NELNET INC

Previous wording

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three months ended March 31, 2025 and 2024. All dollars are in thousands, except per share amounts, unless otherwise noted.)

Current wording

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three and six months ended June 30, 2025 and 2024. All dollars are in thousands, except per share amounts, unless otherwise noted.)

Previous wording

The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the 2024 Annual Report and include such risks and uncertainties as:

Current wording

The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” sections of the 2024 Annual Report and this report and include such risks and uncertainties as:

Previous wording

•risks related to the expected benefits to the Company from its continuing investment in ALLO, and risks related to solar tax equity investments, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;

Current wording

•risks related to the Company's solar tax equity investments and solar construction business, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities and risks from the impact of the enactment of the One Big Beautiful Bill that accelerates the expiration and phase out of solar energy credits;

Previous wording

•risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom) including venture capital and real estate investments, reinsurance, acquisitions, solar construction, and other activities (including risks associated with errors that occasionally occur in converting loan servicing portfolios to a new servicing platform), including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;

Current wording

•risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom) including venture capital and real estate investments, reinsurance, acquisitions, and other activities (including risks associated with errors that occasionally occur in converting loan servicing portfolios to a new servicing platform), including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;

Previous wording

The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. Management has structured all of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting in the consolidated financial statements. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the Company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.

Current wording

The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. Management has structured all of the Company’s derivative transactions with the intent that each is economically effective; however, the majority of the Company’s derivative instruments do not qualify for hedge accounting in the consolidated financial statements. As a result, the change in fair value for the derivative instruments that do not qualify for hedge accounting is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the Company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.

Previous wording

The Company has both a voting and preferred membership interest investment in ALLO. In April 2025, the Company entered into an agreement pursuant to which ALLO will redeem certain of its membership interests. The Company expects ALLO to redeem all of the Company's outstanding preferred membership interests, including the accrued preferred return earned through the closing date, and a portion of the Company's voting membership interest. The transaction is expected to close in late May 2025. The Company expects to receive cash proceeds of approximately $410 million from ALLO for these redemptions and recognize a pre-tax gain of approximately $175 million. See note 16 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information about this transaction.

Current wording

Nelnet had both voting and preferred membership interest investments in ALLO. On June 4, 2025, Nelnet redeemed a portion of its voting membership interests in ALLO and all its outstanding preferred membership interests, including the preferred return accrued on such membership interests through June 3, 2025. The Company received cash proceeds of $410.9 million from ALLO and recognized a pre-tax gain of $175.0 million as a result of this transaction. See note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information about this transaction.

Previous wording

Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities ("Corporate"). Corporate also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions, certain investment activities including its investment in ALLO, early-stage and emerging growth companies (venture capital investments), and solar tax equity investments, the operating results of the Company's solar engineering, procurement, and construction business, and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services. In addition, Corporate includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.

Current wording

Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities ("Corporate"). Corporate also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions, certain investment activities including its investment in ALLO, early-stage and emerging growth companies (venture capital investments), solar tax equity investments, the operating results of the Company's solar engineering, procurement, and construction business, and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services. In addition, Corporate includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.

Previous wording

The information below presents the operating results (net income (loss) before taxes) for each of the Company's reportable and certain other operating segments reconciled to the consolidated financial statements for the three months ended March 31, 2025 and 2024. See "Results of Operations" for additional detail regarding each reportable operating segment, the NFS operating segments, and Corporate and Other Activities under this Item 2.

Current wording

The information below presents the operating results (net income (loss) before taxes) for each of the Company's reportable and certain other operating segments reconciled to the consolidated financial statements for the three and six months ended June 30, 2025 and 2024. See "Results of Operations" for additional detail regarding each reportable operating segment, the NFS operating segments, and Corporate and Other Activities under this Item 2.

Previous wording

An analysis of the Company's consolidated operating results for the three months ended March 31, 2025 compared with the same period in 2024 is provided below.

Current wording

An analysis of the Company's consolidated operating results for the three and six months ended June 30, 2025 compared with the same periods in 2024 is provided below.

Previous wording

As of March 31, 2025, the AGM operating segment had a $9.3 billion loan portfolio, consisting primarily of federally insured loans. For a summary of the Company’s loan portfolio as of March 31, 2025 and December 31, 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Current wording

As of June 30, 2025, the AGM operating segment had an $8.9 billion loan portfolio, consisting primarily of federally insured loans. For a summary of the Company’s loan portfolio as of June 30, 2025 and December 31, 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Previous wording

The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "other investments and notes receivable, net" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2025, the Company’s ownership correlates to approximately $1.82 billion of loans included in these securitizations. The loans held in these securitizations are not included in the above table. Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment interest" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.

Current wording

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 June 30, 2025, the Company’s ownership correlates to approximately $1.70 billion of loans included in these securitizations. The loans held in these securitizations are not included in the above table. Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment interest" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.

Previous wording

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 March 31, 2025 and December 31, 2024; and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three months ended March 31, 2025 and 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Current wording

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 June 30, 2025 and December 31, 2024; and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three and six months ended June 30, 2025 and 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Previous wording

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 3, “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. 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. This also results in student loan spread decreasing in the short term in a decreasing interest rate environment.

Current wording

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 3, “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. In a decreasing interest rate environment, student loan spread on FFELP loans decreases 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. This also results in student loan spread increasing in the short term in an increasing interest rate environment.

Previous wording

Variable loan spread was higher during the three months ended March 31, 2025 compared with the same period in 2024 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. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM's federally insured student loans earning fixed rate floor income.

Current wording

Variable loan spread was higher during the three and six months ended June 30, 2025 compared with the same periods in 2024 due to an increase in loans funded by the Company with operating cash (versus funded with debt). As of June 30, 2025, AGM had $576.1 million (par value) of unencumbered federally insured, private education, consumer, and other loans (as compared to $253.5 million, $194.1 million, and $77.0 million as of December 31, 2024, June 30, 2024, and December 31, 2023, respectively). 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. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM's federally insured student loans earning fixed rate floor income.

Previous wording

As of March 31, 2025, Nelnet Bank had a $761.6 million loan portfolio. For a summary of the Company’s loan portfolio as of March 31, 2025 and December 31, 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Current wording

As of June 30, 2025, Nelnet Bank had an $827.6 million loan portfolio. For a summary of the Company’s loan portfolio as of June 30, 2025 and December 31, 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Previous wording

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 March 31, 2025 and December 31, 2024; and the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three months ended March 31, 2025 and 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Current wording

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 June 30, 2025 and December 31, 2024; and the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three and six months ended June 30, 2025 and 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Previous wording

As of March 31, 2025, Nelnet Bank had $1.38 billion of deposits, which included $68.6 million from Nelnet, Inc. (parent company) and its subsidiaries (intercompany), and thus have been eliminated for consolidated financial reporting purposes. For a summary of deposits as of March 31, 2025 and December 31, 2024, see note 9 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Current wording

As of June 30, 2025, Nelnet Bank had $1.53 billion of deposits, which included $149.9 million from Nelnet, Inc. (parent company) and its subsidiaries (intercompany), and thus have been eliminated for consolidated financial reporting purposes. For a summary of deposits as of June 30, 2025 and December 31, 2024, see note 10 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Previous wording

(a) The Company provides investment advisory services through Whitetail Rock Capital Management, LLC (WRCM), the Company's SEC-registered investment advisor subsidiary, under various arrangements. WRCM earned management and performance fees of $1.5 million for each of the three months ended March 31, 2025 and 2024. Fees earned by WRCM are included in "other income, net" in the table above.

Current wording

(a) The Company provides investment advisory services through Whitetail Rock Capital Management, LLC (WRCM), the Company's SEC-registered investment advisor subsidiary, under various arrangements. WRCM earned management and performance fees of $1.5 million for each of the three months ended June 30, 2025 and 2024, respectively, and $3.0 million for each of the six months ended June 30, 2025 and 2024, respectively. Fees earned by WRCM are included in "other income, net" in the table above.

Previous wording

(c) Represents the operating results of the Company’s real estate investments and the administrative costs to manage this portfolio. The Company recognized net losses from its real estate investments of $1.6 million and $1.8 million for the three months ended March 31, 2025 and 2024, respectively, which are included in "other income, net" in the table above. The net losses recognized relates primarily to the Company's proportionate share of certain real estate investments accounted for under the equity method.

Current wording

(c) Represents the operating results of the Company’s real estate investments and the administrative costs to manage this portfolio. Included in "other income, net" in the table above are primarily the net losses recognized related to the Company's proportionate share of certain real estate investments accounted for under the equity method. Operating results for the three and six months ended June 30, 2025 also includes a realized gain of $1.6 million as a result of the sale of a certain real estate investment during the second quarter.

Previous wording

(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. The decrease in interest income and interest expense in 2025 compared with 2024 was primarily due to a decrease in the average balance of investments and debt outstanding, respectively, and a decrease in interest rates. As of December 31, 2024, the majority of debt used to finance such investments had been repaid. See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate and Market Risk - Investments," which provides additional detail on NFS's investment debt securities.

Current wording

(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. The decrease in investment interest income and interest expense in 2025 compared with 2024 was primarily due to a decrease in the average balance of investment debt securities and debt outstanding, respectively, and a decrease in interest rates. As of December 31, 2024, the majority of debt used to finance such investments had been repaid. See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate and Market Risk - Investments," which provides additional detail on NFS's investment debt securities.

Previous wording

(a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services. The amount allocated to operating segments is reflected as “intersegment expenses, net” in the table above. Also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.

Current wording

(a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services. The amount allocated to operating segments is reflected as “intersegment expenses, net” in the table above. Also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs. During the second quarter 2025, the Company recognized a non-cash impairment charge of $3.3 million related to operating lease assets as a result of the Company consolidating office space.

Previous wording

(b) Includes operating results of the Company's tax equity investments in renewable energy solar partnerships. The Company accounts for these investments under the HLBV method of accounting, which commonly results in accelerated losses in the initial years of the investment. In the periods presented, these HLBV net losses are offset by gains recognized from sales of certain investments at the end of the contractual agreement (typically five years). These losses are also offset by revenue earned by the Company related to management, consulting, and performance fees provided on tax equity investments made by third parties. Due to the recognition pattern

Current wording

(b) Includes operating results of the Company's tax equity investments in renewable energy solar partnerships. The Company accounts for these investments using the HLBV method of accounting, which commonly results in accelerated losses in the initial years of the investment. In the periods presented, these HLBV net losses are offset by gains recognized from sales of certain investments at the end of the contractual agreement (typically five years). These losses are also offset by revenue earned by the Company related to management, consulting, and performance fees provided on tax equity investments syndicated to third parties. Due to the recognition pattern (accelerated losses in initial years and gains upon sale at the end of the contractual agreement), these investments may create volatility in earnings. For additional information on the results of this operating segment, see note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Previous wording

(c) Nelnet Renewable Energy (NRE) is the Company’s solar construction business that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities. The Company entered this business from its acquisition of 80% of GRNE Solar in June 2022. Since the acquisition of GRNE Solar, it has incurred low and, in some cases, negative margins on certain legacy projects. The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024. Uncertain economic conditions have impacted the costs to complete existing construction contracts and new construction projects being initiated which may continue to negatively impact margins and revenue, respectively, in future periods.

Current wording

Since the acquisition of GRNE Solar, NRE has incurred low and, in many cases, negative margins on legacy projects. The Company has a handful of remaining legacy construction contracts it is obligated to complete, down from over 30 at the beginning of 2024. During the second quarter 2025, NRE recognized $12.9 million in contract loss reserves that represents NRE's estimate of costs it will incur to complete the remaining legacy contracts. The loss reserve expense is included in "costs to provide solar construction services" in the table above. In addition, uncertain economic conditions and legislation activity have impacted new construction projects being initiated which has adversely impacted and will continue to adversely impact revenue. See Part II, Item 1A "Risk Factors" of this report for additional information on the adverse impacts on NRE's business related to the enactment of the One Big Beautiful Bill.

Previous wording

(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. During the first quarter of 2025, the Company recognized income, net of losses, of $2.1 million from equity method investees, $1.7 million related to the periodic adjustment of certain fund investments to their respective fair value, and $0.6 million on certain measurement alternative investments as a result of observable price changes.

Current wording

(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. These investments may create volatility in earnings from recognizing results of certain equity method investees, periodic adjustment of certain fund investments to their respective fair value, and, when applicable, observable price changes on certain measurement alternative investments.

Previous wording

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.

Current wording

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. On July 4, 2025, the One Big Beautiful Bill (the "Bill") was enacted into law. Among other substantial changes to the tax code, the Bill makes numerous changes to the federal student loan program. Graduate students and parents of undergraduates will be subject to new caps on federal lending. Overall, we expect these changes will boost privatization of student lending and may create opportunities for the Company to expand its private education loan originations and acquisitions.

Previous wording

The Company has historically generated positive cash flow from operations. During the three months ended March 31, 2025 and 2024, the Company generated $91.2 million and $211.6 million, respectively, in cash from operating activities. The decrease in 2025 compared with 2024 was due to:

Current wording

The Company has historically generated positive cash flow from operations. During the six months ended June 30, 2025 and 2024, the Company generated $172.9 million and $345.3 million, respectively, in cash from operating activities. The decrease in 2025 compared with 2024 was due to:

Previous wording

•Adjustments to net income for the non-cash change in gain on investments, loan discount and deferred lender fees accretion, and depreciation and amortization; and

Current wording

•Adjustments to net income for certain non-cash items, including the gain recognized on the partial redemption of the Company's ALLO investment, deferred income tax benefit, loan discount and deferred lender fees accretion, and gain/loss on investments; and

Previous wording

•The impact of changes to accrued interest receivable, accounts receivable, and other assets during the three months ended March 31, 2025 compared with the same period in 2024.

Current wording

•The impact of changes to accrued interest receivable during the six months ended June 30, 2025 compared with the same period in 2024.

Previous wording

•Adjustments to net income for the non-cash change in derivative market value adjustments, deferred income tax expense, and provision for loan losses; and

Current wording

•Adjustments to net income for the non-cash change in derivative market value adjustments and provision for loan losses; and

Previous wording

•The impact of changes to other liabilities during the three months ended March 31, 2025 compared with the same period in 2024.

Current wording

•The impact of changes to other liabilities during the six months ended June 30, 2025 compared with the same period in 2024.

Previous wording

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). The primary items included in financing activities are the payments on bonds and notes payable, the change in deposits at Nelnet Bank used to fund loans and investment activity at Nelnet Bank, and the change in due to customers. Cash provided by investing activities and used in financing activities for the three months ended March 31, 2025 was $136.4 million and $326.4 million, respectively. Cash provided by investing activities and used in financing activities for the three months ended March 31, 2024 was $1.09 billion and $1.38 billion, respectively. Investing and financing activities are further addressed in the discussion that follows.

Current wording

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 and sale of other investments. During June 2025, the Company received cash proceeds of $410.9 million from the redemption of its membership interests in ALLO. The proceeds from the ALLO redemption are included in investing activities on the statement of cash flows. The primary items included in financing activities are the payments on bonds and notes payable, the change in deposits at Nelnet Bank used to fund loans and investment activity at Nelnet Bank, and the change in due to customers. Cash provided by investing activities and used in financing activities for the six months ended June 30, 2025 was $709.8 million and $1.01 billion, respectively. Cash provided by investing activities and used in financing activities for the six months ended June 30, 2024 was $1.82 billion and $2.25 billion, respectively. Investing and financing activities are further addressed in the discussion that follows.

Previous wording

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. 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. 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.

Current wording

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. Cash generated from student loans funded in asset-backed securitizations provides the source of liquidity to satisfy all obligations related to the outstanding bonds and notes issued in such securitizations. 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 that AGM earns from these transactions, AGM has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.

Previous wording

As of March 31, 2025, 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 $1.02 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 reach a certain threshold.

Current wording

As of June 30, 2025, 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 reach a certain threshold.

Previous wording

The forecasted cash flow presented below includes loans funded in asset-backed securitizations as of March 31, 2025, the majority of which are federally insured student loans. As of March 31, 2025, AGM had $8.0 billion of loans included in asset-backed securitizations, which represented 86.1% of its total loan portfolio. 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 March 31, 2025, and loans owned by Nelnet Bank.

Current wording

The forecasted cash flow presented below includes loans funded in asset-backed securitizations as of June 30, 2025, the majority of which are federally insured student loans. As of June 30, 2025, AGM had $7.9 billion of loans included in asset-backed securitizations, which represented 88.7% of its total loan portfolio. 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 federally insured, 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 June 30, 2025, and loans owned by Nelnet Bank.

Previous wording

The forecasted future undiscounted cash flows of approximately $1.02 billion include approximately $0.74 billion (as of March 31, 2025) of overcollateralization included in the asset-backed securitizations. 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 $0.28 billion, or approximately $0.21 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 March 31, 2025 balance.

Current wording

The forecasted future undiscounted cash flows of approximately $1.07 billion include approximately $0.74 billion (as of June 30, 2025) of overcollateralization included in the asset-backed securitizations. 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 $0.33 billion, or approximately $0.25 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 June 30, 2025 balance.

Previous wording

Prepayments: The primary variable in establishing a life of loan estimate is the level and timing of prepayments. Prepayment rates equal the amount of loans that prepay annually as a percentage of the beginning of period balance, net of scheduled principal payments. 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. Should any of these factors change, management may revise its assumptions, which in turn would impact the projected future cash flow. The Company’s cash flow forecast above assumes prepayment rates of 6% for both federally insured consolidation and Stafford loans. Prepayment rates for private education loans range from 11% to 20%.

Current wording

Prepayments: The primary variables in establishing a life of loan estimate are the level and timing of prepayments. Prepayment rates equal the amount of loans that prepay annually as a percentage of the beginning-of-period balance, net of scheduled principal payments. 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. Should any of these factors change, management may revise its assumptions, which in turn would impact the projected future cash flow. The Company’s cash flow forecast above assumes prepayment rates of 6% for both federally insured consolidation and Stafford loans. Prepayment rates for private education loans range from 11% to 20%.

Previous wording

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 $0.74 billion (as of March 31, 2025); however, the Company would not receive the $0.28 billion ($0.21 billion after tax) of estimated future earnings from the portfolio.

Current wording

If the entire AGM student loan portfolio was prepaid, the Company would receive the full amount of overcollateralization included in the asset-backed securitizations of approximately $0.74 billion (as of June 30, 2025); however, the Company would not receive the $0.33 billion ($0.25 billion after tax) of estimated future earnings from the portfolio.

Previous wording

There were no asset-backed securitization transactions completed during the three months ended March 31, 2025.

Current wording

There were no asset-backed securitization transactions completed during the six months ended June 30, 2025.

Previous wording

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. As of March 31, 2025, $597.2 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. 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. 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.

Current wording

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. As of June 30, 2025, $583.2 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. 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. 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.

Previous wording

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. 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 March 31, 2025, the Company's ownership correlates to approximately $1.82 billion of loans included in these securitizations. 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.

Current wording

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. 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 June 30, 2025, the Company's ownership correlates to approximately $1.70 billion of loans included in these securitizations. 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.