What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 325 added, 248 removed, 546 unchanged (51% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three months ended March 31, 2022 and 2021.

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three and six months ended June 30, 2022 and 2021.

All dollars are in thousands, except per share amounts, unless otherwise noted.)

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These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the 2021 Annual Report, the "Risk Factors" section of this report, and elsewhere in this report, and include such risks and uncertainties as:

• risks and uncertainties related to the severity, magnitude, and duration of the coronavirus disease 2019 (“COVID-19”) pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on business, educational, individual, or travel activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;

• risks and uncertainties related to the severity, magnitude, and duration of the coronavirus disease 2019 (“COVID-19”) pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on various activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;

• risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and any future servicing contracts with the U.S.

Department of Education (the "Department"), which current contracts accounted for 29 percent of the Company's revenue in 2021, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the Company may not be successful in obtaining any of such potential new contracts, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), private education, and consumer loans;

• loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, and consumer loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, and consumer loans, and risks from changes in levels of loan prepayment or default rates;

• financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay repayment of the associated bonds, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;

• risks from changes in the terms of education loans and in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets, such as changes resulting from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and the expected decline over time in FFELP loan interest income due to the discontinuation of new FFELP loan originations in 2010 and government initiatives or proposals to consolidate existing FFELP loans to Federal Direct Loan Program loans, otherwise encourage or allow

FFELP loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs;

• loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans, and risks from changes in levels of loan prepayment or default rates;

• financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from recent market volatility resulting from rising interest rates and other economic pressures and from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay

repayment of the associated bonds, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;

• risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to a disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;

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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 early-stage and emerging growth companies, real estate, and renewable energy (solar).

The Company is also actively expanding its private education and consumer loan portfolios, and in November 2020 launched Nelnet Bank.

The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank.

GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments

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A reconciliation of the Company's GAAP net income to 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.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

GAAP net income attributable to Nelnet, Inc.

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Tax effect (a)

9,696 (388) 44,672 8,927

Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)

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GAAP net income attributable to Nelnet, Inc.

$ 2.26 2.16 7.18 5.36

Realized and unrealized derivative market value adjustments

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Tax effect (a)

0.25 — 1.17 0.23

Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)

$ 1.44 2.20 3.44 4.63

(a) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.

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Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured and other corporate related debt transactions.

The information below provides the operating results (net income before taxes) for each reportable operating segment and Corporate and Other Activities for the three months ended March 31, 2022 and 2021.

The information below provides the operating results (income (loss) before income taxes) for each reportable operating segment and Corporate and Other Activities for the three and six months ended June 30, 2022 and 2021.

See "Results of Operations" for each reportable operating segment under this Item 2 for additional detail.

Three months ended March 31,

2022 2021 Certain Items Impacting Comparability (All dollar amounts below are pre-tax)

Three months ended June 30,

2022 2021 Certain Items Impacting Comparability

(All dollar amounts below are pre-tax)

NDS $ 13,488 15,513

NBS 14,687 17,232

AGM 213,429 141,609 • A net gain of $145.7 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first quarter of 2022 as compared to a net gain of $38.8 million for the same period in 2021

• An increase of $6.5 million in investment interest income in 2022 as compared to 2021 primarily from beneficial interest investments

AGM 99,348 78,916 • A net gain of $40.4 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the second quarter of 2022 as compared to a net loss of $1.6 million for the same period in 2021

• An increase of $8.2 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021

• A decrease of $10.1 million in net interest income due to the decrease in the average balance of FFELP loans in the second quarter of 2022 as compared to 2021

• The recognition of an $8.8 million provision for loan losses in the second quarter of 2022, as compared to $0.3 million for the same period in 2021

• The recognition of a gain of $15.3 million on the sale of loans during the second quarter of 2021

Nelnet Bank 474 (268)

Corporate (19,609) (2,142) • The recognition of a net loss of $16.9 million for the second quarter of 2022 related to the Company’s investment in ALLO, as compared to net income of $1.1 million for the same period in 2021.

During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of an error that resulted in a $14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to income.

• The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)

• The recognition of a $15.2 million gain in the second quarter of 2022 as a result of the revaluation of the Company's previously held 50 percent ownership interests in NGWeb Solutions, LLC ("NextGen") (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests

• Investment income of $3.1 million in the second quarter of 2022 as compared to $14.3 million for the same period in 2021.

During the second quarter of 2021, the Company recognized realized and unrealized gains from certain real estate and venture capital investments, including realized gains of $6.0 million from the sale of certain real estate investments.

Income before income taxes 108,387 109,250

Income tax expense (25,483) (26,237)

Net loss attributable to noncontrolling interests 2,225 854

Net income $ 85,129 83,867

Six months ended June 30,

2022 2021 Certain Items Impacting Comparability

(All dollar amounts below are pre-tax)

NDS $ 25,580 31,596

NBS 47,800 48,206

AGM 312,777 220,524 • A net gain of $186.1 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first half of 2022 as compared to a net gain of $37.2 million for the same period in 2021

• A decrease of $23.8 million in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid

• The recognition of $17.5 million negative provision for loan losses on AGM’s loan portfolio in the first quarter of 2021, as compared to a negative provision of $0.9 million for the same period in 2022

• A decrease of $8.2 million in net interest income due to the decrease in the average balance of loans and the decrease in fixed rate floor income in the first quarter of 2022 as compared to 2021

• The recognition of $3.0 million on the sale of loans during the first quarter of 2022

• The recognition of provision for loan losses of $8.0 million in the first half of 2022 as compared to negative provision of $17.2 million for the same period in 2021

• The recognition of a gain of $15.3 million on the sale of loans during the second quarter of 2021

• An increase of $8.4 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021

• A decrease of $18.4 million in net interest income due to the decrease in the average balance of FFELP loans in the first half of 2022 as compared to 2021

• An increase of $6.3 million in investment interest income in 2022 as compared to 2021 primarily related to AGM's investments in private education loan beneficial interests obtained throughout 2021 as securitizations were being completed by the joint venture to purchase and securitize loans sold by Wells Fargo, and an increase of $4.1 million in revenue recognized during the first half of 2022 from serving as administrator and sponsor for such securitizations

Nelnet Bank 1,434 (1,519)

Corporate (19,013) (29,650) • The recognition of a net loss of $13.1 million for the first quarter of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $22.2 million for the same period in 2021

Net income before taxes 240,583 157,765

Corporate (38,623) (31,792) • The recognition of a net loss of $30.1 million for the first half of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $21.1 million for the same period in 2021

• The recognition of a $15.2 million gain in the second quarter of 2022 as a result of the revaluation of the Company's previously held 50 percent ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests

• Investment income of $11.9 million for the first half of 2022 as compared to $22.8 million for the same period in 2021.

During the first half of 2021, the Company recognized realized and unrealized gains from certain real estate and venture capital investments, including realized gains of $11.1 million from the sale of certain real estate investments.

Income before income taxes 348,969 267,015

Income tax expense (81,180) (61,098)

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In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan before the Department completes implementation of these changes, which the Department estimates to be no sooner than January 1, 2023.

The Company currently believes these announced changes could significantly increase FFEL Program loan prepayments.

In addition, on July 6, 2022, the Department announced the issuance of proposed regulations that would expand major student loan discharge programs under the Higher Education Act through changes related to borrower defense to repayment where there is a dispute with the higher education institution, the Public Service Loan Forgiveness program under the Federal Direct Loan Program, the interest capitalization rules, and closed school discharges, as well as other matters, which changes may also result in an increase in consolidations of FFELP loans into Federal Direct Loan Program loans.

The announced changes have increased, and the Company currently believes these announced changes may continue to increase, FFEL Program loan prepayments.

In addition, if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could also increase prepayments.

A significant increase in FFEL Program loan prepayments could have a materially adverse impact in future periods on the Company’s net interest income in its AGM operating segment, FFELP servicing revenue in the Company’s LSS operating segment, investment advisory services revenue earned by the Company’s SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on the Company’s FFELP loan asset-backed securities investments.

In addition, student loan forgiveness under the Federal Direct Loan Program as a result of the changes described in the announcements could have a materially adverse impact on future revenue earned by the LSS operating segment under the Company’s government servicing contracts, including software services revenue earned by the Company in providing remote hosted services to other government servicers.

In addition, student loan forgiveness or discharge under the Federal Direct Loan Program as a result of the changes described in the announcements and proposals could have a materially adverse impact on future revenue earned by the LSS operating segment under the Company’s government servicing contracts, including software services revenue earned by the Company in providing remote hosted services to other government servicers.

See Part II, Item 1A, “Risk Factors” in this report for additional information.

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CONSOLIDATED RESULTS OF OPERATIONS

An analysis of the Company's consolidated operating results for the three months ended March 31, 2022 compared to the same period in 2021 is provided below.

An analysis of the Company's consolidated operating results for the three and six months ended June 30, 2022 compared to the same periods in 2021 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.

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Since the Company monitors and assesses its operations and results based on these segments, the discussion following the consolidated results of operations is presented on a reportable segment basis.

Three months ended

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021 Additional information

Loan interest $ 111,377 124,117 Decrease was due primarily to a decrease in the average balance of loans and in gross fixed rate floor income, partially offset by an increase in the gross yield earned on loans in 2022 as compared to 2021.

Investment interest 13,819 4,986 Includes income from unrestricted interest-earning deposits and investments and funds in asset-backed securitizations.

Increase was due to interest income earned on loan beneficial interest investments and an increase in interest rates in 2022 as compared to 2021.

Loan interest $ 134,706 122,005 246,083 246,123 Increase for the three months ended June 30, 2022 compared to the same period in 2021 was due primarily 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.

For the six months ended June 30, 2022 compared to the same period in 2021, the decrease in the average balance of loans and in gross fixed rate floor income offset the increase in the gross yield earned on loans.

Investment interest 16,881 11,578 30,700 16,563 Includes income from interest-earning deposits and investments and funds in asset-backed securitizations.

Increase was due to an increase in interest earning investments and an increase in interest rates in 2022 as compared to 2021.

Total interest income 151,587 133,583 276,783 262,686

Interest expense 48,079 27,773 During the first quarter of 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.

Interest expense 73,642 49,991 121,721 77,764 Interest expense increased in 2022 as compared to 2021 due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

In addition, during the first quarter of 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.

The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013.

Excluding this reduction, interest expense decreased in 2022 as compared to 2021.

This decrease was due to a decrease in the average balance of debt outstanding, partially offset by an increase in cost of funds.

Net interest income 77,945 83,592 155,062 184,922

Less negative provision for loan losses (435) (17,048) The Company recorded a negative provision for loan losses for its federally insured loan portfolio for the three months ended March 31, 2022 due to the amortization of the portfolio and an increase in expected prepayments as a result of an initiative offered by the Department for FFELP borrowers to consolidate their loans into Federal Direct Loan Program loans with the Department by October 31, 2022 to qualify for loan forgiveness under the Public Service Loan Forgiveness program.

This negative provision was partially offset by the Company recording a provision for loan losses for loans acquired and originated during the period.

The Company recorded a negative provision for loan losses for the three months ended March 31, 2021 due to management's estimate of certain improved economic conditions as of March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020.

The negative provision recorded during the first quarter of 2021 was partially offset by the Company recording a provision expense for loans originated and acquired during the period as well as recording additional provision expense for its private education loan portfolio as a result of an increase of loans in forbearance.

Less provision (negative provision) for loan losses 9,409 374 8,974 (16,674) Represents the current period provision (negative provision) to reflect the lifetime expected credit losses related to the Company's loan portfolio.

See note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report for the activity in the Company's allowance for loan losses.

Net interest income after provision for loan losses 68,536 83,218 146,088 201,596

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Other 12,647 22,921 22,524 18,317 See table below for the components of "other."

Gain on sale of loans 2,989 — On January 26, 2022, the Company sold $18.1 million (par value) of consumer loans to an unrelated third party and recognized a gain of $3.0 million.

Gain on sale of loans — 15,271 2,989 15,271 The Company sold $18.1 million (par value) and $77.4 million (par value) of consumer loans in January 2022 and May 2021, respectively, and recognized gains of $3.0 million and $15.3 million, respectively.

Impairment expense and provision for beneficial interests, net (6,284) (500) (6,284) 1,936 During the second quarter of 2022, the Company recorded impairment expense related primarily to a venture capital investment and certain real estate leases.

Derivative settlements, net 4,623 (5,374) 1,814 (9,678) The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility.

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The majority of the derivative market value adjustments related to the changes in fair value of the Company's floor income interest rate swaps.

An increase in the forward yield curve during the three months ended March 31, 2022 and 2021 resulted in an increase in the fair value of such swaps.

Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.

Total other income/expense 267,291 219,499 671,736 458,611

Cost of services:

Cost to provide education technology, services, and payment processing services 30,852 21,676 66,397 48,728 Represents primarily direct costs to provide payment processing and instructional services in the ETS&PP operating segment.

1 unchanged sentence

See ETS&PP operating segment - results of operations.

Total cost of services 35,545 27,052

Operating expenses:

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Depreciation and amortization 18,250 20,236 35,206 40,419 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.

Amortization of intangible assets for the three months ended March 31, 2022 and 2021 was $2.5 million and $8.4 million, respectively.

The decrease in the amortization of intangibles during 2022 as compared to 2021 was due to the majority of intangible assets recorded from the acquisition of Great Lakes in February 2018 becoming fully amortized as of June 30, 2021.

Amortization of intangible assets for the three months ended June 30, 2022 and 2021 was $2.9 million and $8.3 million, respectively, and for the six months ended June 30 2022 and 2021 was $5.3 million and $16.6 million, respectively.

The decrease in the amortization of intangibles during 2022 as compared to 2021 was due to the majority of intangible assets recorded from the acquisition of Great Lakes Educational Loan Services, Inc.

("Great Lakes") in February 2018 becoming fully amortized as of June 30, 2021.

Other expenses 36,940 32,587 76,439 69,286 Other expenses includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs.

Increase was due to (i) an increase in expenses in the LSS operating segment due to costs associated with Nelnet Renewable Energy activities and technology costs associated with the growth of borrowers under the government servicing contracts;

and (ii) an increase in expenses in the ETS&PP operating segment due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies.

Increase was due to (i) an increase in expenses in the LSS operating segment due to growth of borrowers under the government servicing contracts;

and (ii) an increase in expenses in the ETS&PP operating segment 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 subsided in 2021 due to the COVID pandemic.

Total operating expenses 196,588 171,791 402,458 344,464

Income before income taxes 108,387 109,250 348,969 267,015

Income tax expense 55,697 34,861 The effective tax rate was 23% and 22% for the three months ended March 31, 2022 and 2021, respectively.

Income tax expense 25,483 26,237 81,180 61,098 The effective tax rate was 23.0% and 23.8% for the three months ended June 30, 2022 and 2021, respectively, and 23.0% and 22.8% for the six months ended June 30, 2022 and 2021, respectively.

The Company currently expects its effective tax rate for 2022 will range between 22 and 24 percent.

Net income 82,904 83,013 267,789 205,917

Net loss attributable to noncontrolling interests 1,761 694 Amounts for noncontrolling interests reflect the net income/loss attributable to the holders of minority membership interests in WRCM and multiple solar entities.

Net loss attributable to noncontrolling interests 2,225 854 3,987 1,548 Amounts for noncontrolling interests primarily reflect the net income/loss attributable to the holders of minority membership interests in WRCM and multiple solar entities.

Net income attributable to Nelnet, Inc.

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The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Income/gains from investments, net (a) $ 18,127 15,591 29,983 24,089

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ALLO preferred return (c) 2,140 2,020 4,257 4,342

Investment advisory services (d) 1,282 2,697

Negative provision for beneficial interests investment (e) — 2,436

Administration/sponsor fee income (d) 2,012 — 4,134 —

Investment advisory services (e) 1,482 1,145 2,764 3,842

Loss from ALLO voting membership interest investment (f) (16,941) 1,094 (30,071) (21,125)

2 unchanged sentences

Other income $ 12,647 22,921 22,524 18,317

(a) During the three months ended March 31, 2022, the Company recognized (pre-tax) realized and unrealized gains from certain real estate and venture capital investments of $4.4 million and $5.3 million, respectively.

In addition, during 2022 the Company recognized income of $1.9 million from its investment in the joint venture that purchased the former Wells Fargo private education loan portfolio.

During the three months ended March 31, 2021, the Company recognized (pre-tax) realized and unrealized gains from certain real estate and venture capital investments of $5.9 million and $2.5 million , respectively.

(a) During the three months ended June 30, 2022, the Company recognized a $15.2 million (pre-tax) gain as a result of the revaluation of its previously held 50 percent ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests in NextGen on April 30, 2022.

In addition, the Company recognized net income/gains from its real estate and venture capital investment portfolios of $5.4 million and $14.2 million during the three months ended June 30, 2022 and 2021, respectively, and $17.0 million and $22.6 million during the six months ended June 30, 2022 and 2021, respectively.

The majority of these gains were from the sale of investments, and thus are not recurring.

The remaining amount of income/gains from investments recognized by the Company and included in the table above relate to gains/losses from sales of debt and equity securities and the remeasurement of certain equity securities measured at fair value.

(b) Represents borrower late fees earned by the AGM operating segment.

The increase in borrower late fees for the three months ended March 31, 2022 as compared to the same period in 2021 was due to the Company suspending substantially all borrower late fees effective March 13, 2020 to provide borrowers relief as a result of the COVID-19 pandemic.

The increase in borrower late fees for the three and six months ended June 30, 2022 as compared to the same periods in 2021 was due to the Company suspending substantially all borrower late fees effective March 13, 2020 to provide borrowers relief as a result of the COVID-19 pandemic.

The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans).

(c) Represents the Company's income on its preferred membership interests in ALLO, which was deconsolidated from the Company's financial statements in December 2020.

As of March 31, 2022, the amount of preferred membership interests held by the Company was $137.3 million, which earns a preferred annual return of 6.25 percent.

(d) The Company provides investment advisory services through Whitetail Rock Capital Management, LLC ("WRCM"), the Company's SEC-registered investment advisor subsidiary, under various arrangements.

As of June 30, 2022 and 2021, the amount of preferred membership interests held by the Company was $137.3 million and $129.7 million, respectively, which earns a preferred annual return of 6.25 percent.

(d) Represents fee income earned by the AGM operating segment as administrator and sponsor for the securitizations completed by the joint venture to purchase and securitize private education loans sold by Wells Fargo.

(e) 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 earns annual fees of 10 basis points to 25 basis points on the majority of the outstanding balance of asset-backed securities under management and a share of the gains from the sale of asset-backed securities or asset-backed securities being called prior to the full contractual maturity for which it provides advisory services.

As of March 31, 2022, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.2 billion, of which all of such securities were FFELP student loan

asset-backed securities.

As of June 30, 2022, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.8 billion, of which all of such securities were FFELP student loan asset-backed securities.

In addition, WRCM earns annual management fees of five basis points for Nelnet stock under management (with the Nelnet stock primarily shares of Class B common stock held in various trust estates).

(e) 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.

Such allowance was initially recorded in March 2020 as a result of the COVID-19 pandemic.

(f) Represents the Company's share of loss on its voting membership interests in ALLO.

See note 5 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information regarding the accounting for and income statement impact of this investment.

(g) Represents the Company's share of income or loss from solar investments under the Hypothetical Liquidation at Book Value ("HLBV") method of accounting.

Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers.

The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP.

Applying the Hypothetical Liquidation at Book Value ("HLBV") method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years.

(g) Represents the Company's share of income or loss from solar investments under the HLBV method of accounting.

For the majority of the Company's solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment.

Losses from solar investments in 2022 and 2021 include losses of $1.8 million and $0.6 million, respectively, attributable to third-party minority interest investors that are included in "net loss attributable to noncontrolling interests" in the consolidated statements of income.

Losses from solar investments include losses attributable to third-party minority interest investors of $2.0 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $3.8 million and $1.9 million for the six months ended June 30, 2022 and 2021, respectively, that are included in "net loss attributable to noncontrolling interests" in the consolidated statements of income.

LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS

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2021 March 31,

2022 June 30,

Servicing volume (dollars in millions):

Nelnet Servicing:

Government $ 443,248 453,681 452,450 461,054 478,402 507,653 542,398

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Private and consumer 16,226 21,397 24,758 24,229 23,702 23,433 22,838

Government 251,570 257,806 257,420 262,311 262,605 264,642

Total $ 490,237 505,162 506,569 513,527 529,020 556,732 589,460

Number of servicing borrowers:

Nelnet Servicing:

Government 13,251,930 13,301,364 13,253,051 13,570,056 14,196,520 14,727,860 15,426,607

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Private and consumer 636,136 882,477 1,039,537 1,097,252 1,065,439 1,030,863 998,454

Government 7,605,984 7,637,270 7,616,270 7,778,535 7,797,106 7,749,312

Total 15,188,743 15,417,302 15,491,451 15,817,522 16,354,025 16,793,636 17,402,846

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Government Loan Servicing

Nelnet Servicing's and Great Lakes' current student loan servicing contracts with the Department are scheduled to expire on December 14, 2023.

In 2017, the Department initiated a contract procurement process referred to as the Next Generation Financial Services Environment ("NextGen") for a new framework for the servicing of all student loans owned by the Department.

The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the NextGen process, including that any new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance.

The Company cannot predict the timing, nature, or ultimate outcome of NextGen or any other contract procurement process by the Department.

Nelnet Servicing and Great Lakes are two of the current seven private sector entities that have student loan servicing contracts with the Department.

The Company's student loan servicing contracts with the Department are scheduled to expire on December 14, 2023.

In 2017, the Department initiated a contract procurement process referred to as the Next Generation Financial Services Environment for a new framework for the servicing of all student loans owned by the Department.

The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the process, including that any new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance.

In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution ("USDS") for the new servicing framework.

The Company responded to the USDS solicitation.

The Company cannot predict the timing, nature, or ultimate outcome of this or any other contract procurement process by the Department.

In July 2021, the Pennsylvania Higher Education Assistance Agency ("PHEAA"), a servicer for the Department, announced that it will exit the federal student loan servicing business.

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At the time of this announcement, PHEAA serviced approximately 8.5 million borrowers under its contract.

As of March 31, 2022, approximately 1,175,000 PHEAA borrowers have been transitioned to Nelnet Servicing’s platform (of which approximately 603,000 were converted prior to December 31, 2021).

The Company anticipates additional PHEAA volume to be transitioned to its platform during the remainder of 2022, but cannot currently estimate the number of additional borrowers that will be transferred and/or the timing of such transfers.

On April 6, 2022, the Department extended the student loan payment pause under the CARES Act from May 1, 2022 to August 31, 2022.

As of December 31, 2021, March 31, 2022, and June 30, 2022, approximately 603,000, 1,175,000, and 1,905,000 PHEAA borrowers, respectively, have been transitioned to the Company's platform.

The Department currently allocates new loan volume among its servicers based on certain performance metrics that measure the satisfaction among separate customer groups, including borrowers and Department personnel who work with the servicers.

The metrics also measure the success of keeping borrowers in an on-time repayment status and helping borrowers avoid default.

Under the most recent publicly announced performance metrics used by the Department for the quarterly periods July 1, 2021 through December 31, 2021, the overall rankings of Great Lakes and Nelnet Servicing, LLC ("Nelnet Servicing") among the remaining six go-forward servicers for the Department (which excludes PHEAA) were tied for second (with two other servicers) and fourth, respectively.

Based on these results, Great Lakes’ and Nelnet Servicing’s allocation of new student loan servicing volumes beginning March 1, 2022 are 18 percent and 12 percent, respectively.

Servicing contract amendments entered into with the Department in September 2021 to extend the contracts through December 14, 2023 also amended the methodology for performance measurements and new loan volume allocations, in part by reflecting additional service level performance metrics under which, along with portfolio performance metrics, the Department will evaluate each servicer and make new loan volume allocations on a quarterly basis.

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.

As a result of the CARES Act, the Company receives less servicing revenue per borrower from the Department based on the borrower forbearance status than what was earned on such accounts prior to these provisions.

The Company currently anticipates revenue per borrower from the Department will increase to pre-CARES Act levels beginning September 1, 2022.

During the fourth quarter of 2021 and first quarter of 2022, the Company earned additional revenue from the Department based on incremental work being performed by the Company to support the Department borrowers coming out of forbearance, including outbound engagement.

The Department paused supplemental outreach with the additional extension of the CARES Act student loan payment pause from May 1, 2022 to August 31, 2022.

On April 6, 2022, the Department extended the student loan payment pause under the CARES Act from May 1, 2022 to August 31, 2022.

Prior to the April 2022 extension (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.

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 on August 31, 2022.

Once borrowers transition back to repayment, the Company anticipates revenue per borrower from the Department will increase to pre-CARES Act levels.

Private Education Loan Servicing

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Summary and Comparison of Operating Results

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Net interest income $ 43 11

Net interest income $ 226 7 269 16 Increase was due to higher interest rates in 2022 as compared to 2021.

Loan servicing and systems revenue 124,873 112,094 261,241 223,611 See table below for additional information.

Intersegment servicing revenue 8,381 8,480 16,860 16,748 Represents revenue earned by the LSS operating segment from servicing loans for the AGM and Nelnet Bank operating segments.

Increase was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities performed for AGM in the first quarter of 2022 as compared to the same period in 2021.

Increase in the six months ended June 30, 2022 compared to the same period in 2021 was due to ending COVID-19 pandemic borrower relief policies, which increased servicing activities performed for AGM.

Increase was partially offset by the expected amortization of AGM's FFELP portfolio.

FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.

Other income 740 1,113 Represents revenue earned from providing administrative support and marketing services, which primarily was to Great Lakes’ former parent company under a contract that expired on January 31, 2021.

Other income 611 701 1,350 1,814 Represents revenue earned from providing administrative support and marketing services, which primarily were to Great Lakes’ former parent company under a contract that expired on January 31, 2021.

Total other income 133,865 121,275 279,451 242,173

Salaries and benefits 91,972 66,458 Increase in 2022 compared to 2021 was due to the Company hiring contact center operations and support associates to prepare for the resumption of federal student loan payments and other activities after the CARES Act suspension.

Salaries and benefits 83,220 68,388 175,192 134,846 Increase in 2022 compared to 2021 was due to the Company hiring contact center operations and support associates to prepare for the resumption of federal student loan payments and other activities after the CARES Act suspension expires.

The CARES Act suspension was originally expected to expire on January 31, 2022 and has been extended two additional times to May 1, 2022 and again to August 31, 2022.

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Depreciation and amortization 5,318 7,974 10,272 16,166 Includes amortization of intangibles from the Great Lakes acquisition in February 2018 and depreciation on property and equipment.

Amortization of intangible assets for the three months ended March 31, 2022 and 2021 was $0.4 million and $5.5 million, respectively.

Amortization of intangible assets for the three months ended June 30, 2022 and 2021 was $0.4 million and $5.5 million, respectively, and for the six months ended June 30, 2022 and 2021 was $0.7 million and $11.0 million, respectively.

The majority of the Great Lakes intangible assets became fully amortized as of June 30, 2021.

Excluding amortization of intangible assets, the increase in 2022 compared to 2021 was due to scaling of the Nelnet servicing platform for the PHEAA loan volume transferred to Nelnet's platform.

Other expenses 16,213 13,285 Increase in 2022 compared to 2021 was due to costs associated with Nelnet Renewable Energy activities and technology costs associated with the growth of borrowers under the government servicing contracts.

Excluding amortization of intangible assets, the increase in 2022 compared to 2021 was due to scaling of the Company's servicing platform for the PHEAA loan volume transferred to its platform.

Other expenses 13,507 13,273 29,721 26,557 Increase in 2022 compared to 2021 was due to additional costs associated with the growth of borrowers under the government servicing contracts.

Intersegment expenses 18,558 16,134 38,955 33,024 Intersegment expenses represent costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

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Loan servicing and systems revenue

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Government servicing - Nelnet $ 61,049 34,872 Represents revenue from Nelnet Servicing's Department servicing contract.

Increase in 2022 compared to 2021 was due to (i) an increase in the number of borrowers serviced, including PHEAA borrowers transferred to Nelnet Servicing’s platform;

(ii) a per borrower rate increase beginning September 1, 2021 to reflect the increase in the cost of labor (Economic Cost Index) per the provisions of the contract;

(iii) the recognition of $6.7 million of revenue in the first quarter of 2022 for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers;

and (iv) the recognition of $10.5 million of revenue in the first quarter of 2022 related to the discharge of borrowers under the Total and Permanent Disability ("TPD") discharge program.

Nelnet Servicing earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program.

The revenue earned by Nelnet Servicing for the discharge of TPD borrowers and CARES Act forbearance exit outreach is expected to be minimal for the remainder of 2022.

Government servicing - Great Lakes 48,076 43,302 Represents revenue from the Great Lakes' Department servicing contract.

Increase in 2022 compared to 2021 was due to (i) an increase in the number of borrowers serviced;

Government servicing $ 98,815 79,239 207,940 157,413 Represents revenue from the Company's Department servicing contracts.

Increase in the three and six months ended June 30, 2022 compared to the same periods in 2021 was due to (i) an increase in the number of borrowers serviced, including PHEAA borrowers transferred to the Company's servicing platform;

(ii) a per borrower rate increase beginning September 1, 2021 to reflect the increase in the cost of labor (Economic Cost Index) per the provisions of the contract;

and (iii) the recognition of $2.4 million of revenue in the first quarter of 2022 for incremental work related to CARES Act forbearance exit outreach activities to borrowers.

The revenue earned by Great Lakes for CARES Act forbearance exit outreach is expected to be minimal for the remainder of 2022.

Private education and consumer loan servicing 12,873 8,548 Increase in 2022 compared to 2021 was due to 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.

and (iii) a CARES Act forbearance rate increase effective May 1, 2022.

Increase in the six months ended June 30, 2022 compared to the same period in 2021 was also due to (i) the recognition of $9.1 million of revenue in the first quarter of 2022 for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers;

and (ii) the recognition of $10.5 million of revenue in the first quarter of 2022 related to the discharge of borrowers under the Total and Permanent Disability ("TPD") discharge program.

The Company earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program.

The revenue earned by the Company for the discharge of TPD borrowers and CARES Act forbearance exit outreach is expected to be minimal for the remainder of 2022.

Private education and consumer loan servicing 12,122 12,816 24,995 21,364 Increase for the six months ended June 30, 2022 compared to the same period in 2021 was due to 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.

Excluding revenue earned on the former Wells Fargo portfolio, revenue for 2022 decreased compared to 2021.

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Over time, FFELP servicing revenue will continue to decrease as third-party customers' FFELP portfolios pay off.

Software services 7,400 8,454 Decrease in 2022 compared to 2021 was due to many of the services provided under the Company's remote hosted servicing and system support contract with Great Lakes' former parent, representing 2.3 million borrowers, expiring on January 31, 2021.

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 the continued extension of borrower relief under the CARES Act and an initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness program.

Software services 7,907 7,374 15,308 15,827 Decrease for the six months ended 2022 compared to the same period in 2021 was due to many of the services provided under the Company's remote hosted servicing and system support contract with Great Lakes' former parent, representing 2.3 million borrowers, expiring on January 31, 2021.

This decrease in revenue was partially offset by an increase in 2022 as compared to 2021 in the number of remote hosted servicing borrowers from the Company's remaining customers.

Outsourced services and other 2,018 7,962 4,739 19,634 The majority of this revenue relates to providing contact center and back office operational outsourcing services, including services to state agencies to assist with COVID-19 specific activities that have been performed under shorter-term contracts.

Revenue from providing COVID-19 related services to state agencies was $0.3 million and $9.7 million for the three months ended March 31, 2022 and 2021, respectively.

Outsourcing activities provided for these activities decreased in 2022 as the needs for such services have decreased from prior periods.

Revenue from providing COVID-19 related services to state agencies was $5.4 million and $15.1 million during the three and six months ended June 30, 2021.

There was no revenue for these services during the three and six months ended June 30, 2022.

Loan servicing and systems revenue $ 124,873 112,094 261,241 223,611

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Summary and Comparison of Operating Results

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Net interest income $ 874 210 1,213 473 Represents interest income on tuition funds held in custody for schools.

Increase was due to higher interest rates in 2022 as compared to 2021.

Education technology, services, and payment processing revenue 91,031 76,702 203,317 171,960 See table below for additional information.

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Depreciation and amortization 2,698 2,956 5,013 6,027 Represents primarily amortization of intangible assets from prior business acquisitions.

Amortization of intangible assets related to business acquisitions was $2.1 million and $2.9 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization of intangible assets related to business acquisitions was $2.5 million and $2.8 million for the three months ended June 30, 2022 and 2021, respectively, and $4.6 million and $5.7 million for the six months ended June 30, 2022 and 2021, respectively.

Amortization of intangible assets is expected to increase in future periods as a result of the business combination with NextGen.

See note 6 of the notes to the consolidated financial statements included under Part I, Item 1 of this report.

Other expenses 6,750 4,437 12,514 9,259 Increase was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies.

Increase was also due to an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID pandemic.

Intersegment expenses, net 4,805 3,520 9,410 7,184 Intersegment expenses represent costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

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Net income 11,162 13,096 36,328 36,636

Net loss attributable to noncontrolling interests 53 — 53 — Amounts for noncontrolling interests reflect the net loss attributable to the holders of minority membership interests in NextGen, of which the Company became the majority owner on April 30, 2022.

See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Net income attributable to Nelnet, Inc.

$ 11,215 13,096 36,381 36,636

Education technology, services, and payment processing revenue

The following table provides disaggregated revenue by service offering and before tax operating margin for each reporting period.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Tuition payment plan services $ 27,637 26,538 58,352 56,088 Revenue increased in 2022 as compared to 2021 as a result of a higher number of payment plans in the K-12 market, partially offset by lower revenues for institutions of higher education as a result of lower enrollment trends.

Payment processing 38,071 33,038 Payment volumes in 2022 increased as compared to 2021 in both the K-12 and higher education markets.

The increase in payments volume is driven by both new customers and an increase in volume from existing customers.

Payment processing 27,968 25,008 66,039 58,046 Payment volumes in 2022 increased as compared to 2021 for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.

Education technology and services 34,956 24,930 78,207 57,457 Increase in 2022 compared to 2021 was due to an increase in revenues from the Company’s school information system software, enrollment and communication products, and FACTS Education Solutions instructional and professional development services.

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Loan Portfolio

As of March 31, 2022, the AGM operating segment had a $16.6 billion loan portfolio, consisting primarily of federally insured loans.

For a summary of the Company’s loan portfolio as of March 31, 2022 and December 31, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of June 30, 2022, the AGM operating segment had a $15.9 billion loan portfolio, consisting primarily of federally insured loans.

For a summary of the Company’s loan portfolio as of June 30, 2022 and December 31, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Activity

The following table sets forth the activity of loans in the AGM operating segment:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Beginning balance $ 16,618,627 19,030,223 17,441,790 19,559,108

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Private education loans 6,484 63,413 7,510 86,451

Consumer loans 18,522 19,456

Consumer and other loans 118,012 20,924 136,534 40,380

Total loan acquisitions 168,243 782,075 197,993 889,300

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Loans lost to external parties (453,158) (213,026) (840,806) (442,571)

Consumer loans sold (18,125) —

Loans sold (114) (77,417) (18,239) (77,417)

Ending balance $ 15,855,137 19,331,725 15,855,137 19,331,725

The Company has also purchased partial ownership in certain private education, consumer, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments" 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, 2022, the Company’s ownership correlates to approximately $680 million, $190 million, and $450 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.

The Company has also purchased partial ownership in certain private education, consumer, 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.

As of the latest remittance reports filed by the various trusts prior to or as of June 30, 2022, the Company’s ownership correlates to approximately $650 million, $160 million, and $430 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.

The loans held in these securitizations are not included in the above table.

Allowance for Loan Losses and Loan Delinquencies

AGM's total allowance for loan losses of $116.3 million at March 31, 2022 represents reserves equal to 0.59% of AGM's federally insured loans (or 21.6% of the risk sharing component of the loans that is not covered by the federal guaranty), 5.25% of AGM's private education loans, and 12.77% of AGM's consumer loans.

For a summary of the allowance as a percentage of the ending balance for each of AGM's loan portfolios as of March 31, 2022 and December 31, 2021, the activity in AGM's allowance for loan losses for the three months ended March 31, 2022 and 2021, and a summary of AGM's loan status and delinquency amounts as of March 31, 2022, December 31, 2021, and March 31, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

AGM's total allowance for loan losses of $118.4 million at June 30, 2022 represents reserves equal to 0.60% of AGM's federally insured loans (or 21.8% of the risk sharing component of the loans that is not covered by the federal guaranty), 5.59% of AGM's private education loans, and 6.93% of AGM's consumer loans.

For a summary of the allowance as a percentage of the ending balance for each of AGM's loan portfolios as of June 30, 2022 and December 31, 2021, the activity in AGM's allowance for loan losses for the three and six months ended June 30, 2022 and 2021, and a summary of AGM's loan status and delinquency amounts as of June 30, 2022, December 31, 2021, and June 30, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Spread Analysis

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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.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Variable loan yield, gross 3.59 % 2.63 % 3.16 % 2.67 %

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derivative settlements follows.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Core loan spread 1.61 % 1.41 % 1.53 % 1.43 %

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(d) Derivative settlements consist of net settlements paid related to the Company’s floor income interest rate swaps.

(d) Derivative settlements consist of net settlements received (paid) related to the Company’s floor income interest rate swaps.

A trend analysis of AGM's core and variable loan spreads is summarized below.

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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.

Variable loan spread increased during the three months ended March 31, 2022 compared to the same period in 2021 due to a narrowing of the basis between the asset and debt indices in which the Company earns interest on its loans and funds such loans (as reflected in the table above).

Variable loan spread increased during the three and six months ended June 30, 2022 compared to the same periods in 2021 due to a significant increase in short-term interest rates during the first half of 2022.

In an increasing interest rate environment, student loan spread increases due to the timing of interest rate resets on the Company's assets occurring daily in contrast to the timing of the interest resets on the Company's debt that occurs either monthly or quarterly.

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A summary of fixed rate floor income and its contribution to core loan spread follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Fixed rate floor income, gross $ 18,292 36,639 47,285 72,178

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Fixed rate floor income contribution to spread, net 0.55 % 0.66 % 0.58 % 0.66 %

(a) Derivative settlements consist of net settlements paid related to the Company's derivatives used to hedge student loans earning fixed rate floor income.

The decrease in gross fixed rate floor income for the three months ended March 31, 2022 compared to the same period in 2021 was due to higher interest rates in 2022 as compared to 2021.

On May 4, 2022, the Federal Reserve increased interest rates, and it is currently anticipated that interest rates may continue to rise in 2022 as a result of inflationary pressures in the U.S.

(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.

The decrease in gross fixed rate floor income for the three and six months ended June 30, 2022 compared to the same periods in 2021 was due to higher interest rates in 2022 as compared to 2021.

Subsequent to June 30, 2022 (on July 27, 2022), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise in 2022 as a result of

inflationary pressures in the U.S.

increases in interest rates will reduce the amount of gross fixed rate floor income the Company is currently receiving.

The Company has a portfolio of derivative instruments in which the Company pays a fixed rate and receives a floating rate to economically hedge a portion of loans earning fixed rate floor income.

The decrease in derivative settlements paid for the three months ended March 31, 2022 compared to the same period in 2021 was due to an increase in interest rates and a decrease in the notional amount of derivatives outstanding.

The Company has a portfolio of derivative instruments in which the Company pays a fixed rate and receives a floating rate to economically hedge loans earning fixed rate floor income.

The increase in net derivative settlements received by the Company during the three and six months ended June 30, 2022, as compared to net derivative settlements paid during the same periods in 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.

See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on the Company’s portfolio earning fixed rate floor income and the derivatives used by the Company to hedge these loans.

Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate

As of March 31, 2022, the interest earned on a principal amount of $15.2 billion of AGM's FFELP student loan asset portfolio was indexed to one-month LIBOR, and the interest paid on a principal amount of $15.1 billion of AGM’s FFELP student loan asset-backed debt securities was indexed to one-month or three-month LIBOR.

As of June 30, 2022, the interest earned on a principal amount of $14.4 billion of AGM's FFELP student loan asset portfolio was indexed to one-month LIBOR, and the interest paid on a principal amount of $14.3 billion of AGM’s FFELP student loan asset-backed debt securities was indexed to one-month or three-month LIBOR.

In addition, the Company’s derivative financial instrument transactions used to manage LIBOR interest rate risks are indexed to LIBOR.

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Parties remain free to agree on a different benchmark replacement rate, and the Company has worked and will continue to work with its asset-backed securitization investors to amend transaction documents to address the discontinuation of LIBOR.

On July 19, 2022, the Federal Reserve issued a notice of proposed rulemaking for proposed regulations to implement the LIBOR Act, as required by its terms.

The LIBOR Act also amends the Higher Education Act to substitute the current special allowance payment rate-setting mechanism for FFELP loans from the one-month LIBOR to the 30-day average SOFR in effect for each of the days in an applicable quarter, adjusted daily by adding a tenor spread adjustment.

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Summary and Comparison of Operating Results

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Net interest income after provision for loan losses $ 61,861 80,990 135,320 197,912 See table below for additional analysis.

Other income 6,511 2,881 Other income includes borrower late fees, which were $2.4 million and $0.4 million during the three months ended March 31, 2022 and 2021, respectively.

Other income 5,133 2,316 11,644 2,760 Other income includes primarily borrower late fees, income from providing administration activities for third-parties, and income from AGM's investment in a joint venture.

Borrower late fees for the three months ended June 30, 2022 and 2021 were $2.4 million and $0.7 million, respectively, and for the six months ended June 30, 2022 and 2021 were $4.9 million and $1.2 million, respectively.

The Company suspended borrower late fees in March 2020 to provide borrowers relief as a result of the COVID-19 pandemic.

The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans).

The Company also recognized revenue of $2.1 million in the first quarter of 2022 as administrator and sponsor for the securitizations completed by the joint venture to purchase and securitize private education loans sold by Wells Fargo and recognized income of $1.9 million in the first quarter of 2022 related to its investment in the joint venture.

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.

The Company recognized revenue of $2.0 million and $4.1 million for the three and six months ended June 30, 2022, 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.

No administrator and sponsor revenue was earned during the first half of 2021.

The Company also recognized a loss of $0.4 million and income of $1.2 million for the three months ended June 30, 2022 and 2021, respectively, and income of $1.6 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively, related to its investment in the joint venture.

Impairment expense and provision for beneficial interests, net — — — 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.

Such allowance was initially recorded in March 2020 as a result of the COVID-19 pandemic.

Gain on sale of loans 2,989 — On January 26, 2022, the Company sold $18.1 million (par value) of consumer loans to an unrelated third party and recognized a gain of $3.0 million.

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Derivative market value adjustments, net 40,401 (1,615) 186,135 37,194 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.

The majority of the derivative market value adjustments during the three months ended March 31, 2022 and 2021 related to the changes in fair value of the Company's floor income interest rate swaps.

An increase in the forward yield curve during the three months ended March 31, 2022 and 2021 resulted in an increase in the fair value of such swaps.

The majority of the derivative market value adjustments during 2022 and 2021 related to the changes in fair value of the Company's floor income interest rate swaps.

Total other income/expense 50,157 10,598 202,582 47,983

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The decrease in 2022 as compared to 2021 was due to a decrease in AGM's loan portfolio.

These decreases were partially offset by increased costs due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first half of 2022 as compared to the same period in 2021.

Intersegment expenses 8,513 8,549 17,344 16,976 Amounts include fees paid to the LSS operating segment for the servicing of AGM’s loan portfolio.

These amounts exceed the actual cost of servicing the loans.

The increase in servicing fees in 2022 as compared to 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first quarter of 2022 as compared to the same period in 2021.

The increase in servicing fees for the six months ended June 30, 2022 as compared to the same period in 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first half of 2022 as compared to the same period in 2021.

These increases were partially offset by the expected amortization of AGM's FFELP portfolio.

Intersegment expenses also include 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 12,455 12,699 Total operating expenses were 29 basis points and 26 basis points of the average balance of loans for the three months ended March 31, 2022 and 2021, respectively.

The increase in operating expenses as a percent of the average balance of loans in 2022 as compared to 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first quarter of 2022 as compared to the same period in 2021.

Total operating expenses 12,670 12,672 25,125 25,371 Total operating expenses were 31 basis points and 27 basis points of the average balance of loans for the three months ended June 30, 2022 and 2021, respectively, and 30 basis points and 26 basis points for the six months ended June 30, 2022 and 2021, respectively.

The increase in operating expenses as a percent of the average balance of loans in 2022 as compared to 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first half of 2022 as compared to the same period in 2021.

Income before income taxes 99,348 78,916 312,777 220,524

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Net interest income after provision for loan losses, net of settlements on derivatives The following table summarizes the components of "net interest income after provision for loan losses" and "derivative settlements, net."

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Variable interest income, gross $ 115,753 129,170 Decrease in 2022 compared to 2021 was due to a decrease in the average balance of loans, partially offset by an increase in the gross yield earned on loans.

Variable interest income, gross $ 146,911 124,267 262,663 253,436 Increase in 2022 compared to 2021 was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.

Consolidation rebate fees (34,952) (40,250) (71,723) (81,323) Decrease in 2022 compared to 2021 was due to a decrease in the average consolidation loan balance.

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Interest on bonds and notes

payable (45,209) (26,771) During the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds.

Excluding this adjustment, interest expense decreased in 2022 as compared to 2021.

This decrease was due to a decrease in the average balance of debt outstanding, partially offset by an increase in cost of funds.

payable (68,616) (48,542) (113,825) (75,312) Increase in 2022 compared to 2021 was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

In addition, during the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds.

Derivative settlements, net (a) 931 (221) 1,327 (240) Derivative settlements include the net settlements received (paid) related to the Company’s 1:3 basis swaps.

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Fixed rate floor income, gross 18,292 36,639 47,285 72,178 Decrease in 2022 compared to 2021 was due to higher interest rates in 2022 as compared to 2021.

On May 4, 2022, the Federal Reserve increased interest rates, and it is currently anticipated that interest rates may continue to rise in 2022 as a result of inflationary pressures in the U.S.

Subsequent to June 30, 2022 (on July 27, 2022), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise in 2022 as a result of inflationary pressures in the U.S.

increases in interest rates will reduce the amount of fixed rate floor income the Company is currently receiving.

Derivative settlements, net (a) (3,205) (4,285) Derivative settlements include the settlements paid related to the Company's floor income interest rate swaps.

The decrease in net settlements paid in 2022 as compared to 2021 was due to an increase in interest rates and a decrease in the notional amount of derivatives outstanding.

Derivative settlements, net (a) 3,692 (5,153) 487 (9,438) Derivative settlements include the settlements received (paid) related to the Company's floor income interest rate swaps.

Fixed rate floor income, net of settlements on derivatives 21,984 31,486 47,772 62,740

Core loan interest income (a) 67,732 67,167 129,148 159,847

Investment interest 9,164 2,648 Increase in 2022 compared to 2021 was due primarily to an increase in interest income on the Company's loan beneficial interest investments.

Investment interest 8,671 8,882 17,835 11,530 Increase for the six months ended June 30, 2022 compared to 2021 was due primarily to an increase in the Company's loan beneficial interest investments during the first half of 2021.

Intercompany interest (1,092) (128) (1,886) (308)

Negative provision for loan losses - federally insured loans 2,748 7,483 See "Allowance for Loan Losses and Loan Delinquencies" included above under "Asset Generation and Management Operating Segment - Results of Operations."

Negative provision (provision) for loan losses - private education loans 400 (1,431)

(Provision) negative provision for loan losses - consumer loans (2,284) 11,418

Net interest income after provision for loan losses (net of settlements on derivatives) (a) $ 70,650 112,618 Decrease in 2022 as compared to 2021 was due to (i) a decrease in the average balance of loans;

(ii) the reversal of a historical accrued interest liability on certain bonds in 2021;

and (iii) the Company recognizing a larger negative provision for loan losses in 2021 as compared to 2022.

These items were partially offset by an increase in interest income on the Company's loan beneficial interest investments in 2022 as compared to 2021.

(Provision) negative provision for loan losses - federally insured loans (2,365) 397 383 7,880 See "Allowance for Loan Losses and Loan Delinquencies" included above under "Asset Generation and Management Operating Segment - Results of Operations."

(Provision) negative provision for loan losses - private education loans (1,217) 1,004 (817) (427)

(Provision) negative provision for loan losses - consumer and other loans (5,245) (1,706) (7,529) 9,712

Net interest income after provision for loan losses (net of settlements on derivatives) (a) $ 66,484 75,616 137,134 188,234 Decrease for the three months ended June 30, 2022 as compared to the same period in 2021 was due to (i) a decrease in the average balance of loans;

and (ii) an increase in provision for loan losses.

These items were partially offset by an increase in core loan spread.

Decrease for the six months ended June 30, 2022 as compared to the same period in 2021 was due to (i) a decrease in the average balance of loans;

(ii) an increase in provision for loan losses;

and (iii) the reversal of a historical accrued interest liability on certain bonds in the first quarter of 2021.

These items were partially offset by an increase in core loan spread and an increase in interest income as a result of an increase in the Company's loan beneficial interest investments during the first half of 2021.

(a) Core loan interest income and net interest income after provision for loan losses (net of settlements on derivatives) are non-GAAP financial measures.

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Future levels of net interest income can be affected by the levels of prepayments with respect to the Company's loan portfolios.

See Part II, Item 1A, "Risk Factors" in this report for information regarding the potential impact on prepayments of recent government announcements related to student loan income-driven repayment forgiveness.

NELNET BANK OPERATING SEGMENT – RESULTS OF OPERATIONS

Loan Portfolio

As of March 31, 2022, Nelnet Bank had a $368.3 million loan portfolio, consisting of $285.5 million of private education loans and $82.8 million of FFELP loans.

As of March 31, 2022, Nelnet Bank's allowance for loan losses on its portfolio was $1.5 million, which represents reserves equal to 0.30% of Nelnet Bank's federally insured loans (or 11.8% of the risk sharing component of the loans that is not covered by the federal guaranty), and 0.44% of Nelnet Bank's private education loans.

For a summary of the allowance as a percentage of the ending balance of each of Nelnet Bank's loan portfolios as of March 31, 2022 and December 31, 2021, the activity in Nelnet Bank's allowance for loan losses for the three months ended March 31, 2022 and 2021, and a summary of Nelnet Bank's loan status, delinquency amounts, and other key credit quality indicators as of March 31, 2022, December 31, 2021, and March 31, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of June 30, 2022, Nelnet Bank had a $423.6 million loan portfolio, consisting of $346.1 million of private education loans and $77.4 million of FFELP loans.

As of June 30, 2022, Nelnet Bank's allowance for loan losses on its portfolio was $2.0 million, which represents reserves equal to 0.33% of Nelnet Bank's federally insured loans (or 13.2% of the risk sharing component of the loans that is not covered by the federal guaranty), and 0.50% of Nelnet Bank's private education loans.

For a summary of the allowance as a percentage of the ending balance of each of Nelnet Bank's loan portfolios as of June 30, 2022 and December 31, 2021, the activity in Nelnet Bank's allowance for loan losses for the three and six months ended June 30, 2022 and 2021, and a summary of Nelnet Bank's loan status, delinquency amounts, and other key credit quality indicators as of June 30, 2022, December 31, 2021, and June 30, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

The following table sets forth the activity in Nelnet Bank's loan portfolio:

Three months ended March 31,

Beginning balance:

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Beginning balance $ 368,257 79,231 257,901 17,543

Federally insured student loan acquisitions — 99,973 — 99,973

Private education loan originations 75,204 21,246 205,546 86,155

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Ending balance $ 423,553 190,571 423,553 190,571

$ 368,257 79,231

As of March 31, 2022, Nelnet Bank had $546.7 million of deposits, of which $62.6 million were deposits from Nelnet, Inc.

As of June 30, 2022, Nelnet Bank had $751.3 million of deposits, of which $162.9 million were deposits from Nelnet, Inc.

(the parent company) and its subsidiaries (intercompany), and thus eliminated for consolidated financial reporting purposes.

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The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities.

Three months ended March 31,

Balance Rate Balance Rate

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Balance Rate Balance Rate Balance Rate Balance Rate

Average assets

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Summary and Comparison of Operating Results

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021 Additional information

Total interest income $ 5,212 2,041 8,241 3,418 Represents interest earned on Nelnet Bank's FFELP and private education student loans, cash, and investments.

Increase is due to an increase of these balances in 2022 as compared to 2021.

Increase was due to an increase of these balances and interest rates in 2022 as compared to 2021.

Interest expense 1,639 392 2,494 586 Represents interest expense on deposits.

Increase is due to an increase of deposits and interest rates in 2022 as compared to 2021.

Increase was due to an increase of deposits and interest rates in 2022 as compared to 2021.

Net interest income 3,573 1,649 5,747 2,832

Provision for loan losses 429 422

Provision for loan losses 582 69 1,011 491 Represents the current period provision expense to reflect the current lifetime expected credit losses related to Nelnet Bank's loan portfolio.

Increase was due to an increase in loans originated in 2022 as compared to 2021.

Net interest income after provision for loan losses 2,991 1,580 4,736 2,341

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Salaries and benefits 1,714 1,578 3,268 3,065 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.

Depreciation 3 —

Other expenses 903 237 1,591 781 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.

Increase was due to the overall growth of Nelnet Bank activities.

Intersegment expenses 57 37 102 40 Represents primarily servicing costs paid to the LSS operating segment.

Certain shared service and support costs incurred by the Company to support Nelnet Bank are not and will not be reflected as part of the Nelnet Bank operating segment through 2023 (when the bank's de novo period will end).

The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank's operating segment were $1.3 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank's operating segment were $1.5 million and $1.0 million for the three months ended June 30, 2022 and 2021, respectively, and $2.8 million and $1.7 million for the six months ended June 30, 2022 and 2021, respectively.

Total operating expenses 2,674 1,852 4,961 3,886

Income (loss) before income taxes 474 (268) 1,434 (1,519)

Income tax (expense) benefit (223) 286 Represents income tax (expense) benefit at an effective tax rate of 23.2% and 22.8% for the three months ended March 31, 2022 and 2021, respectively.

Income tax (expense) benefit (106) 64 (328) 351 Represents income tax (expense) benefit at an effective tax rate of 22.3% and 24.1% for the three months ended June 30, 2022 and 2021, respectively, and 22.9% and 23.1% for the six months ended June 30, 2022 and 2021, respectively.

Net income (loss) $ 368 (204) 1,106 (1,168)

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Sources of Liquidity

The Company has historically generated positive cash flow from operations.

For the year ended December 31, 2021 and the three months ended March 31, 2022, the Company’s net cash provided by operating activities was $544.9 million and $185.5 million, respectively.

As of March 31, 2022, the Company had cash and cash equivalents of $162.8 million.

Cash held by Nelnet Bank is generally not available for Company activities outside of Nelnet Bank.

Excluding Nelnet Bank, cash and cash equivalents as of March 31, 2022 was $144.8 million.

The Company also has a $495.0 million unsecured line of credit that matures on September 22, 2026.

As of March 31, 2022, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $737.5 million, subject to certain conditions.

In addition, the Company has retained certain of its own asset-backed securities upon their initial issuance or repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.

As of June 30, 2022, the Company's sources of liquidity included:

Cash and cash equivalents $ 128,499

Cash and cash equivalents held at Nelnet Bank (1) (33,218)

Net cash and cash equivalents 95,281

Available-for-sale (AFS) debt securities (investments) - at fair value 1,294,537

AFS debt securities held at Nelnet Bank - at fair value (1) (393,457)

AFS debt securities serving as collateral on participation agreement - at fair value (2) (370,522)

AFS debt securities serving as collateral on repurchase agreements - at fair value (3) (338,441)

Net AFS debt securities (investments) - at fair value 192,117

Unencumbered private, consumer, and other loans (Non-Nelnet Bank) 244,234

Repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (4) 431,211

Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreements - at par (206,925)

Unused capacity on unsecured line of credit (5) 495,000

Sources of liquidity as of June 30, 2022 $ 1,250,918

(1) Cash and investments held at Nelnet Bank are generally not available for Company activities outside of Nelnet Bank.

(2) See the caption "Other Debt Facilities" below.

(3) See the caption "Repurchase Agreements" below.

(4) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.

For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements.

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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.

As of March 31, 2022, the Company holds $398.1 million (par value) of its own asset-backed securities.

As of March 31, 2022, $45.7 million of the Company's repurchased asset-backed securities were financed with proceeds from the Company's repurchase agreements and such amount is included in "bonds and notes payable" on the Company's consolidated balance sheet as of March 31, 2022.

The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP, private education, and consumer loan acquisitions (or investment interests therein);

Certain of these securities serve as collateral on amounts outstanding under the Company's repurchase agreements as reflected in the table above.

(5) The Company has a $495.0 million unsecured line of credit that matures on September 22, 2026.

As of June 30, 2022, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP, private education, consumer, and other loan acquisitions (or investment interests therein);

strategic acquisitions and investments;

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The timing and size of these opportunities will vary and will have a direct impact on the Company's cash and investment balances.

During the three months ended March 31, 2022, the Company generated $185.5 million in operating activities, compared to generating $48.7 million for the same period in 2021.

The increase in such cash flows from operating activities was due to:

The Company has historically generated positive cash flow from operations.

During the six months ended June 30, 2022 and 2021, the Company generated $483.7 million and $185.9 million, respectively, in cash from operating activities.

See the caption "Reclassification of Prior Period Cash Flows Presentation" in note 1 of the notes to the consolidated financial statements under Part I, Item 1 of this report for additional information.

The increase in 2022 as compared to 2021 was due to:

• An increase in net income;

• Adjustments to net income for the impact of provision for loan losses and the non-cash change in deferred income taxes;

• An increase in proceeds from the Company's clearinghouse for margin payments on derivatives for the three months ended March 31, 2022 compared to the same period in 2021;

• Proceeds from the sale of equity securities for the three months ended March 31, 2022 compared to purchases in the same period in 2021;

• The impact of changes to accrued interest receivable, accounts receivable, and accrued interest payable during the three months ended March 31, 2022 as compared to the same period in 2021.

• An increase in proceeds from the Company's clearinghouse for margin payments on derivatives for the six months ended June 30, 2022 compared to the same period in 2021;

• Proceeds from termination of derivative instruments for the six months ended June 30, 2022 compared to no proceeds from terminations in the same period in 2021;

• Net proceeds from the sale of equity securities for the six months ended June 30, 2022 compared to net purchases in the same period in 2021;

• Adjustments to net income for the impact of provision for loan losses, gain on sale of loans, and the non-cash change in deferred income taxes;

• The impact of changes to accounts receivable, accrued interest receivable, and accrued interest payable during the six months ended June 30, 2022 as compared to the same period in 2021.

These factors were partially offset by:

• The adjustments to net income for derivative market value adjustments;

• Adjustments to net income for the impact of losses recognized on certain investments;

• The impact of changes to the due to customers liability account during the three months ended March 31, 2022 as compared to the same period in 2021.

The primary items included in the statement of cash flows for investing activities are the purchase, origination, and repayment of loans.

The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable and deposits used to fund loans.

Cash provided by investing activities and used in financing activities for the three months ended March 31, 2022 was $603.1 million and $805.2 million, respectively.

Cash provided by investing activities and used in financing activities for the three months ended March 31, 2021 was $468.4 million and $528.1 million, respectively.

• The impact of changes to other assets during the six months ended June 30, 2022 as compared to the same period in 2021.

The primary items included in the statement of cash flows for investing activities are the purchase, origination, and repayment of loans and the purchase and sale of available-for-sale securities.

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.

Cash provided by investing activities and used in financing activities for the six months ended June 30, 2022 was $837.0 million and $1.3 billion, respectively.

Cash used in investing activities and provided by financing activities for the six months ended June 30, 2021 was $243.4 million and $176.6 million, respectively.

Investing and financing activities are further addressed in the discussion that follows.

1 unchanged sentence

The following table shows AGM's debt obligations outstanding that are secured by loan assets and related collateral.

As of March 31, 2022

As of June 30, 2022

Carrying amount

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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.

As of March 31, 2022, 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 $1.83 billion as detailed below.

The forecasted cash flow presented below includes all loans funded in asset-backed securitizations as of March 31, 2022.

As of March 31, 2022, AGM had $16.3 billion of loans included in asset-backed securitizations, which represented 98.4 percent of its total loan portfolio.

The forecasted cash flow does not include cash flows that the Company expects to receive related to loans funded in its warehouse facilities, private education and consumer loans funded with operating cash, loans acquired subsequent to March 31, 2022, 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" on the Company's consolidated balance sheets).

As of June 30, 2022, 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 $1.72 billion as detailed below.

The forecasted cash flow presented below includes all loans funded in asset-backed securitizations as of June 30, 2022.

As of June 30, 2022, AGM had $15.5 billion of loans included in asset-backed securitizations, which represented 97.6 percent of its

total loan portfolio.

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 and consumer loans funded with operating cash, loans acquired subsequent to June 30, 2022, 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" on the Company's consolidated balance sheets).

Asset-backed Securitization Cash Flow Forecast

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(dollars in millions)

The forecasted future undiscounted cash flows of approximately $1.83 billion include approximately $1.11 billion (as of March 31, 2022) of overcollateralization included in the asset-backed securitizations.

These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.72 billion, or approximately $0.55 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 March 31, 2022 balance of consolidated shareholders' equity.

The forecasted future undiscounted cash flows of approximately $1.72 billion include approximately $1.07 billion (as of June 30, 2022) of overcollateralization included in the asset-backed securitizations.

These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.65 billion, or approximately $0.49 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 June 30, 2022 balance of consolidated shareholders' equity.

The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast.

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The Company’s cash flow forecast above assumes prepayment rates of 4 percent for consolidation loans and 5 percent for all other loan types.

These prepayment rates are generally consistent with those utilized in the Company’s recent asset-backed securitization transactions.

These prepayment rates are generally consistent with those utilized in the Company’s most recent asset-backed securitization transactions.

On April 19, 2022, the Department issued a press release, and the Department's Office of Federal Student Aid ("FSA") posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment ("IDR") plans for federal student loans.

currently believes these announced changes could significantly increase FFEL Program loan prepayments.

See Part II, Item 1A, "Risk Factors" in this report for additional information related to these announcements.

from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan.

These announced changes have increased, and the Company currently believes these announced changes may continue to increase, FFEL Program loan prepayments.

For example, 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 the continued extension of the CARES Act and an initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness program.

See Part II, Item 1A, "Risk Factors" in this report for additional information related to these announcements and other risks associated with loan prepayments.

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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10x $0.58 billion $1.14 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 $1.11 billion (as of March 31, 2022);

however, the Company would not receive the $0.65 billion ($0.49 billion after tax) of estimated future earnings from the portfolio.

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If the forecast is computed assuming a spread of 24 basis points between three-month and one-month LIBOR for the life of the portfolio, the cash flow forecast would be reduced by approximately $60 million to $85 million.

As the percentage of the Company's outstanding debt financed by three-month LIBOR declines, the Company's basis risk will be reduced.

As the percentage of the Company's outstanding debt financed

by three-month LIBOR declines, the Company's basis risk will be reduced.

In addition, the Company attempts to mitigate the impact of this basis risk by entering into certain derivative instruments.

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk - AGM Operating Segment."

LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the forecasted cash flows from the Company's asset-backed securitizations.

See "Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate" above and Item 1A, "Risk Factors - Loan Portfolio -

Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.

The Company uses the current forward interest rate yield curve to forecast cash flows.

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An increase in future interest rates will reduce the amount of fixed rate floor income the Company is currently receiving.

The Company attempts to mitigate the impact of a rise in short-term rates by hedging interest rate risks.

The Company attempts to mitigate the impact of a rise in short-term rates by entering into certain derivative instruments.

The forecasted cash flow does not include cash flows the Company expects to pay/receive related to derivative instruments used by the Company to manage interest rate risk.

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment."

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment" for additional information about various interest rate risks which may impact future cash flows from AGM's loan assets.

In addition, LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the forecasted cash flows from the Company's asset-backed securitizations.

See "Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate" above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.

Warehouse Facilities

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Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.

As of March 31, 2022, the Company's warehouse facility had a maximum financing amount available of $60.0 million, of which $5.0 million was outstanding and $55.0 million was available for additional funding.

The warehouse facility has a static advance rate until the expiration date of the liquidity provisions (May 23, 2022).

As of June 30, 2022, the Company's warehouse facility had a maximum financing amount available of $25.0 million, of which $4.6 million was outstanding and $20.4 million was available for additional funding.

The warehouse facility has a static advance rate until the expiration date of the liquidity provisions (November 22, 2022).

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.

The loans would then be funded at this new advance rate until the final maturity date of the facility (May 22, 2023).

As of March 31, 2022, the Company had $0.3 million advanced as equity support on this facility.

The Company has a private education loan warehouse facility that, as of March 31, 2022, had an aggregate maximum financing amount available of $175.0 million, an advance rate of 80 to 90 percent, liquidity provisions through June 30, 2022, and a final maturity date of June 30, 2023.

As of March 31, 2022, $96.7 million was outstanding under this warehouse facility, $78.3 million was available for future funding, and $10.6 million was advanced as equity support.

The loans would then be funded at this new advance rate until the final maturity date of the facility (November 22, 2023).

As of June 30, 2022, the Company had $0.3 million advanced as equity support on this facility.

The Company has a private education loan warehouse facility that, as of June 30, 2022, had an aggregate maximum financing amount available of $175.0 million, an advance rate of 80 to 90 percent, liquidity provisions through October 31, 2022, and a final maturity date of October 31, 2023.

As of June 30, 2022, $89.5 million was outstanding under this warehouse facility, $85.5 million was available for future funding, and $10.1 million was advanced as equity support.

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.

Other Uses of Liquidity

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 and consumer loans (or investment interests therein).

The Company plans to fund additional loan acquisitions and related investments using current cash and investments;

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;

using proceeds from the sale of certain investments;

using its unsecured line of credit, Union Bank student loan participation agreement, 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;

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and continuing to access the asset-backed securities market.

Private Education Loan Investment

Repurchase Agreements

In December 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education loans representing approximately 445,000 borrowers.

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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.

The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance sheet as "investments" and as of March 31, 2022, the fair value of these bonds was $371.9 million.

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 June 30, 2022, the fair value of these bonds was $338.4 million.

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.

The Company entered into repurchase agreements with third

parties, the proceeds of which were used to purchase a portion of the asset-backed investments, and such investments serve as collateral on the repurchase obligations.

As of March 31, 2022, $384.3 million was outstanding on the Company's repurchase agreements, of which $338.6 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement.

The repurchase agreements have various maturity dates (as of March 31, 2022) between April 14, 2022 and December 20, 2023, but are subject to early termination upon required notice provided by the Company or the applicable counterparty prior to the maturity dates.

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.

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.

As of June 30, 2022, $500.7 million was outstanding on the Company's repurchase agreements, of which $319.2 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement and $181.5 million was borrowed to fund repurchased FFELP loan asset-backed securities.

The repurchase agreements have various maturity dates (as of June 30, 2022) between August 8, 2022 and November 27, 2024, but are subject to early termination upon required notice provided by the Company or the applicable counterparty prior to the maturity dates.

The Company is required to pay additional cash in the event the fair value of the securities subject to a repurchase agreement becomes less than the original purchase price of such securities.

Upon termination or expiration of the repurchase agreements, the Company would use cash and/or cash proceeds from its unsecured line of credit to satisfy any outstanding obligations subject to the repurchase agreements.

Upon termination or expiration of the repurchase agreements, the Company would use cash and/or cash proceeds from its unsecured line of credit, consider the sale of assets (subject to any restrictions described above), or transfer collateral to satisfy any outstanding obligations subject to the repurchase agreements.

Union Bank Participation Agreement

The Company maintains an agreement with Union Bank, a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans.

As of March 31, 2022, $917.5 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

As of June 30, 2022, $915.2 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.

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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.

There were no asset-backed securitization transactions completed during the first three months of 2022.

There were no asset-backed securitization transactions completed during the six months ended June 30, 2022.

Liquidity Impact Related to Nelnet Bank

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As part of the Capital and Liquidity Maintenance Agreement, Nelnet, Inc.

is obligated to (i) contribute capital to Nelnet Bank for it to maintain capital levels that meet FDIC requirements for a “well capitalized” bank, including a leverage ratio of capital to total assets of at least 12 percent;

(ii) provide and maintain an irrevocable asset liquidity takeout commitment for the benefit of Nelnet Bank in an amount equal to the greater of either 10 percent of Nelnet Bank’s total assets or such additional amount as agreed to by Nelnet Bank and Nelnet, Inc.;

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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.

The CBLR framework allows banks to satisfy capital standards and be considered "well capitalized" under the prompt corrective action framework if their leverage ratio is

greater than 9%, unless the banking organization's federal banking agency determines that the banking organization's risk profile warrants a more stringent leverage ratio.

The CBLR framework allows banks to satisfy capital standards and be considered "well capitalized" under the prompt corrective action framework if their leverage ratio is greater than 9%, unless the banking organization's federal banking agency determines that the banking organization's risk profile warrants a more stringent leverage ratio.

The FDIC has ordered Nelnet Bank to maintain at least a 12% leverage ratio.

Nelnet Bank has opted into the CBLR framework for the quarter ended March 31, 2022 with a leverage ratio of 17.2%.

Nelnet Bank has opted into the CBLR framework for the quarter ended June 30, 2022 with a leverage ratio of 13.8%.

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.

Based on Nelnet Bank's business plan for growth and current financial condition, the Company currently believes additional capital contributions to Nelnet Bank may be required during the fourth quarter of 2022 and/or during 2023.

In the second quarter of 2022, Nelnet, Inc.

made an additional capital contribution to Nelnet Bank of $15.0 million.

Based on Nelnet Bank's business plan for growth and current financial condition, the Company currently believes no additional capital contributions to Nelnet Bank will be required for the remainder of 2022.

Liquidity Impact Related to ALLO

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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.

As of March 31, 2022, the outstanding preferred membership interests of ALLO held by the Company was $137.3 million that earns a preferred annual return of 6.25 percent.

The agreements among the Company, SDC (a third party global digital infrastructure investor), and ALLO provide that they will use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause the redemption, on or before April 2024, of the remaining non-voting preferred membership interests in ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests.

As of June 30, 2022, the outstanding preferred membership interests of ALLO held by the Company was $137.3 million that earns a preferred annual return of 6.25 percent.

Agreements among the Company, SDC (a third party global digital infrastructure investor), and ALLO provide that they will use commercially reasonable efforts (which excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause the redemption, on or before April 2024, of the remaining non-voting preferred membership interests in ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests.

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.

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As a result of this equity contribution, the Company’s voting membership interests percentage did not materially change.

Based on ALLO's business plan for growth and current financial condition, the Company currently believes additional capital contributions to ALLO may be required during the fourth quarter of 2022 and during 2023 and 2024.

Liquidity Impact Related to Hedging Activities

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By using derivative instruments, the Company is exposed to market risk which could impact its liquidity.

Based on the derivative portfolio outstanding as of March 31, 2022, the Company does not currently 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.

Based on the derivative portfolio outstanding as of June 30, 2022, the Company does not currently 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.

However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio, the replacement of LIBOR as a benchmark rate has significant adverse impacts on the Company's derivatives, 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.

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As discussed above, the Company has a $495.0 million unsecured line of credit with a maturity date of September 22, 2026.

As of March 31, 2022, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.

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 the amount outstanding under the line, or find alternative funding if necessary.

As of June 30, 2022, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.

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.

During 2020, the Company entered into an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in federally insured student loan asset-backed securities.

As of March 31, 2022, $267.5 million (par value) of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

As of June 30, 2022, $393.4 million (par value) of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

This participation agreement has been accounted for by the Company as a secured borrowing.

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In 2019, the Board of Directors authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ended May 7, 2022.

On May 9, 2022, the Board of Directors authorized a new stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2025.

The five million shares authorized under the new program include the

remaining unpurchased shares from the prior program, which the new program replaced.

As of March 31, 2022, 2,222,859 shares remained authorized for repurchase under the Company's prior program.

The five million shares authorized under the new program include the remaining unpurchased shares from the prior program, which the new program replaced.

As of June 30, 2022, 4,683,837 shares remained authorized for repurchase under the Company's stock repurchase program.

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.

Shares repurchased by the Company during the three months ended March 31, 2022 are shown below.

For additional information on stock repurchases during the first quarter of 2022, see "Stock Repurchases" under Part II, Item 2 of this report.

Shares repurchased by the Company during the three months ended March 31, 2022 and June 30, 2022 are shown below.

For additional information on stock repurchases during the second quarter of 2022, see "Stock Repurchases" under Part II, Item 2 of this report.

Total shares repurchased Purchase price

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Quarter ended March 31, 2022 380,053 $ 32,899 86.56

Subsequent to March 31, 2022 (through May 9, 2022), the Company repurchased an additional 253,838 Class A common shares for $21.2 million (average price of $83.62 per share).

On March 15, 2022, the Company paid a first quarter 2022 cash dividend on the Company's Class A and Class B common stock of $0.24 per share.

In addition, the Company's Board of Directors has declared a second quarter 2022 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.24 per share.

The second quarter cash dividend will be paid on June 15, 2022 to shareholders of record at the close of business on June 1, 2022.

Quarter ended June 30, 2022 558,257 46,032 82.46

Total 938,310 $ 78,931 84.12

On June 15, 2022, the Company paid a second quarter 2022 cash dividend on the Company's Class A and Class B common stock of $0.24 per share.

In addition, the Company's Board of Directors has declared a third quarter 2022 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.24 per share.

The third quarter cash dividend will be paid on September 15, 2022 to shareholders of record at the close of business on September 1, 2022.

The Company currently plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors.

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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.

Management has identified the allowance for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2021 Annual Report.

For additional information regarding changes in the Company’s allowance for loan losses for the three months ended March 31, 2022 and 2021, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Management has identified the allowance for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2021 Annual Report.

For additional information regarding changes in the Company’s allowance for loan losses for the three and six months ended June 30, 2022 and 2021, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

There have been no material changes to the Company’s critical accounting policy and estimate since December 31, 2021.

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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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis