What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-08 compared with 2022-11-07 · 431 added, 420 removed, 639 unchanged (57% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Loans and accrued interest receivable (net of allowance for loan losses of $ 134,704 and

34 unchanged sentences

issued and outstanding

10,673,659 shares and 10,676,642 shares, respectively

10,668,460 shares

Additional paid-in capital 4,639 1,109

Retained earnings 3,251,677 3,234,844

Accumulated other comprehensive (loss) earnings, net ( 28,639 ) 9,304

Accumulated other comprehensive loss, net ( 27,006 ) ( 37,366 )

Total Nelnet, Inc.

3 unchanged sentences

Total liabilities and equity $ 18,082,609 19,374,044

Supplemental information - assets and liabilities of consolidated education lending

Supplemental information - assets and liabilities of consolidated education and other lending

variable interest entities:

3 unchanged sentences

Accrued interest payable and other liabilities ( 140,221 ) ( 145,309 )

Net assets of consolidated education lending variable interest entities $ 1,064,668 1,156,755

Net assets of consolidated education and other lending variable interest entities $ 1,089,706 1,074,557

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands, except share data)

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

Three months ended

Interest income:

10 unchanged sentences

Solar construction revenue 8,651 —

Other 2,225 11,867 24,750 30,183

Gain on sale of loans 2,627 3,444 5,616 18,715

Impairment expense and provision for beneficial interests, net 121 ( 14,159 ) ( 6,163 ) ( 12,223 )

Other, net ( 14,071 ) 9,877

Gain on sale of loans, net 11,812 2,989

Derivative market value adjustments and derivative settlements, net ( 14,074 ) 142,925

18 unchanged sentences

shareholders - basic and diluted

$ 2.80 1.38 9.99 6.74

Weighted average common shares outstanding - basic and diluted

4 unchanged sentences

(Dollars in thousands)

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

Net income $ 23,017 184,886

3 unchanged sentences

Unrealized holding gains (losses) arising during period, net 8,651 ( 16,698 )

Reclassification of gains recognized in net income, net of losses ( 578 ) ( 1,173 ) ( 4,220 ) ( 2,052 )

Reclassification of losses (gains) recognized in net income, net 4,982 ( 2,793 )

Income tax effect ( 3,272 ) 10,361 4,678 ( 14,813 )

Net changes related to equity method investee's other comprehensive income:

Gain on cash flow hedges 2 —

Income tax effect — 2 — —

Other comprehensive income (loss) 10,360 ( 14,804 )

7 unchanged sentences

(Dollars in thousands, except share data)

Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) earnings Noncontrolling interests Total equity

Class A Class B

Balance as of June 30, 2021 — 27,494,942 11,054,171 $ — 275 111 10,158 2,812,315 10,941 ( 5,182 ) 2,828,618

Issuance of noncontrolling interests — — — — — — — — — 4,935 4,935

Net income (loss) — — — — — — — 53,138 — ( 1,919 ) 51,219

Other comprehensive income — — — — — — — — 2,538 — 2,538

Distribution to noncontrolling interests — — — — — — — — — ( 125 ) ( 125 )

Cash dividends on Class A and Class B common stock - $ 0.22 per share

— — — — — — — ( 8,407 ) — — ( 8,407 )

Issuance of common stock, net of forfeitures — 29,805 — — — — 493 — — — 493

Compensation expense for stock based awards — — — — — — 2,770 — — — 2,770

Repurchase of common stock — ( 341,094 ) — — ( 3 ) — ( 11,828 ) ( 13,247 ) — — ( 25,078 )

Conversion of common stock — 372,717 ( 372,717 ) — 4 ( 4 ) — — — — —

Balance as of September 30, 2021 — 27,556,370 10,681,454 $ — 276 107 1,593 2,843,799 13,479 ( 2,291 ) 2,856,963

Balance as of June 30, 2022 — 26,613,733 10,674,892 $ — 266 107 1,180 3,127,687 ( 31,858 ) ( 6,237 ) 3,091,145

Issuance of noncontrolling interests — — — — — — — — — 14,018 14,018

Net income (loss) — — — — — — — 104,798 — ( 4,329 ) 100,469

Other comprehensive income — — — — — — — — 3,219 — 3,219

Distribution to noncontrolling interests — — — — — — — — — ( 17,707 ) ( 17,707 )

Cash dividends on Class A and Class B common stock - $ 0.24 per share

— — — — — — — ( 8,925 ) — — ( 8,925 )

Issuance of common stock, net of forfeitures — 38,192 — — 1 — 476 — — — 477

Compensation expense for stock based awards — — — — — — 3,631 — — — 3,631

Repurchase of common stock — ( 169,860 ) — — ( 2 ) — ( 4,450 ) ( 9,841 ) — — ( 14,293 )

Conversion of common stock — 1,233 ( 1,233 ) — — — — — — — —

Other — — — — — — — ( 5,675 ) — — ( 5,675 )

Balance as of September 30, 2022 — 26,483,298 10,673,659 $ — 265 107 837 3,208,044 ( 28,639 ) ( 14,255 ) 3,166,359

See accompanying notes to consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands, except share data)

Class A Class B

2 unchanged sentences

Net income (loss) — — — — — — — 186,647 — ( 1,761 ) 184,886

Other comprehensive income — — — — — — — — 7,377 — 7,377

Other comprehensive loss — — — — — — — — ( 14,804 ) — ( 14,804 )

Distribution to noncontrolling interests — — — — — — — — — ( 5,125 ) ( 5,125 )

5 unchanged sentences

Conversion of common stock — 1,750 ( 1,750 ) — — — — — — — —

Balance as of September 30, 2021 — 27,556,370 10,681,454 $ — 276 107 1,593 2,843,799 13,479 ( 2,291 ) 2,856,963

Balance as of March 31, 2022 — 27,151,270 10,674,892 $ — 272 107 1,208 3,092,226 ( 5,500 ) ( 3,250 ) 3,085,063

Balance as of December 31, 2022 — 26,461,651 10,668,460 $ — 265 107 1,109 3,234,844 ( 37,366 ) 943 3,199,902

1 unchanged sentence

Net income (loss) — — — — — — — 26,487 — ( 3,470 ) 23,017

Other comprehensive loss — — — — — — — — ( 37,943 ) — ( 37,943 )

Other comprehensive income — — — — — — — — 10,360 — 10,360

Distribution to noncontrolling interests — — — — — — — — — ( 5,028 ) ( 5,028 )

4 unchanged sentences

Repurchase of common stock — ( 36,513 ) — — — — ( 3,302 ) — — — ( 3,302 )

Conversion of common stock — 2,983 ( 2,983 ) — — — — — — — —

Other — — — — — — — ( 5,675 ) — — ( 5,675 )

Balance as of September 30, 2022 — 26,483,298 10,673,659 $ — 265 107 837 3,208,044 ( 28,639 ) ( 14,255 ) 3,166,359

Balance as of March 31, 2023 — 26,623,662 10,668,460 $ — 266 107 4,639 3,251,677 ( 27,006 ) ( 6,354 ) 3,223,329

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Nine months ended

September 30,

Three months ended

Net income attributable to Nelnet, Inc.

2 unchanged sentences

Net income 23,017 184,886

Adjustments to reconcile net income to net cash provided by operating activities, net of business acquisitions:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 34,211 36,335

2 unchanged sentences

Derivative market value adjustments 37,411 ( 145,734 )

Proceeds from termination of derivative instruments, net 91,786 —

Proceeds from clearinghouse - initial and variation margin, net of payments 227,448 41,033

Gain on sale of loans ( 5,616 ) ( 18,715 )

Loss (gain) on investments, net 13,605 ( 293 )

(Gain) loss from repurchases of debt, net ( 1,231 ) 3,964

Proceeds from sale (purchases) of equity securities, net 42,863 ( 41,591 )

Deferred income tax expense 57,633 33,078

Proceeds from termination of derivative instruments 164,079 —

(Payments to) proceeds from clearinghouse - initial and variation margin, net ( 210,284 ) 149,649

Gain on sale of loans, net ( 11,812 ) ( 2,989 )

Loss on investments, net 24,344 2,801

Proceeds from sale of equity securities, net 75 572

Deferred income tax (benefit) expense ( 13,750 ) 39,443

Non-cash compensation expense 3,838 2,920

Provision for beneficial interests and impairment expense, net 6,163 12,223

Increase in loan and investment accrued interest receivable ( 16,206 ) ( 41,931 )

Decrease (increase) in accounts receivable 47,514 ( 2,137 )

(Increase) decrease in other assets, net ( 73,291 ) 35,381

Decrease in loan and investment accrued interest receivable 16,630 10,694

Decrease in accounts receivable 43,675 18,442

Increase in other assets, net ( 9,760 ) ( 2,073 )

Decrease in the carrying amount of ROU asset, net 1,251 1,439

Increase (decrease) in accrued interest payable 17,230 ( 24,260 )

Increase in other liabilities, net 5,388 41,040

(Decrease) increase in accrued interest payable ( 1,675 ) 2,650

Decrease in other liabilities ( 3,729 ) ( 11,824 )

Decrease in the carrying amount of lease liability ( 1,275 ) ( 1,500 )

Net cash provided by operating activities 122,845 275,349

Cash flows from investing activities, net of business acquisitions:

Cash flows from investing activities:

Purchases and originations of loans ( 289,177 ) ( 161,334 )

8 unchanged sentences

Purchases of property and equipment ( 24,430 ) ( 15,794 )

Business acquisitions, net of cash acquired ( 35,973 ) —

Net cash provided by investing activities 723,932 603,069

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine months ended

September 30,

Cash flows from financing activities, net of business acquisitions:

Three months ended

Cash flows from financing activities:

Payments on bonds and notes payable $ ( 1,415,424 ) ( 918,270 )

1 unchanged sentence

Payments of debt issuance costs ( 169 ) ( 312 )

Increase in bank deposits, net 236,510 146,018

(Decrease) increase in due to customers ( 59,467 ) 53,146

(Decrease) increase in bank deposits, net ( 15,555 ) 139,732

Decrease in due to customers ( 67,642 ) ( 89,884 )

Dividends paid ( 9,654 ) ( 9,063 )

5 unchanged sentences

Effect of exchange rate changes on cash ( 91 ) 169

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 150,860 ) 292,683

Net decrease in cash, cash equivalents, and restricted cash ( 459,573 ) ( 16,523 )

Cash, cash equivalents, and restricted cash, beginning of period 1,357,616 1,194,189

4 unchanged sentences

Cash disbursements made for operating leases $ 1,705 1,887

Non-cash operating, investing, and financing activity:

Noncash operating, investing, and financing activity:

ROU assets obtained in exchange for lease obligations $ 15,545 746

Receipt of beneficial interest in consumer loan securitizations $ 8,336 23,506

Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans $ 34,540 3,660

Receipt of asset-backed investment securities as consideration from sale of loans $ 58,182 —

Distribution to noncontrolling interests $ 4,035 4,760

Issuance of noncontrolling interests $ 5,917 2,082

(a) The Company utilized $ 9.4 million and $ 22.2 million of federal and state tax credits related primarily to renewable energy during the nine months ended September 30, 2022 and 2021, respectively.

Supplemental disclosures of noncash activities regarding the Company's business acquisitions are contained in note 6.

(a) The Company utilized $ 5.7 million and $ 1.1 million of federal and state tax credits related primarily to renewable energy during the three months ended March 31, 2023 and 2022, respectively.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total of the amounts reported in the consolidated statements of cash flows.

As of As of As of As of

September 30, 2022 December 31, 2021 September 30, 2021 December 31, 2020

March 31, 2023 December 31, 2022 March 31, 2022 December 31, 2021

Total cash and cash equivalents $ 187,574 118,146 162,785 125,563

9 unchanged sentences

The accompanying unaudited consolidated financial statements of Nelnet, Inc.

and subsidiaries (the “Company”) as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2021 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented.

and subsidiaries (the “Company”) as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2022 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented.

The preparation of financial statements in conformity with U.S.

1 unchanged sentence

Actual results could differ from those estimates.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results for the year ending December 31, 2023.

The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report").

Reclassification of Prior Period Cash Flows Presentation

Prior to June 30, 2022, the line item in the Company's consolidated statements of cash flows for changes during a period in amounts "due to customers" was presented in cash flows from operating activities.

Beginning in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, the Company corrected this presentation in its statements of cash flows to show this activity as a financing activity.

This correction had no impact on the Company's previously reported consolidated net income, total assets (including cash and cash equivalents), liabilities, and equity, and while the correction had a corresponding impact on the amounts of cash flows from operating and financing activities, it had no impact on the net increase or decrease in cash for previously reported periods.

The Company has concluded that the correction was not material from a combined quantitative and qualitative perspective to its previously issued interim financial statements, or its previously issued financial statements for 2021, 2020, and 2019.

Loans and Accrued Interest Receivable and Allowance for Loan Losses

Loans and accrued interest receivable consisted of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Non-Nelnet Bank:

Federally insured student loans:

Federally insured loans:

Stafford and other $ 3,229,778 3,389,178

4 unchanged sentences

Non-Nelnet Bank loans 13,482,620 14,169,771

Federally insured student loans 72,905 88,011

Federally insured loans 63,399 65,913

Private education loans 355,705 353,882

Consumer and other loans 19,903 —

Nelnet Bank loans 439,007 419,795

9 unchanged sentences

Private education loans ( 2,894 ) ( 2,390 )

Consumer and other loans ( 1,827 ) —

Nelnet Bank allowance for loan losses ( 4,881 ) ( 2,560 )

1 unchanged sentence

The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Non-Nelnet Bank:

Federally insured student loans (a) 0.61 % 0.60 %

Federally insured loans (a) 0.61 % 0.62 %

Private education loans 6.28 % 6.11 %

Consumer and other loans (b) 5.74 % 12.63 %

Federally insured student loans (a) 0.22 % 0.30 %

Consumer and other loans 11.41 % 8.62 %

Federally insured loans (a) 0.25 % 0.26 %

Private education loans 0.81 % 0.68 %

(a) As of September 30, 2022 and December 31, 2021, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 22.3 % and 22.2 %, respectively, and for Nelnet Bank was 8.9 % and 12.1 %, respectively.

(b) During 2022, the Company purchased home equity loans that generally have lower default rates than unsecured consumer loans.

As such, the allowance for loan losses as a percentage of the ending loan balance has decreased as of September 30, 2022 as compared to December 31, 2021.

Gain on Sale of Loans

On January 26, 2022 and July 7, 2022, the Company sold $ 18.1 million (par value) and $ 28.9 million (par value) of consumer loans, respectively, to an unrelated third party who securitized such loans.

The Company recognized a gain of $ 3.0 million (pre-tax) and $ 2.6 million (pre-tax), respectively, as part of these transactions.

As partial consideration received for the consumer loans sold, the Company received a 6.6 percent and 7.6 percent residual interest, respectively, in the consumer loan securitizations that are included in "investments and notes receivable" on the Company's consolidated balance sheet.

Consumer and other loans 9.18 % —

(a) As of March 31, 2023 and December 31, 2022, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 22.3 % and 22.4 %, respectively, and for Nelnet Bank was 10.1 % and 10.3 %, respectively.

The Company has sold portfolios of loans to unrelated third parties who securitized such loans.

As partial consideration received for the loans sold, the Company received residual interest in the loan securitizations that are included in "investments and notes receivable" on the Company's consolidated balance sheets.

The following table summarizes the loans sold and gains/losses recognized by the Company during the three months ended March 31, 2023 and 2022.

(par value) Gain (loss) Loan type Residual interest received in securitization

Three months ended March 31, 2023

January 31 $ 97,350 ( 1,441 ) Home equity 64.8 % (a)

January 31 42,275 4,350 Consumer 13.3

March 2 122,132 8,966 Consumer 24.6 (a)

March 22 145 ( 63 ) Home equity —

$ 261,902 11,812

Three months ended March 31, 2022

January 26 $ 18,125 2,989 Consumer 6.6 %

(a) In addition to receiving a residual interest in the securitizations, the Company also received $ 14.5 million and $ 43.7 million of asset-backed investment securities as part of the January 31 and March 2 transactions, respectively, that are included in "investments and notes receivable" on the Company's consolidated balance sheet.

Activity in the Allowance for Loan Losses

The following table presents the activity in the allowance for loan losses by portfolio segment.

Balance at beginning of period Provision (negative provision) for loan losses Charge-offs Recoveries Initial allowance on loans purchased with credit deterioration (a) Loan sales Balance at end of period

Three months ended September 30, 2022

Balance at beginning of period Provision (negative provision) for loan losses Charge-offs Recoveries Initial allowance on loans purchased with credit deterioration Loan sales Balance at end of period

Three months ended March 31, 2023

Non-Nelnet Bank:

4 unchanged sentences

Private education loans 2,390 614 ( 110 ) — — — 2,894

$ 120,424 9,625 ( 7,802 ) 383 12 ( 3,585 ) 119,057

Three months ended September 30, 2021

Non-Nelnet Bank:

Federally insured loans $ 120,802 4,452 ( 10,330 ) — 935 — 115,859

Private education loans 19,403 ( 1,208 ) ( 954 ) 113 — ( 301 ) 17,053

Consumer and other loans — 1,827 — — — — 1,827

Federally insured loans 245 44 — — — — 289

Private education loans 567 ( 157 ) — 4 — — 414

$ 131,827 34,290 ( 9,697 ) 384 6 ( 22,106 ) 134,704

Nine months ended September 30, 2022

Three months ended March 31, 2022

Non-Nelnet Bank:

5 unchanged sentences

$ 127,113 ( 459 ) ( 7,010 ) 342 123 ( 2,284 ) 117,825

Nine months ended September 30, 2021

The following table summarizes annualized net charge-offs as a percentage of average loans for each of the Company's loan portfolios.

Three months ended March 31,

Non-Nelnet Bank:

4 unchanged sentences

Private education loans 0.13 % 0.02 %

$ 175,698 ( 10,847 ) ( 17,960 ) 1,126 2,260 ( 12,233 ) 138,044

(a) During the three months ended September 30, 2022 and 2021, and nine months ended September 30, 2022 and 2021, the Company acquired $ 0.9 million (par value), $ 64.6 million (par value), $ 11.6 million (par value), and $ 153.3 million (par value), respectively, of federally insured rehabilitation loans that met the definition of purchased loans with credit deterioration ("PCD loans") when they were purchased by the Company.

The Company recorded a negative provision for loan losses for its federally insured loan portfolio during the first quarter of 2022 due to the amortization of the portfolio and an increase in expected prepayments as a result of an initiative offered by the Department of Education (the “Department”) for Federal Family Education Loan Program ("FFELP" or "FFEL Program") 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.

The Company recorded a provision for loan losses on its consumer loan portfolio during the first quarter of 2022 as a result of loans acquired during the period.

The Company recorded a provision for loan losses for its federally insured, private education, consumer, and other loan portfolios during the second and third quarters of 2022 due to management's estimate of declining economic conditions.

In addition, the Company recorded provision for loan losses on its consumer and other loan and Nelnet Bank private education loan portfolios during these periods as a result of loans acquired and originated during the period.

The provision for loan losses recognized by the Company for its federally insured loan portfolio during these periods was partially offset due to the continued amortization of the portfolio.

Unfunded Private Education Loan Commitments

As of September 30, 2022, Nelnet Bank has a liability of approximately $ 76,000 related to $ 4.3 million of unfunded private education loan commitments.

The liability for unfunded loan commitments is included in "other liabilities" on the consolidated balance sheet.

During the nine months ended September 30, 2022, Nelnet Bank recognized provision for loan losses of approximately $ 65,000 related to unfunded loan commitments.

Consumer and other loans — —

The Company recorded a provision for loan losses for the three months ended March 31, 2023 due to (i) management's estimate of declining economic conditions as of March 31, 2023 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2022;

and (ii) the establishment of an initial allowance for loans originated and acquired during the period.

These amounts were partially offset by the amortization of the federally insured loan portfolio.

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 of Education (the “Department”) for Federal Family Education Loan Program (the "FFEL Program" or 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.

The Company recorded a provision for loan losses on its consumer loan portfolio during the three months ended March 31, 2022 as a result of loans acquired during the period.

Unfunded Loan Commitments

As of March 31, 2023, Nelnet Bank has a liability of approximately $ 71,000 related to $ 2.5 million of unfunded private education loan commitments.

The liability for unfunded loan commitments is included in "other liabilities" on the consolidated balance sheets.

During the three months ended March 31, 2023 and 2022, Nelnet Bank recognized negative provision for loan losses of approximately $ 15,000 and provision for loan losses of approximately $ 24,000 , respectively, related to unfunded loan commitments.

Loan Modifications to Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Company adopted ASU No.

2022-02, Financial Instruments – Credit Losses:

Troubled Debt Restructurings and Vintage Disclosures, which eliminates the troubled debt restructurings recognition and measurement guidance and instead requires an entity to evaluate whether the modification represents a new loan or a continuation of an existing loan.

The guidance also enhances the disclosure requirements for certain modifications of receivables made to borrowers experiencing financial difficulty and vintage disclosures reflecting gross charge-offs by year of origination.

Under the Higher Education Act, FFELP loan borrowers may be granted a deferment or forbearance for a period of time based on need.

In addition, eligible borrowers may qualify for income-driven repayment plans offered by the Department.

Because FFELP loan modifications are driven by the Higher Education Act, the Company does not consider these events as part of its loan modification programs.

Administrative forbearances (e.g.

bankruptcy, military service, death and disability, and disaster forbearance) are required by law and therefore are also not considered as part of the Company's loan modification programs.

The Company does offer payment delays in the form of deferments or forbearances on certain private education and consumer loan programs for short-term periods.

The Company generally considers payment delays to be insignificant when the delay is 3 months or less.

The amortized cost of the Company’s private education and consumer loans in which the borrower is experiencing financial difficulty and the financial effect of such loan modifications is not material.

Key Credit Quality Indicators

3 unchanged sentences

Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs.

The table below shows the Company’s loan status and delinquency amounts.

As of September 30, 2022 As of December 31, 2021 As of September 30, 2021

The following table presents the Company’s loan status and delinquency amounts.

As of March 31, 2023 As of December 31, 2022 As of March 31, 2022

Federally insured loans - Non-Nelnet Bank:

14 unchanged sentences

Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 13,611,078 $ 14,255,562 $ 16,942,918

As of March 31, 2023 As of December 31, 2022 As of March 31, 2022

Private education loans - Non-Nelnet Bank:

9 unchanged sentences

Accrued interest receivable 2,277 2,146 1,898

Loan discount, net of unamortized premiums ( 185 ) ( 1,123 ) ( 1,496 )

Loan premium, net of unaccreted discount 79 ( 38 ) ( 598 )

Allowance for loan losses ( 15,175 ) ( 15,411 ) ( 14,622 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 228,696 $ 239,080 $ 265,215

As of September 30, 2022 As of December 31, 2021 As of September 30, 2021

Consumer and other loans - Non-Nelnet Bank:

8 unchanged sentences

Accrued interest receivable 3,288 3,658 374

Loan discount, net of unamortized premiums ( 1,847 ) 913 664

Loan premium, net of unaccreted discount 913 ( 588 ) 1,040

Allowance for loan losses ( 35,317 ) ( 30,263 ) ( 5,710 )

16 unchanged sentences

Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 65,114 $ 67,521 $ 83,798

As of March 31, 2023 As of December 31, 2022 As of March 31, 2022

Private education loans - Nelnet Bank (a):

12 unchanged sentences

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 359,596 $ 358,004 $ 289,228

Consumer and other loans - Nelnet Bank (a):

Loans in deferment $ — — %

Loans in repayment status:

Loans current 19,903 100.0 %

Loans delinquent 30-59 days — —

Loans delinquent 60-89 days — —

Loans delinquent 90 days or greater — —

Total loans in repayment 19,903 100.0 100.0 %

Total consumer and other loans 19,903 100.0 %

Accrued interest receivable 117

Loan premium 1

Allowance for loan losses ( 1,827 )

Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 18,194

(a) For the periods presented for Nelnet Bank, the delinquency bucket periods conform with the delinquency bucket periods reflected in Nelnet Bank's Call Reports filed with the Federal Deposit Insurance Corporation.

2 unchanged sentences

The following tables highlight the gross principal balance of Nelnet Bank's private education loan portfolio, by year of origination, stratified by FICO score at the time of origination.

Loan balance as of September 30, 2022

Nine months ended September 30, 2022 2021 2020 Total

Loan balance as of March 31, 2023

Three months ended March 31, 2023 2022 2021 2020 Total

FICO at origination:

16 unchanged sentences

The Company does not place federally insured loans on nonaccrual status due to the government guaranty.

The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2021 and September 30, 2022, was not material.

The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2022 and March 31, 2023, was not material.

Amortized Cost Basis by Origination Year

The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of September 30, 2022 based on year of origination.

The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of March 31, 2023 based on year of origination.

Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program.

As such, all the Company’s federally insured loans were originated prior to July 1, 2010.

Nine months ended September 30, 2022 2021 2020 2019 2018 Prior years Total

Three months ended March 31, 2023 2022 2021 2020 2019 Prior years Total

Private education loans - Non-Nelnet Bank:

9 unchanged sentences

Accrued interest receivable 2,277

Loan discount, net of unamortized premiums ( 185 )

Loan premium, net of unaccreted discount 79

Allowance for loan losses ( 15,175 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 228,696

Gross charge-offs - three months ended March 31, 2023 $ — — — — 171 469 640

Consumer and other loans - Non-Nelnet Bank:

8 unchanged sentences

Accrued interest receivable 3,288

Loan discount, net of unamortized premiums ( 1,847 )

Loan premium, net of unaccreted discount 913

Allowance for loan losses ( 35,317 )

Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 278,430

Gross charge-offs - three months ended March 31, 2023 $ — 1,868 245 27 46 81 2,267

Three months ended March 31, 2023 2022 2021 2020 2019 Prior years Total

Private education loans - Nelnet Bank (a):

12 unchanged sentences

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 359,596

Gross charge-offs - three months ended March 31, 2023 $ — 110 — — — — 110

Consumer and other loans - Nelnet Bank (a):

Loans in deferment $ — — — — — — —

Loans in repayment status:

Loans current 19,259 589 55 — — — 19,903

Loans delinquent 30-59 days — — — — — — —

Loans delinquent 60-89 days — — — — — — —

Loans delinquent 90 days or greater — — — — — — —

Total loans in repayment 19,259 589 55 — — — 19,903

Total consumer and other loans $ 19,259 589 55 — — — 19,903

Accrued interest receivable 117

Loan premium 1

Allowance for loan losses ( 1,827 )

Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 18,194

Gross charge-offs - three months ended March 31, 2023 $ — — — — — — —

1 unchanged sentence

The following tables summarize the Company’s outstanding debt obligations by type of instrument:

As of September 30, 2022

As of March 31, 2023

Interest rate

6 unchanged sentences

Total FFELP variable-rate bonds and notes 11,186,330

Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations

646,956 1.42 % - 3.45 %

Fixed-rate bonds and notes issued in FFELP loan asset-backed

securitizations 548,642 1.42 % - 3.45 %

10/25/67 - 8/27/68

1 unchanged sentence

Private education loan warehouse facility 47,937 5.18 % 12/31/23

Consumer loan warehouse facility 82,405 5.15 % 11/14/25

Variable-rate bonds and notes issued in private education loan asset-backed securitizations 17,808 6.40 % / 6.60 %

12/26/40 / 6/25/49

Fixed-rate bonds and notes issued in private education loan asset-backed securitization 22,145 3.60 % / 5.35 %

12/26/40 / 12/28/43

Unsecured line of credit — — 9/22/26

17 unchanged sentences

594,051 1.42 % - 3.45 %

10/25/67 - 8/27/68

FFELP loan warehouse facility 978,956 4.69 % / 4.71 %

Private education loan warehouse facility 64,356 4.72 % 12/31/23

Consumer loan warehouse facility 89,000 4.73 % 11/14/25

Variable-rate bonds and notes issued in private education loan asset-backed securitizations 19,865 5.90 % / 6.14 %

6 unchanged sentences

1/4/23 - 11/27/24

Secured line of credit 5,000 1.91 % 5/30/22

Other - due to related party 6,187 3.55 % - 6.05 %

3/1/24 - 11/15/30

Discount on bonds and notes payable and debt issuance costs ( 148,088 )

3 unchanged sentences

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

FFELP loan warehouse facility

As of September 30, 2022, the Company’s FFELP warehouse facility had an aggregate maximum financing amount available of $ 300.0 million that was increased from $ 25.0 million per a July 29, 2022 amendment to the facility.

A May 2022 amendment extended the liquidity provisions and final maturity to November 22, 2022 and November 22, 2023, respectively.

As of September 30, 2022, $ 249.5 million was outstanding under this facility, $ 50.5 million was available for future funding, and the Company had $ 20.3 million advanced as equity support.

FFELP loan warehouse facilities

On March 31, 2023, the Company’s FFELP warehouse facility was amended to increase the aggregate maximum financing amount available from $ 1.20 billion to $ 1.25 billion.

The liquidity provisions and final maturity remain through May 22, 2023 and May 22, 2024, respectively.

As of March 31, 2023, $ 919.3 million was outstanding under this facility, $ 330.7 million was available for future funding, and the Company had $ 62.8 million advanced as equity support.

Subsequent to the end of the first quarter, the Company closed on a $ 250.0 million FFELP warehouse facility on April 3, 2023, with liquidity provisions expiring on April 2, 2024 and a final maturity date of April 2, 2025.

Private education loan warehouse facility

As of September 30, 2022, the Company's private education warehouse facility had an aggregate maximum financing amount available of $ 175.0 million and an advance rate of 80 to 90 percent.

On June 30, 2022, the Company amended the facility to extend the liquidity provisions through October 31, 2022 and final maturity date to October 31, 2023.

As of September 30, 2022, $ 86.2 million was outstanding under this warehouse facility, $ 88.8 million was available for future funding, and the Company had $ 9.8 million advanced as equity support.

As of March 31, 2023, the Company's private education warehouse facility had an outstanding balance of $ 47.9 million, liquidity provisions through June 30, 2023, a final maturity of December 31, 2023, and $ 19.4 million was advanced as equity support.

No additional amounts can be borrowed under this facility.

Consumer loan warehouse facility

As of March 31, 2023, the Company's consumer loan warehouse facility had an aggregate maximum financing amount available of $ 250.0 million, an advance rate of 70 %, liquidity provisions through November 14, 2024, and a final maturity date of November 14, 2025.

As of March 31, 2023, $ 82.4 million was outstanding under this facility, $ 167.6 million was available for future funding, and the Company had $ 35.2 million advanced as equity support.

Unsecured Line of Credit

The Company has a $ 495.0 million unsecured line of credit that has a maturity date of September 22, 2026.

As of September 30, 2022, no amount was outstanding on the 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.

As of March 31, 2023, no amount was outstanding on the line of credit and $ 495.0 million was available for future use subject to certain financial covenants, including limitations on recourse indebtedness to adjusted EBITDA (over the last four rolling quarters).

Of the $ 495.0 million availability, approximately $ 260 million was available for purposes other than reducing existing recourse debt due to the limitations on recourse indebtedness to adjusted EBITDA financial covenant.

Participation Agreement

The Company has an agreement with Union Bank and Trust Company ("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 FFELP loan asset-backed securities.

As of September 30, 2022, $ 399.7 million of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

As of March 31, 2023, $ 311.8 million (par value) of FFELP loan asset-backed securities 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.

2 unchanged sentences

The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its discretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities.

As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance sheet as "investments and notes receivable" and the participation interests outstanding have been accounted for by the Company as a secured borrowing.

As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance sheets as "investments and notes receivable" and the participation interests outstanding have been accounted for by the Company as a secured borrowing.

See note 5 for additional information about the FFELP loan asset-backed securities investments serving as collateral under this participation agreement.

Repurchase Agreements

On May 3, 2021 and June 23, 2021, the Company entered into repurchase agreements with non-affiliated third parties, the proceeds of which are collateralized by certain private education and FFELP loan asset-backed securities.

The first agreement has various maturity dates through November 27, 2024 or earlier if either party provides 180 days’ prior written notice, and the second agreement has various maturity dates through January 13, 2023.

Included in “bonds and notes payable” as of September 30, 2022 was $ 218.0 million subject to the first agreement and $ 289.0 million subject to the second agreement.

Subsequent to March 31, 2023, the maturities on this agreement were extended, and as of May 8, 2023, the maturity dates vary from May 26, 2023 through November 27, 2024.

Under the first agreement, the Company is subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase

price of such securities on any scheduled reset date, and under the second agreement, the Company could be subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities and the counter-party provides notice requiring such payment.

Included in “bonds and notes payable” in the consolidated balance sheets as of March 31, 2023 was $ 291.9 million subject to the first agreement and $ 141.1 million subject to the second agreement.

See note 5 and below under "Debt Repurchases" for additional information about the private education and FFELP loan asset-backed securities investments, respectively, serving as collateral for these repurchase agreements.

Accrued Interest Liability

During the first quarter of 2021, the Company reversed a historical accrued interest liability of $ 23.8 million on certain bonds, which liability the Company determined was 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.

The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income.

Nelnet Bank has Federal Funds lines of credit with correspondent banks totaling $ 30.0 million at a stated interest rate at the time of borrowing.

As of March 31, 2023, no amounts were drawn on these lines of credit.

Debt Repurchases

The following table summarizes the Company's repurchases of its own debt.

Gains/losses recorded by the Company from the repurchase of debt are included in "other" in "other income/expense" on the Company's consolidated statements of income.

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Gains/losses recorded by the Company from the repurchase of debt are included in "other, net" in "other income (expense)" on the Company's consolidated statements of income.

Three months ended March 31,

Purchase price $ ( 828 ) ( 18,454 )

1 unchanged sentence

Remaining unamortized cost of issuance ( 2 ) ( 45 )

Gain (loss) $ 160 ( 3,268 ) 1,231 ( 3,964 )

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

2 unchanged sentences

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 September 30, 2022, the Company holds $ 431.5 million (par value) of its own FFELP asset-backed securities.

As of September 30, 2022, $ 230.6 million (par value) of the Company's repurchased FFELP loan asset-backed securities were serving as collateral on amounts outstanding under the Company's repurchase agreements (as discussed above).

As of March 31, 2023, the Company holds $ 397.8 million (par value) of its own FFELP loan asset-backed securities.

As of March 31, 2023, $ 197.5 million (par value) of the Company's repurchased FFELP loan asset-backed securities were serving as collateral on amounts outstanding under the Company's repurchase agreements (as discussed above).

Subsequent Event

Subsequent to the end of the first quarter, in April 2023, the Company redeemed $ 188.6 million of FFELP loan asset-backed securities (bonds and notes payable) prior to their legal maturity, of which the Company owned $ 140.5 million of the bonds that were redeemed.

The remaining unamortized debt discount associated with these bonds at the time of redemption was written-off, resulting in a $ 25.9 million non-cash expense recognized in April 2023.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage interest rate risk.

The Company uses derivative financial instruments primarily to manage interest rate risk.

Derivative instruments used as part of the Company's interest rate risk management strategy are further described in note 6 of the notes to consolidated financial statements included in the 2022 Annual Report.

A tabular presentation of such derivatives outstanding as of September 30, 2022 and December 31, 2021 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of September 30, 2022 and December 31, 2021, in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").

A tabular presentation of such derivatives outstanding as of March 31, 2023 and December 31, 2022 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of March 31, 2023 and December 31, 2022, in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").

Maturity Notional amount

September 30, 2022 December 31, 2021

2022 $ 1,000,000 2,000,000

March 31, 2023 December 31, 2022

2023 $ — 750,000

3 unchanged sentences

$ 3,150,000 3,900,000

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2022 and December 31, 2021 was one-month LIBOR plus 9.4 basis points and 9.1 basis points, respectively.

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of March 31, 2023 and December 31, 2022 was one-month LIBOR plus 10.1 basis points and 9.7 basis points, respectively.

Interest Rate Swaps – Floor Income Hedges

The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.

As of September 30, 2022 As of December 31, 2021

Maturity Notional amount Weighted average fixed rate paid by the Company (a) Notional amount Weighted average fixed rate paid by the Company (a)

2022 $ — — % $ 500,000 0.94 %

2023 — — 900,000 0.62

2024 2,000,000 0.35 2,500,000 0.35

The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income as of December 31, 2022.

Maturity Notional amount Weighted average fixed rate paid by the Company (a)

2024 $ 2,000,000 0.35 %

1 unchanged sentence

2031 100,000 1.53

2032 (b) 200,000 2.92

$ 2,800,000 0.70 %

(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.

In March 2022, the Company terminated $ 650 million in notional amount of derivatives ($ 500 million and $ 150 million that had maturity dates in 2022 and 2023, respectively) for net payments of $ 0.1 million.

On April 29, 2022, the Company terminated $ 1.25 billion in notional amount of derivatives ($ 500 million, $ 250 million, and $ 500 million that had maturity dates in 2023, 2024, and 2025, respectively) for total proceeds of $ 68.1 million.

On August 26, 2022, the Company terminated $ 500 million in notional amount of derivatives ($ 250 million that had maturity dates in each of 2023 and 2024) for total proceeds of $ 23.8 million.

(a) For the interest rate derivatives maturing in 2032, the Company was to receive payments based on Secured Overnight Financing Rate (SOFR) that reset quarterly.

For all other interest rate derivatives, the Company received payments based on three-month LIBOR that reset quarterly.

(b) These derivatives had forward effective start dates in November 2024.

All over-the-counter derivative contracts executed by the Company are cleared post-execution at a regulated clearinghouse.

Clearing is a process by which a third party, the clearinghouse, steps in between the original counterparties and guarantees the performance of both, by requiring that each post liquid collateral on an initial (initial margin) and mark-to-market (variation margin) basis to cover the clearinghouse’s potential future exposure in the event of default.

Through March 15, 2023, the Company had received cash or had a receivable from the clearinghouse related to variation margin equal to the fair value of the fixed rate floor derivatives as of March 15, 2023 of $ 183.2 million, which included $ 19.1 million related to current period settlements.

To minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($ 2.8 billion in notional amount of derivatives).

Consolidated Financial Statement Impact Related to Derivatives - Statements of Income

The following table summarizes the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income.

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

1:3 basis swaps $ 859 396

Interest rate swaps - floor income hedges 11,356 ( 5,209 ) 11,843 ( 14,648 )

Interest rate swaps - floor income hedges (a) 22,478 ( 3,205 )

Total settlements - income (expense) 23,337 ( 2,809 )

1 unchanged sentence

1:3 basis swaps ( 23 ) 889

Interest rate swaps - floor income hedges 52,802 6,199 238,196 41,700

Total change in fair value - income 52,991 7,260 239,125 44,455

Derivative market value adjustments and derivative settlements, net - income $ 63,262 1,351 251,210 28,868

Interest rate swaps - floor income hedges (a) ( 37,388 ) 144,845

Total change in fair value - (expense) income ( 37,411 ) 145,734

Derivative market value adjustments and derivative settlements, net - (expense) income $ ( 14,074 ) 142,925

(a) As a result of the Company terminating all its interest rate swaps hedging loans earning fixed rate floor income on March 15, 2023 (as discussed above), there will be no derivative settlements and changes in fair value on these derivatives in future periods.

Investments and Notes Receivable

A summary of the Company's investments and notes receivable follows:

As of September 30, 2022 As of December 31, 2021

Amortized cost Gross unrealized gains Gross unrealized losses (a) Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value

Investments and notes receivable consisted of the following:

As of March 31, 2023 As of December 31, 2022

Amortized cost Gross unrealized gains Gross unrealized losses Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value

Investments (at fair value):

FFELP loan asset-backed securities- available-for-sale (b) $ 783,676 7,767 ( 6,434 ) 785,009 480,691 14,710 ( 719 ) 494,682

Private education loan asset-backed securities - available-for-sale (c) 352,500 — ( 34,599 ) 317,901 414,286 507 ( 2,241 ) 412,552

Other debt securities - available-for-sale 279,589 357 ( 4,785 ) 275,161 22,435 — — 22,435

Total available-for-sale debt securities $ 1,415,765 8,124 ( 45,818 ) 1,378,071 917,412 15,217 ( 2,960 ) 929,669

Available-for-sale asset-backed securities

Non-Nelnet Bank:

FFELP loan (a) $ 336,327 4,175 ( 7,926 ) 332,576 463,861 3,498 ( 11,105 ) 456,254

Private education loan (b) 321,120 — ( 26,531 ) 294,589 335,903 — ( 29,438 ) 306,465

Other debt securities 53,743 2,365 ( 803 ) 55,305 158,589 151 ( 3,790 ) 154,950

Total Non-Nelnet Bank 711,190 6,540 ( 35,260 ) 682,470 958,353 3,649 ( 44,333 ) 917,669

FFELP loan (c) 240,348 754 ( 3,622 ) 237,480 349,855 955 ( 8,853 ) 341,957

Private education loan 1,818 — ( 101 ) 1,717 1,941 — ( 122 ) 1,819

Other debt securities 152,571 14 ( 3,549 ) 149,036 131,481 18 ( 3,907 ) 127,592

Total Nelnet Bank 394,737 768 ( 7,272 ) 388,233 483,277 973 ( 12,882 ) 471,368

Total available-for-sale asset-backed securities $ 1,105,927 7,308 ( 42,532 ) 1,070,703 1,441,630 4,622 ( 57,215 ) 1,389,037

Equity securities 35,663 39,082

1 unchanged sentence

Other Investments and Notes Receivable (not measured at fair value):

Other debt securities - held-to-maturity 8,440 8,200

Held to maturity investments

Non-Nelnet Bank:

Debt securities (d) 4,700 18,554

FFELP loan asset-backed securities (c) 149,179 —

Other debt securities 240 220

Total Nelnet Bank 149,419 220

Total held to maturity investments 154,119 18,774

Venture capital and funds:

Measurement alternative 159,437 157,609

Measurement alternative (e) 191,731 160,052

Equity method 98,217 89,332

2 unchanged sentences

Investment in ALLO:

Voting interest/equity method (d) 74,271 87,247

Preferred membership interest and accrued and unpaid preferred return (e) 143,763 137,342

Voting interest/equity method (f) 55,756 67,538

Preferred membership interest and accrued and unpaid preferred return (g) 148,175 145,926

Total investment in ALLO 203,931 213,464

Beneficial interest in loan securitizations (f):

Private education loans, including accrued interest 77,447 66,008

Consumer loans 27,617 28,366

Beneficial interest in loan securitizations (h):

Consumer loans and other 81,399 39,249

Private education loans 72,898 75,261

Federally insured student loans 23,591 24,228

Total beneficial interest in loan securitizations 177,888 138,738

Solar (g) ( 71,000 ) ( 42,457 )

Solar (i) ( 66,353 ) ( 55,448 )

Notes receivable 30,246 31,106

2 unchanged sentences

Total investments and notes receivable $ 1,987,570 $ 2,111,917

(a) As of September 30, 2022, the aggregate fair value of available-for-sale debt securities with unrealized losses was $ 1.0 billion.

The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.

(b) As of September 30, 2022, $ 399.7 million (par value) of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 3 under "Participation Agreement."

(c) As of September 30, 2022, $ 350.9 million (par value) of private education loan asset-backed securities are subject to repurchase agreements with third parties, as discussed in note 3 under “Repurchase Agreements.”

(d) On February 25, 2022, the Company contributed $ 34.7 million of additional equity to ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO").

(a) A portion of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 3 under "Participation Agreement." As of March 31, 2023, the par value and fair value of these securities was $ 311.8 million and $ 289.1 million, respectively.

(b) A portion of private education loan asset-backed securities were subject to repurchase agreements with third parties, as discussed in note 3 under "Repurchase Agreements." As of March 31, 2023, the par value and fair value of these securities was $ 321.6 million and $ 294.6 million, respectively.

(c) On March 31, 2023, securities at Nelnet Bank with a fair value of $ 149.2 million were transferred from available for sale to held to maturity.

The securities were reclassified at fair value at the time of the transfer, and such transfer represented a non-cash transaction.

Accumulated other comprehensive income as of March 31, 2023 includes pre-tax unrealized losses of $ 3.7 million related to the transfer.

These unrealized losses will be amortized, consistent with the amortization of any discounts on such securities, over the remaining lives of the respective securities as an adjustment of yield.

(d) On March 31, 2023, certain Non-Nelnet Bank debt securities were transferred from held to maturity to available for sale.

(e) The Company has an investment in Agile Sports Technologies, Inc.

(doing business as “Hudl”) that is included in “venture capital and funds” in the above table.

On February 6, 2023, the Company acquired additional ownership interests in Hudl for $ 31.5 million.

Such ownership interests were purchased by the Company from certain existing Hudl investors.

The Company accounts for its investment in Hudl using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions.

The February 6, 2023 transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities, and the price was privately negotiated between the Company and the selling parties.

Accordingly, the Company did not adjust its carrying value of its Hudl investment to the February 2023 transaction value.

As of March 31, 2023, the carrying amount of the Company's investment in Hudl is $ 165.5 million, and the Company's equity ownership interests did not materially change as a result of the February 6, 2023 transaction.

Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl.

(f) During the first quarter of 2023, the Company contributed $ 8.4 million of additional equity to ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO").

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

The Company accounts for its voting membership interests in ALLO under the Hypothetical Liquidation at Book Value (HLBV) method of accounting.

During the three months ended September 30, 2022 and 2021, the Company recognized pre-tax losses of $ 17.6 million and $ 10.5 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment, and during the nine months ended September 30, 2022 and 2021, the Company recognized pre-tax losses of $ 47.6 million and $ 31.6 million, respectively.

Income and losses from the Company's investment in ALLO are included in "other" in "other income/expense" on the consolidated statements of income.

(e) As of September 30, 2022, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 137.3 million and $ 6.4 million, respectively.

The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 percent.

The Company recognized pre-tax income on its ALLO preferred membership interests of $ 2.2 million and $ 2.0 million during the three months ended September 30, 2022 and 2021, respectively, and $ 6.4 million during each of the nine months ended September 30, 2022 and 2021.

This income is included in "other" in "other income/expense" on the consolidated statements of income.

(f) The Company has partial ownership in certain private education, consumer, and federally insured student loan securitizations.

As of the latest remittance reports filed by the various trusts prior to or as of September 30, 2022, the Company's ownership correlates to approximately $ 630 million, $ 150 million, and $ 420 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.

(g) As of September 30, 2022, the Company has funded a total of $ 252.1 million in solar investments, which includes $ 81.3 million funded by syndication partners.

During the three months ended March 31, 2023 and 2022, the Company recognized losses of $ 20.2 million and $ 13.1 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment.

Income and losses from the Company's investment in ALLO are included in "other, net" in "other income (expense)" on the consolidated statements of income.

(g) As of March 31, 2023, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 145.9 million and $ 2.2 million, respectively.

The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 %.

The Company recognized income on its ALLO preferred membership interests of $ 2.2 million and $ 2.1 million during the three months ended March 31, 2023 and 2022, respectively.

This income is included in "other, net" in "other income (expense)" on the consolidated statements of income.

(h) The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations.

As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2023, the Company's ownership correlates to approximately $ 585 million, $ 590 million, and $ 370 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations.

(i) As of March 31, 2023, the Company has funded a total of $ 294.4 million in solar investments, which includes $ 115.9 million funded by syndication partners.

The carrying value of the Company’s investment in a solar project is reduced by tax credits earned when the solar project is placed-in-service.

The solar investment balance at September 30, 2022 represents the sum of total tax credits earned on solar projects placed in service through September 30, 2022 and the calculated HLBV net losses being larger than total payments made by the Company on such projects.

As of September 30, 2022, the Company is committed to fund an additional $ 42.8 million on these projects, of which $ 35.1 million will be provided by syndication partners.

The solar investment balance as of March 31, 2023 represents the sum of total tax credits earned on solar projects placed-in-service through March 31, 2023 and the calculated HLBV net losses being larger than the total investment contributions made by the Company on such projects.

As of March 31, 2023, the Company is committed to fund an additional $ 220.3 million on tax equity investments, of which $ 141.4 million is expected to be provided by syndication partners.

The Company accounts for its solar investments using 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.

The Company recognized pre-tax losses on its solar investments of $ 4.2 million and $ 3.4 million during the three months ended September 30, 2022 and 2021, respectively, and $ 7.1 million and $ 7.4 million during the nine months ended September 30, 2022 and 2021, respectively.

These losses are included in “other” in "other income/expense" on the consolidated statements of income.

Losses from solar investments include losses attributable to third-party minority interest investors (syndication partners) that are included in “net loss attributable to noncontrolling interests” in the consolidated statements of income.

Solar losses attributed to minority interest investors was $ 4.1 million and $ 2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $ 8.0 million and $ 4.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Impairment Expense

During the second quarter of 2022, the Company recorded an impairment charge of $ 5.4 million related primarily to one of its venture capital investments accounted for under the measurement alternative method.

The impairment expense is included in "impairment expense and provision for beneficial interests, net" on the consolidated statements of income.

Business Combinations

NGWeb Solutions, LLC

On April 30, 2022, the Company acquired 30 percent of the ownership interests of NGWeb Solutions, LLC ("NextGen") for total cash consideration of $ 9.2 million.

NextGen provides software solutions primarily to higher education institutions to enable administrators to efficiently manage online forms, scholarships, employment, online timesheets, and other specialized processes that require signed authorizations and interactions with student information.

Prior to the acquisition, the Company owned 50 percent of the ownership interests of NextGen and accounted for this investment under the equity method.

As a result of the acquisition, the previously held 50 percent ownership interests was remeasured to its fair value as of the April 30, 2022 date of acquisition of the additional 30 percent of the ownership interests, resulting in a $ 15.2 million revaluation gain, which is included in "other" in "other income/expense" on the consolidated statements of income.

For segment reporting, this gain is included in Corporate and Other Activities.

Subsequent to the acquisition, the Company has consolidated the operating results of NextGen and such results are included in the Education Technology, Services, and Payment Processing reportable segment.

The following table summarizes the final estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

During the three months ended September 30, 2022, the Company recognized certain adjustments to the provisional amounts recorded on the acquisition date that were needed to reflect new information obtained about facts and circumstances that existed as of the acquisition date.

The net impact of these adjustments had no impact on operating results.

Cash and cash equivalents $ 1,885

Accounts receivable 1,315

Property and equipment 800

Other assets 201

Intangible assets 15,250

Excess cost over fair value of net assets acquired (goodwill) 15,937

Other liabilities ( 4,550 )

Net assets acquired 30,838

Minority interest ( 6,291 )

Remeasurement of previously held investment ( 15,342 )

Total consideration paid by the Company $ 9,205

The $ 15.3 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 14 years.

The intangible assets that made up this amount include customer relationships of $ 12.8 million ( 15 -year useful life), computer software of $ 1.7 million ( 5 -year useful life) and a trade name of $ 0.8 million ( 10 -year useful life).

The $ 15.9 million of goodwill is not expected to be deductible for tax purposes.

The amount allocated to goodwill was primarily attributed to the synergies and economies of scale expected from combining the operations of the Company and NextGen.

The pro forma impacts of the NextGen acquisition on the Company's historical results prior to the acquisition were not material.

On July 1, 2022, the Company acquired 80 percent of the ownership interests 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 cash consideration of $ 30.4 million.

GRNE designs and installs residential, commercial, and utility-scale solar systems in the Midwest.

ENRG owns certain assets that generate and sell solar energy.

The acquisition diversifies the Company's position in the renewable energy space to include solar construction.

For segment reporting, the operating results of GRNE Solar are included in Corporate and Other Activities.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

Cash and cash equivalents $ 1,742

Accounts receivable 4,941

Property and equipment 8,720

Other assets 3,092

Intangible assets 11,683

Excess cost over fair value of net assets acquired (goodwill) 14,004

Bonds and notes payable ( 750 )

Other liabilities ( 5,438 )

Net assets acquired 37,994

Minority interest ( 7,599 )

Total consideration paid by the Company $ 30,395

The $ 11.7 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 8 years.

The intangible assets that made up this amount include a trade name of $ 8.1 million ( 10 -year useful life), customer relationships of $ 1.1 million ( 3 -year useful life), and other separably identified intangibles of $ 2.4 million ( 5 -year useful life).

The $ 14.0 million of goodwill is expected to be deductible for tax purposes.

The amount allocated to goodwill was attributed to synergies from combining the operations of the Company and GRNE Solar and intangible assets that do not qualify for separate recognition.

The pro forma impacts of the GRNE Solar acquisition on the Company's historical results prior to the acquisition were not material.

The Company recognized losses on its solar investments of $ 1.9 million and $ 1.0 million during the three months ended March 31, 2023 and 2022, respectively.

These losses, which include losses attributable to third-party noncontrolling interest investors (syndication partners), are included in “other, net” in "other income (expense)" on the consolidated statements of income.

Solar losses attributed to noncontrolling interest investors was $ 2.7 million and $ 1.8 million for the three months ended March 31, 2023 and 2022, respectively, and is reflected in “net loss attributable to noncontrolling interests” in the consolidated statements of income.

The following table presents, by remaining contractual maturity, the amortized cost and fair value of debt securities at March 31, 2023:

As of March 31, 2023

1 year or less After 1 year through 5 years After 5 years through 10 years After 10 years Total

Available-for-sale asset-backed securities

Non-Nelnet Bank:

FFELP loan $ 26,196 12,274 50,051 247,806 336,327

Private education loan — — — 321,120 321,120

Other debt securities — 99 — 53,644 53,743

Total Non-Nelnet Bank 26,196 12,373 50,051 622,570 711,190

Fair value 25,997 12,308 48,679 595,486 682,470

FFELP loan 39,728 6,933 34,659 159,028 240,348

Private education loan — — — 1,818 1,818

Other debt securities — 23,084 92,316 37,171 152,571

Total Nelnet Bank 39,728 30,017 126,975 198,017 394,737

Fair value 39,139 29,704 124,228 195,162 388,233

Total available-for-sale asset-backed securities at amortized cost $ 65,924 42,390 177,026 820,587 1,105,927

Total available-for-sale asset-backed securities at fair value $ 65,136 42,012 172,907 790,648 1,070,703

Held to maturity investments

Non-Nelnet Bank:

Debt securities $ 4,700 — — — 4,700

Fair value 4,700 — — — 4,700

FFELP loan asset-backed securities — — 3,797 145,382 149,179

Other debt securities 240 — — — 240

Total Nelnet Bank 240 — 3,797 145,382 149,419

Fair value 240 — 3,797 145,382 149,419

Total held-to-maturity investments at amortized cost $ 4,940 — 3,797 145,382 154,119

Total held-to-maturity investments at fair value $ 4,940 — 3,797 145,382 154,119

The following table presents the gross unrealized losses and fair value of securities classified as available for sale at March 31, 2023.

These securities are segregated between investments that had been in a continuous unrealized loss position for less than twelve months and twelve months or more, based on the point in time that the fair value declined below the amortized cost basis.

All securities in the table below have been evaluated to determine if a credit loss exists.

As part of that assessment, the Company concluded it currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.

As of March 31, 2023

Unrealized loss position less than 12 months Unrealized loss position 12 months or more Total

Available-for-sale asset-backed securities Unrealized loss Fair value Unrealized loss Fair value Unrealized loss Fair value

Non-Nelnet Bank:

FFELP loan $ ( 5,324 ) 182,059 ( 2,602 ) 44,238 ( 7,926 ) 226,297

Private education loan — — ( 26,531 ) 294,590 ( 26,531 ) 294,590

Other debt securities ( 803 ) 21,462 — — ( 803 ) 21,462

Total Non-Nelnet Bank ( 6,127 ) 203,521 ( 29,133 ) 338,828 ( 35,260 ) 542,349

FFELP loan ( 2,891 ) 155,672 ( 731 ) 37,285 ( 3,622 ) 192,957

Private education loan ( 101 ) 1,717 — — ( 101 ) 1,717

Other debt securities ( 3,492 ) 111,638 ( 57 ) 3,940 ( 3,549 ) 115,578

Total Nelnet Bank ( 6,484 ) 269,027 ( 788 ) 41,225 ( 7,272 ) 310,252

Total available-for-sale asset-backed securities $ ( 12,611 ) 472,548 ( 29,921 ) 380,053 ( 42,532 ) 852,601

As of December 31, 2022, the aggregate fair value of available-for-sale debt securities with unrealized losses was $ 1.2 billion.

The following table summarizes the gross proceeds and gross realized gains and losses of available-for-sale asset-backed securities.

Gross realized gains Gross realized losses Gross proceeds from sales

Three months ended March 31, 2023 $ 1,274 ( 6,256 ) 492,173

Three months ended March 31, 2022 2,965 ( 172 ) 113,980

Intangible Assets

1 unchanged sentence

Weighted average remaining useful life as of

September 30, 2022 (months)

September 30, 2022 December 31, 2021

March 31, 2023 (months)

March 31, 2023 December 31, 2022

Amortizable intangible assets, net:

1 unchanged sentence

110 $ 49,569 51,738

Trade names (net of accumulated amortization of $ 312 )

Trade names (net of accumulated amortization of $ 882 and $ 617 , respectively)

111 8,028 8,293

Computer software (net of accumulated amortization of $ 6,514 and $ 6,400 , respectively)

49 1,406 1,520

Other (net of accumulated amortization of $ 245 )

Other (net of accumulated amortization of $ 655 and $ 490 , respectively)

51 1,785 1,950

Total - amortizable intangible assets, net 107 $ 60,788 63,501

The Company recorded amortization expense on its intangible assets of $ 3.3 million for the three months ended September 30, 2022 and 2021, and $ 8.6 million and $ 19.9 million during the nine months ended September 30, 2022 and 2021, respectively.

The Company recorded amortization expense on its intangible assets of $ 2.7 million and $ 2.5 million for the three months ended March 31, 2023 and 2022, respectively.

The Company will continue to amortize intangible assets over their remaining useful lives.

As of September 30, 2022, the Company estimates it will record amortization expense as follows:

2022 (October 1 - December 31) $ 3,509

As of March 31, 2023, the Company estimates it will record amortization expense as follows:

2023 (April 1 - December 31) $ 7,648

2028 and thereafter 21,224

The carrying amount of goodwill by reportable operating segment was as follows:

The following table presents the carrying amount of goodwill as of March 31, 2023 and December 31, 2022 by reportable operating segment:

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management Nelnet Bank Corporate and Other Activities Total

Balance as of December 31, 2021 and March 31, 2022 $ 23,639 76,570 41,883 — — 142,092

Goodwill acquired during the period (NextGen) — 7,025 — — — 7,025

Balance as of June 30, 2022 23,639 83,595 41,883 — — 149,117

Goodwill acquired during the period (GRNE Solar) — — — — 14,004 14,004

NextGen purchase price allocation adjustment — 8,912 — — — 8,912

Balance as of September 30, 2022 $ 23,639 92,507 41,883 — 14,004 172,033

Goodwill balance $ 23,639 92,507 41,883 — 18,873 176,902

Bank Deposits

Deposits are interest-bearing deposits and consist of brokered certificates of deposit (CDs) and retail and other savings deposits and CDs.

Retail and other deposits include savings deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trusts (STFIT), and commercial and institutional CDs.

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

CDs are accounts that have a stipulated maturity and interest rate.

For savings accounts, the depositor may be required to give written notice of any intended withdrawal no less than seven days before the withdrawal is made.

Generally, early withdrawal of brokered CDs is prohibited (except in the case of death or legal incapacity).

Nelnet Bank has intercompany deposits from Nelnet, Inc.

and its subsidiaries, including a $ 40.0 million pledged deposit from Nelnet, Inc.

as required under a Capital and Liquidity Maintenance Agreement with the FDIC.

All intercompany deposits held at Nelnet Bank are eliminated for consolidated financial reporting purposes.

The following table summarizes Nelnet Bank’s interest-bearing deposits, excluding intercompany deposits:

March 31, 2023 December 31, 2022

Brokered CDs, net of brokered deposit fees $ 203,714 254,817

Retail and other savings (529, STFIT, and HSA) 447,792 410,556

Retail and other CDs (commercial and institutional) 24,261 25,949

Total interest-bearing deposits $ 675,767 691,322

The following table presents certificates of deposit remaining maturities as of March 31, 2023:

After two years to three years $ 65,513

After three years to four years 162,115

After four years to five years 347

Total $ 227,975

The Educational 529 College Savings, STFIT, and Health Savings plan deposits are large interest-bearing omnibus accounts structured to allow FDIC insurance to flow through to underlying individual depositors.

Except for the pledged deposit from Nelnet, Inc.

and an earmarked deposit required for intercompany transactions, there were no deposits exceeding the FDIC insurance limits as of March 31, 2023 and December 31, 2022.

Earnings per Common Share

Presented below is a summary of the components used to calculate basic and diluted earnings per share.

The following table p resents the components used to calculate basic and diluted earnings per share.

The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards.

Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.

Three months ended September 30,

Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total

Net income attributable to Nelnet, Inc.

$ 102,763 2,035 104,798 52,245 893 53,138

Weighted-average common shares outstanding - basic and diluted 36,654,781 725,712 37,380,493 37,947,257 648,464 38,595,721

Earnings per share - basic and diluted $ 2.80 2.80 2.80 1.38 1.38 1.38

Nine months ended September 30,

Three months ended March 31,

Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total

5 unchanged sentences

See note 17 of the notes to consolidated financial statements included in the 2022 Annual Report for a description of the Company's operating segments.

The following tables include the results of each of the Company's operating segments reconciled to the consolidated financial statements.

Three months ended September 30, 2022

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset

Generation and

Management Nelnet Bank Corporate and Other Activities Eliminations Total

Total interest income $ 831 3,707 182,932 7,551 10,860 ( 2,748 ) 203,133

Interest expense — — 120,009 3,298 6,067 ( 2,748 ) 126,625

Net interest income 831 3,707 62,923 4,253 4,793 — 76,508

Less provision (negative provision) for loan losses — — 9,215 450 — — 9,665

Net interest income after provision for loan losses 831 3,707 53,708 3,803 4,793 — 66,843

Other income/expense:

Loan servicing and systems revenue 134,197 — — — — — 134,197

Intersegment revenue 8,281 8 — — — ( 8,289 ) —

Education technology, services, and payment processing revenue — 106,894 — — — — 106,894

Solar construction revenue — — — — 9,358 — 9,358

Other 596 — 4,627 566 ( 3,564 ) — 2,225

Gain on sale of loans — — 2,627 — — — 2,627

Impairment expense and provision for beneficial interests, net — — — — 121 — 121

Derivative settlements, net — — 10,271 — — — 10,271

Derivative market value adjustments, net — — 52,991 — — — 52,991

Total other income/expense 143,074 106,902 70,516 566 5,915 ( 8,289 ) 318,684

Cost of services:

Cost to provide education technology, services, and payment processing services — 42,676 — — — — 42,676

Cost to provide solar construction services — — — — 5,968 — 5,968

Total cost of services — 42,676 — — 5,968 — 48,644

Operating expenses:

Salaries and benefits 82,067 34,950 653 1,814 27,713 — 147,198

Depreciation and amortization 5,784 2,532 — 4 10,452 — 18,772

Other expenses 16,654 7,034 3,349 1,427 15,395 — 43,858

Intersegment expenses, net 17,486 4,762 8,350 69 ( 22,378 ) ( 8,289 ) —

Total operating expenses 121,991 49,278 12,352 3,314 31,182 ( 8,289 ) 209,828

Income (loss) before income taxes 21,914 18,655 111,872 1,055 ( 26,442 ) — 127,055

Income tax (expense) benefit ( 5,259 ) ( 4,475 ) ( 26,849 ) ( 246 ) 10,244 — ( 26,586 )

Net income (loss) 16,655 14,180 85,023 809 ( 16,198 ) — 100,469

Net (income) loss attributable to noncontrolling interests — ( 61 ) — — 4,390 — 4,329

Net income (loss) attributable to Nelnet, Inc.

$ 16,655 14,119 85,023 809 ( 11,808 ) — 104,798

Total assets as of September 30, 2022 $ 235,858 440,859 16,374,493 884,089 2,360,882 ( 732,648 ) 19,563,533

Three months ended September 30, 2021

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset

Generation and

Management Nelnet Bank Corporate and Other Activities Eliminations Total

Total interest income $ 31 344 131,781 2,061 2,609 ( 172 ) 136,654

Interest expense 24 — 48,662 421 1,242 ( 172 ) 50,176

Net interest income 7 344 83,119 1,640 1,367 — 86,478

Less provision (negative provision) for loan losses — — 5,940 ( 113 ) — — 5,827

Net interest income after provision for loan losses 7 344 77,179 1,753 1,367 — 80,651

Other income/expense:

Loan servicing and systems revenue 112,351 — — — — — 112,351

Intersegment revenue 8,621 3 — — — ( 8,624 ) —

Education technology, services, and payment processing revenue — 85,324 — — — — 85,324

Solar construction revenue — — — — — — —

Other 727 13 ( 7,275 ) 450 17,952 — 11,867

Gain on sale of loans — — 3,444 — — — 3,444

Impairment expense and provision for beneficial interests, net ( 13,243 ) — — — ( 916 ) — ( 14,159 )

Derivative settlements, net — — ( 5,909 ) — — — ( 5,909 )

Derivative market value adjustments, net — — 7,260 — — — 7,260

Total other income/expense 108,456 85,340 ( 2,480 ) 450 17,036 ( 8,624 ) 200,178

Cost of services:

Cost to provide education technology, services, and payment processing services — 31,335 — — — — 31,335

Cost to provide solar construction services — — — — — — —

Total cost of services — 31,335 — — — — 31,335

Operating expenses:

Salaries and benefits 75,305 29,119 542 890 22,735 — 128,592

Depreciation and amortization 4,245 2,762 — — 8,702 — 15,710

Other expenses 12,738 4,804 5,420 445 14,918 — 38,324

Intersegment expenses, net 19,217 3,672 8,652 32 ( 22,949 ) ( 8,624 ) —

Total operating expenses 111,505 40,357 14,614 1,367 23,406 ( 8,624 ) 182,626

Income (loss) before income taxes ( 3,042 ) 13,992 60,085 836 ( 5,003 ) — 66,868

Income tax (expense) benefit 730 ( 3,358 ) ( 14,421 ) ( 200 ) 1,600 — ( 15,649 )

Net income (loss) ( 2,312 ) 10,634 45,664 636 ( 3,403 ) — 51,219

Net (income) loss attributable to noncontrolling interests — — — — 1,919 — 1,919

Net income (loss) attributable to Nelnet, Inc.

$ ( 2,312 ) 10,634 45,664 636 ( 1,484 ) — 53,138

Total assets as of September 30, 2021 $ 238,602 415,178 20,001,997 413,155 1,740,060 ( 406,253 ) 22,402,739

Nine months ended September 30, 2022

The following tables present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.

Three months ended March 31, 2023

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset

11 unchanged sentences

Solar construction revenue — — — — 8,651 — 8,651

Other 1,946 — 16,270 2,224 4,309 — 24,750

Gain on sale of loans — — 5,616 — — — 5,616

Impairment expense and provision for beneficial interests, net — — — — ( 6,163 ) — ( 6,163 )

Other, net 608 — 2,845 210 ( 17,734 ) — ( 14,071 )

Gain on sale of loans, net — — 11,812 — — — 11,812

Derivative settlements, net — — 23,337 — — — 23,337

14 unchanged sentences

Net income (loss) 19,166 28,571 ( 168 ) ( 58 ) ( 24,494 ) — 23,017

Net (income) loss attributable to noncontrolling interests — ( 8 ) — — 8,323 — 8,315

Net loss attributable to noncontrolling interests — 138 — — 3,332 — 3,470

Net income (loss) attributable to Nelnet, Inc.

$ 19,166 28,709 ( 168 ) ( 58 ) ( 21,162 ) — 26,487

Total assets as of September 30, 2022 $ 235,858 440,859 16,374,493 884,089 2,360,882 ( 732,648 ) 19,563,533

Nine months ended September 30, 2021

Total assets as of March 31, 2023 $ 232,667 424,742 14,939,324 1,000,659 2,207,722 ( 722,505 ) 18,082,609

Three months ended March 31, 2022

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset

11 unchanged sentences

Solar construction revenue — — — — — — —

Other 2,541 13 ( 4,514 ) 475 31,668 — 30,183

Gain on sale of loans — — 18,715 — — — 18,715

Impairment expense and provision for beneficial interests, net ( 13,243 ) — 2,436 — ( 1,416 ) — ( 12,223 )

Other, net 740 — 6,511 1,500 1,125 — 9,877

Gain on sale of loans, net — — 2,989 — — — 2,989

Derivative settlements, net — — ( 2,809 ) — — — ( 2,809 )

14 unchanged sentences

Net income (loss) 9,191 25,166 162,206 738 ( 12,415 ) — 184,886

Net (income) loss attributable to noncontrolling interests — — — — 3,467 — 3,467

Net loss attributable to noncontrolling interests — — — — 1,761 — 1,761

Net income (loss) attributable to Nelnet, Inc.

$ 9,191 25,166 162,206 738 ( 10,654 ) — 186,647

Total assets as of September 30, 2021 $ 238,602 415,178 20,001,997 413,155 1,740,060 ( 406,253 ) 22,402,739

Total assets as of March 31, 2022 $ 259,712 376,794 18,158,972 656,242 2,066,417 ( 528,396 ) 20,989,741

Disaggregated Revenue

The following tables provide disaggregated revenue by service offering and/or customer type for the Company's fee-based reportable operating segments.

The following tables present disaggregated revenue by service offering or customer type for the Company's fee-based operating segments.

Loan Servicing and Systems

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Government servicing $ 104,428 84,084 312,368 241,497

Three months ended March 31,

Government loan servicing $ 108,880 109,125

Private education and consumer loan servicing 12,164 12,873

FFELP servicing 4,127 4,557 12,386 13,930

FFELP loan servicing 3,368 4,248

Software services 9,697 7,400

Outsourced services and other 5,215 3,560 9,954 23,192

Outsourced services 5,118 2,722

Loan servicing and systems revenue $ 139,227 136,368

Education Technology, Services, and Payment Processing

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

Tuition payment plan services $ 34,187 30,716

3 unchanged sentences

Education technology, services, and payment processing revenue $ 133,603 112,286

Solar Construction

GRNE Solar was acquired on July 1, 2022;

accordingly, there are no results for the three months ended March 31, 2022.

Three months ended March 31, 2023

Commercial revenue $ 6,234

Residential revenue 2,775

Other ( 358 )

Solar construction revenue $ 8,651

Other Income (Expense)

The following table provides the components of "other" in "other income/expense" on the consolidated statements of income:

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Income/gains from investments, net $ 10,701 16,050 40,685 40,141

Borrower late fee income 2,824 514 7,693 1,698

The following table presents the components of "other, net" in "other income (expense)" on the consolidated statements of income:

Three months ended March 31,

ALLO preferred return $ 2,249 2,117

Borrower late fee income 2,247 2,431

Administration/sponsor fee income 1,772 2,123

1 unchanged sentence

Loss from ALLO voting membership interest investment ( 20,213 ) ( 13,130 )

Investment activity, net ( 3,577 ) 11,856

Loss from solar investments ( 1,947 ) ( 1,030 )

Other 3,786 4,228

$ 2,225 11,867 24,750 30,183

Other, net $ ( 14,071 ) 9,877

Major Customer

The Company earns loan servicing revenue from servicing contracts with the Department.

Revenues earned by the Company related to these contracts are set forth in the "Government servicing" line item of the "Loan Servicing and Systems" table in note 11.

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

Government Loan Servicing

Nelnet Servicing, LLC (Nelnet Servicing) and Great Lakes Educational Loan Services, Inc.

(Great Lakes), both subsidiaries of the Company, are two of the current six private sector entities that have student loan servicing contracts with the Department.

Revenue earned by the Company related to these contracts was $ 108.9 million and $ 109.1 million for the three months ended March 31, 2023 and 2022, respectively.

The Company currently licenses its hosted servicing software two of the six servicers for the Department.

Contract Modifications and Award

On March 22, 2023, each of Nelnet Servicing and Great Lakes received modifications of contract with an effective date of April 1, 2023 (collectively the “modifications”) from the Department.

Such modifications outline the Department's amendment to the student loan servicing contracts between the Department and each of Nelnet Servicing and Great Lakes (the “servicing contracts”) to reduce the current prices earned by Nelnet Servicing and Great Lakes under the servicing 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 modifications reduce the monthly fee by $ 0.19 per borrower on certain borrower statuses.

The Company's 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 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.

On August 24, 2022, the Department issued a bulletin titled “Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation to Smooth Transition to Repayment” (the “August 24, 2022 Bulletin”).

The August 24, 2022 Bulletin indicates the Department will provide targeted student debt cancellation to borrowers with loans held by the Department, and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.

On October 21, 2022, the U.S.

Court of Appeals for the Eighth Circuit issued a temporary administrative stay of implementation of the Department's student debt relief plan in response to a legal challenge that was initiated by other parties (not the Company).

As of September 30, 2022, the Company was servicing 15.7 million borrowers under its government servicing contracts.

The Company cannot currently estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the August 24, 2022 Bulletin and subsequent publicly available guidance provided by the Department.

However, revenue earned by the Company under its contracts will be negatively impacted if the Department’s student debt relief plan or other broad based loan forgiveness is implemented.

The Company responded to the USDS solicitation.

On April 24, 2023, Nelnet Diversified Solutions, LLC (NDS), a subsidiary of the Company, received a contract award from the Department, pursuant to which NDS was selected to provide continued servicing capabilities for the Department's Office of Federal Student Aid's student aid recipients under a new USDS contract (the "New Government Servicing Contract") which will replace the existing legacy Department student loan servicing contracts that are currently scheduled to expire December 14, 2023.

The New Government Servicing Contract is effective April 24, 2023 and has a five year base period, with 2 two-year and 1 one-year possible extensions.

The Department's total loan servicing volume of more than 37 million existing borrowers will be allocated by the Department to NDS and four other servicers that were awarded a USDS contract.

New Department borrowers will be allocated to the USDS servicers based on service and performance levels.

Under the New Government Servicing Contract, NDS will begin immediately to make required servicing platform enhancements, for which NDS will be compensated from the Department on certain of these investments.

In a press release issued on April 24, 2023 by the Department's Office of Federal Student Aid (FSA), FSA indicated that servicing under the USDS contracts will go live in 2024 and to maintain stability as the new loan servicing environment gets underway, FSA will extend the current legacy servicing contracts with the Department from December 14, 2023 to December 2024.

Until servicing under the USDS contracts goes live, the Company will continue to earn revenue for servicing borrowers under its current legacy servicing contracts with the Department.

The fee structure included in the new Department servicing contracts under USDS are structurally different than the current legacy servicing contracts with the Department.

The USDS servicing contracts have multiple revenue components with tiered pricing based on borrower volume, while revenue earned under the legacy servicing contracts is primarily based on borrower status.

Assuming borrower volume remains consistent under the USDS servicing contract, the Company expects revenue earned on a per borrower blended basis will decrease under the USDS contract versus the current legacy contracts.

However, consistent with the current legacy contracts, the Company expects to earn additional revenue from the Department under the USDS servicing contract for change requests, consolidations, and other support services.

As discussed below, during 2023, the Company will continue to transfer the Great Lakes direct loan servicing volume to the Nelnet servicing platform.

The associated cost savings with moving government borrowers to one servicing platform will be partially offset under the USDS contract as the Company will incur additional costs for cybersecurity and other system specifications as required under the new contract.

Loan Volume Transfers

Edfinancial Services, LLC ("Edfinancial"), a current servicer for the Department, utilizes Nelnet Servicing's platform to service their loans for the Department.

In the fourth quarter of 2022, Nelnet Servicing and Edfinancial reached an agreement on a decommission schedule transferring Edfinancial’s direct loan servicing volume to another servicing platform.

As of March 31, 2023, Edfinancial was servicing 3.5 million borrowers for the Department on the Company’s platform.

In February 2023, the Department notified the Company of its intention to transfer up to one million borrowers of the Company’s existing Department servicing borrowers to another servicer, and one of the Company’s remote hosted servicing customers notified the Company the Department intends to move that customer’s servicing borrowers to a different servicing platform.

As of March 31, 2023, the remote hosted servicing customer was servicing approximately 1.4 million borrowers for the Department on the Company's platform.

Neither transfer decision was based on the Company’s performance.

The 2023 transfers discussed above began in the first quarter of 2023 and the Company expects the transfers to be completed by the end of the second quarter of 2023.

As a result of the transfers, software services revenue for remote hosted customers and government servicing revenue will decrease in future periods as borrowers are transferred off of the Company’s platform.

In addition, once all remote hosted servicing transfers are complete, there will be no active Department remote hosted servicing customers using the Company’s platform.

In addition, the Company continues to transfer the Great Lakes direct loan servicing volume to the Nelnet servicing platform (the GreatNet Federal servicing platform).

The Company anticipates the transfer of active borrowers to be completed by the end of the second quarter of 2023 and decommissioning of the Great Lakes' platform to be completed by the end of 2023.

Therefore, potential associated cost savings as a result of transferring direct loan servicing volume to one platform will not be recognized in operating results until 2024.

Department of Education Debt Relief

In August 2022, the Department announced a broad based student debt relief plan that would provide targeted student debt cancellation to borrowers with loans held by the Department, and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.

Decisions by the U.S.

Courts of Appeals for the Eighth Circuit and Fifth Circuit in October 2022 and November 2022, respectively, in response to legal challenges that were initiated by other parties (not the Company) have blocked implementation of the Department's broad based student debt relief plan.

These cases have been appealed to the U.S.

Supreme Court.

As of the filing of this report, the Supreme Court has not ruled on, and the Company cannot predict the timing, nature, or ultimate outcome of, this case.

The Company cannot estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the Department's announcement.

If there was a broad $10,000 or $20,000 per borrower forgiveness on all government owned loans, the Company estimates it would decrease the number of borrowers serviced (based on the borrower loan information as of March 31, 2023) by approximately 4.5 million borrowers and 7.7 million borrowers, respectively.

The actual impact to the number of borrowers serviced may be less than these amounts due to annual income ceilings for borrowers to qualify for forgiveness and the impact of whether a Pell Grant was received on the amount of forgiveness for a borrower.

Revenue earned under the current Department servicing contracts will decrease in future periods if the Department's student debt relief plan or other broad based loan forgiveness is implemented.

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.

As of September 30, 2022 As of December 31, 2021

As of March 31, 2023 As of December 31, 2022

Level 1 Level 2 Total Level 1 Level 2 Total

FFELP loan asset-backed debt securities - available-for-sale $ — 785,009 785,009 — 494,682 494,682

Private education loan asset-backed debt securities - available-for-sale — 317,901 317,901 — 412,552 412,552

Other debt securities - available-for-sale 100 275,061 275,161 100 22,335 22,435

Asset-backed debt securities - available-for-sale $ 99 1,070,604 1,070,703 100 1,388,937 1,389,037

Equity securities 91 — 91 6,719 — 6,719

4 unchanged sentences

The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets:

As of September 30, 2022

As of March 31, 2023

Fair value Carrying value Level 1 Level 2 Level 3

4 unchanged sentences

Investments (at fair value) 1,106,366 1,106,366 190 1,070,604 —

Investments - held to maturity 154,119 154,119 — 154,119 —

Notes receivable 30,246 30,246 — 30,246 —

Beneficial interest in loan securitizations 201,216 177,888 — — 201,216

13 unchanged sentences

Investments (at fair value) 1,428,119 1,428,119 6,819 1,388,937 —

Investments - held to maturity 18,996 18,774 — 18,996 —

Notes receivable 31,106 31,106 — 31,106 —

Beneficial interest in loan securitizations 162,360 138,738 — — 162,360

8 unchanged sentences

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 1. Financial Statements