5 unchanged sentences
This discussion and analysis contains forward-looking statements subject to various risks and uncertainties and should be read in conjunction with the disclosures and information contained in "Forward-Looking and Cautionary Statements" and Item 1A "Risk Factors" included in this report.
−Removed: The Company is a diverse, innovative company with a purpose to serve others and a vision to make dreams possible.
+Added: A discussion related to the results of operations and changes in financial condition for the year ended December 31, 2024 compared with the year ended December 31, 2023 is presented below.
+Added: A discussion related to the results of operations and changes in financial condition for the year ended December 31, 2023 compared with the year ended December 31, 2022 can be found in Part II, Item 7.
+Added: "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2023 Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission on February 27, 2024.
+Added: The Company is a diversified hybrid holding company with primary businesses being consumer lending, loan servicing, payments, and technology – with many of these businesses serving customers in the education space.
The largest operating businesses engage in loan servicing and education technology services and payments.
A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans.
−Removed: 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).
+Added: 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).
The Company was formed as a Nebraska corporation in 1978 to service federal student loans for two local banks.
The Company built on this initial foundation as a servicer to become a leading originator, holder, and servicer of federal student loans, principally consisting of loans originated under the FFEL Program.
−Removed: The Reconciliation Act of 2010 discontinued new loan originations under the FFEL Program in 2010, and requires all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program.
+Added: The Reconciliation Act of 2010 discontinued new loan originations under the FFEL Program, effective July 1, 2010, and requires all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program.
+Added: This law does not alter or affect the terms and conditions of existing FFELP loans.
Subsequent to the Reconciliation Act of 2010, the Company no longer originates FFELP loans.
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In addition, the Company has been servicing federally owned student loans for the Department since 2009.
+Added: Reclassifications and Immaterial Error Corrections
+Added: The accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations gives effect to the immaterial error corrections made to the previously reported consolidated financial statements for the year ended December 31, 2023.
+Added: For additional information, see “Reclassification and Immaterial Error Corrections” within note 2 of the notes to consolidated financial statements included in this report.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
1 unchanged sentence
However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance.
−Removed: 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.
+Added: 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.
Year ended December 31,
−Removed: 2023 2022 2021
GAAP net income attributable to Nelnet, Inc.
$ 184,045 89,826
−Removed: Realized and unrealized derivative market value adjustments 41,773 (231,691) (92,813)
−Removed: Tax effect (a) (10,026) 55,606 22,275
−Removed: Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b) $ 123,279 231,262 322,748
+Added: Realized and unrealized derivative market value adjustments (a) (10,124) 41,773
+Added: Tax effect (b) 2,430 (10,026)
+Added: Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $ 176,351 121,573
Earnings per share:
GAAP net income attributable to Nelnet, Inc.
−Removed: $ 2.45 10.83 10.20
−Removed: Realized and unrealized derivative market value adjustments 1.12 (6.16) (2.41)
−Removed: Tax effect (a) (0.28) 1.48 0.58
−Removed: Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b) $ 3.29 6.15 8.37
−Removed: (a) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.
−Removed: (b) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.
−Removed: "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.
−Removed: 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.
+Added: Realized and unrealized derivative market value adjustments (a) (0.28) 1.12
+Added: Tax effect (b) 0.07 (0.27)
+Added: Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $ 4.81 3.25
+Added: (a) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.
+Added: "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.
+Added: The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met.
Management has structured all of the Company’s derivative transactions with the intent that each is economically effective;
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However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.
−Removed: 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.
+Added: The Company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations.
Accordingly, the Company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the Company’s performance and in presentations with credit rating agencies, lenders, and investors.
−Removed: Consequently, the Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management.
+Added: Consequently, the Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management and represents what earnings would have been had these derivatives qualified for hedge accounting.
There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.
+Added: (b) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.
Operating Segments
6 unchanged sentences
The Company earns fee-based revenue through its NDS and NBS reportable operating segments.
−Removed: The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM reportable operating segment.
+Added: 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.
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industrial bank franchise focused on the private education and unsecured consumer loan markets, with a home office in Salt Lake City, Utah.
−Removed: The Company formally established the Nelnet Financial Services division in 2023 intended to focus on the Company’s key objective to maximize the amount and timing of cash flows generated from its FFELP portfolio and reposition itself for the post-FFELP environment by expanding its private education, consumer, and other loan portfolios.
−Removed: The creation of NFS resulted in financial results grouped and reported differently to the Company’s chief operating decision maker.
−Removed: 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:
+Added: The NFS division was formed to focus on the Company’s key objective to maximize the amount and timing of cash flows generated from its FFELP portfolio and reposition itself for the post-FFELP environment by expanding its private education, consumer, and other loan portfolios.
+Added: 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.
Securities and Exchange Commission (SEC)-registered investment advisor subsidiary
−Removed: • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and causality policies
+Added: • 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
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• Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs
−Removed: • 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
+Added: • 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
+Added: • 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)
3 unchanged sentences
Year ended December 31,
−Removed: 2023 2022 2021
NDS $ 40,497 77,714
5 unchanged sentences
Unallocated corporate costs (46,194) (63,223)
−Removed: Nelnet Renewable Energy (108,991) (11,639) (12,029)
+Added: Nelnet Renewable Energy - solar construction (35,972) (54,691)
+Added: Solar tax equity investments (2,179) (60,982)
ALLO investment 8,087 (57,972)
1 unchanged sentence
Other corporate activities 10,481 11,635
+Added: Eliminations/reclassifications 77 —
Net income before taxes 228,584 68,715
2 unchanged sentences
Net income $ 184,045 89,826
−Removed: (a) For the periods presented, the majority of noncontrolling interests represents losses attributed to noncontrolling membership interests in the Company’s Nelnet Renewable Energy operating segment, which were $37.6 million, $11.6 million, and $7.7 million in 2023, 2022, and 2021, respectively.
+Added: (a) For the periods presented, the majority of noncontrolling interests represents losses attributed to noncontrolling membership interests in the Company’s Nelnet Renewable Energy and solar tax equity investments operating segments, which were $8.5 million and $41.0 million, in 2024 and 2023, respectively.
2024 Operating and Liquidity Highlights
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(ii) a description of significant and/or unusual events and transactions in 2024 that impacted and may potentially impact the Company’s operating results;
−Removed: and (iii) a summary of the Company’s current liquidity, including certain items that impacted the Company’s liquidity in 2023.
+Added: and (iii) a summary of the Company’s current liquidity, including certain items that will impact the Company’s liquidity in future periods.
See “Results of Operations” for each reportable operating segment, the NFS division, and Corporate and Other Activities and “Liquidity and Capital Resources” under this Item 7 for additional detail.
Loan Servicing and Systems
−Removed: Effective April 1, 2023, the Department modified the loan servicing contract between the Department and Nelnet Servicing to reduce the monthly fee under the servicing contract by $0.19 per borrower.
−Removed: In addition, beginning in the second quarter of 2023, the Department transferred one million of the Company’s existing Department servicing borrowers to another third-party servicer.
−Removed: These items negatively impacted LSS’s government servicing revenue in 2023.
−Removed: In the first quarter of 2023, the Company reduced staff to manage expenses due to (i) the delays in the government’s student debt relief and return to repayment programs under the CARES Act, (ii) the April 2023 monthly fee reduction on the government contract, and (iii) the transfer of government borrowers from the Company to another servicer.
−Removed: The staff reductions resulted in salaries and benefits expense being reduced in 2023 as compared with 2022.
−Removed: In 2022, the Company was fully staffed in preparation of the expiration of the student loan payment pause under the CARES Act.
−Removed: In August 2023, the Company began to hire additional associates to support borrowers returning to repayment on September 1, 2023.
−Removed: In April 2023, the Company and four other third-party servicers were awarded servicing contracts to provide continued servicing for the Department under a new Unified Servicing and Data Solutions (USDS) contract which will replace the existing Department student loans servicing contracts.
−Removed: The Company’s new contract has a five year base period, with 5 years of possible extensions.
−Removed: The new USDS servicing contracts have multiple revenue components with tiered pricing based on borrower volume, while revenue earned under the legacy servicing contract is primarily based on borrower status.
−Removed: Assuming borrower volume remains consistent under the USDS servicing contract, the Company expects revenue earned on a per borrower blended basis will decrease under the USDS contract versus the current legacy contract.
+Added: In April 2023, the Company and four other third-party servicers were awarded servicing contracts to provide continued servicing for the Department under a new Unified Servicing and Data Solutions (USDS) contract which replaced the Company’s legacy servicing contract with the Department.
+Added: The USDS contract became effective in April 2023 and has a five-year base period, with 5 years of possible extensions.
+Added: Servicing under the USDS contract went live on April 1, 2024 and the Company recognized revenue in accordance with this new contract beginning in the second quarter of 2024.
+Added: The Company recognized less revenue from the Department in 2024 under the USDS contract due to a decrease in the number of borrowers serviced and lower revenue earned on a per borrower blended basis under the new contract versus the legacy contract.
+Added: The new USDS servicing contract has multiple revenue components with tiered pricing based on borrower volume, while revenue earned under the legacy servicing contract was primarily based on borrower status.
Education Technology Services and Payments
1 unchanged sentence
The growth was from existing and new customers.
−Removed: Operating margin decreased from recent historical periods as a result of continued investments in the development of new services and technologies and superior customer service.
−Removed: Due to an increase in interest rates, the Company recognized $27.0 million in interest income on tuition funds held in custody for schools, an increase from $9.4 million in 2022.
+Added: Operating margin increased from recent historical periods as a result of increases in tuition payment plan services and payment processing revenue, while maintaining a consistent cost structure for services.
Asset Generation and Management
−Removed: Net interest income was negatively impacted in 2023 due to the expected continued amortization of the Company’s FFELP student loan portfolio.
+Added: Net interest income decreased in 2024 compared to 2023 after removing the impacts to interest expense for the write-off of the remaining unamortized debt discount associated with the redemption of certain asset-backed debt securities in 2024 and 2023 discussed below.
+Added: Net interest income was negatively impacted in 2024 due to the expected continued amortization of the Company’s FFELP student loan portfolio and a decrease in core loan spread.
The average balance of student loans decreased $3.0 billion from $13.3 billion in 2023 to $10.3 billion in 2024.
−Removed: 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.
−Removed: Interest income was also negatively impacted by an increase in interest rates.
−Removed: As a result of an increase in interest rates, gross fixed rate floor income recognized by the Company was only $2.2 million in 2023 compared with $57.4 million in 2022.
−Removed: Based on current interest rates, the Company does not anticipate earning a significant amount of fixed rate floor income in the foreseeable future.
−Removed: 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.
−Removed: Nelnet Renewable Energy
−Removed: 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.
−Removed: During 2023, the Company invested a total of $185.1 million (which included $94.5 million syndicated to third-party investors) in solar tax equity investments.
+Added: 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.
+Added: However, the Company has observed a significant decrease in FFELP borrowers consolidating their loans into the Federal Direct Loan Program since August 2024 that has resulted in prepayment rates on the Company’s FFELP portfolio being more consistent with longer-term historical rates.
+Added: 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.
+Added: The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations, which are accounted for as held-to-maturity beneficial interest investments.
+Added: An increase in cumulative loss expectations in 2024 on certain securitizations and loan vintages caused a change in estimate of future cash flows related to certain of the Company's beneficial interest securitization investments.
+Added: As a result, during 2024, the Company recorded a $39.5 million allowance for credit losses (and related provision expense) related to these investments.
+Added: Nelnet Renewable Energy (NRE)
+Added: NRE is the Company’s solar construction company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.
+Added: In April 2024, the Company announced a change in its solar EPC operations to focus exclusively on the commercial solar market and consequently discontinued its residential solar operations in 2024.
+Added: As a result, residential revenue will continue to decline from recent historical amounts as existing customer contracts are completed.
+Added: Residential solar construction revenue was $3.3 million and $10.7 million for the year ended December 31, 2024 and 2023, respectively.
+Added: The Company entered the EPC business with its July 2022 acquisition of GRNE Solar.
+Added: Since the acquisition, NRE has incurred low and, in some cases, negative margins on certain legacy projects.
+Added: During 2023 and 2024, NRE recognized a net loss before taxes of $54.7 million and $36.0 million, respectively.
+Added: These losses in 2023 and 2024 include impairment charges on goodwill, intangible assets, and other assets of $20.6 million and $1.9 million, respectively.
+Added: The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.
+Added: As new projects are completed and the legacy contracts are substantially complete, the Company believes operating results will improve from prior historical periods.
+Added: Solar Tax Equity Investments
+Added: 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.
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.
1 unchanged sentence
For the majority of the Company's solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment.
−Removed: Nelnet Renewable Energy recognized pre-tax losses on its tax equity investments of $46.7 million in 2023, which includes $26.4 million attributable to noncontrolling interests.
+Added: The Company recognized pre-tax losses on its tax equity investments of $6.5 million in 2024, which includes $4.6 million attributable to noncontrolling interests.
+Added: The pre-tax losses were partially offset by recognizing gains of $15.3 million, which includes $1.8 million attributable to noncontrolling interests, related to investments that were sold during 2024.
In periods in which the Company makes significant investments in solar tax equity investments, operating results are negatively impacted due to the accelerated losses recognized in the initial years of investment.
However, given the timing and amount of cash flows expected to be generated over the life of these investments, the Company considers these investments a good use of capital.
−Removed: Through December 31, 2023, the Company has recognized cumulative pre-tax losses (excluding noncontrolling interests) of approximately $56 million on its tax equity investments.
+Added: Through December 31, 2024, the Company has recognized cumulative pre-tax losses (excluding noncontrolling interests) of approximately $70 million on its tax equity investments currently outstanding.
The Company expects its current investments (assuming no additional investments are made subsequent to December 31, 2024) to generate approximately $93 million of pre-tax earnings (excluding noncontrolling interests) over the life of the investments.
−Removed: Accordingly, the Company expects to recognize approximately $134 million in pre-tax income (excluding noncontrolling interests) over the remaining years of its current investments.
−Removed: In addition to solar tax equity investments, the Company has a strategy to own solar energy project assets.
−Removed: Accordingly, the Company has begun to execute a multi-faceted approach to construct, finance, own, and operate these assets.
−Removed: As part of this strategy, on July 1, 2022, the Company acquired 80% of GRNE Solar, a solar construction company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.
−Removed: Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects.
−Removed: In addition, higher interest rates reduced residential demand and made community solar projects more costly.
−Removed: GRNE Solar recognized a net loss of $34.2 million in 2023.
−Removed: In the fourth quarter of 2023, the Company recognized an impairment charge of $20.6 million related to goodwill and certain intangible assets initially recognized from the GRNE Solar acquisition.
−Removed: Due to the complexity and long-term nature of GRNE’s existing construction contracts, GRNE may continue to incur low and/or negative margins to complete projects currently under contract.
+Added: Accordingly, the Company
+Added: expects to recognize approximately $163 million in pre-tax income (excluding noncontrolling interests) between January 1, 2025 and December 31, 2030 (the remaining years of its current investments).
Investments - ALLO and Hudl
1 unchanged sentence
The Company accounts for its ALLO voting membership interests investment under the HLBV method of accounting that resulted in the recognition of a net loss of $10.7 million during 2024.
−Removed: As of December 31, 2023, the carrying amount of the Company’s investment in ALLO was $10.7 million.
−Removed: The Company expects to fully expense the remaining investment balance of ALLO during the first quarter of 2024.
−Removed: The Company has an investment in Agile Sports Technologies, Inc.
−Removed: (doing business as “Hudl.”) During the first quarter of 2023, the Company acquired additional ownership interests in Hudl for $31.5 million from existing Hudl investors.
−Removed: This transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities.
−Removed: Accordingly, the Company did not adjust its carrying value of its Hudl investment to the transaction value.
+Added: Absent additional equity contributions with respect to ALLO's voting membership interests, the Company will not recognize additional losses for its voting membership interests in ALLO.
+Added: The Company also owns preferred membership interests in ALLO that earn a preferred return.
+Added: As of December 31, 2024, the outstanding preferred membership interests of ALLO held by the Company was $225.6 million.
+Added: The Company recognized income on its ALLO preferred membership interests of $17.5 million in 2024.
+Added: Nelnet continues to work with ALLO and SDC, a third-party global digital infrastructure investor that holds a significant investment in ALLO, to explore various funding and capital options to support ALLO’s growth.
+Added: The Company has an approximately 22% preferred ownership investment in Agile Sports Technologies, Inc.
+Added: (doing business as “Hudl.”) During the fourth quarter of 2024 and first quarter of 2023, the Company acquired additional ownership interests in Hudl for $3.3 million and $31.5 million, respectively, from existing Hudl investors.
+Added: These transactions were not considered observable market transactions (not orderly) because they were not subject to customary marketing activities.
+Added: Accordingly, the Company did not adjust its carrying value of its Hudl investment to the transaction values.
As of December 31, 2024, the carrying amount of the Company's investment in Hudl is $168.7 million.
Certain investments, including solar tax equity, ALLO, and Hudl, may be recorded at a carrying value that is less than its market value due to HLBV (solar investments and ALLO) and the measurement alternative (Hudl) method of accounting.
−Removed: Future operating results of solar and ALLO or an observable transaction of Hudl could impact the valuation on our financial statements or our investments in them and may result in significant fluctuations of the Company’s earnings.
−Removed: 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.
−Removed: 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 and retained the $183.2 million of cash (representing the termination date fair value of the derivatives) from its clearinghouse.
+Added: Future operating results of solar and ALLO, an observable transaction of Hudl, or a liquidation event of ALLO or Hudl could impact the valuation on our financial statements or our investments in them and may result in significant fluctuations of the Company’s earnings.
As of December 31, 2024, the Company had $717.1 million of unencumbered cash and investments.
In addition, the Company has a $495.0 million unsecured line of credit that matures in September 2026.
−Removed: No amounts were outstanding on the line of credit as of December 31, 2023.
−Removed: In addition, as of December 31, 2023, the Company expects to generate future undiscounted cash flows from its AGM loan portfolio of approximately $1.30 billion, including approximately $850.0 million in the next five years.
−Removed: 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);
+Added: No amounts were outstanding on the line of credit as of December 31, 2024 and $495.0 million was available for future use.
+Added: Further, as of December 31, 2024, the Company expects to generate future undiscounted cash flows from its AGM loan portfolio of approximately $1.07 billion (including approximately $675.0 million in the next five years);
+Added: and from its beneficial interest investments of approximately $323.4 million (the majority of which is expected to be received over the next five years).
+Added: 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;
2 unchanged sentences
CONSOLIDATED RESULTS OF OPERATIONS
−Removed: An analysis of the Company's consolidated operating results for the years ended December 31, 2023, 2022, and 2021 is provided below.
+Added: An analysis of the Company's consolidated operating results for the year ended December 31, 2024 compared with 2023 is provided below.
The Company’s operating results are primarily driven by the performance of its existing loan portfolio and the revenues generated by its fee-based businesses and the costs to provide such services.
5 unchanged sentences
2024 2023 Additional information
−Removed: Loan interest $ 931,945 651,205 482,337 Increases due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans and in gross fixed rate floor income.
−Removed: Investment interest 177,855 91,601 41,498 Includes income from unrestricted interest-earning deposits and investments in asset-backed securitizations.
−Removed: Increases due to an increase in interest earning investments and an increase in interest rates.
+Added: Loan interest $ 787,498 931,945 Decrease due to decreases in the average balance of loans in the AGM operating segment partially offset by an increase in the gross yield earned on loans.
+Added: Investment interest 185,901 177,855 Includes income from unrestricted interest-earning deposits and investments, and restricted cash in asset-backed securitizations.
+Added: Increase due to an increase in the average balances and interest rates.
Total interest income 973,399 1,109,800
−Removed: Interest expense 845,091 430,137 176,233 Increases due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.
−Removed: In 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of a $25.9 million non-cash expense from the write-off of the remaining debt discount associated with these bonds at the time of redemption.
−Removed: In 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid.
−Removed: The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013.
+Added: Interest expense 680,537 845,091 Decrease due to a decrease in the average balance of debt outstanding partially offset by an increase in cost of funds and deposits at Nelnet Bank.
+Added: In addition, the Company recognized a $6.3 million and $25.9 million non-cash expense during 2024 and 2023, respectively, as the result of writing off the remaining unamortized debt discount related to the redemption of certain asset-backed debt securities prior to their maturity.
Net interest income 292,862 264,709
−Removed: Less provision (negative provision) for loan losses 65,450 46,441 (12,426) Represents the current period provision (negative provision) to reflect the lifetime expected credit losses related to the Company’s loan portfolio.
+Added: Less provision for loan losses 54,607 8,115 Represents the current period provision to reflect the lifetime expected credit losses related to the Company’s loan portfolio.
See note 3 of the notes to consolidated financial statements in this report for the factors impacting provision for loan losses for the periods presented.
3 unchanged sentences
486,962 463,311 See ETSP operating segment - results of operations.
−Removed: Solar construction revenue 31,669 24,543 — On July 1, 2022, the Company acquired 80% of the ownership interests of GRNE Solar.
−Removed: GRNE Solar designs and installs residential and commercial solar systems.
−Removed: The acquisition diversified the Company’s position in the renewable energy space to include solar construction.
+Added: Reinsurance premiums earned 62,923 20,067 Represents premiums earned, net of ceded portion, from reinsurance treaties on property and casualty policies.
+Added: Increase due to a higher number of policies the Company reinsures.
+Added: Solar construction revenue 56,569 31,669 Represents revenue earned from NRE providing solar construction services, including design and installations of residential and commercial solar systems.
+Added: In April 2024, the Company announced a change in its solar EPC operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations.
+Added: As a result, residential revenue will continue to decline in future periods as existing customer contracts are completed.
Other, net 61,602 (74,327) See table below for components of “other, net.”
−Removed: Gain on sale of loans, net 39,673 2,903 18,715 Represents net gains recognized from selling portfolios of loans.
+Added: Loss on sale of loans, net (1,643) (17,662) The AGM operating segment recognized losses from selling portfolios of loans.
See note 3 of the notes to consolidated financial statements in this report for additional information.
−Removed: Impairment expense (31,925) (15,523) (16,360) Represents impairment charges recognized by the Company.
−Removed: See note 11 of the notes to consolidated financial statements in this report for identification of impairment by asset type and reportable segment.
Derivative settlements, net 6,134 25,072 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.
−Removed: The majority of derivative settlements received (paid) by the Company during the periods presented was from the Company’s derivatives used to hedge loans earning fixed rate floor income.
−Removed: To minimize the Company’s exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio on March 15, 2023.
+Added: The majority of derivative settlements received by the Company during the periods presented was from the Company’s derivatives used to hedge loans earning fixed rate floor income.
+Added: To minimize the Company’s exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio in March 2023.
+Added: Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400 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.
+Added: See AGM operating segment - results of operations for additional information.
Derivative market value adjustments, net 10,124 (41,773) 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.
−Removed: 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.
+Added: 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.
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.
−Removed: To minimize the Company’s exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio on March 15, 2023.
−Removed: As such, the Company expects the derivative market value adjustments in future periods will be less substantial.
+Added: To minimize the Company's exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio ($2.8 billion notional amount) in March 2023.
+Added: 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.
+Added: The Company expects the derivative market value adjustments in future periods will be less substantial.
Total other income (expense), net 1,165,079 924,311
−Removed: Cost of services:
+Added: Cost of services and expenses:
+Added: Costs incurred to provide loan servicing 1,889 — Represents primarily the amortization of previously capitalized contract fulfillment costs.
+Added: The costs were pre-contract costs incurred to enhance the resources of the Company to satisfy future performance obligations and are expected to be recovered.
Cost to provide education technology services and payments 172,763 171,183 Represents direct costs to provide payment processing and instructional services in ETSP.
−Removed: Increases were primarily due to additional instructional services costs.
+Added: Increase primarily due to additional instructional services costs.
See ETSP operating segment - results of operations.
−Removed: Cost to provide solar construction services 48,576 19,971 — As noted above, the Company acquired GRNE Solar on July 1, 2022.
−Removed: These amounts represent direct costs related to GRNE providing solar construction services.
−Removed: Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects.
+Added: Cost to provide solar construction services 77,673 48,576 Represents direct costs related to NRE providing solar construction services.
+Added: Since the acquisition of GRNE Solar in 2022, it has incurred low and, in some cases, negative margins on certain projects.
+Added: During 2024, the Company recorded an expense of $24.6 million related to estimated losses on legacy construction projects.
+Added: The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.
+Added: As new projects are completed and the legacy contracts are now substantially complete, the Company believes operating results will improve from prior historical periods.
Total cost of services 252,325 219,759
−Removed: Operating expenses:
−Removed: Salaries and benefits 591,537 589,579 507,132 Increase was primarily due to an increase in headcount in ETSP to support the growth of its customer base and the investment in the development of new technologies.
−Removed: In 2023, increase was partially offset by staff reductions in LSS in the first two quarters of 2023 to manage expenses due to delays in the government’s student debt relief and return to repayment programs and lower pricing and reduced servicing volume for the Department servicing contract.
−Removed: In August 2023, LSS began to hire additional associates to support borrowers returning to repayment.
−Removed: In 2022, increase in salaries and benefits was driven by more associates at LSS as the Company had been required to prepare for the resumption of federal student loan payments upon the expiration of the CARES Act borrower relief provisions, which was extended several times throughout 2022.
+Added: Salaries and benefits 576,931 591,537 Decrease primarily due to staff reductions in the first half of 2023 in LSS to manage expenses due to lower pricing and reduced servicing volume for LSS's Department servicing contract, partially offset by an increase in ETSP due to annual merit pay increases and an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.
Depreciation and amortization 58,116 79,118 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.
−Removed: Other expenses 189,851 170,778 145,469 Other expense includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, reinsurance loss reserve and acquisition costs, and certain information technology-related costs.
−Removed: Increase was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies and an increase in costs for travel and in-person hosted conferences that had previously subsided due to the COVID-19 pandemic in the ETSP operating segment.
−Removed: In addition, increase in 2023 was due to an increase in reinsurance volume in the NFS division.
−Removed: Increase in 2022 compared with 2021 was also due to additional costs associated with the growth of borrowers under the government servicing contracts in the LSS operating segment.
+Added: Decrease primarily due to reduction in depreciation due to prior year non-cash impairment charges recognized for lease, buildings, and associated improvements as the Company continues to evaluate the use of office space as it modifies its hybrid work model for associates.
+Added: See note 11 of the notes to the consolidated financial statements in this report for additional information.
+Added: Reinsurance losses and underwriting expenses 55,246 16,781 Represents case reserve, estimated loss reserve, and amortization of acquisition costs, which consist primarily of commissions and brokerage expenses, net of ceded portion, from reinsurance treaties on property and casualty policies.
+Added: Increase due to a higher number of policies the Company reinsures.
+Added: Other expenses 189,503 173,070 Includes expenses such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs.
+Added: Increase due to an increase in LSS due to additional postage costs as a result of borrowers returning to repayment on September 1, 2023.
Total operating expenses 879,796 860,506
+Added: Impairment expense and provision for beneficial interests 42,629 31,925 Represents impairment charges recognized by the Company and the establishment of an allowance for credit losses (and related provision expense) related to the Company’s beneficial interest in certain loan securitizations.
+Added: See note 11 of the notes to consolidated financial statements in this report for additional information.
+Added: Total expenses 1,174,750 1,112,190
Income before income taxes 228,584 68,715
Income tax expense 52,669 19,385 The effective tax rate was 22.25% and 17.75% for 2024 and 2023, respectively.
−Removed: The decrease in the effective tax rate in 2023 was due to a reduction in the dollar amounts of uncertain tax positions and recognized state tax incentives relative to the smaller amount of income before income taxes.
+Added: The increase in the effective tax rate in 2024 was due to an increase in state income taxes and a reduction of state tax incentives.
The Company expects its future effective tax rate will range between 22% and 24%.
Net income 175,915 49,330
−Removed: Net loss attributable to noncontrolling interests 37,097 11,106 7,003 Amounts for noncontrolling interests reflect the net income/loss attributable to the holders of noncontrolling membership interests in WRCM, NextGen, multiple solar entities (including GRNE Solar), and multiple entities investing in federal opportunity zone programs.
+Added: Net loss attributable to noncontrolling interests 8,130 40,496 Represents the net loss attributable to the holders of noncontrolling membership interests.
+Added: The majority is attributed to noncontrolling membership interests in the Company’s solar construction and tax equity investments operating segments.
Net income attributable to Nelnet, Inc.
2 unchanged sentences
Net income attributable to Nelnet, Inc.
−Removed: $ 91,532 407,347 393,286 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.
+Added: $ 184,045 89,826 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP financial information.
Derivative market value adjustments, net (10,124) 41,773
4 unchanged sentences
2024 2023 Additional information
−Removed: Reinsurance premiums $ 20,067 157 — See NFS division - results of operations - NFS other operating segments.
ALLO preferred return $ 17,486 9,120 See Corporate - results of operations.
+Added: Investment activity, net (a) 12,438 (8,586) See note (b) below for additional information.
Borrower late fee income 8,828 8,997 See NFS division - results of operations - AGM operating segment.
−Removed: Administration/sponsor fee income 6,793 7,898 3,656 See NFS division - results of operations - AGM operating segment.
Investment advisory services (WRCM) 5,934 6,760 See NFS division - results of operations - NFS other operating segments.
+Added: Administration/sponsor fee income 5,823 6,793 See NFS division - results of operations - AGM operating segment.
Management fee revenue 2,769 2,587 See LSS operating segment - results of operations.
−Removed: Loss from ALLO voting membership interest investment (65,277) (67,966) (42,148) See Corporate - results of operations.
−Removed: Loss from solar investments (46,702) (9,479) (10,132) See Corporate - results of operations.
−Removed: Investment activity, net (8,586) 51,493 91,593 See note (a) below for additional information.
+Added: Loss from ALLO voting membership interest investment (a) (10,693) (65,277) See Corporate - results of operations.
+Added: Loss from solar investments, net (a) (6,477) (59,645) See Corporate - results of operations.
Other 25,494 24,924
Other, net $ 61,602 (74,327)
−Removed: (a) The Company anticipates fluctuations in future periodic earnings resulting from investment sales and valuation adjustments.
−Removed: Investment activity by operating segment and investment type follows:
+Added: (a) The Company anticipates fluctuations in future periodic earnings resulting from investment purchases, sales, and valuation adjustments.
+Added: (b) Investment activity by operating segment and investment type follows:
Real Estate Venture Capital and Funds Equity / Bonds Total
11 unchanged sentences
$ 439 (7,172) (1,853) (8,586)
−Removed: Year ended December 31, 2021
−Removed: NFS - AGM $ — 32,884 1,025 33,909
−Removed: NFS - Nelnet Bank — (79) 783 704
−Removed: NFS - Other Operating Segments 21,551 — 6,730 28,281
−Removed: Corporate — 28,750 (51) 28,699
−Removed: $ 21,551 61,555 8,487 91,593
LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS
21 unchanged sentences
842,200 662,075 133,681 65,295 70,580 103,396 716,908 5,048,324 6,135,760
−Removed: Government Loan Servicing
−Removed: Nelnet Servicing is one of the current four private sector entities that have student loan servicing contracts with the Department to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department.
−Removed: The Company also earned remote hosted servicing revenue by licensing software to certain third-party servicers for the Department.
−Removed: Contract Modifications and Award
−Removed: Effective April 1, 2023, the Department modified the student loan servicing contract between the Department and Nelnet Servicing (the “servicing contract”) to reduce the monthly fee under the servicing contract by $0.19 per borrower on certain borrower statuses.
−Removed: The Company's current student loan servicing contract with the Department was scheduled to expire on December 14, 2023.
−Removed: In April 2023, the Company 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 contract which will replace the existing legacy Department student loan servicing contract.
−Removed: The New Government Servicing Contract is effective April 24, 2023 and has a five year base period, with 2 two-year and 1 one-year possible extensions.
−Removed: 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 based on service and performance levels.
−Removed: Under the New Government Servicing Contract, Nelnet Servicing immediately began to make required servicing platform enhancements, for which it will be compensated from the Department on certain of these investments.
−Removed: Until servicing under the USDS contract goes live, which is anticipated to be in April 2024, the Company will continue to earn revenue for servicing borrowers under its current legacy servicing contract with the Department.
−Removed: The new USDS servicing contract has multiple revenue components with tiered pricing based on borrower volume, while revenue earned under the legacy servicing contract is primarily based on borrower status.
−Removed: Assuming borrower volume remains consistent under the USDS servicing contract, the Company expects revenue earned on a per borrower blended basis will decrease under the USDS contract versus the current legacy contract.
−Removed: However, consistent with the current legacy contract, the Company expects to earn additional revenue from the Department under the USDS servicing contract for change requests and other support services.
−Removed: As discussed below, during the second quarter of 2023, the Company completed the transfer of Great Lakes direct loan servicing volume to the Nelnet servicing platform.
−Removed: The associated cost savings with moving government borrowers to one servicing platform is expected to be partially offset under the USDS contract as the Company will incur additional costs for cybersecurity and other system specifications as required under the new contract.
−Removed: Loan Volume Transfers - Full Service Borrowers
−Removed: In July 2021, the Pennsylvania Higher Education Assistance Agency (PHEAA) announced its exit from the federal student loan servicing business.
−Removed: All applicable student loans serviced for the Department by PHEAA were transferred to successor servicers.
−Removed: As of December 31, 2021 and 2022, approximately 603,000 and 1,910,000 PHEAA borrowers, respectively, were transferred from PHEAA to the Company's platform.
−Removed: In addition, over this same time period, PHEAA borrowers were transferred to other servicers to which the Company provided its servicing system (remote hosted servicing customers).
−Removed: In February 2023, the Department notified the Company of its intention to transfer up to one million of the Company’s existing Department servicing borrowers to another third-party servicer.
−Removed: This transfer decision was not based on the Company's performance.
−Removed: These transfers began in the second quarter of 2023 and were completed in July 2023.
−Removed: In addition, the Company completed the transfer of active borrowers of Great Lakes direct loan servicing volume to the Nelnet servicing platform (the GreatNet Federal servicing platform) during the second quarter of 2023.
−Removed: The decommissioning of the Great Lakes' platform was completed in the fourth quarter of 2023 and potential associated cost savings as a result of transferring direct loan servicing volume to one platform are expected to be realized in operating results towards the end of 2024.
−Removed: Loan Volume Transfers - Remote Hosted Servicing Borrowers
−Removed: Edfinancial Services, LLC ("Edfinancial"), a current servicer for the Department, utilized Nelnet Servicing's platform to service their loans for the Department (remote hosted servicing customer).
−Removed: In the fourth quarter of 2022, Nelnet Servicing and Edfinancial reached an agreement on a decommission schedule transferring Edfinancial’s direct loan servicing volume to another third-party servicing platform.
−Removed: As of December 31, 2022, Edfinancial was servicing 4.5 million borrowers for the Department on the Company’s platform.
−Removed: The Company began transferring Edfinancial's servicing volume to another servicing platform in the first quarter of 2023 which reduced the number of Edfinancial's borrowers serviced on the Company's platform to 3.5 million borrowers as of March 31, 2023 and 579,000 borrowers as of June 30, 2023.
−Removed: Edfinancial's remaining borrowers were transferred off of the Company's platform in July 2023.
−Removed: In February 2023, the Company’s other remote hosted servicing customer notified the Company the Department intended to move that customer’s servicing borrowers to a different third-party servicing platform.
−Removed: This transfer decision was the result of this customer not being one of the servicers awarded a USDS contract.
−Removed: As of March 31, 2023, this remote hosted servicing customer was servicing 1.4 million borrowers for the Department on the Company's platform.
−Removed: The majority of this volume was transferred to another third-party servicing platform during the second quarter of 2023, and the remaining borrowers were transferred off of the Company's platform in July 2023.
−Removed: As a result of the transfers discussed above, the Company currently has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.
−Removed: However, the Company has executed an agreement with a third-party servicer awarded a USDS contract to license its servicing software to such entity and the Company anticipates earning remote hosted servicing revenue from this new customer when USDS goes live, which is anticipated to be during the second quarter of 2024.
−Removed: The amount of revenue earned by the Company from this new customer will depend on the number of servicing borrowers allocated by the Department to the new customer.
−Removed: The Company does not have volume projections for the new customer at this time, however, such new volume from this customer is not expected to fully offset the loss of borrowers from lost remote hosted servicing customers.
−Removed: Department of Education Debt Relief
−Removed: In August 2022, the Department announced a broad based student debt relief plan that would provide targeted student debt cancellation to borrowers with loans held by the Department with unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.
−Removed: Federal courts blocked implementation of the Department's broad based student debt relief plan and on June 30, 2023, the Supreme Court struck down the Department's plan.
−Removed: While the current version of the Department's forgiveness plan has been invalidated, the Department recently announced that it has begun a new rulemaking process to consider other ways to provide debt relief to borrowers.
−Removed: The Company cannot predict the timing, nature, or ultimate outcome of any future potential student loan forgiveness programs as a result of the rulemaking process.
−Removed: Revenue earned under the current Department servicing contract will decrease in future periods if the Department successfully implements broad based loan forgiveness.
−Removed: The CARES Act
−Removed: Under the CARES Act, beginning in March 2020, federal student loan payments and interest accruals were suspended for all borrowers that had loans owned by the Department.
−Removed: As a result of the CARES Act, the Company received less servicing
−Removed: revenue per borrower from the Department based on the borrower forbearance status than what was earned on such accounts prior to these provisions.
−Removed: After multiple extensions of the student loans payment pause under the CARES Act, the payment and interest accrual suspension ended August 31, 2023, and borrowers returned to repayment on September 1, 2023.
−Removed: The Company anticipates revenue per borrower from the Department will increase with borrowers transitioned back to repayment under the legacy government contract from the CARES Act levels.
−Removed: During the fourth quarter of 2021 and first quarter of 2022, the Company earned additional revenue from the Department based on incremental work, including outbound engagement, being performed by the Company to support the anticipated Department borrowers coming out of forbearance.
−Removed: Effective May 1, 2022, the Department increased the monthly per borrower CARES Act forbearance rate paid to its servicers to compensate them for supplemental outreach to certain borrowers and to support the transition of borrowers back to repayment.
−Removed: Effective April 1, 2023, the Department decreased the monthly per borrower CARES Act forbearance rate by $0.19 per borrower (as discussed above).
−Removed: Reduction in Staff
−Removed: On January 18, 2023, the Company announced a reduction in staff to manage expenses due to delays in the government's student debt relief and return to repayment programs under the CARES Act.
−Removed: Approximately 350 associates who were hired within the prior six months were laid off with a 60 day notice period and approximately 210 associates were immediately terminated for performance.
−Removed: On March 23, 2023, the Company announced a reduction in staff due to the Department’s March 2023 announcement to reduce the monthly fee earned by the Company under its government servicing contract (as discussed above) and the notification by the Department in February 2023 of its intention to transfer up to one million of the Company's existing Department servicing borrowers to another servicer (as discussed above).
−Removed: Approximately 550 associates who work in LSS, including some in related shared services areas that support LSS, were notified their positions were being eliminated.
−Removed: The Company incurred a charge of $4.3 million related to the staff reductions that was primarily recognized in the first and second quarters of 2023.
−Removed: As a result of the decommissioning of the Great Lakes’ platform in the fourth quarter of 2023, the Company incurred a charge of $3.5 million related to staff reductions, including some in related shared services areas that support LSS.
−Removed: Borrowers Return to Repayment
−Removed: As discussed above, after multiple extensions of the student loan payment pause that began in March 2020, the payment and interest accrual suspension ended on August 31, 2023, and all borrowers returned to repayment on September 1, 2023.
−Removed: This unprecedented event, along with frequent program changes announced and/or proposed by the Department, has generated extraordinary call volume and web traffic that has adversely impacted the Company’s level of service.
−Removed: In August 2023, the Company began to hire additional associates to support borrowers returning to repayment.
−Removed: Private Education Loan Servicing
−Removed: In December 2020, Wells Fargo announced the sale of its approximately $10 billion portfolio of private education student loans representing approximately 445,000 borrowers.
−Removed: In conjunction with the sale, the Company was selected as servicer of the portfolio.
−Removed: During March 2021, approximately 261,000 borrowers were converted to the Company's servicing platform, with the vast majority of the remaining borrowers converted in the second quarter of 2021.
−Removed: In January 2024, Discover announced they were moving the servicing of its approximately $10 billion private education loan portfolio, representing approximately 500,000 borrowers, to the Company.
−Removed: The timing of the conversion of these loans to the Company’s platform is dependent on the timing of Discover’s potential sale of its portfolio.
Summary and Comparison of Operating Results
1 unchanged sentence
2024 2023 Additional information
−Removed: Net interest income $ 4,845 2,678 43 Increases due to higher interest rates and average funds held.
+Added: Interest income $ 4,877 4,845 Represents interest income on cash balances primarily collected from borrower remittances that are subsequently disbursed to servicing customers (lenders).
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.
−Removed: Decreases due to the continued amortization of AGM's FFELP portfolio.
−Removed: FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
+Added: Decrease due to the continued amortization of AGM's FFELP portfolio.
+Added: Intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Other income 2,769 2,587 Represents revenue earned from providing administrative support services.
−Removed: Impairment expense (296) (5,511) (13,243) The Company continues to evaluate the use of office space as a large number of employees continue to work from home.
−Removed: As a result, the Company recorded non-cash impairment charges in each period presented related to certain facilities and associated assets no longer used.
−Removed: In addition, in 2022, the Company recorded a $3.7 million non-cash impairment charge to internally developed software.
−Removed: Total other income, net 549,156 565,661 510,383
−Removed: Salaries and benefits 317,885 344,809 297,406 Increase in 2022 compared with 2023 and 2021 was due to the Company being fully staffed with contact center operations and support associates as the Company prepared for expiration of federal student loan payment pause and other activities under the CARES Act.
−Removed: In the first half of 2023, the Company reduced staff to manage expenses due to delays in the government’s student debt relief and return to repayment programs, lower pricing, and reduced servicing volume.
−Removed: See “Reduction in Staff” above for additional details.
−Removed: In August 2023, the Company began to hire additional associates to support borrowers returning to repayment on September 1, 2023.
−Removed: Depreciation and amortization 19,257 24,255 25,649 Decrease in 2023 compared to 2022 and 2021 was due to all intangible assets from the Great Lakes acquisition (February 2018) being fully amortized by December 2022.
−Removed: Amortization of intangible assets for 2022 and 2021 was $4.5 million and $12.3 million, respectively.
−Removed: Other expenses 60,517 59,674 52,720 Increase in 2023 compared with 2022 was due to additional postage and communication costs due to borrowers returning to repayment on September 1, 2023.
−Removed: Increase in 2022 compared with 2021 was due to additional costs associated with the growth of borrowers under the government servicing contracts.
+Added: Total other income 509,670 549,452
+Added: Cost of services 1,889 — Represents primarily the amortization of previously capitalized contract fulfillment costs.
+Added: The costs were pre-contract costs incurred to enhance the resources of the Company to satisfy future performance obligations and are expected to be recovered.
+Added: Salaries and benefits 300,366 317,885 Decrease due to the Company being fully staffed at the beginning of 2023 with contact center operations and support associates as the Company prepared for expiration of the federal student loan payment pause under the CARES Act.
+Added: In the first half of 2023, the Company reduced staff to manage expenses due to lower pricing and reduced servicing volume for LSS's Department servicing contract.
+Added: In June 2024, the Company announced an additional reduction in headcount after the completion of required servicing platform enhancements for the new government servicing contract and the transfer of direct loan servicing volume to one platform.
+Added: These staff reductions took place during the second half of 2024.
+Added: Depreciation 19,475 19,257
+Added: Postage expense 36,820 21,194 Increase due to borrowers returning to repayment on September 1, 2023 after the expiration of the federal student loan payment pause under the CARES Act, requiring an increase in outreach.
+Added: Other expenses 43,282 39,323 The total of other expenses and intercompany expenses decreased due to moving to one platform in 2024 and continued focus on expense reductions.
Intersegment expenses represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
+Added: Intersegment expenses 71,482 78,628
Total operating expenses 471,425 476,287
+Added: Impairment expense 736 296 The Company recorded an impairment charge in the fourth quarter of 2024 and third quarter of 2023, respectively, related to owned office space and certain facilities as a result of the Company's on-going evaluation of the use of office space and adapting to a hybrid work model.
+Added: Total expenses 474,050 476,583
Income before income taxes
40,497 77,714
−Removed: Income tax expense (18,651) (15,470) (14,987) Reflects income tax expense at an effective tax rate of 24%.
+Added: Income tax expense (9,719) (18,651) Represents income tax expense at an effective tax rate of 24%.
Net income $ 30,778 59,063
−Removed: GAAP before tax operating margin 14.1 % 11.3 % 11.9 % Before tax operating margin, excluding impairment and amortization expense, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes (excluding impairment and amortization expense) divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue.
+Added: Before tax operating margin 8.0 % 14.1 % Before tax operating margin is a measure of before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes divided by the total of loan servicing and systems revenue (less cost of services), intersegment servicing revenue, and other income.
The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it provides additional information to facilitate an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods.
−Removed: Before tax operating margin, excluding impairment and amortization expense, increased in 2023 compared with 2022 due primarily to a decrease in salaries and benefits expense as described above and due to $4.8 million of revenue recognized by the Company in 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company’s platform.
−Removed: Operating margin decreased in 2022 compared with 2021 due to increased operating expenses, primarily salaries and benefits, as the Company prepared for a January 31, 2022 expiration of the federal student loan payment pause under the CARES Act, which was extended multiple times throughout 2022 and ended August 31, 2023.
−Removed: Impairment expense 0.1 0.9 2.5
−Removed: Amortization expense — 0.8 2.4
−Removed: Non-GAAP before tax operating margin, excluding impairment and amortization expense 14.2 % 13.0 % 16.8 %
+Added: Before tax operating margin decreased due primarily to a decrease in loan servicing and systems revenue as described in the table below, while total expenses have remained relatively consistent period over period.
+Added: Expenses have remained consistent despite a decrease in revenue due to costs incurred for the completion of the transfer of direct loan servicing volume to one platform, making platform enhancements for the new student loan servicing contract with the Department, preparation of the conversion of the Discover portfolio, and an increase in postage and communication costs due to borrowers returning to repayment on September 1, 2023.
+Added: The Company expects before tax operating margin to continue to be lower than historical prior year results until the full impact of its cost-saving measures take effect and revenue is generated from servicing the entire Discover and Sofi portfolios after their full conversion to the Company's platform.
Loan servicing and systems revenue
1 unchanged sentence
2024 2023 Additional information
−Removed: Government loan servicing $ 412,478 423,066 360,793 Represents revenue from the Company's Department servicing contract.
−Removed: Decrease in 2023 compared with 2022 was due to (i) the monthly fee earned per borrower on certain borrower statuses being reduced by $0.19 effective April 1, 2023;
−Removed: and (ii) a decrease of borrowers beginning in the second quarter of 2023 as part of the Department’s plan to transfer up to one million of the Company’s existing borrowers to another third-party servicer.
−Removed: The decrease was partially offset by an increase in average per borrower rate beginning September 1, 2023 as a result of borrowers returning to repayment.
−Removed: Increase in 2023 and 2022 revenue compared with 2021 was due to (i) an increase in borrowers serviced due to the PHEAA servicing volume transferred to the Company’s platform in 2022;
−Removed: (ii) a per borrower rate increase on each September 1, 2021 (1.8%), September 1, 2022 (5.0%), and September 1, 2023 (2.3%) to reflect the increase in the cost of labor (Employment Cost Index) per the provisions of the contracts;
−Removed: and (iii) a CARES Act forbearance rate increase effective May 1, 2022.
−Removed: Increase in 2022 revenue compared with 2023 and 2021 was also due to (i) the recognition of $16.2 million of revenue related to an increase in call center hours, a staff retention incentive from the Department, and additional change requests;
−Removed: and (ii) the recognition of $9.9 million of revenue for activities supporting preparedness for the Department’s debt relief program.
−Removed: Included in revenue for 2022 and 2021 was $13.6 million and $9.1 million, respectively, of revenue related to the discharge of borrowers under the TPD discharge program, and $7.7 million and $25.0 million, respectively, of revenue for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers.
−Removed: Private education and consumer loan servicing 48,984 49,210 47,302 Increase in 2022 compared with 2021 was due to (i) the addition of the former Wells Fargo private education loan borrowers converted to the Company's servicing platform during March and the second quarter of 2021 (an amortizing portfolio);
−Removed: and (ii) revenue earned on new backup servicing agreements.
−Removed: FFELP loan servicing 13,704 16,016 18,281 Decreases due to a decrease in the number of borrowers serviced.
−Removed: Over time, FFELP servicing revenue will continue to decrease as third-party customers' FFELP portfolios pay off.
−Removed: Since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of borrower relief under the CARES Act and 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.
−Removed: Software services 29,208 33,409 34,600 Represents revenue from providing remote hosted servicing software to the Department and other servicers and providing diversified technology services.
−Removed: Decrease in 2023 compared with 2022 was due to the transfer of remote hosted borrowers to other third-party servicers, partially offset by the recognition of $4.8 million of non-recurring revenue in the third quarter of 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company’s platform.
−Removed: As a result of the transfers, the Company has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.
−Removed: See “Loan Volume Transfers - Remote Hosted Servicing Borrowers” above for additional information.
−Removed: Decrease in 2022 compared with 2021 was due to the recognition of deconversion fees in the fourth quarter of 2021 from Granite State, a remote hosted servicing customer, when they exited the federal student loan servicing business and transferred their loan volume to a third party.
−Removed: Outsourced services 13,580 13,758 25,387 Decrease in 2023 and 2022 compared with 2021 was due to assisting state agencies with COVID-19 related services in 2021 totaling $17.3 million.
+Added: Government loan servicing $ 380,921 412,478 Represents revenue from the Company's servicing contracts with the Department.
+Added: The Company recognized revenue under the new government servicing USDS contract beginning April 1, 2024.
+Added: Decrease due to (i) a decrease in the number of borrowers serviced (due primarily from the Department transferring one million of the Company's existing borrowers to another third-party servicer during the second and third quarters of 2023);
+Added: (ii) lower revenue earned on a per borrower blended basis under the new contract, and (iii) the legacy servicing contract reduction of the monthly fee earned per borrower on certain borrower statuses by $0.19 effective April 1, 2023.
+Added: These decreases were partially offset by an increase in the average revenue earned on a per borrower blended basis as a result of borrowers moving to a repayment status on September 1, 2023 and the recognition of $10.9 million of revenue in the fourth quarter of 2024 to reflect a settlement related to certain provisions included in the legacy contract concerning inflation adjustments.
+Added: Private education and consumer loan servicing 63,453 48,984 On July 17, 2024, Discover Financial Services (Discover) announced the sale of its approximately $10 billion private education student loan portfolio, representing approximately 400,000 borrowers, to partnerships managed by two global investment firms, with Firstmark Services, a division of the Company, assuming responsibility for servicing the portfolio upon the sale.
+Added: The conversion of these loans to the Company’s platform began in September 2024 with the majority of loan conversions completed in the fourth quarter of 2024.
+Added: Increase due to (i) an increase in backup servicing volume and loan servicing volume from the Discover portfolio;
+Added: (ii) $4.0 million of non-recurring revenue recognized in 2024 associated with conversions and deconversions;
+Added: and (iii) rate increases based on contractual consumer price index changes.
+Added: During 2024, Sofi Technologies, Inc.
+Added: (Sofi) selected the Company as a sub-servicer for its school and refinance loan programs.
+Added: Transfer of new and existing Sofi loans began in the fourth quarter of 2024, with the anticipated completion of all existing loans to be complete by the second quarter of 2025.
+Added: The addition of the Sofi servicing borrowers did not have a significant impact to revenue in 2024 but will have a positive impact to revenue in future periods.
+Added: FFELP loan servicing 12,212 13,704 Represents revenue from servicing third-party customers' FFELP portfolios.
+Added: Over time, FFELP servicing revenue will decrease as third-party customers' FFELP portfolios pay off.
+Added: Software services 21,032 29,208 Represents revenue from providing remote hosted servicing software to certain Department and other servicers and providing diversified technology services.
+Added: Decrease primarily due to (i) the transfer of all Department remote hosted borrowers to other third-party servicers throughout 2023 under the Department's legacy servicing contracts and (ii) the recognition of $4.8 million of revenue in the third quarter of 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company's platform.
+Added: This decrease was partially offset by the Company beginning in the second quarter of 2024 to recognize revenue from a new remote hosted servicing customer awarded a USDS contract.
+Added: Outsourced services 4,790 13,580 Represents revenue from providing contact center and back office operational outsourcing services.
+Added: Decrease was due to the contracts for support provided to certain Department servicers expiring in July 2023.
Loan servicing and systems revenue $ 482,408 517,954
9 unchanged sentences
2024 2023 Additional information
−Removed: Net interest income $ 26,962 9,377 1,075 Represents interest income on tuition funds held in custody for schools.
−Removed: Increases due to higher interest rates and average funds held.
+Added: Interest income $ 29,891 26,962 Represents interest income on tuition funds held in custody for schools.
+Added: Increase due to higher balances and interest rates.
Education technology services and payments revenue
1 unchanged sentence
Intersegment revenue 220 253
−Removed: Impairment expense (4,310) (2,239) — In 2023 and 2022, the Company recognized non-cash impairment charges related to previously acquired computer software.
Total other income 487,182 463,564
Cost of services 172,763 171,183 See table below for additional information.
−Removed: Salaries and benefits 155,296 133,428 112,046 Increases due to an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.
+Added: Salaries and benefits 164,716 155,296 Increase due to annual merit pay increases, an increase in headcount to support the growth of the customer base, and the investment in the development of new technologies.
Depreciation and amortization 10,531 11,319 Represents primarily amortization of intangible assets from prior business acquisitions and depreciation of capitalized software development costs.
−Removed: Other expenses 34,133 30,104 19,318 Increases due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies.
−Removed: Increases also due to an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID pandemic.
−Removed: In addition, during 2023 the Company increased its allowance for uncollectible accounts due to the age of certain receivables primarily driven by economic conditions and the increase in volume of FACTS instructional services revenue.
+Added: Other expenses 32,281 34,133 Decrease due to a decrease in consulting and professional services resulting from reduced outsourced work and an improvement in allowance for doubtful accounts period over period.
+Added: Decrease was partially offset by an increase in technology services.
Intersegment expenses, net 18,886 23,184 Represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
Total operating expenses 226,414 223,932
+Added: Impairment expense — 4,310 In 2023, the Company recognized non-cash impairment charges related to previously acquired computer software.
+Added: Total expenses 399,177 399,425
Income before income taxes 117,896 91,101
1 unchanged sentence
Net income 89,563 69,210
−Removed: Net loss (income) attributable to noncontrolling interests 109 (3) — Amounts for noncontrolling interests reflect the net loss (income) attributable to the holders of minority membership interests in NextGen, of which the Company became the controlling owner on April 30, 2022.
−Removed: See note 7 of the notes to consolidated financial statements included in this report for additional information.
−Removed: Net income $ 69,319 56,317 55,262
+Added: Net loss attributable to noncontrolling interests 158 109 Amounts for noncontrolling interests reflect the net loss attributable to the holders of minority membership interests in NextGen.
+Added: Net income $ 89,721 69,319 The Company expects net income to be impacted in 2025 as compared to 2024 due to a decrease in contribution from FACTS education services as a result of the end of the EANS program as described in the revenue table below and an expected increase in expenses.
Education technology services and payments revenue
2 unchanged sentences
2024 2023 Additional information
−Removed: Tuition payment plan services $ 125,326 110,802 103,970 Increases due to a higher number of payment plans in the K-12 market for both new and existing customers.
−Removed: In 2023, the increase was also due to a higher number of payment plans in higher education markets for both new and existing customers.
−Removed: 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.
−Removed: Education technology services 170,754 146,679 105,975 Increases due to an increase in revenues from the Company’s school information system software, application and enrollment services, the NextGen acquisition completed in April 2022, and FACTS learning management services.
−Removed: Learning management instructional services revenue was the largest component of this increase, driven by the Emergency Assistance to Non-Public Schools (EANS) program.
−Removed: EANS revenue was $46.9 million, $37.8 million, and $8.7 million in 2023, 2022, and 2021, respectively.
−Removed: EANS provides funds to non-public schools to address the impact COVID-19 has had or continues to have on students and teachers.
−Removed: The EANS I program funding ended on September 30, 2023 and EANS II program funding ends on September 30, 2024, which will result in a decrease of future instructional services revenue compared with recent historical periods.
+Added: Tuition payment plan services $ 135,851 125,326 Increase due to a higher number of payment plans in the K-12 and higher education markets for both new and existing customers.
+Added: 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.
+Added: Education technology services 169,065 170,754 Decrease due to a decrease in FACTS education services revenue which resulted from the wind down of economic aid provided to private schools in response to the COVID 19 pandemic.
+Added: Learning management instructional services revenue provided to private schools has been funded by the CARES Act and the Emergency Assistance to Non-Public Schools (EANS) programs.
+Added: The EANS I program funding ended on September 30, 2023 and EANS II program funding ended on September 30, 2024.
+Added: Future instructional services revenue will be adversely impacted compared to recent historical results as a result of the EANS programs ending.
+Added: Revenue earned under the EANS programs was $23.1 million and $46.9 million in 2024 and 2023, respectively.
+Added: This decrease was partially offset by an increase in revenue from the Company’s school information system software and application and enrollment services.
Other 3,003 3,372
Education technology services and payments revenue 486,962 463,311
−Removed: 463,311 408,543 338,234
−Removed: Cost of services 171,183 148,403 108,660 Costs relate to payment processing revenue and such costs decrease/increase in relationship to payment volumes.
−Removed: Costs to provide instructional services are also a component of this expense and decrease/increase in relationship to instructional services revenue.
−Removed: Costs to provide instructional services were the primary driver of the increases due to the increase in instructional services resulting from the EANS program as noted above.
+Added: Cost of services 172,763 171,183 Represents direct costs to provide payment processing revenue and such costs decrease/increase in relationship to payment volumes.
+Added: Costs to provide instructional services are also a component of this expense and decrease/increase in relationship to instructional services revenues.
Net revenue $ 314,199 292,128
−Removed: 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.
+Added: 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.
The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it facilitates an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods.
−Removed: Before tax operating margin, excluding net interest income, decreased due to investments in (i) the development of new services and technologies;
−Removed: and (ii) superior customer experiences to align with the Company’s strategies to grow, retain, and diversify revenues.
+Added: Before tax operating margin, excluding net interest income, increased due to increased net revenue while maintaining a consistent cost structure.
+Added: The Company expects operating margin to decrease in 2025 compared to 2024 as a result of a decrease in FACTS education services revenue and an increase in operating expenses.
Net interest income (9.5) (9.2)
7 unchanged sentences
The following table sets forth the activity of loans in the AGM operating segment:
−Removed: Year ended December 31,
−Removed: 2023 2022 2021
−Removed: Beginning balance $ 14,169,771 17,441,790 19,559,108
+Added: FFELP Private Consumer and other Total
+Added: Balance as of December 31, 2022 $ 13,566,473 252,383 350,915 14,169,771
Loan acquisitions 576,224 77,401 478,666 1,132,291
−Removed: Federally insured student loans 576,224 721,853 904,088
−Removed: Private education loans 77,401 8,244 89,308
−Removed: Consumer and other loans 478,666 516,215 81,923
−Removed: Total loan acquisitions 1,132,291 1,246,312 1,075,319
Repayments, claims, capitalized interest, participations, and other, net (1,342,866) (45,942) (72,995) (1,461,803)
1 unchanged sentence
Loans sold (57,484) — (670,651) (728,135)
−Removed: Ending balance $ 12,049,462 14,169,771 17,441,790
−Removed: The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements.
+Added: Balance as of December 31, 2023 11,686,207 277,320 85,935 12,049,462
+Added: Loan acquisitions 106,916 — 599,543 706,459
+Added: Repayments, claims, capitalized interest, participations, and other, net (1,209,242) (51,262) (191,931) (1,452,435)
+Added: Loans lost to external parties (1,616,724) (4,314) — (1,621,038)
+Added: Loans sold (578,593) — (147,987) (726,580)
+Added: Balance as of December 31, 2024 $ 8,388,564 221,744 345,560 8,955,868
+Added: The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "other investments and notes receivable, net" in the Company's consolidated financial statements.
As of the latest remittance reports filed by the various trusts prior to or as of 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.
−Removed: 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.
+Added: Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment interest" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.
+Added: 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.
After multiple extensions of the student loans payment pause under the CARES Act, the payment and interest accrual suspension ended August 31, 2023, and Federal Direct Loan Program borrowers returned to repayment on September 1, 2023.
+Added: 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.
+Added: Even if a broad debt cancellation program only applied to student loans held by the Department, such program could result in a significant increase in consolidations of FFELP loans to Federal Direct Loan Program loans and a corresponding increase in prepayments with respect to our FFELP loan portfolio.
+Added: See Part I, Item 1A, “Risk Factors - Loan Portfolio - Prepayment risk” included in this report for further information.
+Added: The Company has observed a significant decrease in FFELP borrowers consolidating their loans into the Federal Direct Loan Program since August 2024 that has resulted in prepayment rates on the Company’s FFELP portfolio being more consistent with longer-term historical rates.
Allowance for Loan Losses, Loan Delinquencies, and Loan Charge-offs
−Removed: For a summary of the allowance as a percentage of the ending balance for each of AGM's loan portfolios as of December 31, 2023 and 2022;
−Removed: loan status and delinquency amounts for each of AGM's loan portfolios as of December 31, 2023, 2022, and 2021;
−Removed: and the activity in AGM’s allowance for loan losses and net charge-offs as a percentage of average loans for 2023, 2022, and 2021, see note 3 of the notes to consolidated financial statements included in this report.
+Added: For a summary of the allowance as a percentage of the ending balance, loan status, delinquency amounts, and other key credit quality indicators for each of AGM’s loan portfolios as of December 31, 2024 and 2023;
+Added: and the activity in AGM’s allowance for loan losses and net charge-offs as a percentage of average loans in 2024 and 2023, see note 3 of the notes to consolidated financial statements included in this report.
Loan Spread Analysis
The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets.
−Removed: 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.
+Added: 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.
Year ended December 31,
−Removed: 2023 2022 2021
Variable loan yield, gross 8.03 % 7.56 %
Consolidation rebate fees (0.80) (0.80)
−Removed: Discount accretion, net of premium and deferred origination costs amortization (a) 0.06 0.04 0.02
+Added: Discount accretion, net of premium and deferred origination costs amortization 0.02 0.06
Variable loan yield, net 7.25 6.82
−Removed: Loan cost of funds - interest expense (b) (c) (d) (5.99) (2.58) (1.04)
−Removed: Loan cost of funds - derivative settlements (e) (f) 0.01 (0.00 ) (0.01)
+Added: Loan cost of funds - interest expense (a) (6.34) (5.99)
+Added: Loan cost of funds - derivative settlements (b) (c) 0.01 0.01
Variable loan spread 0.92 0.84
Fixed rate floor income, gross 0.01 0.02
−Removed: Fixed rate floor income - derivative settlements (e) (g) 0.18 0.21 (0.11)
+Added: Fixed rate floor income - derivative settlements (b) (d) 0.04 0.18
Fixed rate floor income, net of settlements on derivatives 0.05 0.20
2 unchanged sentences
Average balance of AGM’s debt outstanding 9,871,828 12,720,097
−Removed: (a) During each of the fourth quarters of 2022 and 2021, the Company changed its estimate of the constant prepayment rate used to amortize/accrete federally insured loan premium/discounts for its loans which resulted in a $8.4 million increase and a $6.2 million decrease, respectively, to interest income.
−Removed: The impact of these adjustments was excluded from the table above.
−Removed: (b) 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.
−Removed: This expense was excluded from the table above.
−Removed: (c) In the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid, resulting in a reduction of interest expense.
−Removed: The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013.
−Removed: The reduction of this expense was excluded from the table above.
−Removed: (d) In the third quarter of 2021, the Company redeemed certain asset-backed debt securities prior to their legal maturity, resulting in the recognition of $1.5 million in interest expense from the write-off of all remaining debt issuance costs related to the initial issuance of such bonds.
−Removed: This expense was excluded from the table above.
−Removed: (e) Derivative settlements 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.
+Added: (a) The Company recognized $6.3 million and $25.9 million in non-cash interest expense during 2024 and 2023, respectively, as a result of writing off the remaining unamortized debt discount related to the redemption of certain asset-backed debt securities prior to their maturity.
+Added: This non-cash expense was excluded from the respective periods in the table above.
+Added: (b) Derivative settlements represent the cash paid or received during the respective period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.
Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income.
3 unchanged sentences
There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.
−Removed: 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.
+Added: 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.
A reconciliation of core loan spread, which includes the impact of derivative settlements on loan spread, to loan spread without derivative settlements follows.
Year ended December 31,
−Removed: 2023 2022 2021
Core loan spread 0.97 % 1.04 %
2 unchanged sentences
Loan spread 0.92 % 0.85 %
−Removed: (f) Derivative settlements consist of net settlements received (paid) related to the Company’s 1:3 basis swaps.
−Removed: (g) Derivative settlements consist of net settlements received (paid) related to the Company’s floor income interest rate swaps.
+Added: (c) Derivative settlements consist of net settlements received related to the Company’s 1:3 basis swaps.
+Added: (d) Derivative settlements consist of net settlements received related to the Company’s floor income interest rate swaps.
The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread.
See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s FFELP student loan assets and related funding for those assets.
−Removed: 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.
−Removed: Variable loan spread was higher during 2022 compared with 2023 and 2021 due to a significant increase in short-term rates during 2022 compared with the increase in rates for 2023 and 2021.
+Added: 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.
+Added: This also results in student loan spread decreasing in the short term in a decreasing interest rate environment.
+Added: Variable loan spread was higher during 2024 compared with 2023 due to an increase in consumer loans funded by the Company with operating cash (versus funded with debt).
The difference between variable loan spread and core loan spread is fixed rate floor income earned on a portion of AGM's federally insured student loan portfolio.
1 unchanged sentence
Year ended December 31,
−Removed: 2023 2022 2021
Fixed rate floor income, gross $ 1,249 2,169
2 unchanged sentences
Fixed rate floor income contribution to spread, net 0.05 % 0.20 %
−Removed: (a) Derivative settlements consist of net settlements received (paid) related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
−Removed: Gross fixed rate floor income decreased in 2023 and 2022 compared with 2022 and 2021, respectively, due to higher interest rates.
+Added: (a) Derivative settlements consist of net settlements received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
+Added: 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.
−Removed: 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).
−Removed: 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.
−Removed: The decrease in net derivative settlements received by the Company in 2023 compared with 2022 was due to the termination of the fixed rate floor derivatives in March 2023.
−Removed: The increase in net derivative settlements received on the floor income interest rate swaps in 2022 compared with 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.
+Added: 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).
+Added: 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.
+Added: 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.
+Added: The decrease in net derivative settlements received by the Company in 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.
See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s portfolio earning fixed rate floor income and the derivatives used by the Company to hedge these loans.
2 unchanged sentences
2024 2023 Additional information
−Removed: Net interest income after provision for loan losses $ 97,099 220,056 347,203 See table below for additional analysis.
−Removed: Other income, net 11,269 21,170 34,306 Represents primarily borrower late fees, income from providing administration activities for third parties, gains/losses from repurchase of debt, and income/losses from AGM's investments in joint ventures.
−Removed: Borrower late fees for 2023, 2022, and 2021 were $9.0 million, $10.8 million, and $3.4 million, respectively.
−Removed: The Company suspended borrower late fees in March 2020 to provide borrowers relief as a result of the COVID-19 pandemic.
−Removed: The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans).
−Removed: The Company recognized revenue of $6.8 million, $7.9 million, and $3.7 million in 2023, 2022, and 2021, respectively, as administrator and sponsor for the securitizations completed during 2021 by the joint venture to purchase and securitize private education loans sold by Wells Fargo (an amortizing portfolio).
−Removed: The Company also recognized a loss of $4.3 million, and income of $1.2 million, and $32.9 million, in 2023, 2022, and 2021, respectively, related to its investments in joint ventures.
−Removed: For 2021, other income was partially offset by a $6.8 million loss recognized as a result of purchasing back its own debt.
−Removed: Gain on sale of loans, net 39,673 2,903 18,715 The Company recognized net gains from selling portfolios of loans.
+Added: Interest income:
+Added: Loan interest $ 749,117 910,139 See table below for additional analysis.
+Added: Investment interest 68,302 67,019 Represents primarily investment interest earned on beneficial interest investments and restricted cash included in student loan securitizations and other secured borrowings.
+Added: AGM earned $36.4 million and $35.7 million on beneficial interest investments during 2024 and 2023, respectively.
+Added: Total interest income 817,419 977,158
+Added: Loan interest expense 632,742 788,251 See table below for additional analysis.
+Added: Intercompany interest expense 21,604 34,833 Represents interest paid by AGM to Nelnet, Inc.
+Added: (parent company) related to (i) internal borrowings to fund equity advances on certain AGM debt facilities;
+Added: and (ii) AGM issued bonds held by Nelnet, Inc.
+Added: Decrease due to a decrease in the weighted average balance of outstanding AGM issued bonds held by Nelnet, Inc.
+Added: Intercompany interest is eliminated for consolidated financial reporting purposes.
+Added: Net interest income 163,073 154,074
+Added: Less provision (negative provision) for loan losses 27,691 (360) See note 3 of the notes to consolidated financial statements in this report for factors impacting provision (negative provision) for loan losses for the periods presented.
+Added: Net interest income after provision for loan losses 135,382 154,434
+Added: Other income, net 15,879 11,269 Represents primarily borrower late fees, income from providing administration activities for third parties, sponsor fee income, and income/losses from AGM's investment in joint ventures.
+Added: See "Overview - Consolidated Results of Operations" for further detail included in other income.
+Added: Loss on sale of loans, net (1,643) (17,662) The Company recognized losses from selling portfolios of loans.
See note 3 of the notes to consolidated financial statements included in this report for additional information.
−Removed: Provision for beneficial interests — — 2,436 In the first quarter of 2021, due to improved economic conditions, the Company recorded a negative provision of $2.4 million related to its remaining allowance on a consumer loan securitization beneficial interest investment.
−Removed: Such allowance was initially recorded in March 2020 as a result of the COVID-19 pandemic.
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.
+Added: The majority of derivative settlements received in the periods presented was from the Company's derivative portfolio used to hedge loans earning fixed rate floor income.
+Added: Decrease due to the termination of the floor income interest rate swaps ($2.8 billion notional amount) in March 2023.
+Added: See above under "Loan Spread Analysis" for further information.
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.
1 unchanged sentence
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.
−Removed: On March 15, 2023, AGM terminated its portfolio of floor income interest rate swaps to minimize the Company’s exposure to market volatility and increase liquidity.
−Removed: As such, the Company expects the derivative market value adjustments in future periods will be less substantial.
+Added: To minimize the Company's exposure to market volatility and increase liquidity, AGM terminated its portfolio of floor income interest rate swaps ($2.8 billion notional amount) in March 2023.
+Added: As such, the Company expects the derivative market value adjustments in future periods to be less substantial.
+Added: See above under "Loan Spread Analysis" for further information.
Total other income, net 24,875 (22,055)
−Removed: Salaries and benefits 4,191 2,524 2,135 Increase in 2023 due to additional headcount as the Company actively expands into new asset loan classes.
−Removed: Other expenses 14,728 16,835 13,487 Represents primarily servicing fees paid to third parties.
−Removed: Also includes certain professional and legal fees.
−Removed: See “Total operating expenses” below.
−Removed: Intersegment expenses 32,824 34,679 34,868 Represents fees paid to LSS for the servicing of AGM’s loan portfolio.
−Removed: These amounts exceed the actual cost of servicing the loans.
−Removed: Intersegment expenses also includes costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
−Removed: Total operating expenses 51,743 54,038 50,490 Total operating expenses were 39 basis points, 34 basis points, and 27 basis points of the average balance of loans in 2023, 2022, and 2021, respectively.
−Removed: The increase in operating expenses as a percent of the average balance of loans was due to an increase in professional and legal fees and salaries and benefit costs as the Company actively expands into new asset classes.
−Removed: In addition, 2021 operating expenses were down due to less activity during the COVID pandemic.
+Added: Salaries and benefits 4,784 4,191 Increase due to additional headcount as the Company actively expands into new asset loan classes.
+Added: Servicing fees 31,591 37,389 Represents servicing fees paid to (i) third parties and (ii) LSS for the servicing of AGM’s loans.
+Added: The amounts paid to LSS exceed the actual cost of servicing the loans.
+Added: Decrease due to the amortization of the FFELP student loan portfolio, the majority of which is serviced by LSS.
+Added: Intercompany servicing is eliminated for consolidated financial reporting purposes.
+Added: Other expenses 4,152 4,988
+Added: Intersegment expenses 5,037 5,175 Includes costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
+Added: Total operating expenses 45,564 51,743 Total operating expenses were 44 basis points and 39 basis points of the average balance of loans in 2024 and 2023, respectively.
+Added: The increase in operating expenses as a percent of the average balance of loans was due to an increase in servicing fees and salaries and benefit costs as the Company actively expands into new asset classes.
+Added: Provision for beneficial interests 39,491 — During 2024, the Company recorded an allowance for credit losses (and related provision expense) related to the Company's beneficial interest in certain loan securitizations.
+Added: See note 6 of the notes to consolidated financial statements included in this report for additional information.
+Added: Total expenses 85,055 51,743
Income before income taxes 75,202 80,636
2 unchanged sentences
Additional information:
−Removed: GAAP Net income $ 61,283 345,591 321,948 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.
+Added: GAAP Net income $ 57,154 61,283 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP financial information.
Derivative market value adjustments, net (5,422) 40,250
1 unchanged sentence
Non-GAAP net income, excluding derivative market value adjustments $ 53,033 91,873
−Removed: Net interest income after provision for loan losses, net of settlements on derivatives
−Removed: The following table summarizes the components of "net interest income after provision for loan losses" and "derivative settlements, net."
+Added: Net loan interest income, including settlements on derivatives
+Added: The following table summarizes the components of "loan interest," "loan interest expense" and "derivative settlements, net."
Year ended December 31,
2024 2023 Additional information
−Removed: Variable interest income, gross $ 1,007,424 701,816 499,698 Increases due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.
+Added: Variable interest income, gross $ 829,024 1,007,424 Decrease due to a decrease in the average balance of loans partially offset by an increase in the gross yield earned on loans.
Consolidation rebate fees (82,872) (106,756) Decreases due to a decrease in the average consolidation loan balance.
−Removed: Discount accretion, net of premium and deferred origination costs amortization 7,302 14,010 (3,347) During each of the fourth quarters of 2022 and 2021, the Company changed its estimate of the constant prepayment rate used to amortize/accrete federally insured loan premium/discounts for its loans which resulted in a $8.4 million increase and a $6.2 million decrease, respectively, to interest income.
−Removed: Excluding these items, the Company recognized a net discount accretion of $5.6 million and $2.9 million in 2022 and 2021, respectively.
−Removed: Net discount accretion during 2023, 2022, and 2021 was due to the Company’s purchase of loans at a net discount over the last several years.
+Added: Discount accretion, net of premium and deferred origination costs amortization 1,716 7,302 Net discount accretion due to the Company’s purchase of loans at a net discount over the last several years, partially offset in 2024 due to consumer loans purchased at a premium.
Variable interest income, net 747,868 907,970
−Removed: Interest on bonds and notes payable (788,251) (399,806) (171,320) Increases due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.
−Removed: In 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of a $25.9 million non-cash expense from the write-off of the remaining debt discount associated with these bonds at the time of redemption.
−Removed: In 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds.
−Removed: Derivative settlements, net (a) 1,544 (206) (1,638) Represents net derivative settlements received (paid) related to the Company’s 1:3 basis swaps.
−Removed: Variable loan interest margin,
−Removed: net of settlements on derivatives
−Removed: 121,263 181,236 163,165
−Removed: Fixed rate floor income, gross 2,169 57,380 142,606 Decreases due to higher interest rates.
−Removed: Derivative settlements, net (a) 23,044 33,149 (19,729) Represents net derivative settlements received (paid) related to the Company's floor income interest rate swaps.
+Added: Interest on bonds and notes payable (632,742) (788,251) Decrease due to a decrease in the average balance of debt outstanding, partially offset by an increase in cost of funds.
+Added: In addition, the Company recognized a $6.3 million and $25.9 million non-cash expense during 2024 and 2023, respectively, as the result of writing off the remaining unamortized debt discount related to the redemption of certain asset-backed debt securities prior to their maturity.
+Added: Derivative settlements, net (a) 929 1,544 Represents net derivative settlements received related to the Company’s 1:3 basis swaps.
+Added: Variable loan interest margin, net of settlements on derivatives 116,055 121,263
+Added: Fixed rate floor income, gross 1,249 2,169 Decrease due to higher interest rates.
+Added: Derivative settlements, net (a) 4,288 23,044 Represents net derivative settlements received related to the Company's floor income interest rate swaps.
+Added: Decrease due to the termination of the floor income interest rate swaps ($2.8 billion notional amount) in March 2023.
+Added: See above under "Loan Spread Analysis" for further information.
Fixed rate floor income, net of settlements on derivatives 5,537 25,213
−Removed: Core loan interest income (a) 146,476 271,765 286,042
−Removed: Investment interest 67,019 37,929 28,172 Increases due to an increase in the balance of restricted cash due to significant loan prepayments and interest earned on restricted cash due to higher interest rates.
−Removed: Intercompany interest (34,833) (12,094) (1,598) Increases due to an increase in the balance of borrowings and higher interest rates.
−Removed: (Provision) negative provision for loan losses - federally insured loans (4,303) (3,731) 7,343 See note 3 of the notes to consolidated financial statements included in this report for the factors impacting provision for loan losses for the periods presented.
−Removed: (Provision) negative provision for loan losses - private education loans (2,865) (2,487) 1,333
−Removed: (Provision) negative provision for loan losses - consumer and other loans (49,807) (38,383) 4,544
−Removed: Net interest income after provision for loan losses (net of settlements on derivatives) (a) $ 121,687 252,999 325,836
−Removed: (a) Core loan interest income and net interest income after provision for loan losses (net of settlements on derivatives) are non-GAAP financial measures.
−Removed: 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.
−Removed: 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.
+Added: Net loan interest income, including derivative settlements (core loan interest income) (a) $ 121,592 146,476
+Added: (a) Net loan interest income, including derivative settlements (core loan interest income) is a non-GAAP financial measure.
+Added: 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.
+Added: 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.
Nelnet Bank Operating Segment
3 unchanged sentences
Loan Activity
−Removed: The following table sets forth the activity in Nelnet Bank's loan portfolio:
−Removed: Year ended December 31,
−Removed: 2023 2022 2021
−Removed: Beginning balance $ 419,795 257,901 17,543
+Added: The following table sets forth the activity in the Nelnet Bank operating segment:
+Added: FFELP Private Consumer and other Total
+Added: Balance as of December 31, 2022 $ 65,913 353,882 — 419,795
Loan acquisitions and originations — 53,286 85,967 139,253
−Removed: Federally insured student loans — — 99,973
−Removed: Private education loans 53,286 235,139 179,749
−Removed: Consumer and other loans 85,967 — —
−Removed: Total loan acquisitions and originations 139,253 235,139 279,722
Repayments (8,429) (46,431) (13,615) (68,475)
Loans sold to AGM (57,484) (217) — (57,701)
−Removed: Ending balance $ 432,872 419,795 257,901
+Added: Balance as of December 31, 2023 — 360,520 72,352 432,872
+Added: Loan acquisitions and originations — 180,919 210,527 391,446
+Added: Repayments — (58,994) (55,639) (114,633)
+Added: Loans sold to AGM — — (65,088) (65,088)
+Added: Balance as of December 31, 2024 $ — 482,445 162,152 644,597
+Added: In October 2024, Nelnet Bank purchased a residual trust that included $133 million of private education loans.
+Added: The trust is consolidated as part of the bank’s financial statements.
+Added: These loans are included in “loan acquisitions and originations” in the table above.
Allowance for Loan Losses, Loan Delinquencies, and Loan Charge-offs
−Removed: For a summary of the allowance as a percentage of the ending balance for each of Nelnet Bank’s loan portfolios as of December 31, 2023 and 2022;
−Removed: loan status, delinquency amounts, and other key credit quality indicators of each of Nelnet Bank's loan portfolios as of December 31, 2023, 2022, and 2021;
+Added: For a summary of the allowance as a percentage of the ending balance, loan status, delinquency amounts, and other key credit quality indicators for each of Nelnet Bank’s loan portfolios as of December 31, 2024 and 2023;
and the activity in Nelnet Bank’s allowance for loan losses and net charge-offs as a percentage of average loans in 2024 and 2023, see note 3 of the notes to consolidated financial statements included in this report.
−Removed: As of December 31, 2023, Nelnet Bank had $847.6 million of deposits.
−Removed: All of 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.
−Removed: 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.
+Added: As of December 31, 2024, Nelnet Bank had $1.25 billion of deposits.
+Added: All of 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.
+Added: 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.
6 unchanged sentences
Year ended December 31, (a)
−Removed: 2023 2022 2021
−Removed: Balance Rate Balance Rate Balance Rate
+Added: Balance Rate Balance Rate
Average assets
15 unchanged sentences
Total liabilities and equity $ 1,209,598 $ 1,021,957
+Added: Net interest margin 3.39 % 2.33 %
(a) Calculated using average daily balances.
2 unchanged sentences
2024 2023 Additional information
−Removed: Total interest income $ 57,859 25,973 7,721 Represents interest earned on loans, cash, and investments.
−Removed: Increases due to an increase of these balances and interest rates.
+Added: Interest income:
+Added: Loan interest $ 38,381 21,806 Represents interest earned on loans.
+Added: Increase due to an increase in the balance and mix of loans and interest rates.
+Added: Investment interest 45,992 36,053 Represents interest earned on cash and investments.
+Added: Increase due to an increase of these balances and interest rates.
+Added: Total interest income 84,373 57,859
Interest expense 44,859 34,704 Represents interest expense on deposits.
−Removed: Increases due to an increase of deposits and interest rates.
+Added: Increase due to an increase in the balance of deposits and interest rates.
Net interest income 39,514 23,155
−Removed: Provision for loan losses 8,475 1,840 794 Increases in provision for loan losses was due to increase in balance of loans and the mix of loans, including the mix of loans acquired and originated in each year compared with the preceding year.
+Added: Provision for loan losses 26,916 8,475 Increase due to the mix of loans and an increase in the notional amount of loans acquired and originated in 2024 compared with 2023.
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
−Removed: Other income 1,095 2,625 713 Represents primarily net gains and income from investments.
−Removed: Impairment expense — (214) —
−Removed: Derivative settlements, net 484 — — During 2023, Nelnet Bank entered into derivatives to hedge its exposure related to variable rate intercompany deposits to minimize volatility from future changes in interest rates.
+Added: Other income, net 2,951 1,095 Represents primarily net gains and income from investments.
+Added: Derivative settlements, net 917 484 Nelnet Bank's use of derivatives is to hedge its exposure related to variable rate intercompany deposits to minimize volatility from future changes in interest rates.
Nelnet Bank has designated its derivative instruments as cash flow hedges;
1 unchanged sentence
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.
+Added: "Derivative settlements" represent the cash paid or received during the respective period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.
+Added: For additional information on Nelnet Bank's derivative portfolio, see note 5 of the notes to consolidated financial statements in this report.
Derivative market value adjustments, net 4,702 (1,523)
1 unchanged sentence
Salaries and benefits 11,122 9,074 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.
−Removed: Increases due to the overall growth of Nelnet Bank activities.
+Added: Increase due to the overall growth of Nelnet Bank activities.
Depreciation 1,282 574
−Removed: Other expenses 4,994 3,925 1,776 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses.
−Removed: Increases due to the overall growth of Nelnet Bank activities.
−Removed: Intersegment expenses 462 244 107 Represents primarily servicing costs paid to LSS.
−Removed: Certain shared service and support costs incurred by the Company to support Nelnet Bank have not been reflected as part of Nelnet Bank through 2023 (when the bank’s de novo period ended).
−Removed: The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank’s operating segment were $7.7 million, $5.8 million, and $3.4 million for 2023, 2022, and 2021, respectively.
−Removed: These expenses will be allocated to Nelnet Bank beginning in 2024.
+Added: Servicing fees 1,373 509 Represents primarily fees paid to LSS for servicing certain of Nelnet Bank's loans.
+Added: Intercompany servicing is eliminated for consolidated financial reporting purposes.
+Added: Other expenses 6,972 4,994 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain technology-related costs, insurance, and marketing.
+Added: Increase due to the overall growth of Nelnet Bank activities.
+Added: Intersegment expenses 2,361 (47) Includes costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
+Added: The majority of shared service costs incurred by the Company to support Nelnet Bank were not allocated to Nelnet Bank through the bank’s de novo period which ended at the end of 2023.
+Added: The shared service and support costs incurred by the Company related to Nelnet Bank and not allocated to Nelnet Bank was $7.7 million in 2023.
Total operating expenses 23,110 15,104
−Removed: (Loss) income before income taxes (368) 4,357 (792)
−Removed: Income tax benefit (expense) 153 (1,013) 175 Represents income tax benefit (expense) at an effective tax rate of 41.5%, 23.3%, and 22.1% for the years ended December 31, 2023, 2022, and 2021, respectively.
−Removed: Net (loss) income $ (215) 3,344 (617)
+Added: Loss before income taxes (1,942) (368)
+Added: Income tax benefit 579 153
+Added: Net loss $ (1,363) (215)
Additional information:
−Removed: Net (loss) income $ (215) 3,344 (617)
−Removed: See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional details about non-GAAP net income, excluding derivative market value adjustments.
+Added: Net loss $ (1,363) (215)
+Added: See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional details about non-GAAP financial information.
Derivative market value adjustments, net (4,702) 1,523
Tax effect 1,128 (366)
−Removed: Net income (loss), excluding derivative market value adjustments $ 942 3,344 (617)
+Added: Net (loss) income, excluding derivative market value adjustments $ (4,937) 942
NFS Other Operating Segments
4 unchanged sentences
Year ended December 31, 2024
−Removed: Interest income $ 11 1,563 564 72,719 74,857
−Removed: Interest expense — — — (29,747) (29,747)
−Removed: Net interest income 11 1,563 564 42,972 45,110
−Removed: Other, net 6,746 21,854 451 (2,403) 26,648
−Removed: Salaries and benefits (216) (370) (544) — (1,130)
−Removed: Other expenses (326) (18,757) (82) (7) (19,172)
−Removed: Intersegment expenses, net (12) (175) (397) — (584)
−Removed: Income (loss) before income taxes 6,203 4,115 (8) 40,562 50,872
−Removed: Income tax (expense) benefit (1,340) (988) (10) (9,735) (12,073)
−Removed: Net (income) loss attributable to noncontrolling interests (620) — 52 — (568)
−Removed: Net income (loss) $ 4,243 3,127 34 30,827 38,231
−Removed: Year ended December 31, 2022
−Removed: Interest income $ 2 674 994 38,707 40,377
+Added: Investment interest $ 14 5,876 380 48,087 54,357
Interest expense — (1,541) — (7,296) (8,837)
Net interest income 14 4,335 380 40,791 45,520
−Removed: Other, net 6,026 6,061 24,284 (1,112) 35,259
+Added: Reinsurance premiums earned — 62,923 — — 62,923
+Added: Other income, net 5,866 3,060 (2,297) 1,684 8,313
Salaries and benefits (196) (591) (800) — (1,587)
+Added: Reinsurance losses and underwriting expenses — (55,246) — — (55,246)
Other expenses (279) (2,894) (175) (4) (3,352)
5 unchanged sentences
Year ended December 31, 2023
−Removed: Interest income $ — 496 548 8,422 9,466
+Added: Investment interest $ 11 1,563 564 72,719 74,857
Interest expense — — — (29,747) (29,747)
Net interest income 11 1,563 564 42,972 45,110
−Removed: Other, net 7,785 2,115 21,994 6,555 38,449
+Added: Reinsurance premiums earned — 20,067 — — 20,067
+Added: Other income, net 6,746 1,787 451 (2,403) 6,581
Salaries and benefits (216) (370) (544) — (1,130)
+Added: Reinsurance losses and underwriting expenses — (16,781) — — (16,781)
Other expenses (326) (1,976) (82) (7) (2,391)
8 unchanged sentences
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).
−Removed: During 2023, 2022, and 2021, WRCM earned $6.2 million, $6.0 million, and $4.2 million, respectively, in management fees.
−Removed: During 2023 and 2021, WRCM earned $0.5 million and $3.2 million in performance fees, respectively (performance fees were insignificant in 2022).
−Removed: Fees earned by WRCM are included in “other, net” in the table above.
+Added: During 2024 and 2023, WRCM earned $5.6 million and $6.2 million, respectively, in management fees.
+Added: During 2024 and 2023, WRCM earned $0.3 million and $0.6 million in performance fees, respectively.
+Added: 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.
−Removed: During 2023 and 2022, the Company earned reinsurance premiums of $41.6 million and $0.3 million, respectively, and ceded $21.5 million and $0.2 million, respectively, of its earned reinsurance premiums, which are included in “other, net” in the table above.
−Removed: During 2023 and 2022, the Company recognized $34.7 million and $0.3 million, respectively, of loss reserve, commissions, and broker fees of which it ceded $18.0 million and $0.2 million, respectively, which are included in “other expenses” in the table above.
−Removed: There was no reinsurance activity in 2021.
+Added: The timing and magnitude of catastrophic losses can produce significant volatility in the Company’s periodic underwriting results.
+Added: The Company’s reinsurance treaties include loss limits, which the Company believes reduces the magnitude of a potential catastrophic loss.
+Added: There were no material catastrophic events in 2024.
+Added: The Company has exposure to the January 2025 California wildfires;
+Added: however, the impact is not expected to be material.
(c) Represents the operating results of the Company’s real estate investments and the administrative costs to manage this portfolio.
−Removed: During 2023, 2022, and 2021, the Company recognized net income and gains of $0.4 million, $24.8 million and $21.5 million, respectively, from its real estate investments, which is included in “other, net” in the table above.
−Removed: (d) Represents interest income earned on investment debt securities (primarily student loan and other asset-backed securities), unrealized gains/losses on marketable equity securities, realized gains/losses on marketable equity securities and investment debt securities, and other costs to manage these investments.
+Added: During 2024 and 2023, the Company recognized net losses of $2.3 million and net gains of $0.4 million, respectively, from its real estate investments, which are included in “other income, net” in the table above.
+Added: The net results recognized relates primarily to the
+Added: Company's proportionate share of certain real estate investments accounted for under the equity method.
+Added: The net loss for 2024 was partially offset by a $2.9 million gain from the sale of a real estate investment.
+Added: (d) Represents interest income earned on investment debt securities (primarily student loan and other asset-backed securities, including Nelnet-owned asset-backed securities which it has repurchased and are eliminated in consolidation), interest income on certain notes receivable, unrealized gains/losses on marketable equity securities, realized gains/losses on marketable equity securities and investment debt securities, and other costs to manage these investments.
Also includes interest expense incurred on debt used to finance such investments.
+Added: As of December 31, 2024, this debt had been repaid in full.
+Added: See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate and Market Risk - Investments,” which provides additional detail on NFS’s investment debt securities.
CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS
3 unchanged sentences
Summary and Comparison of Operating Results
−Removed: Nelnet Renewable Energy (b)
−Removed: Shared services (a) Tax equity investments / syndication / administration GRNE Solar ALLO investment (c) Venture capital investments (d) Other Total
+Added: 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
+Added: Investment interest $ — 2 32 — — 11,739 11,773
+Added: Interest expense — — (833) — — (954) (1,787)
Net interest income (expense) — 2 (801) — — 10,785 9,986
Solar construction revenue — — 56,569 — — — 56,569
−Removed: Other, net 2,754 (44,095) 159 (55,763) (2,878) 9,438 (90,385)
−Removed: Impairment expense (4,678) — (20,581) — (2,060) — (27,319)
+Added: 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)
3 unchanged sentences
Intersegment expenses, net 101,992 50 (1,792) (4) (97) (550) 99,599
−Removed: Income (loss) before income taxes (63,223) (54,300) (54,691) (57,972) (6,008) 10,428 (225,766)
−Removed: Income tax (expense) benefit 15,173 6,337 10,807 13,913 1,442 4,389 52,061
−Removed: Net (income) loss attributable to noncontrolling interests — 27,894 9,662 — — — 37,556
−Removed: Net income (loss) $ (48,050) (20,069) (34,222) (44,059) (4,566) 14,817 (136,149)
−Removed: Year ended December 31, 2022
−Removed: Net interest income (expense) $ — — (120) — 20 2,735 2,635
−Removed: Solar construction revenue — — 24,543 — — — 24,543
−Removed: Other, net 2,575 (9,088) 15 (58,781) 19,809 9,358 (36,112)
Impairment expense — — (1,865) — (537) — (2,402)
−Removed: Cost to provide solar construction services — — (19,971) — — — (19,971)
−Removed: Salaries and benefits (90,259) (1,386) (2,143) (972) (741) (5,489) (100,990)
−Removed: Depreciation and amortization (37,852) — (1,489) — — (282) (39,623)
−Removed: Other expenses (42,289) (593) (934) (5,489) (78) (8,405) (57,788)
−Removed: Intersegment expenses, net 96,640 (103) (370) (3) — (982) 95,182
−Removed: Income (loss) before income taxes (72,183) (11,170) (469) (65,245) 12,449 (3,065) (139,683)
−Removed: Income tax (expense) benefit 17,324 (123) 126 15,659 (2,988) 12,417 42,415
−Removed: Net (income) loss attributable to noncontrolling interests — 11,682 (57) — — — 11,625
−Removed: Net income (loss) $ (54,859) 389 (400) (49,586) 9,461 9,352 (85,643)
+Added: (Loss) income before income taxes (46,194) (2,179) (35,972) 8,087 6,912 10,481 (58,865)
+Added: Income tax benefit (expense) 11,087 (1,123) 8,236 (1,941) (1,659) 1,514 16,114
+Added: Net loss attributable to noncontrolling interests — 6,857 1,655 — — — 8,512
+Added: Net (loss) income $ (35,107) 3,555 (26,081) 6,146 5,253 11,995 (34,239)
Year ended December 31, 2023
+Added: Investment interest $ — — 87 — — 12,054 12,141
+Added: Interest expense — — (933) — — (645) (1,578)
Net interest income (expense) — — (846) — — 11,409 10,563
Solar construction revenue — — 31,669 — — — 31,669
−Removed: Other, net 3,604 (10,238) — (33,722) 28,800 13,463 1,907
−Removed: Impairment expense (916) — — — (4,637) — (5,553)
+Added: 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)
3 unchanged sentences
Intersegment expenses, net 111,572 (5,125) 239 (2) (58) 1,462 108,088
−Removed: Income (loss) before income taxes (72,673) (12,029) — (35,123) 23,256 (2,431) (99,000)
−Removed: Income tax (expense) benefit 17,442 1,032 — 8,430 (5,581) 6,961 28,284
−Removed: Net (income) loss attributable to noncontrolling interests — 7,729 — — — — 7,729
−Removed: Net income (loss) $ (55,231) (3,268) — (26,693) 17,675 4,530 (62,987)
+Added: Impairment expense (4,678) — (20,581) — (2,060) — (27,319)
+Added: (Loss) income before income taxes (63,223) (60,982) (54,691) (57,972) (6,008) 11,635 (231,241)
+Added: Income tax benefit (expense) 15,173 7,125 10,807 13,913 1,442 3,969 52,429
+Added: Net loss attributable to noncontrolling interests — 31,293 9,662 — — — 40,955
+Added: Net (loss) income $ (48,050) (22,564) (34,222) (44,059) (4,566) 15,604 (137,857)
(a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
2 unchanged sentences
Also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.
−Removed: (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.
−Removed: As of December 31, 2023, the Company has invested a total of $470.7 million (which includes $198.8 million syndicated to third-party investors) in solar tax equity investments.
−Removed: 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.
−Removed: 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.
+Added: (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.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: Nelnet Renewable Energy recognized losses on its tax equity investments of $46.7 million, $9.5 million, and $10.1 million during 2023, 2022, and 2021, respectively.
−Removed: These losses, which include losses attributable to third-party noncontrolling interest investors, are included in “other, net” in the table above.
−Removed: Solar losses attributable to third-party noncontrolling interest investors was $26.4 million, $10.9 million and $7.4 million during 2023, 2022, and 2021, respectively, and are reflected in “net (income) loss attributable to noncontrolling interests” in the table above.
−Removed: Nelnet Renewable Energy syndicates tax equity investments to third parties and earns management and performance fees.
−Removed: Management fee income recognized by Nelnet Renewable Energy was $1.8 million and $1.0 million during 2023 and 2022, respectively, which is included in “other, net” in the table above.
−Removed: In addition to solar tax equity investments, the Company has a strategy to own solar energy project assets.
−Removed: As part of this strategy, on July 1, 2022, the Company acquired 80% of the ownership interest of GRNE Solar for total consideration of $33.9 million.
−Removed: The operating results for GRNE Solar in the “Year ended December 31, 2022” table above are for the period from July 1, 2022 through December 31, 2022.
−Removed: GRNE is a solar construction company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.
−Removed: Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects.
+Added: The Company recognized net losses on its solar tax equity investments of $6.5 million and $59.6 million during 2024 and 2023, respectively.
+Added: The net losses in 2024 were partially offset by recognizing gains of $15.3 million related to investments that were sold during 2024.
+Added: These income statement amounts, which include amounts attributable to third-party noncontrolling interest investors, are included in “other income, net” in the table above.
+Added: The amount of net losses attributable to third-party noncontrolling interest investors was $4.6 million and $37.9 million during 2024 and 2023, respectively, and are reflected in “net loss attributable to noncontrolling interests” in the table above.
+Added: The Company syndicates solar tax equity investments to third parties and earns management and performance fees.
+Added: Management fee income recognized by the Company was $3.6 million and $1.8 million during 2024 and 2023, respectively, which is included in “other income, net” in the table above.
+Added: During 2024, the Company also recognized solar consulting revenue of $6.1 million.
+Added: (c) Nelnet Renewable Energy (NRE) is the Company’s solar construction business that provides full-service engineering, procurement, and construction services to residential homes and commercial entities.
+Added: The Company entered this business from its acquisition of 80% of GRNE Solar in June 2022.
+Added: Since the acquisition of GRNE Solar, it has incurred low and, in some cases, negative margins on certain projects.
In addition, higher interest rates reduced residential demand and made community solar projects more costly.
−Removed: Due to the complexity and long-term nature of existing construction contracts, the Company may continue to incur low and/or negative margins to complete projects currently under contract.
−Removed: As part of the Company’s November 2023 annual goodwill impairment assessment completed in conjunction with the Company’s annual November budget process, the Company recognized non-cash impairment charges in the fourth quarter of 2023 for goodwill and intangibles of $18.9 million and $1.7 million, respectively.
−Removed: See note 11 of the notes to consolidated financial statements included in this report for additional information.
−Removed: (c) Represents primarily the Company's share of loss on its voting membership interests and income on its preferred membership interests in ALLO.
+Added: On April 12, 2024, the Company announced a change in its solar EPC operations to focus exclusively on the commercial solar market and discontinued its residential solar operations.
+Added: As a result, residential revenue will continue to decline from recent historical amounts as existing customer contracts are completed.
+Added: Residential solar construction revenue was $3.3 million and $10.7 million during 2024 and 2023, respectively.
+Added: During 2023 and 2024, NRE recognized impairment charges on goodwill, intangible assets, and other assets of $20.6 million and $1.9 million, respectively.
+Added: See note 11 of the notes to consolidated financial statements included in this report for additional information on such impairment charges.
+Added: The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.
+Added: As new projects are completed and the legacy contracts are now substantially complete, the Company believes operating results will improve from prior historical periods.
+Added: On June 30, 2024, the Company acquired the remaining 20% of the ownership interest of GRNE Solar for $0.3 million.
+Added: (d) Represents primarily the Company's share of loss on its voting membership interests and income on its preferred membership interests in ALLO.
The Company accounts for its approximately 45% voting membership interests in ALLO under the HLBV method of accounting.
−Removed: The Company recognized losses under the HLBV method of accounting on its ALLO voting membership interests investment of $65.3 million, $68.0 million, and $42.1 million, during 2023, 2022, and 2021, respectively.
−Removed: These amounts are reflected in “other, net” in the table above.
+Added: Under the HLBV method of accounting on its ALLO voting membership interests investment, the Company recognized losses of $10.7 million and $65.3 million in 2024 and 2023, respectively.
+Added: These amounts are reflected in “other income, net” in the table above.
+Added: Absent additional equity contributions with respect to ALLO's voting membership interests, the Company will not recognize additional losses for its voting membership interests in ALLO.
As of December 31, 2024, the outstanding preferred membership interests of ALLO held by the Company was $225.6 million.
Accrued and unpaid preferred return capitalizes to preferred membership interests annually on each December 31.
−Removed: The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25% that will increase to 10.00% in April 2024.
−Removed: The Company recognized income on its ALLO preferred membership interests of $9.1 million, $8.6 million, and $8.4 million during 2023, 2022, and 2021, respectively.
−Removed: These amounts are reflected in “other, net” in the table above.
−Removed: 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.
−Removed: The Company recognized expense of $2.2 million and $5.3 million associated with this obligation during 2023 and 2022, respectively, which is included in “other expenses” in the table above.
−Removed: (d) Represents the operating results of the Company’s venture capital investments, including Hudl which the Company accounts for using the measurement alternative method (see note 6 of the notes to consolidated financial statements included in this report for additional information), and the administrative costs to manage this portfolio.
−Removed: During 2022, the Company recognized $19.8 million in net income and gains on venture capital investments, including a $15.2 million gain from the revaluation of its previously held 50% ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30% ownership interests in NextGen on April 30, 2022.
−Removed: In 2021, the Company recognized $28.8 million in net income and gains on venture capital investments, including $10.3 million as a result of CompanyCam Inc.’s equity raise.
−Removed: In October 2021, CompanyCam Inc., an entity in which the Company has an equity investment, completed an additional equity raise.
−Removed: The Company accounts for its investment in this entity using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions.
−Removed: As a result of this entity’s equity raise, the Company recognized a gain during the fourth quarter of 2021 to adjust its carrying value to reflect the October 2021 transaction value.
+Added: The Company historically earned a preferred annual return of 6.25% that increased to 10.00% on April 1, 2024 for $155.0 million of preferred membership interests of ALLO held by the Company.
+Added: On December 31, 2024, $14.1 million of accrued preferred return was capitalized to preferred membership interests.
+Added: The preferred annual return on the updated balance of $169.1 million preferred membership interests increased to 13.5% on January 1, 2025.
+Added: During 2024, the Company purchased an additional $53.1 million of preferred membership interests of ALLO, which earn a preferred annual return of 20.0%.
+Added: Including the accrued preferred return of $3.4 million that was capitalized on December 31, 2024, the updated balance of preferred membership interests that earns at 20.0% was $56.5 million as of December 31, 2024.
+Added: The Company recognized income on its ALLO preferred membership interests of $17.5 million and $9.1 million during December 31, 2024 and 2023, respectively.
+Added: These amounts are reflected in “other income, net” in the table above.
+Added: 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.
+Added: The Company adjusts the balance of this contingent liability each reporting period.
+Added: For the year ended December 31, 2024, the Company reduced the obligation resulting in an expense reduction of $1.5 million, and for the year ended December 31, 2023, recognized expense of $2.2 million, which is included in “other expenses” in the table above.
+Added: (e) Represents the operating results of the Company’s venture capital investments, including Hudl which the Company accounts for using the measurement alternative method, and the administrative costs to manage this portfolio.
LIQUIDITY AND CAPITAL RESOURCES
1 unchanged sentence
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.
−Removed: Nelnet Bank launched operations in November 2020.
−Removed: Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and the Company contributed an additional $30.0 million and $5.0 million to Nelnet Bank during 2022 and 2023, respectively.
−Removed: Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.
−Removed: Cash and investments held at Nelnet Bank are generally not available for Company activities outside of Nelnet Bank.
−Removed: See “Liquidity Impact Related to Nelnet Bank” included below for additional information.
−Removed: Therefore, the Liquidity and Capital Resources discussion is concentrated on the Company’s liquidity and capital needs to meet existing debt obligations in the Asset Generation and Management operating segment and the Company's other initiatives to pursue additional strategic investments.
+Added: Therefore, the Liquidity and Capital Resources discussion is concentrated on the Company’s liquidity and capital needs to meet existing debt obligations in the Nelnet Financial Services division, which includes the Asset Generation and Management and Nelnet Bank reportable operating segments, and the Company's other initiatives to pursue additional strategic investments.
The Company may issue equity and debt securities in the future in order to improve capital, increase liquidity, refinance upcoming maturities, or provide for general corporate purposes.
12 unchanged sentences
Cash and cash equivalents $ 194,518
−Removed: Cash and cash equivalents held at Nelnet Bank (1) (11,599)
+Added: Cash and cash equivalents held at Nelnet Bank (a) (48,166)
Net cash and cash equivalents 146,352
Available-for-sale (AFS) debt securities (investments) - at fair value 1,085,826
−Removed: AFS debt securities held at Nelnet Bank - at fair value (1) (371,610)
−Removed: AFS private education loan debt securities - held as risk retention - at fair value (2) (252,917)
+Added: AFS debt securities held at Nelnet Bank - at fair value (a) (536,323)
+Added: AFS private education and consumer loan debt securities - held as risk retention - at fair value (b) (227,726)
Restricted investments (101,987)
1 unchanged sentence
Unencumbered private, consumer, and other loans (Non-Nelnet Bank) - at par 253,484
−Removed: Repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (3) 312,016
−Removed: Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreement - at par (4) (118,925)
−Removed: Unencumbered repurchased Nelnet issued asset-backed debt securities - at par 193,091
−Removed: Unused capacity on unsecured line of credit (5) 495,000
+Added: Unencumbered repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (c) 97,482
+Added: Unused capacity on unsecured line of credit (d) 495,000
Sources of liquidity as of December 31, 2024
−Removed: (1) Cash and investments held at Nelnet Bank are generally not available for Company activities outside of Nelnet Bank.
−Removed: (2) The Company is sponsor for certain securitizations and as sponsor, is required to provide a certain level of risk retention.
+Added: (a) Cash and investments held at Nelnet Bank are generally not available for Company activities outside of Nelnet Bank.
+Added: (b) The Company is sponsor for certain private education and consumer loan securitizations and as sponsor, is required to provide a certain level of risk retention.
To satisfy this requirement, the Company has purchased bonds issued in the securitizations.
−Removed: The Company is required to retain these bonds as described under the caption “Repurchase Agreements” below.
−Removed: (3) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.
−Removed: For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements.
−Removed: 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.
+Added: The majority of the purchased bonds reflected in the table above relate to private education loan securitizations.
+Added: For these securitizations, the Company is required to retain these bonds until the latest of (i) the date the aggregate outstanding principal balance of the loans in the securitization is 33% or less of the initial loan balance, and (ii) the date the aggregate outstanding principal balance of the bonds is 33% or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell these bonds to a third party.
+Added: (c) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.
+Added: For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial
+Added: 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.
Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale.
−Removed: Certain of these securities serve as collateral on amounts outstanding under the Company's repurchase agreements as reflected in the table above.
−Removed: (4) See the caption “Repurchase Agreements” below.
−Removed: (5) The Company has a $495.0 million unsecured line of credit that matures on September 22, 2026.
+Added: (d) The Company has a $495.0 million unsecured line of credit that matures on September 22, 2026.
As of December 31, 2024, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.
4 unchanged sentences
The Company has historically generated positive cash flow from operations.
−Removed: During the year ended December 31, 2023, the Company generated $433.0 million from operating activities, compared with $684.1 million for the same period in 2022.
−Removed: The decrease in such cash flows from operating activities was due to:
−Removed: • A decrease in net income;
−Removed: • Payments to the Company’s clearinghouse for margin payments on derivatives in 2023 compared with proceeds received in 2022;
−Removed: • Adjustments to net income for the impact of non-cash changes in deferred income taxes, depreciation and amortization, and gain on sale of loans;
−Removed: • A decrease in proceeds from the sale of equity securities;
−Removed: • The impact of changes to accrued interest payable in 2023 compared with 2022.
+Added: During the years ended December 31, 2024 and 2023, the Company generated $662.9 million and $432.0 million, respectively, in cash from operating activities.
+Added: The increase in 2024 compared with 2023 was due to:
+Added: • An increase in net income;
+Added: • Proceeds received from the Company’s clearinghouse for margin payments on derivatives in 2024 compared with payments in 2023;
+Added: • Adjustments to net income for the impact of non-cash changes to deferred taxes, provision for loan losses, and impairment expense and provision for beneficial interests;
+Added: • The impact of changes to loan and investment accrued interest receivable, accounts receivable, and other assets in 2024 compared with 2023.
These factors were partially offset by:
−Removed: • Adjustments to net income for the impact of provision for loan losses, impairment expense, derivative market value adjustments, loss on investments, and loan discount accretion;
−Removed: • An increase in the proceeds from termination of derivative instruments in 2023 compared with 2022;
−Removed: • The impact of changes to accrued interest receivable, accounts receivable, and other assets and liabilities in 2023 compared with 2022.
+Added: • Adjustments to net income for the impact of depreciation and amortization, loan discount and deferred lender fees accretion, derivative market value adjustments, loss on sale of loans, and gain on investments;
+Added: • Proceeds from termination of derivative instruments in 2023 compared with none in 2024;
+Added: • The impact of changes to accrued interest payable and other liabilities in 2024 compared with 2023.
The primary items included in the statement of cash flows for investing activities are the purchase, origination, repayment, and sale of loans, the purchase and sale of available-for-sale securities, and the purchase of other investments (primarily solar investments).
−Removed: The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable and Nelnet Bank deposits used to fund loans and investment activity.
+Added: The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable, the change in deposits at Nelnet Bank used to fund loans and investment activity at Nelnet Bank, and repurchases of common stock.
Cash provided by investing activities and used in financing activities for the year ended December 31, 2024 was $2.41 billion and $3.17 billion, respectively.
1 unchanged sentence
Investing and financing activities are further addressed in the discussion that follows.
−Removed: Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral
+Added: 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.
3 unchanged sentences
Bonds and notes issued in asset-backed securitizations $ 7,411,966 8/26/30 - 9/25/69
−Removed: FFELP, private education, and consumer loan warehouse facilities 1,422,176 4/22/25 - 11/14/25
+Added: FFELP and consumer loan warehouse facilities 943,165 1/31/26 - 11/13/27
Bonds and Notes Issued in Asset-backed Securitizations
The majority of AGM’s portfolio of student loans is funded in asset-backed securitizations that are structured to substantially match the maturity of the funded assets, thereby minimizing liquidity risk.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: 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.
+Added: In addition, due to (i) the difference between the yield AGM receives on the loans and cost of
+Added: 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.
+Added: 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.
The actual timing of cash flows released from the securitizations could be impacted based on when and if the Company terminates a securitization by exercising clean-up calls on the underlying securities when the assets in such securitization get to a certain threshold.
−Removed: 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.
+Added: 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.
−Removed: The forecasted cash flow does not include cash flows that the Company expects to receive related to loans funded in its warehouse facilities, unencumbered private education, consumer, and other loans funded with operating cash, loans acquired subsequent to December 31, 2023, loans owned by Nelnet Bank, and cash flows relating to the Company's ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "investments and notes receivable" on the Company's consolidated balance sheets).
+Added: The forecasted cash flow does not include cash flows that the Company expects to receive in relation to loans funded in its warehouse facilities, unencumbered private education, consumer, and other loans funded with operating cash, its ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "other investments and notes receivable, net" on the Company's consolidated balance sheets), loans acquired subsequent to December 31, 2024, and loans owned by Nelnet Bank.
Asset-backed Securitization Cash Flow Forecast
2 unchanged sentences
The forecasted future undiscounted cash flows of approximately $1.07 billion include approximately $0.73 billion (as of December 31, 2024) of overcollateralization included in the asset-backed securitizations.
−Removed: 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.
+Added: 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.
The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast.
4 unchanged sentences
A number of factors can affect estimated prepayment rates, including the level of consolidation activity, borrower default rates, and utilization of debt management options such as income-based repayment, deferments, and forbearance.
−Removed: Should any of these factors change, management may revise its assumptions, which in turn would impact the projected future cash flow.
−Removed: The Company’s cash flow forecast above assumes prepayment rates of 5% for consolidation loans and 6% for all other loan types.
−Removed: 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.
−Removed: After multiple extensions of the student loans payment pause under the CARES Act, the payment and interest accrual suspension ended August 31, 2023, and Federal Direct Loan Program borrowers returned to repayment on September 1, 2023.
−Removed: In addition, during 2023, the Department issued final regulations on income-driven repayment plans, which could lead to increased consolidation activity for FFELP loans.
−Removed: If the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs, such initiatives could significantly increase prepayments.
−Removed: Item 1A, "Risk Factors - Loan Portfolio - Prepayment risk" for additional information related to risks associated with loan prepayments.
+Added: Should any of these factors change, management may revise its assumptions, which in turn would impact the
+Added: projected future cash flow.
+Added: The Company’s cash flow forecast above assumes prepayment rates of 6% for both federally insured consolidation and Stafford loans.
+Added: Prepayment rates for private education loans range from 11% to 20%.
+Added: Beginning in late 2021, the Company experienced accelerated run-off (prepayments) of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans to qualify for loan forgiveness under various initiatives and programs offered by the federal government and the Department.
+Added: See Item 1A, "Risk Factors - Loan Portfolio - Prepayment risk" for additional information related to risks associated with loan prepayments.
+Added: While more unlikely now due to the change in presidential administration, prepayments could increase if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs.
+Added: However, the Company has observed a significant decrease in FFELP borrowers consolidating their loans into the Federal Direct Loan Program since August 2024 that has resulted in prepayment rates on the Company’s FFELP portfolio being more consistent with longer-term historical rates.
The following table summarizes the estimated impact to the above forecasted cash flows if prepayments were greater than the prepayment rate assumptions used to calculate the forecasted cash flows.
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$0.85 billion
−Removed: 10x $0.45 billion
−Removed: $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);
1 unchanged sentence
Interest rates :
−Removed: On June 30, 2023, LIBOR was discontinued as a benchmark rate.
−Removed: Subsequent to the discontinuation of LIBOR on June 30, 2023, the Company funds a portion of its student loans with floating rate securities that are indexed to 90-day SOFR.
+Added: The Company funds a portion of its student loans with floating rate securities that are indexed to 90-day SOFR.
Meanwhile, the interest earned on the Company’s student loan assets is indexed primarily to the 30-day average SOFR in effect for each day in a calendar quarter.
6 unchanged sentences
Warehouse Facilities
−Removed: Warehousing allows the Company to buy and manage FFELP, private education, and consumer loans prior to transferring them into more permanent financing arrangements.
−Removed: The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities.
−Removed: As of December 31, 2023, the Company had two FFELP warehouse facilities with an aggregate maximum financing amount available of $1.7 billion, of which $1.4 billion was outstanding and $0.3 billion was available for additional funding.
−Removed: One warehouse facility has a static advance rate until the expiration date of the liquidity provisions (May 22, 2024).
−Removed: In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor.
−Removed: The loans would then be funded at this new advance rate until the final maturity date of the facility (May 22, 2025).
−Removed: The other warehouse facility has a maximum advance rate of 92%.
−Removed: As of December 31, 2023, the Company had $102.7 million advanced as equity support on these facilities.
−Removed: For further discussion of the Company’s FFELP warehouse facilities outstanding as of December 31, 2023, see note 4 of the notes to consolidated financial statements included in this report.
−Removed: The Company also has a consumer loan warehouse facility that, as of December 31, 2023, had an aggregate maximum financing amount available of $200.0 million, an advance rate of 70%, liquidity provisions through November 14, 2024, and a final maturity date of November 14, 2025.
−Removed: As of December 31, 2023, $23.7 million was outstanding under this facility, $176.3 million was available for future funding, and the Company had $10.4 million advanced as equity support.
+Added: Warehousing allows the Company to buy and manage loans prior to transferring them into more permanent financing arrangements.
+Added: See note 4 of the notes to consolidated financial statements included in this report for a discussion of the Company's warehouse facilities outstanding as of December 31, 2024.
+Added: The Company has been reducing its warehouse capacity based on its estimated future loan purchases and to save on unused facility costs.
Upon termination or expiration of the warehouse facilities, the Company would expect to access the securitization market, obtain replacement warehouse facilities, use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.
+Added: Asset-backed Securities Transactions
+Added: The Company, through its subsidiaries, has historically funded loans by completing asset-backed securitizations.
+Added: Depending on market conditions, the Company anticipates continuing to access the asset-backed securitization market.
+Added: Such asset-backed securitization transactions would be used to refinance loans included in its warehouse facilities and existing asset-backed securitizations and/or finance loans purchased from third parties and loans that are currently unencumbered.
+Added: There were no asset-backed securitization transactions completed during the year ended December 31, 2024.
Other Uses of Liquidity
−Removed: The Company no longer originates FFELP loans, but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist, including opportunities to purchase private education, consumer, and other loans (or investment interests therein).
+Added: Subsequent to the Reconciliation Act of 2010, the Company no longer originates FFELP loans but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist, including opportunities to purchase private education, consumer, and other loans (or investment interests therein).
The Company plans to fund additional loan acquisitions and related investments using current cash;
+Added: cash provided by operating activities;
proceeds from the sale of certain investments;
−Removed: its unsecured line of credit, its Union Bank student loan participation agreement, its Union Bank student loan asset-backed securities participation agreement, and third-party repurchase agreements (each as described below), and/or establishing similar secured and unsecured borrowing facilities;
+Added: its unsecured line of credit, its Union Bank student loan participation agreement, and its Union Bank student loan asset-backed securities participation agreement (each as described below), and/or establishing similar secured and unsecured borrowing facilities;
using its existing warehouse facilities (as described above);
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and continuing to access the asset-backed securities market.
−Removed: Repurchase Agreements
−Removed: In December 2020, Wells Fargo announced the sale of its approximately $10 billion portfolio of private education loans representing approximately 445,000 borrowers.
−Removed: The Company entered into a joint venture with other investors to acquire the loans, and under the joint venture, the Company had an approximately 8% interest in the loans and has a corresponding 8% interest in residual interests in the 2021 securitizations of the loans discussed below.
−Removed: The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility.
−Removed: During 2021, the Company sponsored four asset-backed securitization transactions to permanently finance a total of $8.7 billion of private education loans sold by Wells Fargo (which represented the total remaining loans originally purchased from Wells Fargo, factoring in borrower payments from the date of purchase).
−Removed: As sponsor, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement.
−Removed: The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance sheet as "investments and notes receivable" and as of December 31, 2023, the fair value of these bonds was $252.9 million.
−Removed: The Company must retain these investment securities until the latest of (i) two years from the closing date of the securitization, (ii) the date the aggregate outstanding principal balance of the loans in the securitization is 33% or less of the initial loan balance, and (iii) the date the aggregate outstanding principal balance of the bonds is 33% or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party.
−Removed: The Company entered into repurchase agreements with third parties, of which a portion of the proceeds from such agreements were used to purchase the asset-backed investments, and such investments serve as collateral on the repurchase obligations.
−Removed: In addition, as discussed above, the Company has repurchased certain of its own asset-backed securities in the secondary market that serve as collateral on amounts outstanding under the Company's repurchase agreements.
−Removed: During the third quarter of 2023, the Company paid down the outstanding balance of one of these facilities.
−Removed: As of December 31, 2023, $208.2 million was outstanding on the Company's remaining repurchase agreement, of which $117.8 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement and $90.4 million was borrowed to fund repurchased FFELP loan asset-backed securities.
−Removed: On January 29, 2024, the Company paid down the $90.4 million borrowed to fund the FFELP loan asset-backed securities.
−Removed: As of February 27, 2024, the maturity dates on this facility vary from November 27, 2024 through December 20, 2024, and the facility is subject to early termination upon 180 days' prior written notice provided by the Company or the counterparty prior to the maturity dates.
−Removed: The Company is subject to cash margin deficit payment requirements in the event the fair value of the securities subject to the repurchase agreement becomes less than the original purchase price of such securities.
−Removed: Upon termination or maturity of the repurchase agreement, there can be no assurance that the Company will be able to maintain this or a similar agreement, or find alternative funding if necessary.
−Removed: If necessary, the Company would expect to use operating cash, consider the sale of unencumbered investments, or borrow on its unsecured line of credit to satisfy any remaining obligations.
−Removed: Union Bank Participation Agreement
+Added: 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.
2 unchanged sentences
This agreement provides beneficiaries of Union Bank’s grantor trusts with access to investments in interests in student loans, while providing liquidity to the Company.
−Removed: The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $900.0 million or an amount in excess of $900.0 million if mutually agreed to by both parties.
+Added: The Company can sell participation interests in loans to Union Bank to the extent of availability under the grantor trusts, up to $900.0 million or an amount in excess of $900.0 million if mutually agreed to by both parties.
Loans participated under this agreement have been accounted for by the Company as loan sales.
Accordingly, the participation interests sold are not included on the Company’s consolidated balance sheets.
−Removed: Asset-backed Securities Transactions
−Removed: During 2023, the Company completed one private education loan asset-backed securitization totaling $189.6 million (par value).
−Removed: The proceeds from this transaction were used to finance loans funded in the Company’s private education loan warehouse, certain unencumbered loans, and loans purchased during the period.
−Removed: See note 4 of the notes to consolidated financial statements included in this report for additional information on this securitization.
−Removed: The Company, through its subsidiaries, has historically funded student loans by completing asset-backed securitizations.
−Removed: Depending on market conditions, the Company anticipates continuing to access the asset-backed securitization market.
−Removed: Such asset-backed securitization transactions would be used to refinance student loans included in its warehouse facilities, loans purchased from third parties, and/or student loans in its existing asset-backed securitizations.
−Removed: Cash Flow Forecast - Beneficial Interest in Loan Securitizations
−Removed: 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.
−Removed: 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.
+Added: The Company also has an agreement with Union Bank under which Union Bank has agreed to purchase from the Company participation interests in FFELP loan asset-backed securities (bond investments).
+Added: The agreement automatically renews annually and is terminable by either party upon five business days' notice.
+Added: The Company can participate FFELP loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $400.0 million or an amount in excess of $400.0 million if mutually agreed to by both parties.
+Added: The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its discretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities.
+Added: As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance sheets as "investments at fair value" and the participation interests outstanding have been accounted for by the Company as a secured borrowing.
+Added: As of December 31, 2024, $0.1 million (par value) of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.
+Added: Liquidity Impact Related to Beneficial Interest in Loan Securitizations
+Added: 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.
+Added: 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.
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.
+Added: Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment interest" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.
As of December 31, 2024, the investment balance on the Company's consolidated balance sheet of its beneficial interest in loan securitizations was $213.8 million.
3 unchanged sentences
The vast majority of these cash flows are expected to be received over the next 5 years.
−Removed: The difference between the total estimated future undiscounted cash flows from these residual interests and the investment carrying value of $225.1 million of $125.5 million, or $95.4 million after income taxes based on the estimated effective tax rate, represents estimated future investment interest income (earnings) from these investments and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the December 31, 2023 balance.
+Added: The difference between the total estimated future undiscounted cash flows from these residual interests ($323.4 million) and the investment carrying value ($213.8 million) of $109.6 million, or $83.3 million after income taxes based on the estimated effective tax rate, represents estimated future investment interest income (earnings) from these investments and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the December 31, 2024 balance.
The undiscounted future cash flows from the consumer and private education loan securitizations are highly subject to credit risk (defaults).
If defaults are higher than management's current estimate, the forecasted cash flows and estimated future investment interest income (earnings) from these securitizations would be adversely impacted.
−Removed: Liquidity Impact Related to Nelnet Bank
+Added: For example, the Company established an allowance of $39.5 million in 2024 related to certain of the Company's beneficial interest securitization investments.
+Added: The Company's change in estimate of future cash flows from the beneficial interest in certain loan securitizations was lower than previously anticipated due to actual and estimated loan defaults within such securitizations.
+Added: Sources and Needs of Liquidity - Nelnet Bank
+Added: Sources of Liquidity
Nelnet Bank launched operations in November 2020.
−Removed: Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and the Company contributed an additional $30.0 million and $5.0 million to Nelnet Bank during 2022 and 2023, respectively.
−Removed: In addition, the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC discussed below.
+Added: Nelnet Bank was funded by the Company with an initial capital contribution of $100 million and the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC as discussed below.
+Added: The Company has contributed an additional $72 million to Nelnet Bank since its inception.
+Added: Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.
+Added: The growth of Nelnet Bank is primarily driven by its ability to achieve loan growth goals while sustaining credit quality and maintaining cost-efficient funding sources to support its loan growth.
+Added: Nelnet Bank utilizes brokered, retail, and other deposits to meet its funding needs and enhance its liquidity position.
+Added: The deposits can be term or liquid deposits.
+Added: The term deposits have terms from three months to ten years.
+Added: Retail, commercial, and institutional deposits are sourced through a direct banking platform and a deposit marketplace and provide diversified funding sources.
+Added: Brokered deposits are sourced through a network of brokers and provide a stable source of funding.
+Added: In addition, Nelnet Bank accepts certain deposits considered non-brokered that are held in large accounts structured to allow FDIC insurance to flow through to underlying individual depositors.
+Added: The deposits are diversified with deposits from Educational 529 College Savings and Health Savings plans, STFIT, and FDIC sweep deposits.
+Added: Regulatory Capital
Prior to Nelnet Bank’s launch of operations, Nelnet Bank, Nelnet, Inc.
8 unchanged sentences
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on Nelnet Bank’s business, results of operations, or financial condition.
−Removed: On January 1,
−Removed: 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.
+Added: 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.
Any banking organization with total consolidated assets of less than $10 billion, limited amounts of certain types of assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9% may opt into the CBLR framework quarterly.
3 unchanged sentences
Nelnet Bank intends to maintain at all times regulatory capital levels that meet both the minimum level necessary to be considered “well capitalized” under the FDIC’s prompt corrective action framework and the minimum level required by the FDIC.
−Removed: Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.
−Removed: Liquidity Impact Related to Nelnet Renewable Energy
−Removed: The Company’s Nelnet Renewable Energy business makes solar tax equity investments.
−Removed: Through December 31, 2023, the Company has invested a total of $470.7 million (which includes $198.8 million syndicated to third-party investors) in tax equity investments in renewable energy solar partnerships.
−Removed: 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.
−Removed: The Company is allowed to reduce its tax estimates paid to the U.S.
+Added: Liquidity Impact Related to Solar Tax Equity Investments
+Added: The Company makes solar tax equity investments in renewable energy solar partnerships that support the development and operations of solar projects throughout the county.
+Added: As of December 31, 2024, the Company has funded a total of $314.8 million in tax equity investments which remain outstanding for itself and $271.4 million on behalf of its syndication partners, for a funded total of $586.2 million.
+Added: 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.
+Added: The Company is then allowed to reduce its tax estimates paid to the U.S.
Treasury based on the credits earned.
+Added: 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.
+Added: 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.
Based on the timing of when the Company funds a project and decreases its tax estimate to the U.S.
−Removed: Treasury due to earning of the tax credit, the amount of capital committed to solar tax equity investments at any point in time is not significant and has a minimal impact on the Company’s liquidity.
−Removed: As of December 31, 2023, the Company is committed to fund an additional $154.2 million of tax equity investments, of which $72.1 million is expected to be provided by syndication partners.
−Removed: In addition to solar tax equity investments, the Company has a strategy to own solar energy project assets.
−Removed: The Company plans to fund a large portion of its current growth plans in owning solar energy projects using third-party debt and third-party tax equity.
−Removed: The collateral on any third-party debt would be limited to the assets of the specific solar projects.
−Removed: Any capital requirements for the origination or purchase of solar projects not funded by third-party debt and third-party tax equity would be provided by the Company using operating cash, borrowings on its unsecured line of credit, and/or the sale of investments.
+Added: Treasury due to earning of the tax credit, the net amount of capital funded to solar tax equity investments at any point in time is not significant and has a minimal impact on the Company’s liquidity.
+Added: As of December 31, 2024, the Company is committed to fund an additional $55.6 million directly in solar tax equity investments and $36.4 million will be funded by its syndication partners, for a total commitment of $92.0 million.
Liquidity Impact Related to ALLO
1 unchanged sentence
In addition, the Company recorded its remaining non-voting preferred membership units of ALLO at fair value, and accounts for such investment as a separate equity investment.
−Removed: As of December 31, 2023, the outstanding preferred membership interests of ALLO held by the Company was $155.0 million that earns a preferred annual return of 6.25%.
−Removed: Accrued and unpaid preferred returns are converted to additional preferred membership interests each December 31.
−Removed: If the non-voting preferred membership interests are not redeemed on or before April 2024, the preferred annual return is increased from 6.25% to 10.00%.
−Removed: In June 2023, ALLO, the Company, and SDC (a third-party global digital infrastructure investor and member of ALLO) agreed to amend the terms of the ALLO non-voting preferred membership units owned by Nelnet.
−Removed: Such amended terms provide that commencing January 1, 2025, the preferred annual return will increase to 13.5%, commencing July 1, 2025, the return will increase to 15.0%, commencing January 1, 2026, the preferred return will increase to 17.5%, and beginning on January 1, 2027 and on each January 1 of each calendar year thereafter, the annual return will increase by an additional 2.5%.
−Removed: In addition, any preferred return accruing on or after January 1, 2025 is expected to be paid on a quarterly basis in cash rather than through an increase to the outstanding preferred membership interests.
−Removed: 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.
+Added: As of December 31, 2024, the outstanding preferred membership interests of ALLO held by the Company were $225.6 million.
+Added: The accrued preferred return capitalizes to preferred membership interests annually on each December 31.
+Added: On January 1, 2025, the preferred annual return on $169.1 million of preferred membership interests of ALLO increased to 13.50%, commencing July 1, 2025, the return will increase to 15.00%, commencing January 1, 2026, the preferred return will increase to 17.50%, and beginning on January 1, 2027 and on each January 1 of each calendar year thereafter, the annual return will increase by an additional 2.50%.
+Added: During 2024, the Company purchased an additional $53.1 million of preferred membership interests in ALLO, which earn a preferred annual return of 20.00%.
+Added: Including the accrued preferred return of $3.4 million that was capitalized on December 31, 2024, the updated balance of preferred membership interests that earns at 20.00% was $56.5 million as of December 31, 2024.
+Added: If ALLO needs additional capital to support its growth in existing or new markets, the Company has the option to contribute additional capital to maintain its voting equity interest and/or may purchase additional preferred membership interests that include a preferred return.
+Added: In addition to equity contributions, ALLO has issued debt to fund its growth.
+Added: As of December 31, 2024, ALLO has $1.14 billion (par value) of debt outstanding.
+Added: Nelnet continues to work with ALLO and SDC, a third-party global digital infrastructure investor that holds a significant investment in ALLO, to explore various funding and capital options to support ALLO’s growth.
+Added: 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.
As of December 31, 2024, the estimated fair value of the contingent payment is $8.3 million.
−Removed: In June 2023, ALLO closed on an asset-backed securities transaction with an aggregate size over $600 million.
−Removed: The proceeds from this transaction were used to refinance the majority of ALLO's prior debt and fund a portion of its current growth plans.
−Removed: If ALLO needs additional capital to support its growth in existing or new markets, the Company has the option to contribute additional capital to maintain its voting equity interest.
−Removed: Although ALLO has obtained debt financing to fund a large portion of its growth plans, the Company contributed $8.4 million of additional equity to ALLO in the first quarter of 2023.
−Removed: As a result of
−Removed: this equity contribution, the Company’s voting membership interests percentage did not materially change.
−Removed: Based on ALLO's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to ALLO in future periods.
Liquidity Impact Related to Hedging Activities
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Clearing is a process by which a third party, the clearinghouse, steps in between the original counterparties and guarantees the performance of both, by requiring that each post liquid collateral on an initial (initial margin) and mark-to-market (variation margin) basis to cover the clearinghouse’s potential future exposure in the event of default.
−Removed: 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).
−Removed: Through March 15, 2023, the Company had received cash or had a receivable from the clearinghouse related to variation margin equal to the fair value as of March 15, 2023 of the derivatives used to hedge loans earning fixed rate floor income of $183.2 million, which included $19.1 million related to current period settlements.
−Removed: 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.
+Added: Nelnet Bank derivative contracts have protection against counterparty risk provided by International Swaps and Derivatives Association, Inc.
+Added: The agreements require collateral to be exchanged based on the net fair value of derivatives with each counterparty.
+Added: The Company’s exposure related to the Nelnet Bank derivatives is limited to the value of the derivative contracts in a gain position, less any collateral held by us.
+Added: 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
+Added: 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.
However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio or if the Company enters into additional derivatives for which the fair value becomes negative, the Company could be required to make variation margin payments to its third-party clearinghouse and/or collateral payments to it non-centrally cleared counterparties.
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See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative portfolio.
−Removed: Other Debt Facilities
+Added: 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.
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Upon the maturity date of this facility, there can be no assurance that the Company will be able to maintain this line of credit, increase or maintain the amount outstanding under the line, or find alternative funding if necessary.
−Removed: On December 21, 2023, the Company entered into a $10.0 million participation agreement with a third-party, the proceeds of which are collateralized by consumer loans.
−Removed: The third-party participant does not have the right to pledge, transfer, or otherwise dispose of their participation interest in all or any portion of the loans subject to this agreement.
−Removed: As such, the consumer loans subject to this agreement are included on the Company's consolidated balance sheet and the participation interests outstanding have been accounted for by the Company as a secured borrowing.
−Removed: This participation agreement will amortize as the consumer loans subject to the participation pay down.
−Removed: For further discussion of these debt facilities described above, see note 4 of the notes to consolidated financial statements included in this report.
Stock Repurchases
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Shares may be repurchased from time to time on the open market, in private transactions (including with related parties), or otherwise, depending on various factors, including share prices and other potential uses of liquidity.
−Removed: Shares repurchased by the Company during 2023, 2022, and 2021 are shown below.
+Added: Shares repurchased by the Company during 2024 and 2023 are shown below, and include shares repurchased under the Company's stock repurchase program and shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares.
Certain of these repurchases were made pursuant to trading plans adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.
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Year ended December 31, 2023 336,943 28,028 83.18
−Removed: Year ended December 31, 2021 713,274 58,111 81.47
−Removed: (a) The average price of shares repurchased for the year ended December 31, 2023 includes excise taxes.
+Added: (a) The average price of shares repurchased includes excise taxes.
On November 13, 2023, the Company repurchased, in a privately negotiated transaction under the Company’s existing stock repurchase program, a total of 283,112 shares of the Company’s Class A common stock from certain family members of Mr.
The shares were repurchased at a discount to the closing market price of the Company’s Class A common stock as of November 10, 2023, and the transaction was separately approved by the Company’s Board of Directors and its Nominating and Corporate Governance Committee.
−Removed: Included in the shares repurchased during 2021 are a total of 337,717 shares of Class A common stock the Company purchased on August 10, 2021 from various estate planning trusts associated with Shelby J.
−Removed: Butterfield, a significant shareholder of the Company.
−Removed: The shares were purchased at a discount to the closing market price of the Company's Class A common stock as of August 9, 2021 and the transaction was approved by the Company's Board of Directors and its Nominating and Corporate Governance Committee.
−Removed: Immediately prior to the Company's repurchase of such shares, certain of the repurchased shares were shares of the Company's Class B common stock that were converted to shares of Class A common stock.
−Removed: Dividends of $0.26 per share on the Company’s Class A and Class B common stock were paid on March 15, 2023, June 15, 2023, and September 15, 2023, respectively, and a dividend of $0.28 per share was paid on December 15, 2023.
+Added: Dividends of $0.28 per share on the Company’s Class A and Class B common stock were paid on March 15, 2024, June 14, 2024, September 13, 2024, and December 16, 2024.
The Company's Board of Directors declared a first quarter 2025 cash dividend on the Company's Class A and Class B common stock of $0.28 per share.
−Removed: The dividend will be paid on March 15, 2024, to shareholders of record at the close of business on March 1, 2024.
+Added: The dividend will be paid on March 14, 2025, to shareholders of record at the close of business on February 28, 2025.
The Company plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors.
−Removed: CRITICAL ACCOUNTING POLICIES AND ESTIMATES
+Added: 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.
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On an on-going basis, management evaluates its estimates and judgments, particularly as they relate to accounting policies that management believes are most “critical” - that is, they are most important to the portrayal of the Company’s financial condition and results of operations and they require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
−Removed: Management has identified the allowance for loan losses as a critical accounting policy and estimate.
+Added: Management has identified the allowance for loan losses as a critical accounting estimate.
Allowance for Loan Losses
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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.
−Removed: Changes in the Company’s assumptions affect “provision (negative provision) for loan losses” on the Company’s consolidated statements of income and the “allowance
−Removed: for loan losses” contained within “loans and accrued interest receivable, net” on the Company’s consolidated balance sheets.
+Added: 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.
For additional information regarding the Company’s allowance for loan losses, see notes 2 and 3 of the notes to consolidated financial statements included in this report.
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The models consider factors such as historical trends in credit losses, recent portfolio performance, and forward-looking macroeconomic conditions.
−Removed: The models vary by portfolio type including FFELP, private education, consumer, and other loans.
+Added: The models vary by portfolio type including FFELP, private education, and consumer and other loans.
If management does not believe the models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding qualitative factors including economic uncertainty, observable changes in portfolio performance, and other relevant factors.
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This evaluation is inherently subjective because it requires numerous estimates made by management.
−Removed: These estimates are subjective in nature and involve uncertainties and matters of significant judgement.
+Added: 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.
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RECENT ACCOUNTING PRONOUNCEMENTS
−Removed: In November 2023, the FASB issued accounting guidance which improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit (referred to as the “significant expense principle”).
−Removed: This guidance will be effective for the Company for the year ending December 31, 2024 annual financial statements, with early adoption permitted.
−Removed: The guidance will be applied retrospectively for all prior periods presented in the financial statements.
−Removed: The Company intends to adopt the standard when it becomes effective for the year ending December 31, 2024 annual financial statements.
−Removed: Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.
In December 2023, the FASB issued accounting guidance to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.
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Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.
+Added: In November 2024, the FASB issued accounting guidance to increase disclosure requirements primarily through enhanced disclosures about types of expenses (including employee compensation, depreciation, and amortization) in commonly presented expense captions.
+Added: This guidance will be effective for the Company for fiscal years beginning after December 15, 2026.
+Added: The guidance is required to be applied prospectively with the option for retrospective application.
+Added: Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.
There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s consolidated financial statements and related disclosures.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.