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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-28 · 643 added, 440 removed, 586 unchanged (65% of the section changed)

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This discussion and analysis contains forward-looking statements subject to various risks and uncertainties and should be read in conjunction with the disclosures and information contained in "Forward-Looking and Cautionary Statements" and Item 1A "Risk Factors" included in this report.

A discussion related to the results of operations and changes in financial condition for the year ended December 31, 2022 compared with the year ended December 31, 2021 is presented below.

A discussion related to the results of operations and changes in financial condition for the year ended December 31, 2021 compared with the year ended December 31, 2020 can be found in Part II, Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2021 Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission on February 28, 2022.

The Company is a diverse, innovative company with a purpose to serve others and a vision to make dreams possible.

The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications.

The largest operating businesses engage in loan servicing and education technology services and payments.

A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans.

The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in early-stage and emerging growth companies, real estate, and renewable energy (solar).

The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in a fiber communications company (ALLO), early-stage and emerging growth companies (venture capital investments), real estate, and renewable energy (solar).

The Company was formed as a Nebraska corporation in 1978 to service federal student loans for two local banks.

The Company built on this initial foundation as a servicer to become a leading originator, holder, and servicer of federal student loans, principally consisting of loans originated under the FFEL Program.

The Reconciliation Act of 2010 discontinued new loan originations under the FFEL Program, effective July 1, 2010, and requires all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program.

As a result, the Company no longer originates FFELP loans.

The Reconciliation Act of 2010 discontinued new loan originations under the FFEL Program in 2010, and requires all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program.

Subsequent to the Reconciliation Act of 2010, the Company no longer originates FFELP loans.

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

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

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

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

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

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

The Company is also actively expanding its private education, consumer, and other loan portfolios, or investment interests therein, and as part of this strategy launched Nelnet Bank in 2020.

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

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Year ended December 31,

2023 2022 2021

GAAP net income attributable to Nelnet, Inc.

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Realized and unrealized derivative market value adjustments 41,773 (231,691) (92,813)

(231,691) (92,813)

Tax effect (a) (10,026) 55,606 22,275

55,606 22,275

Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b) $ 123,279 231,262 322,748

$ 231,262 322,748

Earnings per share:

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Realized and unrealized derivative market value adjustments 1.12 (6.16) (2.41)

(6.16) (2.41)

Tax effect (a) (0.28) 1.48 0.58

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Management has structured all of the Company’s derivative transactions with the intent that each is economically effective;

however, the Company’s derivative instruments do not qualify for hedge accounting.

however, the Company’s derivative instruments do not qualify for hedge accounting in the consolidated financial statements.

As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item.

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They include:

• Loan Servicing and Systems (LSS) - referred to as Nelnet Diversified Services (NDS), which includes the operations of Nelnet Servicing and Great Lakes

• Education Technology, Services, and Payment Processing (ETS&PP) - referred to as Nelnet Business Services (NBS)

• Asset Generation and Management (AGM)

• Nelnet Bank

• Communications

• Loan Servicing and Systems (LSS) - referred to as Nelnet Diversified Services (NDS)

• Education Technology Services and Payments (ETSP) - referred to as Nelnet Business Services (NBS)

• Asset Generation and Management (AGM), part of the Nelnet Financial Services (NFS) division

• Nelnet Bank, part of the NFS division

The Company earns fee-based revenue through its NDS and NBS reportable operating segments.

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The Company actively works to maximize the amount and timing of cash flows generated from its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.

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

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

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

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

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate").

Corporate also includes income earned on the majority of the Company’s investments, interest expense incurred on unsecured and other corporate related debt transactions, and certain shared service activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.

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

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

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

See “Results of Operations” for each reportable operating segment and Corporate and Other Activities under this Item 7 for additional detail.

Nelnet Bank operates as an internet

industrial bank franchise focused on the private education and unsecured consumer loan markets, with a home office in Salt Lake City, Utah.

The Company formally established the Nelnet Financial Services division in 2023 intended to focus on the Company’s key objective to maximize the amount and timing of cash flows generated from its FFELP portfolio and reposition itself for the post-FFELP environment by expanding its private education, consumer, and other loan portfolios.

The creation of NFS resulted in financial results grouped and reported differently to the Company’s chief operating decision maker.

In addition to AGM and Nelnet Bank being part of the NFS division, NFS’s other operating segments that are not reportable (that were previously included in Corporate and Other Activities) include:

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

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

• The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and causality policies

• The operating results of the Company’s investment activities in real estate

• The operating results of the Company’s investment debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments

Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities ("Corporate").

Corporate includes the following items:

• Shared service activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.

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

• Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs

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

• The operating results of certain of the Company’s investment activities, including its investment in ALLO and early-stage and emerging growth companies (venture capital investments)

• Interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions

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

The following table presents the operating results (net income (loss) before taxes) for each of the Company’s reportable and certain other operating segments reconciled to the consolidated financial statements.

Year ended December 31,

2022 2021 Certain Items Impacting Comparability

(All dollar amounts below are pre-tax)

NDS $ 64,456 62,445 • The recognition of $5.5 million of non-cash impairment charges in 2022 compared with $13.2 million in 2021, due primarily to continued evaluation of office space needs as employees continue to work from home due to COVID-19.

• Decrease in operating margin in 2022 compared with 2021 due to increased operating expenses in 2022, primarily salaries and benefits, as the Company hired employees in preparation for the resumption of federal student loan payments once the CARES Act suspension was to expire.

The expiration of the CARES Act was extended multiple times throughout 2022.

NBS 74,105 72,713 • The recognition of $9.4 million of interest income in 2022 compared with $1.1 million in 2021 due to higher interest rates.

• The recognition of a $2.2 million non-cash impairment charge in 2022 related to previously acquired computer software.

• Decrease in operating margin in 2022 compared with 2021 due to additional investments during 2022 in the development of new services and technologies;

and superior customer experiences to grow, retain, and diversify revenue.

AGM 454,725 423,616 • A net gain of $231.7 million related to changes in the fair value of derivative instruments that do not qualify for hedge accounting in 2022 compared with a gain of $92.8 million in 2021.

• A decrease of $46.3 million in net interest income due to the decrease in the average balance of loans in 2022 compared with 2021.

• An increase of $27.1 million in net interest income due to an increase in core loan spread in 2022 compared with 2021.

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

• An increase of $8.4 million in interest income in 2022 compared with a $6.2 million decrease to interest income in 2021, as a result of increasing the constant prepayment rate used to amortize/accrete federally insured loan premium/discounts for loans.

• The recognition of $44.6 million in provision for loan losses in 2022 compared with a negative provision of $13.2 million in 2021.

• The recognition of a $32.9 million gain in 2021 related to the Company’s joint venture to acquire a private education student loan portfolio previously owned by Wells Fargo.

• The recognition of $10.8 million in borrower late fees in 2022 compared with $3.4 million in 2021.

• The recognition of $9.9 million in interest income on restricted cash in 2022 compared with $0.1 million in 2021 due to an increase in the balance of restricted cash and interest rates.

• The recognition of $7.9 million in administration and sponsor fee income in 2022 compared with $3.7 million in 2021.

• The recognition of $2.9 million in gains from the sale of loans in 2022 compared with $18.7 million in 2021.

• The recognition of a $1.2 million gain in 2022 from the repurchase of debt compared with a loss of $6.8 million in 2021.

Nelnet Bank 4,357 (792) • Increase in 2022 compared with 2021 was due to an increase in loans and investments, offset by increased operating expenses to support the bank’s growth.

Corporate (88,180) (55,875) • The recognition of a net loss of $68.0 million in 2022 related to the Company’s investment in ALLO compared with a net loss of $42.1 million in 2021.

• The recognition of $12.9 million of non-cash impairment and contingency charges in 2022 compared with $5.6 million in 2021.

Impairment charges were primarily due to certain venture capital investments.

2023 2022 2021

NDS $ 77,714 64,456 62,445

NBS 91,101 74,105 72,713

Nelnet Financial Services division:

AGM 80,636 454,725 423,616

Nelnet Bank (368) 4,357 (792)

NFS Other Operating Segments 50,872 51,502 43,123

Unallocated corporate costs (63,223) (72,183) (72,673)

Nelnet Renewable Energy (108,991) (11,639) (12,029)

ALLO investment (57,972) (65,245) (35,123)

Venture capital investments (6,008) 12,449 23,256

Other corporate activities 10,428 (3,065) (2,431)

Net income before taxes 74,188 509,465 502,105

Income tax expense (19,753) (113,224) (115,822)

Net loss attributable to noncontrolling interests 11,106 7,003

Net loss attributable to noncontrolling interests (a) 37,097 11,106 7,003

Net income $ 91,532 407,347 393,286

(a) For the periods presented, the majority of noncontrolling interests represents losses attributed to noncontrolling membership interests in the Company’s Nelnet Renewable Energy operating segment, which were $37.6 million, $11.6 million, and $7.7 million in 2023, 2022, and 2021, respectively.

2023 Operating and Liquidity Highlights

See below for a summary of (i) certain highlights of the Company’s 2023 operating results;

(ii) a description of significant and/or unusual events and transactions in 2023 that impacted and may potentially impact the Company’s operating results;

and (iii) a summary of the Company’s current liquidity, including certain items that impacted the Company’s liquidity in 2023.

See “Results of Operations” for each reportable operating segment, the NFS division, and Corporate and Other Activities and “Liquidity and Capital Resources” under this Item 7 for additional detail.

Loan Servicing and Systems

Effective April 1, 2023, the Department modified the loan servicing contract between the Department and Nelnet Servicing to reduce the monthly fee under the servicing contract by $0.19 per borrower.

In addition, beginning in the second quarter of 2023, the Department transferred one million of the Company’s existing Department servicing borrowers to another third-party servicer.

These items negatively impacted LSS’s government servicing revenue in 2023.

In the first quarter of 2023, the Company reduced staff to manage expenses due to (i) the delays in the government’s student debt relief and return to repayment programs under the CARES Act, (ii) the April 2023 monthly fee reduction on the government contract, and (iii) the transfer of government borrowers from the Company to another servicer.

The staff reductions resulted in salaries and benefits expense being reduced in 2023 as compared with 2022.

In 2022, the Company was fully staffed in preparation of the expiration of the student loan payment pause under the CARES Act.

In August 2023, the Company began to hire additional associates to support borrowers returning to repayment on September 1, 2023.

In April 2023, the Company and four other third-party servicers were awarded servicing contracts to provide continued servicing for the Department under a new Unified Servicing and Data Solutions (USDS) contract which will replace the existing Department student loans servicing contracts.

The Company’s new contract has a five year base period, with 5 years of possible extensions.

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

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

Education Technology Services and Payments

Education technology services and payments revenue grew to $463.3 million in 2023.

The growth was from existing and new customers.

Operating margin decreased from recent historical periods as a result of continued investments in the development of new services and technologies and superior customer service.

Due to an increase in interest rates, the Company recognized $27.0 million in interest income on tuition funds held in custody for schools, an increase from $9.4 million in 2022.

Asset Generation and Management

Net interest income was negatively impacted in 2023 due to the expected continued amortization of the Company’s FFELP student loan portfolio.

The average balance of student loans decreased $2.7 billion from $16.0 billion in 2022 to $13.3 billion in 2023.

Since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness, income-driven repayment plans, and other programs.

Interest income was also negatively impacted by an increase in interest rates.

As a result of an increase in interest rates, gross fixed rate floor income recognized by the Company was only $2.2 million in 2023 compared with $57.4 million in 2022.

Based on current interest rates, the Company does not anticipate earning a significant amount of fixed rate floor income in the foreseeable future.

In the second quarter of 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of $25.9 million in interest expense from the write-off of the remaining unamortized debt discount associated with these bonds at the time of redemption.

Nelnet Renewable Energy

Nelnet Renewable Energy includes solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar construction and development.

During 2023, the Company invested a total of $185.1 million (which included $94.5 million syndicated to third-party investors) in solar tax equity investments.

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

Included in the Company’s operating results is the Company's share of income or loss from solar investments accounted for under the Hypothetical Liquidation at Book Value (HLBV) method of accounting.

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

Nelnet Renewable Energy recognized pre-tax losses on its tax equity investments of $46.7 million in 2023, which includes $26.4 million attributable to noncontrolling interests.

In periods in which the Company makes significant investments in solar tax equity investments, operating results are negatively impacted due to the accelerated losses recognized in the initial years of investment.

However, given the timing and amount of cash flows expected to be generated over the life of these investments, the Company considers these investments a good use of capital.

Through December 31, 2023, the Company has recognized cumulative pre-tax losses (excluding noncontrolling interests) of approximately $56 million on its tax equity investments.

The Company expects its current investments (assuming no additional investments are made subsequent to December 31, 2023) to generate approximately $78 million of pre-tax earnings (excluding noncontrolling interests) over the life of the investments.

Accordingly, the Company expects to recognize approximately $134 million in pre-tax income (excluding noncontrolling interests) over the remaining years of its current investments.

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

Accordingly, the Company has begun to execute a multi-faceted approach to construct, finance, own, and operate these assets.

As part of this strategy, on July 1, 2022, the Company acquired 80% of GRNE Solar, a solar construction company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.

Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects.

In addition, higher interest rates reduced residential demand and made community solar projects more costly.

GRNE Solar recognized a net loss of $34.2 million in 2023.

In the fourth quarter of 2023, the Company recognized an impairment charge of $20.6 million related to goodwill and certain intangible assets initially recognized from the GRNE Solar acquisition.

Due to the complexity and long-term nature of GRNE’s existing construction contracts, GRNE may continue to incur low and/or negative margins to complete projects currently under contract.

Investments - ALLO and Hudl

The Company has a 45% voting membership interests in ALLO.

The Company accounts for its ALLO voting membership interests investment under the HLBV method of accounting that resulted in the recognition of a net loss of $65.3 million during 2023.

As of December 31, 2023, the carrying amount of the Company’s investment in ALLO was $10.7 million.

The Company expects to fully expense the remaining investment balance of ALLO during the first quarter of 2024.

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

(doing business as “Hudl.”) During the first quarter of 2023, the Company acquired additional ownership interests in Hudl for $31.5 million from existing Hudl investors.

This transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities.

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

As of December 31, 2023, the carrying amount of the Company's investment in Hudl is $165.5 million.

Certain investments, including solar tax equity, ALLO, and Hudl, may be recorded at a carrying value that is less than its market value due to HLBV (solar investments and ALLO) and the measurement alternative (Hudl) method of accounting.

Future operating results of solar and ALLO or an observable transaction of Hudl could impact the valuation on our financial statements or our investments in them and may result in significant fluctuations of the Company’s earnings.

The Company had a significant portfolio of derivative instruments, in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.

On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income and retained the $183.2 million of cash (representing the termination date fair value of the derivatives) from its clearinghouse.

As of December 31, 2023, the Company had $740.0 million of unencumbered cash and investments.

In addition, the Company has a $495.0 million unsecured line of credit that matures in September 2026.

No amounts were outstanding on the line of credit as of December 31, 2023.

In addition, as of December 31, 2023, the Company expects to generate future undiscounted cash flows from its AGM loan portfolio of approximately $1.30 billion, including approximately $850.0 million in the next five years.

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

strategic acquisitions and investments;

and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions.

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

CONSOLIDATED RESULTS OF OPERATIONS

An analysis of the Company's consolidated operating results for the year ended December 31, 2022 compared with 2021 is provided below.

An analysis of the Company's consolidated operating results for the years ended December 31, 2023, 2022, and 2021 is provided below.

The Company’s operating results are primarily driven by the performance of its existing loan portfolio and the revenues generated by its fee-based businesses and the costs to provide such services.

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2023 2022 2021 Additional information

Loan interest $ 651,205 482,337 Increase was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans and in gross fixed rate floor income.

Investment interest 91,601 41,498 Includes income from unrestricted interest-earning deposits and investments and funds in asset-backed securitizations.

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

Loan interest $ 931,945 651,205 482,337 Increases due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans and in gross fixed rate floor income.

Investment interest 177,855 91,601 41,498 Includes income from unrestricted interest-earning deposits and investments in asset-backed securitizations.

Increases due to an increase in interest earning investments and an increase in interest rates.

Total interest income 1,109,800 742,806 523,835

Interest expense 430,137 176,233 Increase was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

In addition, during the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid.

Interest expense 845,091 430,137 176,233 Increases due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

In 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of a $25.9 million non-cash expense from the write-off of the remaining debt discount associated with these bonds at the time of redemption.

In 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid.

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

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Less provision (negative provision) for loan losses 65,450 46,441 (12,426) Represents the current period provision (negative provision) to reflect the lifetime expected credit losses related to the Company’s loan portfolio.

See note 4 of the notes to consolidated financial statements in this report for the activity in the Company’s allowance for loan losses.

See note 3 of the notes to consolidated financial statements in this report for the factors impacting provision for loan losses for the periods presented.

Net interest income after provision for loan losses 199,259 266,228 360,028

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LSS revenue 517,954 535,459 486,363 See LSS operating segment - results of operations.

ETS&PP revenue 408,543 338,234 See ETS&PP operating segment - results of operations.

463,311 408,543 338,234 See ETSP operating segment - results of operations.

Solar construction revenue 31,669 24,543 — On July 1, 2022, the Company acquired 80% of the ownership interests of GRNE Solar.

GRNE Solar designs and installs residential, commercial, and utility-scale solar systems.

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

Other, net 25,486 78,681 See table below for components of “other.”

Gain on sale of loans, net 2,903 18,715 The Company sold $167.0 million (par value) and $101.1 million (par value) of consumer and other loans to unrelated third parties in 2022 and 2021, respectively, and recognized net gains from such sales.

Impairment expense and provision for beneficial interests, net (15,523) (16,360) The Company continues to evaluate the use of office space as a large number of employees continue to work from home due to COVID-19.

As a result of this evaluation, the Company recorded a non-cash impairment charge on certain building and lease assets of $2.8 million and $14.2 million in 2022 and 2021, respectively.

In addition, the Company recognized non-cash impairment charges on certain venture capital investments of $6.6 million and $4.6 million during 2022 and 2021, respectively.

The Company also recognized non-cash impairment charges of $6.2 million in 2022 related to internally developed and purchased software.

GRNE Solar designs and installs residential and commercial solar systems.

The acquisition diversified the Company’s position in the renewable energy space to include solar construction.

Other, net (48,787) 25,486 78,681 See table below for components of “other, net.”

Gain on sale of loans, net 39,673 2,903 18,715 Represents net gains recognized from selling portfolios of loans.

See note 3 of the notes to consolidated financial statements in this report for additional information.

Impairment expense (31,925) (15,523) (16,360) Represents impairment charges recognized by the Company.

See note 11 of the notes to consolidated financial statements in this report for identification of impairment by asset type and reportable segment.

Derivative settlements, net 25,072 32,943 (21,367) The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility.

Derivative settlements for each applicable period should be evaluated with the Company's net interest income.

See AGM operating segment - results of operations.

The majority of derivative settlements received (paid) by the Company during the periods presented was from the Company’s derivatives used to hedge loans earning fixed rate floor income.

To minimize the Company’s exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio on March 15, 2023.

Derivative market value adjustments, net (41,773) 231,691 92,813 Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.

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

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

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

Total other income (expense) 1,246,045 977,079

To minimize the Company’s exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio on March 15, 2023.

As such, the Company expects the derivative market value adjustments in future periods will be less substantial.

Total other income (expense), net 955,194 1,246,045 977,079

Cost of services:

Cost to provide education technology, services, and payment processing services 148,403 108,660 Represents direct costs to provide payment processing and instructional services in the ETS&PP operating segment.

Increase in 2022 compared with 2021 was primarily due to additional instructional services costs.

See ETS&PP operating segment - results of operations.

Cost to provide education technology services and payments 171,183 148,403 108,660 Represents direct costs to provide payment processing and instructional services in ETSP.

Increases were primarily due to additional instructional services costs.

See ETSP operating segment - results of operations.

Cost to provide solar construction services 48,576 19,971 — As noted above, the Company acquired GRNE Solar on July 1, 2022.

These amounts represent direct costs related to GRNE providing solar construction services.

Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects.

Total cost of services 219,759 168,374 108,660

Operating expenses:

Salaries and benefits 589,579 507,132 Increase was due to an increase in headcount in the (i) LSS operating segment as the Company has been required to prepare for the resumption of federal student loan payments upon the expiration of the CARES Act borrower relief provisions, which have been extended several times throughout 2022;

and (ii) ETS&PP operating segment to support the growth of its customer base and the investment in the development of new technologies.

Salaries and benefits 591,537 589,579 507,132 Increase was primarily due to an increase in headcount in ETSP to support the growth of its customer base and the investment in the development of new technologies.

In 2023, increase was partially offset by staff reductions in LSS in the first two quarters of 2023 to manage expenses due to delays in the government’s student debt relief and return to repayment programs and lower pricing and reduced servicing volume for the Department servicing contract.

In August 2023, LSS began to hire additional associates to support borrowers returning to repayment.

In 2022, increase in salaries and benefits was driven by more associates at LSS as the Company had been required to prepare for the resumption of federal student loan payments upon the expiration of the CARES Act borrower relief provisions, which was extended several times throughout 2022.

Depreciation and amortization 79,118 74,077 73,741 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.

Other expenses 170,778 145,469 Other expense includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs.

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

and (ii) an increase in expenses in the ETS&PP operating segment due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies, and an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID-19 pandemic.

Other expenses 189,851 170,778 145,469 Other expense includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, reinsurance loss reserve and acquisition costs, and certain information technology-related costs.

Increase was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies and an increase in costs for travel and in-person hosted conferences that had previously subsided due to the COVID-19 pandemic in the ETSP operating segment.

In addition, increase in 2023 was due to an increase in reinsurance volume in the NFS division.

Increase in 2022 compared with 2021 was also due to additional costs associated with the growth of borrowers under the government servicing contracts in the LSS operating segment.

Total operating expenses 860,506 834,434 726,342

1 unchanged sentence

Income tax expense 19,753 113,224 115,822 The effective tax rate was 17.75%, 21.75%, and 22.75% for 2023, 2022, and 2021, respectively.

The decrease in the effective tax rate in 2023 was due to a reduction in the dollar amounts of uncertain tax positions and recognized state tax incentives relative to the smaller amount of income before income taxes.

The Company expects its future effective tax rate will range between 21% and 24%.

12 unchanged sentences

2023 2022 2021 Additional information

Income/gains from investments, net $ 51,552 91,593 See Corporate - results of operations and note (a) below for additional information.

Borrower late fee income 10,809 3,444 See AGM operating segment - results of operations.

Reinsurance premiums $ 20,067 157 — See NFS division - results of operations - NFS other operating segments.

ALLO preferred return 9,120 8,584 8,427 See Corporate - results of operations.

Administration/sponsor fee income 7,898 3,656 See AGM operating segment - results of operations.

Investment advisory services 6,026 7,773 See Corporate - results of operations.

Borrower late fee income 8,997 10,809 3,444 See NFS division - results of operations - AGM operating segment.

Administration/sponsor fee income 6,793 7,898 3,656 See NFS division - results of operations - AGM operating segment.

Investment advisory services (WRCM) 6,760 6,026 7,773 See NFS division - results of operations - NFS other operating segments.

Management fee revenue 2,587 2,543 3,307 See LSS operating segment - results of operations.

1 unchanged sentence

Loss from solar investments (46,702) (9,479) (10,132) See Corporate - results of operations.

Investment activity, net (8,586) 51,493 91,593 See note (a) below for additional information.

Other 17,454 15,421 12,761

Other, net $ (48,787) 25,486 78,681

(a) During 2022, the Company recognized net investment income and gains of $51.6 million, including $24.2 million from venture capital investments ($22.3 million recognized in Corporate), $26.6 million related to real estate investments, and $0.8 million related to investments in asset-backed securities (bonds) and marketable equity securities (a loss of $1.3 million recognized in Corporate).

Included in the 2022 venture capital gains, the Company recognized a $15.2 million gain during the second quarter of 2022 as a result of the revaluation of its previously held 50% ownership interests in NextGen.

See note 8 of the notes to the consolidated financial statements included in this report for additional information.

During 2021, the Company recognized net investment income and gains of $91.6 million, including $32.9 million from the Company’s joint venture to acquire a private education student loan portfolio previously owned by Wells Fargo (included in the AGM operating segment), $28.8 million from venture capital investments, $22.3 million related to real estate investments, and $7.6 million related to investments in asset-backed securities (bonds) and marketable equity securities ($6.6 million recognized in Corporate).

As the Company expects its investment portfolio will continue to grow, the Company also anticipates fluctuations in future periodic earnings resulting from investment valuation adjustments from time to time.

(a) The Company anticipates fluctuations in future periodic earnings resulting from investment sales and valuation adjustments.

Investment activity by operating segment and investment type follows:

Real Estate Venture Capital and Funds Equity / Bonds Total

Year ended December 31, 2023

NFS - AGM $ — (4,303) (219) (4,522)

NFS - Nelnet Bank — (229) 1,147 918

NFS - Other Operating Segments 439 — (2,544) (2,105)

Corporate — (2,640) (237) (2,877)

$ 439 (7,172) (1,853) (8,586)

Year ended December 31, 2022

NFS - AGM $ — 1,196 — 1,196

NFS - Nelnet Bank — 707 1,869 2,576

NFS - Other Operating Segments 28,702 — (790) 27,912

Corporate — 19,809 — 19,809

$ 28,702 21,712 1,079 51,493

Year ended December 31, 2021

NFS - AGM $ — 32,884 1,025 33,909

NFS - Nelnet Bank — (79) 783 704

NFS - Other Operating Segments 21,551 — 6,730 28,281

Corporate — 28,750 (51) 28,699

$ 21,551 61,555 8,487 91,593

LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS

Loan Servicing Volumes

2020 March 31,

2021 June 30,

2023 September 30,

2021 December 31,

2021 March 31,

2023 June 30,

2023 March 31,

2023 December 31,

2022 September 30,

2022 June 30,

2022 March 31,

2022 December 31,

13 unchanged sentences

Government Loan Servicing

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

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

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

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

The Company responded to the USDS solicitation.

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

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

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

In addition, if any current or future Department servicing contracts become subject to unfavorable modifications or interpretations by the Department, including adverse pricing changes, servicing revenue would be negatively impacted and could result in potential restructuring charges that may be necessary to re-align the Company’s cost structure with the Company’s servicing operations.

For example, due to a lack of Federal government appropriations, the Department may modify its cost under existing contracts with its servicers, and such modifications could adversely impact the Company’s servicing revenue and operating results.

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

Nelnet Servicing is one of the current four private sector entities that have student loan servicing contracts with the Department to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department.

The Company also earned remote hosted servicing revenue by licensing software to certain third-party servicers for the Department.

Contract Modifications and Award

Effective April 1, 2023, the Department modified the student loan servicing contract between the Department and Nelnet Servicing (the “servicing contract”) to reduce the monthly fee under the servicing contract by $0.19 per borrower on certain borrower statuses.

The Company's current student loan servicing contract with the Department was scheduled to expire on December 14, 2023.

In April 2023, the Company received a contract award from the Department, pursuant to which it was selected to provide continued servicing capabilities for the Department's student aid recipients under a new contract which will replace the existing legacy Department student loan servicing contract.

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 40 million existing borrowers will be allocated by the Department to Nelnet Servicing and four other third-party servicers that were awarded a USDS contract based on service and performance levels.

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

Until servicing under the USDS contract goes live, which is anticipated to be in April 2024, the Company will continue to earn revenue for servicing borrowers under its current legacy servicing contract with the Department.

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

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

As discussed below, during the second quarter of 2023, the Company completed the transfer of Great Lakes direct loan servicing volume to the Nelnet servicing platform.

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

Loan Volume Transfers - Full Service Borrowers

In July 2021, the Pennsylvania Higher Education Assistance Agency (PHEAA) announced its exit from the federal student loan servicing business.

All applicable student loans serviced for the Department by PHEAA were transferred to successor servicers.

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

As of December 31, 2021 and 2022, approximately 603,000 and 1,910,000 PHEAA borrowers, respectively, have been transitioned to the Company's platform.

In addition, over this same time period, PHEAA borrowers were transferred to other servicers that the Company provides its servicing system (remote hosted servicing customers).

This has increased the number of remote hosted borrowers as reflected in the table above.

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

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

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

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 December 31, 2021 and 2022, approximately 603,000 and 1,910,000 PHEAA borrowers, respectively, were transferred from PHEAA to the Company's platform.

In addition, over this same time period, PHEAA borrowers were transferred to other servicers to which the Company provided its servicing system (remote hosted servicing customers).

In February 2023, the Department notified the Company of its intention to transfer up to one million of the Company’s existing Department servicing borrowers to another third-party servicer.

This transfer decision was not based on the Company's performance.

These transfers began in the second quarter of 2023 and were completed in July 2023.

In addition, the Company completed the transfer of active borrowers of Great Lakes direct loan servicing volume to the Nelnet servicing platform (the GreatNet Federal servicing platform) during the second quarter of 2023.

The decommissioning of the Great Lakes' platform was completed in the fourth quarter of 2023 and potential associated cost savings as a result of transferring direct loan servicing volume to one platform are expected to be realized in operating results towards the end of 2024.

Loan Volume Transfers - Remote Hosted Servicing Borrowers

Edfinancial Services, LLC ("Edfinancial"), a current servicer for the Department, utilized Nelnet Servicing's platform to service their loans for the Department (remote hosted servicing customer).

As of December 31, 2022, Edfinancial was servicing 4.5 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 us the Department intends to move that customer’s servicing borrowers to a different servicing platform.

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

The Company expects the three transfers discussed above to begin in the first quarter of 2023 and be completed prior to the end of the CARES Act forbearance period.

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.

The Company began transferring Edfinancial's servicing volume to another servicing platform in the first quarter of 2023 which reduced the number of Edfinancial's borrowers serviced on the Company's platform to 3.5 million borrowers as of March 31, 2023 and 579,000 borrowers as of June 30, 2023.

Edfinancial's remaining borrowers were transferred off of the Company's platform in July 2023.

In February 2023, the Company’s other remote hosted servicing customer notified the Company the Department intended to move that customer’s servicing borrowers to a different third-party servicing platform.

This transfer decision was the result of this customer not being one of the servicers awarded a USDS contract.

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

The majority of this volume was transferred to another third-party servicing platform during the second quarter of 2023, and the remaining borrowers were transferred off of the Company's platform in July 2023.

As a result of the transfers discussed above, the Company currently has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.

However, the Company has executed an agreement with a third-party servicer awarded a USDS contract to license its servicing software to such entity and the Company anticipates earning remote hosted servicing revenue from this new customer when USDS goes live, which is anticipated to be during the second quarter of 2024.

The amount of revenue earned by the Company from this new customer will depend on the number of servicing borrowers allocated by the Department to the new customer.

The Company does not have volume projections for the new customer at this time, however, such new volume from this customer is not expected to fully offset the loss of borrowers from lost remote hosted servicing customers.

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 December 31, 2022) by approximately 4.3 million borrowers and 7.5 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.

In August 2022, the Department announced a broad based student debt relief plan that would provide targeted student debt cancellation to borrowers with loans held by the Department with unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.

Federal courts blocked implementation of the Department's broad based student debt relief plan and on June 30, 2023, the Supreme Court struck down the Department's plan.

While the current version of the Department's forgiveness plan has been invalidated, the Department recently announced that it has begun a new rulemaking process to consider other ways to provide debt relief to borrowers.

The Company cannot predict the timing, nature, or ultimate outcome of any future potential student loan forgiveness programs as a result of the rulemaking process.

Revenue earned under the current Department servicing contract will decrease in future periods if the Department successfully implements broad based loan forgiveness.

The CARES Act

Under the CARES Act, beginning in March 2020, federal student loan payments and interest accruals were suspended for all borrowers that had loans owned by the Department.

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

On April 6, 2022, the Department extended the student loans payment pause under the CARES Act from May 1, 2022 to August 31, 2022, and on August 24, 2022, the Department extended such payment pause from August 31, 2022 to December 31, 2022.

On November 22, 2022, the Department again extended such payment pause until 60 days following the date the Department is permitted to implement the debt relief program or the litigation initiated by other parties is resolved.

If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023, borrower forbearances will end 60 days after June 30, 2023, and payments will resume within 60 days after that (on or before October 28, 2023).

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

As a result of the CARES Act, the Company received less servicing

revenue per borrower from the Department based on the borrower forbearance status than what was earned on such accounts prior to these provisions.

After multiple extensions of the student loans payment pause under the CARES Act, the payment and interest accrual suspension ended August 31, 2023, and borrowers returned to repayment on September 1, 2023.

The Company anticipates revenue per borrower from the Department will increase with borrowers transitioned back to repayment under the legacy government contract from the CARES Act levels.

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

Effective May 1, 2022, the Department increased the monthly per borrower CARES Act forbearance rate paid to its servicers to compensate them for supplemental outreach to certain borrowers and to support the transition of borrowers back to repayment.

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

Effective April 1, 2023, the Department decreased the monthly per borrower CARES Act forbearance rate by $0.19 per borrower (as discussed above).

Reduction in Staff

On January 18, 2023, the Company announced a reduction in staff to manage expenses due to delays in the government's student debt relief and return to repayment programs under the CARES Act.

Approximately 350 associates who were hired within the prior six months were laid off with a 60 day notice period and approximately 210 associates were immediately terminated for performance.

On March 23, 2023, the Company announced a reduction in staff due to the Department’s March 2023 announcement to reduce the monthly fee earned by the Company under its government servicing contract (as discussed above) and the notification by the Department in February 2023 of its intention to transfer up to one million of the Company's existing Department servicing borrowers to another servicer (as discussed above).

Approximately 550 associates who work in LSS, including some in related shared services areas that support LSS, were notified their positions were being eliminated.

The Company incurred a charge of $4.3 million related to the staff reductions that was primarily recognized in the first and second quarters of 2023.

As a result of the decommissioning of the Great Lakes’ platform in the fourth quarter of 2023, the Company incurred a charge of $3.5 million related to staff reductions, including some in related shared services areas that support LSS.

Borrowers Return to Repayment

As discussed above, after multiple extensions of the student loan payment pause that began in March 2020, the payment and interest accrual suspension ended on August 31, 2023, and all borrowers returned to repayment on September 1, 2023.

This unprecedented event, along with frequent program changes announced and/or proposed by the Department, has generated extraordinary call volume and web traffic that has adversely impacted the Company’s level of service.

In August 2023, the Company began to hire additional associates to support borrowers returning to repayment.

Private Education Loan Servicing

2 unchanged sentences

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

In January 2024, Discover announced they were moving the servicing of its approximately $10 billion private education loan portfolio, representing approximately 500,000 borrowers, to the Company.

The timing of the conversion of these loans to the Company’s platform is dependent on the timing of Discover’s potential sale of its portfolio.

Summary and Comparison of Operating Results

1 unchanged sentence

2023 2022 2021 Additional information

Net interest income $ 2,678 43 Increase was due to higher interest rates in 2022 compared with 2021.

Net interest income $ 4,845 2,678 43 Increases due to higher interest rates and average funds held.

Loan servicing and systems revenue 517,954 535,459 486,363 See table below for additional information.

Intersegment servicing revenue 33,170 33,956 Represents revenue earned by the LSS operating segment from servicing loans for the AGM and Nelnet Bank operating segments.

Decrease in 2022 compared with 2021 was due to the continued amortization of AGM's FFELP portfolio.

Intersegment servicing revenue 28,911 33,170 33,956 Represents revenue earned by LSS from servicing loans for AGM and Nelnet Bank.

Decreases due to the continued amortization of AGM's FFELP portfolio.

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

Other income 2,543 3,307 Represents revenue earned from providing administrative support and marketing services.

The decrease in 2022 compared with 2021 was due to a contract for services provided to Great Lakes’ former parent company that expired in January 2021.

Impairment expense (5,511) (13,243) The Company continues to evaluate the use of office space as a large number of employees continue to work from home due to COVID-19.

As a result of this evaluation, the Company recorded a non-cash impairment charge of $1.8 million and $13.2 million in 2022 and 2021, respectively, to certain building and lease assets.

In addition, during the fourth quarter of 2022, the Company recorded a $3.7 million non-cash impairment charge to internally developed software.

Total other income (expense) 565,661 510,383

Salaries and benefits 344,809 297,406 Increase in 2022 compared with 2021 was due to the Company hiring contact center operations and support associates as the Company prepared for expiration of federal student loan payment pause and other activities under the CARES Act.

See “Government Loan Servicing - The CARES Act” above for additional details.

Depreciation and amortization 24,255 25,649 Includes amortization of intangible assets from the Great Lakes acquisition in February 2018 and depreciation on property and equipment.

The majority of the Great Lakes intangible assets became fully amortized as of June 30, 2021 and all remaining assets were fully amortized by December 2022.

Other income 2,587 2,543 3,307 Represents revenue earned from providing administrative support services.

Impairment expense (296) (5,511) (13,243) The Company continues to evaluate the use of office space as a large number of employees continue to work from home.

As a result, the Company recorded non-cash impairment charges in each period presented related to certain facilities and associated assets no longer used.

In addition, in 2022, the Company recorded a $3.7 million non-cash impairment charge to internally developed software.

Total other income, net 549,156 565,661 510,383

Salaries and benefits 317,885 344,809 297,406 Increase in 2022 compared with 2023 and 2021 was due to the Company being fully staffed with contact center operations and support associates as the Company prepared for expiration of federal student loan payment pause and other activities under the CARES Act.

In the first half of 2023, the Company reduced staff to manage expenses due to delays in the government’s student debt relief and return to repayment programs, lower pricing, and reduced servicing volume.

See “Reduction in Staff” above for additional details.

In August 2023, the Company began to hire additional associates to support borrowers returning to repayment on September 1, 2023.

Depreciation and amortization 19,257 24,255 25,649 Decrease in 2023 compared to 2022 and 2021 was due to all intangible assets from the Great Lakes acquisition (February 2018) being fully amortized by December 2022.

Amortization of intangible assets for 2022 and 2021 was $4.5 million and $12.3 million, respectively.

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

Other expenses 59,674 52,720 Increase in 2022 compared with 2021 was due to additional costs associated with the growth of borrowers under the government servicing contracts.

Intersegment expenses 75,145 72,206 Intersegment expenses represent costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Increase in 2022 compared with 2021 was due to the Company hiring contact center operations and support associates in preparation for the provisions of the CARES Act to expire.

Other expenses 60,517 59,674 52,720 Increase in 2023 compared with 2022 was due to additional postage and communication costs due to borrowers returning to repayment on September 1, 2023.

Increase in 2022 compared with 2021 was due to additional costs associated with the growth of borrowers under the government servicing contracts.

Intersegment expenses 78,628 75,145 72,206 Represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Total operating expenses 476,287 503,883 447,981

3 unchanged sentences

Net income $ 59,063 48,986 47,458

GAAP before tax operating margin 11.3 % 11.9 % Before tax operating margin, excluding impairment and amortization expense, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the LSS segment is calculated as income before income taxes (excluding impairment and amortization expense) divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue.

GAAP before tax operating margin 14.1 % 11.3 % 11.9 % Before tax operating margin, excluding impairment and amortization expense, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes (excluding impairment and amortization expense) divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue.

The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it provides additional information to facilitate an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods.

Before tax operating margin, excluding impairment and amortization expense, decreased in 2022 compared with 2021 due to increased operating expenses, primarily salaries and benefits, as the Company prepared for a January 31, 2022 expiration of the federal student loan payment pause under the CARES Act, which has been extended multiple times throughout 2022.

Before tax operating margin, excluding impairment and amortization expense, increased in 2023 compared with 2022 due primarily to a decrease in salaries and benefits expense as described above and due to $4.8 million of revenue recognized by the Company in 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company’s platform.

Operating margin decreased in 2022 compared with 2021 due to increased operating expenses, primarily salaries and benefits, as the Company prepared for a January 31, 2022 expiration of the federal student loan payment pause under the CARES Act, which was extended multiple times throughout 2022 and ended August 31, 2023.

Impairment expense 0.1 0.9 2.5

4 unchanged sentences

2023 2022 2021 Additional information

Government loan servicing $ 423,066 360,793 Represents revenue from the Company's Department servicing contracts.

Increase in 2022 compared with 2021 was due to (i) an increase in the number of borrowers serviced, including PHEAA borrowers transferred to the Company's servicing platform;

(ii) a per borrower rate increase on each September 1, 2021 (1.8%) and September 1, 2022 (5.0%) to reflect the increase in the cost of labor (Employment Cost Index) per the provisions of the contracts;

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

(vi) the recognition of $16.2 million of revenue in 2022 related to an increase in call center hours of operations, staff retention incentive from the Department, and additional change requests;

and (v) the recognition of $9.9 million of revenue in 2022 for activities supporting preparedness for the Department’s debt relief program.

Included in revenue for 2022 and 2021 was $13.6 million and $9.1 million, respectively, of revenue related to the discharge of borrowers under the Total and Permanent Disability (TPD) discharge program (the Company earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program), and $7.7 million and $25.0 million of revenue, respectively, for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers.

Private education and consumer loan servicing 49,210 47,302 Increase in 2022 compared with 2021 was due to (i) the addition of the former Wells Fargo private education loan borrowers converted to the Company's servicing platform during March and the second quarter of 2021;

Government loan servicing $ 412,478 423,066 360,793 Represents revenue from the Company's Department servicing contract.

Decrease in 2023 compared with 2022 was due to (i) the monthly fee earned per borrower on certain borrower statuses being reduced by $0.19 effective April 1, 2023;

and (ii) a decrease of borrowers beginning in the second quarter of 2023 as part of the Department’s plan to transfer up to one million of the Company’s existing borrowers to another third-party servicer.

The decrease was partially offset by an increase in average per borrower rate beginning September 1, 2023 as a result of borrowers returning to repayment.

Increase in 2023 and 2022 revenue compared with 2021 was due to (i) an increase in borrowers serviced due to the PHEAA servicing volume transferred to the Company’s platform in 2022;

(ii) a per borrower rate increase on each September 1, 2021 (1.8%), September 1, 2022 (5.0%), and September 1, 2023 (2.3%) to reflect the increase in the cost of labor (Employment Cost Index) per the provisions of the contracts;

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

Increase in 2022 revenue compared with 2023 and 2021 was also due to (i) the recognition of $16.2 million of revenue related to an increase in call center hours, a staff retention incentive from the Department, and additional change requests;

and (ii) the recognition of $9.9 million of revenue for activities supporting preparedness for the Department’s debt relief program.

Included in revenue for 2022 and 2021 was $13.6 million and $9.1 million, respectively, of revenue related to the discharge of borrowers under the TPD discharge program, and $7.7 million and $25.0 million, respectively, of revenue for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers.

Private education and consumer loan servicing 48,984 49,210 47,302 Increase in 2022 compared with 2021 was due to (i) the addition of the former Wells Fargo private education loan borrowers converted to the Company's servicing platform during March and the second quarter of 2021 (an amortizing portfolio);

and (ii) revenue earned on new backup servicing agreements.

Excluding revenue earned on the former Wells Fargo portfolio and new backup servicing agreements, revenue for 2022 decreased compared with 2021.

The decrease in revenue was due to a decrease in servicing volume and client requested enhanced delinquency services.

FFELP loan servicing 16,016 18,281 Decrease in 2022 compared with 2021 was due to a decrease in the number of borrowers serviced.

FFELP loan servicing 13,704 16,016 18,281 Decreases due to a decrease in the number of borrowers serviced.

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

Since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of borrower relief under the CARES Act and initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.

Software services 33,409 34,600 Decrease in 2022 compared with 2021 was due to (i) the Company earned deconversion fees in the fourth quarter of 2021 from Granite State, a remote hosted servicing customer, when they exited the federal student loan servicing business and transferred their loan volume to a third party;

and (ii) many of the services provided under the Company's remote hosted servicing and system support contract with Great Lakes' former parent, representing 2.3 million borrowers, expiring on January 31, 2021.

These decreases were offset by an increase in the number of remote hosted servicing borrowers primarily from the transfer of PHEAA borrowers to these servicing customers throughout 2021 and 2022.

Software services revenue from Department remote hosted servicing customers will be adversely impacted in future periods.

See “Government Loan Servicing” above for additional information.

Outsourced services 13,758 25,387 The majority of this revenue relates to providing contact center and back office operational outsourcing services.

In 2021, these services included assisting state agencies with COVID-19 specific activities.

Revenue from providing COVID-19 related services to state agencies in 2021 was $17.3 million.

Excluding COVID-19 specific activities, outsourced services revenue has increased in 2022 compared with 2021 due to additional outsourced opportunities, including assisting existing Department servicers as they wind down their operations.

Since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of borrower relief under the CARES Act and initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.

Software services 29,208 33,409 34,600 Represents revenue from providing remote hosted servicing software to the Department and other servicers and providing diversified technology services.

Decrease in 2023 compared with 2022 was due to the transfer of remote hosted borrowers to other third-party servicers, partially offset by the recognition of $4.8 million of non-recurring revenue in the third quarter of 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company’s platform.

As a result of the transfers, the Company has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.

See “Loan Volume Transfers - Remote Hosted Servicing Borrowers” above for additional information.

Decrease in 2022 compared with 2021 was due to the recognition of deconversion fees in the fourth quarter of 2021 from Granite State, a remote hosted servicing customer, when they exited the federal student loan servicing business and transferred their loan volume to a third party.

Outsourced services 13,580 13,758 25,387 Decrease in 2023 and 2022 compared with 2021 was due to assisting state agencies with COVID-19 related services in 2021 totaling $17.3 million.

Loan servicing and systems revenue $ 517,954 535,459 486,363

EDUCATION TECHNOLOGY, SERVICES, AND PAYMENT PROCESSING OPERATING SEGMENT – RESULTS OF OPERATIONS

EDUCATION TECHNOLOGY SERVICES AND PAYMENTS OPERATING SEGMENT – RESULTS OF OPERATIONS

This segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year.

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This is primarily due to generally fixed year-round personnel costs and seasonal marketing costs.

Based on the timing of revenue recognition and when expenses are incurred, revenue and pre-tax operating margin are higher in the first quarter as compared to the remainder of the year.

Based on the timing of revenue recognition and when expenses are incurred, revenue and before tax operating margin are higher in the first quarter compared with the remainder of the year.

Summary and Comparison of Operating Results

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Net interest income $ 26,962 9,377 1,075 Represents interest income on tuition funds held in custody for schools.

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

Education technology, services, and

payment processing revenue 408,543 338,234 See table below for additional information.

Increases due to higher interest rates and average funds held.

Education technology services and payments revenue

463,311 408,543 338,234 See table below for additional information.

Intersegment revenue 253 81 12

Impairment expense (2,239) — During the fourth quarter of 2022, the Company recognized a non-cash impairment charge related to previously acquired computer software.

Total other income (expense) 406,385 338,246

Impairment expense (4,310) (2,239) — In 2023 and 2022, the Company recognized non-cash impairment charges related to previously acquired computer software.

Total other income 459,254 406,385 338,246

Cost of services 171,183 148,403 108,660 See table below for additional information.

Salaries and benefits 133,428 112,046 Increase in 2022 compared with 2021 was due to an increase in headcount to support the growth of the customer base, and the investment in the development of new technologies.

Depreciation and amortization 10,184 11,404 Represents primarily amortization of intangible assets from prior business acquisitions.

Amortization of intangible assets related to business acquisitions was $9.1 million and $10.7 million for 2022 and 2021, respectively.

Other expenses 30,104 19,318 Increase was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies.

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

Intersegment expenses, net 19,538 15,180 Intersegment expenses represent costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Increase in 2022 compared with 2021 was due to an increase in costs to support the growth of the customer base, and the investment in the development of new technologies.

Salaries and benefits 155,296 133,428 112,046 Increases due to an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.

Depreciation and amortization 11,319 10,184 11,404 Represents primarily amortization of intangible assets from prior business acquisitions and depreciation of capitalized software development costs.

Other expenses 34,133 30,104 19,318 Increases due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies.

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

In addition, during 2023 the Company increased its allowance for uncollectible accounts due to the age of certain receivables primarily driven by economic conditions and the increase in volume of FACTS instructional services revenue.

Intersegment expenses, net 23,184 19,538 15,180 Represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Total operating expenses 223,932 193,254 157,948

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Net income 69,210 56,320 55,262

Net income attributable to noncontrolling interests (3) — Amounts for noncontrolling interests reflect the net income attributable to the holders of minority membership interests in NextGen, of which the Company became the controlling owner on April 30, 2022.

Net loss (income) attributable to noncontrolling interests 109 (3) — Amounts for noncontrolling interests reflect the net loss (income) attributable to the holders of minority membership interests in NextGen, of which the Company became the controlling owner on April 30, 2022.

See note 7 of the notes to consolidated financial statements included in this report for additional information.

Net income $ 69,319 56,317 55,262

Education technology, services, and payment processing revenue

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

Education technology services and payments revenue

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

Year ended December 31,

2023 2022 2021 Additional information

Tuition payment plan services $ 110,802 103,970 Revenue increased for 2022 compared with 2021 primarily due to a higher number of payment plans in the K-12 market.

Revenue for tuition payment plan services for higher education institutions in 2022 was consistent with 2021 amounts.

Payment processing 148,212 127,080 Payment volumes in 2022 increased compared with 2021 for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.

Education technology and services 146,679 105,975 Increase in 2022 compared with 2021 was due to an increase in revenues from the Company’s school information system software, enrollment and communication services, the NextGen acquisition completed in April 2022, and FACTS Education Solutions instructional and professional development services.

FACTS Education Solutions instructional services revenue was the largest component of this increase, driven by the Emergency Assistance to Non-Public Schools (EANS) program which provides funds to non-public schools through September 2024 to address the impact COVID-19 has had or continues to have on school students and teachers.

Tuition payment plan services $ 125,326 110,802 103,970 Increases due to a higher number of payment plans in the K-12 market for both new and existing customers.

In 2023, the increase was also due to a higher number of payment plans in higher education markets for both new and existing customers.

Payment processing 163,859 148,212 127,080 Increases due to increase in payment volumes for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.

Education technology services 170,754 146,679 105,975 Increases due to an increase in revenues from the Company’s school information system software, application and enrollment services, the NextGen acquisition completed in April 2022, and FACTS learning management services.

Learning management instructional services revenue was the largest component of this increase, driven by the Emergency Assistance to Non-Public Schools (EANS) program.

EANS revenue was $46.9 million, $37.8 million, and $8.7 million in 2023, 2022, and 2021, respectively.

EANS provides funds to non-public schools to address the impact COVID-19 has had or continues to have on students and teachers.

The EANS I program funding ended on September 30, 2023 and EANS II program funding ends on September 30, 2024, which will result in a decrease of future instructional services revenue compared with recent historical periods.

Other 3,372 2,850 1,209

Education technology, services, and payment processing revenue 408,543 338,234

Education technology services and payments revenue

463,311 408,543 338,234

Cost of services 171,183 148,403 108,660 Costs relate to payment processing revenue and such costs decrease/increase in relationship to payment volumes.

Costs to provide instructional services are also a component of this expense and were the primary driver of the increase in 2022 compared with 2021 due to the increase in instructional services resulting from the EANS program as noted above.

Costs to provide instructional services are also a component of this expense and decrease/increase in relationship to instructional services revenue.

Costs to provide instructional services were the primary driver of the increases due to the increase in instructional services resulting from the EANS program as noted above.

Net revenue $ 292,128 260,140 229,574

GAAP before tax operating margin 28.5 % 31.7 % Before tax operating margin, excluding net interest income, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the ETS&PP segment is calculated as income before income taxes less interest income divided by net revenue.

GAAP before tax operating margin 31.2 % 28.5 % 31.7 % Before tax operating margin, excluding net interest income, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the ETSP segment is calculated as income before income taxes less interest income divided by net revenue.

The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it facilitates an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods.

Before tax operating margin, excluding net interest income, decreased in 2022 compared with 2021 due to investments in (i) the development of new services and technologies;

Before tax operating margin, excluding net interest income, decreased due to investments in (i) the development of new services and technologies;

and (ii) superior customer experiences to align with the Company’s strategies to grow, retain, and diversify revenues.

The Company anticipates before tax operating margin, excluding net interest income, will be impacted over the next several years as it continues to invest in these areas.

Net interest income (9.2) (3.6) (0.5)

Non-GAAP before tax operating margin, excluding net interest income 22.0 % 24.9 % 31.2 %

ASSET GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS

NELNET FINANCIAL SERVICES DIVISION - RESULTS OF OPERATIONS

Asset Generation and Management Operating Segment

Loan Portfolio

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Year ended December 31,

2023 2022 2021

Beginning balance $ 14,169,771 17,441,790 19,559,108

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Ending balance $ 12,049,462 14,169,771 17,441,790

The Company has also purchased partial ownership in certain federally insured student, private education, and consumer and other loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements.

As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2022, the Company’s ownership correlates to approximately $390 million, $620 million, and $310 million of federally insured student, private education, and consumer and other loans, respectively, included in these securitizations.

The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements.

As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2023, the Company’s ownership correlates to approximately $1.76 billion of loans included in these securitizations.

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

Since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act payment pause on Department held loans and the initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.

After multiple extensions of the student loans payment pause under the CARES Act, the payment and interest accrual suspension ended August 31, 2023, and Federal Direct Loan Program borrowers returned to repayment on September 1, 2023.

Allowance for Loan Losses, Loan Delinquencies, and Loan Charge-offs

For a summary of the allowance as a percentage of the ending balance and loan status and delinquency amounts for each of AGM's loan portfolios as of December 31, 2022 and 2021;

For a summary of the allowance as a percentage of the ending balance for each of AGM's loan portfolios as of December 31, 2023 and 2022;

loan status and delinquency amounts for each of AGM's loan portfolios as of December 31, 2023, 2022, and 2021;

and the activity in AGM’s allowance for loan losses and net charge-offs as a percentage of average loans for 2023, 2022, and 2021, see note 3 of the notes to consolidated financial statements included in this report.

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Year ended December 31,

2023 2022 2021

Variable loan yield, gross 7.56 % 4.39 % 2.64 %

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Variable loan yield, net 6.82 3.59 1.81

Loan cost of funds - interest expense (b) (c) (2.58) (1.04)

Loan cost of funds - derivative settlements (d) (e) (0.00 ) (0.01)

Loan cost of funds - interest expense (b) (c) (d) (5.99) (2.58) (1.04)

Loan cost of funds - derivative settlements (e) (f) 0.01 (0.00 ) (0.01)

Variable loan spread 0.84 1.01 0.76

Fixed rate floor income, gross 0.02 0.36 0.76

Fixed rate floor income - derivative settlements (d) (f) 0.21 (0.11)

Fixed rate floor income - derivative settlements (e) (g) 0.18 0.21 (0.11)

Fixed rate floor income, net of settlements on derivatives 0.20 0.57 0.65

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The impact of these adjustments was excluded from the table above.

(b) In the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid.

(b) In the second quarter of 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of $25.9 million in interest expense from the write-off of the remaining unamortized debt discount associated with these bonds at the time of redemption.

This expense was excluded from the table above.

(c) In the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid, resulting in a reduction of interest expense.

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 and the impact of this reduction to interest expense was excluded from the table above.

(c) In the third quarter of 2021, the Company redeemed certain asset-backed debt securities prior to their legal maturity, resulting in the recognition of $1.5 million in interest expense from the write-off of all remaining debt issuance costs related to the initial issuance of such bonds.

The reduction of this expense was excluded from the table above.

(d) In the third quarter of 2021, the Company redeemed certain asset-backed debt securities prior to their legal maturity, resulting in the recognition of $1.5 million in interest expense from the write-off of all remaining debt issuance costs related to the initial issuance of such bonds.

This expense was excluded from the table above.

(d) Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.

(e) Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.

Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income.

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There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.

See note 6 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the 2022 and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 6 and in this table.

See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's Non-Nelnet Bank derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the 2023, 2022, and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" and in this table.

A reconciliation of core loan spread, which includes the impact of derivative settlements on loan spread, to loan spread without derivative settlements follows.

Year ended December 31,

2023 2022 2021

Core loan spread 1.04 % 1.58 % 1.41 %

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Loan spread 0.85 % 1.37 % 1.53 %

(e) Derivative settlements consist of net settlements paid related to the Company’s 1:3 basis swaps.

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

A trend analysis of AGM’s core and variable loan spreads by calendar year quarter is summarized below.

The interest earned on a large portion of AGM's FFELP student loan assets is indexed to the one-month LIBOR rate.

AGM funds a portion of its assets with three-month LIBOR indexed floating rate securities.

(f) Derivative settlements consist of net settlements received (paid) related to the Company’s 1:3 basis swaps.

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

The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread.

The table above (the right axis) shows the difference between AGM's liability base rate and the one-month LIBOR rate by quarter.

Variable loan spread increased during 2022 compared with 2021 due to a significant increase in short-term interest rates throughout 2022.

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

See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s FFELP student loan assets and related funding for those assets.

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

Variable loan spread was higher during 2022 compared with 2023 and 2021 due to a significant increase in short-term rates during 2022 compared with the increase in rates for 2023 and 2021.

The difference between variable loan spread and core loan spread is fixed rate floor income earned on a portion of AGM's federally insured student loan portfolio.

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Year ended December 31,

2023 2022 2021

Fixed rate floor income, gross $ 2,169 57,380 142,606

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

Gross fixed rate floor income decreased in 2022 compared with 2021 due to higher interest rates in 2022 compared with 2021.

Subsequent to December 31, 2022 (on February 2, 2023), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise as a result of inflationary pressures in the U.S.

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

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

Gross fixed rate floor income decreased in 2023 and 2022 compared with 2022 and 2021, respectively, due to higher interest rates.

The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.

Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.

The decrease in net derivative settlements received by the Company in 2023 compared with 2022 was due to the termination of the fixed rate floor derivatives in March 2023.

The increase in net derivative settlements received on the floor income interest rate swaps in 2022 compared with net derivative settlements paid in 2021 was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.

See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s portfolio earning fixed rate floor income and the derivatives used by the Company to hedge these loans.

Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate

As of December 31, 2022, the interest earned on a principal amount of $12.7 billion of AGM's FFELP student loan asset portfolio was indexed to one-month LIBOR, and the interest paid on a principal amount of $11.9 billion of AGM’s FFELP student loan asset-backed debt securities was indexed to one-month or three-month LIBOR.

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

The market transition away from the LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets, as well as the Company’s LIBOR-indexed derivative instruments.

See Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" for additional information.

Summary and Comparison of Operating Results

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Net interest income after provision for loan losses $ 97,099 220,056 347,203 See table below for additional analysis.

Other income, net 21,170 34,306 Other income includes primarily borrower late fees, income from providing administration activities for third parties, and income from AGM's investment in a joint venture.

Borrower late fees for 2022 and 2021 were $10.8 million and $3.4 million, respectively.

Other income, net 11,269 21,170 34,306 Represents primarily borrower late fees, income from providing administration activities for third parties, gains/losses from repurchase of debt, and income/losses from AGM's investments in joint ventures.

Borrower late fees for 2023, 2022, and 2021 were $9.0 million, $10.8 million, and $3.4 million, respectively.

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

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

The Company recognized revenue of $7.9 million and $3.7 million in 2022 and 2021, respectively, as administrator and sponsor for the securitizations completed during 2021 by the joint venture to purchase and securitize private education loans sold by Wells Fargo.

The Company also recognized income of $1.2 million and $32.9 million in 2022 and 2021, respectively, related to its investment in the joint venture.

For 2021, other income was partially offset by a $6.8 million loss recognized by the Company as a result of purchasing back its own debt.

Gain on sale of loans, net 2,903 18,715 The Company sold $167.0 million (par value) and $101.1 million (par value) of loans to unrelated third parties in 2022 and 2021, respectively, and recognized net gains from such sales.

The Company recognized revenue of $6.8 million, $7.9 million, and $3.7 million in 2023, 2022, and 2021, respectively, as administrator and sponsor for the securitizations completed during 2021 by the joint venture to purchase and securitize private education loans sold by Wells Fargo (an amortizing portfolio).

The Company also recognized a loss of $4.3 million, and income of $1.2 million, and $32.9 million, in 2023, 2022, and 2021, respectively, related to its investments in joint ventures.

For 2021, other income was partially offset by a $6.8 million loss recognized as a result of purchasing back its own debt.

Gain on sale of loans, net 39,673 2,903 18,715 The Company recognized net gains from selling portfolios of loans.

See note 3 of the notes to consolidated financial statements included in this report for additional information.

Provision for beneficial interests — — 2,436 In the first quarter of 2021, due to improved economic conditions, the Company recorded a negative provision of $2.4 million related to its remaining allowance on a consumer loan securitization beneficial interest investment.

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Derivative market value adjustments, net (40,250) 231,691 92,813 Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.

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

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

Total other income (expense) 288,707 126,903

Salaries and benefits 2,524 2,135

Other expenses 16,835 13,487 The primary component of other expenses is servicing fees paid to third parties.

The increase in 2022 compared with 2021 was due to increased costs resulting from ending COVID-19 borrower relief policies which increased servicing activities in 2022 compared with 2021.

This increase was partially offset by a decrease in AGM's loan portfolio.

Other expenses also includes certain professional and legal fees.

Professional fees increased in 2022 compared with 2021 due to incurring additional costs as the Company actively expands into new asset loan classes.

Intersegment expenses 34,679 34,868 Amounts include fees paid to the LSS operating segment for the servicing of AGM’s loan portfolio.

On March 15, 2023, AGM terminated its portfolio of floor income interest rate swaps to minimize the Company’s exposure to market volatility and increase liquidity.

As such, the Company expects the derivative market value adjustments in future periods will be less substantial.

Total other income, net 35,280 288,707 126,903

Salaries and benefits 4,191 2,524 2,135 Increase in 2023 due to additional headcount as the Company actively expands into new asset loan classes.

Other expenses 14,728 16,835 13,487 Represents primarily servicing fees paid to third parties.

Also includes certain professional and legal fees.

See “Total operating expenses” below.

Intersegment expenses 32,824 34,679 34,868 Represents fees paid to LSS for the servicing of AGM’s loan portfolio.

These amounts exceed the actual cost of servicing the loans.

Intersegment expenses also includes costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Total operating expenses 54,038 50,490 Total operating expenses were 34 basis points and 27 basis points of the average balance of loans in 2022 and 2021, respectively.

The increase in operating expenses as a percent of the average balance of loans in 2022 compared with 2021 was due to an increase in certain professional costs as discussed above.

Total operating expenses 51,743 54,038 50,490 Total operating expenses were 39 basis points, 34 basis points, and 27 basis points of the average balance of loans in 2023, 2022, and 2021, respectively.

The increase in operating expenses as a percent of the average balance of loans was due to an increase in professional and legal fees and salaries and benefit costs as the Company actively expands into new asset classes.

In addition, 2021 operating expenses were down due to less activity during the COVID pandemic.

Income before income taxes 80,636 454,725 423,616

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Additional information:

Net income $ 345,591 321,948 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.

GAAP Net income $ 61,283 345,591 321,948 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.

Derivative market value adjustments, net 40,250 (231,691) (92,813)

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Non-GAAP net income, excluding derivative market value adjustments $ 91,873 169,506 251,410

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

Net interest income after provision for loan losses, net of settlements on derivatives

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

Year ended December 31,

2023 2022 2021 Additional information

Variable interest income, gross $ 701,816 499,698 Increase in 2022 compared with 2021 was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.

Consolidation rebate fees (134,578) (160,228) Decrease in 2022 compared with 2021 was due to a decrease in the average consolidation loan balance.

Variable interest income, gross $ 1,007,424 701,816 499,698 Increases due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.

Consolidation rebate fees (106,756) (134,578) (160,228) Decreases due to a decrease in the average consolidation loan balance.

Discount accretion, net of premium and deferred origination costs amortization 7,302 14,010 (3,347) During each of the fourth quarters of 2022 and 2021, the Company changed its estimate of the constant prepayment rate used to amortize/accrete federally insured loan premium/discounts for its loans which resulted in a $8.4 million increase and a $6.2 million decrease, respectively, to interest income.

Excluding these items, the Company recognized a net discount accretion of $5.6 million and $2.9 million in 2022 and 2021, respectively.

Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years.

Net discount accretion during 2023, 2022, and 2021 was due to the Company’s purchase of loans at a net discount over the last several years.

Variable interest income, net 907,970 581,248 336,123

Interest on bonds and notes payable (399,806) (171,320) Increase in 2022 compared with 2021 was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

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

Derivative settlements, net (a) (206) (1,638) Derivative settlements include the net settlements paid related to the Company’s 1:3 basis swaps.

Interest on bonds and notes payable (788,251) (399,806) (171,320) Increases due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

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

Derivative settlements, net (a) 1,544 (206) (1,638) Represents net derivative settlements received (paid) related to the Company’s 1:3 basis swaps.

Variable loan interest margin,

net of settlements on derivatives (a)

net of settlements on derivatives

121,263 181,236 163,165

Fixed rate floor income, gross 57,380 142,606 Decrease was due to higher interest rates in 2022 compared with 2021.

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

Derivative settlements, net (a) 33,149 (19,729) Derivative settlements include the settlements received (paid) related to the Company's floor income interest rate swaps.

The increase in net derivative settlements received by the Company during 2022, compared with net derivative settlements paid during 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.

Fixed rate floor income, gross 2,169 57,380 142,606 Decreases due to higher interest rates.

Derivative settlements, net (a) 23,044 33,149 (19,729) Represents net derivative settlements received (paid) related to the Company's floor income interest rate swaps.

Fixed rate floor income, net of settlements on derivatives 25,213 90,529 122,877

Core loan interest income (a) 146,476 271,765 286,042

Investment interest 37,929 28,172 Increase in 2022 compared with 2021 was due to an increase in the balance of restricted cash due to significant loan prepayments and interest earned on restricted cash due to higher rates in 2022 compared with 2021.

Intercompany interest (12,094) (1,598) Increase was due to an increase in the weighted average intercompany debt outstanding and higher interest rates in 2022 compared with 2021.

(Provision) negative provision for loan losses - federally insured loans (3,731) 7,343 The Company has recognized provision for loan losses in 2022 due to management’s estimate of declining economic conditions, as well as establishing an initial allowance for loans acquired during the period.

For additional information on the provision activity, see note 4 of the notes to consolidated financial statements included in this report.

Investment interest 67,019 37,929 28,172 Increases due to an increase in the balance of restricted cash due to significant loan prepayments and interest earned on restricted cash due to higher interest rates.

Intercompany interest (34,833) (12,094) (1,598) Increases due to an increase in the balance of borrowings and higher interest rates.

(Provision) negative provision for loan losses - federally insured loans (4,303) (3,731) 7,343 See note 3 of the notes to consolidated financial statements included in this report for the factors impacting provision for loan losses for the periods presented.

(Provision) negative provision for loan losses - private education loans (2,865) (2,487) 1,333

(Provision) negative provision for loan losses - consumer and other loans (49,807) (38,383) 4,544

Net interest income after provision for loan losses (net of settlements on derivatives) (a) $ 252,999 325,836 Decrease for 2022 compared with 2021 was due to (i) a decrease in the average balance of loans;

(ii) an increase in provision for loan losses;

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

These items were partially offset by (i) an increase in core loan spread;

(ii) an increase in investment interest income;

and (iii) the impact of changes in the constant prepayment rates used to accrete/amortize loan premium/discounts in both 2022 and 2021.

Net interest income after provision for loan losses (net of settlements on derivatives) (a) $ 121,687 252,999 325,836

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

For an explanation of GAAP accounting for derivative settlements and the reasons why the Company reports these non-GAAP measures (and the limitations thereof), see footnote (d) to the table immediately under the caption “Loan Spread Analysis” above.

See note 6 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the 2022 and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 6 and in this table.

NELNET BANK OPERATING SEGMENT – RESULTS OF OPERATIONS

For an explanation of GAAP accounting for derivative settlements and the reasons why the Company reports these non-GAAP measures (and the limitations thereof), see footnote (e) to the table immediately under the caption “Loan Spread Analysis” above.

See note 5 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the 2023, 2022, and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" and in this table.

Nelnet Bank Operating Segment

Loan Portfolio

As of December 31, 2022, Nelnet Bank had a $419.8 million loan portfolio, consisting of $353.9 million of private education loans and $65.9 million of FFELP loans.

For a summary of the allowance as a percentage of the ending balance and loan status, delinquency amounts, and other key credit quality indicators of each of Nelnet Bank's loan portfolios as of December 31, 2022 and 2021;

and the activity in Nelnet Bank’s allowance for loan losses and net charge-offs as a percentage of average loans for the years ended December 31, 2022 and 2021, see note 4 of the notes to consolidated financial statements included in this report.

As of December 31, 2023, Nelnet Bank had a $432.9 million loan portfolio, consisting of $360.5 million of private education loans and $72.4 million of consumer and other loans.

For a summary of the Company’s loan portfolio as of December 31, 2023 and 2022, see note 3 of the notes to consolidated financial statements included in this report.

Loan Activity

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

Year ended December 31,

2023 2022 2021

Beginning balance $ 419,795 257,901 17,543

Loan acquisitions and originations:

Federally insured student loan acquisitions — 99,973

Private education loan acquisitions 6,856 —

Private education loan originations 228,283 179,749

Federally insured student loans — — 99,973

Private education loans 53,286 235,139 179,749

Consumer and other loans 85,967 — —

Total loan acquisitions and originations 139,253 235,139 279,722

Repayments (68,475) (69,022) (36,181)

Sales to AGM (4,223) (3,183)

Loans sold to AGM (57,701) (4,223) (3,183)

Ending balance $ 432,872 419,795 257,901

Allowance for Loan Losses, Loan Delinquencies, and Loan Charge-offs

For a summary of the allowance as a percentage of the ending balance for each of Nelnet Bank’s loan portfolios as of December 31, 2023 and 2022;

loan status, delinquency amounts, and other key credit quality indicators of each of Nelnet Bank's loan portfolios as of December 31, 2023, 2022, and 2021;

and the activity in Nelnet Bank’s allowance for loan losses and net charge-offs as a percentage of average loans in 2023, 2022, and 2021, see note 3 of the notes to consolidated financial statements included in this report.

As of December 31, 2023, Nelnet Bank had $847.6 million of deposits.

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

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

Union Bank, a related party, is the program manager for the Educational 529 College Savings plans.

Nelnet Bank’s deposits include $98.3 million from Nelnet, Inc.

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

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

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

Union Bank, a related party, is the program manager for the Educational 529 College Savings plans and trustee for the STFIT.

As of December 31, 2023, Nelnet Bank’s deposits included $104.0 million from Nelnet, Inc.

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

The intercompany deposits include a pledged deposit of $40.0 million from Nelnet, Inc.

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

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

Average Balance Sheet

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Year ended December 31, (a)

Balance Rate Balance Rate

2023 2022 2021

Balance Rate Balance Rate Balance Rate

Average assets

1 unchanged sentence

Private education loans 356,201 3.82 317,016 3.23 86,285 3.16

Consumer and other loans 33,829 12.96 — — — —

Cash and investments 563,199 6.40 383,250 3.50 220,735 1.86

6 unchanged sentences

Retail and other deposits 502,177 4.52 304,077 1.65 132,010 0.60

Federal funds purchased and other borrowed money 132 6.07 — — — —

Total interest-bearing liabilities 886,459 3.86 % 674,451 1.64 % 274,282 0.55 %

6 unchanged sentences

2023 2022 2021 Additional information

Total interest income $ 25,973 7,721 Represents interest earned on Nelnet Bank's FFELP and private education student loans, cash, and investments.

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

Total interest income $ 57,859 25,973 7,721 Represents interest earned on loans, cash, and investments.

Increases due to an increase of these balances and interest rates.

Interest expense 34,704 11,055 1,507 Represents interest expense on deposits.

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

Increases due to an increase of deposits and interest rates.

Net interest income 23,155 14,918 6,214

Provision for loan losses 1,840 794 Increase in provision for loan losses was due to an increase in private education loans originated in 2022 compared with 2021 as well as management’s estimate of declining economic conditions.

For additional information on the provision activity, see note 4 of the notes to consolidated financial statements included in this report.

Provision for loan losses 8,475 1,840 794 Increases in provision for loan losses was due to increase in balance of loans and the mix of loans, including the mix of loans acquired and originated in each year compared with the preceding year.

See note 3 of the notes to consolidated financial statements included in this report for additional information.

Net interest income after provision for loan losses 14,680 13,078 5,420

Other income 2,625 713 Represents primarily income and gains from investments.

Other income 1,095 2,625 713 Represents primarily net gains and income from investments.

Impairment expense — (214) —

Total other income (expense) 2,411 713

Derivative settlements, net 484 — — During 2023, Nelnet Bank entered into derivatives to hedge its exposure related to variable rate intercompany deposits to minimize volatility from future changes in interest rates.

Nelnet Bank has designated its derivative instruments as cash flow hedges;

however, because the hedged items are intercompany deposits, the derivative instruments are not eligible for hedge accounting in the consolidated financial statements.

Accordingly, all changes in fair value of such derivatives are recorded through earnings and presented as “derivative market value adjustments, net” in the statements of operations.

Derivative market value adjustments, net (1,523) — —

Total other income, net 56 2,411 713

Salaries and benefits 9,074 6,948 5,042 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.

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

Increases due to the overall growth of Nelnet Bank activities.

Depreciation 574 15 —

Other expenses 3,925 1,776 Increase was due to the overall growth of Nelnet Bank activities.

Intersegment expenses 244 107 Represents primarily servicing costs paid to the LSS operating segment.

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

The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank’s operating segment were $5.8 million and $3.4 million for 2022 and 2021, respectively.

Other expenses 4,994 3,925 1,776 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses.

Increases due to the overall growth of Nelnet Bank activities.

Intersegment expenses 462 244 107 Represents primarily servicing costs paid to LSS.

Certain shared service and support costs incurred by the Company to support Nelnet Bank have not been reflected as part of Nelnet Bank through 2023 (when the bank’s de novo period ended).

The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank’s operating segment were $7.7 million, $5.8 million, and $3.4 million for 2023, 2022, and 2021, respectively.

These expenses will be allocated to Nelnet Bank beginning in 2024.

Total operating expenses 15,104 11,132 6,925

(Loss) income before income taxes (368) 4,357 (792)

Income tax benefit (expense) 153 (1,013) 175 Represents income tax benefit (expense) at an effective tax rate of 41.5%, 23.3%, and 22.1% for the years ended December 31, 2023, 2022, and 2021, respectively.

Net (loss) income $ (215) 3,344 (617)

Additional information:

Net (loss) income $ (215) 3,344 (617)

See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional details about non-GAAP net income, excluding derivative market value adjustments.

Derivative market value adjustments, net 1,523 — —

Tax effect (366) — —

Net income (loss), excluding derivative market value adjustments $ 942 3,344 (617)

NFS Other Operating Segments

The following table summarizes the operating results of other operating segments included in NFS that are not reportable.

Income taxes are allocated based on 24% of income (loss) before taxes for each activity.

Summary and Comparison of Operating Results

WRCM (a) Nelnet Insurance Services (b) Real estate investments (c) Investment securities (d) Total

Year ended December 31, 2023

Interest income $ 11 1,563 564 72,719 74,857

Interest expense — — — (29,747) (29,747)

Net interest income 11 1,563 564 42,972 45,110

Other, net 6,746 21,854 451 (2,403) 26,648

Salaries and benefits (216) (370) (544) — (1,130)

Other expenses (326) (18,757) (82) (7) (19,172)

Intersegment expenses, net (12) (175) (397) — (584)

Income (loss) before income taxes 6,203 4,115 (8) 40,562 50,872

Income tax (expense) benefit (1,013) 175 Represents income tax (expense) benefit at an effective tax rate of 23.3% and 22.1% for the years ended December 31, 2022 and 2021, respectively.

Income tax (expense) benefit (1,340) (988) (10) (9,735) (12,073)

Net (income) loss attributable to noncontrolling interests (620) — 52 — (568)

Net income (loss) $ 4,243 3,127 34 30,827 38,231

Year ended December 31, 2022

Interest income $ 2 674 994 38,707 40,377

Interest expense — (2) — (21,972) (21,974)

Net interest income 2 672 994 16,735 18,403

Other, net 6,026 6,061 24,284 (1,112) 35,259

Salaries and benefits (221) (244) (415) — (880)

Other expenses (347) (1,958) (142) (6) (2,453)

Intersegment expenses, net (12) 1,605 (420) — 1,173

Income (loss) before income taxes 5,448 6,136 24,301 15,617 51,502

Income tax (expense) benefit (1,177) (1,473) (5,839) (3,748) (12,237)

Net (income) loss attributable to noncontrolling interests (545) — 29 — (516)

Net income (loss) $ 3,726 4,663 18,491 11,869 38,749

Year ended December 31, 2021

Interest income $ — 496 548 8,422 9,466

Interest expense — (22) — (2,734) (2,756)

Net interest income — 474 548 5,688 6,710

Other, net 7,785 2,115 21,994 6,555 38,449

Salaries and benefits (227) (271) (332) — (830)

Other expenses (328) (2,177) (77) (3) (2,585)

Intersegment expenses, net (10) 1,610 (221) — 1,379

Income (loss) before income taxes 7,220 1,751 21,912 12,240 43,123

Income tax (expense) benefit (1,560) (420) (5,258) (2,937) (10,175)

Net (income) loss attributable to noncontrolling interests (722) — (4) — (726)

Net income (loss) $ 4,938 1,331 16,650 9,303 32,222

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

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

As of December 31, 2023, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.6 billion, of which the majority of such securities were FFELP student loan asset-backed securities.

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

During 2023, 2022, and 2021, WRCM earned $6.2 million, $6.0 million, and $4.2 million, respectively, in management fees.

During 2023 and 2021, WRCM earned $0.5 million and $3.2 million in performance fees, respectively (performance fees were insignificant in 2022).

Fees earned by WRCM are included in “other, net” in the table above.

(b) Represents the operating results of the Company’s reinsurance treaties on property and casualty policies and the Company’s Nebraska chartered life and health company, which is in run-off mode and reinsures a decreasing term life insurance product distributed to FACTS.

During 2023 and 2022, the Company earned reinsurance premiums of $41.6 million and $0.3 million, respectively, and ceded $21.5 million and $0.2 million, respectively, of its earned reinsurance premiums, which are included in “other, net” in the table above.

During 2023 and 2022, the Company recognized $34.7 million and $0.3 million, respectively, of loss reserve, commissions, and broker fees of which it ceded $18.0 million and $0.2 million, respectively, which are included in “other expenses” in the table above.

There was no reinsurance activity in 2021.

(c) Represents the operating results of the Company’s real estate investments and the administrative costs to manage this portfolio.

During 2023, 2022, and 2021, the Company recognized net income and gains of $0.4 million, $24.8 million and $21.5 million, respectively, from its real estate investments, which is included in “other, net” in the table above.

(d) Represents interest income earned on investment debt securities (primarily student loan and other asset-backed securities), unrealized gains/losses on marketable equity securities, realized gains/losses on marketable equity securities and investment debt securities, and other costs to manage these investments.

Also includes interest expense incurred on debt used to finance such investments.

CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities (“Corporate.”) The following table summarizes the operating results of these activities.

Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities (“Corporate.”) The following table summarizes the operating results of these activities.

Income taxes are allocated based on 24% of income (loss) before taxes for each activity.

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Summary and Comparison of Operating Results

Nelnet Renewable Energy (c) Interest income/expense, net (g)

Shared services (a) WRCM (b) Tax equity investments / syndication / administration GRNE Solar ALLO investment (d) Real estate investments (e) Venture capital investments (f) Other Total

Nelnet Renewable Energy (b)

Shared services (a) Tax equity investments / syndication / administration GRNE Solar ALLO investment (c) Venture capital investments (d) Other Total

Year ended December 31, 2023

Interest income $ — 2 — 34 — 994 1,289 39,638 619 42,576

Interest expense — — — (154) — — — (22,590) 1,206 (21,538)

Net interest income — 2 — (120) — 994 1,289 17,048 1,825 21,038

Net interest income (expense) $ — — (846) — — 11,409 10,563

Solar construction revenue — — 31,669 — — — 31,669

11 unchanged sentences

Year ended December 31, 2022

Interest income $ — — — — — 541 8 8,757 495 9,801

Interest expense — — — — — — — (3,837) 322 (3,515)

Net interest income — — — — — 541 8 4,920 817 6,286

Net interest income (expense) $ — — (120) — 20 2,735 2,635

Solar construction revenue — — 24,543 — — — 24,543

10 unchanged sentences

Net income (loss) $ (54,859) 389 (400) (49,586) 9,461 9,352 (85,643)

Year ended December 31, 2021

Net interest income (expense) $ — — — — 8 (432) (424)

Solar construction revenue — — — — — — —

Other, net 3,604 (10,238) — (33,722) 28,800 13,463 1,907

Impairment expense (916) — — — (4,637) — (5,553)

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

Salaries and benefits (83,401) (1,212) — (505) (872) (3,683) (89,673)

Depreciation and amortization (36,297) — — — — (385) (36,682)

Other expenses (44,040) (119) — (896) (42) (10,492) (55,589)

Intersegment expenses, net 88,377 (460) — — (1) (902) 87,014

Income (loss) before income taxes (72,673) (12,029) — (35,123) 23,256 (2,431) (99,000)

Income tax (expense) benefit 17,442 1,032 — 8,430 (5,581) 6,961 28,284

Net (income) loss attributable to noncontrolling interests — 7,729 — — — — 7,729

Net income (loss) $ (55,231) (3,268) — (26,693) 17,675 4,530 (62,987)

(a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.

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

Certain shared service costs incurred to support Nelnet Bank will not be allocated to Nelnet Bank until the end of the Bank’s de novo period (November 2023).

The amount allocated to operating segments is reflected as “intersegment expenses, net” in the table above.

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

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

As of December 31, 2022, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.8 billion, of which all of such securities were FFELP student loan asset-backed securities.

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

During 2021, WRCM earned $4.2 million in management fees and $3.6 million in performance fees, and in 2022 all income ($6.0 million) earned by WRCM was management fees.

Fees earned by WRCM are included in “other, net” in the table above.

(c) Nelnet Renewable Energy, which includes solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar development.

(b) Nelnet Renewable Energy includes solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar construction and development.

As of December 31, 2023, the Company has invested a total of $470.7 million (which includes $198.8 million syndicated to third-party investors) in solar tax equity investments.

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

Included in tax equity investments is the Company's share of income or loss from solar investments under the Hypothetical Liquidation at Book Value (HLBV) method of accounting.

Included in tax equity investments is the Company's share of income or loss from solar investments accounted for under the Hypothetical Liquidation at Book Value (HLBV) method of accounting.

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

For the years ended December 31, 2022 and 2021, Nelnet Renewable Energy recognized losses of $9.5 million and $10.1 million, respectively, on its tax equity investments.

Nelnet Renewable Energy recognized losses on its tax equity investments of $46.7 million, $9.5 million, and $10.1 million during 2023, 2022, and 2021, respectively.

These losses, which include losses attributable to third-party noncontrolling interest investors, are included in “other, net” in the table above.

Solar losses attributable to third-party noncontrolling interest investors was $10.9 million and $7.4 million for the years ended December 31, 2022 and 2021, respectively, and are reflected in “net (income) loss attributable to noncontrolling interests” in the table above.

Solar losses attributable to third-party noncontrolling interest investors was $26.4 million, $10.9 million and $7.4 million during 2023, 2022, and 2021, respectively, and are reflected in “net (income) loss attributable to noncontrolling interests” in the table above.

Nelnet Renewable Energy syndicates tax equity investments to third parties and earns management and performance fees.

Management fee income recognized by Nelnet Renewable Energy was $0.4 million for the year ended December 31, 2022, which is included in “other, net” in the table above.

Management fee income recognized by Nelnet Renewable Energy was $1.8 million and $1.0 million during 2023 and 2022, respectively, which is included in “other, net” in the table above.

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

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

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

The operating results for Nelnet Solar in the table above are for the period from July 1, 2022 through December 31, 2022.

As part of this strategy, on July 1, 2022, the Company acquired 80% of the ownership interest of GRNE Solar for total consideration of $33.9 million.

The operating results for GRNE Solar in the “Year ended December 31, 2022” table above are for the period from July 1, 2022 through December 31, 2022.

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

Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects.

In addition, higher interest rates reduced residential demand and made community solar projects more costly.

Due to the complexity and long-term nature of existing construction contracts, the Company may continue to incur low and/or negative margins to complete projects currently under contract.

As part of the Company’s November 2023 annual goodwill impairment assessment completed in conjunction with the Company’s annual November budget process, the Company recognized non-cash impairment charges in the fourth quarter of 2023 for goodwill and intangibles of $18.9 million and $1.7 million, respectively.

See note 11 of the notes to consolidated financial statements included in this report for additional information.

(d) Represents primarily the Company's share of loss on its voting membership interests and income on its preferred membership interest in ALLO.

The Company accounts for its approximately 45% voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO") under the HLBV method of accounting.

During the years ended December 31, 2022 and 2021, the Company recognized losses of $68.0 million and $42.1 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment.

(c) Represents primarily the Company's share of loss on its voting membership interests and income on its preferred membership interests in ALLO.

The Company accounts for its approximately 45% voting membership interests in ALLO under the HLBV method of accounting.

The Company recognized losses under the HLBV method of accounting on its ALLO voting membership interests investment of $65.3 million, $68.0 million, and $42.1 million, during 2023, 2022, and 2021, respectively.

These amounts are reflected in “other, net” in the table above.

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

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

Applying the HLBV method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years.

As of December 31, 2022, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $145.9 million.

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

During the years ended December 31, 2022 and 2021, the Company recognized income on its ALLO preferred membership interests of $8.6 million and $8.4 million, respectively.

As of December 31, 2023, the outstanding preferred membership interests of ALLO held by the Company was $155.0 million.

Accrued and unpaid preferred return capitalizes to preferred membership interests annually on each December 31.

The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25% that will increase to 10.00% in April 2024.

The Company recognized income on its ALLO preferred membership interests of $9.1 million, $8.6 million, and $8.4 million during 2023, 2022, and 2021, respectively.

These amounts are reflected in “other, net” in the table above.

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

However, if the non-voting preferred membership interests are not redeemed on or before April 2024, the preferred annual return is increased from 6.25% to 10.00%.

As part of the ALLO recapitalization transaction, the Company and SDC entered into an agreement, in which the Company has contingent payment obligation to pay SDC a contingent payment amount of $25.0 million to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.

During 2022, the Company recognized an expense of $5.3 million associated with this obligation, which is included in “other expenses” in the table above.

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

(e) Includes the operating results of the Company’s real estate investments and the administrative costs to manage this portfolio.

During 2022 and 2021, the Company recognized $26.6 million and $22.3 million, respectively, in net income and gains from its real estate investments, which is included in “other, net” in the table above.

In 2022, the Company incurred development fees of $0.5 million, which is included in “other, net” in the table above.

(f) Includes the operating results of the Company’s venture capital investments, including Hudl which the Company accounts for using the measurement alternative method (see note 7 of the notes to consolidated financial statements included in this report for additional information), and the administrative costs to manage this portfolio.

During 2022, the Company recognized $22.3 million in net income and gains on venture capital investments, including a $15.2 million gain as a result of the revaluation of its previously held 50% ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30% ownership interests in NextGen on April 30, 2022.

As part of the ALLO recapitalization transaction completed in 2020, the Company and SDC (a third-party global digital infrastructure investor and member of ALLO) entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.

The Company recognized expense of $2.2 million and $5.3 million associated with this obligation during 2023 and 2022, respectively, which is included in “other expenses” in the table above.

(d) Represents the operating results of the Company’s venture capital investments, including Hudl which the Company accounts for using the measurement alternative method (see note 6 of the notes to consolidated financial statements included in this report for additional information), and the administrative costs to manage this portfolio.

During 2022, the Company recognized $19.8 million in net income and gains on venture capital investments, including a $15.2 million gain from the revaluation of its previously held 50% ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30% ownership interests in NextGen on April 30, 2022.

In 2021, the Company recognized $28.8 million in net income and gains on venture capital investments, including $10.3 million as a result of CompanyCam Inc.’s equity raise.

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As a result of this entity’s equity raise, the Company recognized a gain during the fourth quarter of 2021 to adjust its carrying value to reflect the October 2021 transaction value.

(g) Includes interest income earned on cash and investment debt securities (primarily student loan and other asset-backed securities), interest expense incurred on unsecured and certain other corporate related debt transactions, unrealized gains/losses on marketable equity securities, realized gains/losses on marketable equity securities and investment debt securities, and other costs to manage these investments and facilities.

During 2022 and 2021, the Company recognized $8.0 million in unrealized losses and $5.0 million in unrealized gains, respectively, on its marketable equity securities and $6.7 million and $1.6 million in realized gains, respectively, on its investment debt securities and marketable equity securities, which are included in “other, net” in the table above.

During 2022 and 2021, the Company recognized $3.6 million and $0.1 million, respectively, in fees owed on collateral deposits with its derivative third-party clearinghouse as the result of an increase in collateral deposit balances and interest rates, which is included in “other expenses” in the table above.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s Loan Servicing and Systems, and Education Technology, Services, and Payment Processing operating segments are non-capital intensive and both produce positive operating cash flows.

The Company’s Loan Servicing and Systems, and Education Technology Services and Payments operating segments are non-capital intensive and both produce positive operating cash flows.

As such, a minimal amount of debt and equity capital is allocated to these segments and any liquidity or capital needs are satisfied using cash flow from operations.

Nelnet Bank launched operations in November 2020.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and the Company contributed an additional $30.0 million to Nelnet Bank during 2022.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and the Company contributed an additional $30.0 million and $5.0 million to Nelnet Bank during 2022 and 2023, respectively.

Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.

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AFS debt securities held at Nelnet Bank - at fair value (1) (371,610)

AFS debt securities serving as collateral on participation agreement - at fair value (2) (370,666)

AFS debt securities serving as collateral on repurchase agreements - at fair value (3) (306,464)

AFS private education loan debt securities - held as risk retention - at fair value (2) (252,917)

Restricted investments (17,969)

Unencumbered AFS debt securities (investments) - at fair value 313,407

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Repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (3) 312,016

Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreements - at par (3) (331,550)

Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreement - at par (4) (118,925)

Unencumbered repurchased Nelnet issued asset-backed debt securities - at par 193,091

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

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

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

(2) The Company is sponsor for certain securitizations and as sponsor, is required to provide a certain level of risk retention.

To satisfy this requirement, the Company has purchased bonds issued in the securitizations.

The Company is required to retain these bonds as described under the caption “Repurchase Agreements” below.

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

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

(4) See the caption “Repurchase Agreements” below.

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

As of December 31, 2023, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

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

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

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During the year ended December 31, 2023, the Company generated $433.0 million from operating activities, compared with $684.1 million for the same period in 2022.

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

• An increase in net income;

• Adjustments to net income for the impact of non-cash depreciation and amortization, provision for loan losses, gain on sale of loans, and net losses/gains on investments;

• An increase in net proceeds from the Company’s clearinghouse for margin payments on derivatives;

• Proceeds from termination of derivatives in 2022;

• Net proceeds from the sale of equity securities in 2022 compared with net purchases in 2021;

• The impact of changes to accounts receivable, accrued interest payable, and other liabilities in 2022 compared with 2021.

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

• A decrease in net income;

• Payments to the Company’s clearinghouse for margin payments on derivatives in 2023 compared with proceeds received in 2022;

• Adjustments to net income for the impact of non-cash changes in deferred income taxes, depreciation and amortization, and gain on sale of loans;

• A decrease in proceeds from the sale of equity securities;

• The impact of changes to accrued interest payable in 2023 compared with 2022.

These factors were partially offset by:

• Adjustments to net income for the impact of derivative market value adjustments, loan discount accretion, and deferred taxes;

• The impact of changes to accrued interest receivable and other assets in 2022 compared with 2021.

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

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

• Adjustments to net income for the impact of provision for loan losses, impairment expense, derivative market value adjustments, loss on investments, and loan discount accretion;

• An increase in the proceeds from termination of derivative instruments in 2023 compared with 2022;

• The impact of changes to accrued interest receivable, accounts receivable, and other assets and liabilities in 2023 compared with 2022.

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

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

Cash provided by investing activities and used in financing activities for the year ended December 31, 2023 was $1.94 billion and $2.70 billion, respectively.

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In addition, due to (i) the difference between the yield AGM receives on the loans and cost of financing within these transactions, and (ii) the servicing and administration fees AGM earns from these transactions, AGM has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.

As of December 31, 2022, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM expects future undiscounted cash flows from its portfolio to be approximately $1.46 billion as detailed below.

As of December 31, 2023, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM currently expects future undiscounted cash flows from its portfolio to be approximately $1.30 billion as detailed below.

The actual timing of cash flows released from the securitizations could be impacted based on when and if the Company terminates a securitization by exercising clean-up calls on the underlying securities when the assets in such securitization get to a certain threshold.

The forecasted cash flow presented below includes all loans, the majority of which are federally insured student loans, funded in asset-backed securitizations as of December 31, 2023.

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The forecasted future undiscounted cash flows of approximately $1.30 billion include approximately $0.82 billion (as of December 31, 2023) of overcollateralization included in the asset-backed securitizations.

These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.52 billion, or approximately $0.40 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's December 31, 2022 balance of consolidated shareholders' equity.

These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.48 billion, or approximately $0.36 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the December 31, 2023 balance.

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

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The Company’s cash flow forecast above assumes prepayment rates of 5% for consolidation loans and 6% for all other loan types.

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

In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan.

These changes were reflected in executive actions announced by the Department on October 25, 2022 and final regulations announced by the Department on October 31, 2022.

The final regulations are to become effective on July 1, 2023, and the fact sheet accompanying the October 25, 2022 announcement indicates that if a borrower has a commercially held FFEL Program loan, the borrower must apply for consolidation to a Federal Direct Loan Program loan by May 1, 2023 to receive the IDR plan and other benefits set forth in the announcement.

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

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

For example, since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act and an initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.

See Item 1A, "Risk Factors - Loan Portfolio - Prepayment risk" for additional information related to these announcements and other risks associated with loan prepayments.

In addition, during 2023, the Department issued final regulations on income-driven repayment plans, which could lead to increased consolidation activity for FFELP loans.

If the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs, such initiatives could significantly increase prepayments.

Item 1A, "Risk Factors - Loan Portfolio - Prepayment risk" for additional information related to risks associated with loan prepayments.

The following table summarizes the estimated impact to the above forecasted cash flows if prepayments were greater than the prepayment rate assumptions used to calculate the forecasted cash flows.

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Forecasted cash flow using increased prepayment rate

2x $0.11 billion $1.35 billion

4x $0.28 billion $1.18 billion

10x $0.52 billion $0.94 billion

2x $0.07 billion

$1.23 billion

4x $0.25 billion

$1.05 billion

10x $0.45 billion

$0.85 billion

If the entire AGM student loan portfolio prepaid, the Company would receive the full amount of overcollateralization included in the asset-backed securitizations of approximately $0.82 billion (as of December 31, 2023);

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Interest rates :

The Company funds a large portion of its student loans with three-month LIBOR indexed floating rate securities.

Meanwhile, the interest earned on the Company’s student loan assets is indexed primarily to a one-month LIBOR rate.

On June 30, 2023, LIBOR was discontinued as a benchmark rate.

Subsequent to the discontinuation of LIBOR on June 30, 2023, the Company funds a portion of its student loans with floating rate securities that are indexed to 90-day SOFR.

Meanwhile, the interest earned on the Company’s student loan assets is indexed primarily to the 30-day average SOFR in effect for each day in a calendar quarter.

The different interest rate characteristics of the Company’s loan assets and liabilities funding these assets result in basis risk.

The Company’s cash flow forecast assumes three-month LIBOR will exceed one-month LIBOR by 12 basis points for the

life of the portfolio, which approximates the historical relationship between these indices.

If the forecast is computed assuming a spread of 24 basis points between three-month and one-month LIBOR for the life of the portfolio, the cash flow forecast would be reduced by approximately $50 million to $70 million.

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

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

The Company’s cash flow forecast assumes, for the life of the portfolio, a relationship between the various SOFR indices that is implied by the current forward SOFR curves.

If the forecast is computed assuming a spread of an additional 12 basis points between Term SOFR and 30-day average SOFR for the life of the portfolio, the cash flow forecast would be reduced by approximately $15 million to $20 million.

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

A change in the forward interest rate curve would impact the future cash flows generated from the portfolio.

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

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

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

See Item 7A, "Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk — AGM Operating Segment" for additional information about various interest rate risks which may impact future cash flows from AGM's loan assets.

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

See Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate."

Warehouse Facilities

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

The Company has a FFELP warehouse facility that, as of December 31, 2022, had an aggregate maximum financing amount available of $1.2 billion, of which $979.0 million was outstanding and $221.0 million was available for additional funding.

The warehouse facility has a static advance rate until the expiration date of the liquidity provisions (May 22, 2023).

Warehousing allows the Company to buy and manage FFELP, private education, and consumer loans prior to transferring them into more permanent financing arrangements.

The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities.

As of December 31, 2023, the Company had two FFELP warehouse facilities with an aggregate maximum financing amount available of $1.7 billion, of which $1.4 billion was outstanding and $0.3 billion was available for additional funding.

One warehouse facility has a static advance rate until the expiration date of the liquidity provisions (May 22, 2024).

In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor.

The loans would then be funded at this new advance rate until the final maturity date of the facility (May 22, 2025).

As of December 31, 2022, the Company had $67.0 million advanced as equity support on this facility.

The Company has a private education loan warehouse facility that, as of December 31, 2022, had an aggregate maximum financing amount available of $64.4 million, an advance rate of 75%, liquidity provisions through June 30, 2023, and a final maturity date of December 31, 2023.

As of December 31, 2022, $64.4 million was outstanding under this facility with no amount available for future funding, and the Company had $22.4 million advanced as equity support.

The other warehouse facility has a maximum advance rate of 92%.

As of December 31, 2023, the Company had $102.7 million advanced as equity support on these facilities.

For further discussion of the Company’s FFELP warehouse facilities outstanding as of December 31, 2023, see note 4 of the notes to consolidated financial statements included in this report.

The Company also has a consumer loan warehouse facility that, as of December 31, 2023, had an aggregate maximum financing amount available of $200.0 million, an advance rate of 70%, liquidity provisions through November 14, 2024, and a final maturity date of November 14, 2025.

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In addition, as discussed above, the Company has repurchased certain of its own asset-backed securities in the secondary market that serve as collateral on amounts outstanding under the Company's repurchase agreements.

As of December 31, 2022, $567.3 million was outstanding on the Company's repurchase agreements, of which $291.3 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement and $276.0 million was borrowed to fund repurchased FFELP loan asset-backed securities.

The repurchase agreements have various maturity dates (as of December 31, 2022) from January 4, 2023 through November 27, 2024, but one of the agreements is subject to early termination upon required notice provided by the Company or the applicable counterparty prior to the maturity dates.

Subsequent to December 31, 2022, the maturities on these agreements were extended, and as of February 28, 2023, the maturity dates vary from March 8, 2023 through November 27, 2024.

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

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

During the third quarter of 2023, the Company paid down the outstanding balance of one of these facilities.

As of December 31, 2023, $208.2 million was outstanding on the Company's remaining repurchase agreement, of which $117.8 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement and $90.4 million was borrowed to fund repurchased FFELP loan asset-backed securities.

On January 29, 2024, the Company paid down the $90.4 million borrowed to fund the FFELP loan asset-backed securities.

As of February 27, 2024, the maturity dates on this facility vary from November 27, 2024 through December 20, 2024, and the facility is subject to early termination upon 180 days' prior written notice provided by the Company or the counterparty prior to the maturity dates.

The Company is subject to cash margin deficit payment requirements in the event the fair value of the securities subject to the repurchase agreement becomes less than the original purchase price of such securities.

Upon termination or maturity of the repurchase agreement, there can be no assurance that the Company will be able to maintain this or a similar agreement, or find alternative funding if necessary.

If necessary, the Company would expect to use operating cash, consider the sale of unencumbered investments, or borrow on its unsecured line of credit to satisfy any remaining obligations.

Union Bank Participation Agreement

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Asset-backed Securities Transactions

During 2023, the Company completed one private education loan asset-backed securitization totaling $189.6 million (par value).

The proceeds from this transaction were used to finance loans funded in the Company’s private education loan warehouse, certain unencumbered loans, and loans purchased during the period.

See note 4 of the notes to consolidated financial statements included in this report for additional information on this securitization.

The Company, through its subsidiaries, has historically funded student loans by completing asset-backed securitizations.

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Such asset-backed securitization transactions would be used to refinance student loans included in its warehouse facilities, loans purchased from third parties, and/or student loans in its existing asset-backed securitizations.

There were no asset-backed securitization transactions completed during the year ended December 31, 2022

Cash Flow Forecast - Beneficial Interest in Loan Securitizations

The Company has partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as "beneficial interest in loan securitizations" and included in "investments and notes receivable" on the Company's consolidated balance sheets.

These residual interests were acquired by the Company or have been received by the Company as consideration as the result of selling portfolios of loans to unrelated third parties who securitized such loans.

As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2023, the Company's ownership correlates to approximately $1.76 billion of loans included in these securitizations

As of December 31, 2023, the investment balance on the Company's consolidated balance sheet of its beneficial interest in loan securitizations was $225.1 million.

For a summary of this investment balance, see note 6 of the notes to consolidated financial statements included in this report.

The Company's partial ownership percentage in each loan securitization grants the Company the right to receive the corresponding percentage of cash flows generated by the securitization.

As of December 31, 2023, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its partial ownership in these securitizations to be approximately $350.6 million.

The vast majority of these cash flows are expected to be received over the next 5 years.

The difference between the total estimated future undiscounted cash flows from these residual interests and the investment carrying value of $225.1 million of $125.5 million, or $95.4 million after income taxes based on the estimated effective tax rate, represents estimated future investment interest income (earnings) from these investments and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the December 31, 2023 balance.

The undiscounted future cash flows from the consumer and private education loan securitizations are highly subject to credit risk (defaults).

If defaults are higher than management's current estimate, the forecasted cash flows and estimated future investment interest income (earnings) from these securitizations would be adversely impacted.

Liquidity Impact Related to Nelnet Bank

Nelnet Bank launched operations in November 2020.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and the Company contributed an additional $30.0 million to Nelnet Bank during 2022.

In addition, the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC discussed below.

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Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on Nelnet Bank’s business, results of operations, or financial condition.

On January 1, 2020, the Community Bank Leverage Ratio (CBLR) framework, as issued jointly by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC, became effective.

On January 1,

2020, the Community Bank Leverage Ratio (CBLR) framework, as issued jointly by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC, became effective.

Any banking organization with total consolidated assets of less than $10 billion, limited amounts of certain types of assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9% may opt into the CBLR framework quarterly.

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The Company’s Nelnet Renewable Energy business makes solar tax equity investments.

Through December 31, 2022, the Company has invested a total of $175.6 million (which excludes $102.8 million syndicated to third-party investors) in tax equity investments in renewable energy solar partnerships.

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

Through December 31, 2023, the Company has invested a total of $470.7 million (which includes $198.8 million syndicated to third-party investors) in tax equity investments in renewable energy solar partnerships.

These investments provide a federal income tax credit under the Internal Revenue Code, equaling 30% to 40% of the eligible project cost, with the tax credit available when the project is placed-in-service.

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

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Treasury due to earning of the tax credit, the amount of capital committed to solar tax equity investments at any point in time is not significant and has a minimal impact on the Company’s liquidity.

As of December 31, 2023, the Company is committed to fund an additional $154.2 million of tax equity investments, of which $72.1 million is expected to be provided by syndication partners.

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

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

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

As part of this strategy, on July 1, 2022, the Company acquired 80% of the ownership interest in GRNE and ENRG for total consideration of $33.9 million.

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

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

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

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

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

The Company plans to fund a large portion of its current growth plans in owning solar energy projects using third-party debt and third-party tax equity.

The collateral on any third-party debt would be limited to the assets of the

specific solar projects.

The collateral on any third-party debt would be limited to the assets of the specific solar projects.

Any capital requirements for the origination or purchase of solar projects not funded by third-party debt and third-party tax equity would be provided by the Company using operating cash, borrowings on its unsecured line of credit, and/or the sale of investments.

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As of December 31, 2023, the outstanding preferred membership interests of ALLO held by the Company was $155.0 million that earns a preferred annual return of 6.25%.

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

However, if the non-voting preferred membership interests are not redeemed on or before April 2024, the preferred annual return is increased from 6.25% to 10.00%.

Accrued and unpaid preferred returns are converted to additional preferred membership interests each December 31.

If the non-voting preferred membership interests are not redeemed on or before April 2024, the preferred annual return is increased from 6.25% to 10.00%.

In June 2023, ALLO, the Company, and SDC (a third-party global digital infrastructure investor and member of ALLO) agreed to amend the terms of the ALLO non-voting preferred membership units owned by Nelnet.

Such amended terms provide that commencing January 1, 2025, the preferred annual return will increase to 13.5%, commencing July 1, 2025, the return will increase to 15.0%, commencing January 1, 2026, the preferred return will increase to 17.5%, and beginning on January 1, 2027 and on each January 1 of each calendar year thereafter, the annual return will increase by an additional 2.5%.

In addition, any preferred return accruing on or after January 1, 2025 is expected to be paid on a quarterly basis in cash rather than through an increase to the outstanding preferred membership interests.

As part of the ALLO recapitalization transaction in December 2020, the Company and SDC entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.

As of December 31, 2023, the estimated fair value of the contingent payment is $9.8 million.

In June 2023, ALLO closed on an asset-backed securities transaction with an aggregate size over $600 million.

The proceeds from this transaction were used to refinance the majority of ALLO's prior debt and fund a portion of its current growth plans.

If ALLO needs additional capital to support its growth in existing or new markets, the Company has the option to contribute additional capital to maintain its voting equity interest.

Although ALLO has obtained third-party debt financing to fund a large portion of its current growth plans, the Company contributed $48.3 million of additional equity to ALLO in 2022.

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

Although ALLO has obtained debt financing to fund a large portion of its growth plans, the Company contributed $8.4 million of additional equity to ALLO in the first quarter of 2023.

As a result of

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

Based on ALLO's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to ALLO in future periods.

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

Based on the derivative portfolio outstanding as of December 31, 2022, the Company does not anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse.

However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio, the replacement of LIBOR as a benchmark rate has significant adverse impacts on the Company's derivatives, or if the Company enters into additional derivatives for which the fair value becomes negative, the Company could be required to make variation margin payments to its third-party clearinghouse.

The variation margin, if significant, could negatively impact the Company's liquidity and capital resources.

All Non-Nelnet Bank 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.

To minimize the Company's exposure to market volatility and increase liquidity, on March 15, 2023, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).

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

Based on the derivative portfolio outstanding as of December 31, 2023, the Company does not anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse and/or payments to its counterparties for its non-centrally cleared derivatives.

However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio or if the Company enters into additional derivatives for which the fair value becomes negative, the Company could be required to make variation margin payments to its third-party clearinghouse and/or collateral payments to it non-centrally cleared counterparties.

The variation margin and collateral payments, if significant, could negatively impact the Company's liquidity and capital resources.

In addition, clearing rules require the Company to post amounts of liquid collateral when executing new derivative instruments, which could prevent or limit the Company from utilizing additional derivative instruments to manage interest rate sensitivity and risks.

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Upon the maturity date of this facility, there can be no assurance that the Company will be able to maintain this line of credit, increase or maintain the amount outstanding under the line, or find alternative funding if necessary.

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

As of December 31, 2022, $395.4 million (par value) of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

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

Upon termination or expiration of this agreement, the Company would expect to use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.

On December 21, 2023, the Company entered into a $10.0 million participation agreement with a third-party, the proceeds of which are collateralized by consumer loans.

The third-party participant does not have the right to pledge, transfer, or otherwise dispose of their participation interest in all or any portion of the loans subject to this agreement.

As such, the consumer loans subject to this agreement are included on the Company's consolidated balance sheet and the participation interests outstanding have been accounted for by the Company as a secured borrowing.

This participation agreement will amortize as the consumer loans subject to the participation pay down.

For further discussion of these debt facilities described above, see note 4 of the notes to consolidated financial statements included in this report.

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Certain of these repurchases were made pursuant to trading plans adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.

Total shares repurchased Purchase price (in thousands) Average price of shares repurchased (per share)

Total shares repurchased Purchase price (in thousands) Average price of shares repurchased (per share) (a)

Year ended December 31, 2023 336,943 $ 28,028 $ 83.18

Year ended December 31, 2022 1,162,533 97,685 84.03

Year ended December 31, 2021 713,274 58,111 81.47

(a) The average price of shares repurchased for the year ended December 31, 2023 includes excise taxes.

On November 13, 2023, the Company repurchased, in a privately negotiated transaction under the Company’s existing stock repurchase program, a total of 283,112 shares of the Company’s Class A common stock from certain family members of Mr.

The shares were repurchased at a discount to the closing market price of the Company’s Class A common stock as of November 10, 2023, and the transaction was separately approved by the Company’s Board of Directors and its Nominating and Corporate Governance Committee.

Included in the shares repurchased during 2021 are a total of 337,717 shares of Class A common stock the Company purchased on August 10, 2021 from various estate planning trusts associated with Shelby J.

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Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain.

Such assumptions are discussed below, and such uncertainty is due in part to the fact that the weighted average maturity of the Company’s loan portfolio is approximately 15 years, and actual credit losses will be affected by, among other things, future economic conditions

and future personal financial situations for borrowers, over that extended time frame.

Changes in the Company’s assumptions affect “provision for loan losses” on the Company’s consolidated statements of income and the “allowance for loan losses” contained within “loans and accrued interest receivable, net of allowance for loan losses” on the Company’s consolidated balance sheets.

Changes in the Company’s assumptions affect “provision (negative provision) for loan losses” on the Company’s consolidated statements of income and the “allowance

for loan losses” contained within “loans and accrued interest receivable, net” on the Company’s consolidated balance sheets.

For additional information regarding the Company’s allowance for loan losses, see notes 2 and 3 of the notes to consolidated financial statements included in this report.

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RECENT ACCOUNTING PRONOUNCEMENTS

Financial Instruments - Credit Losses

In March 2022, the FASB issued accounting guidance 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.

The adoption of this standard by the Company on January 1, 2023, was immaterial to the Company’s consolidated financial statements and related disclosures.

In November 2023, the FASB issued accounting guidance which improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit (referred to as the “significant expense principle”).

This guidance will be effective for the Company for the year ending December 31, 2024 annual financial statements, with early adoption permitted.

The guidance will be applied retrospectively for all prior periods presented in the financial statements.

The Company intends to adopt the standard when it becomes effective for the year ending December 31, 2024 annual financial statements.

Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.

In December 2023, the FASB issued accounting guidance to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

This guidance will be effective for the Company for the year ending December 31, 2025 annual financial statements, with early adoption permitted.

The guidance will be applied on a prospective basis.

The Company intends to adopt the standard when it becomes effective for the year ending December 31, 2025.

Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.

There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis