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 September 30, 2024 December 31, 2023 Assets: Loans and accrued interest receivable (net of allowance for loan losses of $ 102,142 and $ 104,643 , respectively) $ 10,572,881 13,108,204 Cash and cash equivalents: Cash and cash equivalents - not held at a related party 90,731 34,912 Cash and cash equivalents - held at a related party 128,953 133,200 Total cash and cash equivalents 219,684 168,112 Investments and notes receivable (including investments at fair value of $ 996,385 and $ 988,841 , respectively) 1,903,561 1,846,707 Restricted cash 344,366 488,723 Restricted cash - due to customers 334,968 368,656 Restricted investments 49,755 17,969 Accounts receivable (net of allowance for doubtful accounts of $ 3,675 and $ 4,304 , respectively) 153,638 196,200 Goodwill 158,029 158,029 Intangible assets, net 38,371 44,819 Property and equipment, net 124,575 127,008 Other assets 184,300 187,957 Total assets $ 14,084,128 16,712,384 Liabilities: Bonds and notes payable $ 8,938,446 11,828,393 Accrued interest payable 25,389 35,391 Bank deposits 1,070,758 743,599 Other liabilities 434,938 479,387 Due to customers 404,459 425,507 Total liabilities 10,873,990 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 25,627,446 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 4,179 3,096 Retained earnings 3,287,541 3,270,403 Accumulated other comprehensive loss, net ( 1,431 ) ( 20,119 ) Total Nelnet, Inc. shareholders' equity 3,290,652 3,253,751 Noncontrolling interests ( 80,514 ) ( 53,644 ) Total equity 3,210,138 3,200,107 Total liabilities and equity $ 14,084,128 16,712,384 Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities: Loans and accrued interest receivable $ 9,842,750 12,676,932 Restricted cash 323,936 451,932 Bonds and notes payable ( 9,182,445 ) ( 12,006,170 ) Accrued interest payable and other liabilities ( 98,744 ) ( 135,748 ) Net assets of consolidated education and other lending variable interest entities $ 885,497 986,946 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 Nine months ended September 30, September 30, 2024 2023 2024 2023 Interest income: Loan interest $ 190,211 236,423 609,064 704,712 Investment interest 50,272 48,128 143,086 129,835 Total interest income 240,483 284,551 752,150 834,547 Interest expense on bonds and notes payable and bank deposits 168,328 207,159 539,367 639,756 Net interest income 72,155 77,392 212,783 194,791 Less provision for loan losses 18,111 4,275 32,551 5,065 Net interest income after provision for loan losses 54,044 73,117 180,232 189,726 Other income (expense): Loan servicing and systems revenue 108,175 127,892 344,428 389,138 Education technology services and payments revenue 118,179 113,796 378,627 357,258 Solar construction revenue 19,321 6,301 42,741 19,687 Other, net 32,325 ( 3,062 ) 78,057 ( 27,297 ) Loss on sale of loans ( 107 ) ( 1,022 ) ( 1,685 ) ( 16,776 ) Impairment expense and provision for beneficial interests ( 29,052 ) ( 4,974 ) ( 36,865 ) ( 4,974 ) Derivative market value adjustments and derivative settlements, net ( 11,525 ) 3,957 1,378 ( 8,047 ) Total other income (expense), net 237,316 242,888 806,681 708,989 Cost of services: Cost to provide education technology services and payments 45,273 43,694 134,106 131,804 Cost to provide solar construction services 26,815 7,783 49,115 25,204 Total cost of services 72,088 51,477 183,221 157,008 Operating expenses: Salaries and benefits 146,192 141,204 429,701 438,620 Depreciation and amortization 13,661 21,835 45,572 57,114 Other expenses 61,642 51,370 178,278 138,154 Total operating expenses 221,495 214,409 653,551 633,888 (Loss) income before income taxes ( 2,223 ) 50,119 150,141 107,819 Income tax (benefit) expense ( 282 ) 10,512 37,653 28,785 Net (loss) income ( 1,941 ) 39,607 112,488 79,034 Net loss attributable to noncontrolling interests 4,329 4,747 8,398 18,705 Net income attributable to Nelnet, Inc. $ 2,388 44,354 120,886 97,739 Earnings per common share: Net income attributable to Nelnet, Inc. shareholders - basic and diluted $ 0.07 1.18 3.29 2.61 Weighted average common shares outstanding - basic and diluted 36,430,485 37,498,073 36,703,314 37,437,587 See accompanying notes to consolidated financial statements. 3 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (unaudited) Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Net (loss) income $ ( 1,941 ) 39,607 112,488 79,034 Other comprehensive income (loss): Net changes related to foreign currency translation adjustments $ 23 ( 8 ) 6 ( 11 ) Net changes related to available-for-sale debt securities: Unrealized holding gains (losses) arising during period, net 2,656 ( 4,566 ) 28,291 12,734 Reclassification of (gains) losses recognized in net income, net ( 1,721 ) ( 1,064 ) ( 3,326 ) 3,001 Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity 64 66 186 136 Income tax effect ( 240 ) 759 1,335 ( 4,229 ) ( 6,036 ) 19,115 ( 3,810 ) 12,061 Net changes related to equity method investee's other comprehensive income: Gain (loss) on cash flow hedge 62 336 ( 570 ) ( 163 ) Income tax effect ( 15 ) 47 ( 80 ) 256 137 ( 433 ) 40 ( 123 ) Other comprehensive income (loss) 829 ( 3,981 ) 18,688 11,927 Comprehensive (loss) income ( 1,112 ) 35,626 131,176 90,961 Comprehensive loss attributable to noncontrolling interests 4,329 4,747 8,398 18,705 Comprehensive income attributable to Nelnet, Inc. $ 3,217 40,373 139,574 109,666 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 June 30, 2023 — 26,646,490 10,668,460 $ — 266 107 10,114 3,261,717 ( 21,458 ) ( 22,619 ) 3,228,127 Net income (loss) — — — — — — — 44,354 — ( 4,747 ) 39,607 Other comprehensive loss — — — — — — — — ( 3,981 ) — ( 3,981 ) Issuance of noncontrolling interests — — — — — — — — — 19,092 19,092 Distribution to noncontrolling interests — — — — — — — — — ( 40,057 ) ( 40,057 ) Cash dividends on Class A and Class B common stock - $ 0.26 per share — — — — — — — ( 9,701 ) — — ( 9,701 ) Issuance of common stock, net of forfeitures — 15,109 — — 1 — 499 — — — 500 Compensation expense for stock based awards — — — — — — 4,095 — — — 4,095 Repurchase of common stock — ( 5,948 ) — — — — ( 543 ) — — — ( 543 ) Balance as of September 30, 2023 — 26,655,651 10,668,460 $ — 267 107 14,165 3,296,370 ( 25,439 ) ( 48,331 ) 3,237,139 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 Net income (loss) — — — — — — — 2,388 — ( 4,329 ) ( 1,941 ) Other comprehensive income — — — — — — — — 829 — 829 Issuance of noncontrolling interests — — — — — — — — — 20,999 20,999 Distribution to noncontrolling interests — — — — — — — — — ( 23,145 ) ( 23,145 ) Cash dividends on Class A and Class B common stock - $ 0.28 per share — — — — — — — ( 10,148 ) — — ( 10,148 ) Issuance of common stock, net of forfeitures — 46,865 — — — — 1,230 — — — 1,230 Compensation expense for stock based awards — — — — — — 2,868 — — — 2,868 Repurchase of common stock — ( 5,259 ) — — — — ( 576 ) — — — ( 576 ) Balance as of September 30, 2024 — 25,627,446 10,663,088 $ — 256 107 4,179 3,287,541 ( 1,431 ) ( 80,514 ) 3,210,138 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 Net income (loss) — — — — — — — 97,739 — ( 18,705 ) 79,034 Other comprehensive income — — — — — — — — 11,927 — 11,927 Issuance of noncontrolling interests — — — — — — — — — 31,996 31,996 Distribution to noncontrolling interests — — — — — — — — — ( 53,026 ) ( 53,026 ) Cash dividends on Class A and Class B common stock - $ 0.78 per share — — — — — — — ( 29,049 ) — — ( 29,049 ) Issuance of common stock, net of forfeitures — 241,195 — — 2 — 5,618 — — — 5,620 Compensation expense for stock based awards — — — — — — 11,748 — — — 11,748 Repurchase of common stock — ( 47,195 ) — — — — ( 4,310 ) — — — ( 4,310 ) Balance as of September 30, 2023 — 26,655,651 10,668,460 $ — 267 107 14,165 3,296,370 ( 25,439 ) ( 48,331 ) 3,237,139 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 Net income (loss) — — — — — — — 120,886 — ( 8,398 ) 112,488 Other comprehensive income — — — — — — — — 18,688 — 18,688 Issuance of noncontrolling interests — — — — — — — — — 29,150 29,150 Distribution to noncontrolling interests — — — — — — — — — ( 49,715 ) ( 49,715 ) Cash dividends on Class A and Class B common stock - $ 0.84 per share — — — — — — — ( 30,676 ) — — ( 30,676 ) Issuance of common stock, net of forfeitures — 116,779 — — 1 — 4,526 — — — 4,527 Compensation expense for stock based awards — — — — — — 8,703 — — — 8,703 Repurchase of common stock — ( 889,963 ) — — ( 9 ) — ( 12,146 ) ( 70,732 ) — — ( 82,887 ) Acquisition of remaining 20 % of GRNE Solar, net of tax — — — — — — — ( 2,340 ) — 2,093 ( 247 ) Balance as of September 30, 2024 — 25,627,446 10,663,088 $ — 256 107 4,179 3,287,541 ( 1,431 ) ( 80,514 ) 3,210,138 See accompanying notes to consolidated financial statements. 6 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited) Nine months ended September 30, 2024 2023 Net income attributable to Nelnet, Inc. $ 120,886 97,739 Net loss attributable to noncontrolling interests ( 8,398 ) ( 18,705 ) Net income 112,488 79,034 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 106,022 128,658 Loan discount and deferred lender fees accretion ( 36,838 ) ( 22,527 ) Provision for loan losses 32,551 5,065 Derivative market value adjustments 3,668 32,266 Proceeds from termination of derivative instruments — 164,079 Payments to clearinghouse - initial and variation margin, net ( 4,404 ) ( 210,168 ) Loss on sale of loans 1,685 16,776 Loss on investments, net 6,595 73,296 Deferred income tax benefit ( 22,707 ) ( 25,403 ) Non-cash compensation expense 8,954 11,981 Impairment expense and provision for beneficial interests 36,865 2,588 Decrease in loan and investment accrued interest receivable 168,795 5,613 Decrease in accounts receivable 42,553 64,738 Decrease in other assets, net 48,059 7,069 Decrease in the carrying amount of ROU asset, net 2,857 3,859 (Decrease) increase in accrued interest payable ( 10,002 ) 342 (Decrease) increase in other liabilities ( 11,435 ) 19,132 Decrease in the carrying amount of lease liability ( 2,868 ) ( 3,908 ) Other ( 481 ) 75 Net cash provided by operating activities 482,357 352,565 Cash flows from investing activities: Purchases and originations of loans ( 611,595 ) ( 556,255 ) Purchases of loans from a related party ( 104,198 ) ( 467,554 ) Net proceeds from loan repayments, claims, and capitalized interest 2,745,084 1,910,379 Proceeds from sale of loans 291,693 341,760 Purchases of available-for-sale securities ( 391,018 ) ( 510,804 ) Purchases of restricted available-for-sale securities ( 23,288 ) — Proceeds from sales of available-for-sale securities 370,896 776,096 Proceeds from sales of restricted available-for-sale securities 1,280 — Proceeds from beneficial interest in loan securitizations 33,898 23,753 Purchases of other investments and issuance of notes receivable ( 287,590 ) ( 179,632 ) Proceeds from other investments and repayments of notes receivable 79,095 30,417 Purchases of held-to-maturity debt securities — ( 11,325 ) Redemption of held-to-maturity debt securities 11,890 2,893 Purchases of property and equipment ( 38,280 ) ( 52,604 ) Net cash provided by investing activities $ 2,077,867 1,307,124 7 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Nine months ended September 30, 2024 2023 Cash flows from financing activities: Payments on bonds and notes payable $ ( 3,010,914 ) ( 2,996,916 ) Proceeds from issuance of bonds and notes payable 85,037 756,268 Payments of debt issuance costs ( 2,191 ) ( 2,233 ) Increase in bank deposits, net 327,159 26,731 Decrease in due to customers ( 21,185 ) ( 6,422 ) Dividends paid ( 30,676 ) ( 29,049 ) Repurchases of common stock ( 82,887 ) ( 4,310 ) Proceeds from issuance of common stock 1,424 1,315 Acquisition of noncontrolling interest ( 325 ) — Issuance of noncontrolling interests 51,245 32,581 Distribution to noncontrolling interests ( 3,587 ) ( 2,519 ) Net cash used in financing activities ( 2,686,900 ) ( 2,224,554 ) Effect of exchange rate changes on cash and restricted cash 203 ( 206 ) Net decrease in cash, cash equivalents, and restricted cash ( 126,473 ) ( 565,071 ) Cash, cash equivalents, and restricted cash, beginning of period 1,025,491 1,357,616 Cash, cash equivalents, and restricted cash, end of period $ 899,018 792,545 Supplemental disclosures of cash flow information: Cash disbursements made for interest $ 511,247 585,482 Cash disbursements made for income taxes, net of refunds and credits received (a) $ 13,441 45,444 Cash disbursements made for operating leases $ 3,615 5,029 Non-cash operating, investing, and financing activity: ROU assets obtained in exchange for lease obligations $ 1,048 18,860 Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans $ 13,799 63,878 Receipt of asset-backed investment securities as consideration from sale of loans $ 20,250 58,182 Transfer of available-for-sale securities to restricted investments $ 8,262 — Distribution to noncontrolling interests $ 46,128 50,508 Issuance of noncontrolling interests $ 22,095 585 (a) The Company utilized $ 34.0 million and $ 49.0 million of federal and state tax credits related primarily to renewable energy during the nine months ended September 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 September 30, 2024 December 31, 2023 September 30, 2023 December 31, 2022 Total cash and cash equivalents $ 219,684 168,112 187,690 118,146 Restricted cash 344,366 488,723 445,983 945,159 Restricted cash - due to customers 334,968 368,656 158,872 294,311 Cash, cash equivalents, and restricted cash $ 899,018 1,025,491 792,545 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 September 30, 2024 and for the three and nine months ended September 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 nine months ended September 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 September 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 $ 6.4 million and $ 49.5 million for the three and nine months ended September 30, 2023, respectively. This correction had no impact on previously reported consolidated assets, liabilities, 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 $ 2.9 million and $ 6.0 million for the three and nine months ended September 30, 2023, respectively, partially offset by an increase in "net loss attributable to noncontrolling interests" of $ 1.7 million and $ 3.0 million for the three and nine months ended September 30, 2023, respectively. The after-tax net income impact to Nelnet, Inc. was a reduction of $ 1.0 million and $ 2.3 million for the three and nine months ended September 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 September 30, 2024 December 31, 2023 Non-Nelnet Bank: Federally insured loans: Stafford and other $ 2,202,590 2,936,174 Consolidation 6,868,152 8,750,033 Total 9,070,742 11,686,207 Private education loans 234,295 277,320 Consumer and other loans 244,552 85,935 Non-Nelnet Bank loans 9,549,589 12,049,462 Nelnet Bank: Private education loans 352,654 360,520 Consumer and other loans 207,218 72,352 Nelnet Bank loans 559,872 432,872 Accrued interest receivable 600,097 764,385 Loan discount and deferred lender fees, net of unamortized loan premiums and deferred origination costs ( 34,535 ) ( 33,872 ) Allowance for loan losses: Non-Nelnet Bank: Federally insured loans ( 50,834 ) ( 68,453 ) Private education loans ( 11,744 ) ( 15,750 ) Consumer and other loans ( 22,380 ) ( 11,742 ) Non-Nelnet Bank allowance for loan losses ( 84,958 ) ( 95,945 ) Nelnet Bank: Private education loans ( 3,670 ) ( 3,347 ) Consumer and other loans ( 13,514 ) ( 5,351 ) Nelnet Bank allowance for loan losses ( 17,184 ) ( 8,698 ) $ 10,572,881 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 September 30, 2024 December 31, 2023 Non-Nelnet Bank: Federally insured loans (a) 0.56 % 0.59 % Private education loans 5.01 % 5.68 % Consumer and other loans (b) 9.15 % 13.66 % Nelnet Bank: Private education loans 1.04 % 0.93 % Consumer and other loans (b) 6.52 % 7.40 % (a) As of September 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 20.7 % and 21.8 %, respectively. (b) Decrease as of September 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 September 30, 2024 and 2023, the Company sold $ 1.1 million and $ 61.8 million, respectively, of consumer loans, and recognized losses from such sales of $ 0.1 million and $ 1.0 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company sold $ 335.0 million and $ 482.0 million, respectively, of FFELP and consumer loans, and recognized losses from such sales of $ 1.7 million and $ 16.8 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 September 30, 2024 Non-Nelnet Bank: Federally insured loans $ 54,180 1,247 ( 4,593 ) — 50,834 Private education loans 13,065 ( 126 ) ( 1,414 ) 219 11,744 Consumer and other loans 14,135 10,847 ( 2,981 ) 379 22,380 Nelnet Bank: Private education loans 3,559 565 ( 892 ) 438 3,670 Consumer and other loans 11,825 5,326 ( 3,830 ) 193 13,514 $ 96,764 17,859 ( 13,710 ) 1,229 102,142 Three months ended September 30, 2023 Non-Nelnet Bank: Federally insured loans $ 74,061 1,641 ( 3,659 ) — 72,043 Private education loans 14,322 3,009 ( 571 ) 184 16,944 Consumer and other loans 20,005 ( 2,302 ) ( 4,115 ) 434 14,022 Nelnet Bank: Federally insured loans 154 ( 2 ) ( 4 ) — 148 Private education loans 2,905 220 ( 42 ) — 3,083 Consumer and other loans 2,816 1,554 ( 517 ) — 3,853 $ 114,263 4,120 ( 8,908 ) 618 110,093 Nine months ended September 30, 2024 Non-Nelnet Bank: Federally insured loans $ 68,453 ( 2,593 ) ( 15,026 ) — 50,834 Private education loans 15,750 ( 392 ) ( 4,254 ) 640 11,744 Consumer and other loans 11,742 17,184 ( 7,567 ) 1,021 22,380 Nelnet Bank: Private education loans 3,347 1,576 ( 1,796 ) 543 3,670 Consumer and other loans 5,351 16,563 ( 8,635 ) 235 13,514 $ 104,643 32,338 ( 37,278 ) 2,439 102,142 Nine months ended September 30, 2023 Non-Nelnet Bank: Federally insured loans $ 83,593 4,052 ( 15,602 ) — 72,043 Private education loans 15,411 3,249 ( 2,279 ) 563 16,944 Consumer and other loans 30,263 ( 8,073 ) ( 9,264 ) 1,096 14,022 Nelnet Bank: Federally insured loans 170 ( 15 ) ( 7 ) — 148 Private education loans 2,390 1,350 ( 657 ) — 3,083 Consumer and other loans — 4,370 ( 517 ) — 3,853 $ 131,827 4,933 ( 28,326 ) 1,659 110,093 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 September 30, 2024 Non-Nelnet Bank Consumer and other loans $ 11,026 ( 179 ) 10,847 Three months ended September 30, 2023 Non-Nelnet Bank Consumer and other loans $ 4,082 ( 6,384 ) ( 2,302 ) Nine months ended September 30, 2024 Non-Nelnet Bank Consumer and other loans $ 30,058 ( 12,874 ) 17,184 Nine months ended September 30, 2023 Non-Nelnet Bank Consumer and other loans $ 41,388 ( 49,461 ) ( 8,073 ) 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Non-Nelnet Bank: Federally insured loans 0.19 % 0.11 % 0.19 % 0.16 % Private education loans 1.97 % 0.61 % 1.89 % 0.94 % Consumer and other loans 4.81 % 9.57 % 4.92 % 4.59 % Nelnet Bank: Federally insured loans — 0.03 % — 0.01 % Private education loans 0.51 % 0.05 % 0.46 % 0.25 % Consumer and other loans 7.28 % 5.69 % 7.49 % 3.00 % 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. Unfunded Loan Commitments As of September 30, 2024 and December 31, 2023, Nelnet Bank had a liability of approximately $ 371,000 and $ 158,000 , respectively, related to $ 29.9 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 Nine months ended September 30, September 30, 2024 2023 2024 2023 Provision for loan losses from allowance activity table above $ 17,859 4,120 32,338 4,933 Provision for unfunded loan commitments 252 155 213 132 Provision for loan losses reported in consolidated statements of income $ 18,111 4,275 32,551 5,065 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. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the following tables, do not include those loans while they are in forbearance). The following table presents the Company’s loan status and delinquency amounts. As of September 30, 2024 As of December 31, 2023 As of September 30, 2023 Federally insured loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ 428,013 4.7 % $ 522,304 4.5 % $ 562,754 4.6 % Loans in forbearance 647,797 7.2 979,588 8.4 906,060 7.4 Loans in repayment status: Loans current 6,702,079 83.8 % 8,416,624 82.6 % 9,014,731 83.2 % Loans delinquent 31-60 days 348,833 4.4 377,108 3.7 441,016 4.1 Loans delinquent 61-90 days 190,379 2.4 254,553 2.5 301,028 2.8 Loans delinquent 91-120 days 148,417 1.9 187,145 1.9 213,245 2.0 Loans delinquent 121-270 days 419,730 5.2 685,829 6.7 648,924 6.0 Loans delinquent 271 days or greater 185,494 2.3 263,056 2.6 211,226 1.9 Total loans in repayment 7,994,932 88.1 100.0 % 10,184,315 87.1 100.0 % 10,830,170 88.0 100.0 % Total federally insured loans 9,070,742 100.0 % 11,686,207 100.0 % 12,298,984 100.0 % Accrued interest receivable 592,250 757,713 798,102 Loan discount, net of unamortized premiums and deferred origination costs ( 22,807 ) ( 28,963 ) ( 30,979 ) Allowance for loan losses ( 50,834 ) ( 68,453 ) ( 72,043 ) Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 9,589,351 $ 12,346,504 $ 12,994,064 Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ 7,504 3.2 % $ 9,475 3.4 % $ 11,373 3.9 % Loans in forbearance 1,979 0.8 2,529 0.9 2,280 0.8 Loans in repayment status: Loans current 218,425 97.2 % 257,639 97.1 % 271,948 97.4 % Loans delinquent 31-60 days 3,013 1.3 3,395 1.3 3,485 1.2 Loans delinquent 61-90 days 1,301 0.6 1,855 0.7 1,424 0.5 Loans delinquent 91 days or greater 2,073 0.9 2,427 0.9 2,494 0.9 Total loans in repayment 224,812 96.0 100.0 % 265,316 95.7 100.0 % 279,351 95.3 100.0 % Total private education loans 234,295 100.0 % 277,320 100.0 % 293,004 100.0 % Accrued interest receivable 2,248 2,653 2,750 Loan discount, net of unamortized premiums ( 6,772 ) ( 8,037 ) ( 8,069 ) Allowance for loan losses ( 11,744 ) ( 15,750 ) ( 16,944 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 218,027 $ 256,186 $ 270,741 Consumer and other loans - Non-Nelnet Bank: Loans in deferment $ 315 0.1 % $ 146 0.2 % $ 20 0.0 % Loans in repayment status: Loans current 239,128 97.9 % 81,195 94.6 % 137,744 95.9 % Loans delinquent 31-60 days 2,032 0.8 2,035 2.4 1,987 1.4 Loans delinquent 61-90 days 1,515 0.6 1,189 1.4 1,293 0.9 Loans delinquent 91 days or greater 1,562 0.7 1,370 1.6 2,589 1.8 Total loans in repayment 244,237 99.9 100.0 % 85,789 99.8 100.0 % 143,613 100.0 100.0 % Total consumer and other loans 244,552 100.0 % 85,935 100.0 % 143,633 100.0 % Accrued interest receivable 1,115 861 1,716 Loan discount and deferred lender fees, net of unamortized premiums ( 10,789 ) ( 2,474 ) ( 180 ) Allowance for loan losses ( 22,380 ) ( 11,742 ) ( 14,022 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 212,498 $ 72,580 $ 131,147 13 As of September 30, 2024 As of December 31, 2023 As of September 30, 2023 Private education loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 29,396 8.3 % $ 19,089 5.3 % $ 20,537 5.7 % Loans in forbearance 2,364 0.7 1,285 0.4 1,169 0.3 Loans in repayment status: Loans current 318,090 99.2 % 338,448 99.5 % 336,602 99.5 % Loans delinquent 30-59 days 1,075 0.3 839 0.2 691 0.2 Loans delinquent 60-89 days 723 0.2 253 0.1 428 0.1 Loans delinquent 90 days or greater 1,006 0.3 606 0.2 514 0.2 Total loans in repayment 320,894 91.0 100.0 % 340,146 94.3 100.0 % 338,235 94.0 100.0 % Total private education loans 352,654 100.0 % 360,520 100.0 % 359,941 100.0 % Accrued interest receivable 3,098 2,023 1,905 Deferred origination costs, net of unaccreted discount 5,786 5,608 5,578 Allowance for loan losses ( 3,670 ) ( 3,347 ) ( 3,083 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 357,868 $ 364,804 $ 364,341 Consumer and other loans - Nelnet Bank (a): Loans in deferment $ 3,073 1.5 % $ 103 0.1 % $ 95 0.2 % Loans in forbearance — — — — 32 0.1 Loans in repayment status: Loans current 198,613 97.3 % 69,584 96.3 % 48,358 97.7 % Loans delinquent 30-59 days 2,251 1.1 1,075 1.5 527 1.1 Loans delinquent 60-89 days 1,497 0.7 941 1.3 306 0.6 Loans delinquent 90 days or greater 1,784 0.9 649 0.9 293 0.6 Total loans in repayment 204,145 98.5 100.0 % 72,249 99.9 100.0 % 49,484 99.7 100.0 % Total consumer and other loans 207,218 100.0 % 72,352 100.0 % 49,611 100.0 % Accrued interest receivable 1,386 575 373 Loan premium, net of unaccreted discount 47 ( 6 ) ( 7 ) Allowance for loan losses ( 13,514 ) ( 5,351 ) ( 3,853 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 195,137 $ 67,570 $ 46,124 (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 September 30, 2024 Nine months ended September 30, 2024 2023 2022 2021 2020 Total FICO at origination: Less than 705 $ 1,090 3,793 4,964 4,302 334 14,483 705 - 734 2,209 9,425 20,475 7,739 432 40,280 735 - 764 2,720 8,973 30,669 13,177 1,260 56,799 765 - 794 2,715 6,368 47,803 24,872 1,197 82,955 Greater than 794 7,079 16,546 70,172 51,544 4,589 149,930 No FICO score available or required (a) 2,553 5,654 — — — 8,207 $ 18,366 50,759 174,083 101,634 7,812 352,654 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 September 30, 2024 Nine months ended September 30, 2024 2023 2022 2021 2020 Prior years Total FICO at origination: Less than 720 $ 18,676 13,850 — 1,274 1,574 1,569 36,943 720 - 769 49,525 25,932 19 6,782 5,559 3,266 91,083 Greater than 769 50,565 16,902 104 4,737 2,156 975 75,439 No FICO score available or required (a) 2,981 438 280 54 — — 3,753 $ 121,747 57,122 403 12,847 9,289 5,810 207,218 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 September 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 September 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 of the Company’s federally insured loans were originated prior to July 1, 2010. Nine months ended September 30, 2024 2023 2022 2021 2020 Prior years Total Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ — — 685 3,364 769 2,686 7,504 Loans in forbearance — — 29 185 422 1,343 1,979 Loans in repayment status: Loans current — 200 4,211 4,737 40,986 168,291 218,425 Loans delinquent 31-60 days — — 21 32 398 2,562 3,013 Loans delinquent 61-90 days — — 8 46 3 1,244 1,301 Loans delinquent 91 days or greater — — — 12 114 1,947 2,073 Total loans in repayment — 200 4,240 4,827 41,501 174,044 224,812 Total private education loans $ — 200 4,954 8,376 42,692 178,073 234,295 Accrued interest receivable 2,248 Loan discount, net of unamortized premiums ( 6,772 ) Allowance for loan losses ( 11,744 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 218,027 Gross charge-offs - nine months ended September 30, 2024 $ — — — 84 208 3,962 4,254 Consumer and other loans - Non-Nelnet Bank: Loans in deferment $ — 315 — — — — 315 Loans in repayment status: Loans current 204,317 31,099 3,002 379 254 77 239,128 Loans delinquent 31-60 days 856 960 163 45 6 2 2,032 Loans delinquent 61-90 days 409 951 145 10 — — 1,515 Loans delinquent 91 days or greater 187 841 426 103 — 5 1,562 Total loans in repayment 205,769 33,851 3,736 537 260 84 244,237 Total consumer and other loans $ 205,769 34,166 3,736 537 260 84 244,552 Accrued interest receivable 1,115 Loan discount and deferred lender fees, net of unamortized premiums ( 10,789 ) Allowance for loan losses ( 22,380 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 212,498 Gross charge-offs - nine months ended September 30, 2024 $ 56 5,389 1,793 227 40 62 7,567 Private education loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 9,440 11,529 7,434 587 406 — 29,396 Loans in forbearance 22 139 1,444 759 — — 2,364 Loans in repayment status: Loans current 8,674 37,936 164,277 99,922 7,281 — 318,090 Loans delinquent 30-59 days 133 460 194 163 125 — 1,075 Loans delinquent 60-89 days 53 279 255 136 — — 723 Loans delinquent 90 days or greater 44 416 479 67 — — 1,006 Total loans in repayment 8,904 39,091 165,205 100,288 7,406 — 320,894 Total private education loans $ 18,366 50,759 174,083 101,634 7,812 — 352,654 Accrued interest receivable 3,098 Deferred origination costs, net of unaccreted discount 5,786 Allowance for loan losses ( 3,670 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 357,868 Gross charge-offs - nine months ended September 30, 2024 $ 48 816 600 285 47 — 1,796 16 Nine months ended September 30, 2024 2023 2022 2021 2020 Prior years Total Consumer and other loans - Nelnet Bank (a): Loans in deferment $ 3,029 44 — — — — 3,073 Loans in repayment status: Loans current 117,453 53,106 403 12,642 9,249 5,760 198,613 Loans delinquent 30-59 days 787 1,320 — 87 19 38 2,251 Loans delinquent 60-89 days 272 1,081 — 118 21 5 1,497 Loans delinquent 90 days or greater 206 1,571 — — — 7 1,784 Total loans in repayment 118,718 57,078 403 12,847 9,289 5,810 204,145 Total consumer and other loans $ 121,747 57,122 403 12,847 9,289 5,810 207,218 Accrued interest receivable 1,386 Loan premium, net of unaccreted discount 47 Allowance for loan losses ( 13,514 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 195,137 Gross charge-offs - nine months ended September 30, 2024 $ 503 7,811 — 221 20 80 8,635 (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 September 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 $ 7,346,522 5.41 % - 6.97 % 8/26/30 - 9/25/69 Bonds and notes based on auction 70,220 0.00 % - 6.46 % 3/22/32 - 11/26/46 Total FFELP variable-rate bonds and notes 7,416,742 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 360,044 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP loan warehouse facilities 889,092 4.93 % - 5.19 % 1/31/26 / 4/1/26 Consumer loan warehouse facilities 90,277 5.15 % / 7.35 % 11/14/25 / 8/1/26 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 60,222 6.40 % / 7.53 % 6/25/49 / 11/25/53 Fixed-rate bonds and notes issued in private education loan asset-backed securitizations 56,599 5.35 % / 7.15 % 12/28/43 / 11/25/53 Unsecured line of credit — — 9/22/26 Participation agreements 6,434 5.58 % - 6.08 % 5/4/25 / 1/30/33 Repurchase agreement 108,182 5.54 % - 6.75 % 11/27/24 / 12/20/24 Other - due to related party 4,669 5.00 % 11/15/28 - 11/15/30 8,992,261 Discount on bonds and notes payable and debt issuance costs ( 53,815 ) Total $ 8,938,446 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 September 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) $ 800,000 589,303 210,697 1/31/2025 1/31/2026 note (b) $ 42,542 FFELP (c) 375,000 299,789 75,211 4/1/2025 4/1/2026 92 % 25,106 $ 1,175,000 889,092 285,908 $ 67,648 Consumer (d) $ 100,000 5,277 94,723 11/14/2024 11/14/2025 70 % $ 2,364 Consumer (e) 125,000 85,000 40,000 1/1/2026 8/1/2026 60 % - 80 % 19,681 $ 225,000 90,277 134,723 $ 22,045 (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. On October 3, 2024, this facility was amended to reduce the maximum financing amount from $ 800 million to $ 600 million. (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. On September 6, 2024, this facility was amended to reduce the maximum financing amount from $ 150 million to $ 100 million. (e) On July 1, 2024, the Company closed on this $ 125 million consumer loan facility. Unsecured Line of Credit The Company has a $ 495.0 million unsecured line of credit that has a maturity date of September 22, 2026. As of September 30, 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 September 30, 2024 was $ 108.2 million. The agreement has various maturity dates through December 20, 2024 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 September 30, 2024, the Company holds $ 309.5 million (par value) of its own FFELP asset-backed securities. Debt Redemptions Subsequent to September 30, 2024, in October 2024, the Company redeemed $ 169.3 million of FFELP loan asset-backed debt securities (bonds and notes payable) prior to their maturity. The Company had the ability and intention to redeem these asset- 19 backed debt securities as of September 30, 2024. As such, the remaining unamortized debt discount associated with these bonds as of September 30, 2024 was written-off, resulting in a $ 5.6 million non-cash expense recognized in September 2024. 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. The expense related to the acceleration of unamortized debt discount costs described above is included in "interest expense on bonds and notes payable and bank deposits" on the consolidated statements of income. 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. 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 September 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 September 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 September 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 to hedge exposure to variability in cash flows related to variable rate intercompany deposits. As of September 30, 2024 As of December 31, 2023 Maturity Notional amount Weighted average fixed rate paid by the Company (a) Notional amount Weighted average fixed rate paid by the Company (a) 2028 $ 40,000 3.33 % $ 40,000 3.33 % 2029 25,000 3.37 — — 2030 (b) 50,000 3.06 50,000 3.06 2032 (c) 25,000 4.03 25,000 4.03 2033 (d) 25,000 3.90 25,000 3.90 $ 165,000 3.44 % $ 140,000 3.46 % (a) For all interest rate derivatives, the Company receives monthly or quarterly payments based on SOFR that resets daily. (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 September 30, 2024 As of December 31, 2023 As of September 30, 2024 As of December 31, 2023 Interest rate swaps - Nelnet Bank $ 118 452 2,434 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Settlements: 1:3 basis swaps $ 159 386 773 1,180 Interest rate swaps - floor income hedges 1,200 235 3,583 22,760 Interest rate swaps - Nelnet Bank 281 196 690 279 Total settlements - income 1,640 817 5,046 24,219 Change in fair value: 1:3 basis swaps ( 125 ) ( 464 ) ( 710 ) ( 253 ) Interest rate swaps - floor income hedges ( 9,393 ) 1,656 ( 2,165 ) ( 35,070 ) Interest rate swaps - Nelnet Bank ( 3,647 ) 1,948 ( 793 ) 3,057 Total change in fair value - (expense) income ( 13,165 ) 3,140 ( 3,668 ) ( 32,266 ) Derivative market value adjustments and derivative settlements, net - (expense) income $ ( 11,525 ) 3,957 1,378 ( 8,047 ) 21 6. Investments and Notes Receivable "Restricted investments" and “investments and notes receivable” consisted of the following: As of September 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 $ 47,799 2,044 ( 88 ) 49,755 16,993 1,069 ( 93 ) 17,969 Non-restricted available-for-sale investments (at fair value): Non-Nelnet Bank: FFELP loan $ 203,260 6,396 ( 1,395 ) 208,261 271,479 4,883 ( 5,393 ) 270,969 Private education loan (a) 247,633 — ( 20,344 ) 227,289 281,791 — ( 28,874 ) 252,917 Other debt securities 39,685 2,280 — 41,965 41,693 2,020 ( 1,275 ) 42,438 Total Non-Nelnet Bank 490,578 8,676 ( 21,739 ) 477,515 594,963 6,903 ( 35,542 ) 566,324 Nelnet Bank: FFELP loan (b) 226,522 6,011 ( 299 ) 232,234 304,555 4,488 ( 2,286 ) 306,757 Private education loan 2,063 — — 2,063 17,083 20 ( 10 ) 17,093 Other debt securities 214,211 1,214 ( 1,197 ) 214,228 49,284 117 ( 1,641 ) 47,760 Total Nelnet Bank 442,796 7,225 ( 1,496 ) 448,525 370,922 4,625 ( 3,937 ) 371,610 Total available-for-sale asset-backed securities $ 933,374 15,901 ( 23,235 ) 926,040 965,885 11,528 ( 39,479 ) 937,934 Equity securities 70,345 50,907 Total investments at fair value 996,385 988,841 Other Investments and Notes Receivable (not measured at fair value): Held-to-maturity investments Non-Nelnet Bank: Debt securities — 4,700 Nelnet Bank: FFELP loan asset-backed securities (b) 214,380 149,938 Private education loan asset-backed securities 8,100 8,100 Total Nelnet Bank 222,480 158,038 Total held-to-maturity investments 222,480 162,738 Venture capital and funds: Measurement alternative 197,515 194,084 Equity method 107,812 91,464 Total venture capital and funds 305,327 285,548 Real estate: Equity method 125,424 103,811 Investment in ALLO: Voting interest/equity method (c) — 10,693 Preferred membership interest and accrued and unpaid preferred return (d) 195,353 155,047 Total investment in ALLO 195,353 165,740 Beneficial interest in loan securitizations (e): Consumer loans, net of allowance for credit losses of $ 32,997 as of September 30, 2024 145,238 134,113 Private education loans, net of allowance for credit losses of $ 901 as of September 30, 2024 55,211 68,372 Federally insured student loans, net of allowance for credit losses of $ 965 as of September 30, 2024 18,210 22,594 Total beneficial interest in loan securitizations, net of allowance 218,659 225,079 Solar (f) ( 197,582 ) ( 146,040 ) Notes receivable 27,778 53,747 Tax liens, affordable housing, and other 9,737 7,243 Total investments (not measured at fair value) 907,176 857,866 Total investments and notes receivable $ 1,903,561 $ 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 September 30, 2024, the par value and fair value of the securities subject to this agreement was $ 144.4 million and $ 128.5 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 are being 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 $ 17.3 million of losses during the three months ended September 30, 2024 and 2023, respectively, and losses of $ 10.7 million and $ 49.7 million during the nine months ended September 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 September 30, 2024, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 184.0 million and $ 11.4 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 and third quarter of 2024, the Company purchased an additional $ 29.0 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 $ 4.8 million and $ 2.3 million during the three months ended September 30, 2024 and 2023, respectively, and $ 11.4 million and $ 6.8 million during the nine months ended September 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, which are accounted for as held-to-maturity beneficial interest investments. As of the latest remittance reports filed by the various trusts prior to or as of September 30, 2024, the Company's ownership correlates to approximately $ 1.19 billion, $ 480 million, and $ 315 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations. An increase in cumulative loss expectations on certain securitizations and loan vintages caused a change in estimate of future cash flows related to certain of the Company's beneficial interest securitization investments. As a result, during the second and third quarter of 2024, the Company recorded a $ 5.9 million and $ 29.0 million allowance for credit losses (and related provision expense), respectively, related to these investments. (f) The Company invests in solar tax equity investments. Due to the management and control of each of these investment partnerships, such partnerships that invest in tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s (syndication partner's) portion being presented as noncontrolling interests. As of September 30, 2024, the Company has funded a total of $ 543.7 million in solar investments that remain outstanding, which includes $ 241.4 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 September 30, 2024, the Company has earned a total of $ 524.6 million of tax credits on those projects that remain outstanding, which includes $ 238.7 million earned by syndication partners. The solar investment negative carrying value on the consolidated balance sheet of $ 197.6 million as of September 30, 2024 represents the sum of total tax credits earned on solar projects placed-in-service through September 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 September 30, 2024, excluding the portion owned by syndication partners that is reflected as "noncontrolling interests" on the consolidated balance sheet, was $ 95.4 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, 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 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 excluding net losses attributed to noncontrolling interest investors (such amount reflecting the before tax net income impact of such solar tax equity investments to the Company). 23 Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Net losses $ ( 11,238 ) ( 6,456 ) ( 11,068 ) ( 19,485 ) Less: net losses attributed to noncontrolling interest investors (syndication partners) 3,936 3,278 5,568 14,706 Net losses, excluding activity attributed to noncontrolling interest investors $ ( 7,302 ) ( 3,178 ) ( 5,500 ) ( 4,779 ) As of September 30, 2024, the Company is committed to fund an additional $ 107.9 million on solar investments, of which $ 89.5 million is expected to be provided by syndication partners. The following table presents, by remaining contractual maturity, the amortized cost and fair value of debt securities as of September 30, 2024: As of September 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 $ — 10,258 3,015 34,526 47,799 Fair value — 10,331 3,041 36,383 49,755 Non-Nelnet Bank: FFELP loan — 370 12,466 190,424 203,260 Private education loan — — — 247,633 247,633 Other debt securities — 100 4,000 35,585 39,685 Total Non-Nelnet Bank — 470 16,466 473,642 490,578 Fair value — 501 16,365 460,649 477,515 Nelnet Bank: FFELP loan 47,185 19,619 21,154 138,564 226,522 Private education loan — — — 2,063 2,063 Other debt securities — 41,741 33,154 139,316 214,211 Total Nelnet Bank 47,185 61,360 54,308 279,943 442,796 Fair value 47,499 61,411 54,402 285,213 448,525 Total available-for-sale asset-backed securities at amortized cost $ 47,185 72,088 73,789 788,111 981,173 Total available-for-sale asset-backed securities at fair value $ 47,499 72,243 73,808 782,245 975,795 Held-to-maturity investments Nelnet Bank: FFELP loan asset-backed securities $ — 2,807 1,154 210,419 214,380 Private education loan asset-backed securities — — — 8,100 8,100 Total held-to-maturity investments at amortized cost $ — 2,807 1,154 218,519 222,480 Total held-to-maturity investments at fair value $ — 2,876 1,177 223,533 227,586 Beneficial interest in loan securitizations (a): Amortized cost $ — — — — 218,659 Fair value $ — — — — 232,654 (a) The Company's beneficial interest in loan securitizations are not due at a single maturity date. The following table summarizes the unrealized positions for held-to-maturity investments and the beneficial interest in loan securitizations as of September 30, 2024: Carrying value Gross unrealized gains Gross unrealized losses Fair value Asset-backed and other securities $ 222,480 5,106 — 227,586 Beneficial interest in loan securitizations 218,659 14,154 ( 159 ) 232,654 24 The following table presents securities classified as available-for-sale that have gross unrealized losses at September 30, 2024 and the fair value of such securities as of September 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 September 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 $ ( 88 ) 8,160 — — ( 88 ) 8,160 Non-Nelnet Bank: FFELP loan ( 15 ) 6,508 ( 1,380 ) 68,960 ( 1,395 ) 75,468 Private education loan — — ( 20,344 ) 227,288 ( 20,344 ) 227,288 Total Non-Nelnet Bank ( 15 ) 6,508 ( 21,724 ) 296,248 ( 21,739 ) 302,756 Nelnet Bank: FFELP loan ( 71 ) 14,372 ( 228 ) 14,122 ( 299 ) 28,494 Other debt securities ( 48 ) 13,081 ( 1,149 ) 14,555 ( 1,197 ) 27,636 Total Nelnet Bank ( 119 ) 27,453 ( 1,377 ) 28,677 ( 1,496 ) 56,130 Total available-for-sale asset-backed securities $ ( 222 ) 42,121 ( 23,101 ) 324,925 ( 23,323 ) 367,046 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 Nine months ended September 30, September 30, 2024 2023 2024 2023 Gross proceeds from sales $ 105,628 198,548 372,176 776,096 Gross realized gains $ 1,791 1,257 4,362 3,451 Gross realized losses ( 70 ) ( 193 ) ( 1,036 ) ( 6,452 ) Net gains (losses) $ 1,721 1,064 3,326 ( 3,001 ) 25 7. Intangible Assets Intangible assets consisted of the following: Weighted average remaining useful life as of September 30, 2024 (months) As of As of September 30, 2024 December 31, 2023 Amortizable intangible assets, net: Customer relationships (net of accumulated amortization of $ 52,706 and $ 46,573 , respectively) 98 $ 36,898 43,031 Trade names (net of accumulated amortization of $ 186 and $ 8,268 , respectively) 91 584 642 Computer software (net of accumulated amortization of $ 831 and $ 574 , respectively) 31 889 1,146 Total amortizable intangible assets, net 97 $ 38,371 44,819 The Company recorded amortization expense on its intangible assets of $ 2.1 million and $ 5.4 million for the three months ended September 30, 2024 and 2023, respectively, and $ 6.4 million and $ 11.6 million during the nine months ended September 30, 2024 and 2023, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of September 30, 2024, the Company estimates it will record amortization expense as follows: 2024 (October 1 - December 31) $ 2,043 2025 6,099 2026 6,012 2027 5,714 2028 5,354 2029 and thereafter 13,149 $ 38,371 8. Goodwill The following table presents the carrying amount of goodwill as of September 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 impairment charges and provision for beneficial interests by asset and reportable operating segment recognized by the Company. These expense items 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 September 30, 2024 Investments - beneficial interest in loan securitizations (a) $ — — 28,952 — — — 28,952 Investments - venture capital — — — — — 100 100 $ — — 28,952 — — 100 29,052 Three months ended September 30, 2023 Leases, buildings, and associated improvements (b) $ 296 — — — — 4,678 4,974 Nine months ended September 30, 2024 Investments - beneficial interest in loan securitizations (a) $ — — 34,863 — — — 34,863 Investments - venture capital — — — — — 137 137 Property and equipment - solar facilities (c) — — — — — 1,170 1,170 Other assets - solar inventory (c) — — — — — 695 695 $ — — 34,863 — — 2,002 36,865 Nine months ended September 30, 2023 Leases, buildings, and associated improvements (b) $ 296 — — — — 4,678 4,974 (a) The Company recorded a non-cash allowance for credit losses (and related provision expense) related to the Company's beneficial interest in certain loan securitizations. See note 6 for additional information. (b) In 2023, the Company recorded impairment charges related to operating lease assets and associated leasehold improvements, which included a $ 2.4 million lease termination fee paid to Union Bank, a related party. The Company recorded this impairment as a result of its on-going evaluation of the use of office space when a large number of associates continued to work from home. (c) In April 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, the Company recognized non-cash impairment charges on certain solar facilities and inventory related to the residential solar operations. Restructure Charges GRNE Solar In April 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 and $ 4.1 million was recognized in the second and third quarter of 2024, respectively, which is included in "salaries and benefits" in the consolidated statements of income. The remaining expense will be recognized during the fourth quarter of 2024. 27 10. Bank Deposits The following table summarizes Nelnet Bank’s interest-bearing deposits, excluding intercompany deposits: As of As of September 30, 2024 December 31, 2023 Retail and other savings $ 801,170 520,017 Brokered CDs, net of brokered deposit fees 247,802 203,522 Retail and other CDs, net of issuance fees 21,786 20,060 Total interest-bearing deposits $ 1,070,758 743,599 As of September 30, 2024 and December 31, 2023, Nelnet Bank had intercompany deposits from Nelnet, Inc. and its subsidiaries totaling $ 77.7 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 September 30, 2024: One year or less $ 995 After one year to two years 148,591 After two years to three years 75,215 After three years to four years 348 After four years to five years 44,439 After five years — Total $ 269,588 Retail and other savings deposits include deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trust (STFIT), and commercial and 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 September 30, 2024 was $ 44.5 million, the majority of which are intercompany deposits from Nelnet, Inc. and its subsidiaries. 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 September 30, 2024 2023 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 2,343 45 2,388 43,409 945 44,354 Denominator: Weighted-average common shares outstanding - basic and diluted 35,743,895 686,590 36,430,485 36,699,510 798,563 37,498,073 Earnings per share - basic and diluted $ 0.07 0.07 0.07 1.18 1.18 1.18 Nine months ended September 30, 2024 2023 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 118,549 2,337 120,886 95,685 2,054 97,739 Denominator: Weighted-average common shares outstanding - basic and diluted 35,993,634 709,680 36,703,314 36,650,653 786,934 37,437,587 Earnings per share - basic and diluted $ 3.29 3.29 3.29 2.61 2.61 2.61 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 September 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 $ — — 180,571 9,639 — — — 190,211 Investment interest 894 9,734 18,970 12,522 12,415 3,105 ( 7,368 ) 50,272 Total interest income 894 9,734 199,541 22,161 12,415 3,105 ( 7,368 ) 240,483 Interest expense — — 161,142 11,606 2,245 704 ( 7,368 ) 168,328 Net interest income 894 9,734 38,399 10,555 10,170 2,401 — 72,155 Less provision (negative provision) for loan losses — — 11,968 6,143 — — — 18,111 Net interest income after provision for loan losses 894 9,734 26,431 4,412 10,170 2,401 — 54,044 Other income (expense): Loan servicing and systems revenue 108,175 — — — — — — 108,175 Intersegment revenue 5,428 60 — — — — ( 5,488 ) — Education technology services and payments revenue — 118,179 — — — — — 118,179 Solar construction revenue — — — — — 19,321 — 19,321 Other, net 690 — 4,918 841 22,370 3,506 — 32,325 Loss on sale of loans — — ( 107 ) — — — — ( 107 ) Impairment expense and provision for beneficial interests — — ( 28,952 ) — — ( 100 ) — ( 29,052 ) Derivative settlements, net — — 1,359 281 — — — 1,640 Derivative market value adjustments, net — — ( 9,518 ) ( 3,647 ) — — — ( 13,165 ) Total other income (expense), net 114,293 118,239 ( 32,300 ) ( 2,525 ) 22,370 22,727 ( 5,488 ) 237,316 Cost of services: Cost to provide education technology services and payments — 45,273 — — — — — 45,273 Cost to provide solar construction services — — — — — 26,815 — 26,815 Total cost of services — 45,273 — — — 26,815 — 72,088 Operating expenses: Salaries and benefits 76,820 41,053 1,220 2,973 398 23,852 ( 124 ) 146,192 Depreciation and amortization 4,854 2,616 — 343 — 5,848 — 13,661 Other expenses 19,663 7,614 2,775 2,570 17,904 11,116 — 61,642 Intersegment expenses, net 18,399 4,604 6,482 759 200 ( 25,080 ) ( 5,364 ) — Total operating expenses 119,736 55,887 10,477 6,645 18,502 15,736 ( 5,488 ) 221,495 Income (loss) before income taxes ( 4,549 ) 26,813 ( 16,346 ) ( 4,758 ) 14,038 ( 17,423 ) — ( 2,223 ) Income tax (expense) benefit 1,092 ( 6,450 ) 3,923 1,143 ( 3,341 ) 3,915 — 282 Net income (loss) ( 3,457 ) 20,363 ( 12,423 ) ( 3,615 ) 10,697 ( 13,508 ) — ( 1,941 ) Net loss (income) attributable to noncontrolling interests — 54 — — ( 117 ) 4,392 — 4,329 Net income (loss) attributable to Nelnet, Inc. $ ( 3,457 ) 20,417 ( 12,423 ) ( 3,615 ) 10,580 ( 9,116 ) — 2,388 Total assets as of September 30, 2024 $ 202,366 556,897 10,707,442 1,328,808 1,020,732 763,310 ( 495,427 ) 14,084,128 30 Three months ended September 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 $ — — 230,816 5,608 — — — 236,423 Investment interest 1,098 8,934 18,062 9,563 13,021 3,232 ( 5,783 ) 48,128 Total interest income 1,098 8,934 248,878 15,171 13,021 3,232 ( 5,783 ) 284,551 Interest expense — — 197,393 9,456 5,661 432 ( 5,783 ) 207,159 Net interest income 1,098 8,934 51,485 5,715 7,360 2,800 — 77,392 Less provision (negative provision) for loan losses — — 2,348 1,927 — — — 4,275 Net interest income after provision for loan losses 1,098 8,934 49,137 3,788 7,360 2,800 — 73,117 Other income (expense): Loan servicing and systems revenue 127,892 — — — — — — 127,892 Intersegment revenue 6,944 77 — — — — ( 7,021 ) — Education technology services and payments revenue — 113,796 — — — — — 113,796 Solar construction revenue — — — — — 6,301 — 6,301 Other, net 687 — 2,776 565 9,861 ( 16,950 ) — ( 3,062 ) Loss on sale of loans — — ( 1,022 ) — — — — ( 1,022 ) Impairment expense and provision for beneficial interests ( 296 ) — — — — ( 4,678 ) — ( 4,974 ) Derivative settlements, net — — 621 196 — — — 817 Derivative market value adjustments, net — — 1,192 1,948 — — — 3,140 Total other income (expense), net 135,227 113,873 3,567 2,709 9,861 ( 15,327 ) ( 7,021 ) 242,888 Cost of services: Cost to provide education technology services and payments — 43,694 — — — — — 43,694 Cost to provide solar construction services — — — — — 7,783 — 7,783 Total cost of services — 43,694 — — — 7,783 — 51,477 Operating expenses: Salaries and benefits 73,310 39,776 1,242 2,520 288 24,731 ( 663 ) 141,204 Depreciation and amortization 5,023 3,030 — 259 — 13,522 — 21,835 Other expenses 15,629 8,309 2,952 1,290 7,522 15,670 — 51,370 Intersegment expenses, net 17,894 5,875 7,948 129 191 ( 25,679 ) ( 6,358 ) — Total operating expenses 111,856 56,990 12,142 4,198 8,001 28,244 ( 7,021 ) 214,409 Income (loss) before income taxes 24,469 22,123 40,562 2,299 9,220 ( 48,554 ) — 50,119 Income tax (expense) benefit ( 5,872 ) ( 5,307 ) ( 9,735 ) ( 552 ) ( 2,177 ) 13,131 — ( 10,512 ) Net income (loss) 18,597 16,816 30,827 1,747 7,043 ( 35,423 ) — 39,607 Net loss (income) attributable to noncontrolling interests — ( 6 ) — — ( 149 ) 4,902 — 4,747 Net income (loss) attributable to Nelnet, Inc. $ 18,597 16,810 30,827 1,747 6,894 ( 30,521 ) — 44,354 Total assets as of September 30, 2023 $ 243,697 444,631 14,111,517 1,089,565 1,096,494 931,853 ( 719,868 ) 17,197,889 31 Nine months ended September 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 $ — — 583,907 25,157 — — — 609,064 Investment interest 4,046 23,315 54,513 33,301 43,910 9,566 ( 25,565 ) 143,086 Total interest income 4,046 23,315 638,420 58,458 43,910 9,566 ( 25,565 ) 752,150 Interest expense — — 523,678 31,872 7,268 2,114 ( 25,565 ) 539,367 Net interest income 4,046 23,315 114,742 26,586 36,642 7,452 — 212,783 Less provision (negative provision) for loan losses — — 14,199 18,352 — — — 32,551 Net interest income after provision for loan losses 4,046 23,315 100,543 8,234 36,642 7,452 — 180,232 Other income (expense): Loan servicing and systems revenue 344,428 — — — — — — 344,428 Intersegment revenue 18,419 166 — — — — ( 18,585 ) — Education technology services and payments revenue — 378,627 — — — — — 378,627 Solar construction revenue — — — — — 42,741 — 42,741 Other, net 2,085 — 11,239 1,991 51,013 11,730 — 78,057 Loss on sale of loans — — ( 1,685 ) — — — — ( 1,685 ) Impairment expense and provision for beneficial interests — — ( 34,863 ) — — ( 2,002 ) — ( 36,865 ) Derivative settlements, net — — 4,356 690 — — — 5,046 Derivative market value adjustments, net — — ( 2,875 ) ( 793 ) — — — ( 3,668 ) Total other income (expense), net 364,932 378,793 ( 23,828 ) 1,888 51,013 52,469 ( 18,585 ) 806,681 Cost of services: Cost to provide education technology services and payments — 134,106 — — — — — 134,106 Cost to provide solar construction services — — — — — 49,115 — 49,115 Total cost of services — 134,106 — — — 49,115 — 183,221 Operating expenses: Salaries and benefits 224,172 121,956 3,529 8,491 1,129 72,159 ( 1,735 ) 429,701 Depreciation and amortization 15,304 8,012 — 944 — 21,312 — 45,572 Other expenses 59,861 23,772 9,985 5,765 41,536 37,359 — 178,278 Intersegment expenses, net 55,955 14,216 21,491 2,252 665 ( 77,729 ) ( 16,850 ) — Total operating expenses 355,292 167,956 35,005 17,452 43,330 53,101 ( 18,585 ) 653,551 Income (loss) before income taxes 13,686 100,046 41,710 ( 7,330 ) 44,325 ( 42,295 ) — 150,141 Income tax (expense) benefit ( 3,284 ) ( 24,035 ) ( 10,010 ) 1,800 ( 10,550 ) 8,426 — ( 37,653 ) Net income (loss) 10,402 76,011 31,700 ( 5,530 ) 33,775 ( 33,869 ) — 112,488 Net loss (income) attributable to noncontrolling interests — 101 — — ( 366 ) 8,663 — 8,398 Net income (loss) attributable to Nelnet, Inc. $ 10,402 76,112 31,700 ( 5,530 ) 33,409 ( 25,206 ) — 120,886 Total assets as of September 30, 2024 $ 202,366 556,897 10,707,442 1,328,808 1,020,732 763,310 ( 495,427 ) 14,084,128 32 Nine months ended September 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 $ — — 689,633 15,079 — — — 704,712 Investment interest 3,193 20,237 47,726 26,013 54,481 8,826 ( 30,643 ) 129,835 Total interest income 3,193 20,237 737,359 41,092 54,481 8,826 ( 30,643 ) 834,547 Interest expense — — 618,905 24,841 24,860 1,793 ( 30,643 ) 639,756 Net interest income 3,193 20,237 118,454 16,251 29,621 7,033 — 194,791 Less provision (negative provision) for loan losses — — ( 772 ) 5,837 — — — 5,065 Net interest income after provision for loan losses 3,193 20,237 119,226 10,414 29,621 7,033 — 189,726 Other income (expense): Loan servicing and systems revenue 389,138 — — — — — — 389,138 Intersegment revenue 21,980 198 — — — — ( 22,178 ) — Education technology services and payments revenue — 357,258 — — — — — 357,258 Solar construction revenue — — — — — 19,687 — 19,687 Other, net 1,900 — 6,939 1,395 15,087 ( 52,617 ) — ( 27,297 ) Loss on sale of loans — — ( 16,776 ) — — — — ( 16,776 ) Impairment expense and provision for beneficial interests ( 296 ) — — — — ( 4,678 ) — ( 4,974 ) Derivative settlements, net — — 23,940 279 — — — 24,219 Derivative market value adjustments, net — — ( 35,323 ) 3,057 — — — ( 32,266 ) Total other income (expense), net 412,722 357,456 ( 21,220 ) 4,731 15,087 ( 37,608 ) ( 22,178 ) 708,989 Cost of services: Cost to provide education technology services and payments — 131,804 — — — — — 131,804 Cost to provide solar construction services — — — — — 25,204 — 25,204 Total cost of services — 131,804 — — — 25,204 — 157,008 Operating expenses: Salaries and benefits 234,012 116,040 3,093 6,881 717 78,686 ( 808 ) 438,620 Depreciation and amortization 14,400 8,424 — 315 — 33,976 — 57,114 Other expenses 42,760 26,063 12,083 3,696 12,223 41,327 — 138,154 Intersegment expenses, net 58,030 17,559 24,789 302 447 ( 79,757 ) ( 21,370 ) — Total operating expenses 349,202 168,086 39,965 11,194 13,387 74,232 ( 22,178 ) 633,888 Income (loss) before income taxes 66,713 77,803 58,041 3,951 31,321 ( 130,011 ) — 107,819 Income tax (expense) benefit ( 16,011 ) ( 18,700 ) ( 13,930 ) ( 913 ) ( 7,417 ) 28,188 — ( 28,785 ) Net income (loss) 50,702 59,103 44,111 3,038 23,904 ( 101,823 ) — 79,034 Net loss (income) attributable to noncontrolling interests — 113 — — ( 418 ) 19,010 — 18,705 Net income (loss) attributable to Nelnet, Inc. $ 50,702 59,216 44,111 3,038 23,486 ( 82,813 ) — 97,739 Total assets as of September 30, 2023 $ 243,697 444,631 14,111,517 1,089,565 1,096,494 931,853 ( 719,868 ) 17,197,889 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Government loan servicing $ 85,215 100,154 277,705 304,769 Private education and consumer loan servicing 13,057 12,330 38,634 36,556 FFELP loan servicing 2,945 3,304 9,570 10,226 Software services 5,197 9,416 14,617 25,076 Outsourced services 1,761 2,688 3,902 12,511 Loan servicing and systems revenue $ 108,175 127,892 344,428 389,138 Education Technology Services and Payments Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Tuition payment plan services $ 31,659 30,223 104,702 95,235 Payment processing 55,813 50,848 137,926 126,716 Education technology services 30,080 31,793 133,306 132,796 Other 627 932 2,693 2,511 Education technology services and payments revenue $ 118,179 113,796 378,627 357,258 Solar Construction Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Commercial revenue $ 18,764 4,221 39,477 12,426 Residential revenue (a) 557 2,080 3,264 7,261 Solar construction revenue $ 19,321 6,301 42,741 19,687 (a) In April 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 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 September 30, Nine months ended September 30, 2024 2023 2024 2023 Reinsurance premiums $ 16,619 6,287 44,250 10,638 Investment activity, net 8,529 ( 1,003 ) 7,447 ( 8,155 ) ALLO preferred return 4,783 2,299 11,353 6,822 Borrower late fee income 1,741 2,220 7,460 6,635 Administration/sponsor fee income 1,420 1,712 4,448 5,180 Investment advisory services (WRCM) 1,394 1,633 4,427 4,884 Loss from ALLO voting membership interest investment — ( 17,293 ) ( 10,693 ) ( 49,676 ) Loss from solar investments, net ( 11,238 ) ( 6,456 ) ( 11,068 ) ( 19,485 ) Other 9,077 7,539 20,433 15,860 Other, net $ 32,325 ( 3,062 ) 78,057 ( 27,297 ) 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 $ 85.2 million and $ 100.2 million for the three months ended September 30, 2024 and 2023, respectively, and $ 277.7 million and $ 304.8 million for the nine months ended September 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 September 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 $ 100 975,695 975,795 99 955,804 955,903 Equity securities 186 — 186 73 — 73 Equity securities measured at net asset value (a) 70,159 50,834 Total investments 286 975,695 1,046,140 172 955,804 1,006,810 Derivative instruments — 118 118 — 452 452 Total assets $ 286 975,813 1,046,258 172 956,256 1,007,262 Liabilities: Derivative instruments $ — 2,434 2,434 — 1,976 1,976 Total liabilities $ — 2,434 2,434 — 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. 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. As of September 30, 2024 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 10,502,403 9,972,784 — — 10,502,403 Accrued loan interest receivable 600,097 600,097 — 600,097 — Cash and cash equivalents 219,684 219,684 219,684 — — Investments (at fair value) 1,046,140 1,046,140 286 975,695 — Investments - held-to-maturity asset-backed securities 227,586 222,480 — 227,586 — Notes receivable 27,778 27,778 — 27,778 — Beneficial interest in loan securitizations 232,654 218,659 — — 232,654 Restricted cash 344,366 344,366 344,366 — — Restricted cash – due to customers 334,968 334,968 334,968 — — Derivative instruments 118 118 — 118 — Financial liabilities: Bonds and notes payable 8,901,588 8,938,446 — 8,901,588 — Accrued interest payable 25,389 25,389 — 25,389 — Bank deposits 1,058,023 1,070,758 754,116 303,907 — Due to customers 404,459 404,459 404,459 — — Derivative instruments 2,434 2,434 — 2,434 — 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 asset-backed securities 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 —