What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-07 · 472 added, 546 removed, 476 unchanged (68% of the section changed)

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

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three and nine months ended September 30, 2023 and 2022.

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three months ended March 31, 2024 and 2023.

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

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This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document.

for future operations, and statements that assume or are dependent upon future events, are forward-looking statements.

Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements.

The words “anticipate,” “assume,” “believe,” “continue,” “could,” “ensure,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “scheduled,” “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.

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These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the 2023 Annual Report and include such risks and uncertainties as:

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

Department of Education (the "Department") and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or FFELP), private education, and consumer loans;

• loan portfolio risks such as credit risk, interest rate basis and repricing risk, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans, and risks from changes in levels of loan prepayment or default rates;

• risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and future servicing contracts with the Department, risks related to unfavorable contract modifications or interpretations, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or FFELP), private education, and consumer loans;

• loan portfolio risks such as prepayment risk, credit risk, interest rate basis and repricing risk, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans;

• financing and liquidity risks, including risks of changes in the interest rate environment;

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• risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors;

• risks related to use of artificial intelligence;

• uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;

• risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration;

• risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;

• risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom), acquisitions, and other activities, including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;

• risks related to the ability of Nelnet Bank to achieve its business objectives and effectively deploy loan and deposit strategies and achieve expected market penetration;

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

• risks and uncertainties associated with climate change;

• risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses.

• risks and uncertainties associated with litigation matters and maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company’s consolidated financial statements.

All forward-looking statements contained in this report are qualified by these cautionary statements and are made only as of the date of this document.

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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, reinsurance, and renewable energy (solar).

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

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A reconciliation of the Company's GAAP net income to Non-GAAP net income, excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, is provided below.

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

2023 2022 2023 2022

Three months ended March 31,

GAAP net income attributable to Nelnet, Inc.

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GAAP net income attributable to Nelnet, Inc.

$ 1.21 2.80 2.67 9.99

Realized and unrealized derivative market value adjustments (0.21) 1.00

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However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.

The Comp any believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations.

The Company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations.

Accordingly, the Company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the Company’s performance and in presentations with credit rating agencies, lenders, and investors.

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

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

• Asset Generation and Management (AGM)

• Nelnet Bank

• 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.

The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM reportable operating segment.

The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, through its AGM reportable operating segment.

This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes.

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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.

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.

Other operating segments included in the NFS division include the Company's U.S.

Securities and Exchange Commission (SEC)-registered investment advisor subsidiary, property and casualty reinsurance activities, investment activities in real estate, and 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 also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions, certain investment activities including its investment in ALLO and early-stage and emerging growth companies (venture capital investments), and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services.

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

The information below presents the operating results (net income (loss) before taxes) for each reportable operating segment and Corporate and Other Activities for the three and nine months ended September 30, 2023 and 2022.

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

Three months ended September 30, Nine months ended September 30, Certain Items Impacting Comparability

The information below presents the operating results (net income (loss) before taxes) for each of the Company's reportable and certain other operating segments reconciled to the consolidated financial statements for the three months ended March 31, 2024 and 2023.

See "Results of Operations" for each reportable operating segment, the NFS operating segments, and Corporate and Other Activities under this Item 2 for additional detail.

Three months ended March 31, Certain Items Impacting Comparability

(All dollar amounts below are pre-tax)

2023 2022 2023 2022

NDS $ 24,469 21,914 66,713 47,494 • An increase in before tax operating margin in 2023 compared with 2022 due to a decrease in operating expenses, primarily salaries and benefits.

In 2022, the Company was fully staffed 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.

The Company reduced staff in the first and second quarters of 2023 to manage expenses due to the delays in the government's student debt relief and return to repayment programs and lower pricing and reduced servicing volume for the Company's Department servicing contracts.

Margin was also positively impacted in 2023 due to $4.8 million of deconversion revenue recognized in the third quarter of 2023 related to a remote hosted servicing customer leaving the Company's platform.

NBS 22,123 18,655 77,803 66,454 • The recognition of $8.9 million and $20.2 million of interest income for the three and nine months ended September 30, 2023, respectively, compared with $3.7 million and $4.9 million for the same periods in 2022, due to higher interest rates.

• A decrease in before tax operating margin, excluding net interest income, in 2023 compared with 2022 due to additional investments in the development of new services and technologies and superior customer experiences to align with the Company's strategies to grow, retain, and diversify revenue.

AGM 40,562 111,872 58,041 424,647 • A net gain of $1.2 million and net loss of $35.3 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three and nine months ended September 30, 2023, respectively, compared with a net gain of $53.0 million and $239.1 million for the same periods in 2022.

• The recognition of a $25.9 million non-cash expense in the second quarter of 2023 as the result of redeeming certain asset-backed debt securities prior to their maturity and writing off the remaining unamortized debt discount at the time of redemption.

• A decrease of $24.0 million and $38.7 million in net interest income due to a decrease in core loan spread for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022.

• A decrease of $4.9 million and $24.2 million in net interest income due to the decrease in the average balance of loans for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022.

• The recognition of $18.1 million and $47.7 million of investment interest for the three and nine months ended September 30, 2023, respectively, compared with $10.3 million and $28.1 million for the same periods in 2022 due to an increase of interest earned on restricted cash due to higher interest rates.

• The recognition of $5.4 million and $32.7 million in gains from the sale of loans for the three and nine months ended September 30, 2023, respectively, compared with $2.6 million and $5.6 million for the same periods in 2022.

• The recognition of $8.7 million and $48.7 million in provision for loan losses for the three and nine months ended September 30, 2023, respectively, compared with $9.2 million and $17.2 million for the same periods in 2022.

NDS $ 15,990 25,219 • A decrease in before tax operating margin due primarily to a decrease in loan servicing and systems revenue, partially offset by a decrease in salaries and benefits resulting from restructure charges incurred during the first quarter of 2023 and staff reductions in 2023.

NBS 47,635 37,637 • An increase in before tax operating margin, excluding net interest income, due to increased revenue while maintaining a consistent cost structure.

• The recognition of $7.9 million of interest income in 2024 compared with $6.0 million in 2023 due to higher interest rates.

Nelnet Financial Services division:

AGM 33,743 (221) • A net gain of $5.7 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in 2024 compared with a net loss of $37.4 million in 2023.

• A decrease of $21.1 million in net interest income due to a decrease in core loan spread in 2024 compared with 2023.

• A decrease of $5.1 million in net interest income due to the decrease in the average balance of loans in 2024 compared with 2023.

• The recognition of $6.6 million in provision for loan losses in 2024 compared with $31.9 million in 2023.

• The recognition of a net gain of $11.8 million in 2023 from the sale of loans.

• The recognition of $21.8 million of investment interest in 2024 compared with $13.8 million in 2023 due to an increase in interest earned on the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.

Nelnet Bank 1,147 (93)

Corporate (36,483) (26,442) (92,686) (65,061) • An increase of $4.2 million and $25.1 million in net interest income from the Company's cash and investment (bond) portfolio due to an increase in interest rates for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022.

• The recognition of net investment income of $0.3 million and losses of $4.5 million for the three and nine months ended September 30, 2023, respectively, compared with net investment income of $10.5 million and $37.2 million for the same periods in 2022.

• The recognition of $4.9 million and $16.2 million of losses from the Company's acquisition of GRNE Solar on July 1, 2022 for the three and nine months ended September 30, 2023, respectively, compared with losses of $0.7 million for both the comparable periods in 2022.

• The recognition of an impairment charge of $4.7 million in the third quarter of 2023 related to real estate leases as the Company continues to downsize its facility footprint as a result of associates working from home compared with $6.2 million in the second quarter of 2022 related primarily to a venture capital investment.

Income before income taxes 52,970 127,055 113,823 476,023

NFS other operating segments 13,762 5,177 • The recognition of $12.2 million of net interest income in 2024 compared with $6.4 million in 2023 due to higher average yield on interest-earning debt securities (bonds) and a decrease in outstanding debt used to finance such investments.

• The recognition of $4.0 million of realized losses on sales of investment securities in 2023.

Unallocated corporate costs (10,045) (12,989)

ALLO investment (8,593) (17,882) • The recognition of a net loss from the ALLO voting membership interest investment of $10.7 million in 2024 compared with $20.2 million in 2023.

Absent additional equity contributions, the Company will not recognize additional losses for its voting membership interests in ALLO.

• The recognition of income of $2.4 million and $2.2 million in 2024 and 2023, respectively, on the $155.0 million (as of March 31, 2024) outstanding preferred membership interests of ALLO.

The preferred membership interests of ALLO held by the Company historically earned a preferred annual return of 6.25% that increased to 10.00% on April 1, 2024.

Nelnet Renewable Energy (1,533) (6,701) • The recognition of a loss in the solar construction business of $4.0 million in 2024 compared with $3.1 million in 2023.

• The recognition of a net gain from tax solar investments of $3.0 million in 2024 compared with a net loss of $1.9 million in 2023.

Other corporate activities 2,019 1,120

Net income before taxes 94,127 31,267

Income tax expense (23,119) (8,250)

Net loss attributable to noncontrolling interests 3,096 4,329 15,738 8,315

Net loss attributable to noncontrolling interests 2,202 3,470 • The majority of noncontrolling interests represents losses attributed to noncontrolling membership interests in the Company’s Nelnet Renewable Energy operating segment, which were $2.3 million and $3.5 million in 2024 and 2023, respectively.

Net income $ 73,210 26,487

CONSOLIDATED RESULTS OF OPERATIONS

An analysis of the Company's consolidated operating results for the three and nine months ended September 30, 2023 compared with the same periods in 2022 is provided below.

An analysis of the Company's consolidated operating results for the three months ended March 31, 2024 compared with the same period in 2023 is provided below.

The Company operates as distinct reportable operating segments as described above.

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

Three months ended Nine months ended

September 30, September 30,

Three months ended

2024 2023 Additional information

Loan interest $ 236,423 176,244 704,712 422,327 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 48,128 26,889 129,835 57,589 Includes income from interest-earning deposits and investments and restricted cash in asset-backed securitizations.

Increase was due to an increase in interest earning investments and an increase in interest rates.

Loan interest $ 216,724 225,243 Decrease was due to decreases in the average balance of loans and gross fixed rate floor income partially offset by an increase in the gross yield earned on loans.

Investment interest 52,078 40,725 Includes income from unrestricted interest-earning deposits and investments, and restricted cash in asset-backed securitizations.

Increase was due to an increase in interest rates and an increase in interest earned on the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.

Total interest income 268,802 265,968

Interest expense 207,159 126,625 639,756 248,347 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 second quarter of 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.

Interest expense 194,580 199,449 Decrease was due to a decrease in the average balance of debt outstanding partially offset by an increase in cost of funds.

Net interest income 74,222 66,519

Less provision for loan losses 10,928 34,275 Represents the current period provision to reflect the lifetime expected credit losses related to the Company's loan portfolio.

The primary item impacting provision for loan losses was the establishment of an initial allowance for loans originated and acquired during the periods presented.

See note 2 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 63,294 32,244

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LSS revenue 127,201 139,227 See LSS operating segment - results of operations.

ETS&PP revenue 113,796 106,894 357,258 310,211 See ETS&PP operating segment - results of operations.

Solar construction revenue 6,301 9,358 19,687 9,358 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.

ETSP revenue 143,539 133,603 See ETSP operating segment - results of operations.

Solar construction revenue 13,726 8,651 Represents revenue earned from GRNE Solar providing solar construction services, including design and installations of residential and commercial solar systems.

On April 12, 2024, the Company announced a change in its solar EPC operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations.

As a result, residential revenue will decline in future periods as existing customer contracts are completed.

Residential solar construction revenue was $2.1 million and $2.8 million for the three months ended March 31, 2024 and 2023, respectively, and $11.8 million for the year ended December 31, 2023.

Other, net 17,015 (14,071) See table below for the components of "other, net."

Gain on sale of loans, net 5,362 2,627 32,685 5,616 The Company recognized gains from selling portfolios of loans in 2023 and 2022.

(Loss) gain on sale of loans, net (41) 11,812 The Company recognized a loss and net gains from selling loans in 2024 and 2023, respectively.

For additional information, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Impairment and other expense, net (4,974) 121 (4,974) (6,163) During the third quarter of 2023, the Company recorded an expense of $5.0 million related to real estate leases as the Company continues to downsize its facility footprint as a result of associates working from home.

During the second quarter of 2022, the Company recorded an expense of $6.2 million related primarily to a venture capital investment.

Derivative settlements, net 1,757 23,337 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.

The majority of derivative settlements received by the Company was from the Company's derivatives used to hedge loans earning fixed rate floor income.

To minimize the Company's exposure to market volatility, the Company terminated this derivative portfolio on March 15, 2023.

The majority of derivative settlements received in 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.

Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.

See AGM operating segment - results of operations for additional information.

Derivative market value adjustments, net 7,964 (37,411) 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 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.

To minimize the Company's exposure to market volatility, the Company terminated this derivative portfolio on March 15, 2023.

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.

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Cost of services:

Cost to provide education technology, services, and payment processing services 43,694 42,676 131,804 109,073 Represents direct costs to provide payment processing and instructional services in ETS&PP.

See ETS&PP operating segment - results of operations.

Cost to provide solar construction services 7,783 5,968 25,204 5,968 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.

As existing contracts are completed and revenue from new projects grows as a percent of overall revenue, the Company expects margin to improve in future periods.

Cost to provide education technology services and payments 48,610 47,704 Represents direct costs to provide payment processing and instructional services in ETSP.

See ETSP operating segment - results of operations.

Cost to provide solar construction services 14,229 8,299 Represents direct costs to provide solar construction services.

Since the acquisition of GRNE in July 2022, it has incurred low and, in some cases, negative margins on certain projects.

Total cost of services 62,839 56,003

Operating expenses:

Salaries and benefits 141,204 147,198 438,620 438,010 Increase for the nine months ended September 30, 2023 compared with the same period in 2022 was primarily due to (i) an increase in headcount in ETS&PP to support the growth of its customer base and the investment in the development of new technologies;

and (ii) the acquisition of GRNE Solar on July 1, 2022.

This increase was partially offset by staff reductions in LSS in the first and second 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 LSS's Department servicing contracts.

The Company expects salaries and benefits beginning to increase at LSS in the fourth quarter of 2023 as it hires additional associates as a result of Department borrowers returning to repayment on September 1, 2023.

Salaries and benefits 143,875 152,710 Decrease was primarily due to restructuring charges recognized in the first quarter of 2023 and staff reductions in LSS 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 LSS's Department servicing contract.

This was partially offset by an increase in ETSP due to annual merit pay increases and an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.

Depreciation and amortization 16,769 16,627 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.

Increase was primarily due to an increase in the amortization of intangibles from the GRNE Solar acquisition on July 1, 2022.

Other expenses 51,370 43,858 138,154 120,297 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 an increase in expenses in ETS&PP 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.

Other expenses 56,845 40,785 Represents expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, reinsurance loss reserve and acquisitions costs, and certain information technology-related costs.

Increase was driven by an increase in NFS due to reinsurance loss reserve and acquisition costs as a result of growth in reinsurance policies and in LSS due to additional postage and communication costs as a result of borrowers returning to repayment on September 1, 2023.

Total operating expenses 217,489 210,122

Income before income taxes 94,127 31,267

Income tax expense 10,734 26,586 29,475 107,765 The effective tax rate was 19.1% and 20.2% for the three months ended September 30, 2023 and 2022, respectively, and 22.7% and 22.2% for the nine months ended September 30, 2023 and 2022, respectively.

The Company expects its effective tax rate will range between 21% and 23% for the remainder of 2023.

Income tax expense 23,119 8,250 The effective tax rate was 24.0% and 23.7% for the three months ended March 31, 2024 and 2023, respectively.

The Company expects its tax rate will range between 22% and 24% for the remainder of 2024.

Net income 71,008 23,017

Net loss attributable to noncontrolling interests 3,096 4,329 15,738 8,315 Amounts for noncontrolling interests reflect the net income/loss attributable to the holders of noncontrolling membership interests in WRCM, NextGen, multiple solar entities (including GRNE Solar), and multiple entities investing in federal opportunity zone programs.

Net loss attributable to noncontrolling interests 2,202 3,470 Represents the net income/loss attributable to the holders of noncontrolling membership interests.

The majority is attributed to noncontrolling membership interests in the Company's Nelnet Renewable Energy operating segment.

Net income attributable to Nelnet, Inc.

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Tax effect 1,911 (8,979)

Net income attributable to Nelnet, Inc., excluding derivative market value adjustments $ 42,946 64,525 124,608 194,838

Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $ 67,157 54,919

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

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

Three months ended March 31,

2024 2023 Additional information

Reinsurance premiums $ 12,780 535 See NFS division - results of operations - NFS other operating segments.

Borrower late fee income 3,133 2,247 See NFS division - results of operations - AGM operating segment.

Gain (loss) from solar investments, net 2,971 (1,947) See Corporate - results of operations.

ALLO preferred return 2,409 2,249 See Corporate - results of operations.

Borrower late fee income 2,220 2,824 6,635 7,693 See AGM operating segment - results of operations.

Administration/sponsor fee income 1,712 1,920 5,180 6,055 See AGM operating segment - results of operations.

Investment advisory services 1,633 1,612 4,884 4,375 See Corporate - results of operations.

Administration/sponsor fee income 1,546 1,772 See NFS division - results of operations - AGM operating segment.

Investment advisory services (WRCM) 1,508 1,612 See NFS division - results of operations - NFS other operating segments.

Loss from ALLO voting membership interest investment (10,693) (20,213) See Corporate - results of operations.

Loss from solar investments (3,605) (4,216) (13,481) (7,100) See Corporate - results of operations.

Investment activity, net (1,016) 10,701 (8,169) 40,626 See Corporate - results of operations and note (a) below for additional information.

Investment activity, net (1,298) (3,577) See note (a) below for additional information.

Other 4,659 3,251

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Investment activity by operating segment and investment type follows:

Real Estate Venture Capital Equity / Bonds Total Real Estate Venture Capital Equity / Bonds Total

Three months ended September 30,

Corporate $ (535) 286 567 318 9,717 (39) 792 10,470

AGM — (1,883) — (1,883) — (315) — (315)

Nelnet Bank — (16) 565 549 — 303 243 546

$ (535) (1,613) 1,132 (1,016) 9,717 (51) 1,035 10,701

Nine months ended September 30,

Real Estate Venture Capital and Funds Equity / Bonds Total Real Estate Venture Capital and Funds Equity / Bonds Total

Three months ended March 31,

NFS - AGM $ — 322 — 322 — (104) (476) (580)

NFS - Nelnet Bank — (179) 529 350 — (263) 465 202

NFS - Other Operating Segments (1,794) — 212 (1,582) 1,148 — (4,058) (2,910)

Corporate — (388) — (388) — (289) — (289)

AGM — (4,532) (476) (5,008) — 1,260 — 1,260

Nelnet Bank — (288) 1,651 1,363 — 675 1,511 2,186

$ (1,794) (245) 741 (1,298) 1,148 (656) (4,069) (3,577)

1 unchanged sentence

Loan Servicing Volumes

September 30,

2023 June 30,

2023 March 31,

2024 December 31,

16 unchanged sentences

Government Loan Servicing

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

(Great Lakes), both subsidiaries of the Company, are two of the current five 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 contracts between the Department and each of Nelnet Servicing and Great Lakes (the “servicing contracts”) to reduce the monthly fee under the servicing contracts by $0.19 per borrower on certain borrower statuses.

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

In April 2023, Nelnet Diversified Solutions, LLC (NDS), a subsidiary of the Company, received a contract award from the Department, pursuant to which NDS was selected to provide continued servicing capabilities for the Department's student aid recipients under a new Unified Servicing and Data Solution (USDS) contract (the "New Government Servicing Contract") which will replace the existing legacy Department student loan servicing contracts.

On October 11, 2023, the USDS contract awarded to NDS was novated to Nelnet Servicing.

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

The Department's total loan servicing volume of more than 37 million existing borrowers will be allocated by the Department to Nelnet Servicing and four other third-party servicers that were awarded a USDS contract based on service and performance levels.

Nelnet Servicing earns loan servicing revenue from a servicing contract with the Department.

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

In April 2023, Nelnet Servicing 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 Unified Servicing and Data Solution (USDS) contract (the "New Government Servicing Contract") which replaced the legacy Department student loan servicing contract.

The New Government Servicing Contract became 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 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.

In April 2023, the Department indicated that servicing under the USDS contracts will go live in 2024 and it will extend the current legacy servicing contracts from December 14, 2023 to December 2024.

Until servicing under the USDS contracts goes live, which is anticipated to be during the second quarter of 2024, the Company will continue to earn revenue for servicing borrowers under its current legacy servicing contracts with the Department.

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

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

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

As discussed below, during 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 will be partially offset under the USDS contract as the Company will incur additional costs for cybersecurity and other system specifications as required under the new contract.

Loan Volume Transfers - 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.

As of December 31, 2021 and 2022, approximately 603,000 and 1,910,000 PHEAA borrowers, respectively, have been 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 Company anticipates the decommissioning of the Great Lakes' platform to be completed by the end of 2023.

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

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).

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 third-party servicing platform.

As of December 31, 2022, Edfinancial was servicing 4.5 million borrowers for the Department on 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 beginning in the second quarter of 2024.

Servicing under the New Government Servicing Contract went live on April 1, 2024 and the Company will recognize revenue in accordance with this new contract beginning in the second quarter of 2024.

The Company earned revenue for servicing borrowers under the legacy servicing contract with the Department through March 31, 2024.

The New Government Servicing Contract has multiple revenue components with tiered pricing based on borrower volume, while revenue earned under the legacy servicing contract was primarily based on borrower status.

Assuming borrower volume remains consistent under the New Government Servicing Contract, the Company expects revenue earned on a per borrower blended basis will decrease under the New Government Servicing Contract versus the legacy contract.

However, consistent with the legacy contract, the Company expects to earn additional revenue from the Department under the New Government Servicing Contract for change requests and other support services.

In addition, the Company has executed an agreement with a third-party servicer awarded a USDS contract to license its servicing software to such entity.

The Company will begin to earn remote hosted servicing revenue from this new customer 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.

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 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 contracts 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 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 contracts 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.

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 March 2023 government servicing contract price modifications (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.

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.

In August 2022, the Department announced a broad-based student debt relief plan that would have provided up to $20,000 in one-time debt relief to income-qualified recipients with Department held student loans.

On June 30, 2023, the Supreme Court ruled that the Department was prohibited from implementing this plan.

After the invalidation of this broad-based relief plan, the Department announced plans to enter into a negotiated rulemaking process to achieve debt relief for federal student loan borrowers using provisions of the Higher Education Act (HEA).

Publicly available negotiated rulemaking sessions occurred in the fourth quarter of 2023 and the first quarter of 2024.

The Department published draft regulations for public comment in April 2024, including regulations that would grant automatic discharge for all federal student loans older than 20 or 25 years.

The April 2024 draft publication did not include regulations to provide forgiveness for borrowers “experiencing financial hardship;”

however, publication and comment period for such regulations are expected in Summer of 2024.

Final publication and effective date for all pending forgiveness regulations pursuant to the HEA are expected in Fall of 2024.

The Company cannot predict the timing, nature, or ultimate outcome of any student debt relief program as a result of the negotiated rulemaking process.

Revenue earned under the New Government Servicing Contract will decrease in future periods if the Department successfully implements its debt relief plan and/or if the Department initiates additional loan forgiveness or cancellation programs in the future.

Private Education Loan Servicing

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

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

Three months ended March 31,

2024 2023 Additional information

Net interest income $ 1,098 831 3,193 1,100 Increase in 2023 compared with 2022 was due to higher interest rates.

Net interest income $ 1,894 1,037 Increase was due to higher interest rates.

Loan servicing and systems revenue 127,201 139,227 See table below for additional information.

Intersegment servicing revenue 6,886 7,790 Represents revenue earned by LSS from servicing loans for AGM and Nelnet Bank.

Decrease in 2023 compared with 2022 was due to the continued amortization of AGM's FFELP portfolio.

Decrease was 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 687 596 1,900 1,946 Represents revenue earned from providing administrative support and marketing services.

Impairment expense (296) — (296) — The Company continues to evaluate the use of office space as a large number of associates continue to work from home.

As a result, the Company recorded an additional impairment charge related to certain facilities no longer used by the Company.

Total other income, net 135,227 143,074 412,722 422,526

Salaries and benefits 73,310 82,067 234,012 257,259 Decrease in 2023 compared with 2022 was due to the Company being fully staffed with contact center operations and support associates in 2022 in preparation for the resumption of federal student loan payments and other activities after the CARES Act suspension.

During the first and second quarters of 2023, the Company reduced staff 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 government servicing contracts.

See "Reduction in Staff" above for additional details.

The Company expects salaries and benefits to increase beginning in the fourth quarter of 2023 as it hires additional associates as a result of Department borrowers returning to repayment on September 1, 2023.

Other income 710 608 Represents revenue earned from providing administrative support services.

Total other income 134,797 147,625

Salaries and benefits 76,722 84,560 Decrease was due to the Company being fully staffed at the beginning of 2023 with contact center operations and support associates as the Company prepared for expiration of the federal student loan payment pause 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 and lower pricing and reduced servicing volume for LSS's Department servicing contract.

As part of these reductions, the Company recognized a restructuring charge of $2.7 million in the first quarter of 2023.

Depreciation and amortization 5,109 4,513

Other expenses 15,629 16,654 42,760 46,375 Decrease in 2023 compared with 2022 was due to a decrease in professional fees and facility costs.

Over the last year, the Company has reduced its office space as a large number of employees continue to work from home.

Other expenses 19,538 13,313 Increase was due to additional postage and communication costs due to borrowers returning to repayment on September 1, 2023.

Intersegment expenses 19,332 21,057 Represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

3 unchanged sentences

Net income $ 12,152 19,166

Before tax operating margin 18.1 % 15.3 % 16.2 % 11.2 % Before tax operating margin represents before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue.

Before tax operating margin 11.9 % 17.1 % Before tax operating margin represents before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income.

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 increased in 2023 compared with 2022 due primarily to a decrease in salaries and benefits expense as described above.

The increase in the three months ended September 30, 2023 compared with the same period in 2022 was also due to $4.8 million of revenue recognized by the Company in the third quarter of 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company's platform.

Before tax operating margin decreased due primarily to a decrease in loan servicing and systems revenue as described in the table below, partially offset by a decrease in salaries and benefits resulting from restructure charges incurred during the first quarter of 2023 and staff reductions in 2023.

Loan servicing and systems revenue

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

The following table presents disaggregated revenue by service offering for each reporting period.

Three months ended March 31,

2024 2023 Additional information

Government loan servicing $ 100,154 104,428 304,769 312,368 Represents revenue from the Company's Department servicing contracts.

Decrease in the three and nine months ended September 30, 2023 compared with the same periods in 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 in the second and third quarters 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.

Decrease in the nine months ended September 30, 2023 compared with the same period in 2022 was also due to (i) the recognition of $6.7 million of revenue in the first quarter of 2022 for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers;

and (ii) the recognition of $10.5 million of revenue in the first quarter of 2022 related to the discharge of borrowers under the Total and Permanent Disability (TPD) discharge program (the Company earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program).

The decrease in revenue for the nine months ended September 30, 2023 compared with the same period in 2022 was partially offset by (i) an increase in borrowers serviced due to the PHEAA servicing volume transferred to the Company's platform in 2022;

(ii) a per borrower CARES Act forbearance rate increase on May 1, 2022;

and (iii) a per borrower rate increase on certain statuses on September 1, 2022 (5.0%) to reflect the increase in the cost of labor (Employment Cost Index) per the provisions of the contracts.

Private education and consumer loan servicing 12,330 12,198 36,556 37,194 Increase in the three months ended September 30, 2023 compared with the same period in 2022 was due to an increase in backup servicing volume, partially offset by a decrease in servicing volume.

Decrease in the nine months ended September 30, 2023 compared with the same period in 2022 was due to a decrease in servicing volume and client requested enhanced delinquency services.

FFELP loan servicing 3,304 4,127 10,226 12,386 Decrease in 2023 compared with 2022 was 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 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 9,416 8,229 25,076 23,536 Represents revenue from providing remote hosted servicing software to Department and other servicers and providing diversified technology services.

Increase in the three and nine months ended September 30, 2023 compared with the same periods in 2022 was due to (i) the recognition of $4.8 million of revenue in the third quarter of 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company's platform;

(ii) annual rate increases on Department remote hosted servicing customers;

(iii) contract programming associated with loan transfers and change requests, and (iv) growth in LSS's technology outsourcing opportunities.

These increases were partially offset by the transfer of remote hosted borrowers to other third-party servicers.

As a result of the transfers, 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.

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

Outsourced services 2,688 5,215 12,511 9,954 Represents primarily revenue to provide contact center and back office operational outsourcing services.

Decrease in the three months ended September 30, 2023 compared with the same period in 2022 was due to the contracts for support provided to Department servicers expiring at the end of July 2023.

Increase in the nine months ended September 30, 2023 compared with the same period in 2022 was due to additional outsourced opportunities, including assisting existing Department servicers as operations transitioned from exiting servicers.

Government loan servicing $ 105,474 108,880 Represents revenue from the Company's Department legacy servicing contract.

Decrease was due to the reduction of the monthly fee earned per borrower on certain borrower statuses by $0.19 effective April 1, 2023 and a decrease of borrowers serviced due to the Department transferring one million of the Company's existing borrowers to another third-party servicer during the second and third quarters of 2023.

These decreases were partially offset by an increase in the average revenue earned on a per borrower blended basis as a result of borrowers moving to a repayment status on September 1, 2023.

Private education and consumer loan servicing 12,620 12,164 Increase was due to rate increases based on contractual consumer price index changes, partially offset by a decrease in the number of borrowers serviced.

FFELP loan servicing 3,380 3,368 Represents revenue from servicing third-party customers' FFELP portfolios.

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

Software services 4,541 9,697 Represents revenue from providing remote hosted servicing software to certain Department and other servicers and providing diversified technology services.

Decrease was primarily due to the transfer of all Department remote hosted borrowers to other third-party servicers throughout 2023 under the Department's legacy servicing contracts.

Outsourced services 1,186 5,118 Represents revenue from providing contact center and back office operational outsourcing services.

Decrease was due to the contracts for support provided to certain Department servicers expiring in July 2023.

Loan servicing and systems revenue $ 127,201 139,227

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

EDUCATION TECHNOLOGY SERVICES AND PAYMENTS OPERATING SEGMENT – RESULTS OF OPERATIONS

As discussed further in the Company's 2023 Annual Report, this segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year.

1 unchanged sentence

Summary and Comparison of Operating Results

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

Three months ended March 31,

2024 2023 Additional information

Net interest income $ 7,866 6,036 Represents interest income on tuition funds held in custody for schools.

Increase in 2023 compared with 2022 was due to higher interest rates.

Education technology, services, and payment processing revenue 113,796 106,894 357,258 310,211 See table below for additional information.

Increase was due to higher interest rates.

Education technology services and payments revenue

143,539 133,603 See table below for additional information.

Intersegment revenue 49 56

1 unchanged sentence

Cost of services 48,610 47,704 See table below for additional information.

Salaries and benefits 39,776 34,950 116,040 98,356 Increase in 2023 compared with 2022 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 3,030 2,532 8,424 7,544 Represents primarily amortization of intangible assets from prior business acquisitions and depreciation of capitalized software development costs.

Other expenses 8,309 7,034 26,063 19,549 Increase in 2023 compared with 2022 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 previously subsided due to the COVID pandemic.

In addition, during the second quarter of 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 Education Solutions instructional services revenue.

Salaries and benefits 40,167 37,913 Increase was due to annual merit pay increases and an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.

Depreciation and amortization 2,683 2,578 Represents primarily amortization of intangible assets from prior business acquisitions.

Other expenses 7,558 8,063 Decrease was due to a decrease in consulting and professional services resulting from reduced outsourced work.

Decrease was partially offset by an increase in technology services.

Intersegment expenses, net 4,801 5,800 Represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

3 unchanged sentences

Net income 36,200 28,571

Net (income) loss attributable to noncontrolling interests (6) (61) 113 (8) Amounts for noncontrolling interests reflect the net (income) loss attributable to the holders of minority membership interests in NextGen, of which the Company became the majority owner on April 30, 2022.

Net loss attributable to noncontrolling interests 17 138

Net income $ 36,217 28,709

Education technology, services, and payment processing revenue

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

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

Education technology services and payments revenue

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

Three months ended March 31,

2024 2023 Additional information

Tuition payment plan services $ 30,223 25,779 95,235 84,131 Increase in 2023 compared with 2022 was due to a higher number of payment plans in the K-12 and higher education markets for both new and existing customers.

Payment processing 50,848 47,957 126,716 113,996 Increase in 2023 compared with 2022 was 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 and services 31,793 32,548 132,796 110,755 Decrease in the three months ended September 30, 2023 compared with the same period in 2022 was due to a decrease in FACTS Education Solutions instructional services revenue as a result of the wind down of economic aid provided to private schools in response to the COVID 19 pandemic.

Instructional services revenue provided to schools that was funded by the CARES Act and the Emergency Assistance to Non-Public Schools (EANS) I program was the primary cause of the decline.

EANS I program funding ended on September 30, 2023 and EANS II program funding ends on September 30, 2024.

The decrease was offset by an increase in revenue from the Company’s school information system software, enrollment and communication services, and financial needs assessments.

The increase in revenue in the nine months ended September 30, 2023 compared with the same period in 2022 was due to an increase in revenue from the Company’s school information system software, enrollment and communication services, financial needs assessments, the NextGen acquisition completed in April 2022, and instructional services.

Instructional services revenue was the largest component of this increase, driven by the EANS programs.

Tuition payment plan services $ 38,880 34,187 Increase was due to a higher number of payment plans in the K-12 and higher education markets for both new and existing customers.

Payment processing 47,786 44,041 Increase was 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 56,021 54,787 Increase was due to an increase in revenue from the Company’s school information system software and application and enrollment services.

This increase was partially offset by a decrease in FACTS learning management services revenue as a result of decrease in economic aid provided to private schools in response to the COVID 19 pandemic.

Learning management instructional services revenue provided to private schools has been funded by the CARES Act and the Emergency Assistance to Non-Public Schools (EANS) programs.

The EANS I program funding ended on September 30, 2023 and EANS II program funding ends on September 30, 2024.

As economic aid provided to schools under the EANS programs stopped on September 30, 2023 (EANS I) and winds down (EANS II), future instructional services revenue will decrease from recent historical periods.

Revenue earned under the EANS programs for the three months ended March 31, 2024 and 2023 was $10.6 million and $16.4 million, respectively.

Other 852 588

Education technology, services, and payment processing revenue 113,796 106,894 357,258 310,211

Cost of services 43,694 42,676 131,804 109,073 Represents costs relating to payment processing revenue and such costs decrease/increase in relationship to payment volumes.

Education technology services and payments revenue

143,539 133,603

Cost of services 48,610 47,704 Represents direct costs to provide 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 decrease/increase in relationship to instructional services revenues.

Net revenue $ 94,929 85,899

GAAP before tax operating margin 31.6 % 29.1 % 34.5 % 33.0 % 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 50.2 % 43.8 % 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 net 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 2023 compared with 2022 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 the development of new services and customer experiences.

Before tax operating margin, excluding net interest income, increased due to increased net revenue while maintaining a consistent cost structure.

Net interest income (8.3) (7.0)

Non-GAAP before tax operating margin, excluding net interest income 41.9 % 36.8 %

ASSET GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS

NELNET FINANCIAL SERVICES DIVISION - RESULTS OF OPERATIONS

Asset Generation and Management Operating Segment

Loan Portfolio

As of September 30, 2023, the AGM operating segment had a $12.7 billion loan portfolio, consisting primarily of federally insured loans.

For a summary of the Company’s loan portfolio as of September 30, 2023 and December 31, 2022, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of March 31, 2024, the AGM operating segment had a $10.8 billion loan portfolio, consisting primarily of federally insured loans.

For a summary of the Company’s loan portfolio as of March 31, 2024 and December 31, 2023, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Activity

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

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

2023 2022 2023 2022

Three months ended March 31,

Beginning balance $ 12,049,462 14,169,771

1 unchanged sentence

Federally insured student loans — 2,980

Private education loans 77,365 667 77,365 8,177

Consumer and other loans 80,730 250,706

5 unchanged sentences

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 September 30, 2023, the Company’s ownership correlates to approximately $660 million, $540 million, and $350 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations.

As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2024, the Company’s ownership correlates to approximately $1.79 billion of loans included in these securitizations.

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

1 unchanged sentence

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.

On June 30, 2023, the Supreme Court ruled that the Department was prohibited from implementing this plan.

The Department released proposed regulatory text prior to holding its statutorily-required negotiated rulemaking sessions.

Notably, the Department proposed forgiveness for certain groups of borrowers with privately-held FFELP loans without consolidation into the Federal Direct Loan Program as a prerequisite requirement for such forgiveness.

Publicly available negotiated rulemaking sessions occurred in the fourth quarter of 2023 and the first quarter of 2024.

The Department published draft regulations for public comment in April 2024, including regulations that would grant automatic discharge for all federal student loans, including privately-held FFELP loans, older than 20 or 25 years.

The April 2024 draft publication did not include regulations to provide forgiveness for borrowers (including borrowers with privately-held FFELP loans) “experiencing financial hardship;” however, publication and comment period for such regulations are expected in Summer of 2024.

Final publication and effective date for all pending forgiveness regulations pursuant to the HEA are expected in Fall of 2024.

In addition, during 2023, the Department issued final regulations on the Saving on a Valuable Education (SAVE) income-driven repayment (IDR) plan.

The SAVE plan makes significant changes to IDR to lower monthly payment amounts, subsidize interest, and accelerate time to forgiveness for some borrowers.

FFELP borrowers can access the new income-driven repayment changes by consolidating their loans into the Federal Direct Loan Program.

The benefits of the SAVE plan are conferred not exclusively on a go-forward basis, as has been the case with previous IDR rulemaking, meaning borrowers who consolidate into the Federal Direct Loan Program receive credit toward forgiveness for months in repayment prior to consolidation.

The new income-driven repayment regulations are effective July 1,

however, the Biden-Harris Administration announced implementation for some features starting July 30, 2023 and SAVE forgiveness starting February 2024.

The proposed forgiveness regulations and implementation of the SAVE IDR plan regulations have increased, and may continue to increase, consolidation activity as FFELP borrowers (i) consolidate their loans into the Federal Direct Loan Program in order to be eligible for potential debt relief for Department borrowers and the SAVE plan and (ii) begin receiving automatic forgiveness for loans older than 20 or 25 years.

Prepayments could significantly increase if the federal government and/or the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs.

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 September 30, 2023 and December 31, 2022;

and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three and nine months ended September 30, 2023 and 2022, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

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 March 31, 2024 and December 31, 2023;

and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three months ended March 31, 2024 and 2023, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Spread Analysis

1 unchanged sentence

The spread amounts included in the following table are calculated by using the notional dollar values found in the table under the caption "Net interest income after provision for loan losses, net of settlements on derivatives" below, divided by the average balance of loans or debt outstanding.

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

2023 2022 2023 2022

Three months ended March 31,

Variable loan yield, gross 7.99 % 7.12 %

2 unchanged sentences

Variable loan yield, net 7.28 6.36

Loan cost of funds - interest expense (a) (6.14) (3.11) (5.86) (1.95)

Loan cost of funds - derivative settlements (b) (c) 0.01 (0.03) 0.01 0.00

Loan cost of funds - interest expense (6.50) (5.53)

Loan cost of funds - derivative settlements (a) (b) 0.01 0.03

Variable loan spread 0.79 0.86

Fixed rate floor income, gross 0.01 0.03

Fixed rate floor income - derivative settlements (b) (d) 0.01 0.30 0.23 0.10

Fixed rate floor income - derivative settlements (a) (c) 0.04 0.68

Fixed rate floor income, net of settlements on derivatives 0.05 0.71

2 unchanged sentences

Average balance of AGM's debt outstanding 11,387,400 13,364,876

(a) 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.

(b) 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.

(a) 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.

3 unchanged sentences

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 4 of the notes to consolidated financial statements included under Part I, Item 1 of 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 and 2022 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 4 and in this table.

See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of 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 2024 and 2023 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.

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

2023 2022 2023 2022

Three months ended March 31,

Core loan spread 0.84 % 1.57 %

2 unchanged sentences

Loan spread 0.79 % 0.86 %

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

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

(c) Derivative settlements consist of net settlements received 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.

See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s FFELP student loan assets and related funding for those assets.

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

Variable loan spread decreased during the three and nine months ended September 30, 2023 compared to the same periods in 2022 due to a significant increase in short-term rates during each of the first three quarters of 2022 compared with the increase in rates for the same periods in 2023.

Variable loan spread was lower during the three months ended March 31, 2024 compared with the same period in 2023 due to a significant increase in short-term rates during the first quarter of 2023 compared with an insignificant change in rates for the same period in 2024.

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.

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

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

2023 2022 2023 2022

Three months ended March 31,

Fixed rate floor income, gross $ 180 1,110

3 unchanged sentences

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

The decrease in gross fixed rate floor income for the three and nine months ended September 30, 2023 compared with the same periods in 2022 was due to higher interest rates in 2023 compared with 2022.

The decrease in gross fixed rate floor income for the three months ended March 31, 2024 compared with the same period in 2023 was due to higher interest rates in 2024 compared with 2023.

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, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).

On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, 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 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.

In June 2023, the Company entered into a derivative with a notional amount of $50.0 million to hedge a portion of loans remaining that earn fixed rate floor income.

The decrease in net derivative settlements received by the Company during the three months ended September 30, 2023, compared with the same period in 2022, was due to the termination of the fixed rate floor derivatives in March 2023.

The increase in net derivative settlements received by the Company during the nine months ended September 30, 2023, compared with the same period in 2022, was due to an increase in settlements on the Company's derivatives outstanding during this period as a result of an increase in interest rates.

Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400.0 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.

The decrease in net derivative settlements received by the Company during the three months ended March 31, 2024, compared with the same period in 2023, was due to a decrease in the notional amount of derivatives outstanding and less favorable terms on the $400.0 million of notional derivatives entered into in 2023 compared with the $2.8 billion notional derivatives that were terminated due to an increase in interest rates from when the terminated derivatives were initially executed.

Summary and Comparison of Operating Results

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

Three months ended March 31,

2024 2023 Additional information

Net interest income after provision for loan losses $ 34,003 13,663 See table below for additional analysis.

Other income, net 2,776 4,627 6,939 16,270 Represents primarily borrower late fees, income from providing administration activities for third parties, gain/losses from repurchases of debt, and income/losses from AGM's investment in joint ventures.

AGM recognized joint venture losses of $1.9 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and losses of $4.5 million and income of $1.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Gain on sale of loans, net 5,362 2,627 32,685 5,616 The Company recognized gains from selling portfolios of loans in 2023 and 2022.

Other income, net 4,983 2,845 Represents primarily borrower late fees, income from providing administration activities for third parties, and income/losses from AGM's investment in joint ventures.

(Loss) gain on sale of loans, net (41) 11,812 The Company recognized a loss and net gains from selling portfolios of loans in 2024 and 2023, respectively.

For additional information, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

2 unchanged sentences

The majority of derivative settlements received in the periods presented was from the Company's derivative portfolio used to hedge loans earning fixed rate floor income.

This derivative portfolio was terminated on March 15, 2023 to minimize the Company's exposure to market volatility.

The decrease in net derivative settlements received by the Company was due to the termination of the floor income interest rate swaps in March 2023.

See above under "Loan Spread Analysis" for further information.

Derivative market value adjustments, net 5,706 (37,411) 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 for the periods presented 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.

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

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.

See above under "Loan Spread Analysis" for further information.

Total other income, net 12,203 583

Salaries and benefits 1,242 653 3,093 1,858 Increase in 2023 compared with 2022 was due to additional headcount as the Company actively expands into new asset loan classes.

Salaries and benefits 1,195 755 Increase was due to additional headcount as the Company actively expands into new asset loan classes.

Other expenses 3,418 5,016 Represents primarily servicing fees paid to third parties.

Also includes certain professional and legal fees.

Increase in the nine months ended September 30, 2023 compared with the same period in 2022 was due to incurring additional professional fees as the Company actively expands into new asset loan classes.

Intersegment expenses 7,948 8,350 24,789 25,694 Represents fees paid to LSS for the servicing of AGM’s loan portfolio.

Decrease in servicing fees was due to the amortization of the FFELP student loan portfolio.

Intersegment expenses 7,850 8,696 Represents fees paid to LSS for the servicing of the majority of AGM’s loans.

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 12,142 12,352 39,965 37,477 Total operating expenses were 37 basis points and 32 basis points of the average balance of loans for the three months ended September 30, 2023 and 2022, respectively, and 39 basis points and 31 basis points for the nine months ended September 30, 2023 and 2022, respectively.

The increase in operating expenses as a percent of the average balance of loans in 2023 compared with 2022 was due to an increase in costs as the Company actively expands into new asset loan classes.

Income before income taxes 40,562 111,872 58,041 424,647

Income tax expense (9,735) (26,849) (13,930) (101,915) Represents income tax expense at an effective tax rate of 24%.

Net income $ 30,827 85,023 44,111 322,732

Total operating expenses 12,463 14,467 Total operating expenses were 43 basis points and 41 basis points of the average balance of loans for the three months ended March 31, 2024 and 2023, respectively.

The increase in operating expenses as a percent of the average balance of loans was due to an increase in costs as the Company actively expands into new asset loan classes.

Income (loss) before income taxes 33,743 (221)

Income tax (expense) benefit (8,099) 53 Represents income tax expense at an effective tax rate of 24%.

Net income (loss) $ 25,644 (168)

Additional information:

Net income $ 30,827 85,023 44,111 322,732 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.

GAAP net income (loss) $ 25,644 (168) 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.

The decrease in non-GAAP net income, excluding derivative market value adjustments was due to (i) a decrease in the average balance of loans;

(ii) a decrease in core loan spread;

and (iii) the net gain on sale of loans in 2023.

These changes were partially offset by (i) a decrease in provision expense and (ii) an increase in investment interest income on the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.

Derivative market value adjustments, net (5,706) 37,411

Tax effect 1,369 (8,979)

Net income, excluding derivative market value adjustments $ 29,921 44,750 70,956 140,997

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

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

Non-GAAP net income, excluding derivative market value adjustments $ 21,307 28,264

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

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

Three months ended March 31,

2024 2023 Additional information

Variable interest income, gross $ 254,569 196,910 763,933 459,575 Increase in 2023 compared with 2022 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 (26,143) (32,612) (81,753) (104,335) Decrease in 2023 compared with 2022 was due to a decrease in the average consolidation loan balance.

Variable interest income, gross $ 229,817 246,594 Decrease was due to a decrease in the average balance of loans partially offset by an increase in the gross yield earned on loans.

Consolidation rebate fees (23,057) (28,399) Decrease was due to a decrease in the average consolidation loan balance.

Discount accretion, net of premium and deferred origination costs amortization 2,688 1,607 Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years.

Variable interest income, net 209,448 219,802

Interest on bonds and notes payable (194,098) (118,135) (594,764) (231,960) Increase in 2023 compared with 2022 was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

Derivative settlements, net (a) 386 (1,085) 1,180 242 Represents net derivative settlements received (paid) related to the Company’s 1:3 basis swaps.

Interest on bonds and notes payable (184,145) (182,063) Increase was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.

Derivative settlements, net (a) 365 859 Represents net derivative settlements received related to the Company’s 1:3 basis swaps.

Variable loan interest margin, net of settlements on derivatives 25,668 38,598

Fixed rate floor income, gross 450 7,585 2,016 54,870 Decrease in 2023 compared with 2022 was due to higher interest rates.

Fixed rate floor income, gross 180 1,110 Decrease was due to higher interest rates.

Derivative settlements, net (a) 1,190 22,478 Represents net derivative settlements received related to the Company's floor income interest rate swaps.

On March 15, 2023, to minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income.

The decrease in net derivative settlements received by the Company was due to the termination of the floor income interest rate swaps in March 2023.

See above under "Loan Spread Analysis" for further information.

Fixed rate floor income, net of settlements on derivatives 1,370 23,588

Core loan interest income (a) 27,038 62,186

Investment interest 18,062 10,312 47,726 28,147 Increase in 2023 compared with 2022 was due to an increase of interest earned on restricted cash due to higher interest rates.

Intercompany interest (3,295) (1,874) (24,141) (3,760) Increase in 2023 compared with 2022 was due to an increase in the balance of borrowings and higher rates.

Provision for loan losses - federally insured loans (1,641) (888) (4,052) (505) The primary item impacting provision for loan losses was the establishment of an initial allowance for loans acquired during the periods presented.

For additional information, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Provision for loan losses - private education loans (3,009) (1,154) (3,249) (1,971)

Investment interest 21,835 13,807 Increase was due to an increase in the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.

Intercompany interest (6,760) (7,135)

Negative provision (provision) for loan losses - federally insured loans 1,870 (2,411) See note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report for factors impacting provision for loan losses for the periods presented.

Negative provision (provision) for loan losses - private education loans 265 (240)

Provision for loan losses - consumer and other loans (8,690) (29,207)

1 unchanged sentence

(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 (b) to the table immediately under the caption “Loan Spread Analysis” above.

See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of 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 and 2022 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 4 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 (a) to the table immediately under the caption “Loan Spread Analysis” above.

See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of 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 2024 and 2023 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income."

Nelnet Bank Operating Segment

Loan Portfolio

As of September 30, 2023, Nelnet Bank had a $468.8 million loan portfolio, consisting of $359.9 million of private education loans, $59.3 million of FFELP loans, and $49.6 million of consumer and other loans.

As of March 31, 2024, Nelnet Bank had a $483.7 million loan portfolio, consisting of $364.8 million of private education loans and $119.0 million of consumer and other loans.

For a summary of the Company’s loan portfolio as of March 31, 2024 and December 31, 2023, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Activity

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

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

2023 2022 2023 2022

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

Three months ended March 31,

Beginning balance $ 432,872 419,795

7 unchanged sentences

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, delinquency amounts, and other key credit quality indicators of each of Nelnet Bank's loan portfolios as of September 30, 2023 and December 31, 2022;

and the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three and nine months ended September 30, 2023 and 2022, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of September 30, 2023, Nelnet Bank had $947.4 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, Short Term Federal Investment Trust (STFIT), and commercial and institutional CDs.

For a summary of the allowance as a percentage of the ending balance and loan status, delinquency amounts, and other key credit quality indicators for each of Nelnet Bank's loan portfolios as of March 31, 2024 and December 31, 2023;

and the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three months ended March 31, 2024 and 2023, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of March 31, 2024, Nelnet Bank had $960.6 million of deposits.

All of Nelnet Bank’s deposits are interest-bearing and primarily 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 September 30, 2023, Nelnet Bank’s deposits included $229.3 million from Nelnet, Inc.

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

As of March 31, 2024, Nelnet Bank’s deposits included $158.6 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

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

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

2023 2022 2023 2022

Balance Rate Balance Rate Balance Rate Balance Rate

Average assets (a)

Three months ended March 31, (a)

Balance Rate Balance Rate

Average assets

Federally insured student loans $ — — % $ 64,655 5.93 %

5 unchanged sentences

Total assets $ 1,054,708 $ 977,497

Average liabilities and equity (a)

Average liabilities and equity

Brokered deposits $ 204,651 1.39 % $ 205,411 1.39 %

7 unchanged sentences

Summary and Comparison of Operating Results

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

Three months ended March 31,

2024 2023 Additional information

Total interest income $ 17,064 12,259 Represents interest earned on loans, cash, and investments.

Increase in 2023 compared with 2022 was due to an increase of these balances and interest rates.

Increase was due to an increase of these balances and interest rates.

Interest expense 9,497 7,214 Represents interest expense on deposits.

Increase in 2023 compared with 2022 was due to an increase of deposits and interest rates.

Increase was due to an increase of deposits and interest rates.

Net interest income 7,567 5,045

7 unchanged sentences

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.

For additional information on Nelnet Bank's derivative portfolio, see note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Derivative market value adjustments, net 2,258 —

1 unchanged sentence

Salaries and benefits 2,721 2,064 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.

Increase in 2023 compared with 2022 was due to the overall growth of Nelnet Bank activities.

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

Depreciation 260 5

Other expenses 1,290 1,427 3,696 3,009 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses.

Increase in the nine months ended September 30, 2023 compared with the same period in 2022 was due to the overall growth of Nelnet Bank activities.

Intersegment expenses 129 69 302 171 Represents primarily servicing costs paid to LSS.

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

The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank’s operating segment were $1.6 million for both the three months ended September 30, 2023 and 2022, and $5.1 million and $4.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Other expenses 1,128 782 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain technology-related costs, insurance, and marketing.

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

Intersegment expenses 773 80 Represents fees paid to LSS for servicing certain of Nelnet Bank's loans.

These amounts exceed the actual cost of servicing the loans.

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

The majority of shared service costs incurred by the Company to support Nelnet Bank were not allocated to Nelnet Bank through the bank’s de novo period which ended at the end of 2023.

The shared service and support costs incurred by the Company related to Nelnet Bank and not allocated to Nelnet Bank were $1.7 million for the three months ended March 31, 2023.

Total operating expenses 4,882 2,931

Income before income taxes 2,299 1,055 3,951 2,489

Income tax expense (552) (246) (913) (574) Represents income tax expense at an effective tax rate of 24.0% and 23.3% for the three months ended September 30, 2023 and 2022, respectively, and 23.1% for both the nine months ended September 30, 2023 and 2022.

Net income $ 1,747 809 3,038 1,915

Income (loss) before income taxes 1,147 (93)

Income tax (expense) benefit (259) 35 Represents income tax expense at an effective tax rate of 22.6% and 37.4% for the three months ended March 31, 2024 and 2023, respectively.

Net income (loss) $ 888 (58)

Additional information:

Net income $ 1,747 809 3,038 1,915

Net income (loss) $ 888 (58)

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.

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Tax effect 542 —

Net income, excluding derivative market value adjustments $ 267 809 715 1,915

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.

Net loss, excluding derivative market value adjustments $ (828) (58)

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.

The difference between the Corporate income tax expense and the sum of taxes calculated for each activity is included in income taxes in “other” in the table below.

Summary and Comparison of Operating Results

Nelnet Renewable Energy (c)

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

Three months ended September 30, 2023

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

Three months ended March 31, 2024

Interest income $ 3 818 141 14,654 15,616

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Net interest income 3 818 141 12,236 13,198

Solar construction revenue — — — 6,301 — — — — — 6,301

Other, net 728 1,632 (2,303) 48 (14,908) (492) 276 558 10,223 (4,238)

Impairment and other expense (4,678) — — — — — — — — (4,678)

Cost to provide solar construction services — — — (7,783) — — — — — (7,783)

Other income, net 1,477 13,066 (1,794) 192 12,941

Salaries and benefits (55) (114) (189) — (358)

Depreciation and amortization (9,917) — — (3,501) — (8) — — (96) (13,522)

Other expenses (75) (11,657) (70) — (11,802)

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Net income (loss) $ 920 1,570 (1,540) 9,418 10,368

Three months ended September 30, 2022

Three months ended March 31, 2023

Interest income $ 2 326 141 18,191 18,660

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Net interest income 2 326 141 6,364 6,833

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

Other, net 631 1,612 (4,216) — (15,398) 9,867 (39) 762 3,217 (3,564)

Impairment and other expense (29) — — — — — 150 — — 121

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

Other income, net 1,596 691 1,147 (4,175) (741)

Salaries and benefits (56) (95) (68) — (219)

Depreciation and amortization (9,649) — — (732) — — — — (71) (10,452)

Other expenses (81) (469) (16) (1) (567)

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Net income (loss) $ 997 321 847 1,663 3,828

Nelnet Renewable Energy (c)

Nine months ended September 30, 2023

Interest income $ — 8 — 136 — 423 3,515 58,765 460 63,307

Interest expense — — — (805) — — — (25,320) (528) (26,653)

Net interest income — 8 — (669) — 423 3,515 33,445 (68) 36,654

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

WRCM earned management fees of $1.4 million and $1.6 million during the three months ended March 31, 2024 and 2023, respectively.

Fees earned by WRCM are included in "other income, 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 the three months ended March 31, 2024 and 2023, the Company earned reinsurance premiums of $25.5 million and $1.1 million, respectively, and ceded $12.7 million and $0.6 million, respectively, of its earned reinsurance premiums, which are included in “other income, net” in the table above.

During the three months ended March 31, 2024 and 2023, the Company recognized $22.8 million and $0.9 million, respectively, of loss reserve, commissions, and broker fees of which it ceded $11.5 million and $0.5 million, respectively, which are included in “other expenses” in the table above.

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

During the three months ended March 31, 2024 and 2023, the Company recognized $1.8 million of net losses and $1.1 million of net gains, respectively, from its real estate investments, which are included in "other income, net" in the table above.

The loss recognized in the first quarter of 2024 relates primarily to the Company's proportionate share of the net losses of certain real estate investments accounted for under the equity method.

(d) Represents interest income earned on investment debt securities (primarily student loan and other asset-backed securities, including Nelnet-owned asset-backed securities which it has repurchased and are eliminated in consolidation), unrealized gains/losses on marketable equity securities, realized gains/losses on marketable equity securities and investment debt securities, and other costs to manage these investments.

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

The decrease in interest income in 2024 compared with 2023 was due to a decrease in the average balance of investments from $1.3 billion in 2023 to $0.9 billion in 2024, partially offset by an increase in interest rates.

The decrease in interest expense in 2024 compared with 2023 was due to a decrease in the average debt outstanding from $0.9 billion in 2023 to $0.1 billion in 2024.

Included in 2023 was $4.0 million of realized losses on sales of asset-backed and marketable securities, which are included in "other income, net" in the table above.

CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS

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.

The difference between the Corporate income tax expense and the sum of taxes calculated for each activity is included in income taxes in “other” in the table below.

Summary and Comparison of Operating Results

Nelnet Renewable Energy (b)

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

Three months ended March 31, 2024

Net interest income (expense) $ — — (312) — — 3,451 3,139

Solar construction revenue — — 13,726 — — — 13,726

Other, net 2,130 4,883 (12,179) 112 (42,483) (806) (614) (2,989) 20,420 (31,526)

Impairment and other expense (4,678) — — — — — — — — (4,678)

Other income, net 706 3,067 42 (8,236) (426) 2,853 (1,994)

Cost to provide solar construction services — — (14,229) — — — (14,229)

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Income tax (expense) benefit 2,411 (979) 794 2,062 169 (672) 3,785

Net (income) loss attributable to noncontrolling interests — (447) 13,000 3,043 — 29 — — — 15,625

Net loss attributable to noncontrolling interests — 1,577 728 — — — 2,305

Net income (loss) $ (7,634) 3,102 (2,515) (6,531) (535) 2,051 (12,062)

Nine months ended September 30, 2022

Interest income $ — 1 — 3 — 841 642 19,181 419 21,087

Interest expense — — — (9) — — — (10,798) (938) (11,745)

Net interest income — 1 — (6) — 841 642 8,383 (519) 9,342

Three months ended March 31, 2023

Net interest income (expense) $ — — (232) — — 2,280 2,048

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

Other, net 1,781 4,375 (6,938) — (41,213) 18,076 22,156 (2,671) 8,743 4,309

Impairment and other expense (904) — — — — — (5,259) — — (6,163)

Other income, net 626 (1,948) 6 (17,864) (289) 2,476 (16,993)

Cost to provide solar construction services — — (8,299) — — — (8,299)

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Income tax (expense) benefit 3,117 165 610 4,292 157 (351) 7,990

Net (income) loss attributable to noncontrolling interests — (394) 8,600 101 — 16 — — — 8,323

Net loss attributable to noncontrolling interests — 2,903 569 — — — 3,472

Net income (loss) $ (9,872) (523) (1,931) (13,590) (497) 1,423 (24,990)

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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.

WRCM earned management fees of $1.5 million and $1.6 million during the three months ended September 30, 2023 and 2022, respectively, and $4.7 million and $4.3 million during

the nine months ended September 30, 2023 and 2022, respectively.

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

(c) 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 development.

As of September 30, 2023, the Company has invested a total of $332.0 million (which includes $126.5 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.

(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 March 31, 2024, the Company has invested a total of $491.8 million (which includes $208.9 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 tax equity investments in the table above 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 losses on its tax equity investments of $3.6 million and $4.2 million during the three months ended September 30, 2023 and 2022, respectively, and $13.5 million and $7.1 million during the nine months ended September 30, 2023 and 2022, 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 $1.8 million and $4.1 million for the three months ended September 30, 2023 and 2022, respectively, and $12.0 million and $8.0 million for the nine months ended September 30, 2023 and 2022, respectively, and are reflected in “net (income) loss attributable to noncontrolling interests” in the table above.

Nelnet Renewable Energy recognized

net gains on its tax equity investments of $3.0 million and net losses of $1.9 million during the three months ended March 31, 2024 and 2023, respectively.

These income statement amounts, which include amounts attributable to third-party noncontrolling interest investors, are included in “other income, net” in the table above.

Solar net losses attributable to third-party noncontrolling interest investors was $1.2 million and $2.7 million for the three months ended March 31, 2024 and 2023, respectively, and are reflected in “net 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 $0.6 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and $1.3 million and $0.7 million for the nine months ended September 30, 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”).

GRNE is a solar contracting 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.

As existing contracts are completed and revenue from new projects grows as a percent of overall revenue, the Company expects margin to improve in future periods.

(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.

The Company recognized losses under the HLBV method of accounting on its ALLO voting membership interests investment of $17.3 million and $17.6 million during the three months ended September 30, 2023 and 2022, respectively, and $49.7 million and $47.6 million during the nine months ended September 30, 2023 and 2022, respectively.

These amounts are reflected in “other, net” in the table above.

As of September 30, 2023, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $145.9 million and $6.8 million, respectively.

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

The Company recognized income on its ALLO preferred membership interests of $2.3 million and $2.2 million during the three months ended September 30, 2023 and 2022, respectively, and $6.8 million and $6.4 million during the nine months ended September 30, 2023 and 2022, respectively.

These amounts are reflected in “other, net” in the table above.

As part of the ALLO recapitalization transaction, 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 $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.

The Company recognized an expense of $0.7 million and $2.0 million associated with this obligation for the three and nine months ended September 30, 2023, respectively, which is included in “other expenses” in the table above.

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

(f) Represents the operating results of the Company’s venture capital investments and the administrative costs to manage this portfolio.

In April 2022, the Company recognized 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.

(g) Represents 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.

Management fee income recognized by Nelnet Renewable Energy was $0.7 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively, which is included in "other income, net" in the table above.

In addition to solar tax equity investments, the Company has a solar construction company (GRNE Solar) that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.

Since the acquisition of GRNE in 2022, it has incurred low and, in some cases, negative margins on certain projects.

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.

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

On April 12, 2024, the Company announced a change in its solar EPC operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations.

As a result, residential revenue will decline in future periods as existing customer contracts are completed.

Residential solar construction revenue was $2.1 million and $2.8 million for the three months ended March 31, 2024 and 2023, respectively, and $11.8 million for the year ended December 31, 2023.

(c) 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 under the HLBV method of accounting.

The Company recognized losses under the HLBV method of accounting on its ALLO voting membership interests investment of $10.7 million and $20.2 million during the three months ended March 31, 2024 and 2023, respectively.

These amounts are reflected in “other income, net” in the table above.

Absent additional equity contributions, the Company will not recognize additional losses for its voting membership interests in ALLO.

As of March 31, 2024, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $155.0 million and $2.4 million, respectively.

The preferred membership interests of ALLO held by the Company historically earned a preferred annual return of 6.25% that increased to 10.00% on April 1, 2024.

The Company recognized income on its ALLO preferred membership interests of $2.4 million and $2.2 million during the three months ended March 31, 2024 and 2023, respectively.

These amounts are reflected in “other income, net” in the table above.

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 $0.4 million associated with this obligation for the three months ended March 31, 2024, 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, and the administrative costs to manage this portfolio.

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 and $5.0 million to Nelnet Bank during 2022 and the third quarter of 2023, respectively.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million in November 2020 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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Sources of Liquidity

As of September 30, 2023, the Company's sources of liquidity included:

As of March 31, 2024, the Company's sources of liquidity included:

Cash and cash equivalents $ 179,682

Cash and cash equivalents held at Nelnet Bank (1) (8,187)

Cash and cash equivalents held at Nelnet Bank (a) (22,869)

Net cash and cash equivalents 156,813

Available-for-sale (AFS) debt securities (investments) - at fair value 1,018,687

AFS debt securities held at Nelnet Bank - at fair value (1) (435,015)

AFS debt securities serving as collateral on participation agreement - at fair value (2) (57)

AFS debt securities serving as collateral on repurchase agreement - at fair value (3) (260,108)

AFS restricted debt securities - at fair value (15,918)

AFS debt securities held at Nelnet Bank - at fair value (a) (445,268)

AFS private education loan debt securities - held as risk retention - at fair value (b) (248,436)

Restricted investments (36,076)

Unencumbered AFS debt securities (investments) - at fair value 288,907

Unencumbered private, consumer, and other loans (Non-Nelnet Bank) - at par 139,377

Repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (4) 257,278

Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreement - at par (118,925)

Unencumbered repurchased Nelnet issued asset-backed debt securities - at par 138,353

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

Sources of liquidity as of September 30, 2023

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

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

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

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

Unencumbered repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (c) 310,321

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

Sources of liquidity as of March 31, 2024

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

(b) 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 Agreement” below.

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

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

However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate.

However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties, redeem the notes at par as cash is generated by the trust estate, or pledge the securities as collateral on repurchase agreements.

Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale.

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

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

As of September 30, 2023, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

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

As of March 31, 2024, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

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

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The Company has historically generated positive cash flow from operations.

During the nine months ended September 30, 2023 and 2022, the Company generated $353.2 million and $656.9 million, respectively, in cash from operating activities.

The decrease in 2023 compared with 2022 was due to:

• A decrease in net income;

• Payments to the Company's clearinghouse for margin payments on derivatives for the nine months ended September 30, 2023 compared with proceeds received in 2022;

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

• A decrease in net proceeds from the sale of equity securities in 2023 compared with 2022;

• The impact of changes to accrued interest payable during the nine months ended September 30, 2023 compared with the same period in 2022.

During the three months ended March 31, 2024 and 2023, the Company generated $211.9 million and $122.8 million, respectively, in cash from operating activities.

The increase in 2024 compared with 2023 was due to:

• An increase in net income;

• Proceeds of $4.2 million from the Company's clearinghouse for margin payments on derivatives during the three months ended March 31, 2024 compared with payments of $210.3 million for the same period in 2023;

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

• The impact of changes to accrued interest receivable, accounts receivable, and other assets during the three months ended March 31, 2024 compared with the same period in 2023.

These factors were partially offset by:

• An increase in proceeds from termination of derivative instruments in 2023 compared with 2022;

• Adjustments to net income for derivative market value adjustments, the impact of provision for loan losses, and loss on investments;

• An increase of non-cash depreciation and amortization during the nine months ended September 30, 2023 compared with the same period in 2022;

• The impact of changes to accrued interest and accounts receivable and other assets and liabilities during the nine months ended September 30, 2023 compared with the same period in 2022.

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

Cash provided by investing activities and used in financing activities for the nine months ended September 30, 2023 was $1.3 billion and $2.2 billion, respectively.

Cash provided by investing activities and used in financing activities for the nine months ended September 30, 2022 was $1.7 billion and $2.5 billion, respectively.

• Adjustments to net income for derivative market value adjustments, the impact of provision for loan losses, and gain/losses on investments;

• No proceeds from the termination of derivative instruments during the three months ended March 31, 2024 compared with $164.1 million for the same period in 2023;

• The impact of changes to other liabilities during the three months ended March 31, 2024 compared with the same period in 2023.

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 proceeds from the issuance of and payments on bonds and notes payable and the change in deposits at Nelnet Bank used to fund loans and investment activity.

Cash provided by investing activities and used in financing activities for the three months ended March 31, 2024 was $1.1 billion and $1.4 billion, respectively.

Cash provided by investing activities and used in financing activities for the three months ended March 31, 2023 was $0.7 billion and $1.3 billion, respectively.

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

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

As of September 30, 2023

As of March 31, 2024

Carrying amount

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Bonds and notes issued in asset-backed securitizations $ 9,423,035 8/26/30 - 9/25/69

FFELP, private education, and consumer loan warehouse facilities 1,554,298 12/31/23 - 11/14/25

FFELP and consumer loan warehouse facilities 1,107,959 4/2/25 - 11/14/25

Bonds and Notes Issued in Asset-backed Securitizations

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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 September 30, 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 $1.40 billion as detailed below.

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 September 30, 2023.

As of September 30, 2023, AGM had $10.9 billion of loans included in asset-backed securitizations, which represented 85.3% of its total loan portfolio.

The forecasted cash flow does not include cash flows that the Company expects to receive related to loans funded in its warehouse facilities, unencumbered private education, consumer, and other loans funded with operating cash, loans acquired subsequent to September 30, 2023, loans owned by Nelnet Bank, and cash flows relating to the Company's ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "investments and notes receivable" on the Company's consolidated balance sheets).

As of March 31, 2024, 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 $1.22 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 loans funded in asset-backed securitizations as of March 31, 2024, the majority of which are federally insured student loans.

As of March 31, 2024, AGM had $9.5 billion of loans included in asset-backed securitizations, which represented 88.4% of its total loan portfolio.

The forecasted cash flow does not include cash

flows that the Company expects to receive related to loans funded in its warehouse facilities, unencumbered private education, consumer, and other loans funded with operating cash, loans acquired subsequent to March 31, 2024, loans owned by Nelnet Bank, and cash flows relating to the Company's ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "investments and notes receivable" on the Company's consolidated balance sheets).

Asset-backed Securitization Cash Flow Forecast

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(dollars in millions)

The forecasted future undiscounted cash flows of approximately $1.40 billion include approximately $0.84 billion (as of September 30, 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, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.56 billion, or approximately $0.43 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 current September 30, 2023 balance.

The forecasted future undiscounted cash flows of approximately $1.22 billion include approximately $0.78 billion (as of March 31, 2024) of overcollateralization included in the asset-backed securitizations.

These excess net asset positions are included in the consolidated balance sheets in the balances of "loans and accrued interest receivable, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.44 billion, or approximately $0.33 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the March 31, 2024 balance.

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

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Prepayment rates equal the amount of loans that prepay annually as a percentage of the beginning of period balance, net of scheduled principal payments.

A number of factors can affect estimated prepayment rates, including the level of consolidation activity,

borrower default rates, and utilization of debt management options such as income-based repayment, deferments, and forbearance.

A number of factors can affect estimated prepayment rates, including the level of consolidation activity, borrower default rates, and utilization of debt management options such as income-based repayment, deferments, and forbearance.

Should any of these factors change, management may revise its assumptions, which in turn would impact the projected future cash flow.

The Company’s cash flow forecast above assumes prepayment rates of 5% for consolidation loans and 6% for all other loan types.

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.

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.

See note 13 of the notes to the consolidated financial statements included in Part I, Item 1 of this report for additional details regarding the federal government's actions with respect to student loan forgiveness and cancellations.

In addition, on July 10, 2023, the Department issued final regulations on income-driven repayment plans for Federal Direct loans.

Eligible FFELP borrowers can access the new changes by consolidating their loans into the Federal Direct Loan Program.

The new regulations are effective July 1, 2024;

however, the Department has elected early implementation for some features starting July 30, 2023.

The regulations provide a lower monthly loan payment on a Direct loan by decreasing discretionary income, decreasing the percentage of discretionary income that must be paid toward a Direct loan, and providing the option for married borrowers to exclude their spouse’s income from being factored by filing a separate tax return.

Other changes provide for the elimination of accrued interest that is not covered by the monthly payment amount, provide credit towards loan forgiveness that counts certain periods of deferment and forbearance, a shorter loan forgiveness period for borrowers with an original principal balance less than or equal to $12,000, and credit toward loan forgiveness for eligible payments on a Direct or FFELP loan that is repaid by a Direct Consolidation loan.

This new income-driven repayment plan may increase consolidation activity in the future as FFELP borrowers consolidate their loans into the Federal Direct Loan Program in order to be eligible for the new income-driven repayment plan.

See Part I, Item 1A, "Risk Factors - Loan Portfolio - Prepayments risk" in the Company's 2022 Annual Report for additional information related to risks associated with loan prepayments.

The Company’s cash flow forecast above assumes prepayment rates of 5% for federally insured consolidation loans and 6% for federally insured Stafford loans.

Prepayment rates for private education loans range from 11% to 20%.

Since late 2021, the Company has experienced accelerated run-off (prepayments) of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans to qualify for loan forgiveness under various initiatives and programs offered by the federal government and the Department.

See "Nelnet Financial Services Division -

Results of Operations - Asset Generation and Management Operating Segment - Loan Activity" included in this report's Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information related to the federal government and the Department's initiatives for debt relief that has increased, and may continue to increase, prepayment activity.

Prepayments could significantly increase if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs.

In addition, see Part I, Item 1A, "Risk Factors - Loan Portfolio - Prepayments risk" in the Company's 2023 Annual Report 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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$0.77 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 $0.84 billion (as of September 30, 2023);

however, the Company would not receive the $0.44 billion ($0.33 billion after tax) of estimated future earnings from the portfolio.

Interest rates :

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 bond equivalent of the 30-day average SOFR in effect for each day in a calendar quarter.

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.

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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 $40 million to $60 million.

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

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

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Warehouse Facilities

Warehousing allows the Company to buy and manage FFELP, private education, and consumer loans prior to transferring them into more permanent financing arrangements.

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

For a summary of the Company's warehouse facilities see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Upon termination or expiration of the warehouse facilities, the Company would expect to access the securitization market, obtain replacement warehouse facilities, use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.

Asset-backed Securities Transactions

The Company, through its subsidiaries, has historically funded loans by completing asset-backed securitizations.

Depending on market conditions, the Company anticipates continuing to access the asset-backed securitization market.

Such asset-backed securitization transactions would be used to refinance loans included in its warehouse facilities, loans purchased from third parties, and/or loans in its existing asset-backed securitizations.

There were no asset-backed securitization transactions completed during the three months ended March 31, 2024.

Other Uses of Liquidity

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

cash provided by operating activities;

proceeds from the sale of certain investments;

its unsecured line of credit, its Union Bank student loan participation agreement, its Union Bank student loan asset-backed securities participation agreement, and third-party repurchase agreements (each as described below), and/or establishing similar secured and unsecured borrowing facilities;

its unsecured line of credit, its Union Bank student loan participation

agreement, its Union Bank student loan asset-backed securities participation agreement, and its third-party repurchase agreement (each as described below), and/or establishing similar secured and unsecured borrowing facilities;

using its existing warehouse facilities (as described above);

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and continuing to access the asset-backed securities market.

Repurchase Agreements

Repurchase Agreement

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

The Company entered into a joint venture with other investors to acquire the loans, and under the joint venture, the Company had an approximately 8% interest in the loans and has a corresponding 8% interest in residual interests in the 2021 securitizations of the loans discussed below.

The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility.

During 2021, the Company sponsored four asset-backed securitization transactions to permanently finance a total of $8.7 billion of private education loans sold by Wells Fargo (which represented the total remaining loans originally purchased from Wells Fargo, factoring in borrower payments from the date of purchase).

As sponsor, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement.

The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance sheets as "investments and notes receivable" and as of September 30, 2023, the fair value of these bonds was $260.1 million.

The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance sheets as "investments and notes receivable" and as of March 31, 2024, the fair value of these bonds was $248.4 million.

The Company must retain these investment securities until the latest of (i) two years from the closing date of the securitization, (ii) the date the aggregate outstanding principal balance of the loans in the securitization is 33% or less of the initial loan balance, and (iii) the date the aggregate outstanding principal balance of the bonds is 33% or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party.

The Company entered into repurchase agreements with third parties, of which a portion of the proceeds from such agreements were used to purchase the asset-backed investments, and such investments serve as collateral on the repurchase obligations.

In addition, as discussed above, the Company has repurchased certain of its own asset-backed securities in the secondary market that serve as collateral on amounts outstanding under the Company's repurchase agreements.

During the third quarter of 2023, the Company paid down the outstanding balance of one of these facilities.

As of September 30, 2023, $336.5 million was outstanding on the Company's remaining repurchase agreement, of which $246.1 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.

As of November 7, 2023, the maturity dates on this facility vary from November 20, 2023 through November 27, 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 entered into a repurchase agreement with a third party, of which a portion of the proceeds from such agreement were used to purchase the asset-backed investments, and such investments serve as collateral on the repurchase obligations.

As of March 31, 2024, $114.5 million was outstanding on the Company's repurchase agreement.

As of May 9, 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 expiration of the remaining repurchase agreement, the Company would use cash and/or cash proceeds from its unsecured line of credit, consider the sale of assets (subject to any restrictions described above), or transfer collateral to satisfy any outstanding obligations subject to the repurchase agreements.

Union Bank Participation Agreement

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 Agreements

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

As of September 30, 2023, $257.0 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

As of March 31, 2024, $469.7 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

The agreement automatically renews annually and is terminable by either party upon five business days' notice.

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Accordingly, the participation interests sold are not included on the Company’s consolidated balance sheets.

Asset-backed Securities Transactions

The Company, through its subsidiaries, has historically funded student loans by completing asset-backed securitizations.

Depending on market conditions, the Company anticipates continuing to access the asset-backed securitization market.

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 nine months ended September 30, 2023.

Cash Flow Forecast - Beneficial Interest in Loan Securitizations

The Company has partial ownership in federally insured, private education, consumer, and other 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 September 30, 2023, the Company's ownership correlates to approximately $1.55 billion of loans included in these securitizations

As of September 30, 2023, the investment balance on the Company's consolidated balance sheet of its beneficial interest in loan securitizations was $191.2 million.

The Company also has an agreement with Union Bank under which Union Bank has agreed to purchase from the Company participation interests in FFELP loan asset-backed securities (bond investments).

The agreement automatically renews annually and is terminable by either party upon five business days' notice.

On May 4, 2024, the agreement automatically renewed for another year through May 4, 2025.

The Company can participate FFELP loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $400.0 million or an amount in excess of $400.0 million if mutually agreed to by both parties.

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

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

As of March 31, 2024, $0.1 million (par value) of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

Liquidity Impact Related to 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 from selling portfolios of loans to unrelated third parties who securitized such loans.

As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2024, the Company's ownership correlates to approximately $1.79 billion of loans included in these securitizations

As of March 31, 2024, the investment balance on the Company's consolidated balance sheet of its beneficial interest in loan securitizations was $235.8 million.

For a summary of this investment balance, see note 5 of the notes to consolidated financial statements included under Part I, Item 1 of 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 September 30, 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 $323.3 million.

As of March 31, 2024, 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 $347.1 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 $191.2 million of $132.1 million, or $100.4 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 current September 30, 2023 balance.

The undiscounted future cash flows from the private education, consumer, and other loan securitizations are highly subject to credit risk (defaults).

The difference between the total estimated future undiscounted cash flows from these residual interests ($347.1 million) and the investment carrying value ($235.8 million) of $111.3 million, or $84.6 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 March 31, 2024 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.

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Nelnet Bank launched operations in November 2020.

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

(ii) provide and maintain an irrevocable asset liquidity takeout commitment for the benefit of Nelnet Bank in an amount

equal to the greater of either 10% of Nelnet Bank’s total assets or such additional amount as agreed to by Nelnet Bank and Nelnet, Inc.;

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

(iii) provide additional liquidity to Nelnet Bank in such amount and duration as may be necessary for Nelnet Bank to meet its ongoing liquidity obligations;

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

Nelnet Bank has opted into the CBLR framework for the quarter ended September 30, 2023 with a leverage ratio of 12.7%.

Nelnet Bank has opted into the CBLR framework for the quarter ended March 31, 2024 with a leverage ratio of 13.0%.

Nelnet Bank intends to maintain at all times regulatory capital levels that meet both the minimum level necessary to be considered “well capitalized” under the FDIC’s prompt corrective action framework and the minimum level required by the FDIC.

Nelnet Bank has a portfolio of asset-backed securities investments that were accounted for and classified as available-for-sale.

Accordingly, these securities were carried at fair value, with the changes in fair value, net of taxes, carried as a separate component of equity.

To reduce Nelnet Bank's market exposure related to decreases in fair value on these investments, on March 31, 2023, securities at Nelnet Bank with a fair value of $149.2 million were transferred from available-for-sale to held to maturity.

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

Accumulated other comprehensive income as of the date of the transfer (March 31, 2023) included pre-tax unrealized losses of $3.7 million.

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

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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The Company’s Nelnet Renewable Energy business makes solar tax equity investments.

Through September 30, 2023, the Company has invested a total of $332.0 million (which includes $126.5 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% of the eligible project costs, with the tax credit available when the project is placed-in-service.

Through March 31, 2024, the Company has invested a total of $491.8 million (which includes $208.9 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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Based on the timing of when the Company funds a project and decreases its tax estimate to the U.S.

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 September 30, 2023, the Company is committed to fund an additional $265.9 million on tax equity investments, of which $128.7 million is expected to be provided by syndication partners.

Treasury due to earning of the tax credit, the amount of capital funded 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 March 31, 2024, the Company is committed to fund an additional $146.6 million on tax equity investments, of which $76.2 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.

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 Company plans to fund a 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.

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In addition, the Company recorded its remaining non-voting preferred membership units of ALLO at fair value, and accounts for such investment as a separate equity investment.

As of September 30, 2023, the outstanding preferred membership interests of ALLO held by the Company was $145.9 million that earns a preferred annual return of 6.25%.

As of March 31, 2024, the outstanding preferred membership interests of ALLO held by the Company was $155.0 million that earned a preferred annual return of 6.25%.

Accrued and unpaid preferred returns are converted to additional preferred membership interests each December 31.

As of September 30, 2023 the accrued and unpaid preferred return was $6.8 million.

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 $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.

As of September 30, 2023, the estimated fair value of the contingent payment is $9.6 million.

In June 2023, ALLO closed on an asset-backed securities transaction with an aggregate size of $576.0 million.

As of March 31, 2024, the accrued and unpaid preferred return was $2.4 million.

On April 1, 2024, the preferred annual return on the non-voting preferred membership interests increased from 6.25% to 10.00%.

On 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%.

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 March 31, 2024, the estimated fair value of the contingent payment is $10.1 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 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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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, 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 September 30, 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.

Based on the derivative portfolio outstanding as of March 31, 2024, 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.

Other Debt Facilities

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

As of September 30, 2023, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.

As of March 31, 2024, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.

Upon the maturity date of this facility, there can be no assurance that the Company will be able to maintain this line of credit, increase or maintain the amount outstanding under the line, or find alternative funding if necessary.

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

As of September 30, 2023, $0.1 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.

As of March 31, 2024, the outstanding balance on this participation agreement was $8.9 million.

Stock Repurchases

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

No shares were repurchased under this

program during the first three quarters 2023.

As of September 30, 2023, 4,467,021 shares remained authorized for repurchase under the Company's stock repurchase program.

As of March 31, 2024, 3,824,767 shares remained authorized for repurchase under the Company's stock repurchase program.

Shares may be repurchased from time to time on the open market, in private transactions (including with related parties), or otherwise, depending on various factors, including share prices and other potential uses of liquidity.

During the first three quarters of 2023, the Company repurchased 47,195 shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares.

These repurchased shares are excluded from the Company's repurchase program.

See "Stock Repurchases" under Part II, Item 2 of this report.

On September 15, 2023, the Company paid a third quarter 2023 cash dividend on the Company's Class A and Class B common stock of $0.26 per share.

In addition, the Company's Board of Directors has declared a fourth quarter 2023 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.28 per share.

The fourth quarter cash dividend will be paid on December 15, 2023 to shareholders of record at the close of business on December 1, 2023.

Shares repurchased by the Company during the three months ended March 31, 2024 are shown below.

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.

For additional information on stock repurchases during the first quarter of 2024, see "Stock Repurchases" under Part II, Item 2 of this report.

Total shares repurchased Purchase price (in thousands) Average price of shares repurchased (per share) (a)

Quarter ended March 31, 2024 396,724 $ 35,469 89.41

(a) The average price of shares repurchased for the three months ended March 31, 2024 includes excise taxes.

Subsequent to March 31, 2024 (through May 9, 2024), the Company repurchased an additional 421,102 Class A common shares for $39.8 million (average price of $94.47 per share) under its stock repurchase program.

On March 15, 2024, the Company paid a first quarter 2024 cash dividend on the Company's Class A and Class B common stock of $0.28 per share.

In addition, the Company's Board of Directors has declared a second quarter 2024 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.28 per share.

The second quarter cash dividend will be paid on June 14, 2024 to shareholders of record at the close of business on May 31, 2024.

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

6 unchanged sentences

On an on-going basis, management evaluates its estimates and judgments, particularly as they relate to accounting policies that management believes are most “critical” - that is, they are most important to the portrayal of the Company’s financial condition and results of operations and they require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Management has identified the allowance for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2022 Annual Report.

For additional information regarding changes in the Company’s allowance for loan losses for the three and nine months ended September 30, 2023 and 2022, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Management has identified the allowance

for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2023 Annual Report.

For additional information regarding changes in the Company’s allowance for loan losses for the three months ended March 31, 2024 and 2023, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

There have been no material changes to the Company’s critical accounting policy and estimate since December 31, 2023.

RECENT ACCOUNTING PRONOUNCEMENTS

Investments - Proportional Amortization Method

In March 2023, the FASB issued accounting guidance which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than at the reporting entity level or for individual investments.

This guidance will be effective for the Company beginning January 1, 2024 with early adoption permitted.

Management believes this pronouncement will not have a material impact on the Company's consolidated financial statements upon adoption.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis