NELNET INC 10-Q

ITEM 1. FINANCIAL STATEMENTS NELNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (unaudited) As of As of June 30, 2024 December 31, 2023 Assets: Loans and accrued interest receivable (net of allowance for loan losses of $ 96,764 and $ 104,643 , respectively) $ 10,939,519 13,108,204 Cash and cash equivalents: Cash and cash equivalents - not held at a related party 33,000 34,912 Cash and cash equivalents - held at a related party 112,478 133,200 Total cash and cash equivalents 145,478 168,112 Investments and notes receivable (including investments at fair value of $ 948,792 and $ 988,841 , respectively) 1,896,433 1,846,707 Restricted cash 538,446 488,723 Restricted cash - due to customers 259,479 368,656 Restricted investments 50,358 17,969 Accounts receivable (net of allowance for doubtful accounts of $ 4,272 and $ 4,304 , respectively) 159,836 196,200 Goodwill 158,029 158,029 Intangible assets, net 40,521 44,819 Property and equipment, net 131,666 127,008 Other assets 181,428 187,957 Total assets $ 14,501,193 16,712,384 Liabilities: Bonds and notes payable $ 9,567,708 11,828,393 Accrued interest payable 27,141 35,391 Bank deposits 890,472 743,599 Other liabilities 406,974 479,387 Due to customers 388,876 425,507 Total liabilities 11,281,171 13,512,277 Commitments and contingencies Equity: Nelnet, Inc. shareholders' equity: Preferred stock, $ 0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding — — Common stock: Class A, $ 0.01 par value. Authorized 600,000,000 shares; issued and outstanding 25,585,840 shares and 26,400,630 shares, respectively 256 264 Class B, convertible, $ 0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,663,088 shares 107 107 Additional paid-in capital 657 3,096 Retained earnings 3,295,301 3,270,403 Accumulated other comprehensive loss, net ( 2,260 ) ( 20,119 ) Total Nelnet, Inc. shareholders' equity 3,294,061 3,253,751 Noncontrolling interests ( 74,039 ) ( 53,644 ) Total equity 3,220,022 3,200,107 Total liabilities and equity $ 14,501,193 16,712,384 Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities: Loans and accrued interest receivable $ 10,276,743 12,676,932 Restricted cash 515,844 451,932 Bonds and notes payable ( 9,822,767 ) ( 12,006,170 ) Accrued interest payable and other liabilities ( 102,370 ) ( 135,748 ) Net assets of consolidated education and other lending variable interest entities $ 867,450 986,946 See accompanying notes to consolidated financial statements. 2 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share data) (unaudited) Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Interest income: Loan interest $ 202,129 243,045 418,853 468,288 Investment interest 40,737 40,982 92,814 81,707 Total interest income 242,866 284,027 511,667 549,995 Interest expense on bonds and notes payable and bank deposits 176,459 233,148 371,039 432,597 Net interest income 66,407 50,879 140,628 117,398 Less provision (negative provision) for loan losses 3,611 ( 11,380 ) 14,440 791 Net interest income after provision for loan losses 62,796 62,259 126,188 116,607 Other income (expense): Loan servicing and systems revenue 109,052 122,020 236,252 261,247 Education technology services and payments revenue 116,909 109,858 260,449 243,462 Solar construction revenue 9,694 4,735 23,420 13,386 Other, net 28,871 ( 9,167 ) 45,734 ( 24,235 ) Loss on sale of loans ( 1,438 ) ( 5,461 ) ( 1,579 ) ( 15,753 ) Impairment expense and provision for beneficial interests ( 7,776 ) — ( 7,813 ) — Derivative market value adjustments and derivative settlements, net 3,182 2,070 12,903 ( 12,005 ) Total other income (expense), net 258,494 224,055 569,366 466,102 Cost of services: Cost to provide education technology services and payments 40,222 40,407 88,832 88,110 Cost to provide solar construction services 8,072 9,122 22,300 17,422 Total cost of services 48,294 49,529 111,132 105,532 Operating expenses: Salaries and benefits 139,634 144,706 283,509 297,416 Depreciation and amortization 15,142 18,652 31,911 35,279 Other expenses 59,792 45,997 116,637 86,781 Total operating expenses 214,568 209,355 432,057 419,476 Income before income taxes 58,428 27,430 152,365 57,701 Income tax expense 14,753 10,187 37,936 18,273 Net income 43,675 17,243 114,429 39,428 Net loss attributable to noncontrolling interests 1,416 10,183 4,069 13,957 Net income attributable to Nelnet, Inc. $ 45,091 27,426 118,498 53,385 Earnings per common share: Net income attributable to Nelnet, Inc. shareholders - basic and diluted $ 1.23 0.73 3.22 1.43 Weighted average common shares outstanding - basic and diluted 36,525,482 37,468,397 36,841,227 37,406,843 See accompanying notes to consolidated financial statements. 3 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (unaudited) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Net income $ 43,675 17,243 114,429 39,428 Other comprehensive income: Net changes related to foreign currency translation adjustments $ ( 21 ) — ( 16 ) ( 3 ) Net changes related to available-for-sale debt securities: Unrealized holding gains arising during period, net of losses 8,874 8,649 25,635 17,300 Reclassification of (gains) losses recognized in net income, net ( 1,053 ) ( 918 ) ( 1,605 ) 4,064 Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity 51 70 122 70 Income tax effect ( 1,890 ) 5,982 ( 1,872 ) 5,929 ( 5,797 ) 18,355 ( 5,144 ) 16,290 Net changes related to equity method investee's other comprehensive income: Gain (loss) on cash flow hedge 335 ( 501 ) ( 632 ) ( 499 ) Income tax effect ( 80 ) 255 120 ( 381 ) 152 ( 480 ) 120 ( 379 ) Other comprehensive income 6,216 5,548 17,859 15,908 Comprehensive income 49,891 22,791 132,288 55,336 Comprehensive loss attributable to noncontrolling interests 1,416 10,183 4,069 13,957 Comprehensive income attributable to Nelnet, Inc. $ 51,307 32,974 136,357 69,293 See accompanying notes to consolidated financial statements. 4 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands, except share data) (unaudited) Nelnet, Inc. Shareholders Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Noncontrolling interests Total equity Class A Class B Balance as of March 31, 2023 — 26,623,662 10,668,460 $ — 266 107 4,639 3,243,985 ( 27,006 ) ( 16,197 ) 3,205,794 Issuance of noncontrolling interests — — — — — — — — — 11,703 11,703 Net income (loss) — — — — — — — 27,426 — ( 10,183 ) 17,243 Other comprehensive income — — — — — — — — 5,548 — 5,548 Distribution to noncontrolling interests — — — — — — — — — ( 7,942 ) ( 7,942 ) Cash dividends on Class A and Class B common stock - $ 0.26 per share — — — — — — — ( 9,694 ) — — ( 9,694 ) Issuance of common stock, net of forfeitures — 27,562 — — — — 2,056 — — — 2,056 Compensation expense for stock based awards — — — — — — 3,884 — — — 3,884 Repurchase of common stock — ( 4,734 ) — — — — ( 465 ) — — — ( 465 ) Balance as of June 30, 2023 — 26,646,490 10,668,460 $ — 266 107 10,114 3,261,717 ( 21,458 ) ( 22,619 ) 3,228,127 Balance as of March 31, 2024 — 26,055,314 10,663,088 $ — 261 107 1,101 3,304,197 ( 8,476 ) ( 61,470 ) 3,235,720 Issuance of noncontrolling interests — — — — — — — — — 6,618 6,618 Net income (loss) — — — — — — — 45,091 — ( 1,416 ) 43,675 Other comprehensive income — — — — — — — — 6,216 — 6,216 Distribution to noncontrolling interests — — — — — — — — — ( 19,864 ) ( 19,864 ) Cash dividends on Class A and Class B common stock - $ 0.28 per share — — — — — — — ( 10,158 ) — — ( 10,158 ) Issuance of common stock, net of forfeitures — 18,506 — — — — 2,171 — — — 2,171 Compensation expense for stock based awards — — — — — — 2,733 — — — 2,733 Repurchase of common stock — ( 487,980 ) — — ( 5 ) — ( 5,348 ) ( 41,489 ) — — ( 46,842 ) Acquisition of remaining 20 % of GRNE Solar, net of tax — — — — — — — ( 2,340 ) — 2,093 ( 247 ) Balance as of June 30, 2024 — 25,585,840 10,663,088 $ — 256 107 657 3,295,301 ( 2,260 ) ( 74,039 ) 3,220,022 See accompanying notes to consolidated financial statements. 5 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands, except share data) (unaudited) Nelnet, Inc. Shareholders Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Noncontrolling interests Total equity Class A Class B Balance as of December 31, 2022 — 26,461,651 10,668,460 $ — 265 107 1,109 3,227,680 ( 37,366 ) ( 8,596 ) 3,183,199 Issuance of noncontrolling interests — — — — — — — — — 12,904 12,904 Net income (loss) — — — — — — — 53,385 — ( 13,957 ) 39,428 Other comprehensive income — — — — — — — — 15,908 — 15,908 Distribution to noncontrolling interests — — — — — — — — — ( 12,970 ) ( 12,970 ) Cash dividends on Class A and Class B common stock - $ 0.52 per share — — — — — — — ( 19,348 ) — — ( 19,348 ) Issuance of common stock, net of forfeitures — 226,086 — — 1 — 5,119 — — — 5,120 Compensation expense for stock based awards — — — — — — 7,653 — — — 7,653 Repurchase of common stock — ( 41,247 ) — — — — ( 3,767 ) — — — ( 3,767 ) Balance as of June 30, 2023 — 26,646,490 10,668,460 $ — 266 107 10,114 3,261,717 ( 21,458 ) ( 22,619 ) 3,228,127 Balance as of December 31, 2023 — 26,400,630 10,663,088 $ — 264 107 3,096 3,270,403 ( 20,119 ) ( 53,644 ) 3,200,107 Issuance of noncontrolling interests — — — — — — — — — 8,151 8,151 Net income (loss) — — — — — — — 118,498 — ( 4,069 ) 114,429 Other comprehensive income — — — — — — — — 17,859 — 17,859 Distribution to noncontrolling interests — — — — — — — — — ( 26,570 ) ( 26,570 ) Cash dividends on Class A and Class B common stock - $ 0.56 per share — — — — — — — ( 20,528 ) — — ( 20,528 ) Issuance of common stock, net of forfeitures — 69,914 — — 1 — 3,297 — — — 3,298 Compensation expense for stock based awards — — — — — — 5,834 — — — 5,834 Repurchase of common stock — ( 884,704 ) — — ( 9 ) — ( 11,570 ) ( 70,732 ) — — ( 82,311 ) Acquisition of remaining 20 % of GRNE Solar, net of tax — — — — — — — ( 2,340 ) — 2,093 ( 247 ) Balance as of June 30, 2024 — 25,585,840 10,663,088 $ — 256 107 657 3,295,301 ( 2,260 ) ( 74,039 ) 3,220,022 See accompanying notes to consolidated financial statements. 6 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited) Six months ended June 30, 2024 2023 Net income attributable to Nelnet, Inc. $ 118,498 53,385 Net loss attributable to noncontrolling interests ( 4,069 ) ( 13,957 ) Net income 114,429 39,428 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 69,623 93,573 Loan discount and deferred lender fees accretion ( 22,538 ) ( 15,412 ) Provision for loan losses 14,440 791 Derivative market value adjustments ( 9,497 ) 35,407 Proceeds from termination of derivative instruments — 164,079 Proceeds from (payments to) clearinghouse - initial and variation margin, net 5,716 ( 209,886 ) Loss on sale of loans 1,579 15,753 Loss on investments, net 6,985 49,834 Deferred income tax benefit ( 4,814 ) ( 16,613 ) Non-cash compensation expense 6,004 7,810 Impairment expense and provision for beneficial interests 7,813 — Decrease (increase) in loan and investment accrued interest receivable 150,907 ( 4,884 ) Decrease in accounts receivable 36,329 59,142 Decrease (increase) in other assets, net 39,667 ( 11,480 ) Decrease in the carrying amount of ROU asset, net 1,911 2,390 Decrease in accrued interest payable ( 8,250 ) ( 123 ) Decrease in other liabilities ( 62,638 ) ( 8,916 ) Decrease in the carrying amount of lease liability ( 1,982 ) ( 2,568 ) Other ( 365 ) 75 Net cash provided by operating activities 345,319 198,400 Cash flows from investing activities: Purchases and originations of loans ( 430,575 ) ( 411,868 ) Purchases of loans from a related party — ( 467,519 ) Net proceeds from loan repayments, claims, and capitalized interest 2,125,052 1,348,827 Proceeds from sale of loans 311,010 290,957 Purchases of available-for-sale securities ( 272,031 ) ( 296,468 ) Purchases of restricted available-for-sale securities ( 23,288 ) — Proceeds from sales of available-for-sale securities 265,887 577,548 Proceeds from sales of restricted available-for-sale securities 660 — Proceeds from beneficial interest in loan securitizations 19,513 13,237 Purchases of other investments and issuance of notes receivable ( 197,440 ) ( 140,129 ) Proceeds from other investments and repayments of notes receivable 53,635 14,982 Purchases of held-to-maturity debt securities — ( 2,889 ) Redemption of held-to-maturity debt securities 5,041 1,487 Purchases of property and equipment ( 33,842 ) ( 37,253 ) Net cash provided by investing activities $ 1,823,622 890,912 7 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Six months ended June 30, 2024 2023 Cash flows from financing activities: Payments on bonds and notes payable $ ( 2,283,381 ) ( 2,417,622 ) Proceeds from issuance of bonds and notes payable 37 806,148 Payments of debt issuance costs ( 693 ) ( 2,214 ) Increase in bank deposits, net 146,873 39,724 Decrease in due to customers ( 36,642 ) ( 48,728 ) Dividends paid ( 20,528 ) ( 19,348 ) Repurchases of common stock ( 82,311 ) ( 3,767 ) Proceeds from issuance of common stock 967 890 Acquisition of noncontrolling interest ( 325 ) — Issuance of noncontrolling interests 27,396 14,018 Distribution to noncontrolling interests ( 2,335 ) ( 1,920 ) Net cash used in financing activities ( 2,250,942 ) ( 1,632,819 ) Effect of exchange rate changes on cash and restricted cash ( 87 ) ( 84 ) Net decrease in cash, cash equivalents, and restricted cash ( 82,088 ) ( 543,591 ) Cash, cash equivalents, and restricted cash, beginning of period 1,025,491 1,357,616 Cash, cash equivalents, and restricted cash, end of period $ 943,403 814,025 Supplemental disclosures of cash flow information: Cash disbursements made for interest $ 355,943 386,686 Cash disbursements made for income taxes, net of refunds and credits received (a) $ 11,932 43,510 Cash disbursements made for operating leases $ 2,451 3,476 Non-cash operating, investing, and financing activity: ROU assets obtained in exchange for lease obligations $ 49 18,485 Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans $ 13,693 53,896 Receipt of asset-backed investment securities as consideration from sale of loans $ — 58,182 Transfer of available-for-sale securities to restricted $ 8,262 — Distribution to noncontrolling interests $ 24,235 11,050 Issuance of noncontrolling interests $ 19,245 1,114 (a) The Company utilized $ 20.3 million and $ 13.9 million of federal and state tax credits related primarily to renewable energy during the six months ended June 30, 2024 and 2023, respectively. The following table presents a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total of the amounts reported in the consolidated statements of cash flows. As of As of As of As of June 30, 2024 December 31, 2023 June 30, 2023 December 31, 2022 Total cash and cash equivalents $ 145,478 168,112 121,769 118,146 Restricted cash 538,446 488,723 484,223 945,159 Restricted cash - due to customers 259,479 368,656 208,033 294,311 Cash, cash equivalents, and restricted cash $ 943,403 1,025,491 814,025 1,357,616 See accompanying notes to consolidated financial statements. 8 NELNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts, unless otherwise noted) (unaudited) 1. Basis of Financial Reporting The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2023 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results for the year ending December 31, 2024. The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report"). 2. Reclassifications and Immaterial Error Corrections During the second quarter of 2024, the Company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the June 30, 2024 presentation. Loan Sales The Company determined the reversal of provision for loan losses resulting from the sale of loans should be presented as a reduction to the provision for loan losses rather than the historical presentation as a gain/(loss) on sale of loans included in "other income (expense)" on the consolidated statements of income. Prior period amounts have been corrected to conform to the current period presentation resulting in a reclassification of $ 21.0 million and $ 43.1 million for the three and six months ended June 30, 2023, respectively. This correction had no impact on previously reported consolidated assets, liabilities, total equity, net income, and cash flows from operating activities. Solar Tax Equity Investments The Company relies on audited financial statements provided by third parties to record its share of earnings or losses on its solar tax equity investments. The Company determined that the Hypothetical Liquidation at Book Value (HLBV) method of accounting was not consistently adopted by all third parties in such audited financial statements for those solar tax equity investments made under a lease pass-through structure. The adoption of the HLBV method of accounting accelerates accounting losses in the initial years of the investment but has no impact on the overall economics of the transaction. During the second quarter of 2024, the Company fully adopted HLBV accounting for these investments and prior period amounts have been corrected, resulting in an increase in solar investment losses included in "other, net" in "other income (expense)" on the consolidated statements of income of $ 2.2 million and $ 3.2 million for the three and six months ended June 30, 2023, respectively, partially offset by an increase in "net loss attributed to noncontrolling interests" of $ 1.0 million and $ 1.3 million for the three and six months ended June 30, 2023, respectively. The after-tax net income impact to Nelnet, Inc. was a reduction of $ 0.8 million and $ 1.4 million for the three and six months ended June 30, 2023, respectively. Consolidated "total equity" on the consolidated balance sheet was reduced $ 21.8 million as of December 31, 2023 and $ 16.7 million as of December 31, 2022, with the 2022 impact reflecting the cumulative impact of this correction through such date. 9 3. Loans and Accrued Interest Receivable and Allowance for Loan Losses Loans and accrued interest receivable consisted of the following: As of As of June 30, 2024 December 31, 2023 Non-Nelnet Bank: Federally insured loans: Stafford and other $ 2,308,561 2,936,174 Consolidation 7,175,172 8,750,033 Total 9,483,733 11,686,207 Private education loans 247,437 277,320 Consumer and other loans 179,447 85,935 Non-Nelnet Bank loans 9,910,617 12,049,462 Nelnet Bank: Private education loans 354,412 360,520 Consumer and other loans 187,939 72,352 Nelnet Bank loans 542,351 432,872 Accrued interest receivable 619,472 764,385 Loan discount and deferred lender fees, net of unamortized loan premiums and deferred origination costs ( 36,157 ) ( 33,872 ) Allowance for loan losses: Non-Nelnet Bank: Federally insured loans ( 54,180 ) ( 68,453 ) Private education loans ( 13,065 ) ( 15,750 ) Consumer and other loans ( 14,135 ) ( 11,742 ) Non-Nelnet Bank allowance for loan losses ( 81,380 ) ( 95,945 ) Nelnet Bank: Private education loans ( 3,559 ) ( 3,347 ) Consumer and other loans ( 11,825 ) ( 5,351 ) Nelnet Bank allowance for loan losses ( 15,384 ) ( 8,698 ) $ 10,939,519 13,108,204 The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios. As of As of June 30, 2024 December 31, 2023 Non-Nelnet Bank: Federally insured loans (a) 0.57 % 0.59 % Private education loans 5.28 % 5.68 % Consumer and other loans (b) 7.88 % 13.66 % Nelnet Bank: Private education loans 1.00 % 0.93 % Consumer and other loans 6.29 % 7.40 % (a) As of June 30, 2024 and December 31, 2023, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty was 20.9 % and 21.8 %, respectively. (b) Decrease as of June 30, 2024 compared with December 31, 2023 is due to the change in the mix of loans outstanding at the end of each period reported. Loan Sales During the three months ended June 30, 2024 and 2023, the Company sold $ 133.8 million and $ 158.3 million, respectively, of consumer loans, and recognized losses from such sales of $ 1.4 million and $ 5.5 million, respectively. During the six months ended June 30, 2024 and 2023, the Company sold $ 333.9 million and $ 420.2 million, respectively, of FFELP and consumer loans, and recognized losses from such sales of $ 1.6 million and $ 15.8 million, respectively. For certain of these loan sales, the Company has sold portfolios of loans to unrelated third parties who securitized such loans. As partial consideration received for the loans sold, the Company received residual interest in the loan securitizations and asset-backed investment securities that are included in "investments and notes receivable" on the Company's consolidated balance sheets. 10 Activity in the Allowance for Loan Losses The following table presents the activity in the allowance for loan losses by portfolio segment. Balance at beginning of period Provision (negative provision) for loan losses (a) Charge-offs Recoveries Balance at end of period Three months ended June 30, 2024 Non-Nelnet Bank: Federally insured loans $ 61,723 ( 1,970 ) ( 5,573 ) — 54,180 Private education loans 14,736 — ( 1,827 ) 156 13,065 Consumer and other loans 18,761 ( 2,255 ) ( 2,634 ) 263 14,135 Nelnet Bank: Private education loans 3,660 255 ( 460 ) 104 3,559 Consumer and other loans 7,128 7,519 ( 2,837 ) 15 11,825 $ 106,008 3,549 ( 13,331 ) 538 96,764 Three months ended June 30, 2023 Non-Nelnet Bank: Federally insured loans $ 79,331 — ( 5,270 ) — 74,061 Private education loans 15,175 — ( 1,069 ) 216 14,322 Consumer and other loans 35,317 ( 12,873 ) ( 2,880 ) 441 20,005 Nelnet Bank: Federally insured loans 160 ( 4 ) ( 2 ) — 154 Private education loans 2,894 517 ( 506 ) — 2,905 Consumer and other loans 1,827 989 — — 2,816 $ 134,704 ( 11,371 ) ( 9,727 ) 657 114,263 Six months ended June 30, 2024 Non-Nelnet Bank: Federally insured loans $ 68,453 ( 3,840 ) ( 10,433 ) — 54,180 Private education loans 15,750 ( 265 ) ( 2,840 ) 420 13,065 Consumer and other loans 11,742 6,335 ( 4,586 ) 644 14,135 Nelnet Bank: Private education loans 3,347 1,012 ( 906 ) 106 3,559 Consumer and other loans 5,351 11,236 ( 4,804 ) 42 11,825 $ 104,643 14,478 ( 23,569 ) 1,212 96,764 Six months ended June 30, 2023 Non-Nelnet Bank: Federally insured loans $ 83,593 2,411 ( 11,943 ) — 74,061 Private education loans 15,411 240 ( 1,709 ) 380 14,322 Consumer and other loans 30,263 ( 5,770 ) ( 5,149 ) 661 20,005 Nelnet Bank: Federally insured loans 170 ( 12 ) ( 4 ) — 154 Private education loans 2,390 1,129 ( 614 ) — 2,905 Consumer and other loans — 2,816 — — 2,816 $ 131,827 814 ( 19,419 ) 1,041 114,263 11 (a) The following table presents the reduction to provision for loan losses as a result of the loan sales described under "Loan Sales" above. Provision for current period Loan sale reduction to provision Provision (negative provision) for loan losses Three months ended June 30, 2024 Non-Nelnet Bank Consumer and other loans $ 10,340 ( 12,595 ) ( 2,255 ) Three months ended June 30, 2023 Non-Nelnet Bank Consumer and other loans $ 8,098 ( 20,971 ) ( 12,873 ) Six months ended June 30, 2024 Non-Nelnet Bank Consumer and other loans $ 19,030 ( 12,695 ) 6,335 Six months ended June 30, 2023 Non-Nelnet Bank Consumer and other loans $ 37,307 ( 43,077 ) ( 5,770 ) The following table summarizes annualized net charge-offs as a percentage of average loans for each of the Company's loan portfolios. Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Non-Nelnet Bank: Federally insured loans 0.22 % 0.16 % 0.19 % 0.18 % Private education loans 2.64 % 1.45 % 1.85 % 1.11 % Consumer and other loans 4.62 % 4.07 % 4.98 % 3.22 % Nelnet Bank: Federally insured loans — 0.01 % — 0.01 % Private education loans 0.40 % 0.57 % 0.44 % 0.35 % Consumer and other loans 7.44 % — 7.66 % — The primary items impacting provision for loan losses during the periods presented above were the establishment of an initial allowance for consumer and other loans originated and acquired and the reversal of provision for consumer and other loans sold. The Company recorded a negative provision for loan losses for its federally insured loan portfolio in 2024 due to the amortization of this portfolio and an increase in prepayment assumptions. Unfunded Loan Commitments As of June 30, 2024 and December 31, 2023, Nelnet Bank had a liability of approximately $ 119,000 and $ 158,000 , respectively, related to $ 11.5 million and $ 12.3 million, respectively, of unfunded private education, consumer, and other loan commitments. When a new loan commitment is made, the Company records an allowance that is included in "other liabilities" on the consolidated balance sheet by recording a provision for loan losses. When the loan is funded, the Company transfers the liability to the allowance for loan losses. Below is a reconciliation of the provision for loan losses reported in the consolidated statements of income. Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Provision for loan losses from allowance activity table above $ 3,549 ( 11,371 ) 14,478 814 Provision (negative provision) for unfunded loan commitments 62 ( 9 ) ( 38 ) ( 23 ) Provision (negative provision) for loan losses reported in consolidated statements of income $ 3,611 ( 11,380 ) 14,440 791 12 Key Credit Quality Indicators Loan Status and Delinquencies Key credit quality indicators for the Company’s federally insured, private education, consumer, and other loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The following table presents the Company’s loan status and delinquency amounts. As of June 30, 2024 As of December 31, 2023 As of June 30, 2023 Federally insured loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ 440,891 4.6 % $ 522,304 4.5 % $ 612,357 4.8 % Loans in forbearance 702,539 7.4 979,588 8.4 930,629 7.3 Loans in repayment status: Loans current 7,012,655 84.1 % 8,416,624 82.6 % 9,609,634 85.2 % Loans delinquent 31-60 days 339,262 4.1 377,108 3.7 496,953 4.4 Loans delinquent 61-90 days 234,746 2.8 254,553 2.5 360,728 3.2 Loans delinquent 91-120 days 151,447 1.8 187,145 1.9 157,685 1.4 Loans delinquent 121-270 days 377,660 4.5 685,829 6.7 457,100 4.1 Loans delinquent 271 days or greater 224,533 2.7 263,056 2.6 194,656 1.7 Total loans in repayment 8,340,303 88.0 100.0 % 10,184,315 87.1 100.0 % 11,276,756 87.9 100.0 % Total federally insured loans 9,483,733 100.0 % 11,686,207 100.0 % 12,819,742 100.0 % Accrued interest receivable 612,374 757,713 810,489 Loan discount, net of unamortized premiums and deferred origination costs ( 24,222 ) ( 28,963 ) ( 33,764 ) Allowance for loan losses ( 54,180 ) ( 68,453 ) ( 74,061 ) Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 10,017,705 $ 12,346,504 $ 13,522,406 Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ 7,906 3.2 % $ 9,475 3.4 % $ 10,440 4.6 % Loans in forbearance 2,248 0.9 2,529 0.9 1,874 0.8 Loans in repayment status: Loans current 230,512 97.1 % 257,639 97.1 % 212,522 97.6 % Loans delinquent 31-60 days 2,814 1.2 3,395 1.3 1,643 0.7 Loans delinquent 61-90 days 1,395 0.6 1,855 0.7 1,253 0.6 Loans delinquent 91 days or greater 2,562 1.1 2,427 0.9 2,324 1.1 Total loans in repayment 237,283 95.9 100.0 % 265,316 95.7 100.0 % 217,742 94.6 100.0 % Total private education loans 247,437 100.0 % 277,320 100.0 % 230,056 100.0 % Accrued interest receivable 2,407 2,653 2,196 Loan discount, net of unamortized premiums ( 7,194 ) ( 8,037 ) 183 Allowance for loan losses ( 13,065 ) ( 15,750 ) ( 14,322 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 229,585 $ 256,186 $ 218,113 Consumer and other loans - Non-Nelnet Bank: Loans in deferment $ 122 0.1 % $ 146 0.2 % $ 102 0.1 % Loans in repayment status: Loans current 174,295 97.2 % 81,195 94.6 % 181,864 96.1 % Loans delinquent 31-60 days 2,100 1.2 2,035 2.4 2,794 1.5 Loans delinquent 61-90 days 1,857 1.0 1,189 1.4 2,533 1.3 Loans delinquent 91 days or greater 1,073 0.6 1,370 1.6 2,034 1.1 Total loans in repayment 179,325 99.9 100.0 % 85,789 99.8 100.0 % 189,225 99.9 100.0 % Total consumer and other loans 179,447 100.0 % 85,935 100.0 % 189,327 100.0 % Accrued interest receivable 763 861 2,246 Loan discount and deferred lender fees, net of unamortized premiums ( 9,205 ) ( 2,474 ) 750 Allowance for loan losses ( 14,135 ) ( 11,742 ) ( 20,005 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 156,870 $ 72,580 $ 172,318 13 As of June 30, 2024 As of December 31, 2023 As of June 30, 2023 Private education loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 41,394 11.7 % $ 25,957 7.2 % $ 16,996 4.8 % Loans in forbearance 1,985 0.6 1,285 0.4 1,797 0.5 Loans in repayment status: Loans current 308,591 99.2 % 331,580 99.4 % 332,205 99.6 % Loans delinquent 30-59 days 934 0.3 839 0.3 691 0.2 Loans delinquent 60-89 days 444 0.2 253 0.1 241 0.1 Loans delinquent 90 days or greater 1,064 0.3 606 0.2 389 0.1 Total loans in repayment 311,033 87.7 100.0 % 333,278 92.4 100.0 % 333,526 94.7 100.0 % Total private education loans 354,412 100.0 % 360,520 100.0 % 352,319 100.0 % Accrued interest receivable 2,709 2,023 1,591 Deferred origination costs, net of unaccreted discount 5,501 5,608 5,366 Allowance for loan losses ( 3,559 ) ( 3,347 ) ( 2,905 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 359,063 $ 364,804 $ 356,371 Consumer and other loans - Nelnet Bank (a): Loans in deferment $ 1,414 0.8 % $ 103 0.1 % $ 6 0.0 % Loans in repayment status: Loans current 181,558 97.3 % 69,584 96.3 % 30,120 98.2 % Loans delinquent 30-59 days 1,516 0.8 1,075 1.5 277 0.9 Loans delinquent 60-89 days 1,814 1.0 941 1.3 205 0.7 Loans delinquent 90 days or greater 1,637 0.9 649 0.9 60 0.2 Total loans in repayment 186,525 99.2 100.0 % 72,249 99.9 100.0 % 30,662 100.0 100.0 % Total consumer and other loans 187,939 100.0 % 72,352 100.0 % 30,668 100.0 % Accrued interest receivable 1,219 575 214 Loan discount, net of unamortized premiums ( 1,037 ) ( 6 ) — Allowance for loan losses ( 11,825 ) ( 5,351 ) ( 2,816 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 176,296 $ 67,570 $ 28,066 (a) For the periods presented for Nelnet Bank, the delinquency bucket periods conform with the delinquency bucket periods reflected in Nelnet Bank's Call Reports filed with the Federal Deposit Insurance Corporation. FICO Scores An additional key credit quality indicator for Nelnet Bank private education and consumer loans is FICO scores at the time of origination. The following tables highlight the gross principal balance of Nelnet Bank's portfolios, by year of origination, stratified by FICO score at the time of origination. Nelnet Bank Private Education Loans Loan balance as of June 30, 2024 Six months ended June 30, 2024 2023 2022 2021 2020 Total FICO at origination: Less than 705 $ 451 3,957 5,200 4,413 374 14,395 705 - 734 950 9,658 20,984 8,167 513 40,272 735 - 764 1,149 9,307 31,511 13,673 1,318 56,958 765 - 794 860 6,543 49,268 25,720 1,286 83,677 Greater than 794 1,760 17,464 72,638 53,755 4,801 150,418 No FICO score available or required (a) 2,610 6,082 — — — 8,692 $ 7,780 53,011 179,601 105,728 8,292 354,412 14 Loan balance as of December 31, 2023 2023 2022 2021 2020 Total FICO at origination: Less than 705 $ 3,840 5,495 4,647 386 14,368 705 - 734 9,534 21,961 8,805 525 40,825 735 - 764 8,648 32,969 14,910 1,358 57,885 765 - 794 5,776 52,045 27,221 1,374 86,416 Greater than 794 15,057 77,996 58,695 5,226 156,974 No FICO score available or required (a) 4,052 — — — 4,052 $ 46,907 190,466 114,278 8,869 360,520 Nelnet Bank Consumer and Other Loans Loan balance as of June 30, 2024 Six months ended June 30, 2024 2023 2022 2021 2020 Prior years Total FICO at origination: Less than 720 $ 13,041 17,016 — 1,360 1,625 1,800 34,842 720 - 769 41,116 30,354 25 6,888 5,793 3,464 87,640 Greater than 769 35,957 19,243 106 4,899 2,262 1,062 63,529 No FICO score available or required (a) 1,153 440 281 54 — — 1,928 $ 91,267 67,053 412 13,201 9,680 6,326 187,939 Loan balance as of December 31, 2023 2023 2022 2021 2020 Prior years Total FICO at origination: Less than 720 $ 21,412 — — — — 21,412 720 - 769 33,571 51 — — — 33,622 Greater than 769 16,484 109 — — — 16,593 No FICO score available or required (a) 386 284 55 — — 725 $ 71,853 444 55 — — 72,352 (a) Loans with no FICO score available or required refers to loans issued to borrowers for which the Company cannot obtain a FICO score or are not required to under a special purpose credit program. Management proactively assesses the risk and size of this loan category and, when necessary, takes actions to mitigate the credit risk. Nonaccrual Status The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of June 30, 2024 and December 31, 2023, was not material. 15 Amortized Cost Basis by Origination Year The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of June 30, 2024 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all the Company’s federally insured loans were originated prior to July 1, 2010. Six months ended June 30, 2024 2023 2022 2021 2020 Prior years Total Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ — — 657 3,325 713 3,211 7,906 Loans in forbearance — — 356 140 429 1,323 2,248 Loans in repayment status: Loans current — 207 4,053 5,141 42,508 178,603 230,512 Loans delinquent 31-60 days — — 13 45 380 2,376 2,814 Loans delinquent 61-90 days — — 7 8 167 1,213 1,395 Loans delinquent 91 days or greater — — — 7 115 2,440 2,562 Total loans in repayment — 207 4,073 5,201 43,170 184,632 237,283 Total private education loans $ — 207 5,086 8,666 44,312 189,166 247,437 Accrued interest receivable 2,407 Loan discount, net of unamortized premiums ( 7,194 ) Allowance for loan losses ( 13,065 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 229,585 Gross charge-offs - six months ended June 30, 2024 $ — — — 76 36 2,728 2,840 Consumer and other loans - Non-Nelnet Bank: Loans in deferment $ — 122 — — — — 122 Loans in repayment status: Loans current 131,766 37,985 3,624 526 283 111 174,295 Loans delinquent 31-60 days 160 1,394 433 103 7 3 2,100 Loans delinquent 61-90 days 42 1,158 649 8 — — 1,857 Loans delinquent 91 days or greater 14 852 176 14 17 — 1,073 Total loans in repayment 131,982 41,389 4,882 651 307 114 179,325 Total consumer and other loans $ 131,982 41,511 4,882 651 307 114 179,447 Accrued interest receivable 763 Loan discount and deferred lender fees, net of unamortized premiums ( 9,205 ) Allowance for loan losses ( 14,135 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 156,870 Gross charge-offs - six months ended June 30, 2024 $ — 2,611 1,678 213 23 61 4,586 Private education loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 5,107 25,688 8,993 674 932 — 41,394 Loans in forbearance 24 149 1,274 430 108 — 1,985 Loans in repayment status: Loans current 2,629 26,518 168,736 103,612 7,096 — 308,591 Loans delinquent 30-59 days 17 292 96 420 109 — 934 Loans delinquent 60-89 days 3 159 217 65 — — 444 Loans delinquent 90 days or greater — 205 285 527 47 — 1,064 Total loans in repayment 2,649 27,174 169,334 104,624 7,252 — 311,033 Total private education loans $ 7,780 53,011 179,601 105,728 8,292 — 354,412 Accrued interest receivable 2,709 Deferred origination costs, net of unaccreted discount 5,501 Allowance for loan losses ( 3,559 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 359,063 Gross charge-offs - six months ended June 30, 2024 $ — 324 348 234 — — 906 16 Six months ended June 30, 2024 2023 2022 2021 2020 Prior years Total Consumer and other loans - Nelnet Bank (a): Loans in deferment $ 1,308 106 — — — — 1,414 Loans in repayment status: Loans current 89,467 62,838 412 12,980 9,656 6,205 181,558 Loans delinquent 30-59 days 146 1,247 — 57 6 60 1,516 Loans delinquent 60-89 days 223 1,459 — 92 — 40 1,814 Loans delinquent 90 days or greater 123 1,403 — 72 18 21 1,637 Total loans in repayment 89,959 66,947 412 13,201 9,680 6,326 186,525 Total consumer and other loans $ 91,267 67,053 412 13,201 9,680 6,326 187,939 Accrued interest receivable 1,219 Loan discount, net of unamortized premiums ( 1,037 ) Allowance for loan losses ( 11,825 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 176,296 Gross charge-offs - six months ended June 30, 2024 $ 73 4,724 — — — 7 4,804 (a) For the periods presented for Nelnet Bank, the delinquency bucket periods conform with the delinquency bucket periods reflected in Nelnet Bank's Call Reports filed with the Federal Deposit Insurance Corporation. 17 4. Bonds and Notes Payable The following tables summarize the Company’s outstanding debt obligations by type of instrument: As of June 30, 2024 Carrying amount Interest rate range Final maturity Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations: Bonds and notes based on indices $ 7,945,989 5.46 % - 7.46 % 8/26/30 - 9/25/69 Bonds and notes based on auction 75,735 0.00 % - 6.45 % 3/22/32 - 11/26/46 Total FFELP variable-rate bonds and notes 8,021,724 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 389,462 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP loan warehouse facilities 964,196 5.41 % - 5.53 % 7/15/25 / 4/1/26 Consumer loan warehouse facility 6,760 5.54 % 11/14/25 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 65,683 6.90 % / 7.59 % 6/25/49 / 11/25/53 Fixed-rate bonds and notes issued in private education loan asset-backed securitizations 63,203 5.35 % / 7.15 % 12/28/43 / 11/25/53 Unsecured line of credit — — 9/22/26 Participation agreements 7,728 5.58 % - 6.08 % 5/4/25 / 1/30/33 Repurchase agreement 111,189 6.44 % - 6.75 % 11/27/24 / 12/20/24 Other - due to related party 4,856 5.00 % 11/15/28 - 11/15/30 9,634,801 Discount on bonds and notes payable and debt issuance costs ( 67,093 ) Total $ 9,567,708 As of December 31, 2023 Carrying amount Interest rate range Final maturity Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations: Bonds and notes based on indices $ 9,552,667 5.45 % - 7.47 % 8/26/30 - 9/25/69 Bonds and notes based on auction 87,360 0.00 % - 6.45 % 3/22/32 - 11/26/46 Total FFELP variable-rate bonds and notes 9,640,027 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 471,427 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP loan warehouse facilities 1,398,485 5.41 % - 5.70 % 4/2/25 / 5/22/25 Consumer loan warehouse facility 23,691 5.70 % 11/14/25 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 80,393 6.90 % / 7.57 % 6/25/49 / 11/25/53 Fixed-rate bonds and notes issued in private education loan asset-backed securitizations 80,130 5.35 % / 7.15 % 12/28/43 / 11/25/53 Unsecured line of credit — — 9/22/26 Participation agreements 10,063 5.58 % - 6.08 % 3/12/24 / 5/4/24 Repurchase agreement 208,164 6.35 % - 6.81 % 1/22/24 - 12/20/24 Other - due to related party 5,778 5.00 % - 6.05 % 3/1/24 - 11/15/30 11,918,158 Discount on bonds and notes payable and debt issuance costs ( 89,765 ) Total $ 11,828,393 18 Warehouse Facilities The Company funds a portion of its loan acquisitions using warehouse facilities. Loan warehousing allows the Company to buy and manage loans prior to transferring them into more permanent financing arrangements. The following table summarizes the Company's warehouse facilities as of June 30, 2024. Type of loans Maximum financing amount Amount outstanding Amount available Expiration of liquidity provisions Final maturity date Advance rate Advanced as equity support FFELP (a) $ 875,000 643,034 231,966 7/15/2024 7/15/2025 note (b) $ 45,502 FFELP (c) 375,000 321,162 53,838 4/1/2025 4/1/2026 92 % 26,539 $ 1,250,000 964,196 285,804 $ 72,041 Consumer (d) $ 150,000 6,760 143,240 11/14/2024 11/14/2025 70 % $ 1,781 (a) Effective March 6, 2024, the maximum financing amount on this facility was reduced from $ 1.25 billion to $ 950 million. On May 17, 2024, this facility was amended to reduce the maximum financing amount from $ 950 million to $ 875 million, and to extend the expiration of liquidity provisions and final maturity date to July 15, 2024 and July 15, 2025, respectively. On July 15, 2024, this facility was amended to reduce the maximum financing amount from $ 875 million to $ 800 million, and to extend the expiration of liquidity provisions and final maturity date to January 31, 2025 and January 31, 2026, respectively. (b) This facility has a static advance rate until the expiration date of the liquidity provisions. The maximum advance rates for this facility are 90 % to 96 %, and the minimum advance rates are 84 % to 90 %. In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor. The loans would then be funded at this new advance rate until the final maturity date of the facility. (c) On April 2, 2024, this facility was amended to reduce the maximum financing amount from $ 432 million to $ 375 million, and to extend the expiration of liquidity provisions and final maturity date to April 1, 2025 and April 1, 2026, respectively. (d) On March 11, 2024, this facility was amended to reduce the maximum financing amount from $ 200 million to $ 150 million. Unsecured Line of Credit The Company has a $ 495.0 million unsecured line of credit that has a maturity date of September 22, 2026. As of June 30, 2024, no amount was outstanding on the line of credit and $ 495.0 million was available for future use. Repurchase Agreement The Company has a repurchase agreement with a non-affiliated third party, the proceeds of which are collateralized by certain private education loan asset-backed securities (bond investments). The outstanding balance under this agreement as of June 30, 2024 was $ 111.2 million. The agreement has various maturity dates through December 20, 2024 or earlier if either party provides 180 days’ prior written notice, and the Company is subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities on any scheduled reset date. See note 6 for additional information about the private education loan asset-backed securities investments serving as collateral for this repurchase agreement. Debt Repurchases 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. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. As of June 30, 2024, the Company holds $ 311.7 million (par value) of its own FFELP asset-backed securities. In April 2023, the Company redeemed $ 188.6 million of FFELP loan asset-backed debt securities (bonds and notes payable) prior to their maturity. The remaining unamortized debt discount associated with these bonds at the time of redemption was written-off, resulting in a $ 25.9 million non-cash expense recognized in April 2023. This expense is included in "interest expense on bonds and notes payable and bank deposits" on the consolidated statements of income. 19 5. Derivative Financial Instruments Non-Nelnet Bank Derivatives The Company uses settled-to-market derivative financial instruments to manage interest rate risk. Derivative instruments used as part of the Company's interest rate risk management strategy are further described in note 5 of the notes to consolidated financial statements included in the 2023 Annual Report. A tabular presentation of such derivatives outstanding as of June 30, 2024 and December 31, 2023 is presented below. Basis Swaps The following table summarizes the Company’s outstanding basis swaps, in which the Company receives and pays the term adjusted Secured Overnight Financing Rate (SOFR) plus the tenor spread adjustment to LIBOR. Prior to the discontinuation of LIBOR on June 30, 2023, the Company received three-month LIBOR set discretely in advance and paid one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps"). Maturity Notional amount As of As of June 30, 2024 December 31, 2023 2024 $ — 1,750,000 2026 1,150,000 1,150,000 2027 250,000 250,000 $ 1,400,000 3,150,000 The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2024 and December 31, 2023 was the term adjusted SOFR (plus the tenor spread adjustment relating to LIBOR) plus 10.4 basis points and 10.1 basis points, respectively. Interest Rate Swaps – Floor Income Hedges The following table summarizes the outstanding derivative instruments used by the Company as of June 30, 2024 and December 31, 2023 to economically hedge loans earning fixed rate floor income. Maturity Notional amount Weighted average fixed rate paid by the Company (a) 2026 $ 200,000 3.92 % 2028 50,000 3.56 2029 (b) 50,000 3.17 2030 (c) 100,000 3.63 $ 400,000 3.71 % (a) For all interest rate derivatives, the Company receives payments based on SOFR, the majority of which reset quarterly. (b) This $ 50 million notional amount derivative has a forward effective start date in January 2026. (c) A $ 50 million notional amount derivative maturing in 2030 has a forward effective start date in November 2025. During the first quarter of 2023, the Company received $ 183.2 million, which included $ 19.1 million related to 2023 settlements, to terminate $ 2.8 billion in notional amount of floor income interest rate swaps prior to their final maturity. 20 Nelnet Bank Derivatives Interest Rate Swaps The following table summarizes the outstanding non-centrally cleared derivative instruments used by Nelnet Bank as of June 30, 2024 and December 31, 2023 to hedge exposure to variability in cash flows related to variable rate intercompany deposits. Maturity Notional amount Weighted average fixed rate paid by the Company (a) 2028 $ 40,000 3.33 % 2030 (b) 50,000 3.06 2032 (c) 25,000 4.03 2033 (d) 25,000 3.90 $ 140,000 3.46 % (a) For all interest rate derivatives, the Company receives payments based on SOFR that reset monthly or quarterly. (b) These $ 25 million notional amount derivatives have forward effective start dates in April 2026 and May 2026, respectively. (c) This $ 25 million notional amount derivative has a forward effective start date in February 2027. (d) This $ 25 million notional amount derivative has a forward effective start date in November 2025. Consolidated Financial Statement Impact Related to Derivatives Balance Sheets Unlike the Company's Non-Nelnet Bank derivatives, Nelnet Bank's derivatives are not cleared post-execution at a regulated clearinghouse. As such, the Company records these derivative instruments in the consolidated balance sheets on a gross basis as either an asset (included in "other assets") or liability (included in "other liabilities") measured at fair value. The following table summarizes the fair value of the Company's Nelnet Bank derivatives as reflected in the consolidated balance sheets. Fair value of asset derivatives Fair value of liability derivatives As of June 30, 2024 As of December 31, 2023 As of June 30, 2024 As of December 31, 2023 Interest rate swaps - Nelnet Bank $ 2,112 452 780 1,976 Statements of Income The following table summarizes the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income. Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Settlements: 1:3 basis swaps $ 249 ( 65 ) 614 794 Interest rate swaps - floor income hedges 1,193 47 2,383 22,525 Interest rate swaps - Nelnet Bank 207 83 409 83 Total settlements - income 1,649 65 3,406 23,402 Change in fair value: 1:3 basis swaps ( 232 ) 235 ( 586 ) 211 Interest rate swaps - floor income hedges 1,168 662 7,228 ( 36,726 ) Interest rate swaps - Nelnet Bank 597 1,108 2,855 1,108 Total change in fair value - income (expense) 1,533 2,005 9,497 ( 35,407 ) Derivative market value adjustments and derivative settlements, net - income (expense) $ 3,182 2,070 12,903 ( 12,005 ) 21 6. Investments and Notes Receivable "Restricted investments" and “investments and notes receivable” consisted of the following: As of June 30, 2024 As of December 31, 2023 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value Restricted available-for-sale investments (at fair value): FFELP loan and other debt securities $ 47,968 2,473 ( 83 ) 50,358 16,993 1,069 ( 93 ) 17,969 Non-restricted available-for-sale investments (at fair value): Non-Nelnet Bank: FFELP loan $ 220,076 6,910 ( 1,450 ) 225,536 271,479 4,883 ( 5,393 ) 270,969 Private education loan (a) 258,390 — ( 22,442 ) 235,948 281,791 — ( 28,874 ) 252,917 Other debt securities 33,673 2,042 — 35,715 41,693 2,020 ( 1,275 ) 42,438 Total Non-Nelnet Bank 512,139 8,952 ( 23,892 ) 497,199 594,963 6,903 ( 35,542 ) 566,324 Nelnet Bank: FFELP loan (b) 227,124 8,090 ( 1,350 ) 233,864 304,555 4,488 ( 2,286 ) 306,757 Private education loan — — — — 17,083 20 ( 10 ) 17,093 Other debt securities 158,609 917 ( 1,418 ) 158,108 49,284 117 ( 1,641 ) 47,760 Total Nelnet Bank 385,733 9,007 ( 2,768 ) 391,972 370,922 4,625 ( 3,937 ) 371,610 Total available-for-sale asset-backed securities $ 897,872 17,959 ( 26,660 ) 889,171 965,885 11,528 ( 39,479 ) 937,934 Equity securities 59,621 50,907 Total investments at fair value 948,792 988,841 Other Investments and Notes Receivable (not measured at fair value): Held-to-maturity investments Non-Nelnet Bank: Debt securities 3,500 4,700 Nelnet Bank: FFELP loan asset-backed securities (b) 217,283 149,938 Private education loan asset-backed securities 8,100 8,100 Total Nelnet Bank 225,383 158,038 Total held-to-maturity investments 228,883 162,738 Venture capital and funds: Measurement alternative 196,803 194,084 Equity method 114,800 91,464 Total venture capital and funds 311,603 285,548 Real estate: Equity method 125,989 103,811 Investment in ALLO: Voting interest/equity method (c) — 10,693 Preferred membership interest and accrued and unpaid preferred return (d) 176,092 155,047 Total investment in ALLO 176,092 165,740 Beneficial interest in loan securitizations (e): Consumer loans, net of allowance for credit losses of $ 5,911 as of June 30, 2024 163,853 134,113 Private education loans 59,326 68,372 Federally insured student loans 20,790 22,594 Total beneficial interest in loan securitizations 243,969 225,079 Solar (f) ( 176,105 ) ( 146,040 ) Notes receivable 28,565 53,747 Tax liens, affordable housing, and other 8,645 7,243 Total investments (not measured at fair value) 947,641 857,866 Total investments and notes receivable $ 1,896,433 $ 1,846,707 22 (a) A portion of the private education loan asset-backed securities were subject to a repurchase agreement with a third party, as discussed in note 4 under "Repurchase Agreement." As of June 30, 2024, the par value and fair value of these securities was $ 148.1 million and $ 130.7 million, respectively. (b) On May 22, 2024, securities at Nelnet Bank with a fair value of $ 70.6 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 May 22, 2024 included pre-tax unrealized gains of $ 3.4 million related to the transfer. These unrealized gains will be amortized, consistent with the amortization of any premiums on such securities, over the remaining lives of the respective securities as an adjustment of yield. (c) The Company accounts for its voting membership interests in ALLO under the Hypothetical Liquidation at Book Value (HLBV) method of accounting. Under the HLBV method of accounting on its ALLO voting membership interests investment, the Company recognized no losses and $ 12.2 million of losses during the three months ended June 30, 2024 and 2023, respectively, and losses of $ 10.7 million and $ 32.4 million during the six months ended June 30, 2024 and 2023, respectively. Losses from the Company's investment in ALLO are included in "other, net" in "other income (expense)" on the consolidated statements of income. Absent additional equity contributions with respect to ALLO's voting membership interests, the Company will not recognize additional losses for its voting membership interests in ALLO. (d) As of June 30, 2024, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 169.5 million and $ 6.6 million, respectively. The Company historically earned a preferred annual return of 6.25 % that increased to 10.00 % on April 1, 2024 for $ 155.0 million of preferred membership interests of ALLO held by the Company. During the second quarter of 2024, the Company purchased an additional $ 14.5 million of preferred membership interests of ALLO, which earn a preferred annual return of 20.0 %. The Company recognized income on its ALLO preferred membership interests of $ 4.2 million and $ 2.3 million during the three months ended June 30, 2024 and 2023, respectively, and $ 6.6 million and $ 4.5 million during the six months ended June 30, 2024 and 2023, respectively. This income is included in "other, net" in "other income (expense)" on the consolidated statements of income. (e) The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations. As of the latest remittance reports filed by the various trusts prior to or as of June 30, 2024, the Company's ownership correlates to approximately $ 1.12 billion, $ 500 million, and $ 315 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations. During the three months ended June 30, 2024, the Company recorded a $ 5.9 million allowance for credit losses (and related provision expense) related to certain of the Company's beneficial interest in consumer loan securitizations. As of June 30, 2024, the Company's estimate of future cash flows from the beneficial interest in certain consumer loan securitizations was lower than previously anticipated due to increased consumer loan defaults within such securitizations. (f) As of June 30, 2024, the Company has funded a total of $ 502.8 million in solar investments that remain outstanding, which includes $ 219.8 million funded by syndication partners. The carrying value of the Company’s investment in a solar project is reduced by tax credits earned when the solar project is placed-in-service. As of June 30, 2024, the Company has earned a total of $ 474.4 million of tax credits on those projects that remain outstanding, which includes $ 218.4 million earned by syndication partners. The solar investment negative carrying value on the consolidated balance sheet of $ 176.1 million as of June 30, 2024 represents the sum of total tax credits earned on solar projects placed-in-service through June 30, 2024 and the calculated HLBV cumulative net losses being larger than the total investment contributions made by the Company and its syndication partners on such projects. The solar investment negative carrying value as of June 30, 2024 excluding the portion owned by syndication partners, which is reflected as "noncontrolling interests" on the consolidated balance sheet, was $ 84.0 million. The Company accounts for its solar investments using the HLBV method of accounting. For the majority of the Company’s solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. The following table presents (i) the Company's recognized net (losses) gains, which include net losses attributable to third-party noncontrolling interest investors (syndication partners), included in “other, net” in "other income (expense)" on the consolidated statements of income, (ii) solar net gains (losses) attributed to noncontrolling interest investors included in “net loss attributable to noncontrolling interests” on the consolidated statements of income, and (iii) the Company's recognized net (losses) gains excluding net gains (losses) attributed to noncontrolling interest investors (such amount reflecting the before tax net income impact of such solar tax equity investments to the Company). Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Net (losses) gains $ ( 2,610 ) ( 10,086 ) 170 ( 13,030 ) Less: net gains (losses) attributed to noncontrolling interest investors (syndication partners) 8 ( 8,430 ) ( 1,633 ) ( 11,428 ) Net (losses) gains, excluding activity attributed to noncontrolling interest investors $ ( 2,618 ) ( 1,656 ) 1,803 ( 1,602 ) As of June 30, 2024, the Company is committed to fund an additional $ 125.7 million on solar investments, of which $ 83.0 million is expected to be provided by syndication partners. 23 The following table presents, by remaining contractual maturity, the amortized cost and fair value of debt securities as of June 30, 2024: As of June 30, 2024 1 year or less After 1 year through 5 years After 5 years through 10 years After 10 years Total Available-for-sale asset-backed securities Restricted Investments: FFELP loan and other debt securities $ — 9,263 4,015 34,690 47,968 Fair value — 9,295 4,049 37,014 50,358 Non-Nelnet Bank: FFELP loan — 4,285 13,866 201,925 220,076 Private education loan — — — 258,390 258,390 Other debt securities — 100 4,000 29,573 33,673 Total Non-Nelnet Bank — 4,385 17,866 489,888 512,139 Fair value — 4,428 17,748 475,023 497,199 Nelnet Bank: FFELP loan 53,474 21,141 23,908 128,601 227,124 Other debt securities — 33,107 16,374 109,128 158,609 Total Nelnet Bank 53,474 54,248 40,282 237,729 385,733 Fair value 54,336 54,254 40,457 242,925 391,972 Total available-for-sale asset-backed securities at amortized cost $ 53,474 67,896 62,163 762,307 945,840 Total available-for-sale asset-backed securities at fair value $ 54,336 67,977 62,254 754,962 939,529 Held-to-maturity investments Non-Nelnet Bank: Debt securities $ 3,500 — — — 3,500 Fair value 3,500 — — — 3,500 Nelnet Bank: FFELP loan asset-backed securities — 3,041 1,278 212,964 217,283 Private education loan asset-backed securities — — — 8,100 8,100 Total Nelnet Bank — 3,041 1,278 221,064 225,383 Fair value — 3,129 1,304 226,330 230,763 Total held-to-maturity investments at amortized cost $ 3,500 3,041 1,278 221,064 228,883 Total held-to-maturity investments at fair value $ 3,500 3,129 1,304 226,330 234,263 Beneficial interest in loan securitizations (a): Amortized cost $ — — — — 243,969 Fair value $ — — — — 261,850 (a) The Company's beneficial interest in loan securitizations are not due at a single maturity date. 24 The following table summarizes the unrealized positions for held-to-maturity investments and the beneficial interest in loan securitizations as of June 30, 2024: Carrying value Gross unrealized gains Gross unrealized losses (a) Fair value Asset-backed and other securities $ 228,883 5,380 — 234,263 Beneficial interest in loan securitizations 243,969 20,512 ( 2,631 ) 261,850 (a) None of the unrealized losses presented in the above table at June 30, 2024 were due to credit losses. The following table presents securities classified as available-for-sale that have gross unrealized losses at June 30, 2024 and the fair value of such securities as of June 30, 2024. These securities are segregated between investments that had been in a continuous unrealized loss position for less than twelve months and twelve months or more, based on the point in time that the fair value declined below the amortized cost basis. All securities in the table below have been evaluated to determine if a credit loss exists. As part of that assessment, the Company concluded it currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses. As of June 30, 2024 Unrealized loss position less than 12 months Unrealized loss position 12 months or more Total Unrealized loss Fair value Unrealized loss Fair value Unrealized loss Fair value Available-for-sale asset-backed securities Restricted Investments: FFELP loan and other debt securities $ ( 83 ) 8,167 — — ( 83 ) 8,167 Non-Nelnet Bank: FFELP loan ( 7 ) 3,494 ( 1,443 ) 79,320 ( 1,450 ) 82,814 Private education loan — — ( 22,442 ) 235,948 ( 22,442 ) 235,948 Total Non-Nelnet Bank ( 7 ) 3,494 ( 23,885 ) 315,268 ( 23,892 ) 318,762 Nelnet Bank: FFELP loan ( 35 ) 9,694 ( 1,315 ) 34,871 ( 1,350 ) 44,565 Other debt securities ( 42 ) 13,098 ( 1,376 ) 16,598 ( 1,418 ) 29,696 Total Nelnet Bank ( 77 ) 22,792 ( 2,691 ) 51,469 ( 2,768 ) 74,261 Total available-for-sale asset-backed securities $ ( 167 ) 34,453 ( 26,576 ) 366,737 ( 26,743 ) 401,190 The following table summarizes the gross proceeds received and gross realized gains and losses related to sales of available-for-sale asset-backed securities. Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Gross proceeds from sales $ 113,173 85,375 266,547 577,548 Gross realized gains $ 1,516 920 2,571 2,194 Gross realized losses ( 463 ) ( 2 ) ( 966 ) ( 6,258 ) Net gains (losses) $ 1,053 918 1,605 ( 4,064 ) 25 7. Intangible Assets Intangible assets consisted of the following: Weighted average remaining useful life as of June 30, 2024 (months) As of As of June 30, 2024 December 31, 2023 Amortizable intangible assets, net: Customer relationships (net of accumulated amortization of $ 50,661 and $ 46,573 , respectively) 100 $ 38,943 43,031 Trade names (net of accumulated amortization of $ 167 and $ 8,268 , respectively) 94 603 642 Computer software (net of accumulated amortization of $ 745 and $ 574 , respectively) 34 975 1,146 Total amortizable intangible assets, net 98 $ 40,521 44,819 The Company recorded amortization expense on its intangible assets of $ 2.1 million and $ 3.5 million for the three months ended June 30, 2024 and 2023, respectively, and $ 4.3 million and $ 6.2 million during the six months ended June 30, 2024 and 2023, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of June 30, 2024, the Company estimates it will record amortization expense as follows: 2024 (July 1 - December 31) $ 4,193 2025 6,099 2026 6,012 2027 5,714 2028 5,354 2029 and thereafter 13,149 $ 40,521 8. Goodwill The following table presents the carrying amount of goodwill as of June 30, 2024 and December 31, 2023 by reportable operating segment: Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Total Total goodwill $ 23,639 92,507 41,883 — — — 158,029 26 9. Impairment Expense, Provision for Beneficial Interests, and Restructure Charges Impairment Expense and Provision for Beneficial Interests The following table presents the non-cash impairment charges by asset and reportable operating segment recognized by the Company during 2024. No impairment charges were recognized during the first six months of 2023. The Company’s impairment charges are included in “impairment expense and provision for beneficial interests” in the consolidated statements of income. Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Total Three months ended June 30, 2024 Investments - beneficial interest in consumer loan securitizations (a) $ — — 5,911 — — — 5,911 Property and equipment - solar facilities (b) — — — — — 1,170 1,170 Other assets - solar inventory (b) — — — — — 695 695 $ — — 5,911 — — 1,865 7,776 Six months ended June 30, 2024 Investments - beneficial interest in consumer loan securitizations (a) $ — — 5,911 — — — 5,911 Investments - venture capital — — — — — 37 37 Property and equipment - solar facilities (b) — — — — — 1,170 1,170 Other assets - solar inventory (b) — — — — — 695 695 $ — — 5,911 — — 1,902 7,813 (a) During the three months ended June 30, 2024, the Company recorded an allowance for credit losses (and related provision expense) related to the Company's beneficial interest in consumer loan securitizations. See note 6 for additional information. (b) On April 12, 2024, the Company announced a change in its solar engineering, procurement, and construction (EPC) operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations. As a result, during the three months ended June 30, 2024, the Company recognized non-cash impairment charges on certain solar facilities and inventory related to the residential solar operations. Restructure Charges GRNE Solar 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. The restructuring plan included a reduction in headcount of approximately 40 associates. The Company incurred a restructure charge of $ 1.6 million related to these staff reductions and commissions paid for canceled contracts, which is included in "salaries and benefits" in the consolidated statements of income. Loan Servicing and Systems (LSS) In June 2024, the Company announced a reduction in headcount after the completion of the transfer of direct loan servicing volume to one platform and the required servicing platform enhancements for the Company's new student loan servicing contract with the Department of Education. Approximately 220 associates who work in LSS, including some in related shared services that support LSS, were notified their positions were being eliminated. The Company estimates incurring a charge of $ 7.1 million related to these staff reductions, of which $ 2.1 million was recognized in the second quarter of 2024, which is included in "salaries and benefits" in the consolidated statements of income. The remaining expense will be recognized during the third and fourth quarters of 2024. 27 10. Bank Deposits The following table summarizes Nelnet Bank’s interest-bearing deposits, excluding intercompany deposits: As of As of June 30, 2024 December 31, 2023 Retail and other savings $ 622,080 520,017 Brokered CDs, net of brokered deposit fees 246,156 203,522 Retail and other CDs, net of issuance fees 22,236 20,060 Total interest-bearing deposits $ 890,472 743,599 As of June 30, 2024 and December 31, 2023, Nelnet Bank had intercompany deposits from Nelnet, Inc. and its subsidiaries totaling $ 143.0 million and $ 104.0 million, respectively, including a $ 40.0 million pledged deposit from Nelnet, Inc. as required under a Capital and Liquidity Maintenance Agreement with the FDIC. All intercompany deposits held at Nelnet Bank are eliminated for consolidated financial reporting purposes. The following table presents certificates of deposit remaining maturities as of June 30, 2024: One year or less $ 982 After one year to two years 149,045 After two years to three years 75,172 After three years to four years 348 After four years to five years 42,845 After five years — Total $ 268,392 Retail and other savings deposits include deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trust (STFIT), and consumer savings. These deposits are large interest-bearing omnibus accounts structured to allow FDIC insurance to flow through to underlying individual depositors. The deposits exceeding the FDIC insurance limits as of June 30, 2024, was $ 44.9 million, which includes a portion of the pledged deposit from Nelnet, Inc., and an earmarked deposit required for intercompany transactions. 28 11. Earnings per Common Share The following table presents the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Three months ended June 30, 2024 2023 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 44,239 852 45,091 26,842 584 27,426 Denominator: Weighted-average common shares outstanding - basic and diluted 35,835,387 690,095 36,525,482 36,670,933 797,464 37,468,397 Earnings per share - basic and diluted $ 1.23 1.23 1.23 0.73 0.73 0.73 Six months ended June 30, 2024 2023 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 116,178 2,320 118,498 52,270 1,115 53,385 Denominator: Weighted-average common shares outstanding - basic and diluted 36,119,876 721,351 36,841,227 36,625,819 781,024 37,406,843 Earnings per share - basic and diluted $ 3.22 3.22 3.22 1.43 1.43 1.43 29 12. Segment Reporting See note 16 of the notes to consolidated financial statements included in the 2023 Annual Report for a description of the Company's operating segments. The following tables present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements. Three months ended June 30, 2024 Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Eliminations Total Interest income: Loan interest $ — — 193,707 8,422 — — — 202,129 Investment interest 1,258 5,715 13,709 10,811 15,880 2,646 ( 9,282 ) 40,737 Total interest income 1,258 5,715 207,416 19,233 15,880 2,646 ( 9,282 ) 242,866 Interest expense — — 171,632 10,769 2,606 733 ( 9,282 ) 176,459 Net interest income 1,258 5,715 35,784 8,464 13,274 1,913 — 66,407 Less provision (negative provision) for loan losses — — ( 4,225 ) 7,836 — — — 3,611 Net interest income after provision for loan losses 1,258 5,715 40,009 628 13,274 1,913 — 62,796 Other income (expense): Loan servicing and systems revenue 109,052 — — — — — — 109,052 Intersegment revenue 6,106 56 — — — — ( 6,162 ) — Education technology services and payments revenue — 116,909 — — — — — 116,909 Solar construction revenue — — — — — 9,694 — 9,694 Other, net 685 — 1,337 775 15,702 10,372 — 28,871 Loss on sale of loans — — ( 1,438 ) — — — — ( 1,438 ) Impairment expense and provision for beneficial interests — — ( 5,911 ) — — ( 1,865 ) — ( 7,776 ) Derivative settlements, net — — 1,442 207 — — — 1,649 Derivative market value adjustments, net — — 936 597 — — — 1,533 Total other income (expense), net 115,843 116,965 ( 3,634 ) 1,579 15,702 18,201 ( 6,162 ) 258,494 Cost of services: Cost to provide education technology services and payments — 40,222 — — — — — 40,222 Cost to provide solar construction services — — — — — 8,072 — 8,072 Total cost of services — 40,222 — — — 8,072 — 48,294 Operating expenses: Salaries and benefits 70,631 40,736 1,113 2,798 374 24,786 ( 804 ) 139,634 Depreciation and amortization 5,342 2,712 — 341 — 6,748 — 15,142 Other expenses 20,661 8,600 3,793 2,067 11,829 12,842 — 59,792 Intersegment expenses, net 18,224 4,811 7,159 719 248 ( 25,803 ) ( 5,358 ) — Total operating expenses 114,858 56,859 12,065 5,925 12,451 18,573 ( 6,162 ) 214,568 Income (loss) before income taxes 2,243 25,599 24,310 ( 3,718 ) 16,525 ( 6,531 ) — 58,428 Income tax (expense) benefit ( 538 ) ( 6,150 ) ( 5,835 ) 916 ( 3,935 ) 788 — ( 14,753 ) Net income (loss) 1,705 19,449 18,475 ( 2,802 ) 12,590 ( 5,743 ) — 43,675 Net loss (income) attributable to noncontrolling interests — 29 — — ( 129 ) 1,516 — 1,416 Net income (loss) attributable to Nelnet, Inc. $ 1,705 19,478 18,475 ( 2,802 ) 12,461 ( 4,227 ) — 45,091 Total assets as of June 30, 2024 $ 264,381 478,077 11,315,210 1,185,302 1,038,068 778,549 ( 558,394 ) 14,501,193 30 Three months ended June 30, 2023 Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Eliminations Total Interest income: Loan interest $ — — 237,906 5,139 — — — 243,045 Investment interest 1,058 5,268 15,857 8,522 22,800 3,055 ( 15,578 ) 40,982 Total interest income 1,058 5,268 253,763 13,661 22,800 3,055 ( 15,578 ) 284,027 Interest expense — — 232,313 8,171 7,371 871 ( 15,578 ) 233,148 Net interest income 1,058 5,268 21,450 5,490 15,429 2,184 — 50,879 Less provision (negative provision) for loan losses — — ( 12,873 ) 1,493 — — — ( 11,380 ) Net interest income after provision for loan losses 1,058 5,268 34,323 3,997 15,429 2,184 — 62,259 Other income (expense): Loan servicing and systems revenue 122,020 — — — — — — 122,020 Intersegment revenue 7,246 65 — — — — ( 7,311 ) — Education technology services and payments revenue — 109,858 — — — — — 109,858 Solar construction revenue — — — — — 4,735 — 4,735 Other, net 605 — 1,319 620 5,967 ( 17,677 ) — ( 9,167 ) Loss on sale of loans — — ( 5,461 ) — — — — ( 5,461 ) Impairment expense and provision for beneficial interests — — — — — — — — Derivative settlements, net — — ( 18 ) 83 — — — 65 Derivative market value adjustments, net — — 897 1,108 — — — 2,005 Total other income (expense), net 129,871 109,923 ( 3,263 ) 1,811 5,967 ( 12,942 ) ( 7,311 ) 224,055 Cost of services: Cost to provide education technology services and payments — 40,407 — — — — — 40,407 Cost to provide solar construction services — — — — — 9,122 — 9,122 Total cost of services — 40,407 — — — 9,122 — 49,529 Operating expenses: Salaries and benefits 76,141 38,351 1,096 2,297 210 26,756 ( 145 ) 144,706 Depreciation and amortization 4,863 2,815 — 51 — 10,923 — 18,652 Other expenses 13,818 9,692 4,115 1,624 4,134 12,613 — 45,997 Intersegment expenses, net 19,079 5,884 8,145 92 127 ( 26,161 ) ( 7,166 ) — Total operating expenses 113,901 56,742 13,356 4,064 4,471 24,131 ( 7,311 ) 209,355 Income (loss) before income taxes 17,028 18,042 17,704 1,744 16,925 ( 44,011 ) — 27,430 Income tax (expense) benefit ( 4,086 ) ( 4,327 ) ( 4,249 ) ( 396 ) ( 4,031 ) 6,902 — ( 10,187 ) Net income (loss) 12,942 13,715 13,455 1,348 12,894 ( 37,109 ) — 17,243 Net loss (income) attributable to noncontrolling interests — ( 19 ) — — ( 128 ) 10,330 — 10,183 Net income (loss) attributable to Nelnet, Inc. $ 12,942 13,696 13,455 1,348 12,766 ( 26,779 ) — 27,426 Total assets as of June 30, 2023 $ 173,926 482,922 14,667,357 1,005,043 1,099,212 970,987 ( 613,757 ) 17,785,690 31 Six months ended June 30, 2024 Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Eliminations Total Interest income: Loan interest $ — — 403,335 15,518 — — — 418,853 Investment interest 3,152 13,580 35,544 20,779 31,495 6,461 ( 18,197 ) 92,814 Total interest income 3,152 13,580 438,879 36,297 31,495 6,461 ( 18,197 ) 511,667 Interest expense — — 362,537 20,266 5,024 1,409 ( 18,197 ) 371,039 Net interest income 3,152 13,580 76,342 16,031 26,471 5,052 — 140,628 Less provision (negative provision) for loan losses — — 2,230 12,210 — — — 14,440 Net interest income after provision for loan losses 3,152 13,580 74,112 3,821 26,471 5,052 — 126,188 Other income (expense): Loan servicing and systems revenue 236,252 — — — — — — 236,252 Intersegment revenue 12,991 106 — — — — ( 13,097 ) — Education technology services and payments revenue — 260,449 — — — — — 260,449 Solar construction revenue — — — — — 23,420 — 23,420 Other, net 1,395 — 6,321 1,150 28,644 8,224 — 45,734 Loss on sale of loans — — ( 1,579 ) — — — — ( 1,579 ) Impairment expense and provision for beneficial interests — — ( 5,911 ) — — ( 1,902 ) — ( 7,813 ) Derivative settlements, net — — 2,997 409 — — — 3,406 Derivative market value adjustments, net — — 6,642 2,855 — — — 9,497 Total other income (expense), net 250,638 260,555 8,470 4,414 28,644 29,742 ( 13,097 ) 569,366 Cost of services: Cost to provide education technology services and payments — 88,832 — — — — — 88,832 Cost to provide solar construction services — — — — — 22,300 — 22,300 Total cost of services — 88,832 — — — 22,300 — 111,132 Operating expenses: Salaries and benefits 147,353 80,903 2,308 5,518 732 48,307 ( 1,611 ) 283,509 Depreciation and amortization 10,450 5,395 — 601 — 15,464 — 31,911 Other expenses 40,198 16,158 7,210 3,194 23,632 26,243 — 116,637 Intersegment expenses, net 37,555 9,612 15,009 1,493 465 ( 52,648 ) ( 11,486 ) — Total operating expenses 235,556 112,068 24,527 10,806 24,829 37,366 ( 13,097 ) 432,057 Income (loss) before income taxes 18,234 73,235 58,055 ( 2,571 ) 30,286 ( 24,872 ) — 152,365 Income tax (expense) benefit ( 4,376 ) ( 17,585 ) ( 13,933 ) 657 ( 7,209 ) 4,511 — ( 37,936 ) Net income (loss) 13,858 55,650 44,122 ( 1,914 ) 23,077 ( 20,361 ) — 114,429 Net loss (income) attributable to noncontrolling interests — 46 — — ( 249 ) 4,272 — 4,069 Net income (loss) attributable to Nelnet, Inc. $ 13,858 55,696 44,122 ( 1,914 ) 22,828 ( 16,089 ) — 118,498 Total assets as of June 30, 2024 $ 264,381 478,077 11,315,210 1,185,302 1,038,068 778,549 ( 558,394 ) 14,501,193 32 Six months ended June 30, 2023 Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Eliminations Total Interest income: Loan interest $ — — 458,818 9,471 — — — 468,288 Investment interest 2,095 11,304 29,664 16,449 41,460 5,594 ( 24,860 ) 81,707 Total interest income 2,095 11,304 488,482 25,920 41,460 5,594 ( 24,860 ) 549,995 Interest expense — — 421,511 15,385 19,198 1,362 ( 24,860 ) 432,597 Net interest income 2,095 11,304 66,971 10,535 22,262 4,232 — 117,398 Less provision (negative provision) for loan losses — — ( 3,119 ) 3,910 — — — 791 Net interest income after provision for loan losses 2,095 11,304 70,090 6,625 22,262 4,232 — 116,607 Other income (expense): Loan servicing and systems revenue 261,247 — — — — — — 261,247 Intersegment revenue 15,036 121 — — — — ( 15,157 ) — Education technology services and payments revenue — 243,462 — — — — — 243,462 Solar construction revenue — — — — — 13,386 — 13,386 Other, net 1,213 — 4,164 830 5,226 ( 35,667 ) — ( 24,235 ) Loss on sale of loans — — ( 15,753 ) — — — — ( 15,753 ) Impairment expense and provision for beneficial interests — — — — — — — — Derivative settlements, net — — 23,319 83 — — — 23,402 Derivative market value adjustments, net — — ( 36,515 ) 1,108 — — — ( 35,407 ) Total other income (expense), net 277,496 243,583 ( 24,785 ) 2,021 5,226 ( 22,281 ) ( 15,157 ) 466,102 Cost of services: Cost to provide education technology services and payments — 88,110 — — — — — 88,110 Cost to provide solar construction services — — — — — 17,422 — 17,422 Total cost of services — 88,110 — — — 17,422 — 105,532 Operating expenses: Salaries and benefits 160,701 76,264 1,851 4,361 429 53,955 ( 145 ) 297,416 Depreciation and amortization 9,377 5,393 — 56 — 20,454 — 35,279 Other expenses 27,131 17,755 9,131 2,406 4,701 25,657 — 86,781 Intersegment expenses, net 40,136 11,684 16,841 173 256 ( 54,078 ) ( 15,012 ) — Total operating expenses 237,345 111,096 27,823 6,996 5,386 45,988 ( 15,157 ) 419,476 Income (loss) before income taxes 42,246 55,681 17,482 1,650 22,102 ( 81,459 ) — 57,701 Income tax (expense) benefit ( 10,139 ) ( 13,393 ) ( 4,196 ) ( 362 ) ( 5,240 ) 15,056 — ( 18,273 ) Net income (loss) 32,107 42,288 13,286 1,288 16,862 ( 66,403 ) — 39,428 Net loss (income) attributable to noncontrolling interests — 119 — — ( 269 ) 14,107 — 13,957 Net income (loss) attributable to Nelnet, Inc. $ 32,107 42,407 13,286 1,288 16,593 ( 52,296 ) — 53,385 Total assets as of June 30, 2023 $ 173,926 482,922 14,667,357 1,005,043 1,099,212 970,987 ( 613,757 ) 17,785,690 33 13. Disaggregated Revenue The following tables present disaggregated revenue by service offering or customer type for the Company's fee-based operating segments. Loan Servicing and Systems Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Government loan servicing $ 87,014 95,736 192,490 204,618 Private education and consumer loan servicing 12,959 12,063 25,577 24,225 FFELP loan servicing 3,245 3,554 6,624 6,921 Software services 4,879 5,962 9,420 15,660 Outsourced services 955 4,705 2,141 9,823 Loan servicing and systems revenue $ 109,052 122,020 236,252 261,247 Education Technology Services and Payments Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Tuition payment plan services $ 34,164 30,825 73,043 65,012 Payment processing 34,326 31,827 82,113 75,868 Education technology services 47,205 46,216 103,227 101,004 Other 1,214 990 2,066 1,578 Education technology services and payments revenue $ 116,909 109,858 260,449 243,462 Solar Construction Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Commercial revenue $ 8,777 2,329 20,355 8,205 Residential revenue (a) 917 2,406 3,065 5,181 Solar construction revenue $ 9,694 4,735 23,420 13,386 (a) On April 12, 2024, the Company announced a change in its solar engineering, procurement, and construction operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations. As a result, residential revenue will continue to decline from recent historical amounts as existing customer contracts are completed. Other Income (Expense) The following table presents the components of "other, net" in "other income (expense)" on the consolidated statements of income: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Reinsurance premiums $ 14,851 3,816 27,631 4,351 ALLO preferred return 4,160 2,274 6,569 4,523 Borrower late fee income 2,584 2,168 5,718 4,414 Investment advisory services (WRCM) 1,524 1,639 3,033 3,251 Administration/sponsor fee income 1,482 1,697 3,028 3,468 Investment activity, net 217 ( 3,574 ) ( 1,082 ) ( 7,154 ) Loss from ALLO voting membership interest investment — ( 12,169 ) ( 10,693 ) ( 32,382 ) (Loss) gain from solar investments, net ( 2,610 ) ( 10,086 ) 170 ( 13,030 ) Other 6,663 5,068 11,360 8,324 Other, net $ 28,871 ( 9,167 ) 45,734 ( 24,235 ) 34 14. Major Customer Government Loan Servicing Nelnet Servicing, a subsidiary of the Company, earns loan servicing revenue from a servicing contract with the Department of Education (the "Department"). Revenue earned by the Company related to this contract was $ 87.0 million and $ 95.7 million for the three months ended June 30, 2024 and 2023, respectively, and $ 192.5 million and $ 204.6 million for the six months ended June 30, 2024 and 2023, respectively. 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 was allocated by the Department to Nelnet Servicing and four other third-party servicers that were awarded a USDS contract. 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. Servicing under the New Government Servicing Contract went live on April 1, 2024 and the Company recognized 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 began earning 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 this servicer. 15. Fair Value The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. As of June 30, 2024 As of December 31, 2023 Level 1 Level 2 Total Level 1 Level 2 Total Assets: Investments: Asset-backed debt securities - available-for-sale $ 100 939,429 939,529 99 955,804 955,903 Equity securities 187 — 187 73 — 73 Equity securities measured at net asset value (a) 59,434 50,834 Total investments 287 939,429 999,150 172 955,804 1,006,810 Derivative instruments — 2,112 2,112 — 452 452 Total assets $ 287 941,541 1,001,262 172 956,256 1,007,262 Liabilities: Derivative instruments $ — 780 780 — 1,976 1,976 Total liabilities $ — 780 780 — 1,976 1,976 (a) In accordance with the Fair Value Measurements Topic of the FASB Accounting Standards Codification, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. 35 The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets: As of June 30, 2024 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 10,902,478 10,320,047 — — 10,902,478 Accrued loan interest receivable 619,472 619,472 — 619,472 — Cash and cash equivalents 145,478 145,478 145,478 — — Investments (at fair value) 999,150 999,150 287 939,429 — Investments - held-to-maturity 234,263 228,883 — 234,263 — Notes receivable 28,565 28,565 — 28,565 — Beneficial interest in loan securitizations 261,850 243,969 — — 261,850 Restricted cash 538,446 538,446 538,446 — — Restricted cash – due to customers 259,479 259,479 259,479 — — Derivative instruments 2,112 2,112 — 2,112 — Financial liabilities: Bonds and notes payable 9,560,951 9,567,708 — 9,560,951 — Accrued interest payable 27,141 27,141 — 27,141 — Bank deposits 869,437 890,472 575,265 294,172 — Due to customers 388,876 388,876 388,876 — — Derivative instruments 780 780 — 780 — As of December 31, 2023 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 12,800,638 12,343,819 — — 12,800,638 Accrued loan interest receivable 764,385 764,385 — 764,385 — Cash and cash equivalents 168,112 168,112 168,112 — — Investments (at fair value) 1,006,810 1,006,810 172 955,804 — Investments - held-to-maturity 163,622 162,738 — 163,622 — Notes receivable 53,747 53,747 — 53,747 — Beneficial interest in loan securitizations 262,093 225,079 — — 262,093 Restricted cash 488,723 488,723 488,723 — — Restricted cash – due to customers 368,656 368,656 368,656 — — Derivative instruments 452 452 — 452 — Financial liabilities: Bonds and notes payable 11,629,359 11,828,393 — 11,629,359 — Accrued interest payable 35,391 35,391 — 35,391 — Bank deposits 722,973 743,599 467,420 255,553 — Due to customers 425,507 425,507 425,507 — — Derivative instruments 1,976 1,976 — 1,976 — The methodologies for estimating the fair value of financial assets and liabilities are described in note 23 of the notes to consolidated financial statements included in the 2023 Annual Report.