What changed in this filing

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Item 1. Business

2023-02-28 compared with 2022-02-28 · 211 added, 212 removed, 384 unchanged (52% of the section changed)

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However, a significant portion of the Company's income continues to be derived from its existing FFELP student loan portfolio.

As of December 31, 2021, the Company had a $17.2 billion FFELP loan portfolio that management anticipates will amortize over the next approximately 15 years and has a weighted average remaining life of approximately 8 years.

As of December 31, 2022, the Company had a $13.6 billion FFELP loan portfolio.

Interest income on the Company's existing FFELP loan portfolio will decline over time as the portfolio is paid down.

Since all FFELP loans will eventually run off, a key objective of the Company is to reposition itself for the post-FFELP environment.

Since all FFELP loans will eventually run off, a key objective of the Company is to maximize the amount and timing of cash flows generated from its FFELP portfolio and reposition itself for the post-FFELP environment.

To reduce its reliance on interest income from FFELP loans, the Company has expanded its services and products.

This expansion has been accomplished through internal growth and innovation as well as business and certain investment acquisitions.

The Company is also actively expanding its private education and consumer loan portfolios, and in November 2020 launched Nelnet Bank (as further explained below).

The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank (as further explained below).

In addition, the Company has been servicing federally owned student loans for the Department since 2009.

Operating Segments

The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its Asset Generation and Management operating segment.

This segment is expected to generate a stable net interest margin and significant amounts of cash as the FFELP portfolio amortizes.

In addition, the Company earns fee-based revenue through its Loan Servicing and Systems and Education Technology, Services, and Payment Processing operating segments.

Further, the Company earned communications revenue through ALLO, formerly a majority-owned subsidiary of the Company prior to a recapitalization of ALLO, resulting in the deconsolidation of ALLO from the Company’s financial statements on December 21, 2020.

The recapitalization of ALLO was not considered a strategic shift in the Company’s involvement with ALLO, and ALLO’s results of operations, prior to the deconsolidation, are presented by the Company as a reportable operating segment.

See note 2, “ALLO Recapitalization” in the accompanying notes to consolidated financial statements included in this report for a description of ALLO’s recapitalization and the Company’s continued involvement.

On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation (“FDIC”) and for a bank charter from the Utah Department of Financial Institutions (“UDFI”) in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations.

Nelnet Bank’s operations are presented by the Company as a reportable operating segment.

The Company’s reportable operating segments are summarized below.

Business activities and operating segments that are not reportable are combined and included in "Corporate and Other Activities." Corporate and Other Activities also includes income earned on the majority of the Company’s investments and interest expense incurred on unsecured and other corporate related debt transactions.

Business activities and operating segments that are not reportable are combined and included in “Corporate and Other Activities."

Loan Servicing and Systems (LSS)

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• Focuses on student and consumer loan origination services and servicing, loan origination and servicing-related technology solutions, and outsourcing business services

• Includes the brands Nelnet Diversified Solutions, Nelnet Loan Servicing, Nelnet Servicing, Great Lakes Educational Loan Services, Inc.

(“Great Lakes”), Firstmark Services, GreatNet, Nelnet Renewable Energy, and Nelnet Government Services

• Includes the brands Nelnet Diversified Solutions, Nelnet Loan Servicing, Nelnet Servicing, Great Lakes, Firstmark Services, GreatNet, and Nelnet Government Services

Education Technology, Services, and Payment Processing (ETS&PP)

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• NBS provides education services, payment technology, and community management solutions for K-12 schools, higher education institutions, churches, and businesses in the United States and internationally

• Includes the divisions of FACTS, Nelnet Campus Commerce, PaymentSpring, Nelnet Community Engagement, and Nelnet International

Communications

• Includes the operations of ALLO prior to the deconsolidation of ALLO on December 21, 2020

• Focuses on providing fiber optic service directly to homes and businesses for internet, telephone, and television services

• Includes the divisions of FACTS, Nelnet Campus Commerce, Nelnet Payment Services (formerly PaymentSpring), Nelnet Community Engagement, and Nelnet International

Asset Generation and Management (AGM)

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• Includes the acquisition and management of student and other loan assets

• Internet Utah-chartered industrial bank focused on the private education loan marketplace

• Internet Utah-chartered industrial bank focused on the private education and unsecured consumer loan markets

Communications

• Comprised of the operations of ALLO prior to the deconsolidation of ALLO on December 21, 2020

• ALLO focuses on providing fiber optic service directly to homes and businesses for internet, telephone, and television services

A more detailed description of each of the Company's reportable operating segments and Corporate and Other Activities is provided below.

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• Providing student loan servicing software and other information technology products and services

• Customer acquisition, management services, and backup servicing for community solar developers

• Providing outsourced services including call center, processing, and technology services

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Servicing federally owned student loans for the Department

Nelnet Servicing, LLC (“Nelnet Servicing”), a subsidiary of the Company, and Great Lakes, acquired by the Company in February 2018, are two of the current seven private sector entities that have student loan servicing contracts with the Department to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department.

As of December 31, 2021, Nelnet Servicing was servicing $215.8 billion of student loans for 6.4 million borrowers under its contract, and Great Lakes was servicing $262.6 billion of student loans for 7.8 million borrowers under its contract.

Nelnet Servicing, LLC (Nelnet Servicing), a subsidiary of the Company, and Great Lakes Educational Loan Services, Inc.

(“Great Lakes”), acquired by the Company in February 2018, are two of the current six private sector entities that have student loan servicing contracts with the Department to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department.

The Department evaluates each federal loan servicer and allocates new borrower accounts on a quarterly basis based on service level and portfolio performance metrics.

As of December 31, 2022, NDS was servicing $545.4 billion of student loans for 15.8 million borrowers under its contracts.

Under the servicing contracts, Nelnet Servicing and Great Lakes earn a monthly fee from the Department for each unique borrower they service on behalf of the Department.

The Department is the Company's largest customer, representing 29 percent of the Company's revenue and 69 percent of the LSS operating segment’s revenue in 2021.

Nelnet Servicing's and Great Lakes' 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.

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.

PHEAA notified the Department it would not be accepting a long-term extension of its student loan servicing contract beyond what was needed to ensure a smooth transition for borrowers.

In November 2021, PHEAA and the Department agreed to a short-term extension that will expire in December 2022.

All applicable student loans serviced by PHEAA will be transferred to successor servicers prior to the end of this contract extension.

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

A portion of the PHEAA servicing volume has been and will be transitioned prior to May 1, 2022, which is the date on which the suspension of federal student loan payments under the CARES Act is scheduled to expire.

Approximately 850,000 PHEAA borrowers have been transitioned to Nelnet Servicing’s platform as of the date of this filing (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.

In addition, the New Hampshire Higher Education Association Foundation Network (“Granite State”) exited the federal student loan servicing business in 2021.

Granite State’s servicing volume of approximately 1.3 million borrowers was transitioned to Edfinancial Services, LLC ("Edfinancial"), a current servicer for the Department, during the third and fourth quarters of 2021.

Edfinancial utilizes Nelnet Servicing's platform to service their loans for the Department, as did Granite State prior to its exit.

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 January 1, 2021 through June 30, 2021, Great Lakes’ and Nelnet Servicing’s overall rankings among the remaining six go-forward servicers for the Department (which excludes PHEAA) were third and fifth, respectively.

Based on these results, Great Lakes’ and Nelnet Servicing’s allocation of new student loan servicing volumes beginning September 1, 2021 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.

The Department is the Company's largest customer, representing 32% of the Company's revenue and 74% of the LSS operating segment’s revenue in 2022.

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.

If the Company’s servicing contracts are not extended beyond the current expiration date or the Company is not chosen as a subsequent servicer, the Company’s servicing revenue would decrease significantly.

If the terms and requirements under a potential new contract with the Department are less favorable than under the Company’s current contracts, loan servicing revenue and/or operating margins could be adversely impacted.

Incremental revenue components earned by Nelnet Servicing or Great Lakes from the Department (in addition to loan servicing revenues) include:

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• Origination of consolidation loans.

The Department outsources the origination of consolidation loans whereby each of the servicers receive Federal Direct Loan consolidation origination volume based on borrower choice.

The Department outsources the origination of consolidation loans whereby servicers receive Federal Direct Loan consolidation origination volume based on borrower choice.

The Department pays the Company a fee for each completed consolidation loan application it processes.

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Servicing FFELP loans

NDS services the Company's FFELP student loan portfolio and the portfolios of third parties.

NDS services AGM and Nelnet Bank’s FFELP student loan portfolios and the portfolios of third parties.

The loan servicing activities include loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliations, and claim processing.

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The discontinuation of new FFELP loan originations in July 2010 has caused and will continue to cause FFELP servicing revenue to decline as these loan portfolios are paid down.

However, the Company believes there may be opportunities to service additional FFELP loan portfolios from current FFELP participants as the program winds down.

However, the Company believes there may be opportunities to service additional FFELP loan portfolios from current FFELP participants not currently using the Company as a servicer as the FFEL Program winds down.

Originating and servicing private education and consumer loans

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These loans are used primarily to bridge the gap between the cost of higher education and the amount funded through financial aid, federal loans, or the borrowers' personal resources.

Although similar in terms of activities and functions as FFELP loan servicing (e.g., application processing, disbursement processing, payment processing, customer service, statement distribution, and reporting), private education loan servicing activities are not required to comply with provisions of the Higher Education Act and may be more customized to individual client requirements.

The Company has invested and currently plans to continue to invest in modernizing key technologies and services to position its consumer loan servicing business for the long-term, expanding services to include personal loan products and other consumer installment assets.

The Company is in the process of a complete modernization of its private education and consumer loan origination and repayment servicing systems.

Improvements in systems will allow for diversified products to be both originated and serviced with secure, state-of-the-art application and servicing platforms to drive growth for the Company's client partners.

Presenting a very wide market opportunity of new entrants and existing players, consumer lending is currently expected to be a growth area.

Although similar in terms of activities and functions as FFELP loan servicing, private education loan servicing activities are not required to comply with provisions of the Higher Education Act and may be more customized to individual client requirements.

The Company has invested and plans to continue to invest in modernizing key technologies and services to position its consumer loan servicing business for the long-term, expanding services to include personal loan products and other consumer installment assets.

The Company is in the process of a modernization of its private education and consumer loan origination and repayment servicing systems.

The Company believes improvements in systems will allow for diversified products to be both originated and serviced with secure, state-of-the-art application and servicing platforms to drive growth for the Company's client partners.

Presenting a very wide market opportunity of new entrants and existing players, consumer lending is expected to be a growth area.

In both backup servicing and full servicing partnerships, the Company is a valuable resource for consumer lenders and asset holders as it allows for leveraged economies of scale, high compliance, and secure service to client partners.

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

In conjunction with the sale, the Company was selected as servicer of the portfolio.

During March 2021, approximately 261,000 borrowers were converted to the Company's servicing platform, with the vast majority of the remaining borrowers converted in the second quarter of 2021.

As of December 31, 2022, NDS serviced private education and consumer loans on behalf of 35 third-party servicing customers.

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For a monthly fee, these arrangements require a 30 to 90 day notice from a triggering event to transfer the customer's servicing volume to the Company's platform and becoming a full servicing customer.

NDS offers backup servicing for FFEL, private education, and consumer loan programs that leverages existing servicing systems and full service experience.

NDS offers backup servicing for FFEL, private education, and consumer loan

programs that leverages existing servicing systems and full service experience.

NDS provides backup servicing arrangements to assist 20 entities for more than 17 million borrowers.

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NDS provides data center services, student loan servicing software for servicing private education and federal loans, guaranty servicing software, and consulting and professional services to support the technology platforms.

These proprietary software

systems are used internally by the Company and/or licensed to third-party student loan holders and servicers.

These proprietary software systems are used internally by the Company and/or licensed to third-party student loan holders and servicers.

These software systems have been adapted so they can be offered as hosted servicing software solutions that can be used by third parties for guaranty servicing and to service various types of student loans, including Federal Direct Loan Program and FFEL Program loans.

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As of December 31, 2022, 6.1 million borrowers were hosted on the Company's hosted servicing software solution platforms, including 6.0 million borrowers who were serviced by entities that have contracts to service loans for the Department.

As of December 31, 2020, 6.6 million borrowers were hosted on the Company’s platforms.

In January 2021, a contract with Great Lakes’ former parent company expired that resulted in a reduction of 2.3 million borrowers.

Customer acquisition, management services, and backup servicing for community solar developers

NDS, under the brand Nelnet Renewable Energy, works with solar developers and financiers to provide marketing, sales, and customer engagement services to meet key milestones before solar projects are interconnected to the grid and provide the subsequent operational support for the term of the subscriber agreement, including addressing incoming inquiries, verifying eligibility, billing, payment processing, and reconciliation.

The Company earns a one-time fee for subscriber acquisition and a recurring fee for subscriber management.

Additionally, NDS provides backup servicing capabilities to solar developers and financiers, which provides assurances that projects will still be serviced in the event the primary servicer’s situation changes.

Providing outsourced services including call center, processing, technology, and marketing services

Six entities, including Nelnet Servicing and Great Lakes, are currently servicers of federally owned loans.

NDS currently licenses its hosted servicing software to two of the six servicers for the Department.

The Company’s remote hosted Department servicing customers will transfer their servicing volume to other servicers in 2023, which will have a significant adverse impact to software services revenue in future periods.

See the MD&A - “Loan Servicing and Systems Operating Segment - Results of Operations - Government Loan Servicing” for additional information.

Providing outsourced services including call center, processing, and technology services

NDS provides business process outsourcing primarily specializing in contact center management.

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NDS also outsources technology expertise and capacity to supplement development needs in organizations.

The Company's scalable servicing platform allows it to provide compliant, efficient, and reliable service at a low cost, giving the Company a competitive advantage over others in the industry.

We believe the Company's scalable servicing platform allows it to provide compliant, efficient, and reliable service at a low cost, giving the Company a competitive advantage over others in the industry.

In contrast to its competitors, the Company has segmented its private education loan servicing on a distinct platform, created specifically to meet the needs of private education student loan borrowers, their family, the school they attend, and the lenders who serve them.

This ensures access to specialized teams with a dedicated focus on servicing these borrowers.

Seven entities, including Nelnet Servicing and Great Lakes, are currently servicers of federally-owned loans.

Upon completion of the exit of PHEAA from the federal student loan servicing business, six servicers will remain on a go-forward basis.

NDS currently licenses its hosted servicing software to two of the eventual remaining six servicers for the Department.

NDS is one of the leaders in the development of servicing software for guaranty agencies, consumer and private education loan programs, the Federal Direct Loan Program, and FFELP student loans.

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• Nelnet Campus Commerce

• PaymentSpring

• Nelnet Payment Services (formerly PaymentSpring)

• Nelnet Community Engagement

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The majority of this segment’s customers are located in the United States;

however, the Company also provides services and technology as part of its Nelnet International division in Australia, New Zealand, and Southeast Asia, and currently believes there are opportunities to increase its customer base and revenues internationally.

however, the Company also provides services and technology as part of its Nelnet International division in Australia, New Zealand, and Southeast Asia, and believes there are opportunities to increase its customer base and revenues internationally.

See the MD&A - “Education Technology, Services, and Payment Processing Operating Segment - Results of Operations” for an overview of the seasonality of the business in this operating segment.

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The Company earns tuition payment plan services revenue by collecting a fee from either the institution or the payer to administer the plan.

Additionally, the Company may earn revenue for payment processing fees when families make tuition payments.

Additionally, the Company may earn payment processing revenue for fees when families make tuition payments.

The Company's grant and aid assessment service helps K-12 schools evaluate and determine the amount of financial aid to disburse to the families it serves.

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These services provide continuous advanced learning and professional development while helping private schools identify and attain equitable participation in Title I and Title II federal education programs.

Due to the increases in federal pandemic-related funds supporting K-12 education under the Emergency Assistance to Non-Public Schools (EANS) program, the Company has

witnessed a spike in schools asking for services in these areas.

FACTS Education Solutions also offers an innovative technology product that aids in both teacher and student evaluation.

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Nelnet Cashiering allows higher education institutions to manage all in-person payments on campus.

Students can receive in-app messages, make payments on their phone, and use a digital student ID with the Company’s Nelnet Campus Key product.

The Company earns hosting fees, per transaction fees, and credit card processing fees for its integrated commerce solutions.

Credit card processing fees are included in payment processing revenue.

PaymentSpring

NBS uses the PaymentSpring brand to provide secure payment processing technology.

PaymentSpring supports and provides payment processing services, including credit card and electronic transfers, to the other divisions of NBS in addition to other industries and software platforms across the United States.

PaymentSpring offers mobile, in-person, and online solutions for customers to collect, process, and view credit card and Automated Clearing House (“ACH”) payments.

PaymentSpring services are Payment Card Industry (“PCI”) compliant.

PaymentSpring earns payment processing revenues through fees for credit card and ACH transactions.

PaymentSpring generated $43 million and $39 million in revenue for the years ended December 31, 2021 and 2020, respectively.

Nelnet Payment Services

NBS uses the Nelnet Payment Services brand to provide secure payment processing technology.

Nelnet Payment Services supports and provides payment processing services, including credit card and electronic transfers, to the other divisions of NBS in addition to other third-party industries and software platforms across the United States.

Nelnet Payment Services offers mobile, in-person, and online solutions for customers to collect, process, and view credit card and Automated Clearing House (ACH) payments.

Services rendered by Nelnet Payment Services are Payment Card Industry (PCI) compliant.

Nelnet Payment Services earns payment processing revenues through fees for credit card and ACH transactions.

Nelnet Payment Services generated $50 million and $43 million in revenue for the years ended December 31, 2022 and 2021, respectively.

Nelnet Community Engagement

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Giving Management – Giving management products connect organizations with partners, donors, and volunteers to make personalized giving simple.

Giving management administrative features provide a dashboard, customizable receipts, pledge

management, and real-time reporting.

Giving management administrative features provide a dashboard, customizable receipts, pledge management, and real-time reporting.

Donors have options to give using the product's mobile app, text messaging, or passcode and can be one-time or recurring gifts.

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Nelnet International provides its services and technology to schools in more than 55 countries, with the largest concentrations in Australia, New Zealand, and the Asia-Pacific region.

Nelnet International generated $7 million and $6 million in revenue for the years ended December 31, 2021 and 2020, respectively.

Nelnet International generated $7 million in revenue for each of the years ended December 31, 2022 and 2021.

The Company is the largest provider of tuition management and financial needs assessment services to the private and faith-based K-12 market in the United States.

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In this market, the primary competition is from a relatively small number of campus commerce and tuition payment providers, as well as solutions developed in-house by colleges and universities.

The Company's principal competitive advantages are (i) the customer service it provides to institutions and consumers, (ii) the technology provided with the Company's service, and (iii) the Company's ability to integrate its technology with the institution clients and their third-party service providers.

The Company believes its principal competitive advantages are (i) the customer service it provides to institutions and consumers, (ii) the technology provided with the Company's service, and (iii) the Company's ability to integrate its technology with the institution clients and their third-party service providers.

The Company believes its clients select products primarily based on technology features, functionality, and the ability to integrate with other systems, but price and service also impact the selection process.

Communications

The Company provided communication services through ALLO, a former majority-owned subsidiary, until a recapitalization and additional funding for ALLO resulted in a deconsolidation of ALLO from the Company’s consolidated financial statements in the fourth quarter of 2020.

The Company continues to hold a significant investment in ALLO.

See note 2 of the notes to consolidated financial statements included in this report for additional information related to the ALLO recapitalization.

ALLO’s results of operations, prior to deconsolidation, are presented by the Company as a reportable operating segment.

ALLO derives its revenue primarily from the sale of telecommunication services, including internet, telephone, and television services, to business, governmental, and residential customers in Nebraska and Colorado, and specializes in high-speed internet and broadband services available through its all-fiber network.

ALLO plans to continue to increase market share and revenue in its existing markets and plans to expand to additional communities.

ALLO has announced plans to serve customers in Arizona and is currently seeking regulatory approval to do so.

As of December 31, 2021, ALLO currently serves, is in the process of building their network in, and has announced they will build in a total of 26 communities.

The total households in these communities is approximately 325,000.

As of December 31, 2021, ALLO served almost 73,000 residential customers and had more than 34,000 business lines.

Asset Generation and Management

AGM includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank).

Loans consist of federally insured student loans (originated under the FFEL Program), private education loans, and consumer loans.

Substantially all of AGM’s loan portfolio (98.0 percent as of December 31, 2021) is federally insured.

Loans consist of federally insured student (originated under the FFEL Program), private education, consumer, and other loans.

As of December 31, 2022, AGM's loan portfolio was $14.2 billion.

The Company generates a substantial portion of its earnings from the spread, referred to as “loan spread,” between the yield it receives on its loan portfolio and the associated costs to finance such portfolio.

Substantially all of AGM’s loan portfolio (95.7% as

of December 31, 2022) is federally insured.

The Company earns net interest income on its loan portfolio, and generates a substantial portion of its earnings from the spread, referred to as “loan spread,” between the yield it receives on its loan portfolio and the associated costs to finance such portfolio.

See the MD&A - "Asset Generation and Management Operating Segment - Results of Operations - Loan Spread Analysis,” for further details related to loan spread.

The loan assets are held in a series of lending subsidiaries and associated securitization trusts designed specifically for this purpose.

In addition to the loan spread earned on its portfolio, all costs and activity associated with managing the portfolio, such as servicing of the assets and debt maintenance, are included in this segment.

AGM's portfolio of federally insured student loans is subject to minimal credit risk, as these loans are guaranteed by the Department at levels ranging from 97 percent to 100 percent.

The Higher Education Act regulates every aspect of the federally insured student loan program, including certain communications with borrowers, loan originations, and default aversion.

AGM's portfolio of federally insured student loans is subject to minimal credit risk, as these loans are guaranteed by the Department at levels ranging from 97% to 100%.

The Higher Education Act regulates every aspect of the federally insured student loan program.

Failure to service a student loan properly could jeopardize the guarantee on federal student loans.

In the case of death, disability, or bankruptcy of the borrower, the guarantee covers 100 percent of the loan's principal and accrued interest.

In the case of death, disability, or bankruptcy of the borrower, the guarantee covers 100% of the loan's principal and accrued interest.

FFELP loans are guaranteed by state agencies or nonprofit companies designated as guarantors, with the Department providing reinsurance to the guarantor.

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Generally, the guarantor is responsible for ensuring that loans are serviced in compliance with the requirements of the Higher Education Act.

When a borrower defaults on a FFELP loan, AGM submits a claim to the guarantor, who provides reimbursements of principal and accrued interest, subject to the applicable risk share percentage.

When a borrower defaults on a FFELP loan, the servicer submits a claim to the guarantor, who provides reimbursements of principal and accrued interest, subject to the applicable risk share percentage.

Origination and acquisition

The Reconciliation Act of 2010 discontinued originations of new FFELP loans, effective July 1, 2010.

However, the Company believes there may be ongoing opportunities to continue to purchase FFELP loan portfolios from current FFELP participants looking to exit or adjust their FFELP businesses.

For example, the Company purchased a total of $904.1 million of FFELP student loans from various third parties during 2021.

However, since all FFELP loans will eventually pay off, a key objective of the Company over the last several years is to reposition itself for the post-FFELP environment.

As such, the Company is actively acquiring private education and consumer loans and currently plans to expand these portfolios.

During 2021, the Company purchased $89.3 million of private education loans and $81.9 million of consumer loans.

AGM's competition for the purchase of FFELP, private education, and consumer loan portfolios includes banks, hedge funds, and other finance companies.

Since all FFELP loans will eventually pay off, as new FFELP loans are not being originated, a key objective of the Company is to maximize the amount and timing of cash flows generated from its FFELP portfolio and reposition itself for the post-FFELP environment.

As such, the Company is actively acquiring private education, consumer, and other loans and plans to expand these portfolios.

During 2022, the Company purchased $524.5 million of private education, consumer, and other non-FFELP loans.

AGM's competition for the purchase of FFELP, private education, consumer, and other loan portfolios includes banks, hedge funds, and other finance companies.

Interest rate risk management

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The effects on the Company's results of operations as a result of the changing interest rate environments are further outlined in the MD&A - "Asset Generation and Management Operating Segment - Results of Operations - Loan Spread Analysis" and in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment.”

Nelnet Bank is a Utah-chartered, FDIC-insured industrial bank headquartered in Salt Lake City, Utah.

On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and for a bank charter from the Utah Department of Financial Institutions (UDFI) in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations.

Nelnet Bank, a wholly owned subsidiary of the Company, operates as an internet industrial bank franchise focused on the private education and unsecured consumer loan markets, with a home office in Salt Lake City, Utah.

Nelnet Bank is governed by a board of directors, a majority of the members of which are independent of the Company.

Nelnet Bank was formed November 2, 2020, and is a wholly-owned subsidiary of the Company.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million, consisting of $55.9 million of cash and $44.1 million of student loan asset-backed

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and an additional $30.0 million of capital was contributed in 2022 by the Company to support Nelnet Bank’s asset growth.

As a consolidated subsidiary of the Company, the Bank’s assets, liabilities, results of operations, and cash flows are reflected in the Company’s consolidated financial statements, and the industrial bank charter allows the Company to maintain its other diversified business offerings.

Nelnet Bank serves and plans to serve a niche market, with a concentration in the private education and unsecured consumer loan markets.

Currently, Nelnet Bank offers refinance private education loan options to borrowers that have higher priced private education and/or federal student loan debt.

Throughout Nelnet Bank’s three-year de novo period, Nelnet Bank plans to continue to launch products focused on helping students achieve their dreams, with the origination of in-school private education loans, K-12 education loans offered to families attending private primary and secondary schools in the United States, and unsecured consumer loans, primarily refinance loans, for consumers to consolidate credit card and other general-purpose debt.

Currently, Nelnet Bank offers refinance private education loan options to borrowers that have higher priced private education and/or federal student loan debt and in-school private education loans to students attending higher education institutions.

The recent increase of interest rates has negatively impacted and will continue to negatively impact the origination of refinanced private education loans.

Nelnet Bank plans to begin offering unsecured consumer loans, primarily refinance loans, in 2023 for consumers to consolidate credit card and other general-purpose debt as well as financing home improvements.

Nelnet Bank extends consumer loans to borrowers in all 50 states plus the District of Columbia.

As of December 31, 2022, Nelnet Bank’s loan portfolio was $419.8 million.

Nelnet Bank currently plans to offer its in-school private education loan product to students attending higher education institutions by the second quarter of 2022 for the 2022-2023 academic school year.

Nelnet Bank’s deposits are interest-bearing and consist of brokered certificates of deposit (CDs), retail and other savings deposits and CDs, and intercompany deposits.

Retail and other deposits include savings deposits from 529 College Savings and Health Savings plans and commercial and institutional CDs.

Retail and other savings deposits include deposits from Educational 529 College

Savings and Health Savings plans and commercial and institutional CDs.

Union Bank and Trust Company (“Union Bank”), a related party, is the program manager for the College Savings plans.

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(parent company), as required under a Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating deposits, and NBS custodial deposits consisting of tuition payments collected which are subsequently remitted to the appropriate school.

As of December 31, 2021, Nelnet Bank had $425.4 million of deposits.

As of December 31, 2022, Nelnet Bank had $789.6 million of deposits, of which $98.3 million were intercompany deposits.

As a Utah-chartered industrial bank, Nelnet Bank is able to fulfill its mission of being a steady and stable supplier of education credit.

The Bank’s goal is to meet underserved needs in the United States for reliable education financing.

The Company’s strong history within, and understanding of, the education industry will afford Nelnet Bank access to more families participating in education nationwide.

The Company’s strong history within, and understanding of, the education industry are expected to afford Nelnet Bank access to more families participating in education nationwide.

Communications

The Company continues to hold a significant investment in ALLO.

See note 2 of the notes to consolidated financial statements included in this report for additional information related to the ALLO recapitalization and the Company’s current ownership investment in ALLO.

ALLO derives its revenue primarily from the sale of telecommunication services, including internet, telephone, and television services to business, governmental, and residential customers in Nebraska, Colorado, and Arizona, and specializes in high-speed internet and broadband services available through its all-fiber network.

ALLO plans to continue to increase market share and revenue in its existing markets and plans to expand to additional communities.

As of December 31, 2022, ALLO currently serves, is in the process of building their network in, and has announced they will build in a total of 36 communities.

The total households in these communities is approximately 410,000.

As of December 31, 2022, ALLO served more than 90,000 residential customers and had nearly 41,000 business lines.

Corporate and Other Activities

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Corporate and Other Activities include the following items:

• The operating results of Whitetail Rock Capital Management, LLC (“WRCM”), the Company's SEC-registered investment advisor subsidiary

• The results of the majority of the Company’s investment activities, including early-stage and emerging growth companies, real estate, and renewable energy (solar)

• The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S.

Securities and Exchange Commission (SEC)-registered investment advisor subsidiary

• The operating results of Nelnet Renewable Energy, which include solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar development

• The results of the majority of the Company’s investment activities, including early-stage and emerging growth companies and real estate

• Interest income earned on cash and investment debt securities (primarily student loan and other asset-backed securities)

• Interest expense incurred on unsecured and certain other corporate related debt transactions

• Other product and service offerings that are not considered reportable operating segments

Corporate and Other Activities also include certain corporate activities and overhead functions related to executive management, internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.

Corporate and Other Activities also include certain activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.

These costs are allocated to each operating segment based on estimated use of such activities and services.

Corporate and Other Activities also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.

Whitetail Rock Capital Management, LLC

As of December 31, 2022, WRCM had $3.5 billion in assets under management for third-party customers, consisting of student loan asset-backed securities ($2.8 billion) and Nelnet stock ($0.7 billion) - primarily shares of Class B common stock.

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

WRCM earns annual management fees of five basis points for Nelnet stock under management.

During 2021, WRCM earned $4.2 million in management fees and generated $3.6 million in performance fees.

The Company makes investments to further diversify itself both within and outside of its historical core education-related businesses, including investments in early-stage and emerging growth companies, real estate, renewable energy resources (solar projects), and various equity and student loan and other asset backed securities.

As of December 31, 2021, the Company has a

$1.6 billion portfolio of investments.

During 2022, WRCM earned $6.0 million in management fees.

Nelnet Renewable Energy

As of December 31, 2022, the Company has invested a total of $175.6 million (which excludes $102.8 million syndicated to third-party investors) in tax equity investments in renewable energy solar partnerships to support the development and operations of solar projects throughout the country.

These investments provide a federal income tax credit under the Internal Revenue Code, equaling either 26% or 30% of the eligible project cost, with the tax credit available when the project is placed-in-service.

The Company is then allowed to reduce its tax estimates paid to the U.S.

Treasury based on the credits earned.

In addition to the credits, the Company structures the investments to receive quarterly distributions of cash from the operating earnings of the solar project for a period of at least five years (so the tax credits are not recaptured).

After that period, the contractual agreements typically provide for the Company’s interest in the projects to be purchased in an exit at the fair market value of the discounted forecasted future cash flows allocable to the Company.

Given the expected timing of cash flows and experience the Company has in underwriting these assets, the Company considers these investments a good use of its capital when looking at its capital deployment initiatives.

In addition to making these tax equity investments for the Company’s own portfolio, the Company is syndicating these investments with co-investors with similar tax attributes.

The Company has developed expertise in sourcing, underwriting, closing, and managing these investments and believes it has strong relationships with solar developers throughout the country.

The Company invests anywhere between 10% and 100% in each investment transaction, with its co-investment partners taking the remaining share.

The Company earns an upfront management fee based on the amount of capital contributed by the co-investor.

The management fee is recognized as income over the duration of the investment (typically five years).

In addition, a performance fee is earned and recognized by the Company upon the co-investor’s exit from the investment.

The performance fee is typically a percentage of the capital invested and is collected during the sixth year following the initial investment.

The aggregate of the management and performance fees earned from co-investors is typically five to six percent of the capital invested.

The Company raised and invested a total of $63.8 million during 2022 on behalf of its co-investors.

Due to the management and control of each of these investment partnerships, the tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s portion being presented as noncontrolling interests.

In addition to solar tax equity investments, the Company has a strategy to own solar energy project assets.

These assets provide long-term, predictable, and recurring cash flows.

Accordingly, the Company has begun to execute a multi-faceted approach to originate, acquire, finance, own, and manage these assets.

As part of this strategy, on July 1, 2022, the Company acquired 80% of the ownership interest of two subsidiaries of GRNE Solutions, LLC named GRNE-Nelnet, LLC (GRNE) and ENRG-Nelnet, LLC (ENRG) (collectively referred to as “GRNE Solar”) for total consideration of $33.9 million.

GRNE is a solar contracting company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.

As of December 31, 2022, it has seven physical branches, predominately in the Midwest with its primary corporate operations in Palatine, Illinois and Lincoln, Nebraska.

GRNE contracts to build solar on a cost-plus-margin basis.

ENRG is a development company that is primarily focused on the development of solar assets that the Company expects to own long-term.

ENRG performs services such as site control, permitting, execution of power purchase agreements, utility interconnections, construction oversight, project finance, and other ancillary services to enable a successful solar photovoltaic project.

The acquisition of GRNE Solar provides technical know-how, customer relationships, a talented workforce, and revenue streams to Nelnet’s expanding renewable energy business.

The acquisition gives the Company an ability to realize a diversified revenue stream by generating a fee-based service from its EPC and operations and maintenance (O&M) services, while also originating solar assets for the Company’s own balance sheet on a high-quality, cost-efficient basis.

These assets are expected to earn revenue and generate a profit for up to 40 years based on energy production and energy sales to entities, such as utilities, governmental bodies, commercial companies, educational institutions, multi-family landlords, and healthcare groups.

The Company plans to expand this business geographically across the United States, increase the team size and technical expertise to build larger projects, and serve new and existing customers on a go-forward basis.

In addition to asset origination, the Company plans to begin acquiring solar assets that are in various stages of their project life-cycle with other development partners.

As of December 31, 2022, the Company has a $2.1 billion portfolio of investments, which includes $1.4 billion of student loan and other asset-backed

See note 7 in the notes to consolidated financial statements for additional detail of the Company’s investments, including a summary of holdings.

Early-Stage and Emerging Growth (Venture Capital) Investments

The Company has invested in early-stage, emerging growth companies and various funds.

The Company has invested in early-stage and emerging growth companies and various funds.

As of December 31, 2022, the Company has investments in 73 entities and funds and the carrying value of such investments was $249.4 million.

The largest investment in the Company’s venture capital portfolio is Hudl.

The largest investment in the Company’s venture capital portfolio is Agile Sports Technologies, Inc.

(doing business as “Hudl”).

As of December 31, 2022, the carrying value of the Company’s investment in Hudl was $133.9 million.

Hudl is a leading sports performance analysis company, and their software provides more than 200,000 teams across 40 sports and in 150 countries the insights to be more competitive.

Hudl is a leading sports performance analysis company, and its software provides more than 200,000 teams across 40 sports and in 150 countries the insights to be more competitive.

Graff, a member of the Company’s board of directors, is a co-founder, the chief executive officer, and a director of Hudl.

As of December 31, 2022, the Company has 31 real estate investments across the United States with a carrying value of $80.4 million.

Included in the Company’s real estate portfolio is the development of commercial properties in the Midwest, and particularly in Lincoln, Nebraska, where the Company is headquartered.

The local investments include projects for the development of properties in Lincoln’s east downtown Telegraph District, where a new facility for the Company’s student loan servicing operations is located, and projects in Lincoln’s Haymarket District, including the new headquarters of Hudl.

Included in the Company’s real estate portfolio is the development of commercial properties in the Midwest, particularly in Lincoln, Nebraska, where the Company is headquartered.

The local investments include projects for the development of properties in Lincoln’s east downtown Telegraph District, where a facility for the Company’s student loan servicing operations is located, and projects in Lincoln’s Haymarket District, including the headquarters of Hudl.

The Company is also a tenant at Hudl's headquarters.

As of December 31, 2021, the Company has invested a total of $168.7 million (which excludes $59.2 million syndicated to third-party investors) in tax equity investments in renewable energy solar partnerships to support the development and operations of solar projects throughout the country.

These investments provide a federal income tax credit under the Internal Revenue Code, currently at 26 percent (for projects commencing construction in 2020-2022) and 30 percent (for projects commencing construction prior to 2020) of the eligible project cost, with the tax credit available when the project is placed-in-service.

The Company is then allowed to reduce its tax estimates paid to the U.S.

Treasury based on the credits earned.

Given the expected timing of cash flows, experience the Company has in underwriting these assets, and beneficial impact to the climate, the Company believes these investments are a great fit within its capital deployment initiatives.

These investments are structured such that a significant proportion of the cash distributions and tax items (including the income tax credit) are allocated back to the Company within the first eighteen months of the investment capital contribution, in order to achieve a target after tax return.

The cash distributions to the Company are then structured to flatten until exit, typically between years five and six.

Given the unique arrangement in which investors share in the profits and losses of the solar investment with cash and tax benefit allocations among the partners changing over the life of the project, the accounting guidance calls for the use of the Hypothetical Liquidation at Book Value (“HLBV”) method, which can result in non-linear GAAP income/loss allocation results.

Under this method, a balance sheet approach is utilized to determine what each investor would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual agreements, assuming the net assets of the funding structures were liquidated at their recorded amounts determined in accordance with GAAP.

As the investor receives a majority of this return through the income tax credit and higher cash distributions at the beginning of the investment, as of the first period of the hypothetical liquidation, the investor’s remaining net claim on assets is relatively low compared to the initial cash contributed.

This difference between the initial cash contributions and the first period’s ending net claim on assets through the hypothetical liquidation causes significant GAAP losses on the investment to be recognized through the income statement within the initial periods of the investment.

After the carrying value of the investment on the balance sheet is written down to the hypothetical liquidation amount, subsequent year’s earnings are expected to align with and reflect the operating profits or losses of the investment.

The Company realizes that application of the HLBV method to its solar investments has a variable impact on its periodic earnings that in the early years is not reflective of the expected long-term economics of the investments.

Given the significant amount of investments made in the last couple of years and the associated ramp-up period, the Company recognized a $3.0 million and $33.6 million pre-tax loss attributable to its interests in these investments in 2021 and 2020, respectively, under the HLBV method.

These pre-tax loss amounts in 2021 and 2020 exclude $7.1 million and $3.8 million, respectively, of losses attributable to third-party investors that are included in “net loss attributable to noncontrolling interests” on the Company’s consolidated statements of income.

As these investments mature and perform as forecasted, the Company expects to recoup that loss and realize additional income between now and the sale of each of its interests, likely 60 to 72 months from the date the project is placed in service.

Thus, the Company expects the economic

gain from these investments to be realized in its future earnings, but, due to the hypothetical liquidation valuations as of the balance sheet dates during the intended investment horizon, the HLBV method results in some volatility in the Company’s consolidated periodic earnings results.

Regulation and Supervision

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Loan Servicing and Systems

NDS, which services Federal Direct Loan Program, FFELP, and private education and consumer loans, is subject to federal and state consumer protection, privacy, and related laws and regulations.

NDS, which services Federal Direct Loan Program, FFELP, private education, and consumer loans, is subject to federal and state consumer protection, privacy, and related laws and regulations.

Some of the more significant federal laws and regulations include:

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• The California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), which enhances the privacy rights and consumer protection for residents of California

• The CARES Act, which provides temporary relief measures through May 1, 2022 for federal student loans held by the Department, as a result of the COVID-19 pandemic

• The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which provides temporary relief measures for federal student loans held by the Department, as a result of the COVID-19 pandemic

• The Federal Bankruptcy laws Title 11 of the U.S.

Code, which provides for the reduction or elimination of certain debts

• The Electronic Signatures in Global and National Commerce Act (ESIGN), which allows the use of electronic records if the consumer has affirmatively consented to such use and has not withdrawn such consent

• Laws prohibiting unfair, deceptive, or abusive acts or practices (UDAAP)

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As a student loan servicer for the federal government and for financial institutions, including the Company’s FFELP student loan portfolio, the Company is subject to the Higher Education Act (HEA) and related laws, rules, regulations, and policies.

The Company is subject to oversight by the Department through the Federal Student Aid Office and the Financial Institution Oversight Service (FIOS) division.

The HEA regulates every aspect of the federally insured student loan program.

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While the HEA is required to be reviewed and reauthorized by Congress every five years, Congress has not reauthorized the HEA since 2008, choosing to temporarily extend the HEA each year since 2013 while Congress works on the next reauthorization.

The Company continuously monitors for potential changes to the HEA and evaluates possible impacts to its business operations.

The Company monitors for potential changes to the HEA and evaluates possible impacts to its business operations.

Our federal servicing contract with the Department, an indefinite-delivery, indefinite quantity contract must be in compliance with the Federal Acquisition Regulations, which regulates the procurement, award, administration, and performance of U.S.

government contracts.

Under the TCPA, plaintiffs may seek actual monetary loss or damages of $500 per violation, and courts may treble the damage award for willful or knowing violations.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (CFPB), which has broad authority to regulate a wide range of consumer financial products and services.

The Company's student loan servicing business is subject to CFPB oversight authority.

In 2015, the CFPB conducted a public inquiry into student loan servicing practices throughout the industry and issued a report discussing public comments submitted in response to the inquiry and suggesting a framework to improve borrower outcomes and reduce defaults, including the creation of consistent, industry-wide standards for the entire servicing market.

The Company's student loan servicing business is subject to CFPB supervision and oversight authority.

The CFPB has authority to draft new regulations implementing federal consumer financial protection laws, to enforce those laws and regulations, and to conduct examinations and investigations of the Company's operations to determine compliance.

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Where the Company has obtained licenses, state licensing statutes may impose a variety of requirements and restrictions on the Company.

In addition, these statutes may also subject the Company to the supervisory and examination authority of state regulators in certain cases, and the Company will be subject to and experience exams by state regulators.

In addition, these statutes may also subject the Company to the supervisory and examination authority of state regulators in certain cases, and the Company will be

subject to and experience exams by state regulators.

If the Company is found to not have complied with applicable laws, regulations, or requirements, it could:

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Education Technology, Services, and Payment Processing

NBS provides tuition management services and school information software for K-12 schools and tuition management services and payment processing solutions for higher education institutions.

NBS provides tuition management services, payment processing, and school information software for K-12 schools and tuition management services and payment processing solutions for higher education institutions.

The Company also provides payment technologies and payment services for software platforms, businesses, and nonprofits beyond the K-12 and higher education space.

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Because the ACH Network uses a batch process, the importance of proper submissions by NACHA members is magnified.

The Company is

also impacted by laws and regulations that affect the bankcard industry.

The Company is registered with Visa, MasterCard, American Express, and the Discover Network as a service provider and is subject to their respective rules.

The Company is also impacted by laws and regulations that affect the bankcard industry.

The Company is registered with the card brand payment networks as a service provider and is subject to their respective rules.

The Company's higher education institution clients are subject to the Family Educational Rights and Privacy Act (FERPA), which protects the privacy of student education records.

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Laws and regulations related to such fees vary from state to state and certain states have laws that to varying degrees prohibit the imposition of a surcharge on a cardholder who elects to use a credit or debit card in lieu of cash, check, or other means.

The Company's contracts with higher education institution clients also require the Company to comply with regulations promulgated by the Department regarding the handling of student financial aid funds received by institutions on behalf of their students under Title IV of the Higher Education Act.

These regulations are designed to ensure students have convenient access to their Title IV funds, do not incur unreasonable fees, and are not led to believe they must open a financial account to receive such funds.

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Nelnet Bank is a Utah industrial bank that is regulated by the FDIC and the UDFI.

As an originator of private education loans, and a purchaser and owner of federally insured student loans, Nelnet Bank is subject to federal and state consumer protection, privacy, and related laws and regulations.

As an originator of private education and consumer loans and a purchaser and owner of federally insured student loans, Nelnet Bank is subject to federal and state consumer protection, privacy, and related laws and regulations.

In addition to having to comply with the majority of laws and regulations addressed in the Loan Servicing and Systems section, there are additional laws and regulations Nelnet Bank must follow.

Some of the more significant laws and regulations applicable to Nelnet Bank include:

• Regulation W and Federal Reserve Act Sections 23A and 23B - Designed to prevent losses to a bank resulting from affiliate engagement and transfer of a bank’s federal deposit insurance safety net to an affiliate

• Community Reinvestment Act - Encourages depository institutions to help meet the credit needs of the communities in which they operate

• Federal Trade Commission (“FTC”) Act - Prevents unfair or deceptive acts or practices and ensures consumer privacy (including the Telephone Sales Rule, FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, and FTC Policy Statement Regarding Advertising Substantiation)

• Regulation O - Places limits and conditions on credit extensions that a bank can offer to its executive officers, principal shareholders, directors, and related interests

• Right to Financial Privacy Act - Establishes specific procedures that government authorities must follow when requesting a customer’s financial records from a bank or other financial institution

• Regulation W and Federal Reserve Act Sections 23A and 23B, which prevents losses to a bank resulting from affiliate engagement and transfer of a bank’s federal deposit insurance safety net to an affiliate

• Community Reinvestment Act, which encourages depository institutions to help meet the credit needs of the communities in which they operate

• Federal Trade Commission (FTC) Act, which prevents unfair or deceptive acts or practices and ensures consumer privacy (including the Telephone Sales Rule, FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, and FTC Policy Statement Regarding Advertising Substantiation)

• Regulation O, which places limits and conditions on credit extensions that a bank can offer to its executive officers, principal shareholders, directors, and related interests

• Right to Financial Privacy Act, which establishes specific procedures that government authorities must follow when requesting a customer’s financial records from a bank or other financial institution

• BSA/AML, which specifies the Bank’s commitment to compliance with the Bank Secrecy Act, Anti-Money Laundering (BSA/AML) laws and regulations, including the USA PATRIOT Act, that were enacted to require financial institutions in the United States to assist U.S.

government agencies with detecting and preventing money laundering and terrorist financing

Regulation D, the Truth in Savings Act (reserve requirements), and Regulation DD (disclosure of deposit terms to customers) will be applicable to Nelnet Bank once consumer deposit products are launched, which is tentatively scheduled for 2023.

Governmental bodies in the United States and abroad have adopted, or are considering the adoption of, laws and regulations restricting the transfer and requiring the safeguarding of nonpublic personal information.

For example, in the United States, the Company and its financial institution clients are, respectively, subject to the FTC’s and the federal banking regulators’ privacy and information safeguarding requirements under the GLBA.

The GLBA requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables customers to opt out of the Company’s ability to share information with unaffiliated third parties under certain circumstances.

Other federal and state laws and regulations impact the Company’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers.

The GLBA also requires financial institutions to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information.

These security and privacy policies and procedures for the protection of personal and confidential information are in effect across all businesses and geographic locations.

Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.

Data privacy and data protection are areas of increasing state legislative focus.

For example, the CCPA, which became effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CCPA gives consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights.

Governmental bodies in the United States and abroad have adopted, or are considering the adoption of, data privacy laws and regulations that include requirements with respect to nonpublic personal information such as data minimization, purpose limitation, transparency, accountability, integrity, and confidentiality.

For example, in the United States, certain of the Company’s operating segments and their financial institution clients are within the corresponding capacities in which they operate, subject to the FTC’s and the federal banking regulators’ privacy and information safeguarding requirements under the GLBA.

The GLBA requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables customers to opt out of the disclosing institution’s ability to share information with third parties under certain circumstances.

Other federal and state laws and regulations also impact the Company’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers.

The GLBA, under the Safeguards Rule, further requires financial institutions to implement a comprehensive information security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer records and information.

The Safeguards Rule was the subject of recent changes approved by the FTC in October 2021 with an effective date of June 9, 2023, whereby such changes are intended to provide for detailed criteria for what specific safeguards applicable financial institutions must implement as part of their information security programs.

Depending on the Company operating segment and the capacities in which they operate, various other domestic federal laws with data privacy and protection requirements may also be relevant such as the FERPA and Fair Credit Reporting Act.

Data privacy and data protection are also areas of increasing state legislative focus.

For example, the CCPA, which became effective on January 1, 2020, is the first state-level comprehensive data privacy and protection law that applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CCPA gives consumers the right to know what personal information is collected about them, the right to access that information, the right to know whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights.

The CCPA contains several exemptions, including an exemption applicable to information that is collected, processed, sold, or disclosed pursuant to the GLBA.

In addition, the CPRA, which amends and expands upon the CCPA, will become effective January 1, 2023.

Further, similar laws may be adopted by other states where the Company does business.

In addition, the CPRA, which amends and expands upon the CCPA, became effective January 1, 2023.

The CPRA, amongst other newly added requirements, and subject to regulations that have yet to become final, sunsets previous CCPA exemptions relating to employment data and business contact data thereby bringing such data within scope of the law.

Also, effective January 1, 2023, is Virginia’s newly enacted VCDPA which is a comprehensive consumer data privacy statute that mandates requirements similar to those found under the California’s CCPA and CPRA.

Similarly, Colorado has enacted the CPA effective July 1, 2023, Connecticut has enacted the CTDPA effective July

1, 2023, and Utah has enacted the UCPA effective December 31, 2023.

Similar comprehensive privacy laws may be adopted by other states where the Company does business.

The federal government may also pass data privacy or data protection legislation.

In addition, in the EU, privacy law is governed by the GDPR, which contains extensive compliance obligations and provides for substantial penalties for non-compliance.

In addition, it is estimated that over 130 countries worldwide have instituted some form of privacy or data protection law.

Of these laws, one of the prominent is the GDPR, which applies to countries in the European Economic Area (EEA) notwithstanding the United Kingdom where the identical law was maintained but is specifically referred to as the UK GDPR.

The GDPR contains extensive compliance obligations and provides for substantial penalties for non-compliance and has expansive extraterritorial scope that reaches beyond the boundaries of the EEA and the UK.

The Company’s renewable energy business is subject to and depends in significant part upon complex federal, state, and other laws and regulations, including the recently passed Inflation Reduction Act, which regulate and, in some instances, incentivize the production of renewable energy.

Intellectual Property

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Employee recruitment, engagement, and retention

The Company works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of its businesses, and has established relationships with trade schools, universities, professional associations, and industry groups to proactively attract talent.

In 2021, the Company hired approximately 4,400 new associates, including approximately 800 temporary associates who are contracted workers who perform a job for only a short amount of time.

The Company works diligently to attract the best talent from a diverse range of sources that are expected to meet the current and future demands of its businesses, and has established relationships with trade schools, universities, professional associations, and industry groups to proactively attract talent.

In 2022, the Company hired approximately 5,200 new associates, including approximately 900 temporary associates who are contracted to perform a job for only a short amount of time.

In 2022, the Company conducted an associate culture survey using a leading outside firm that specializes in employee engagement.

Ninety-one percent of the Company’s associates participated in the survey, 11 points above the survey provider’s industry benchmark.

There were many questions, but the overarching goal of the survey was to determine overall associate engagement through understanding how associates feel about working for the Company and if associates would recommend the Company as a great place to work.

The results of the survey were an overall engagement score of 80 out of 100, which was five points above the survey provider’s industry benchmark, and one point above last year’s survey engagement score.

The Company’s management team collected all the feedback and is focusing on making associate-suggested changes to become an even better place to work.

For 2021, associate voluntary turnover was approximately 28 percent, an 8 percentage point increase from 2020.

The average associate has over six years of service.

Ninety percent of the Company’s associates participated in the survey with results 15 points above the survey provider’s industry benchmark.

There were many questions, but the overarching goal of the survey was to determine overall associate engagement through understanding of how associates feel about working for the Company and if associates would recommend the Company as a great place to work.

The results of the survey were an overall engagement score of 78 out of 100, which was three points above the survey provider’s industry benchmark.

The Company’s management team collected all the feedback and is focusing on making associate-suggested changes so the Company becomes an even better place to work.

For 2022, associate voluntary turnover was approximately 25%, a 3 percentage point decrease from 2021.

The average associate has nearly five years of service.

Diversity and inclusion

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The Company demonstrates its commitment to diversity, equity, and inclusion at the highest levels of the Company.

The Company’s independent directors (seven in total) include three women.

As of December 31, 2021, the Company’s workforce was approximately 66 percent women, an increase from 57 percent as of December 31, 2020.

The Company’s independent directors (seven in total) include four women and two directors that are members of racial/ethnic minorities.

As of December 31, 2022, the Company’s workforce was approximately 66% women, which was unchanged from December 31, 2021.

As of December 31, 2020, 57% of the Company’s workforce was women.

People of color, as defined by the U.S.

Equal Employment Opportunity Commission's EEO-1 race and ethnicity categories for the U.S., represented approximately 27 percent of the Company’s workforce (based on associate self-identification), an increase from 20 percent as of December 31, 2020.

Equal Employment Opportunity Commission's EEO-1 race and ethnicity categories for the U.S., represented approximately 29% of the Company’s workforce (based on associate self-identification), an increase from 27% as of December 31, 2021, and 20% as of December 31, 2020.

The Company is making progress in the number of women and people of color working in leadership positions (defined by the Company as an associate with one or more direct reports) across the organization.

As of December 31, 2021, women and people of color held 52 percent and 10 percent of leadership positions in the Company, respectively, an increase from 50 percent and 8 percent, respectively, as of December 31, 2020.

The Company has acknowledged that people of color are underrepresented in leadership positions at Nelnet and is committed to have its workforce reflect the diversity in its communities.

To further Nelnet’s objective of creating an inspiring work environment and furthering associate development, the Company developed and launched the Nelnet Diversity, Equity, and Inclusion Council (the “Council”), sponsored by the Chief Executive Officer and the Executive Director of People Services.

As of December 31, 2022 and 2021, women held 52% of leadership positions in the Company, an increase from 50% as of December 31, 2020, and people of color held 11% of leadership positions in the Company, an increase from 10% as of December 31, 2021, and 8% as of December 31, 2020.

The Company has acknowledged that people of color are underrepresented in leadership positions at Nelnet and is committed to fostering an inclusive workforce that reflects the diversity in the communities the Company serves and that provides opportunity for all associates to advance and thrive.

To further Nelnet’s objective of creating an inspiring work environment and furthering associate development, the Company developed and launched the Better Together Council (the “Council”), sponsored by the Chief Executive Officer and the Executive Director of People Services.

This Council of 27 members represents locations, functions, and business segments across the entire Company.

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• Developing the Company’s diversity pipeline through recruiting, hiring, developing, mentoring, and retaining diverse top talent;

• Promoting a work environment that enables associates to feel safe to express their ideas and perspectives and feel they belong.

During 2020, the Council partnered with Nelnet University, the Company’s learning and development program for associates, to launch a robust mentoring program.

• Promoting a work environment that enables associates to feel safe to authentically express their ideas and perspectives and feel they belong.

The Council supports multiple highly active associate resource groups for racial and ethnic minorities, women, people with disabilities, and associates who identify as LGBTQIA+, where associates can go for community, support, and collaboration.

The Council has partnered with Nelnet University, the Company’s learning and development program for associates, to launch a robust mentoring program.

The program is available to all associates, prioritizing mentorships for associates from underrepresented racial and ethnic groups.

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The Company also revised its scholarship program for the children of its associates to better recognize minority and low-income students.

In addition, the Company was named on the following three Forbes listings:

Best Employer for Women, Best Employer for Diversity, and Best in State Employer.

In addition, the Company was named on the following Forbes listings:

Best Large Employers and Best Employers for Diversity.

In Lincoln, Nebraska, where the Company’s headquarters is located, the Company was awarded Best Places to Work.

Talent, development, and training

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The executive team convenes meetings with senior leadership and the board of directors to review top enterprise talent.

The Company continues to provide opportunities for associates to grow their careers internally, with over 70 percent of open management positions filled internally during 2021.

The Company provides a variety of professional, technical, and leadership training courses to help its associates grow in their current roles and build new skills.

The Company continues to provide opportunities for associates to grow their careers internally, with almost 70% of open management positions filled internally during 2022.

The Company provides a variety of professional, technical, and leadership training courses to help its associates grow in their current roles and build new skills and capabilities.

The Company emphasizes individual development planning as part of its annual goal setting process, and offers mentoring programs, along with change management and project management upskilling opportunities.

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Training is provided in a number of formats to accommodate the learner’s style, location, and technological knowledge and access, including instructor-led courses and hundreds of online courses in the Company’s learning management system.

The Company also offers tuition assistance to associates for degree programs, non-degree seeking individual classes, or certificate programs that are related to areas of business at Nelnet.

During 2021, the Company paid almost $380,000 in tuition assistance for its associates.

During 2021, the Company partnered with Nebraska Dev Lab and Galvanize to offer two groups of technology-driven associates a modern coding education through the Company’s first ever Coding Academy.

Everyone who participated in the rigorous program passed the program and gained valuable current information technology skills.

The Company also offers tuition assistance to associates for degree programs, non-degree seeking individual classes, or certificate programs.

During 2022, the Company paid over $310,000 in tuition assistance for its associates.

Competitive pay, benefits, wellness, and safety

The general compensation philosophy of the Company, as an organization that values the long-term success of its shareholders, customers, and associates, is that the Company will pay fair, competitive, and equitable compensation designed to encourage focus on the long-term performance objectives of the Company and is differentiated based on both the individual’s performance and the performance of his or her respective business segment.

In carrying out this philosophy, the Company structures its overall compensation framework with the general objectives of encouraging ownership, savings, wellness, productivity, and innovation.

In carrying out this philosophy, the Company structures its overall compensation framework with the general objectives of encouraging equity ownership in the Company, savings, wellness, productivity, and innovation.

In addition, total compensation is intended to be market competitive compared to select industry surveys, internally consistent, and aligned with the philosophy of a performance-based organization.

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In response to the COVID-19 pandemic, the Company has implemented and continues to implement safety measures in all its facilities.

The Company has implemented adjustments to its operations designed to keep associates safe and comply with federal and local guidelines, including those regarding masks, social distancing, and any applicable vaccine mandates.

Since March 2020, a vast majority of associates continue to work from their home.

However, all non-remote associates currently have the choice to work in the office, at home, or a hybrid of both.

However, non-remote associates currently have the choice to work in the office, at home, or a hybrid of both.

Culture, values, and ethics

The Company believes acting ethically and responsibly is the right thing to do, and embraces core values of open, honest communication in work environments.

The Company also believes that it must do its part to improve the world for current and future generations, and as part of this philosophy the Company contributes time, talent, and resources to strengthen the communities where the Company does business.

The Company’s associates participate in many initiatives focused on supporting their communities both financially and with their time.

The Company also believes it must do its part to improve the world for current and future generations;

and as part of this philosophy, the Company contributes time, talent, and resources to strengthen the communities in which the Company does business and promotes the transition to a clean-energy economy.

The Company’s associates participate in many initiatives focused on supporting and the sustainability of their communities, both financially and with their time.

Ethics are deeply embedded in the Company’s values and business processes.

The Company has a Code of Ethics and Conduct that includes the Company’s core values and guiding principles for which every associate is empowered to achieve.

The Company has a Code of Ethics and Conduct that includes the Company’s core values and guiding principles by which every associate is expected to abide and honor.

The Company regularly reinforces its commitment to ethics and integrity in associate communications, in its everyday actions, and in processes and controls.

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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-K

Item 1. Business