
Any reductions or adverse modifications to, or the elimination or adverse interpretation of, governmental regulations or incentives that support renewable energy, or the imposition of taxes, tariffs, or other assessments on renewable energy or renewable energy equipment, could negatively impact this business.
In addition, several states are in a deficit position. Accordingly, states may look to expand their taxable base, alter their tax calculation, or increase tax rates, which could result in additional costs to the us.
In addition, several states are in a deficit position. Accordingly, states may look to expand their taxable base, alter their tax calculation, or increase tax rates, which could result in additional costs to us.
Ineffective or inadequate use of AI by us or our vendors could produce deficient, inaccurate, or biased analyses or customer responses and prevent us from detecting quality or network security issues.
Ineffective or inadequate use of AI by us or our vendors 27 could produce deficient, inaccurate, or biased analyses or customer responses and prevent us from detecting quality or network security issues.
If improper or illegal activities are found, we could become subject to various 29 civil and criminal penalties, including those under the civil U.S. False Claims Act.
If improper or illegal activities are found, we could become subject to various civil and criminal penalties, including those under the civil U.S. False Claims Act.
The inherent uncertainties of estimating loss reserves are generally greater for reinsurance companies as compared to primary insurers, primarily due to (i) the lapse of time from the occurrence of an event to the reporting of the claim and the ultimate resolution or settlement of the claim; (ii) the diversity of development patterns among different types of reinsurance treaties; and (iii) the necessary reliance on the ceding company for information regarding claims.
The inherent uncertainties of estimating loss reserves are generally greater for reinsurance companies as compared to direct primary insurers, primarily due to (i) the lapse of time from the occurrence of an event to the reporting of the claim and the 30 ultimate resolution or settlement of the claim; (ii) the diversity of development patterns among different types of reinsurance treaties; and (iii) the necessary reliance on the ceding company for information regarding claims.
Our inability to consistently surpass competitor performance metrics, unfavorable contract modifications or interpretations, or the loss of servicing borrower volume due to broad based debt cancellation by the Department, could significantly lower servicing revenue in our LSS segment, hinder future service opportunities, and have a material adverse impact on our business, financial condition, or results of operations.
Our inability to consistently meet service requirements and surpass competitor performance metrics, unfavorable contract modifications or interpretations, or the loss of servicing borrower volume due to broad based debt cancellation by the Department, could significantly lower servicing revenue in our LSS segment, hinder future service opportunities, and have a material adverse impact on our business, financial condition, or results of operations.
ALLO derives its revenue primarily from the sale of telecommunication services, which are subject to intense competition and extensive federal, state, and local regulations, as well as tailwinds from the pace of construction permitting and inflationary costs. Additionally, ALLO’s success is dependent on it maintaining and expanding its infrastructure and continuing to increase market share in existing and new markets.
ALLO derives its revenue primarily from the sale of telecommunication services, which are subject to intense competition and extensive federal, state, and local regulations, as well as headwinds from the pace of construction permitting and inflationary costs. Additionally, ALLO’s success is dependent on it maintaining and expanding its infrastructure and continuing to increase market share in existing and new markets.
Our businesses would also be harmed if our customers and potential customers believe our services are unreliable. Some of our third-party service providers may engage vendors of their own as they provide services or technology solutions for our operations, which introduces the same risks that these “fourth parties” could be the source of operational and cybersecurity failures.
Our businesses would also be harmed if our customers and potential customers believe our services are unreliable. Some of our third-party service providers may engage vendors of their own as they provide services or technology solutions for our operations, which introduces the same risks that these “fourth parties” could be the sources of operational and cybersecurity failures.
Government entities in the U.S. often reserve the right to audit contract costs and conduct inquiries and investigations of business practices. These entities also conduct reviews and investigations and make inquiries regarding systems, including systems of third parties, used in connection with the performance of the contracts. Negative findings could adversely affect the contractor’s future revenues and profitability.
Government entities in the U.S. often reserve the right to audit contract costs and conduct inquiries and investigations of business practices. These entities also conduct reviews and investigations and make inquiries regarding systems, including systems of third parties, used in connection with the performance of the contracts. Negative findings could adversely affect our future revenues and profitability.
Our results of operations and financial condition will depend upon our ability to accurately assess the potential losses associated with the risks we reinsure.
Our results of operations and financial condition depend upon our ability to accurately assess the potential losses associated with the risks we reinsure.
Dunlap has control over all of our matters and has the ability to take actions that benefit him, but may not benefit other minority shareholders, and may otherwise exercise his control in a manner with which other minority shareholders may not agree or which they may not consider to be in their best interests.
Dunlap has control over all of our matters and has the ability to take actions that benefit him, but may not benefit other minority shareholders, and may otherwise exercise his control in a manner with which other minority shareholders may not agree or which they may not consider to be in their best interest.
Credit risk - beneficial interest in loan securitizations We own partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as "beneficial interest in loan securitizations" and included in "investments and notes receivable" on our consolidated balance sheets.
Credit risk - beneficial interest in loan securitizations We own partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as "beneficial interest in loan securitizations" and included in "other investments and notes receivable, net" on our consolidated balance sheets.
Consumer access to alternative means of financing, the costs of education, interest rates, and other factors may reduce demand for, or adversely affect Nelnet Bank’s ability to, retain private education loans and the bank’s ability to originate new loans.
Consumer access to alternative means of financing, the costs of education, interest rates, economic conditions, and other factors may reduce demand for, or adversely affect Nelnet Bank’s ability to retain, private education loans and the bank’s ability to originate new loans.
In addition, if any current or future Department servicing contracts become subject to unfavorable modifications or interpretations by the Department, including adverse pricing changes, servicing revenue would be negatively impacted and could result in potential restructuring charges that may be necessary to re-align our cost structure with our servicing operations.
In addition, if any current or future Department servicing contracts become subject to unfavorable modifications or interpretations by the Department, including adverse pricing changes or assessed performance penalties, servicing revenue would be negatively impacted and could result in potential restructuring charges that may be necessary to re-align our cost structure with our servicing operations.
We rely on third parties for a wide array of services for our customers, and to meet our contractual obligations. The failure of a third party with which we work could adversely affect our business performance and reputation. We rely on third parties for many critical operational services, technology, software development, datacenter hosting facilities, cloud computing platforms, and software.
We rely on third parties for a wide array of services for our customers, and to meet our contractual obligations. The failure of a third party with which we work could adversely affect our business performance and reputation. We rely on third parties for many critical operational services, technology, software development, data center hosting facilities, cloud computing platforms, and software.
Operational risks associated with our renewable energy business include, but are not limited to, risks associated with facility start-up operations, compliance risks (including penalties for failures to comply), supply chain risks, climate change risks (including severe weather events), performance below expected or contracted levels of output or production, safety risks, labor availability risks (including our ability to hire and retain talent with solar construction experience), equipment breakdown, ability of offtakers and other counterparties to renewable energy contracts to pay or perform as required, warranty claims, shifting demand and regulatory changes/uncertainty, and insufficient insurance, warranties, and/or indemnities to cover the costs of the foregoing.
Operational risks associated with our renewable energy businesses include, but are not limited to, risks associated with facility start-up operations, compliance risks (including penalties for failures to comply), supply chain risks, tariff risks, climate change risks (including severe weather events), performance below expected or contracted levels of output or production, safety risks, labor availability risks (including our ability to hire and retain talent with solar construction experience), equipment breakdown, ability of offtakers and other counterparties to renewable energy contracts to pay or perform as required, warranty claims, shifting demand and regulatory changes/uncertainty, loss of key personnel, and insufficient insurance, warranties, and/or indemnities to cover the costs of the foregoing.
For additional information, see the MD&A 30 - “Liquidity and Capital Resources - Liquidity Impact Related to Nelnet Bank.” However, any failure to meet minimum capital requirements and FDIC regulations can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material adverse impact on our business, financial condition, or results of operations.
For additional information, see the MD&A - “Liquidity and Capital Resources - Sources and Needs of Liquidity - Nelnet Bank.” However, any failure to meet minimum capital requirements and FDIC regulations can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material adverse impact on our business, financial condition, or results of operations.
Prepayment risk Higher rates of prepayments of student loans, including consolidations by the Department through the Federal Direct Loan Program or private refinancing programs, reduce our interest income. The Higher Education Act allows borrowers to prepay FFEL Program loans at any time without penalty.
Prepayment risk Higher rates of prepayments of student loans, including consolidation of FFELP loans by the Department through the Federal Direct Loan Program or private refinancing programs, reduce our interest income. The Higher Education Act allows borrowers to prepay FFEL Program loans at any time without penalty.
See note 22 of the notes to consolidated financial statements included in this report for additional information related to the transactions between us and Union Bank.
See note 23 of the notes to consolidated financial statements included in this report for additional information related to the transactions between us and Union Bank.
We fund the majority of the FFELP student loan assets in our AGM segment with one-month or three-month Secured Overnight Financing Rate (SOFR) indexed floating rate securities. Meanwhile, the interest earned on our FFELP student loan 21 assets is indexed to 30-day average SOFR, three-month commercial paper, and three-month Treasury bill rates.
Interest rate risk - basis and repricing risk We fund the majority of the FFELP student loan assets in our AGM segment with one-month or three-month Secured Overnight Financing Rate (SOFR) indexed floating rate securities. Meanwhile, the interest earned on our FFELP student loan assets is indexed to 30-day average SOFR, three-month commercial paper, and three-month Treasury bill rates.
Climate change manifesting as physical or transition risks could have a material adverse impact on our operations, vendors, and customers. Our businesses, and the activities of our vendors and customers, could be impacted by climate change.
Climate change manifesting as physical or transition risks could have a material adverse impact on our operations, vendors, and customers. Our businesses, including our reinsurance business, and the activities of our vendors and customers, could be impacted by climate change.
Additionally, some of our vendors use AI to enhance their products and services. Our use of AI, as well as the use by our vendors, may increase over time as the technology continues to develop. Our competitors may incorporate AI into their products or operations more quickly and effectively than we do, which could impair our ability to compete effectively.
Our use of AI, as well as the use by our vendors, may increase over time as the technology continues to develop. Our competitors may incorporate AI into their products or operations more quickly and effectively than we do, which could impair our ability to compete effectively.
These loan programs are authorized by the Higher Education Act and are subject to periodic reauthorization and changes to the programs by the Administration and Congress.
These loan programs are authorized by the Higher Education Act and are subject to periodic reauthorization and changes to the programs by the Trump-Vance Administration and Congress.
Muhleisen serves as a Director, Co-Chairperson, and Chief Executive Officer of F&M and as a Director, Chairperson, and member of the executive committee of Union Bank.
Muhleisen serves as a Director and Co-Chairperson of F&M and as a Director, Chairperson, and member of the executive committee of Union Bank.
The operation and profitability of our renewable energy business is subject to and depends in significant part upon complex federal, state, and other laws and regulations, including the Inflation Reduction Act, which regulate and, in some instances, incentivize the production of renewable energy.
The operation and profitability of our solar construction business are subject to and depends in significant part upon complex federal, state, and other laws and regulations, including the Inflation Reduction Act, which regulate and, in some instances, incentivize the production of renewable energy.
Since late 2021, we have experienced accelerated run-off of our FFELP loan portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of initiatives offered by the Department for FFELP borrowers to qualify for loan forgiveness under various programs and the continued extension of the CARES Act payment pause on Department held loans.
Beginning in late 2021, we have experienced accelerated run-off of our FFELP loan portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of initiatives offered by the Department under the Biden-Harris Administration for FFELP borrowers to qualify for loan forgiveness under various programs and the continued extension of the CARES Act payment pause on Department held loans.
For the years ended December 31, 2023, 2022, and 2021, we earned $2.2 million, $57.4 million, and $142.6 million, respectively, of gross fixed rate floor income. The decrease in the amount of fixed rate floor income earned by us was due to an increase in interest rates.
For the years ended December 31, 2024, 2023, and 2022, we earned $1.2 million, $2.2 million, and $57.4 million, respectively, of gross fixed rate floor income. The decrease in the amount of fixed rate floor income earned by us was due to an increase in interest rates.
For derivatives not required to be executed through an exchange or central clearinghouse (“non-centrally cleared derivatives,”) we are exposed to credit risk. All of Nelnet Bank’s derivatives are non-centrally cleared derivatives. We attempt to manage credit risk by entering into transactions with high-quality counterparties.
For derivatives not required to be executed through a clearinghouse (“non-centrally cleared derivatives,”) we are exposed to credit risk. All of Nelnet Bank’s derivatives are non-centrally cleared derivatives. We attempt to manage credit risk by entering into transactions with high-quality counterparties.
We intend to maintain our relationship with Union Bank, which our management believes provides certain benefits to us, including Union Bank's knowledge of and experience in the FFELP industry, its willingness to provide services, and at times liquidity and capital resources, on an expedient basis, and its proximity to our corporate headquarters in Lincoln, Nebraska.
We intend to maintain our relationship with Union Bank, which our management believes provides certain benefits to us, including Union Bank's willingness to provide services, and at times liquidity and capital resources, on an expedient basis, and its proximity to our corporate headquarters in Lincoln, Nebraska.
If we cannot find funding alternatives, we would have to fund the collateral using operating cash (negatively impacting our liquidity), consider the sale of assets (that could result in losses), and/or lose our collateral, including the loan assets and cash advances, related to these facilities. We are subject to economic and market fluctuations related to our investments.
If we cannot find funding alternatives, we would have to fund the collateral using operating cash (negatively impacting our liquidity), consider the sale of assets (that could result in losses), and/or lose our collateral, including the loan assets and cash advances, related to these facilities.
Our estimated allowance for loan losses is based on periodic evaluations of the credit risk in our loan portfolios, including the consideration of the following factors (as applicable), for each of our loan portfolios: loans in repayment versus those in nonpaying status; delinquency status; type of private education or consumer loan program; trends in defaults in the portfolio based on internal and industry data; past experience; trends in federally insured student loan claims rejected for payment by guarantors; changes to federal student loan programs; the FICO scores of borrowers; current macroeconomic factors, including unemployment rates, gross domestic product, and consumer price index; and other relevant qualitative factors.
Our estimated allowance for loan losses is based on periodic evaluations of the various factors impacting credit risk in our loan portfolios, including repayment status; delinquency status; type of private education or consumer loan program; trends in defaults in the portfolio based on internal and industry data; past experience; trends in federally insured student loan claims rejected for payment by guarantors; changes to federal student loan programs; the FICO scores of borrowers; current macroeconomic factors, including unemployment rates, gross domestic product, and consumer price index; and other relevant qualitative factors.
Reserves are estimates at a given time of claims an insurer ultimately expects to pay, based upon facts and circumstances then known, predictions of future events, estimates of future trends in claim severity, and other variable factors.
Reserves are estimates at a given time of claims an insurer ultimately expects to pay, generally utilizing actuarial expertise and projection techniques based upon facts and circumstances then known, predictions of future events, estimates of future trends in claim severity, and other variable factors.
If any renewable energy project under our long-term ownership or financed by us or otherwise constructed by us is not completed, is delayed, is subject to changes in size, scope, or design, or is subject to cost overruns, we may incur material costs that we may not be able to recover through regulatory or other contractual mechanisms, including obligations to make delay or termination payments, to incur costs without ability to recoup those costs via change order or re-pricing, loss of tax credits and benefits, loss of environmental incentives, or delayed or diminished returns, which could require us to write off all or a portion of our investment in the applicable project(s) and/or recognize costs in excess of contractual revenue to be earned from third party construction customers.
If any of our renewable energy projects are not completed, are delayed, are subject to changes in size, scope, or design, or are subject to cost overruns, we may incur material costs that we may not be able to recover, including obligations to make delay or termination payments, to incur costs without ability to recoup those costs via change order or re-pricing, loss of 25 tax credits and benefits, loss of environmental incentives, or delayed or diminished returns, which could require us to write off all or a portion of our investment in the applicable project(s) and/or recognize costs in excess of contractual revenue to be earned from third party construction customers.
As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2023, the Company's ownership correlates to approximately $1.76 billion of loans included in these securitizations. As of December 31, 2023, the investment balance on our consolidated balance sheet of its beneficial interest in loan securitizations was $225.1 million.
As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2024, our ownership correlates to approximately $1.97 billion of loans included in these securitizations. As of December 31, 2024, the investment balance on our consolidated balance sheet of its beneficial interest in loan securitizations was $213.8 million.
Due to our use of Amazon Web Services (AWS) and Microsoft 365 for a significant amount of our technology products and services, as well as the dependence of many of our third-party service providers on AWS and Microsoft 365, the stability and availability of AWS and Microsoft 365 is critical to our business.
Due to our use of Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Computing Services for a significant amount of our technology products and services, as well as the dependence of many of our third-party service providers on these platforms, the stability and availability of these platforms is critical to our business.
As of December 31, 2023, our AGM segment had $10.9 billion, $0.4 billion, and $0.4 billion of FFELP loans indexed to the 30-day average SOFR, three-month commercial paper, and three-month Treasury bill rate, respectively, all of which reset daily, and $2.8 billion of debt indexed to 90-day SOFR, which resets quarterly, and $6.8 billion of debt indexed to 30-day SOFR, which resets monthly.
As of December 31, 2024, our AGM segment had $7.9 billion, $0.3 billion, and $0.3 billion of FFELP loans indexed to the 30-day average SOFR, three-month commercial paper, and three-month Treasury bill rate, respectively, all of which reset daily, and $2.0 billion of debt indexed to 90-day SOFR, which resets quarterly, and $5.0 billion of debt indexed to 30-day SOFR, which resets monthly.
As of December 31, 2023, Union Bank was deemed to beneficially own 7.0% of the voting rights of our shareholders, and Mr. Dunlap and Ms. Muhleisen beneficially owned 81.4% and 8.9%, respectively, of the voting rights of our shareholders (with certain shares deemed under SEC rules to be beneficially owned by each Union Bank, Mr. Dunlap, and Ms. Muhleisen).
As of December 31, 2024, Union Bank was deemed to beneficially own 6.9% of the voting rights of our shareholders, and Mr. Dunlap and Ms. Muhleisen beneficially owned 80.6% and 8.9%, respectively, of the voting rights of our shareholders (with certain shares deemed under SEC rules to be beneficially owned by each Union Bank, Mr. Dunlap, and Ms. Muhleisen).
As of December 31, 2023, Nelnet Bank had a total notional amount of $140.0 million of derivatives outstanding, and the gross fair value of such derivatives in an asset position was $0.5 million and in a liability position was $2.0 million.
As of December 31, 2024, Nelnet Bank had a total notional amount of $165.0 million of derivatives outstanding, and the gross fair value of such derivatives in an asset position was $3.2 million and in a liability position was $0.1 million.
If we fail to enhance and scale our systems and operational infrastructure or products and services, our LSS and ETSP segments may lose their competitive advantage, which could have a material adverse impact on our business, financial condition, or results of operations. We require skilled technology and security workers to maintain, secure, and improve our information technology systems and infrastructure.
If we fail to enhance and scale our systems and operational infrastructure or products and services, our LSS and ETSP segments may lose their competitive advantage, which could have a material adverse impact on our business, financial condition, or results of operations.
The net aggregate impact on our consolidated statements of income for the years ended December 31, 2023, 2022, and 2021 related to the transactions with Union Bank was income (before income taxes) of $9.4 million, $8.9 million, and $11.0 million, respectively.
The net aggregate impact on our consolidated statements of income for the years ended December 31, 2024 and 2023, related to the transactions with Union Bank was income (before income taxes) of $12.3 million and $9.4 million, respectively.
We operate many different businesses in diverse markets and depend on the efficient and uninterrupted operation of our computer systems, networks, software, datacenters, cloud services providers, telecommunications systems, and the rest of our information technology infrastructure to process and monitor large numbers of daily transactions in compliance with contractual, legal, regulatory, and our own standards.
We operate many different businesses in diverse markets and depend on the secure, efficient, and uninterrupted operation of our computer systems, networks, software, data centers, cloud services providers, telecommunications systems, and the rest of our information technology infrastructure to process, monitor, store, and transmit large numbers of daily transactions, some of which contain personal, confidential, and other sensitive information, in compliance with contractual, legal, regulatory, and our own standards.
For additional information, including risks to us from such state laws, see the paragraph beginning with the same sentence as the immediately preceding sentence that is set forth in Part I, Item 1, “Regulation and Supervision - Loan Servicing and Systems.” 32 As a result of the discontinuation of new FFELP loan originations in 2010, the existing FFELP loan portfolios in our AGM segment will continue to decline over time.
For additional information, including risks to us from such state laws, see Part I, Item 1, “Regulation and Supervision - Loan Servicing and Systems.” As a result of the discontinuation of new FFELP loan originations in 2010, the existing FFELP loan portfolio in our AGM segment will continue to decline over time.
If these events occur, our profitability and financial condition will suffer. Regulatory and Legal Federal and state laws and regulations can restrict our businesses and increase compliance costs, and noncompliance could result in penalties, litigation, reputation damage, and a loss of customers. Our operating segments are heavily regulated by federal and state government regulatory agencies.
Regulatory and Legal Federal and state laws and regulations and changes in the regulatory environment can restrict our businesses and increase compliance costs, and noncompliance could result in penalties, litigation, reputation damage, and a loss of customers. Our operating segments are heavily regulated by federal and state government regulatory agencies.
As of December 31, 2023, we serviced $17.5 billion of FFELP loans that maintained a federal guarantee, of which $10.2 billion and $7.3 billion were owned by us and third parties, respectively.
As of December 31, 2024, we serviced $13.3 billion of FFELP loans that maintained a federal guarantee, of which $7.3 billion and $6.0 billion were owned by us and third parties, respectively.
We invest a substantial portion of our excess cash in student loan and other asset-backed securities that are subject to market fluctuations. Our amortized cost and the fair value of these investments was $982.9 million and $955.9 million, respectively, as of December 31, 2023.
We invest a substantial portion of our excess cash in student loan and other asset-backed securities that are subject to market fluctuations. As of December 31, 2024, our amortized cost and the fair value of these investments were $1.3 billion.
If the federal government or the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs, such initiatives could further increase prepayments and reduce interest income.
While more unlikely now due to the change in presidential administration, if the federal government or the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs, such initiatives could further increase prepayments and reduce interest income.
Information technology infrastructure risks continue to increase in part because of the proliferation of new technologies, the increased use of the internet and telecommunications technologies to support and process customer transactions, the increased number and complexity of transactions being processed, increased instances of employees working from home and/or using 26 personal computing devices, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, nation state threat actors, and other external parties.
Information technology infrastructure risks continue to increase in part because of the proliferation of new technologies, the increased use of the internet and telecommunications technologies to support and process customer transactions, the increased number and complexity of transactions being processed, and increased instances of employees working from home and/or using personal computing devices.
As of December 31, 2023, Nelnet Servicing was servicing $494.7 billion of government owned student loans for 14.5 million borrowers. For the year ended December 31, 2023, our LSS segment recognized $412.5 million in revenue from the Department, which represented 32% of our revenue.
As of December 31, 2024, Nelnet Servicing was servicing $489.9 billion of government owned student loans for 14.0 million borrowers. For the year ended December 31, 2024, our LSS segment recognized $380.9 million in revenue from the Department, which represented 26% of our revenue.
Cyberattacks may increase in frequency during times of global unrest, such as the conflict in Ukraine and the Middle East. Attackers may also attempt to fraudulently induce employees, customers, or other users of our systems to disclose sensitive information to gain access to our data or that of our customers, such as through “phishing” schemes and other social engineering techniques.
Attackers may also attempt to fraudulently induce employees, customers, or other users of our systems to disclose sensitive information to gain access to our data or that of our customers, such as through “phishing” schemes and other social engineering techniques.
See note 5 of the notes to consolidated financial statements included in this report for additional information on derivatives used by us to manage interest rate risk. Our Non-Nelnet Bank derivative instruments are intended as economic hedges but do not qualify for hedge accounting.
Interest rate risk - use of derivatives We utilize derivative instruments to manage interest rate sensitivity. See note 5 of the notes to consolidated financial statements included in this report for additional information on derivatives used by us to manage interest rate risk. Our derivative instruments are not eligible for hedge accounting.
Any noncompliance with these covenants could result in a requirement for the immediate repayment of any outstanding borrowings under the facilities. If we are unable to obtain cost-effective funding alternatives for the loans in the warehouse facilities prior to the facilities' maturities, our cost of funds could increase, adversely affecting our results of operations.
If we are unable to obtain cost-effective funding alternatives for the loans in the warehouse facilities prior to the facilities' maturities, our cost of funds could increase, adversely affecting our results of operations.
Michael S. Dunlap, our Executive Chairman, beneficially owns 81.4% of the voting rights of our shareholders. Accordingly, each member of the Board of Directors and each member of management has been elected or effectively appointed by Mr. Dunlap and can be removed by him. As a result, Mr.
Accordingly, each member of the Board of Directors and each member of management has been elected or effectively appointed by Mr. Dunlap and can be removed by him. As a result, Mr.
These climate-related physical risks and transition risks could have a financial impact on us, and on our vendors and customers, including declines in asset values; cost increases; reduced availability and/or increased cost of insurance; reduced demand for certain goods and services; increased loan delinquencies, bankruptcies, events of default, and force majeure events; increased interruptions to business operations and services; adverse supply chain impacts; and negative consequences to business models and the need to make changes in response to those consequences. 25 The profitability and risk profile of our renewable energy business may be impacted by the terms and availability of federal incentives, regulatory uncertainty, climate change risk, supply chain risk, rising debt, labor, and construction costs, and other risks and costs associated with the construction, financing, sale, and operation and maintenance of renewable energy projects.
These climate-related physical risks and transition risks could have a financial impact on us, and on our vendors and customers, including declines in asset values; cost increases; reduced availability and/or increased cost of insurance; reduced demand for certain goods and services; increased loan delinquencies, bankruptcies, events of default, and force majeure events; increased interruptions to business operations and services; adverse supply chain impacts; and negative consequences to business models and the need to make changes in response to those consequences.
Our loan portfolios and other assets and operations could experience adverse impacts from natural disasters, widespread health crises similar to the COVID-19 pandemic, terrorist activities, or international hostilities.
These payments could have a material adverse effect on our results of operations, financial condition, liquidity, or capital resources. Our loan portfolios and other assets and operations could experience adverse impacts from natural disasters, widespread health crises similar to the COVID-19 pandemic, terrorist activities, or international hostilities.
Due to the complexity and long-term nature of our existing construction contracts, we may continue to incur low and/or negative margins to complete projects currently under contract.
The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024. Due to the complexity and long-term nature of our existing construction contracts, we may continue to incur low and/or negative margins to complete projects currently under contract.
Even though we maintain insurance coverage to offset costs related to incidents such as a cyberattack, information security breach, or extended system outage, this insurance coverage may not cover all costs of such incidents. A security breach of our information technology systems could result in material financial losses and legal exposure, and damage to our reputation.
Even though we maintain insurance coverage to offset costs related to incidents such as a cyberattack, information security breach, or extended system outage, this insurance coverage may not cover all costs of such incidents.
Retrocession reinsurance treaties do not relieve us from our obligation to direct writing companies. Failure of retrocessionaires to honor their obligations could result in losses to us.
In addition, we have entered into arrangements to cede a portion of our exposure to a third party. Retrocession reinsurance treaties do not relieve us from our obligation to direct writing companies. Failure of retrocessionaires to honor their obligations could result in losses to us.
As a result, our economic hedging activities may not effectively manage our interest rate sensitivity, may not have the desired beneficial impact on our results of operations or financial condition, and may cause volatility in our results of operations or have a material adverse impact on our business, financial condition, or results of operations. 22 The Commodity Futures Trading Commission requires over-the-counter derivative transactions to be executed through an exchange or central clearinghouse.
As a result, our economic hedging activities may not effectively manage our interest rate sensitivity, may not have the desired beneficial impact on our results of operations or financial condition, and may cause volatility in our results of operations or have a material adverse impact on our business, financial condition, or results of operations.
In our reinsurance business, we depend on our clients’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses. If our losses greatly exceed our loss reserves, our financial condition may be significantly and negatively affected.
In our reinsurance business, we depend on the insurance carriers’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses. If actual claims exceed our claims and claim adjustment expense reserves (“loss reserves”), our financial results could be materially and adversely affected.
These exclusive forum provisions may limit the ability of our shareholders to commence litigation in a forum that they prefer, which may discourage such lawsuits against us and our current or former directors, officers, and employees. 33 Principal Shareholder and Related Party Transactions Our Executive Chairman beneficially owns 81.4% of the voting rights of our shareholders and effectively has control over all of our matters.
These exclusive forum provisions may limit the ability of our shareholders to commence litigation in a forum that they prefer, which may discourage such lawsuits against us and our current or former directors, officers, and employees.
For instance, the imposition or modification of prevailing wage laws and apprenticeship requirements applicable to solar projects, or increase in prevailing wage rates applicable to solar projects, can significantly impact project viability and cost of compliance.
For our solar construction business, the imposition or modification of prevailing wage laws, tariffs, domestic content requirements, and/or apprenticeship requirements applicable to solar projects, can significantly impact project viability and operational costs.
The majority of our portfolio of loans is funded through asset-backed securitizations that are structured to substantially match the maturities of the funded assets, and there are minimal liquidity issues related to these facilities. We also have loans funded in shorter term warehouse facilities, as described in note 4 of the notes to consolidated financial statements included in this report.
The majority of our portfolio of loans are funded through asset-backed securitizations that are structured to substantially match the maturities of the funded assets, and there are minimal liquidity issues related to these facilities.
Accordingly, we bear the full risk of loss on these loans if the borrower and co-borrower, if applicable, default. We are actively expanding our acquisition of private education and consumer loan portfolios, which increases our exposure to credit risk.
The vast majority (87.4%) of our student loan portfolio is federally guaranteed, limiting our loss exposure. In the event of default, we bear the full risk of loss on our private education and consumer loans, which are unsecured. We are actively expanding our acquisition of private education and consumer loan portfolios, which increases our exposure to credit risk.
Changes or shifts in the forward yield curve can significantly impact and have impacted the valuation of our derivatives, and in turn can significantly impact and have impacted our results of operations. Developing an effective strategy for dealing with movements in interest rates is complex, and no strategy can completely insulate us from risks associated with such fluctuations.
Developing an effective strategy for dealing with movements in interest rates is complex, and no strategy can completely insulate us from risks associated with such fluctuations.
Our estimation of reserves may be less reliable than the reserve estimations of a reinsurer with a greater volume of business and an established loss history. Our actual losses paid may deviate substantially from the estimates of our loss reserves and could negatively affect our results of operations.
These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period and could materially and adversely affect our results of operations and/or our financial position. Our estimation of reserves may be less reliable than the reserve estimations of a reinsurer with a greater volume of business and an established loss history.
Any of the foregoing could result in regulatory action, loss of confidence from government clients, legal liability, and reputational harm and adversely impact our business, financial condition, results of operations, and prospects. In October 2023, the Administration issued an Executive Order to, among other things, establish new standards for AI safety and security.
Any of the foregoing could result in regulatory action, loss of confidence from government clients and other customers, legal liability, and reputational harm and adversely impact our business, financial condition, results of operations, and prospects. We are also subject to existing legal and regulatory frameworks that apply to AI.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Security Operations Center conducts daily briefings, identifies emerging cyber threats affecting the financial and education sectors, and reviews new tactics, techniques, and procedures utilized by cyber criminals and nation-state cyber actors. The Security Operations Center is also our incident response team, and ensures that the Company is prepared to detect, analyze, contain, eradicate, and recover from cyber incidents.
Biggest changeThe Security Operations Center conducts daily briefings, identifies emerging cyber threats affecting the financial and education sectors, and reviews new tactics, techniques, and procedures utilized by cyber criminals and nation-state cyber actors. The Security Operations Center is also our incident response team, focused on detecting, analyzing, containing, eradicating, and recovering from cyber incidents.
Our offensive security team conducts continuous threat-based and risk-based red team activities, and our application security team utilizes a combination of training, tools, code reviews, and awareness to ensure that our applications are developed with security at the forefront. We also engage with professional cybersecurity firms to conduct penetration tests on specific systems and applications annually.
Our offensive security team conducts continuous threat-based and risk-based red team activities, and our application security team utilizes a combination of training, tools, code reviews, and awareness designed to ensure that our applications are developed with security at the forefront. We also engage with professional cybersecurity firms to conduct penetration tests on specific systems and applications annually.
When it comes to posture management, our goal is not just to reactively resolve potential vulnerabilities discovered through the vulnerability management process; we also look for ways to ensure that vulnerabilities don’t materialize through minimizing system ports, protocols, and services to only that which is necessary. Governance, Risk, and Compliance includes the risk management and compliance management teams.
When it comes to posture management, our goal is not just to reactively resolve potential vulnerabilities discovered through the vulnerability management process; we also look for ways to prevent vulnerabilities through minimizing system ports, protocols, and services to only that which is necessary. Governance, Risk, and Compliance includes the risk management and compliance management teams.
The Board Risk and Finance Committee receive regular reports from the Chief Risk Officer and Chief Security Officer on key company risks and emerging threats.
The Board Risk and Finance Committee receives regular reports from the Chief Risk Officer and Chief Security Officer on key company risks and emerging threats.
Based on the results of these scans, this team routinely patches or works with system and platform owners to resolve identified vulnerabilities. Our log operations team works closely as a bridge between the system owners and our Security Operations Center by ensuring that activities on our systems and applications are logged and monitored.
Based on the results of these scans, this team routinely patches or works with system and platform owners to resolve identified vulnerabilities. Our log operations team works closely as a bridge between the system owners and our Security Operations Center by logging and monitoring activities on our systems and applications.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES The Company's headquarters are located in Lincoln, Nebraska. The Company owns or leases office space facilities primarily in Nebraska, Wisconsin, and Colorado. The Company believes its existing office space facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of its business. ITEM 3.
Biggest changeITEM 2. PROPERTIES The Company's headquarters is located in Lincoln, Nebraska. The Company owns or leases office space facilities primarily in Nebraska, Wisconsin, and Colorado. The Company believes its existing office space facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of its business. ITEM 3.
LEGAL PROCEEDINGS Note 24 of the notes to consolidated financial statements included in this report is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.
LEGAL PROCEEDINGS Note 25 of the notes to consolidated financial statements included in this report is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total number of shares purchased (a) Average price paid per share (b) Total number of shares purchased as part of publicly announced plans or programs (c) Maximum number of shares that may yet be purchased under the plans or programs (c) October 1 - October 31, 2023 2,782 $ 82.62 2,735 4,464,286 November 1 - November 30, 2023 283,112 81.52 283,112 4,181,174 December 1 - December 31, 2023 3,854 86.01 — 4,181,174 Total 289,748 $ 81.59 285,847 (a) The total number of shares includes: (i) shares repurchased pursuant to the stock repurchase program discussed in footnote (c) below; and (ii) shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares.
Biggest changePeriod Total number of shares purchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (b) Maximum number of shares that may yet be purchased under the plans or programs (b) October 1 - October 31, 2024 211 $ 111.36 — 3,341,735 November 1 - November 30, 2024 — — — 3,341,735 December 1 - December 31, 2024 3,934 108.17 — 3,341,735 Total 4,145 $ 108.33 — (a) The total number of shares includes shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares.
The graph assumes that the value of an investment in the Company's Class A common stock and each index was $100 on December 31, 2018 and that all dividends, if applicable, were reinvested. The performance shown in the graph represents past performance and should not be considered an indication of future performance.
The graph assumes that the value of an investment in the Company's Class A common stock and each index was $100 on December 31, 2019 and that all dividends, if applicable, were reinvested. The performance shown in the graph represents past performance and should not be considered an indication of future performance.
The Company paid quarterly cash dividends on its Class A and Class B common stock during the years ended December 31, 2023 and 2022 and in amounts totaling $1.06 per share and $0.98 per share, respectively.
The Company paid quarterly cash dividends on its Class A and Class B common stock during the years ended December 31, 2024 and 2023 and in amounts totaling $1.12 per share and $1.06 per share, respectively.
(b) The average price of shares repurchased excludes excise taxes. (c) On May 9, 2022, the Company announced that its Board of Directors authorized a new stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2025.
(b) On May 9, 2022, the Company announced that its Board of Directors authorized a new stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2025.
The number of holders of record of the Company's Class A common stock and Class B common stock as of January 31, 2024 was 1,742 and 69, respectively. The record holders of the Class B common stock are Michael S. Dunlap, Shelby J.
The number of holders of record of the Company's Class A common stock and Class B common stock as of January 31, 2025 was 1,769 and 71, respectively. The record holders of the Class B common stock are Michael S. Dunlap, Shelby J.
Shares of Class A common stock tendered by employees to satisfy tax withholding obligations included 47 shares and 3,854 shares in October and December 2023, respectively. Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company’s shares on the date of vesting.
Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company’s shares on the date of vesting.
Company/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Nelnet, Inc. $ 100.00 $ 112.64 $ 139.72 $ 193.78 $ 182.08 $ 179.09 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Financials 100.00 132.13 129.89 175.40 156.92 175.99 The preceding information under the caption “Performance Graph” shall be deemed to be “furnished” but not “filed” with the Securities and Exchange Commission. 37 Stock Repurchases The following table summarizes the repurchases of Class A common stock during the fourth quarter of 2023 by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934.
Company/Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Nelnet, Inc. $ 100.00 $ 124.04 $ 172.04 $ 161.65 $ 159.00 $ 194.61 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P 500 Financials 100.00 98.31 132.75 118.77 133.20 173.90 The preceding information under the caption “Performance Graph” shall be deemed to be “furnished” but not “filed” with the Securities and Exchange Commission. 37 Stock Repurchases The following table summarizes the repurchases of Class A common stock during the fourth quarter of 2024 by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934.
Removed
Certain share repurchases included in the table below were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.
Removed
Shares purchased pursuant to the applicable stock repurchase program discussed in footnote (c) below consisted of a total of 283,112 shares of Class A common stock purchased in a privately negotiated transaction on November 13, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSummary and Comparison of Operating Results Nelnet Renewable Energy (b) Shared services (a) Tax equity investments / syndication / administration GRNE Solar ALLO investment (c) Venture capital investments (d) Other Total Year ended December 31, 2023 Net interest income (expense) $ — — (846) — — 11,409 10,563 Solar construction revenue — — 31,669 — — — 31,669 Other, net 2,754 (44,095) 159 (55,763) (2,878) 9,438 (90,385) Impairment expense (4,678) — (20,581) — (2,060) — (27,319) Cost to provide solar construction services — — (48,576) — — — (48,576) Salaries and benefits (90,558) (3,658) (4,439) (30) (783) (6,063) (105,531) Depreciation and amortization (38,301) — (9,252) — — (416) (47,969) Other expenses (44,012) (1,422) (3,064) (2,177) (229) (5,403) (56,307) Intersegment expenses, net 111,572 (5,125) 239 (2) (58) 1,463 108,089 Income (loss) before income taxes (63,223) (54,300) (54,691) (57,972) (6,008) 10,428 (225,766) Income tax (expense) benefit 15,173 6,337 10,807 13,913 1,442 4,389 52,061 Net (income) loss attributable to noncontrolling interests — 27,894 9,662 — — — 37,556 Net income (loss) $ (48,050) (20,069) (34,222) (44,059) (4,566) 14,817 (136,149) Year ended December 31, 2022 Net interest income (expense) $ — — (120) — 20 2,735 2,635 Solar construction revenue — — 24,543 — — — 24,543 Other, net 2,575 (9,088) 15 (58,781) 19,809 9,358 (36,112) Impairment expense (998) — — — (6,561) — (7,559) Cost to provide solar construction services — — (19,971) — — — (19,971) Salaries and benefits (90,259) (1,386) (2,143) (972) (741) (5,489) (100,990) Depreciation and amortization (37,852) — (1,489) — — (282) (39,623) Other expenses (42,289) (593) (934) (5,489) (78) (8,405) (57,788) Intersegment expenses, net 96,640 (103) (370) (3) — (982) 95,182 Income (loss) before income taxes (72,183) (11,170) (469) (65,245) 12,449 (3,065) (139,683) Income tax (expense) benefit 17,324 (123) 126 15,659 (2,988) 12,417 42,415 Net (income) loss attributable to noncontrolling interests — 11,682 (57) — — — 11,625 Net income (loss) $ (54,859) 389 (400) (49,586) 9,461 9,352 (85,643) Year ended December 31, 2021 Net interest income (expense) $ — — — — 8 (432) (424) Solar construction revenue — — — — — — — Other, net 3,604 (10,238) — (33,722) 28,800 13,463 1,907 Impairment expense (916) — — — (4,637) — (5,553) Cost to provide solar construction services — — — — — — — Salaries and benefits (83,401) (1,212) — (505) (872) (3,683) (89,673) Depreciation and amortization (36,297) — — — — (385) (36,682) Other expenses (44,040) (119) — (896) (42) (10,492) (55,589) Intersegment expenses, net 88,377 (460) — — (1) (902) 87,014 Income (loss) before income taxes (72,673) (12,029) — (35,123) 23,256 (2,431) (99,000) Income tax (expense) benefit 17,442 1,032 — 8,430 (5,581) 6,961 28,284 Net (income) loss attributable to noncontrolling interests — 7,729 — — — — 7,729 Net income (loss) $ (55,231) (3,268) — (26,693) 17,675 4,530 (62,987) 65 (a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
Biggest changeSummary and Comparison of Operating Results Shared services (a) Solar tax equity investments (b) Nelnet Renewable Energy (c) ALLO investment (d) Venture capital investments (e) Other Total Year ended December 31, 2024 Investment interest $ — 2 32 — — 11,739 11,773 Interest expense — — (833) — — (954) (1,787) Net interest income (expense) — 2 (801) — — 10,785 9,986 Solar construction revenue — — 56,569 — — — 56,569 Other income, net 3,102 285 246 6,593 8,503 12,884 31,613 Cost to provide solar construction services — — (77,673) — — — (77,673) Salaries and benefits (80,572) (1,552) (6,791) — (849) (6,384) (96,148) Depreciation and amortization (25,299) — (1,130) — (29) (370) (26,828) Other expenses (45,417) (964) (2,735) 1,498 (79) (5,884) (53,581) Intersegment expenses, net 101,992 50 (1,792) (4) (97) (550) 99,599 Impairment expense — — (1,865) — (537) — (2,402) (Loss) income before income taxes (46,194) (2,179) (35,972) 8,087 6,912 10,481 (58,865) Income tax benefit (expense) 11,087 (1,123) 8,236 (1,941) (1,659) 1,514 16,114 Net loss attributable to noncontrolling interests — 6,857 1,655 — — — 8,512 Net (loss) income $ (35,107) 3,555 (26,081) 6,146 5,253 11,995 (34,239) Year ended December 31, 2023 Investment interest $ — — 87 — — 12,054 12,141 Interest expense — — (933) — — (645) (1,578) Net interest income (expense) — — (846) — — 11,409 10,563 Solar construction revenue — — 31,669 — — — 31,669 Other income, net 2,754 (50,724) 159 (55,763) (2,878) 10,593 (95,859) Cost to provide solar construction services — — (48,576) — — — (48,576) Salaries and benefits (90,558) (3,658) (4,439) (30) (783) (6,063) (105,531) Depreciation and amortization (38,301) — (9,252) — — (416) (47,969) Other expenses (44,012) (1,475) (3,064) (2,177) (229) (5,350) (56,307) Intersegment expenses, net 111,572 (5,125) 239 (2) (58) 1,462 108,088 Impairment expense (4,678) — (20,581) — (2,060) — (27,319) (Loss) income before income taxes (63,223) (60,982) (54,691) (57,972) (6,008) 11,635 (231,241) Income tax benefit (expense) 15,173 7,125 10,807 13,913 1,442 3,969 52,429 Net loss attributable to noncontrolling interests — 31,293 9,662 — — — 40,955 Net (loss) income $ (48,050) (22,564) (34,222) (44,059) (4,566) 15,604 (137,857) 61 (a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.
Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.
To minimize the Company's exposure to market volatility and increase liquidity, on March 15, 2023, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).
On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).
The models consider factors such as historical trends in credit losses, recent portfolio performance, and forward-looking macroeconomic conditions. The models vary by portfolio type including FFELP, private education, consumer, and other loans.
The models consider factors such as historical trends in credit losses, recent portfolio performance, and forward-looking macroeconomic conditions. The models vary by portfolio type including FFELP, private education, and consumer and other loans.
As part of the ALLO recapitalization transaction completed in 2020, the Company and SDC (a third-party global digital infrastructure investor and member of ALLO) entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.
As part of the ALLO recapitalization transaction completed in 2020, the Company and SDC (a third-party global digital infrastructure investor and member of ALLO) entered into an agreement in which the Company has a contingent obligation to pay SDC an amount up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds, and realizes from such disposition certain targeted return levels.
As part of the ALLO recapitalization transaction in December 2020, the Company and SDC entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.
As part of the ALLO recapitalization transaction in December 2020, the Company and SDC entered into an agreement in which the Company has a contingent obligation to pay SDC an amount up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds, and realizes from such disposition certain targeted return levels.
In addition, due to (i) the difference between the yield AGM receives on the loans and cost of financing within these transactions, and (ii) the servicing and administration fees AGM earns from these transactions, AGM has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.
In addition, due to (i) the difference between the yield AGM receives on the loans and cost of 64 financing within these transactions, and (ii) the servicing and administration fees AGM earns from these transactions, AGM has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.
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, is provided below.
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.
Union Bank Participation Agreement The Company maintains an agreement with Union Bank, a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans.
Union Bank Participation Agreements The Company maintains an agreement with Union Bank, a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans.
Securities and Exchange Commission (SEC)-registered investment advisor subsidiary • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and causality policies • The operating results of the Company’s investment activities in real estate • The operating results of the Company’s 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").
Securities and Exchange Commission (SEC)-registered investment advisor subsidiary • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and casualty policies • The operating results of the Company’s investment activities in real estate • The operating results of the Company’s 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").
The intercompany deposits include a pledged deposit of $40.0 million from Nelnet, Inc. as required under the Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating deposits, and NBS custodial deposits consisting of tuition payments collected which are subsequently remitted to the appropriate school. 60 Average Balance Sheet The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities.
The intercompany deposits include a pledged deposit of $40.0 million from Nelnet, Inc. as required under the Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating deposits, and NBS custodial deposits consisting of tuition payments collected which are subsequently remitted to the appropriate school. 57 Average Balance Sheet The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities.
On January 1, 73 2020, the Community Bank Leverage Ratio (CBLR) framework, as issued jointly by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC, became effective.
On January 1, 2020, the Community Bank Leverage Ratio (CBLR) framework, as issued jointly by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC, became effective.
The Company plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors. CRITICAL ACCOUNTING POLICIES AND ESTIMATES This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
The Company plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors. 70 CRITICAL ACCOUNTING ESTIMATES This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Such assumptions are discussed below, and such uncertainty is due in part to the fact that the weighted average maturity of the Company’s loan portfolio is approximately 15 years, and actual credit losses will be affected by, among other things, future economic conditions and future personal financial situations for borrowers, over that extended time frame.
Such assumptions are discussed below, and such uncertainty is due in part to the fact that the weighted average maturity of the Company’s loan portfolio is approximately 12 years, and actual credit losses will be affected by, among other things, future economic conditions and future personal financial situations for borrowers, over that extended time frame.
Fees earned by WRCM are included in “other, net” in the table above. 63 (b) Represents the operating results of the Company’s reinsurance treaties on property and casualty policies and the Company’s Nebraska chartered life and health company, which is in run-off mode and reinsures a decreasing term life insurance product distributed to FACTS.
Fees earned by WRCM are included in “other income, net” in the table above. (b) Represents the operating results of the Company’s reinsurance treaties on property and casualty policies and the Company’s Nebraska chartered life and health company, which is in run-off mode and reinsures a decreasing term life insurance product distributed to FACTS.
If the forecast is computed assuming a spread of an additional 12 basis points between Term SOFR and 30-day average SOFR for the life of the portfolio, the cash flow forecast would be reduced by approximately $15 million to $20 million. The Company uses the current forward interest rate yield curve to forecast cash flows.
If the forecast is computed assuming a spread of an additional 12 basis points between Term SOFR and 30-day average SOFR for the life of the portfolio, the cash flow forecast would be reduced by approximately $5 million to $15 million. The Company uses the current forward interest rate yield curve to forecast cash flows.
The majority of the derivative market value adjustments during the periods presented were related to the changes in fair value of the Company's floor income interest rate swaps.
The majority of the derivative market value adjustments during the periods presented related to the changes in fair value of the Company's floor income interest rate swaps.
The Company also makes 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, and renewable energy (solar).
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).
Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.
Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to 2023 settlements.
The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP, private education, consumer, and other loan acquisitions (or investment interests therein); strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions.
The Company intends to use its current and future liquidity position to capitalize on market opportunities, including FFELP, private education, consumer, and other loan acquisitions (or investment interests therein); strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions.
This evaluation is inherently subjective because it requires numerous estimates made by management. These estimates are subjective in nature and involve uncertainties and matters of significant judgement. Changes in estimates could significantly affect the Company's recorded balance for the allowance for loan losses.
This evaluation is inherently subjective because it requires numerous estimates made by management. These estimates are subjective in nature and involve uncertainties and matters of significant judgment. Changes in estimates could significantly affect the Company's recorded balance for the allowance for loan losses.
Included in tax equity investments is the Company's share of income or loss from solar investments accounted for under the Hypothetical Liquidation at Book Value (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.
Included in tax equity investments in the table above is the Company's share of income or loss from solar investments accounted for under the Hypothetical Liquidation at Book Value (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.
For additional information regarding changes in the Company’s allowance for loan losses for the years ended December 31, 2023, 2022, and 2021, see the caption “Activity in the Allowance for Loan Losses” in note 3 of the notes to consolidated financial statements included in this report.
For additional information regarding changes in the Company’s allowance for loan losses for the years ended December 31, 2024, 2023, and 2022, see the caption “Activity in the Allowance for Loan Losses” in note 3 of the notes to consolidated financial statements included in this report.
Based on the derivative portfolio outstanding as of December 31, 2023, the Company does not anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse and/or payments to its counterparties for its non-centrally cleared derivatives.
Based on the derivative portfolio outstanding as of December 31, 2024, the Company does not anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in 69 interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse and/or payments to its counterparties for its non-centrally cleared derivatives.
"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.
"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.
In an increasing interest rate environment, student loan spread on FFELP loans increases in the short term because of the timing of interest rate resets on the Company's assets occurring daily in contrast to the timing of the interest rate resets on the Company's debt that occurs either monthly or quarterly.
In an increasing interest rate environment, student loan spread on FFELP loans increases in the short term because of the timing of interest rate resets on the Company's assets occurring daily in contrast to the timing of the interest rate resets on the Company's debt occurring either monthly or quarterly.
These costs are allocated to each operating segment based on estimated use of such activities and services • Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs • The operating results of Nelnet Renewable Energy, which include solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar construction and development • The operating results of certain of the Company’s investment activities, including its investment in ALLO and early-stage and emerging growth companies (venture capital investments) • Interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions • Other product and service offerings that are not considered reportable operating segments 41 The following table 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.
These costs are allocated to each operating segment based on estimated use of such activities and services • Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs • The operating results of solar tax equity investments made by the Company and administrative and management services provided by the Company on solar tax equity investments made by third parties • The operating results of Nelnet Renewable Energy, the Company’s solar engineering, procurement, and construction business • The operating results of certain of the Company’s investment activities, including its investment in ALLO and early-stage and emerging growth companies (venture capital investments) • Interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions • Other product and service offerings that are not considered reportable operating segments 41 The following table 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 an explanation of GAAP accounting for derivative settlements and the reasons why the Company reports these non-GAAP measures (and the limitations thereof), see footnote (e) to the table immediately under the caption “Loan Spread Analysis” above.
For an explanation of GAAP accounting for derivative settlements and the reasons why the Company reports these non-GAAP measures (and the limitations thereof), see footnote (b) to the table immediately under the caption “Loan Spread Analysis” above.
Nelnet Bank has designated its derivative instruments as cash flow hedges; however, because the hedged items are intercompany deposits, the derivative instruments are not eligible for hedge accounting in the consolidated financial statements. Accordingly, all changes in fair value of such derivatives are recorded through earnings and presented as “derivative market value adjustments, net” in the statements of operations.
Nelnet Bank has designated its derivative instruments as cash flow hedges; however, because the hedged items are intercompany deposits, the derivative instruments are not eligible for hedge accounting in the consolidated financial statements. Accordingly, all changes in fair value of such derivatives are recorded through earnings and presented as "derivative market value adjustments, net" in the statements of operations.
The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM reportable operating segment. This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes.
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 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 is met.
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.
See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative portfolio. Other Debt Facilities As discussed above, the Company has a $495.0 million unsecured line of credit with a maturity date of September 22, 2026.
See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative portfolio. Unsecured Line of Credit As discussed above, the Company has a $495.0 million unsecured line of credit with a maturity date of September 22, 2026.
For a summary of the Company's loan portfolio as of December 31, 2023 and 2022, see note 3 of the notes to consolidated financial statements included in this report.
For a summary of the Company's loan portfolio as of December 31, 2024 and 2023, see note 3 of the notes to consolidated financial statements included in this report.
For a summary of the Company’s loan portfolio as of December 31, 2023 and 2022, see note 3 of the notes to consolidated financial statements included in this report.
For a summary of the Company’s loan portfolio as of December 31, 2024 and 2023, see note 3 of the notes to consolidated financial statements included in this report.
Cash generated from student loans funded in asset-backed securitizations provide the sources of liquidity to satisfy all obligations related to the outstanding bonds and notes issued in such securitizations.
Cash generated from student loans funded in asset-backed securitizations provides the sources of liquidity to satisfy all obligations related to the outstanding bonds and notes issued in such securitizations.
These residual interests were acquired by the Company or have been received by the Company as consideration as the result of selling portfolios of loans to unrelated third parties who securitized such loans.
These residual interests were acquired by the Company or have been received by the Company as consideration from selling portfolios of loans to unrelated third parties who securitized such loans.
Management has identified the allowance for loan losses as a critical accounting policy and estimate. Allowance for Loan Losses The allowance for loan losses represents the Company’s estimate of the expected lifetime credit losses inherent in loan receivables as of the balance sheet date.
Management has identified the allowance for loan losses as a critical accounting estimate. Allowance for Loan Losses The allowance for loan losses represents the Company’s estimate of the expected lifetime credit losses inherent in loan receivables as of the balance sheet date.
The Comp any 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.
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.
Due to the management and control of each of these investment partnerships, such partnerships that invest in tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s portion being presented as non-controlling interests.
Due to the management and control of each of these investment partnerships, such partnerships that invest in tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s portion being presented as noncontrolling interests.
As of December 31, 2023, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.
As of December 31, 2024, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.
(3) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements.
(c) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial 63 statements.
These investments provide a federal income tax credit under the Internal Revenue Code, equaling 30% to 40% of the eligible project cost, with the tax credit available when the project is placed-in-service. The Company is allowed to reduce its tax estimates paid to the U.S. Treasury based on the credits earned.
These investments provide a federal income tax credit under the Internal Revenue Code, currently equaling 30% to 70% of the eligible project cost, with the tax credit available when the project is placed in service. The Company is then allowed to reduce its tax estimates paid to the U.S. Treasury based on the credits earned.
These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.48 billion, or approximately $0.36 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the December 31, 2023 balance.
These excess net asset positions are included in the consolidated balance sheets in the balances of "loans and accrued interest receivable, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.34 billion, or approximately $0.26 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the December 31, 2024 balance.
See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's Non-Nelnet Bank derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the 2023, 2022, and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" and in this table.
See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's Non-Nelnet Bank derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the 2024 and 2023 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income” in note 5 and in this table.
As of December 31, 2023, $295.1 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice.
As of December 31, 2024, $687.1 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice.
Changes in the Company’s assumptions affect “provision (negative provision) for loan losses” on the Company’s consolidated statements of income and the “allowance 76 for loan losses” contained within “loans and accrued interest receivable, net” on the Company’s consolidated balance sheets.
Changes in the Company’s assumptions affect “provision for loan losses” on the Company’s consolidated statements of income and the “allowance for loan losses” contained within “loans and accrued interest receivable, net” on the Company’s consolidated balance sheets.
Gross fixed rate floor income decreased in 2023 and 2022 compared with 2022 and 2021, respectively, due to higher interest rates. The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.
Gross fixed rate floor income decreased in 2024 compared with 2023 due to higher interest rates. The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.
Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral The following table shows AGM’s debt obligations outstanding that are secured by loan assets and related collateral.
Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral - AGM Operating Segment The following table shows AGM’s debt obligations outstanding that are secured by loan assets and related collateral.
As of December 31, 2023, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM currently expects future undiscounted cash flows from its portfolio to be approximately $1.30 billion as detailed below.
As of December 31, 2024, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM expects future undiscounted cash flows from its portfolio to be approximately $1.07 billion as detailed below.
As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2023, the Company’s ownership correlates to approximately $1.76 billion of loans included in these securitizations. The loans held in these securitizations are not included in the above table.
As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2024, the Company’s ownership correlates to approximately $1.97 billion of loans included in these securitizations. The loans held in these securitizations are not included in the above table.
As of December 31, 2023, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its partial ownership in these securitizations to be approximately $350.6 million.
As of December 31, 2024, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its partial ownership in these securitizations to be approximately $323.4 million.
Under the range of economic scenarios considered, the allowance for loan losses would have been lower by $14 million (13%) or higher by $11 million (11%).
Under the range of economic scenarios considered, the allowance for loan losses would have been lower by $13 million (11%) or higher by $10 million (9%).
(g) Derivative settlements consist of net settlements received (paid) related to the Company’s floor income interest rate swaps. 55 The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread.
(d) Derivative settlements consist of net settlements received related to the Company’s floor income interest rate swaps. 53 The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread.
Since late 2021, the Company has 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 continued extension 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 the Public Service Loan Forgiveness and other programs.
Beginning in late 2021, the Company has 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 multiple extensions 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 the Public Service Loan Forgiveness and other programs.
Derivative settlements, net 24,588 32,943 (21,367) The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income as reflected in the table below.
Derivative settlements, net 5,217 24,588 The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income as reflected in the table below.
The spread amounts included in the following table are calculated by using the notional dollar values found in the table under the caption "Net interest income after provision for loan losses, net of settlements on derivatives" below, divided by the average balance of loans or debt outstanding.
The spread amounts included in the following table are calculated by using the notional dollar values found in the table under the caption "Net loan interest income, including settlements on derivatives" below, divided by the average balance of loans or debt outstanding.
As of December 31, 2023, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.6 billion, of which the majority of such securities were FFELP student loan asset-backed securities.
As of December 31, 2024, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.4 billion, of which the majority of such securities were FFELP student loan asset-backed securities.
In addition to AGM and Nelnet Bank being part of the NFS division, NFS’s other operating segments that are not reportable (that were previously included in Corporate and Other Activities) include: • The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S.
In addition to AGM and Nelnet Bank being part of the NFS division, NFS’s other operating segments that are not reportable include: • The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the years ended December 31, 2023, 2022 and 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the years ended December 31, 2024 and 2023.
The FDIC has ordered Nelnet Bank to maintain at least a 12% leverage ratio. Nelnet Bank has opted into the CBLR framework for the quarter ended December 31, 2023 with a leverage ratio of 12.5%.
The FDIC has ordered Nelnet Bank to maintain at least a 12% leverage ratio. Nelnet Bank has opted into the CBLR framework for the quarter ended December 31, 2024 with a leverage ratio of 12.4%.
Derivative market value adjustments, net (40,250) 231,691 92,813 Includes the realized and unrealized 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, net 5,422 (40,250) Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.
However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate.
However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties, redeem the notes at par as cash is generated by the trust estate, or pledge the securities as collateral on repurchase agreements.
In the second quarter of 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of $25.9 million in interest expense from the write-off of the remaining unamortized debt discount associated with these bonds at the time of redemption.
In 2024 and 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of $6.3 million and $25.9 million, respectively, in interest expense from the write-off of the remaining unamortized debt discount associated with these bonds at the time of redemption.
Retail and other savings deposits include deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trust (STFIT), and commercial and institutional CDs. Union Bank, a related party, is the program manager for the Educational 529 College Savings plans and trustee for the STFIT.
Retail and other savings deposits include deposits from Educational 529 College Savings plans, Health Savings plans, retirement savings plans, Short Term Federal Investment Trust (STFIT), commercial and consumer savings, and FDIC sweep deposits. Union Bank, a related party, is the program manager for the Educational 529 College Savings plans and trustee for the STFIT.
In addition, WRCM earns annual management fees of five basis points for Nelnet stock under management (primarily shares of Nelnet Class B common stock held in various trust estates). During 2023, 2022, and 2021, WRCM earned $6.2 million, $6.0 million, and $4.2 million, respectively, in management fees.
In addition, WRCM earns annual management fees of five basis points for Nelnet stock under management (primarily shares of Nelnet Class B common stock held in various trust estates). During 2024 and 2023, WRCM earned $5.6 million and $6.2 million, respectively, in management fees. During 2024 and 2023, WRCM earned $0.3 million and $0.6 million in performance fees, respectively.
Net interest income (9.2) (3.6) (0.5) Non-GAAP before tax operating margin, excluding net interest income 22.0 % 24.9 % 31.2 % 53 NELNET FINANCIAL SERVICES DIVISION - RESULTS OF OPERATIONS Asset Generation and Management Operating Segment Loan Portfolio As of December 31, 2023, the AGM operating segment had a $12.0 billion loan portfolio, consisting primarily of federally insured loans.
Net interest income (9.5) (9.2) Non-GAAP before tax operating margin, excluding net interest income 28.0 % 22.0 % 51 NELNET FINANCIAL SERVICES DIVISION - RESULTS OF OPERATIONS Asset Generation and Management Operating Segment Loan Portfolio As of December 31, 2024, the AGM operating segment had a $9.0 billion loan portfolio, consisting primarily of federally insured loans.
The timing and size of these opportunities will vary and will have a direct impact on the Company's cash and investment balances. CONSOLIDATED RESULTS OF OPERATIONS An analysis of the Company's consolidated operating results for the years ended December 31, 2023, 2022, and 2021 is provided below.
The timing and size of these opportunities will vary and will have a direct impact on the Company's cash and investment balances. CONSOLIDATED RESULTS OF OPERATIONS An analysis of the Company's consolidated operating results for the year ended December 31, 2024 compared with 2023 is provided below.
See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the 2023, 2022, and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" and in this table. 59 Nelnet Bank Operating Segment Loan Portfolio As of December 31, 2023, Nelnet Bank had a $432.9 million loan portfolio, consisting of $360.5 million of private education loans and $72.4 million of consumer and other loans.
See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the 2024 and 2023 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 5 and in this table. 56 Nelnet Bank Operating Segment Loan Portfolio As of December 31, 2024, Nelnet Bank had a $644.6 million loan portfolio, consisting of $482.4 million of private education loans and $162.2 million of consumer and other loans.
As of December 31, 2023, Nelnet Bank’s deposits included $104.0 million from Nelnet, Inc. (parent company) and its subsidiaries (intercompany), and thus have been eliminated for consolidated financial reporting purposes.
As of December 31, 2024, Nelnet Bank’s deposits included $68.5 million from Nelnet, Inc. (parent company) and its subsidiaries (intercompany), and thus have been eliminated for consolidated financial reporting purposes.
As such, a minimal amount of debt and equity capital is allocated to these segments and any liquidity or capital needs are satisfied using cash flow from operations. Nelnet Bank launched operations in November 2020.
As such, a minimal amount of debt and equity capital is allocated to these segments and any liquidity or capital needs are satisfied using cash flow from operations.
Prior to Nelnet Bank’s launch of operations, Nelnet Bank, Nelnet, Inc. (the parent), and Michael S. Dunlap (Nelnet, Inc.’s controlling shareholder) entered into a Capital and Liquidity Maintenance Agreement and a Parent Company Agreement with the FDIC in connection with Nelnet, Inc.’s role as a source of financial strength for Nelnet Bank.
Dunlap (Nelnet, Inc.’s controlling shareholder) entered into a Capital and Liquidity Maintenance Agreement and a Parent Company Agreement with the FDIC in connection with Nelnet, Inc.’s role as a source of financial strength for Nelnet Bank.
See note 3 of the notes to consolidated financial statements included in this report for additional information. Net interest income after provision for loan losses 14,680 13,078 5,420 Other income 1,095 2,625 713 Represents primarily net gains and income from investments.
See note 3 of the notes to consolidated financial statements included in this report for additional information. Net interest income after provision for loan losses 12,598 14,680 Other income, net 2,951 1,095 Represents primarily net gains and income from investments.
Net revenue $ 292,128 260,140 229,574 GAAP before tax operating margin 31.2 % 28.5 % 31.7 % Before tax operating margin, excluding net interest income, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the ETSP segment is calculated as income before income taxes less interest income divided by net revenue.
Net revenue $ 314,199 292,128 GAAP before tax operating margin 37.5 % 31.2 % Before tax operating margin, excluding net interest income, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the ETSP segment is calculated as income before income taxes less net interest income divided by net revenue.
(b) Nelnet Renewable Energy includes solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar construction and development.
(b) Includes solar tax equity investments made by the Company and administrative and management services provided by the Company on tax equity investments made by third parties.
Cash Flow Forecast - Beneficial Interest in Loan Securitizations The Company has partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as "beneficial interest in loan securitizations" and included in "investments and notes receivable" on the Company's consolidated balance sheets.
Liquidity Impact Related to Beneficial Interest in Loan Securitizations The Company has partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as "beneficial interest in loan securitizations" and included in "other investments and notes receivable, net" on the Company's consolidated balance sheets.
Since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness, income-driven repayment plans, and other programs. Interest income was also negatively impacted by an increase in interest rates.
Beginning in late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness, income-driven repayment plans, and other programs.
Payment processing 163,859 148,212 127,080 Increases due to increase in payment volumes for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.
Payment processing 179,043 163,859 Increase due to increase in payment volumes for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.
Loan servicing and systems revenue 517,954 535,459 486,363 See table below for additional information. Intersegment servicing revenue 28,911 33,170 33,956 Represents revenue earned by LSS from servicing loans for AGM and Nelnet Bank. Decreases due to the continued amortization of AGM's FFELP portfolio. FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Loan servicing and systems revenue 482,408 517,954 See table below for additional information. Intersegment servicing revenue 24,493 28,911 Represents revenue earned by LSS from servicing loans for AGM and Nelnet Bank. Decrease due to the continued amortization of AGM's FFELP portfolio. Intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Increase in prepayment rate Reduction in forecasted cash flow from table above Forecasted cash flow using increased prepayment rate 2x $0.07 billion $1.23 billion 4x $0.25 billion $1.05 billion 10x $0.45 billion $0.85 billion If the entire AGM student loan portfolio prepaid, the Company would receive the full amount of overcollateralization included in the asset-backed securitizations of approximately $0.82 billion (as of December 31, 2023); however, the Company would not receive the $0.48 billion ($0.36 billion after tax) of estimated future earnings from the portfolio.
Increase in prepayment rate Reduction in forecasted cash flow from table above Forecasted cash flow using increased prepayment rate 2x $0.07 billion $1.00 billion 4x $0.22 billion $0.85 billion If the entire AGM student loan portfolio prepaid, the Company would receive the full amount of overcollateralization included in the asset-backed securitizations of approximately $0.73 billion (as of December 31, 2024); however, the Company would not receive the $0.34 billion ($0.26 billion after tax) of estimated future earnings from the portfolio.
The forecasted cash flow presented below includes all loans, the majority of which are federally insured student loans, funded in asset-backed securitizations as of December 31, 2023. As of December 31, 2023, AGM had $10.5 billion of loans included in asset-backed securitizations, which represented 87.3% of its total loan portfolio.
The forecasted cash flow presented below includes loans funded in asset-backed securitizations as of December 31, 2024, the majority of which are federally insured student loans. As of December 31, 2024, AGM had $7.7 billion of loans included in asset-backed securitizations, which represented 86.0% of its total loan portfolio.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAsset and funding index mismatches Increase of 10 basis points Increase of 30 basis points Increase of 10 basis points Increase of 30 basis points Increase of 10 basis points Increase of 30 basis points Dollars Percent Dollars Percent Dollars Percent Dollars Percent Dollars Percent Dollars Percent Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 Effect on earnings: Increase (decrease) in pre-tax net income before impact of derivative settlements $ (4,564) (6.2) % $ (13,692) (18.4) % $ (4,773) (0.9) % $ (14,319) (2.8) % $ (6,020) (1.2) % $ (18,063) (3.6) % Impact of derivative settlements 3,150 4.2 9,450 12.7 4,895 0.9 14,682 2.9 5,961 1.2 17,884 3.6 Increase (decrease) in net income before taxes $ (1,414) (2.0) % $ (4,242) (5.7) % $ 122 0.0 % $ 363 0.1 % $ (59) — % $ (179) — % Increase (decrease) in basic and diluted earnings per share $ (0.03) $ (0.09) $ 0.00 $ 0.01 $ (0.00) $ (0.00) 81 Interest Rate Risk - Nelnet Bank To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow.
Biggest changeAsset and funding index mismatches Increase of 10 basis points Increase of 30 basis points Increase of 10 basis points Increase of 30 basis points Dollars Percent Dollars Percent Dollars Percent Dollars Percent Year ended December 31, 2024 Year ended December 31, 2023 Effect on earnings: Increase (decrease) in pre-tax net income before impact of derivative settlements $ (3,480) (1.5) % $ (10,437) (4.6) % $ (4,564) (6.2) % $ (13,692) (18.4) % Impact of derivative settlements 1,835 0.8 5,505 2.4 3,150 4.2 9,450 12.7 Increase (decrease) in net income before taxes $ (1,645) (0.7) % $ (4,932) (2.2) % $ (1,414) (2.0) % $ (4,242) (5.7) % Increase (decrease) in basic and diluted earnings per share $ (0.03) $ (0.10) $ (0.03) $ (0.09) 74 Interest Rate Risk - Nelnet Bank To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow.
Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.
Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to 2023 settlements.
As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate 78 floor income.
As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset 72 annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate floor income.
The derivatives are not reflected in the above table. See note 5 of the notes to the consolidated financial statements included in this report for a summary of Nelnet Bank's derivatives outstanding as of December 31, 2023.
The derivatives are not reflected in the above table. See note 5 of the notes to the consolidated financial statements included in this report for a summary of Nelnet Bank's derivatives outstanding as of December 31, 2024.
The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of December 31, 2023.
The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of December 31, 2024.
Maturity Notional amount (i) 2024 $ 1,750,000 2026 1,150,000 2027 250,000 $ 3,150,000 (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of December 31, 2023 was the term adjusted SOFR (plus the tenor spread adjustment relating to LIBOR) plus 10.1 basis points.
Maturity Notional amount (i) 2026 $ 1,150,000 2027 250,000 $ 1,400,000 (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of December 31, 2024 was the term adjusted SOFR (plus the tenor spread adjustment relating to LIBOR) plus 10.4 basis points.
As of December 31, 2023, the gross unrealized loss on the Company’s available-for-sale debt securities was $39.6 million, and the aggregate fair value of available-for-sale debt securities with unrealized losses was $616.7 million. The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.
As of December 31, 2024, the gross unrealized loss on the Company’s available-for-sale debt securities was $20.7 million, and the aggregate fair value of available-for-sale debt securities with unrealized losses was $370.0 million. The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.
On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).
During the first quarter of 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).
(c) The interest rate on the Company's FFELP warehouse facility is indexed to asset-backed commercial paper rates. (d) As of December 31, 2023, the Company was sponsor for $87.4 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (the “Auction Rate Securities”).
(b) The interest rate on the Company's FFELP warehouse facilities is indexed to asset-backed commercial paper rates and daily SOFR. (c) As of December 31, 2024, the Company was sponsor for $36.4 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (the “Auction Rate Securities”).
All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department. No variable rate floor income was earned by the Company in 2023, 2022, or 2021.
All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department.
The following table sets forth AGM’s loan assets and debt instruments by rate characteristics: As of December 31, 2023 As of December 31, 2022 Dollars Percent Dollars Percent Fixed-rate loan assets $ 510,666 4.2 % $ 1,339,900 9.5 % Variable-rate loan assets 11,538,796 95.8 12,829,871 90.5 Total $ 12,049,462 100.0 % $ 14,169,771 100.0 % Fixed-rate debt instruments $ 561,557 4.8 % $ 617,083 4.5 % Variable-rate debt instruments 11,142,596 95.2 13,199,327 95.5 Total $ 11,704,153 100.0 % $ 13,816,410 100.0 % FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment (SAP) formula set by the Department.
The following table sets forth AGM’s loan assets and debt instruments by rate characteristics: As of December 31, 2024 As of December 31, 2023 Dollars Percent Dollars Percent Fixed-rate loan assets $ 814,843 9.1 % $ 510,666 4.2 % Variable-rate loan assets 8,141,025 90.9 11,538,796 95.8 Total $ 8,955,868 100.0 % $ 12,049,462 100.0 % Fixed-rate debt instruments $ 399,994 4.8 % $ 561,557 4.8 % Variable-rate debt instruments 7,958,357 95.2 11,142,596 95.2 Total $ 8,358,351 100.0 % $ 11,704,153 100.0 % FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment (SAP) formula set by the Department.
The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.
Gross fixed rate floor income decreased in 2024 compared with 2023 due to higher interest rates in 2024 compared with 2023. The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.
While these rates will vary, they will generally be based on a spread to SOFR or Treasury Securities, or the Net Loan Rate as defined in the financing documents. (e) Assets include accrued interest receivable and restricted cash.
While these rates will vary, they will generally be based on a spread to SOFR or Treasury Securities, or the Net Loan Rate as defined in the financing documents. (d) Assets include accrued interest receivable and restricted cash. Funding represents overcollateralization (equity), and other liabilities included in FFELP loan asset-backed securitizations and warehouse facilities.
The Company’s portfolio of asset-backed investment securities has limited liquidity, and the Company could incur a significant loss if the investments were sold prior to maturity at an amount less than the original purchase price.
(d) Interest incurred by the Company on amounts that were borrowed under repurchase agreements were at a variable rate of SOFR + 100 to 140 basis points. 75 The Company’s portfolio of asset-backed investment securities has limited liquidity, and the Company could incur a significant loss if the investments were sold prior to maturity at an amount less than the original purchase price.
The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits by rate characteristics: As of December 31, 2023 As of December 31, 2022 Dollars Percent Dollars Percent Fixed-rate loan assets $ 424,284 $ 341,776 Fixed-rate investments 34,644 123,809 Total fixed-rate assets 458,928 47.7 % 465,585 52.2 % Variable-rate loan assets 8,588 78,019 Variable-rate investments 495,004 347,559 Total variable rate assets 503,592 52.3 425,578 47.8 Total assets $ 962,520 100.0 % $ 891,163 100.0 % Fixed-rate deposits $ 280,736 33.1 % $ 336,040 42.6 % Variable-rate deposits (a) 566,828 66.9 453,604 57.4 Total deposits $ 847,564 100.0 % $ 789,644 100.0 % (a) Nelnet Bank uses derivative instruments to hedge exposure to variability in cash flows of variable rate deposits to minimize the exposure to volatility in cash flows from future changes in interest rates.
The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits (including intercompany deposits) by rate characteristics: As of December 31, 2024 As of December 31, 2023 Dollars Percent Dollars Percent Fixed-rate loan assets $ 505,539 $ 424,284 Fixed-rate investments 90,303 34,644 Total fixed-rate assets 595,842 42.8 % 458,928 47.7 % Variable-rate loan assets 139,058 8,588 Variable-rate investments 656,794 495,004 Total variable rate assets 795,852 57.2 503,592 52.3 Total assets $ 1,391,694 100.0 % $ 962,520 100.0 % Fixed-rate deposits $ 449,706 35.8 % $ 280,736 33.1 % Variable-rate deposits (a) 804,916 64.2 566,828 66.9 Total deposits $ 1,254,622 100.0 % $ 847,564 100.0 % (a) Nelnet Bank uses derivative instruments to hedge exposure to variability in cash flows of variable rate deposits to minimize the exposure to volatility in cash flows from future changes in interest rates.
(d) Interest incurred by the Company on amounts borrowed under the repurchase agreements is at a variable rate of SOFR + 100 to 140 basis points.
(c) Interest incurred by the Company on amounts borrowed under the participation agreement is at a variable rate of SOFR + 62.5 basis points.
Funding represents overcollateralization (equity) and other liabilities included in FFELP loan asset-backed securitizations and warehouse facilities. 80 Sensitivity Analysis The following tables summarize the effect on the Company’s consolidated earnings, based upon a sensitivity analysis performed on AGM’s assets and liabilities assuming hypothetical increases and decreases in interest rates of 100 basis points and 300 basis points while funding spreads remain constant.
Consolidated Sensitivity Analysis The following table summarizes the effect on the Company’s consolidated earnings, based upon a sensitivity analysis performed on the Company’s significant interest-earning assets and interest-bearing liabilities assuming hypothetical increases and decreases in interest rates of 100 basis points and 300 basis points while funding spreads remain constant.
Year ended December 31, 2023 2022 2021 Fixed rate floor income, gross $ 2,169 57,380 142,606 Derivative settlements (a) 23,044 33,149 (19,729) Fixed rate floor income, net $ 25,213 90,529 122,877 (a) Derivative settlements consist of settlements received (paid) related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
Year ended December 31, 2024 2023 Fixed rate floor income, gross $ 1,249 2,169 Derivative settlements (a) 4,288 23,044 Fixed rate floor income, net $ 5,537 25,213 (a) Derivative settlements consist of settlements received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of December 31, 2023: Fixed interest rate range Borrower/lender weighted average yield Estimated variable conversion rate (a) Loan balance 8.0 - 8.99% 8.25% 5.61% $ 185,062 > 9.0% 9.05% 6.41% 122,649 $ 307,711 (a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate.
The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of December 31, 2024: Fixed interest rate range Borrower/lender weighted average yield Estimated variable conversion rate (a) Loan balance 7.0 - 7.49% 7.38% 4.74% $ 612 7.5 - 7.99% 7.79% 5.15% 63,377 8.0 - 8.99% 8.18% 5.54% 213,173 > 9.0% 9.06% 6.42% 90,280 $ 367,442 (a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate.
(b) The majority of the Company’s asset-backed securities earn floating rates with expected returns of approximately SOFR + 100 to 350 basis points to maturity.
(b) The majority of the Company’s asset-backed securities earn floating rates with expected returns of approximately SOFR + 100 to 350 basis points to maturity. As of December 31, 2024, $226.1 million (par value) of the Company’s asset-backed securities earn a weighted average fixed rate of 3.60%.
For further details of the Company’s derivatives used to hedge fixed rate loans and investments, see note 5 of the notes to consolidated financial statements included in this report. 79 AGM is also exposed to interest rate risk in the form of repricing risk and basis risk because the interest rate characteristics of AGM’s assets do not match the interest rate characteristics of the funding for those assets.
For further details of the Company’s derivatives used to hedge fixed rate loans and investments, see note 5 of the notes to consolidated financial statements included in this report.
In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.
In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced. No variable rate floor income was earned by the Company in 2024 or 2023. A summary of fixed rate floor income earned by the AGM operating segment follows.
In addition, a sensitivity analysis was performed assuming the funding index increases 10 basis points and 30 basis points while holding the asset index constant, if the funding index is different than the asset index. The sensitivity analysis was performed on AGM’s variable rate assets (including loans earning fixed rate floor income) and liabilities.
The sensitivity analysis was performed assuming the funding index changes 10 basis points and 30 basis points while holding the asset index constant, if the funding index is different than the asset index.
The increase in net derivative settlements received by the Company during 2022 compared with the net derivative settlements paid in 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding. During 2022, the Company terminated $2.4 billion in notional amount of derivatives for net proceeds of $91.8 million.
The decrease in net derivative settlements received by the Company during 2024 compared with 2023, was due to a decrease in the notional amount of derivatives outstanding and less favorable terms on the $400.0 million of notional derivatives entered into in 2023 compared with the $2.8 billion notional derivatives that were terminated due to an increase in interest rates from when the terminated derivatives were initially executed.
During the last half of 2023, the Company entered into multiple derivatives with notional amounts totaling $400 million with maturity dates through 2030, to hedge a portion of loans remaining that earn fixed rate floor income and other loans and investments in which the Company receives a fixed rate.
Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400.0 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.
Year ended December 31, 2023 2022 2021 Average balance Interest income/ expense Average yields/ rates Average balance Interest income/ expense Average yields/ rates Average balance Interest income/ expense Average yields/ rates Investments: Asset-backed securities available-for-sale (a) (b) $ 985,367 68,045 6.91 % $ 1,303,731 35,516 2.72 % $ 587,736 7,409 1.26 % Debt funding asset-backed securities available-for-sale: Participation agreement - variable rate (c) $ 115,420 6,207 5.38 % $ 349,486 9,617 2.75 % $ 152,196 1,176 0.77 % Repurchases agreements - variable rate (d) 381,378 23,540 6.17 481,782 12,355 2.56 223,792 1,558 0.70 $ 496,798 29,747 5.99 $ 831,268 21,972 2.64 $ 375,988 2,734 0.73 (a) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.
Year ended December 31, 2024 2023 Average balance Interest income/ expense Average yields/ rates Average balance Interest income/ expense Average yields/ rates Investments: Asset-backed securities available-for-sale (a) (b) $ 783,806 49,325 6.28 % $ 985,367 62,209 6.31 % Debt funding asset-backed securities available-for-sale: Participation agreement - variable rate (c) $ 4,335 261 6.00 % $ 115,420 6,207 5.38 % Repurchases agreements - variable rate (d) 101,905 7,035 6.88 381,378 23,540 6.17 $ 106,240 7,296 6.85 $ 496,798 29,747 5.99 (a) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.
Subsequent to the discontinuation of LIBOR on June 30, 2023, the Company now receives and pays the term adjusted SOFR rate on these derivatives (plus the tenor spread adjustment relating to LIBOR). The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets.
The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets. The following table summarizes the 1:3 Basis Swaps outstanding as of December 31, 2024.
As of December 31, 2023, the weighted average estimated variable conversion rate was 8.57% and the short-term interest rate was 554 basis points.
As of December 31, 2024, the weighted average estimated variable conversion rate was 5.69% and the short-term interest rate was 499 basis points. 73 AGM is also exposed to interest rate risk in the form of repricing risk and basis risk because the interest rate characteristics of AGM’s assets do not match the interest rate characteristics of the funding for those assets.
Index Frequency of variable resets Assets Funding of student loan assets 30-day average SOFR (a) (b) Daily $ 10,941,576 — 3-month H15 financial commercial paper Daily 375,376 — 3-month Treasury bill Daily 369,255 — 30-day average SOFR / 1-month CME Term SOFR (a) Monthly — 6,780,300 90-day average SOFR / 3-month CME Term SOFR (a) (b) Quarterly — 2,772,367 Asset-backed commercial paper (c) Varies — 1,398,485 Fixed rate — — 471,427 Auction-rate (d) Varies — 87,360 Other (e) — 1,193,097 1,369,365 $ 12,879,304 12,879,304 (a) Transitioned from LIBOR to SOFR after June 30, 2023.
Index Frequency of variable resets Assets Funding of student loan assets 30-day average SOFR (a) Daily $ 7,850,229 — 3-month H15 financial commercial paper Daily 271,536 — 3-month Treasury bill Daily 266,799 — 30-day average SOFR / 1-month CME Term SOFR Monthly — 4,964,666 90-day average SOFR / 3-month CME Term SOFR (a) Quarterly — 1,959,158 Asset-backed commercial paper / SOFR (b) Varies — 853,165 Fixed rate — — 346,359 Auction-rate (c) Varies — 36,395 Other (d) — 794,450 1,023,271 $ 9,183,014 9,183,014 (a) The Company has certain basis swaps outstanding in which the Company receives and pays the term adjusted SOFR plus the tenor spread adjustment to LIBOR (the "1:3 Basis Swaps").
Removed
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (All dollars are in thousands, except share amounts, unless otherwise noted) LIBOR Transition On June 30, 2023, the LIBOR administrator ceased publication (on a representative basis) of all USD LIBOR rates. The Company relied on fallback provisions to transition financial contracts from LIBOR to SOFR.
Added
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (All dollars are in thousands, except share amounts, unless otherwise noted) The Company’s consolidated balance sheets include assets and liabilities whose fair values are subject to market risks, primarily interest rate risk. The following sections address the interest rate risk associated with our relevant business activities.
Removed
The SAP formula for the Company's FFELP loans, the majority of which were indexed to one-month LIBOR, were not able to be modified without legislative action. On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the LIBOR Act) was signed into law.
Added
The following table summarizes the effect on the Company’s consolidated earnings based upon a sensitivity analysis performed on AGM’s variable rate assets (including loans earning fixed rate floor income) and liabilities.
Removed
The LIBOR Act provides that for contracts that contain no fallback provision or contain fallback provisions that do not identify a specific USD LIBOR benchmark replacement (including the SAP formula for FFELP loans), a benchmark replacement based on SOFR will automatically replace the USD LIBOR benchmark in the contract after June 30, 2023.
Added
Interest rates Change from increase of 100 basis points Change from increase of 300 basis points Change from decrease of 100 basis points Change from decrease of 300 basis points Dollars Percent Dollars Percent Dollars Percent Dollars Percent Year ended December 31, 2024 Effect on earnings: AGM Operating Segment (a) $ 6,507 $ 25,369 $ 1,186 $ 12,374 Nelnet Bank Operating Segment (b) (542) (1,627) 542 1,627 NFS Other Operating Segments (c) 5,837 17,512 (5,837) (17,512) ETSP Operating Segment (d) 5,932 17,795 (5,932) (17,795) Corporate and Other Activities (d) 1,026 3,077 (1,026) (3,077) Increase (decrease) in net income before taxes $ 18,760 8.2 % 62,126 27.2 % (11,067) (4.8) % (24,383) (10.7) % Increase (decrease) in basic and diluted earnings per share $ 0.39 $ 1.29 $ (0.23) $ (0.51) (a) Impact associated with variable rate loans and variable rate bonds and notes payable, including the impact of derivative settlements.
Removed
Following the enactment and implementation of the LIBOR Act, all of the Company's financial instruments which were indexed to USD LIBOR transitioned to SOFR after June 30, 2023. Specifically, after June 30, 2023, the SAP formula for FFELP loans transitioned to 30-day average SOFR and the Company's LIBOR-indexed FFELP asset-backed securities also transitioned to a short-term SOFR index.
Added
(b) Impact associated with variable rate loans and debt securities (investments) and variable rate deposits, including the impact of derivative settlements. (c) Impact associated with variable rate debt securities (investments) and debt facilities used to fund a portion of such investments. (d) Impact associated with interest earning operating and restricted cash accounts.
Removed
The Company does not expect the transition from LIBOR to SOFR to significantly impact its asset-backed securitization cash flow forecast as discussed under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral - Bonds and Notes Issued in Asset-backed Securitizations." The Company's LIBOR-indexed derivatives transitioned to the fallback rate (SOFR) as defined in the individual agreements and/or published industry guidelines, as applicable.
Removed
The market transition away from the previous LIBOR framework could result in significant changes to the interest rate characteristics of the Company's prior LIBOR-indexed assets and funding for those assets.
Removed
The Company is still uncertain as to the long-term relationship between overnight SOFR and Term SOFR as they are new indices, and the Company's assumptions with respect to this relationship may evolve over time.
Removed
To the extent that the spread between these indices were to widen, it could adversely impact future interest income earned on the Company's FFELP student loan portfolio.
Removed
For a discussion of the risks related to the LIBOR transition, see Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" for additional information.
Removed
A summary of fixed rate floor income earned by the AGM operating segment follows.
Removed
Gross fixed rate floor income decreased each year compared with the preceding year due to higher interest rates each year compared with the preceding year.
Removed
The decrease in net derivative settlements received by the Company during 2023 compared with 2022, was due to the termination of the fixed rate floor derivatives in March 2023.
Removed
Based on the terms of these derivatives, the Company pays a weighted average fixed rate of 3.71% and receives payments based on SOFR that resets quarterly.
Removed
See "LIBOR Transition" above. (b) The Company has certain basis swaps outstanding in which the Company received three-month LIBOR set discretely in advance and paid one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").
Removed
The following table summarizes the 1:3 Basis Swaps outstanding as of December 31, 2023.
Removed
Interest rates Change from increase of 100 basis points Change from increase of 300 basis points Change from decrease of 100 basis points Change from decrease of 300 basis points Dollars Percent Dollars Percent Dollars Percent Dollars Percent Year ended December 31, 2023 Effect on earnings: Increase (decrease) in pre-tax net income before impact of derivative settlements $ 2,737 3.7 % $ 12,088 16.3 % $ 4,756 6.4 % $ 26,206 35.3 % Impact of derivative settlements (a) 333 0.4 999 1.3 (333) (0.4) (999) (1.3) Increase (decrease) in net income before taxes $ 3,070 4.1 % $ 13,087 17.6 % $ 4,423 6.0 % $ 25,207 34.0 % Increase (decrease) in basic and diluted earnings per share $ 0.06 $ 0.27 $ 0.09 $ 0.51 Year ended December 31, 2022 Effect on earnings: Increase (decrease) in pre-tax net income before impact of derivative settlements $ (19,344) (3.8) % $ (31,648) (6.2) % $ 35,420 7.0 % $ 142,587 28.0 % Impact of derivative settlements 31,561 6.2 94,685 18.6 (31,561) (6.2) (94,684) (18.6) Increase (decrease) in net income before taxes $ 12,217 2.4 % $ 63,037 12.4 % $ 3,859 0.8 % $ 47,903 9.4 % Increase (decrease) in basic and diluted earnings per share $ 0.25 $ 1.27 $ 0.08 $ 0.97 Year ended December 31, 2021 Effect on earnings: Increase (decrease) in pre-tax net income before impact of derivative settlements $ (55,957) (11.1) % $ (103,742) (20.7) % $ 87,060 17.3 % $ 263,398 52.4 % Impact of derivative settlements 43,059 8.6 129,176 25.7 (43,059) (8.5) (129,176) (25.7) Increase (decrease) in net income before taxes $ (12,898) (2.5) % $ 25,434 5.0 % $ 44,001 8.8 % $ 134,222 26.7 % Increase (decrease) in basic and diluted earnings per share $ (0.25) $ 0.50 $ 0.87 $ 2.64 (a) On March 15, 2023, the Company terminated its existing derivative portfolio hedging loans earning fixed rate floor income.
Removed
The table above excludes the impact of these derivatives for the entire period.
Removed
As of December 31, 2023, $226.7 million (par value) of the Company’s asset-backed securities earn a weighted average fixed rate of 3.24%. 82 (c) Interest incurred by the Company on amounts borrowed under the participation agreement is at a variable rate of SOFR + 62.5 basis points.

Other NNI 10-K year-over-year comparisons