NELNET INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures The Company’s management, with the participation of the Company's principal executive and principal financial officers, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2024. Based on this evaluation, the Company’s principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of December 31, 2024. Changes in Internal Control over Financial Reporting There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 76 Management's Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) for the Company. The Company's internal control system is designed to provide reasonable assurance to the Company's management and board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2024 based on the criteria for effective internal control described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2024, the Company's internal control over financial reporting is effective. The effectiveness of the Company's internal control over financial reporting as of December 31, 2024 has been audited by KPMG LLP, the Company's independent registered public accounting firm, as stated in their report included herein. Inherent Limitations on Effectiveness of Internal Controls The Company's management, including the chief executive and chief financial officers, understands that the disclosure controls and procedures and internal control over financial reporting are subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Nelnet, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Nelnet, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 27, 2025 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 77 Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Lincoln, Nebraska February 27, 2025 ITEM 9B. OTHER INFORMATION During the fourth quarter of 2024, no information was required to be disclosed in a report on Form 8-K, but not reported. Rule 10b5-1 Trading Plans During the fourth quarter of 2024, none of the Company's officers or directors adopted or terminated any contract, instruction, or written plan for the purchase or sale of the Company's securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), referred to as Rule 10b5-1 trading plans, or any non-Rule 10b5-1 trading arrangement. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The information required by this Item will be included in the Company’s definitive Proxy Statement to be filed on Schedule 14A with the SEC, no later than 120 days after the end of the Company's fiscal year, relating to the Company's 2025 Annual Meeting of Shareholders scheduled to be held on May 15, 2025 (the “Proxy Statement”), and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference. 78 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table summarizes information about compensation plans under which equity securities are authorized for issuance. Equity Compensation Plan Information As of December 31, 2024 Plan category Number of shares to be issued upon exercise of outstanding options, warrants, and rights (a) Weighted-average exercise price of outstanding options, warrants, and rights (b) Number of shares remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by shareholders — — 1,153,382 (1) Equity compensation plans not approved by shareholders — — — Total — — 1,153,382 (1) Includes 670,329, 193,797, and 289,256 shares of Class A Common Stock remaining available for future issuance under the Nelnet, Inc. Restricted Stock Plan, Nelnet, Inc. Directors Stock Compensation Plan, and Nelnet, Inc. Employee Share Purchase Plan, respectively. The remaining information required by this Item will be included in the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item will be included in the Proxy Statement and is incorporated herein by reference. PART IV. ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. Consolidated Financial Statements The following consolidated financial statements of Nelnet, Inc. and its subsidiaries and the Report of Independent Registered Public Accounting Firm thereon are included in Item 8 above: Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 4 Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 F- 5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022 F- 6 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2024, 2023, and 2022 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 F- 8 Notes to Consolidated Financial Statements F- 10 2. Financial Statement Schedules All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 79 3. Exhibits The exhibits listed in the accompanying index to exhibits are filed, furnished, or incorporated by reference as part of this report. (b) Exhibits Exhibit Index Exhibit No. Description 3.1 Composite Third Amended and Restated Articles of Incorporation of Nelnet, Inc., as amended through August 8, 2022, filed as Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and incorporated herein by reference. 3.2 Ninth Amended and Restated Bylaws of Nelnet, Inc., as amended as of May 24, 2018, filed as Exhibit 3.2 to the registrant's Current Report on Form 8-K filed on May 24, 2018 and incorporated herein by reference. 4.1 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, filed as Exhibit 4.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2022 and incorporated herein by reference. 4.2 Form of Class A Common Stock Certificate of Nelnet, Inc., filed on November 24, 2003 as Exhibit 4.1 to the registrant’s Registration Statement on Form S-1 (Registration No. 333-108070) and incorporated herein by reference. 4.3 Certain instruments, including indentures of trust, defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries, none of which instruments authorizes a total amount of indebtedness thereunder in excess of 10% of the total assets of the registrant and its subsidiaries on a consolidated basis, are omitted from this Exhibit Index pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. Certain of such instruments have been previously filed with the Securities and Exchange Commission, and the registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request. 4.4 Registration Rights Agreement, dated as of December 16, 2003, by and among Nelnet, Inc. and the shareholders of Nelnet, Inc. signatory thereto, filed on November 24, 2003 as Exhibit 4.11 to the registrant’s Registration Statement on Form S-1 (Registration No. 333-108070) and incorporated herein by reference. 10.1 Composite Form of Amended and Restated Participation Agreement, dated as of June 1, 2001, between NELnet, Inc. (subsequently renamed National Education Loan Network, Inc.) and Union Bank and Trust Company, as amended by the First Amendment thereto dated as of December 19, 2001 through the Cancellation of the Fifteenth Amendment thereto dated as of March 16, 2011 (such Participation Agreement and each amendment through the Cancellation of the Fifteenth Amendment thereto have been previously filed as set forth in the Exhibit Index for the registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, and are incorporated herein by reference), filed as Exhibit 10.1 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference. 10.2 Sixteenth Amendment of Amended and Restated Participation Agreement, dated as of March 23, 2012, by and between Union Bank and Trust Company and National Education Loan Network, Inc., filed as Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 and incorporated herein by reference. 10.3 Seventeenth Amendment of Amended and Restated Participation Agreement, dated as of August 1, 2019, by and between Union Bank and Trust Company and National Education Loan Network, Inc., filed as Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference. 10.4 Amendment of Agreements dated as of February 4, 2005, by and between National Education Loan Network, Inc. and Union Bank and Trust Company, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 10, 2005 and incorporated herein by reference. 10.5+ Nelnet, Inc. Employee Share Purchase Plan, as amended through March 17, 2011, filed as Exhibit 10.4 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 and incorporated herein by reference. 10.6+ Nelnet, Inc. Restricted Stock Plan, as amended and restated through May 16, 2024, filed as Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on May 21, 2024 and incorporated herein by reference. 10.7+ Nelnet, Inc. Directors Stock Compensation Plan, as amended and restated as of May 18, 2023, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 22, 2023 and incorporated herein by reference. 80 10.8+ Nelnet, Inc. Executive Officers Incentive Compensation Plan, as amended and restated as of May 18, 2023, filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on May 22, 2023 and incorporated herein by reference. 10.9++ Student Loan Servicing Contract between the United States Department of Education and Nelnet Diversified Solutions, LLC, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April 25, 2023 and incorporated herein by reference. 10.10 Form of Modification of Contract dated effective as of October 10, 2023 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 and incorporated herein by reference. 10.11 Form of Modification of Contract dated effective as of October 11, 2023 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 and incorporated herein by reference. 10.12 Form of Modification of Contract dated effective as of December 15, 2023 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.29 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2023 and incorporated herein by reference. 10.13 Form of Modification of Contract dated effective as of December 15, 2023 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.30 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2023 and incorporated herein by reference. 10.14 Form of Modification of Contract dated effective as of December 15, 2023 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.31 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2023 and incorporated herein by reference. 10.15 Form of Modification of Contract dated effective as of December 15, 2023 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.32 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2023 and incorporated herein by reference. 10.16 Modification of Contract dated effective as of March 26, 2024 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 and incorporated herein by reference. 10.17# Third Amended and Restated Credit Agreement dated as of September 22, 2021, among Nelnet, Inc., U.S. Bank National Association, as Administrative Agent; Wells Fargo Bank, National Association, as Syndication Agent, Royal Bank of Canada, as Documentation Agent, U.S. Bank National Association and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Book Runners; and various lender parties thereto, filed as Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on September 22, 2021 and incorporated herein by reference. 10.18 Amendment No. 1 to Third Amended and Restated Credit Agreement dated as of June 22, 2023, among Nelnet, Inc., the various lender parties thereto, and U.S. Bank National Association, as Administrative Agent, filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and incorporated herein by reference. 10.19 Third Amended and Restated Guaranty dated as of September 22, 2021, by each of the subsidiaries of Nelnet, Inc. signatories thereto, in favor of U.S. Bank National Association, as Administrative Agent, filed as Exhibit 10.2 to the registrant's Current Report on Form 8-K filed on September 22, 2021 and incorporated herein by reference. 10.20 Guaranty Supplement to the Third Amended and Restated Guaranty, dated as of July 27, 2022, in favor of U.S. Bank National Association, as Administrative Agent, filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and incorporated herein by reference. 10.21 Guarantor Consent and Reaffirmation dated as of June 22, 2023, by each of the subsidiaries of Nelnet, Inc. signatories thereto, in favor of U.S. Bank National Association, as Administrative Agent, filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and incorporated herein by reference. 10.22 Guaranty Supplement to the Third Amended and Restated Guaranty, dated as of March 15, 2024, in favor of U.S. Bank National Association, as Administrative Agent, filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and incorporated herein by reference. 81 10.23 Form of Trust/Custodial/Safekeeping Agreement by and between National Education Loan Network, Inc., as Principal, and Union Bank and Trust Company, as Trustee, filed as Exhibit 10.55 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2017 and incorporated herein by reference. 10.24 Form of Special Investment Directions by National Education Loan Network, Inc. and its affiliates, as Principal under the Form of Trust/Custodial/Safekeeping Agreement between Principal and Union Bank and Trust Company, as Trustee, filed as Exhibit 10.56 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2017 and incorporated herein by reference. 10.25* First Amended and Restated Loan Participation Agreement dated as of June 21, 2018 between Union Bank and Trust Company and Union Bank and Trust Company as trustee for National Education Loan Network, Inc. 10.26±± Amended and Restated Trust Agreement, dated effective as of January 11, 2019, by and among Nelnet Private Student Loan Financing Corporation, as Depositor, Union Bank and Trust Company, as Trustee, National Education Loan Network, Inc., as Administrator, and U.S. Bank Trust National Association, as Delaware Trustee, filed as Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 and incorporated herein by reference. 10.27 SLABS Participation Agreement, dated effective as of May 5, 2020, by and between National Education Loan Network, Inc., and Union Bank and Trust Company, as Trustee, filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference. 10.28 First Amendment of SLABS Participation Agreement, dated effective as of October 1, 2021, by and between National Education Loan Network, Inc., and Union Bank and Trust Company, as Trustee, filed as Exhibit 10.77 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 and incorporated herein by reference. 10.29 Parent Company Agreement, dated as of June 26, 2020, by and among the Federal Deposit Insurance Corporation, Nelnet, Inc., Michael Dunlap, and Nelnet Bank, filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference. 10.30 Capital and Liquidity Maintenance Agreement, dated as of June 26, 2020, by and among the Federal Deposit Insurance Corporation, Nelnet, Inc., Michael Dunlap, and Nelnet Bank, filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference. 10.31±± Form of Amended & Restated Limited Liability Company Operating Agreement for solar energy investments managed by a subsidiary of Nelnet, Inc. and in which certain parties referred to therein with other relationships with Nelnet, Inc. have participated, filed as Exhibit 10.83 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 and incorporated herein by reference. 10.32±± Form of Management Agreement for solar energy investments managed by a subsidiary of Nelnet, Inc. and in which certain parties referred to therein with other relationships with Nelnet, Inc. have participated, filed as Exhibit 10.84 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 and incorporated herein by reference. 19* Nelnet, Inc. Securities Trading Policy dated February 1, 2024. 21.1* Subsidiaries of Nelnet, Inc. 23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm. 31.1* Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer Jeffrey R. Noordhoek. 31.2* Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer James D. Kruger. 32** Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97 Nelnet, Inc. Incentive Compensation Clawback Policy dated November 9, 2023, filed as Exhibit 97 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2023 and incorporated herein by reference. 101.INS* Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 82 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith ** Furnished herewith + Indicates a management contract or compensatory plan or arrangement contemplated by Item 15(a)(3) of Form 10-K. ++ Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and similar attachments to the exhibit have been omitted. The exhibit is not intended to be, and should not be relied upon as, including disclosures regarding any facts and circumstances relating to the registrant or any of its subsidiaries or affiliates. The exhibit contains representations and warranties by the registrant and the other parties that were made only for purposes of the agreement set forth in the exhibit and as of specified dates. The representations, warranties, and covenants in the agreement were made solely for the benefit of the parties to the agreement, may be subject to limitations agreed upon by the contracting parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts), and may apply contractual standards of materiality or material adverse effect that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the agreement, which subsequent information may or may not be fully reflected in the registrant's public disclosures. ±± Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. # Schedules, exhibits, and similar attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. ITEM 16. FORM 10-K SUMMARY The Company has elected not to include an optional summary of information required by Form 10-K. 83 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 27, 2025 NELNET, INC. By: /s/ JEFFREY R. NOORDHOEK Name: Jeffrey R. Noordhoek Title: Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ JEFFREY R. NOORDHOEK Chief Executive Officer (Principal Executive Officer) February 27, 2025 Jeffrey R. Noordhoek /s/ JAMES D. KRUGER Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 27, 2025 James D. Kruger /s/ MICHAEL S. DUNLAP Executive Chairman February 27, 2025 Michael S. Dunlap /s/ PREETA D. BANSAL Director February 27, 2025 Preeta D. Bansal /s/ MATTHEW W. DUNLAP Director February 27, 2025 Matthew W. Dunlap /s/ KATHLEEN A. FARRELL Director February 27, 2025 Kathleen A. Farrell /s/ DAVID S. GRAFF Director February 27, 2025 David S. Graff /s/ THOMAS E. HENNING Director February 27, 2025 Thomas E. Henning /s/ ADAM K. PETERSON Director February 27, 2025 Adam K. Peterson /s/ KIMBERLY K. RATH Director February 27, 2025 Kimberly K. Rath /s/ JONA M. VAN DEUN Director February 27, 2025 Jona M. Van Deun 84 NELNET, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 4 Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 F- 5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022 F- 6 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2024, 2023, and 2022 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 F- 8 Notes to Consolidated Financial Statements F- 10 F - 1 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Nelnet, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Nelnet, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the allowance for loan losses As discussed in Note 3 to the consolidated financial statements, the Company's allowance for loan losses as of December 31, 2024, was $114.9 million, of which $49.1 million related to the Company's allowance for loan losses on federally insured loans and $11.1 million related to the Company's allowance for loan losses on Non-Nelnet Bank private education loans, collectively, the allowance for loan losses (the ALL). The ALL is the measure of expected credit losses on a pooled basis for those loans that share similar risk characteristics based on a collective assessment using a combination of measurement models and management judgment. The Company estimated the ALL using an undiscounted cash flow model. The Company's methodology is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. For the undiscounted cash flow models, the expected credit losses are the product of multiplying the Company's estimates of probability of default (PD), loss given default (LGD), and the exposure at default over the expected life of the loans. The undiscounted cash flow model incorporates probability weighted economic forecast scenarios and macroeconomic assumptions over the reasonable and supportable forecast periods. After the reasonable and supportable forecast periods, the Company reverts on a straight-line basis over the reversion period to its historical loss rates, evaluated F - 2 over the historical observation period, for the remaining life of the loans. All such periods are established for each portfolio segment. A portion of the ALL is comprised of qualitative adjustments to historical loss experience. We identified the assessment of the allowance for loan losses as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the ALL methodology, including the methods, models, and significant assumptions used to estimate the PD and LGD. Such assumptions included the economic forecast scenario and macroeconomic assumptions, and the reasonable and supportable forecast periods. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's measurement of the ALL estimate, including controls over the: • development of the ALL methodology • continued use and appropriateness of changes made to PD and LGD models • identification and determination of the significant assumptions used in the PD and LGD models • performance monitoring of the PD and LGD models • analysis of the ALL results, trends, and ratios. We evaluated the Company's process to develop the ALL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: • evaluating the Company’s ALL methodology for compliance with U.S. generally accepted accounting principles • evaluating judgments made by the Company relative to the assessment and performance testing of the PD and LGD models by comparing them to relevant Company-specific metrics and trends and the applicable industry practices • assessing the conceptual soundness and performance testing of the PD and LGD models by inspecting the model documentation to determine whether the models are suitable for their intended use • evaluating the selection of the economic forecast scenarios and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices We also assessed the cumulative results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the ALL estimate by evaluating the: • cumulative results of the audit procedures • qualitative aspects of the Company’s accounting practices • potential bias in the accounting estimates. /s/ KPMG LLP We have served as the Company’s auditor since 1998. Lincoln, Nebraska February 27, 2025 F - 3 NELNET, INC. AND SUBSIDIARIES Consolidated Balance Sheets As of December 31, 2024 and 2023 2024 2023 (Dollars in thousands, except share data) Assets: Loans and accrued interest receivable (net of allowance for loan losses of $ 114,890 and $ 104,643 , respectively) $ 9,992,744 13,108,204 Cash and cash equivalents: Cash and cash equivalents - not held at a related party 48,838 34,912 Cash and cash equivalents - held at a related party 145,680 133,200 Total cash and cash equivalents 194,518 168,112 Investments and notes receivable: Investments at fair value 1,160,320 1,006,810 Other investments and notes receivable, net 1,040,376 857,866 Total investments and notes receivable 2,200,696 1,864,676 Restricted cash 332,100 488,723 Restricted cash - due to customers 404,402 368,656 Accounts receivable (net of allowance for doubtful accounts of $ 2,877 and $ 4,304 , respectively) 159,934 196,200 Goodwill 158,029 158,029 Intangible assets, net 36,328 44,819 Property and equipment, net 95,185 127,008 Other assets 203,817 187,957 Total assets $ 13,777,753 16,712,384 Liabilities: Bonds and notes payable $ 8,309,797 11,828,393 Accrued interest payable 21,046 35,391 Bank deposits 1,186,131 743,599 Other liabilities 483,193 479,387 Due to customers 478,469 425,507 Total liabilities 10,478,636 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 25,634,748 shares and 26,400,630 shares, respectively 256 264 Class B, convertible, $ 0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,658,604 shares and 10,663,088 shares, respectively 107 107 Additional paid-in capital 7,389 3,096 Retained earnings 3,340,540 3,270,403 Accumulated other comprehensive earnings (loss), net 1,470 ( 20,119 ) Total Nelnet, Inc. shareholders' equity 3,349,762 3,253,751 Noncontrolling interests ( 50,645 ) ( 53,644 ) Total equity 3,299,117 3,200,107 Total liabilities and equity $ 13,777,753 16,712,384 Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities: Loans and accrued interest receivable $ 9,122,609 12,676,932 Restricted cash 287,389 451,932 Bonds and notes payable ( 8,452,614 ) ( 12,006,170 ) Accrued interest payable and other liabilities ( 88,200 ) ( 135,748 ) Net assets of consolidated education and other lending variable interest entities $ 869,184 986,946 See accompanying notes to consolidated financial statements. F - 4 NELNET, INC. AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 (Dollars in thousands, except share data) Interest income: Loan interest $ 787,498 931,945 651,205 Investment interest 185,901 177,855 91,601 Total interest income 973,399 1,109,800 742,806 Interest expense on bonds and notes payable and bank deposits 680,537 845,091 430,137 Net interest income 292,862 264,709 312,669 Less provision for loan losses 54,607 8,115 34,973 Net interest income after provision for loan losses 238,255 256,594 277,696 Other income (expense): Loan servicing and systems revenue 482,408 517,954 535,459 Education technology services and payments revenue 486,962 463,311 408,543 Reinsurance premiums earned 62,923 20,067 157 Solar construction revenue 56,569 31,669 24,543 Other, net 61,602 ( 74,327 ) 17,709 Loss on sale of loans, net ( 1,643 ) ( 17,662 ) ( 8,565 ) Derivative market value adjustments and derivative settlements, net 16,258 ( 16,701 ) 264,634 Total other income (expense), net 1,165,079 924,311 1,242,480 Cost of services and expenses: Costs incurred to provide loan servicing 1,889 — — Cost to provide education technology services and payments 172,763 171,183 148,403 Cost to provide solar construction services 77,673 48,576 19,971 Total cost of services 252,325 219,759 168,374 Salaries and benefits 576,931 591,537 589,579 Depreciation and amortization 58,116 79,118 74,077 Reinsurance losses and underwriting expenses 55,246 16,781 154 Other expenses 189,503 173,070 170,624 Total operating expenses 879,796 860,506 834,434 Impairment expense and provision for beneficial interests 42,629 31,925 15,523 Total expenses 1,174,750 1,112,190 1,018,331 Income before income taxes 228,584 68,715 501,845 Income tax expense 52,669 19,385 113,100 Net income 175,915 49,330 388,745 Net loss attributable to noncontrolling interests 8,130 40,496 18,154 Net income attributable to Nelnet, Inc. $ 184,045 89,826 406,899 Earnings per common share: Net income attributable to Nelnet, Inc. shareholders - basic and diluted $ 5.02 2.40 10.82 Weighted average common shares outstanding - basic and diluted 36,642,533 37,416,621 37,603,033 See accompanying notes to consolidated financial statements. F - 5 NELNET, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 (Dollars in thousands) Net income $ 175,915 49,330 388,745 Other comprehensive income (loss): Net changes related to foreign currency translation adjustments $ 11 ( 10 ) ( 9 ) Net changes related to available-for-sale debt securities: Unrealized holding gains (losses) arising during period, net 33,479 18,379 ( 58,946 ) Reclassification of (gains) losses recognized in net income, net ( 4,534 ) 3,504 ( 5,902 ) Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity 779 202 — Income tax effect ( 7,134 ) 22,590 ( 5,301 ) 16,784 15,564 ( 49,284 ) Net changes related to equity method investee's other comprehensive income: (Loss) gain on cash flow hedge ( 1,331 ) 622 3,452 Income tax effect 319 ( 1,012 ) ( 149 ) 473 ( 829 ) 2,623 Other comprehensive income (loss) 21,589 17,247 ( 46,670 ) Comprehensive income 197,504 66,577 342,075 Comprehensive loss attributable to noncontrolling interests 8,130 40,496 18,154 Comprehensive income attributable to Nelnet, Inc. $ 205,634 107,073 360,229 See accompanying notes to consolidated financial statements. F - 6 NELNET, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years ended December 31, 2024, 2023, and 2022 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 earnings (loss) Noncontrolling interests Total equity Class A Class B (Dollars in thousands, except share data) Balance as of December 31, 2021 — 27,239,654 10,676,642 $ — 272 107 1,000 2,933,807 9,304 ( 859 ) 2,943,631 Net income (loss) — — — — — — — 406,899 — ( 18,154 ) 388,745 Other comprehensive loss — — — — — — — — ( 46,670 ) — ( 46,670 ) Issuance of noncontrolling interests — — — — — — — — — 67,003 67,003 Distribution to noncontrolling interests — — — — — — — — — ( 56,586 ) ( 56,586 ) Cash dividends on Class A and Class B common stock - $ 0.98 per share — — — — — — — ( 36,608 ) — — ( 36,608 ) Issuance of common stock, net of forfeitures — 376,348 — — 4 — 7,477 — — — 7,481 Compensation expense for stock based awards — — — — — — 13,888 — — — 13,888 Repurchase of common stock — ( 1,162,533 ) — — ( 11 ) — ( 21,256 ) ( 76,418 ) — — ( 97,685 ) Conversion of common stock — 8,182 ( 8,182 ) — — — — — — — — 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) — — — — — — — 89,826 — ( 40,496 ) 49,330 Other comprehensive income — — — — — — — — 17,247 — 17,247 Issuance of noncontrolling interests — — — — — — — — — 101,237 101,237 Distribution to noncontrolling interests — — — — — — — — — ( 105,789 ) ( 105,789 ) Cash dividends on Class A and Class B common stock - $ 1.06 per share — — — — — — — ( 39,419 ) — — ( 39,419 ) Issuance of common stock, net of forfeitures — 270,550 — — 3 — 6,165 — — — 6,168 Compensation expense for stock based awards — — — — — — 16,162 — — — 16,162 Repurchase of common stock — ( 336,943 ) — — ( 4 ) — ( 20,340 ) ( 7,684 ) — — ( 28,028 ) Conversion of common stock — 5,372 ( 5,372 ) — — — — — — — — 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) — — — — — — — 184,045 — ( 8,130 ) 175,915 Other comprehensive income — — — — — — — — 21,589 — 21,589 Issuance of noncontrolling interests — — — — — — — — — 84,770 84,770 Distribution to noncontrolling interests — — — — — — — — — ( 75,734 ) ( 75,734 ) Cash dividends on Class A and Class B common stock - $ 1.12 per share — — — — — — — ( 40,836 ) — — ( 40,836 ) Issuance of common stock, net of forfeitures — 123,742 — — 1 — 5,140 — — — 5,141 Compensation expense for stock based awards — — — — — — 11,702 — — — 11,702 Repurchase of common stock — ( 894,108 ) — — ( 9 ) — ( 12,549 ) ( 70,732 ) — — ( 83,290 ) Conversion of common stock — 4,484 ( 4,484 ) — — — — — — — — Acquisition of remaining 20 % of GRNE Solar, net of tax — — — — — — — ( 2,340 ) — 2,093 ( 247 ) Balance as of December 31, 2024 — 25,634,748 10,658,604 $ — 256 107 7,389 3,340,540 1,470 ( 50,645 ) 3,299,117 See accompanying notes to consolidated financial statements. F - 7 NELNET, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 (Dollars in thousands) Net income attributable to Nelnet, Inc. $ 184,045 89,826 406,899 Net loss attributable to noncontrolling interests ( 8,130 ) ( 40,496 ) ( 18,154 ) Net income 175,915 49,330 388,745 Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions: Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 132,527 145,393 176,248 Loan discount and deferred lender fees accretion ( 54,053 ) ( 30,813 ) ( 67,480 ) Provision for loan losses 54,607 8,115 34,973 Derivative market value adjustments ( 10,124 ) 41,773 ( 231,691 ) Proceeds from termination of derivative instruments — 164,079 91,786 Proceeds from (payments to) clearinghouse - initial and variation margin, net 2,374 ( 213,923 ) 148,691 Loss on sale of loans, net 1,643 17,662 8,565 (Gain) loss on investments, net ( 7,952 ) 122,492 31,264 Proceeds from sale of equity securities, net of purchases 137 75 42,841 Deferred income tax (benefit) expense ( 21,621 ) ( 52,331 ) 34,516 Non-cash compensation expense 12,045 16,476 14,176 Impairment expense and provision for beneficial interests 42,629 29,539 15,523 Changes in operating assets and liabilities: Decrease (increase) in loan and investment accrued interest receivable 220,938 47,217 ( 38,500 ) Decrease (increase) in accounts receivable 36,106 ( 1,356 ) ( 26,358 ) Decrease (increase) in other assets, net 64,842 3,891 ( 11,783 ) Decrease in the carrying amount of ROU asset, net 3,864 4,881 5,702 (Decrease) increase in accrued interest payable ( 14,536 ) ( 658 ) 31,483 Increase in other liabilities 27,356 85,537 40,001 Decrease in the carrying amount of lease liability ( 3,807 ) ( 5,352 ) ( 5,642 ) Total adjustments 486,975 382,697 294,315 Net cash provided by operating activities 662,890 432,027 683,060 Cash flows from investing activities, net of acquisitions: Purchases and originations of loans, including purchase of student loan residual interests ( 973,942 ) ( 1,202,557 ) ( 1,460,328 ) Net proceeds from loan repayments, claims, and capitalized interest 3,179,752 2,559,384 4,394,183 Proceeds from sale of loans 694,250 553,018 123,129 Purchases of available-for-sale securities ( 603,552 ) ( 581,522 ) ( 1,029,438 ) Proceeds from sales of available-for-sale securities 445,946 963,117 511,124 Proceeds from beneficial interest in loan securitizations 52,234 32,149 21,531 Purchases of other investments and issuance of notes receivable ( 483,714 ) ( 344,918 ) ( 263,346 ) Proceeds from other investments and repayments of notes receivable 97,884 42,257 66,368 Purchases of held-to-maturity debt securities — ( 12,425 ) ( 240 ) Redemption of held-to-maturity debt securities 24,778 4,579 3,500 Purchases of property and equipment ( 20,903 ) ( 74,052 ) ( 59,421 ) Business acquisitions, net of cash and restricted cash acquired — — ( 34,036 ) Net cash provided by investing activities $ 2,412,733 1,939,030 2,273,026 F - 8 NELNET, INC. AND SUBSIDIARIES (Continued) Consolidated Statements of Cash Flows Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 (Dollars in thousands) Cash flows from financing activities, net of acquisitions: Payments on bonds and notes payable $ ( 3,644,658 ) ( 3,606,160 ) ( 4,339,164 ) Proceeds from issuance of bonds and notes payable 30,652 761,182 1,301,554 Payments of debt issuance costs ( 2,327 ) ( 5,744 ) ( 3,795 ) Increase in bank deposits, net 442,532 52,277 347,007 Increase (decrease) in due to customers 52,999 77,182 ( 17,670 ) Dividends paid ( 40,836 ) ( 39,419 ) ( 36,608 ) Repurchases of common stock ( 83,290 ) ( 28,028 ) ( 97,685 ) Proceeds from issuance of common stock 1,946 1,780 1,633 Acquisition of noncontrolling interest ( 325 ) — — Issuance of noncontrolling interests 79,625 88,389 55,777 Distribution to noncontrolling interests ( 5,975 ) ( 4,657 ) ( 3,548 ) Net cash used in financing activities ( 3,169,657 ) ( 2,703,198 ) ( 2,792,499 ) Effect of exchange rate changes on cash and restricted cash ( 437 ) 16 ( 160 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 94,471 ) ( 332,125 ) 163,427 Cash, cash equivalents, and restricted cash, beginning of period 1,025,491 1,357,616 1,194,189 Cash, cash equivalents, and restricted cash, end of period $ 931,020 1,025,491 1,357,616 Supplemental disclosures of cash flow information: Cash disbursements made for interest $ 651,471 781,307 350,662 Cash disbursements made for income taxes, net of refunds and credits received (a) $ 15,238 47,589 57,705 Cash disbursements made for operating leases $ 4,795 6,550 6,797 Non-cash operating, investing, and financing activity: ROU assets obtained in exchange for lease obligations $ 1,331 18,860 7,728 Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans $ 12,493 89,130 19,069 Receipt of asset-backed investment securities as consideration from sale of loans $ 10,000 66,546 13,806 Student loans and other assets acquired $ 121,634 — — Borrowings and other liabilities assumed in acquisition of student loans $ 54,662 — — Distribution to noncontrolling interests $ 69,759 101,132 53,038 Issuance of noncontrolling interests $ 5,145 12,848 11,226 (a) For 2024, 2023, and 2022 the Company utilized $ 53.8 million, $ 104.6 million, and $ 11.2 million of federal and state tax credits, respectively, related primarily to renewable energy. Supplemental disclosures of non-cash activities regarding the Company's business acquisitions are contained in note 7. 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 December 31, 2024 December 31, 2023 December 31, 2022 December 31, 2021 Total cash and cash equivalents $ 194,518 168,112 118,146 125,563 Restricted cash 332,100 488,723 945,159 741,981 Restricted cash - due to customers 404,402 368,656 294,311 326,645 Cash, cash equivalents, and restricted cash $ 931,020 1,025,491 1,357,616 1,194,189 See accompanying notes to consolidated financial statements. F - 9 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 1. Description of Business Nelnet, Inc. and its subsidiaries (“Nelnet” or the “Company”) is a diversified hybrid holding company with primary businesses being consumer lending, loan servicing, payments, and technology – with many of these businesses serving customers in the education space. The largest operating businesses engage in loan servicing and education technology services and payments. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes and manages investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in a fiber communications company (ALLO), early-stage and emerging growth companies (venture capital investments), real estate, reinsurance, and renewable energy (solar). Substantially all revenue from external customers is earned, and all long-lived assets are located, in the United States. The Company was formed as a Nebraska corporation in 1978 to service federal student loans for two local banks. The Company built on this initial foundation as a servicer to become a leading originator, holder, and servicer of federal student loans, principally consisting of loans originated under the Federal Family Education Loan Program (FFELP or “FFEL Program”) of the U.S. Department of Education (the “Department”). The Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act of 2010”) discontinued new loan originations under the FFEL Program, effective July 1, 2010, and requires all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program. This law does not alter or affect the terms and conditions of existing FFELP loans. Subsequent to the Reconciliation Act of 2010, the Company no longer originates FFELP loans. However, a significant portion of the Company's income continues to be derived from its existing FFELP student loan portfolio. Interest income on the Company's existing FFELP loan portfolio will decline over time as the portfolio is paid down. To reduce its reliance on interest income from FFELP loans, the Company has expanded its services and products. This expansion has been accomplished through internal growth and innovation as well as business and certain investment acquisitions. The Company is also actively expanding its private education and consumer loan portfolios, or investment interests therein, and as part of this strategy launched Nelnet Bank in 2020. In addition, the Company has been servicing federally owned student loans for the Department since 2009. The Company's reportable operating segments include: • Loan Servicing and Systems (LSS) • Education Technology Services and Payments (ETSP) • Asset Generation and Management (AGM), part of the Nelnet Financial Services (NFS) division • Nelnet Bank, part of the NFS division A description of each reportable operating segment is included below. See note 16 for additional information on the Company's segment reporting. Loan Servicing and Systems The primary service offerings of the Loan Servicing and Systems reportable operating segment (referred to as Nelnet Diversified Services (NDS)) include: • Servicing federally owned student loans for the Department • Servicing FFELP loans • Servicing private education and consumer loans • Providing backup servicing for FFELP, private education, and consumer loans • Providing student loan servicing software and other information technology products and services • Providing outsourced services including contact center, processing, and administrative services LSS provides for the servicing of the Company's student loan portfolio and the portfolios of third parties. The loan servicing activities include loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliations, and claim processing. These activities are performed internally for the Company's portfolio, in addition to generating external fee revenue when performed for third-party clients. In addition, LSS F - 10 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) provides backup servicing to third parties, which allows a transfer of the customer’s servicing volume to the Company’s platform and becoming a full servicing customer if their existing servicer cannot perform their duties. Nelnet Servicing, LLC (Nelnet Servicing), a subsidiary of the Company, is one of the current five private sector entities that have student loan servicing contracts with the Department to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department. LSS also provides student loan servicing software, which is used internally and licensed to third-party student loan holders and servicers. These software systems have been adapted so that they can be offered as hosted servicing software solutions usable by third parties to service various types of student loans, including Federal Direct Loan Program and FFEL Program loans. This segment also provides business process outsourcing primarily specializing in contact center management. The contact center solutions and services include taking inbound calls, helping with outreach campaigns and sales, interacting with customers through multi-channels, and processing and administrative services. Education Technology Services and Payments The Education Technology Services and Payments reportable operating segment (referred to as Nelnet Business Services (NBS)) provides education and payment technology and services for K-12 schools, higher education institutions, churches, and businesses in the United States and internationally. NBS provides service and technology under four divisions as described below. FACTS provides solutions that elevate the educational experience in the K-12 private and faith-based markets for school administrators, teachers, and families. FACTS offers a comprehensive suite of services and technology in the following categories: (i) financial management, including tuition payment plans, incidental billing, payment forms, advanced accounting, financial needs assessments (grant and aid), and a donation platform; (ii) education technology, including a school management platform and application and enrollment services; and (iii) education services. Nelnet Campus Commerce delivers payment technology to higher education institutions. Nelnet Campus Commerce solutions include (i) tuition management, including tuition payment plans and service and technology for student billings, payments, and refunds; and (ii) integrated commerce, including solutions for in-person, online, and mobile payment experiences on campus. Nelnet Payment Services provides secure payment processing technology. Nelnet Payment Services supports and provides payment processing services, including credit card and electronic transfers, to the other divisions of NBS and Nelnet in addition to other industries and software platforms across the United States. Nelnet International provides its services and technology internationally, primarily in Australia, New Zealand, and the Asia-Pacific region. Nelnet International serves customers in the education, local government, and health care industries. Nelnet International’s suite of services include (i) an integrated commerce payment platform, financial management and tuition payment plan services, and (ii) a school management platform that provides administrative, information management, financial management, and communication functions for K-12 schools. Nelnet Financial Services Nelnet Financial Services is a division of the Company that includes the following reportable operating segments: • Asset Generation and Management • Nelnet Bank Asset Generation and Management The Company's Asset Generation and Management reportable operating segment includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank). Substantially all loan assets included in this segment are student loans originated under the FFEL Program, including the Stafford Loan Program, the PLUS Loan program, and loans that reflect the consolidation into a single loan of certain previously separate borrower obligations (“consolidation” loans). AGM also acquires private education, consumer, and other loans, or investment interests therein. AGM generates a substantial portion of its earnings from the spread, referred to as loan spread, between the yield it receives on its loan portfolio and the associated costs to finance such portfolio. The loan assets are primarily held in a series of lending subsidiaries and associated securitization trusts designed specifically for this purpose. In addition to the loan spread earned on F - 11 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) its portfolio, all costs and activity associated with managing the portfolio, such as servicing of the assets, debt maintenance, and administration costs, are included in this segment. In addition to ownership of loan assets, AGM has partial ownership in consumer, private education, and federally insured student loan third-party securitizations. These residual interests were acquired by AGM or have been received in consideration of AGM selling portfolios of loans to unrelated third parties who securitized such loans. AGM’s partial ownership percentage in each loan securitization grants AGM the right to receive the corresponding percentage of cash flows generated by the securitization. Income generated by these investment interests is considered investment interest income and is not a component of the Company’s loan interest income. Nelnet Bank Nelnet Bank operates as an internet Utah-chartered industrial bank franchise with a home office in Salt Lake City, Utah. Nelnet Bank is focused on the private education and unsecured consumer loan marketplace. NFS Other Operating Segments NFS’s other operating segments that are not reportable include: • The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S. Securities and Exchange Commission (SEC)-registered investment advisor subsidiary • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and casualty policies • The operating results of the Company’s investment activities in real estate • The operating results of the Company’s investment in debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments Corporate and Other Activities Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities (“Corporate”). Corporate includes the following items: • Shared service activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services • Corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs • The operating results of solar tax equity investments made by the Company and administrative and management services provided by the Company on tax equity investments made by third parties • The operating results of Nelnet Renewable Energy, the Company’s solar engineering, procurement, and construction business • The operating results of certain of the Company’s investment activities, including its investment in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as “ALLO”) and early-stage and emerging growth companies (venture capital investments) • Interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions • Other product and service offerings that are not considered reportable operating segments 2. Summary of Significant Accounting Policies and Practices Consolidation The consolidated financial statements include the accounts of Nelnet, Inc. and its consolidated subsidiaries. In addition, the accounts of all variable interest entities (VIEs) of which the Company has determined that it is the primary beneficiary are F - 12 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) included in the consolidated financial statements. Amounts for noncontrolling interests reflect the share of membership interest (equity) and net income attributable to the holders of noncontrolling membership interests of non-wholly owned consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Variable Interest Entities The Company assesses its partnerships and joint ventures to determine if the entity meets the qualifications of a VIE. The Company performs a qualitative assessment of each identified VIE to determine if it is the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. The Company examines specific criteria and uses judgment when determining whether an entity is a VIE and whether it is the primary beneficiary. The Company performs this review initially at the time it enters into a partnership or joint venture agreement and reassess upon reconsideration events. VIEs - Consolidated The Company is required to consolidate VIEs in which it has determined it is the primary beneficiary. The Company's education and other lending subsidiaries are engaged in the securitization of finance assets. These lending subsidiaries hold beneficial interests in eligible loans, subject to creditors with specific interests. The liabilities of the Company's lending subsidiaries are not the direct obligations of Nelnet, Inc. or any of its other subsidiaries. Each lending subsidiary is structured to be bankruptcy remote, meaning that it should not be consolidated in the event of bankruptcy of the parent company or any other subsidiary. The Company is generally the administrator and master servicer of the securitized assets held in its lending subsidiaries and owns the residual interest of the securitization trusts. For accounting purposes, the transfers of loans to the securitization trusts do not qualify as sales. Accordingly, all the financial activities and related assets and liabilities, including debt, of the securitizations are reflected in the Company's consolidated financial statements and are summarized as supplemental information on the balance sheet. VIEs - Not consolidated The Company is not required to consolidate VIEs in which it has determined it is not the primary beneficiary. VIEs not consolidated by the Company include its equity investment in ALLO, solar tax equity investments, beneficial interest in loan securitizations, and an equity investment in a certain co-investment fund. ALLO As of December 31, 2024, the Company owned 45 % of the economic rights of ALLO and has a disproportionate 43 % of the voting rights related to all operating decisions for ALLO's business. ALLO provides pure fiber optic service to homes and businesses for internet, television, and telephone services. See note 6 for the Company’s carrying value of its voting interest and non-voting preferred membership investments, which is the Company’s maximum exposure to loss. Prior to December 21, 2020, the Company consolidated the operating results of ALLO. In 2020, the Company entered into various agreements with SDC, a third-party global digital infrastructure investor, and ALLO, for various transactions contemplated by the parties in connection with a recapitalization for ALLO. The recapitalization transaction ultimately resulted in the deconsolidation of ALLO from the Company’s consolidated financial statements. As part of the ALLO recapitalization transaction, the Company and SDC entered into an agreement in which the Company has a contingent obligation to pay SDC an amount up to $ 35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds, and realizes from such disposition certain targeted return levels. The estimated fair value of the contingent payment was $ 8.3 million and $ 9.8 million as of December 31, 2024 and 2023, respectively, which is included in “other liabilities” on the consolidated balance sheets. Solar Tax Equity Investments The Company makes solar tax equity investments in entities that promote renewable energy sources. The Company’s investments in these entities generate a return primarily through the realization of federal income tax credits, operating cash flows, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These investments are included in "other investments and notes receivable, net" on the consolidated balance sheets. As of December 31, 2024, the Company has invested a total of $ 314.8 million and its third-party investors have invested $ 271.4 F - 13 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) million in tax equity investments that remain outstanding in renewable energy solar partnerships that support the development and operations of solar projects throughout the country. The carrying value of these investments is reduced by tax credits earned when the solar project is placed in service. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are accrued when the solar project is placed in service and are included in “other liabilities” on the consolidated balance sheets. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment, unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. The tax credit recapture period ratably decreases over five years from when the project is placed in service. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the energy-producing projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits. The following table presents a summary of solar investment VIEs that the Company has not consolidated, excluding all third-party investor impacts: As of December 31, 2024 2023 Investment carrying amount $ ( 87,853 ) ( 77,402 ) Tax credits subject to recapture 173,822 153,699 Unfunded capital and other commitments 55,662 82,046 Company’s maximum exposure to loss $ 141,631 158,343 As of December 31, 2024, the Company is committed to fund an additional $ 92.0 million on new tax equity investments, of which $ 36.4 million is expected to be provided by syndication partners. Beneficial Interest in Loan Securitizations The Company has partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as “beneficial interest in loan securitizations” and included in “other investments and notes receivable, net” on the Company’s consolidated balance sheets. These residual interests were acquired by AGM or have been received in consideration of AGM selling portfolios of loans to unrelated third parties who securitized such loans. For certain transactions, the Company is the sponsor and as sponsor, is required to provide a certain level of risk retention. To satisfy this requirement, the Company has purchased bonds issued in the securitizations, which are classified as available-for-sale investments. See note 6 for the Company’s carrying value of its beneficial interest in loan securitization investments and the carrying value and fair value of bonds held as risk retention. The carrying value of its beneficial interest in loan securitization investments and bonds held as risk retention is the Company’s maximum exposure to loss. Fund Investment During 2024, the Company acquired an equity interest in a certain co-investment fund, which has a carrying value of $ 48.5 million at December 31, 2024. Such investment is classified within “venture capital, funds, and other” in note 6, and is included in “other investments and notes receivable, net” on the Company’s consolidated balance sheets. The Company’s maximum exposure to loss related to this investment is its current carrying value plus the Company’s unfunded commitment to the fund of $ 1.5 million. Reclassification and Immaterial Error Corrections Certain amounts previously reported have been reclassified to conform to the current period presentation. These reclassifications include: • Reclassifying “investments at fair value” and “other investments and notes receivable, net” that were previously included in “investments and notes receivable” and “restricted investments” on the Company’s consolidated balance sheet; • Reclassifying “reinsurance premiums earned” and “reinsurance losses and underwriting expenses” as new line items on the Company’s consolidated statements of income, which were previously included in “other, net” in “other income (expense)” and “other expenses” in “operating expenses,” respectively; and F - 14 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) • Reclassifying the line item “impairment expense and provision for beneficial interests” in “other income (expense)” and presenting such expense as part of “total expenses” on the Company’s consolidated statements of income. 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 December 31, 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 $ 57.3 million and $ 11.5 million for the years ended December 31, 2023 and 2022, 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 $ 5.5 million and $ 7.6 million for the years ended December 31, 2023 and 2022, respectively, partially offset by an increase in "net loss attributable to noncontrolling interests" of $ 3.4 million and $ 7.0 million for the years ended December 31, 2023 and 2022, respectively. The after-tax net income impact to Nelnet, Inc. was a reduction of $ 1.7 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively. Consolidated "total equity" on the consolidated balance sheet was reduced $ 21.8 million as of December 31, 2023, $ 16.7 million as of December 31, 2022, and $ 9.2 million as of December 31, 2021, with the 2021 impact reflecting the cumulative impact of this correction through such date. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, reported amounts of revenues and expenses, and other disclosures. Actual results may differ from those estimates. Loans Receivable Loans consist of federally insured student, private education, consumer, and other loans. If the Company has the ability and intent to hold loans for the foreseeable future, such loans are held for investment and carried at amortized cost. Amortized cost includes the unamortized premium or discount and capitalized origination costs and fees, all of which are amortized to interest income. Loans which are held for investment also have an allowance for loan loss as needed. Any loans the Company has the ability and intent to sell are classified as held for sale and are carried at the lower of cost or fair value. Loans which are held for sale do not have the associated premium or discount and origination costs and fees amortized into interest income and there is also no related allowance for loan losses. In addition, once a loan is classified as held for sale, any allowance for loan losses that existed immediately prior to the reclassification to held for sale is reversed through provision. There were no loans classified as held for sale as of December 31, 2024 and 2023. Federally insured loans were originated under the FFEL Program by certain eligible lenders as defined by the Higher Education Act of 1965, as amended (the “Higher Education Act”). These loans, including related accrued interest, are guaranteed at their maximum level permitted under the Higher Education Act by an authorized guaranty agency, which has a contract of reinsurance with the Department. The terms of the loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest. Generally, Stafford and PLUS loans have repayment periods between five and ten years . Consolidation loans have repayment periods of twelve to thirty years . FFELP loans do not require repayment while the borrower is in-school, and during the grace period immediately upon leaving school. Under the Higher Education Act, a borrower may also be granted a deferment or forbearance for a period of time based on need, during which time the borrower is F - 15 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) not considered to be in repayment. Interest continues to accrue on loans in the in-school, deferment, and forbearance program periods. In addition, eligible borrowers may qualify for income-driven repayment plans offered by the Department. These plans determine the borrower's payment amount based on their discretionary income and may extend their repayment period. Interest rates on federally insured student loans may be fixed or variable, dependent upon the type of loan, terms of the loan agreements, and date of origination. Substantially all FFELP loan principal and related accrued interest is guaranteed as provided by the Higher Education Act. These guarantees are subject to the performance of certain loan servicing due diligence procedures stipulated by applicable Department regulations. If these due diligence requirements are not met, affected student loans may not be covered by the guarantees in the event of borrower default. Such student loans are subject to “cure” procedures and reinstatement of the guarantee under certain circumstances. Loans also include private education, consumer, and other loans. Private education loans are loans to students or their families that are non-federal loans and loans not insured or guaranteed under the FFEL Program. These loans are used primarily to bridge the gap between the cost of higher education and the amount funded through financial aid, federal loans, or borrowers' personal resources. The terms of the private education loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest over a period of up to thirty years . The private education loans are not covered by a guarantee or collateral in the event of borrower default. Consumer loans are unsecured loans to an individual for personal, family, or household purposes. The terms of the consumer loans, which vary on an individual basis, generally provide for repayment in weekly or monthly installments of principal and interest over a period of up to six years . Other loans consist of home equity lines of credit and small business loans. Home equity loans are made to an individual primarily for debt consolidation purposes using equity in the borrower’s home as security in the form of primarily second liens. These loans typically have a revolving draw period of five years and a repayment period at the end of the draw period of five to ten years . Principal and interest payments are generally required to be made during the draw and repayment periods. Small business loans have no stated coupon rate but the borrower is charged a one-time lender fee that is accreted to interest income over the estimated life of the loan. Minimum payments on such loans are due every 60 days. For loan modifications, the Company evaluates whether a loan modification represents a new loan or a continuation of an existing loan. Modifications of federally insured loans are driven by the Higher Education Act; thus, the Company does not consider these events as part of its loan modification programs. Administrative forbearances (e.g. bankruptcy, military service, death and disability, and disaster forbearance) are required by law and therefore are also not considered as part of the Company's loan modification programs. The Company does offer payment delays in the form of deferments or forbearances on certain private education and consumer loan programs for short-term periods. The Company generally considers payment delays to be insignificant when the delay is 3 months or less. The amortized cost of the Company’s private education and consumer loans in which the borrower is experiencing financial difficulty and the financial effect of such loan modifications is not material. Allowance for Loan Losses The Company accounts for the evaluation and estimate of probable losses on loans under the current expected credit loss (CECL) methodology. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for financial assets measured at amortized cost at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The allowance for loan losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of prepayments. Loans are charged off when management determines the loan is uncollectible. Charge-offs are recognized as a reduction to the allowance for loan losses. Expected recoveries of amounts previously charged off, not to exceed the aggregate of the amount previously charged off, are included in the estimate of the allowance for loan losses at the balance sheet date. The Company determines its estimated credit losses for the following financial assets as follows: Loans receivable The Company aggregates loans with similar risk characteristics into pools to estimate its expected credit losses. The Company evaluates such pooling decisions each quarter and makes adjustments as risk characteristics change. Management has determined that the federally insured, private education, and consumer and other loan portfolios each meet the definition of a F - 16 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) portfolio segment, which is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. Accordingly, the portfolio segment disclosures are presented on this basis in note 3 for each of these portfolios. The Company does not disaggregate its portfolio segment loan portfolios into classes of financing receivables. The Company utilizes an undiscounted cash flow methodology in determining its lifetime expected credit losses on its federally insured and private education loan portfolios and a remaining life methodology for its consumer and other loan portfolios. For the undiscounted cash flow models, the expected credit losses are the product of multiplying the Company’s estimates of probability of default and loss given default and the exposure of default over the expected life of the loans. For the remaining life method, the expected credit losses are the product of multiplying the Company’s estimated net loss rate by the exposure at default over the expected life of the loans. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current economic conditions, and reasonable and supportable forecasts. The Company has determined that, for modeling current expected credit losses, the Company can reasonably estimate expected losses that incorporate current economic conditions and forecasted probability weighted economic scenarios up to a one-year period. Macroeconomic factors used in the models include such variables as unemployment rates, gross domestic product, and consumer price index. After the "reasonable and supportable" period, the Company reverts to its actual long-term historical loss experience in the historical observation period. The Company uses a straight-line reversion method over two years . Historical credit loss experience provides the basis for the estimation of expected credit losses. A portion of the allowance is comprised of qualitative adjustments to historical loss experience. Qualitative adjustments consider the following factors, as applicable, for each of the Company’s loan portfolios: student loans in repayment versus those in non-paying status; delinquency status; type of private education, consumer, or other loan program; trends in defaults in the portfolio based on Company and industry data; past experience; trends in federally insured student loan claims rejected for payment by guarantors; changes in federal student loan programs; and other relevant qualitative factors. The federal government guarantees 97% of the principal of and the interest on federally insured student loans disbursed on and after July 1, 2006 (and 98% for those loans disbursed on and after October 1, 1993 and prior to July 1, 2006), which limits the Company’s loss exposure on the outstanding balance of the Company’s federally insured portfolio. Federally insured student loans disbursed prior to October 1, 1993 are fully insured. Private education and consumer loans are unsecured, with neither a government nor a private insurance guarantee. Accordingly, the Company bears the full risk of loss on these loans if the borrower and co-borrower, if applicable, default. The Company places private education, consumer, and other loans on nonaccrual status when the collection of principal and interest is 90 days past due and charges off the loan when the collection of principal and interest is 120 days or 180 days past due, depending on type of loan program. Collections, if any, are reflected as a recovery through the allowance for loan losses. Purchased Loans Receivable with Credit Deterioration (PCD) The Company has purchased loans that have experienced more than insignificant credit deterioration since origination. A variety of factors are considered when identifying PCD loans, including, but not limited to delinquency, status, FICO scores, and other qualitative factors. These PCD loans are recorded at the amount paid. An allowance for loan losses is determined using the same methodology as for other loans held for investment. The sum of the loans’ purchase price and allowance for loan losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized or accreted into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense. Loan Accrued Interest Receivable Accrued interest receivable on loans is combined and presented with the loans receivable amortized cost balance on the Company’s consolidated balance sheets. For the Company’s federally insured loan portfolio, the Company records an allowance for credit losses for accrued interest receivables. For federally insured loans, accrued interest receivable is typically charged-off when the contractual payment of principal or interest has become greater than 270 days past due. Charge-offs of accrued interest receivable are recognized as a reduction to the allowance for loan losses. For the Company’s private education, consumer, and other loan portfolios, the Company does not measure an allowance for credit losses for accrued interest receivables. For private education, consumer, and other loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due. Charge-offs of accrued interest receivable are recognized by reversing interest income. F - 17 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Cash and Cash Equivalents The Company considers all investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include amounts due to Nelnet Bank from the Federal Reserve Bank of $ 30.5 million and $ 7.0 million as of December 31, 2024 and 2023, respectively. Investments The Company accounts for purchases and sales of Non-Nelnet Bank debt securities on a settlement-date basis and Nelnet Bank debt securities on a trade-date basis. When an investment is sold, the cost basis is determined through specific identification of the security sold. The Company classifies its debt securities as either available-for-sale or held-to-maturity. Securities classified as available-for-sale are carried at fair value, with the changes in fair value, net of taxes, carried as a separate component of shareholders’ equity. The amortized cost of debt securities in this classification is adjusted for amortization of premiums and accretion of discounts, which are amortized using the effective interest rate method. For available-for-sale debt securities where fair value is less than amortized cost, credit-related impairment, if any, is recognized through an allowance for credit losses and adjusted each period for changes in credit risk. Securities in which the Company has the intent and ability to hold until maturity are classified as held-to-maturity. These securities are carried at amortized cost, with expected future credit losses, if any, recognized through an allowance for credit losses. The Company classifies its residual interest in consumer, private education, and federally insured student loan securitizations as held-to-maturity beneficial interest investments. The Company measures accretable yield initially as the excess of all cash flows expected to be collected attributable to the beneficial interest estimated at the acquisition/transaction date over the initial investment and recognizes interest income over the life of the beneficial interest using the effective interest method. The Company continues to update, over the life of the beneficial interest, the expectation of cash flows to be collected. Beneficial interest investments are evaluated for impairment by comparing the carrying value of the investment to the present value of the cash flows expected to be collected at the current financial reporting date. If the carrying value is less than the present value of cash flows expected to be collected and the Company determines a credit loss has occurred, the Company records an allowance for credit losses for the difference. Subsequent favorable changes, if any, decrease the allowance for credit losses. Equity investments with readily determinable fair values are measured at fair value, with changes in the fair value recognized through net income. For equity investments without readily determinable fair values, the Company uses the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company uses qualitative factors to identify impairment on its measurement alternative investments. The Company accounts for equity investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Equity method investments are recorded at cost and subsequently increased or decreased by the amount of the Company’s proportionate share of the net earnings or losses and other comprehensive income of the investee. Equity method investments are evaluated for other-than-temporary impairment using certain impairment indicators such as a series of operating losses of an investee or other factors. These factors may indicate that a decrease in value of the investment has occurred that is other-than-temporary and shall be recognized. The Company accounts for its qualifying solar tax equity investments under the proportional amortization method (PAM). The Company evaluates each solar tax equity investment to determine if it meets the qualifications to apply the PAM. For qualifying investments, the Company uses the flow-through method of accounting to account for the related tax credit. The flow-through method requires an investor to amortize the cost of its investment through income tax expense (or benefit) as an offset to the nonrefundable income tax credits and other income tax benefits, such as tax deductions from operating losses of the investment. The Company accounts for its non-qualifying PAM solar investments, voting equity investment in ALLO, and certain real estate investments under the Hypothetical Liquidation at Book Value (HLBV) method of accounting. The HLBV method of accounting is used by the Company for equity method investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership or voting interests. The Company applies the HLBV method using a balance sheet approach. A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the amount the Company recognizes for its share of the earnings or losses from the equity investment for the period. F - 18 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Notes Receivable Notes receivable exchanged for cash are recorded at amortized cost. Discounts, if any, upon issuance are accreted to income over the contractual life of the issued note, and interest income is accounted for on an accrual basis. The Company records an allowance for expected credit losses, if any, to present the net amount expected to be collected on the receivable as of the balance sheet date. Restricted Cash and Restricted Investments Restricted cash primarily includes amounts for student loan securitizations and other secured borrowings. This cash must be used to make payments related to trust obligations. Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the student loans held as trust assets and when principal and interest is paid on the trust's asset-backed debt securities. Restricted cash also includes collateral deposits with derivative counterparties and third-party clearinghouses. In accordance with local insurance regulations, Nelnet Insurance Service’s consolidated captive insurance companies are required to hold collateral in third-party trusts related to its reinsurance treaties on property and casualty policies. The cash and investments in such trusts are classified by the Company as restricted. Restricted investments include student loan asset-backed securities classified as available-for-sale. In addition, Nelnet Insurance Services retains cash it collects on behalf of its third parties to which it has retroceded a portion of its exposure. Restricted Cash - Due to Customers As a servicer of student loans, the Company collects student loan remittances and subsequently disburses these remittances to the appropriate lending entities. As part of the Company's Education Technology Services and Payments operating segment, the Company collects tuition payments and subsequently remits these payments to the appropriate schools. Cash collected for customers and the related liability are included in the consolidated balance sheets. A portion of cash collected for customers in the Company's Education Technology Services and Payments operating segment are held at Nelnet Bank, in which Nelnet Bank can use these cash deposits for general operating purposes and is no longer considered restricted. As of December 31, 2024 and 2023, $ 22.5 million and $ 57.5 million, respectively, of cash collected for customers is held at Nelnet Bank. Accounts Receivable Accounts receivable are presented at their net realizable values, which include allowances for doubtful accounts. Allowance estimates are based upon expected loss considering individual customer experience, as well as the age of receivables and likelihood of collection. Business Combinations The Company uses the acquisition method in accounting for acquired businesses. Under the acquisition method, the financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of acquisition, with the exception of contract assets or liabilities generated from contracts with customers, which are measured as if the Company had originated the acquired contract. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. All contingent consideration is measured at fair value on the acquisition date and included in the consideration transferred in the acquisition. Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, and changes in fair value are recognized in earnings. Goodwill The Company reviews goodwill for impairment annually (as of November 30) and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable. Goodwill is tested for impairment using a fair value approach at the reporting unit level. A reporting unit is the operating segment, or a business one level below that operating segment if discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they have similar economic characteristics. F - 19 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The Company tests goodwill for impairment in accordance with applicable accounting guidance. The guidance provides an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform a quantitative impairment test. If the qualitative assessment determines that an impairment is not more likely than not, no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. For the 2024, 2023, and 2022 annual reviews of goodwill, the Company assessed qualitative factors, with the exception of one reporting unit in 2023, and concluded it was not more likely than not that the fair value of its reporting units was less than their carrying amount. As such, except for the one reporting unit in 2023, no further impairment analysis was required. For the one reporting unit identified in 2023 that the Company concluded it was more likely than not that the fair value was less than its carrying amount, the Company performed a quantitative impairment test and concluded there was an impairment. See note 11 for additional information. Intangible Assets The Company uses estimates to determine the fair value of acquired assets to allocate the purchase price to acquired intangible assets. Such estimates are generally based on estimated future cash flows or cost savings associated with particular assets and are discounted to present value using an appropriate discount rate. The estimates of future cash flows associated with intangible assets are generally prepared using a cost savings method, a lost income method, or an excess return method, as appropriate. In utilizing such methods, management must make certain assumptions about the amount and timing of estimated future cash flows and other economic benefits from the assets, the remaining economic useful life of the assets, and general economic factors concerning the selection of an appropriate discount rate. The Company may also use replacement cost or market comparison approaches to estimate fair value if such methods are determined to be more appropriate. Intangible assets with finite lives are amortized over their estimated lives. Such assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. If that pattern cannot be reliably determined, the Company uses a straight-line amortization method. The Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. Property and Equipment Property and equipment are carried at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred, and major improvements, including leasehold improvements, are capitalized. Gains and losses from the sale of property and equipment are included in determining net income. The Company uses the straight-line method for recording depreciation over the estimated useful life of the asset. Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful life of the asset. The Company evaluates the estimated remaining useful lives of property and equipment and whether events or changes in circumstances warrant a revision to the remaining periods of depreciation. Leases When the Company leases assets from others, it records right-of-use (ROU) assets and lease liabilities. The Company determines if the arrangement is, or contains, a lease at the inception of an arrangement and records the lease in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available by the lessor. The Company primarily leases office and data center space and accounts for lease and non-lease components in these contracts together as a single, combined lease component. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The lease expense for these leases is recognized on a straight-line basis over the lease term. All other ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. The Company classifies each lease as operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases. When the discount rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate. Leases may include one or more options to renew, with renewal terms that can be extended. The exercise of lease renewal options for the majority of leases is at the Company's discretion. Renewal options that the Company is reasonably certain to exercise are included in the lease term. Certain leases include escalating rental payments or rental payments adjusted F - 20 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) periodically for inflation. None of the lease agreements include any residual value guarantees, a transfer of title, or a purchase option that is reasonably certain to be exercised. Impairment of Long-Lived Assets The Company reviews its long-lived assets, such as property and equipment, purchased intangibles subject to amortization, and ROU assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assumptions and estimates about future cash flows generated by, remaining useful lives of, and fair values of the Company's intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company's business strategy and internal forecasts. Although the Company believes the historical assumptions and estimates used are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results. Fair Value Measurements The Company uses estimates of fair value in applying various accounting standards for its financial statements. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value, such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates, and credit spreads, relying first on observable data from active markets. Depending on current market conditions, additional adjustments to fair value may be based on factors such as liquidity, credit, and bid/offer spreads. In some cases, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model's output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the estimates of current or future values. The Company categorizes its fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring assets and liabilities at fair value. Classification is based on the lowest level of input that is significant to the fair value of the instrument. The three levels include: • Level 1: Quoted prices for identical instruments in active markets. The types of financial instruments included in Level 1 are highly liquid instruments with quoted prices. • Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose primary value drivers are observable. • Level 3: Instruments whose primary value drivers are unobservable . Inputs are developed based on the best information available; however, significant judgment is required by management in developing the inputs. Revenue Recognition The Company applies the provisions of ASC Topic 606 , Revenue from Contracts with Customers ("Topic 606") , to its fee-based operating segments. The majority of the Company’s revenue earned in its NFS Division, including loan interest and derivative activity earned in its Asset Generation and Management and Nelnet Bank operating segments and reinsurance premiums earned in its Nelnet Insurance Services operating segment, is explicitly excluded from the scope of Topic 606. The Company recognizes revenue under the core principle of Topic 606 to depict the transfer of control of products and services to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the F - 21 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records deferred revenue when revenue is received or receivable in advance of the delivery of service. For multi-year contracts, the Company generally invoices customers annually at the beginning of each annual coverage period. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component. The Company recognizes an asset for the incremental costs of obtaining and/or fulfilling a contract with a customer if it expects the benefit of those costs to be longer than one year. Capitalized costs of obtaining and/or fulfilling a contract are amortized over the estimated life of the customer. Additional information related to revenue earned in its Asset Generation and Management, Nelnet Bank, and Nelnet Insurance Services operating segments is provided below. See note 17 for additional information related to the Company's fee-based operating segments. Loan interest income - The Company recognizes loan interest income as earned, net of amortization of loan premiums and deferred origination costs and the accretion of loan discounts and lender fees. Loan interest income is recognized based upon the expected yield of the loan after giving effect to interest rate reductions resulting from borrower utilization of incentives such as timely payments ("borrower benefits") and other yield adjustments. Loan premiums or discounts, deferred origination costs, lender fees, and borrower benefits are amortized/accreted over the estimated life of the loans, which includes an estimate of forecasted payments in excess of contractually required payments (the constant prepayment rate). Loan interest on federally insured student loans is paid by the Department or the borrower, depending on the status of the loan at the time of the accrual. The Department makes quarterly interest subsidy payments on certain qualified FFELP loans until the student is required under the provisions of the Higher Education Act to begin repayment. Borrower repayment of FFELP loans normally begins within six months after completion of the borrower's course of study, leaving school, or ceasing to carry at least one-half the normal full-time academic load, as determined by the educational institution. Borrower repayment of PLUS and consolidation loans normally begins within 60 days from the date of loan disbursement. Borrower repayment of private education loans typically begins six months following the borrower's graduation from a qualified institution, and the interest is either paid by the borrower or capitalized annually or at repayment. Repayment of consumer and other loans typically starts upon origination of the loan. The Department provides a special allowance to lenders participating in the FFEL Program. The special allowance rate is accrued based upon either the daily fiscal quarter average of the 13-week Treasury Bill auction rate, the daily fiscal quarter average of the three-month financial commercial paper rate, or the daily fiscal quarter average of the 30-day Average Secured Overnight Financing Rate (SOFR), relative to the yield of the student loan. The constant prepayment rate currently used by the Company to amortize/accrete federally insured loan premiums/discounts is 6 % for both federally insured consolidation and Stafford loans. The Company periodically evaluates the assumptions used to estimate the life of the loans and prepayment rates. In instances where there are changes to the assumptions, amortization/accretion is adjusted on a cumulative basis to reflect the change since the acquisition of the loan. During the second quarter of 2024, the Company changed its estimate of the constant prepayment rate on its consolidation loans from 5 % to 6 %, which resulted in a $ 0.8 million increase to the Company’s net loan discount balance and a corresponding decrease to interest income. During the fourth quarter of 2022, the Company changed its estimate of the constant prepayment rate on its Stafford loans from 5 % to 6 % and on its consolidation loans from 4 % to 5 %, which resulted in a $ 8.4 million decrease to the Company’s net loan discount balance and a corresponding increase to interest income. The Company also pays the Department an annual 105 basis point rebate fee on Consolidation loans. These rebate fees are netted against loan interest income. Reinsurance premiums earned and related expenses - The Company earns reinsurance premiums on prospective property and casualty reinsurance contracts over the loss exposure or coverage period in proportion to the level of protection provided. Reinsurance premiums are recognized as income, net of amounts ceded to reinsurers, over the terms of the related contracts and F - 22 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) polices, which is generally pro rata over a policy period of 12 months. Unearned premiums represent the portion of premiums written related to the unexpired terms of contracts and policies in force. Acquisition costs are incurred when a contract or policy is issued and only the direct incremental costs related to the successful acquisition of new and renewal contract or policies are deferred and amortized over the same period in which the related premiums are earned. Acquisition costs consist principally of commissions and brokerage expenses and are shown net of commissions and brokerage expenses earned on ceded reinsurance. The reserve for claims and claim expenses includes estimates for unpaid claims and claim expenses on reported losses as well as an estimate of losses incurred but not reported. The reserve is based on individual claims, case reserves, and other reserve estimates reported by insureds and ceding companies, and represents the estimated ultimate payment amounts. Inherent in the estimates of ultimate losses are expected trends in claim severity and frequency and other factors which could vary significantly as claims are settled. The reserves are adjusted regularly based upon experience. The Company performs a continuing review of its claims and claim expenses, including its reserving techniques and the impact of retroceded risk. Retrocession reinsurance treaties do not relieve the Company of its obligation to direct writing companies. The reserves are also reviewed regularly by qualified actuaries employed or contracted by the Company. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the consolidated statements of income in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to the Company’s results of operations and financial position in such period. Deposits and Interest Expense Deposits are interest-bearing deposits and primarily consist of brokered certificates of deposit (CDs), retail and other savings deposits and CDs, and intercompany deposits. Retail and other savings deposits include deposits from Educational 529 College Savings plans, Health Savings plans, retirement savings plans, Short Term Federal Investment Trust (STFIT), commercial and consumer savings, and FDIC sweep deposits. Union Bank and Trust Company (“Union Bank”), a related party, is the program manager for the Educational 529 College Savings plans and trustee for the STFIT. CDs are accounts that have a stipulated maturity and interest rate. For savings accounts, the depositor may be required to give written notice of any intended withdrawal no less than seven days before the withdrawal is made. Generally, early withdrawal of brokered CDs is prohibited (except in the case of death or legal incapacity). Nelnet Bank has intercompany deposits from Nelnet, Inc. and its subsidiaries. All intercompany deposits held at Nelnet Bank are eliminated for consolidated financial reporting purposes. For bonds and notes payable, interest expense is based upon contractual interest rates, adjusted for the amortization of debt issuance costs and the accretion of discounts. The amortization of debt issuance costs and accretion of discounts are recognized using the effective interest method. Transfer of Financial Assets and Extinguishments of Liabilities The Company accounts for loan sales and debt repurchases in accordance with applicable accounting guidance. If a transfer of loans qualifies as a sale, the Company derecognizes the loan and recognizes a gain or loss as the difference between the carrying basis of the loan sold and the consideration received. The Company from time to time repurchases its outstanding debt and records a gain or loss on the early extinguishment of debt based upon the difference between the carrying amount of the debt and the amount paid to the third party. Derivative Accounting All over-the-counter derivative contracts are cleared post-execution at the Chicago Mercantile Exchange (CME), a regulated clearinghouse. Clearing is a process by which a third party, the clearinghouse, steps in between the original counterparties and guarantees the performance of both, by requiring that each post liquid collateral on an initial (initial margin) and mark-to-market (variation margin) basis to cover the clearinghouse’s potential future exposure in the event of default. The CME legally characterizes variation margin payments for over-the-counter derivatives they clear as settlements of the derivatives’ exposure rather than collateral against the exposure. For accounting and presentation purposes, the Company considers variation margin and the corresponding derivative instrument as a single unit of account. As such, variation margin payments are considered in determining the fair value of the centrally cleared derivative portfolio (“settled-to-market”). The Company records settled-to-market derivative contracts on its balance sheet with a fair value of zero due to the payment or receipt of variation margin between the Company and the CME settling the outstanding mark-to-market exposure on such F - 23 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) derivatives to a balance of zero on a daily basis, and records the underlying daily changes in the market value of such derivative contracts that result in such receipts or payments on its income statement as realized derivative market value adjustments in “derivative market value adjustments and derivative settlements, net” on the consolidated statements of income. The Company records derivative instruments that are not required to be cleared at a clearinghouse (non-centrally cleared derivatives) in the consolidated balance sheets on a gross basis as either an asset or liability measured at its fair value. Certain non-centrally cleared derivatives are subject to right of offset provisions with counterparties. For these derivatives, the Company does not offset fair value amounts executed with the same counterparty under a master netting arrangement. In addition, the Company does not offset fair value amounts recognized for derivative instruments with respect to the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable). The Company determines the fair value for its non-centrally cleared derivative instruments using either (i) pricing models that consider current market conditions and the contractual terms of the derivative instrument; or (ii) counterparty valuations. The factors that impact the fair value of the Company’s derivatives include interest rates, time value, forward interest rate curve, and volatility factors. Management has structured all of the Company's derivative transactions with the intent that each is economically effective; however, the Company's derivative instruments do not qualify for hedge accounting in the consolidated financial statements. As a result, the change in market value of derivative instruments is reported in current period earnings. Changes or shifts in the forward yield curve can significantly impact the valuation of the Company’s derivatives, and therefore impact the results of operations of the Company. The changes in fair value of derivative instruments, as well as the settlement payments made on such derivatives, are included in “derivative market value adjustments and derivative settlements, net” on the consolidated statements of income. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Unless an investment qualifies for proportional amortization, the Company uses the deferred method of accounting for its credits related to state tax incentives and investments that generate investment tax credits. The investment tax credits are recognized as a reduction to the related asset. Income tax expense includes deferred tax expense, which represents a portion of the net change in the deferred tax asset or liability balance during the year, plus any change made in the valuation allowance, and current tax expense, which represents the amount of tax currently payable to or receivable from a tax authority plus amounts for expected tax deficiencies . Compensation Expense for Stock Based Awards The Company has a restricted stock plan that is intended to provide incentives to attract, retain, and motivate employees in order to achieve long term growth and profitability objectives. The restricted stock plan provides for the grant to eligible employees of awards of restricted shares of Class A common stock. The fair value of restricted stock awards is determined on the grant date based on the Company's stock price and is amortized to compensation cost over the related vesting periods, which range up to ten years . For those awards with only service conditions that have graded vesting schedules, the Company recognizes compensation expense on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in substance, multiple awards. Holders of restricted stock are entitled to receive dividends from the date of grant whether or not vested. The Company accounts for forfeitures as they occur. The Company also has a directors stock compensation plan pursuant to which directors can elect to receive their annual retainer fees in the form of fully vested shares of Class A common stock, and also elect to defer receipt of such shares until the termination of their service on the board of directors. The fair value of grants under this plan is determined on the grant date based on the Company's stock price and is expensed over the board member's annual service period. Restructuring Activities From time to time, the Company may implement plans to restructure the business. In conjunction with these restructuring plans, involuntary benefit arrangements, and certain other costs that are incremental and incurred as a direct result of the restructuring plans, are recognized as restructuring charges. See note 11 for additional information. F - 24 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Translation of Foreign Currencies The Company’s foreign subsidiaries use the local currency of the countries in which they are located as their functional currency. Accordingly, assets and liabilities are translated into U.S. dollars (the Company’s reporting currency) using the exchange rates in effect on the consolidated balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings during the year, which is the result of the income statement translation process. Revenue and expense accounts are translated using the weighted average exchange rate during the period. The cumulative translation adjustments associated with the net assets of foreign subsidiaries are recorded in accumulated other comprehensive earnings in the consolidated statements of shareholders’ equity. 3. Loans and Accrued Interest Receivable and Allowance for Loan Losses Loans and accrued interest receivable consisted of the following: As of As of December 31, 2024 December 31, 2023 Non-Nelnet Bank: Federally insured loans: Stafford and other $ 2,108,960 2,936,174 Consolidation 6,279,604 8,750,033 Total 8,388,564 11,686,207 Private education loans 221,744 277,320 Consumer and other loans (a) 345,560 85,935 Non-Nelnet Bank loans 8,955,868 12,049,462 Nelnet Bank: Private education loans 482,445 360,520 Consumer and other loans (a) 162,152 72,352 Nelnet Bank loans 644,597 432,872 Accrued interest receivable 549,283 764,385 Loan discount and deferred lender fees, net of unamortized loan premiums and deferred origination costs ( 42,114 ) ( 33,872 ) Allowance for loan losses: Non-Nelnet Bank: Federally insured loans ( 49,091 ) ( 68,453 ) Private education loans ( 11,130 ) ( 15,750 ) Consumer and other loans ( 38,468 ) ( 11,742 ) Non-Nelnet Bank allowance for loan losses ( 98,689 ) ( 95,945 ) Nelnet Bank: Private education loans ( 10,086 ) ( 3,347 ) Consumer and other loans ( 6,115 ) ( 5,351 ) Nelnet Bank allowance for loan losses ( 16,201 ) ( 8,698 ) $ 9,992,744 13,108,204 (a) During 2024, Nelnet Bank sold a $ 65.1 million consumer loan portfolio to the Company’s AGM (non-Nelnet Bank) operating segment. F - 25 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 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 December 31, 2024 December 31, 2023 Non-Nelnet Bank: Federally insured loans (a) 0.59 % 0.59 % Private education loans 5.02 % 5.68 % Consumer and other loans (b) 11.13 % 13.66 % Nelnet Bank: Private education loans 2.09 % 0.93 % Consumer and other loans (b) 3.77 % 7.40 % (a) As of December 31, 2024 and 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 20.6 % and 21.8 %, respectively. (b) Decrease as of December 31, 2024 compared with 2023 was due to the change in the mix of loans outstanding at the end of each period reported. Loan Sales During 2024, 2023, and 2022, the Company sold $ 726.6 million, $ 728.1 million, and $ 167.0 million of loans, respectively, and recognized net losses of $ 1.6 million, $ 17.7 million, and $ 8.6 million, respectively. Consumer loans sold by the Company during these periods were to non-affiliated third parties who securitized such loans. As partial consideration received for the majority of such loan portfolio sales, the Company received residual interest in the third parties’ loan securitizations that are included in "other investments and notes receivable, net" on the Company's consolidated balance sheets. F - 26 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 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 Initial allowance on loans purchased with credit deterioration Loan sales Balance at end of period Year ended December 31, 2024 Non-Nelnet Bank: Federally insured loans $ 68,453 ( 917 ) ( 18,445 ) — — — 49,091 Private education loans 15,750 ( 392 ) ( 5,045 ) 817 — — 11,130 Consumer and other loans 11,742 29,000 ( 11,033 ) 1,349 — 7,410 38,468 Nelnet Bank: Private education loans 3,347 7,830 ( 3,084 ) 762 1,231 — 10,086 Consumer and other loans 5,351 18,918 ( 11,091 ) 347 — ( 7,410 ) 6,115 $ 104,643 54,439 ( 48,698 ) 3,275 1,231 — 114,890 Year ended December 31, 2023 Non-Nelnet Bank: Federally insured loans $ 83,593 4,303 ( 19,593 ) — 6 144 68,453 Private education loans 15,411 2,865 ( 3,306 ) 780 — — 15,750 Consumer and other loans 30,263 ( 7,528 ) ( 12,467 ) 1,474 — — 11,742 Nelnet Bank: Federally insured loans 170 ( 14 ) ( 12 ) — — ( 144 ) — Private education loans 2,390 2,171 ( 1,214 ) — — — 3,347 Consumer and other loans — 6,245 ( 1,775 ) 881 — — 5,351 $ 131,827 8,042 ( 38,367 ) 3,135 6 — 104,643 Year ended December 31, 2022 Non-Nelnet Bank: Federally insured loans $ 103,381 3,731 ( 24,181 ) — 662 — 83,593 Private education loans 16,143 2,487 ( 3,879 ) 656 — 4 15,411 Consumer and other loans 6,481 26,915 ( 3,725 ) 592 — — 30,263 Nelnet Bank: Federally insured loans 268 ( 93 ) ( 5 ) — — — 170 Private education loans 840 1,860 ( 306 ) — — ( 4 ) 2,390 $ 127,113 34,900 ( 32,096 ) 1,248 662 — 131,827 F - 27 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) (a) Once a loan is classified as held for sale, any allowance for loan losses that existed immediately prior to the reclassification to held for sale is reversed through provision. 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 Year ended December 31, 2024 Non-Nelnet Bank Consumer and other loans $ 42,529 ( 13,529 ) 29,000 Year ended December 31, 2023 Non-Nelnet Bank Consumer and other loans $ 49,807 ( 57,335 ) ( 7,528 ) Year ended December 31, 2022 Non-Nelnet Bank Consumer and other loans $ 38,383 ( 11,468 ) 26,915 The following table summarizes annualized net charge-offs as a percentage of average loans for each of the Company's loan portfolios. Year ended December 31, 2024 2023 2022 Non-Nelnet Bank: Federally insured loans 0.18 % 0.15 % 0.15 % Private education loans 1.70 % 0.99 % 1.18 % Consumer and other loans 7.58 % 5.67 % 2.05 % Nelnet Bank: Federally insured loans — 0.02 % 0.01 % Private education loans 0.60 % 0.34 % 0.10 % Consumer and other loans 6.69 % 2.64 % — During the year ended December 31, 2022, the Company recorded a provision for loan losses due to (i) management's estimate of declining economic conditions as of December 31, 2022 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2021; and (ii) the establishment of an initial allowance for loans originated and acquired during the period. During the years ended December 31, 2023 and 2024, the Company recorded a provision for loan losses primarily due to the establishment of an initial allowance for consumer and other loans originated and acquired during the period. During 2024, additional provision was also recorded on a pool of consumer loans at both Nelnet Bank and AGM (Non-Nelnet Bank) in which loss expectations increased during the period. During 2022, 2023 and 2024, provision for loan losses was offset by the amortization of the federally insured loan portfolio; and during 2022 and 2023 by an increase in expected prepayments as a result of continued initiatives offered and proposed by the Department for FFELP borrowers to consolidate their loans into Federal Direct Loan Program loans with the Department. Unfunded Loan Commitments As of December 31, 2024 and 2023, Nelnet Bank had a liability of approximately $ 326,000 and $ 158,000 , respectively, related to $ 40.7 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. F - 28 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Year ended December 31, 2024 2023 2022 Provision for loan losses from allowance activity table above $ 54,439 8,042 34,900 Provision for unfunded loan commitments 168 73 73 Provision for loan losses reported in consolidated statements of income $ 54,607 8,115 34,973 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 December 31, 2024 2023 2022 Federally insured loans - Non-Nelnet Bank: Loans in-school/grace/deferment (a) $ 376,765 4.5 % $ 522,304 4.5 % $ 637,919 4.7 % Loans in forbearance (b) 586,412 7.0 979,588 8.4 1,103,181 8.1 Loans in repayment status: Loans current 6,374,897 85.9 % 8,416,624 82.6 % 10,173,859 86.0 % Loans delinquent 31-60 days (c) 243,348 3.3 377,108 3.7 415,305 3.5 Loans delinquent 61-90 days (c) 166,474 2.2 254,553 2.5 253,565 2.2 Loans delinquent 91-120 days (c) 113,838 1.5 187,145 1.9 180,029 1.5 Loans delinquent 121-270 days (c) 380,823 5.1 685,829 6.7 534,410 4.5 Loans delinquent 271 days or greater (c)(d) 146,007 2.0 263,056 2.6 268,205 2.3 Total loans in repayment 7,425,387 88.5 100.0 % 10,184,315 87.1 100.0 % 11,825,373 87.2 100.0 % Total federally insured loans 8,388,564 100.0 % 11,686,207 100.0 % 13,566,473 100.0 % Accrued interest receivable 540,272 757,713 808,150 Loan discount, net of unamortized premiums and deferred origination costs ( 21,513 ) ( 28,963 ) ( 35,468 ) Allowance for loan losses ( 49,091 ) ( 68,453 ) ( 83,593 ) Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 8,858,232 $ 12,346,504 $ 14,255,562 Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment (a) $ 5,997 2.7 % $ 9,475 3.4 % $ 12,756 5.1 % Loans in forbearance (b) 2,089 0.9 2,529 0.9 2,017 0.8 Loans in repayment status: Loans current 206,825 96.8 % 257,639 97.1 % 232,539 97.9 % Loans delinquent 31-60 days (c) 3,424 1.6 3,395 1.3 2,410 1.0 Loans delinquent 61-90 days (c) 1,275 0.6 1,855 0.7 767 0.3 Loans delinquent 91 days or greater (c) 2,134 1.0 2,427 0.9 1,894 0.8 Total loans in repayment 213,658 96.4 100.0 % 265,316 95.7 100.0 % 237,610 94.1 100.0 % Total private education loans 221,744 100.0 % 277,320 100.0 % 252,383 100.0 % Accrued interest receivable 2,019 2,653 2,146 Loan discount, net of unamortized premiums ( 6,350 ) ( 8,037 ) ( 38 ) Allowance for loan losses ( 11,130 ) ( 15,750 ) ( 15,411 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 206,283 $ 256,186 $ 239,080 F - 29 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) As of December 31, 2024 2023 2022 Consumer and other loans - Non-Nelnet Bank: Loans in deferment $ 150 0.0 % $ 146 0.2 % $ 109 0.0 % Loans in repayment status: Loans current 335,355 97.1 % 81,195 94.6 % 346,812 98.9 % Loans delinquent 31-60 days (c) 3,667 1.1 2,035 2.4 1,906 0.5 Loans delinquent 61-90 days (c) 2,143 0.6 1,189 1.4 764 0.2 Loans delinquent 91 days or greater (c) 4,245 1.2 1,370 1.6 1,324 0.4 Total loans in repayment 345,410 100.0 100.0 % 85,789 99.8 100.0 % 350,806 100.0 100.0 % Total consumer and other loans 345,560 100.0 % 85,935 100.0 % 350,915 100.0 % Accrued interest receivable 1,868 861 3,658 Loan discount and deferred lender fees, net of unamortized premiums ( 10,713 ) ( 2,474 ) ( 588 ) Allowance for loan losses ( 38,468 ) ( 11,742 ) ( 30,263 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 298,247 $ 72,580 $ 323,722 Private education loans - Nelnet Bank (e): Loans in-school/grace/deferment (a) $ 31,674 6.6 % $ 19,089 5.3 % $ 11,580 3.3 % Loans in forbearance (b) 3,061 0.6 1,285 0.4 864 0.2 Loans in repayment status: Loans current 439,569 98.2 % 338,448 99.5 % 340,830 99.8 % Loans delinquent 30-59 days (c) 4,327 1.0 839 0.2 167 0.1 Loans delinquent 60-89 days (c) 1,497 0.3 253 0.1 32 0.0 Loans delinquent 90 days or greater (c) 2,317 0.5 606 0.2 409 0.1 Total loans in repayment 447,710 92.8 100.0 % 340,146 94.3 100.0 % 341,438 96.5 100.0 % Total private education loans 482,445 100.0 % 360,520 100.0 % 353,882 100.0 % Accrued interest receivable 4,103 2,023 1,152 Loan discount, net of unamortized premiums and deferred origination costs ( 4,581 ) 5,608 5,360 Allowance for loan losses ( 10,086 ) ( 3,347 ) ( 2,390 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 471,881 $ 364,804 $ 358,004 Consumer and other loans - Nelnet Bank (e): Loans in deferment $ 5,186 3.2 % $ 103 0.1 % Loans in repayment status: Loans current 155,772 99.2 % 69,584 96.3 % Loans delinquent 30-59 days (c) 803 0.5 1,075 1.5 Loans delinquent 60-89 days (c) 243 0.2 941 1.3 Loans delinquent 90 days or greater (c) 148 0.1 649 0.9 Total loans in repayment 156,966 96.8 100.0 % 72,249 99.9 100.0 % Total consumer and other loans 162,152 100.0 % 72,352 100.0 % Accrued interest receivable 1,021 575 Loan premium, net of unaccreted discount 1,043 ( 6 ) Allowance for loan losses ( 6,115 ) ( 5,351 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 158,101 $ 67,570 (a) Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g. , residency periods for medical students or a grace period for bar exam preparation for law students. (b) Loans for borrowers who have temporarily ceased making full payments due to hardship or other factors, according to a schedule approved by the servicer consistent with the established loan program servicing procedures and policies. (c) The period of delinquency is based on the number of days scheduled payments are contractually past due and relate to repayment loans, that is, receivables not charged off, and not in-school, grace, deferment, or forbearance. (d) A portion of loans included in loans delinquent 271 days or greater includes loans in claim status, which are loans that have gone into default and have been submitted to the guaranty agency for reinsurance. (e) 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. F - 30 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) FICO Scores An additional key credit quality indicator for Nelnet Bank private education and consumer loans is FICO scores at the time of origination or purchase. The following tables highlight the 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 December 31, 2024 2024 2023 2022 2021 2020 Prior years Total FICO at origination or purchase: Less than 705 $ 2,566 3,578 4,759 4,182 331 15,485 30,901 705 - 734 3,736 8,874 19,666 7,531 426 12,349 52,582 735 - 764 4,398 8,629 29,918 12,775 1,286 17,920 74,926 765 - 794 4,600 6,115 46,340 24,073 1,105 23,867 106,100 Greater than 794 9,971 15,471 67,454 49,408 4,406 63,258 209,968 No FICO score available or required (a) 2,476 5,492 — — — — 7,968 $ 27,747 48,159 168,137 97,969 7,554 132,879 482,445 Loan balance as of December 31, 2023 2023 2022 2021 2020 Total FICO at origination or purchase: 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 December 31, 2024 2024 2023 2022 2021 2020 Prior years Total FICO at origination: Less than 720 $ 19,264 1,762 — 376 675 1,170 23,247 720 - 769 41,217 4,502 19 6,152 5,448 3,105 60,443 Greater than 769 57,323 6,577 103 5,834 2,755 1,165 73,757 No FICO score available or required (a) 3,936 437 277 55 — — 4,705 $ 121,740 13,278 399 12,417 8,878 5,440 162,152 Loan balance as of December 31, 2023 2023 2022 2021 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. F - 31 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 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 December 31, 2024, 2023, and 2022 was not material. Amortized Cost Basis by Origination Year The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of December 31, 2024, based on year of origination. Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all the Company’s federally insured loans were originated prior to July 1, 2010. 2024 2023 2022 2021 2020 Prior years Total Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ — — 460 2,401 568 2,568 5,997 Loans in forbearance — — 41 203 354 1,491 2,089 Loans in repayment status: Loans current — 198 4,226 5,567 39,446 157,388 206,825 Loans delinquent 31-60 days — — — 23 446 2,955 3,424 Loans delinquent 61-90 days — — 12 36 5 1,222 1,275 Loans delinquent 91 days or greater — — — 16 150 1,968 2,134 Total loans in repayment — 198 4,238 5,642 40,047 163,533 213,658 Total private education loans $ — 198 4,739 8,246 40,969 167,592 221,744 Accrued interest receivable 2,019 Loan discount, net of unamortized premiums ( 6,350 ) Allowance for loan losses ( 11,130 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 206,283 Gross charge-offs - year ended December 31, 2024 $ — — — 90 271 4,684 5,045 Consumer and other loans - Non-Nelnet Bank: Loans in deferment $ 51 99 — — — — 150 Loans in repayment status: Loans current 284,333 47,626 2,746 342 243 65 335,355 Loans delinquent 31-60 days 1,969 1,611 60 20 6 1 3,667 Loans delinquent 61-90 days 886 1,164 83 10 — — 2,143 Loans delinquent 91 days or greater 2,058 1,790 335 57 — 5 4,245 Total loans in repayment 289,246 52,191 3,224 429 249 71 345,410 Total consumer and other loans $ 289,297 52,290 3,224 429 249 71 345,560 Accrued interest receivable 1,868 Loan discount and deferred lender fees, net of unamortized premiums ( 10,713 ) Allowance for loan losses ( 38,468 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 298,247 Gross charge-offs - year ended December 31, 2024 $ 479 8,197 1,961 236 40 120 11,033 F - 32 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 2024 2023 2022 2021 2020 Prior years Total Private education loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 14,402 9,733 5,942 439 219 939 31,674 Loans in forbearance — 63 926 743 105 1,224 3,061 Loans in repayment status: Loans current 12,802 36,592 160,467 95,821 7,105 126,782 439,569 Loans delinquent 30-59 days 209 1,087 457 715 — 1,859 4,327 Loans delinquent 60-89 days 169 176 55 42 — 1,055 1,497 Loans delinquent 90 days or greater 165 508 290 209 125 1,020 2,317 Total loans in repayment 13,345 38,363 161,269 96,787 7,230 130,716 447,710 Total private education loans $ 27,747 48,159 168,137 97,969 7,554 132,879 482,445 Accrued interest receivable 4,103 Loan discount, net of unamortized premiums and deferred origination costs ( 4,581 ) Allowance for loan losses ( 10,086 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 471,881 Gross charge-offs - year ended December 31, 2024 $ 113 1,010 986 342 47 586 3,084 Consumer and other loans - Nelnet Bank (a): Loans in deferment $ 5,186 — — — — — 5,186 Loans in repayment status: Loans current 116,055 12,944 399 12,211 8,782 5,381 155,772 Loans delinquent 30-59 days 333 199 — 158 94 19 803 Loans delinquent 60-89 days 115 51 — 48 2 27 243 Loans delinquent 90 days or greater 51 84 — — — 13 148 Total loans in repayment 116,554 13,278 399 12,417 8,878 5,440 156,966 Total consumer and other loans $ 121,740 13,278 399 12,417 8,878 5,440 162,152 Accrued interest receivable 1,021 Loan premium, net of unaccreted discount 1,043 Allowance for loan losses ( 6,115 ) Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 158,101 Gross charge-offs - year ended December 31, 2024 $ 958 9,776 — 221 45 91 11,091 (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. F - 33 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 4. Bonds and Notes Payable The following tables summarize the Company’s outstanding debt obligations by type of instrument: As of December 31, 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 $ 6,923,824 4.89 % - 6.45 % 8/26/30 - 9/25/69 Bonds and notes based on auction 36,395 5.71 % - 5.72 % 3/22/32 - 8/25/37 Total FFELP variable-rate bonds and notes 6,960,219 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 346,359 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP loan warehouse facilities 853,165 4.41 % - 4.69 % 1/31/26 / 4/1/26 Consumer loan warehouse facilities 90,000 4.46 % / 4.57 % 8/1/26 / 11/13/27 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 54,973 5.90 % / 6.82 % 6/25/49 / 11/25/53 Fixed-rate bonds and notes issued in private education loan asset-backed securitizations 50,415 5.35 % / 7.15 % 12/28/43 / 11/25/53 Unsecured line of credit — — 9/22/26 Participation agreements 3,320 5.27 % - 5.82 % 5/4/25 / 1/30/33 8,358,451 Discount on bonds and notes payable and debt issuance costs ( 48,654 ) Total $ 8,309,797 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 (a) 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 (a) Union Bank, a related party, provided funding to the Company for certain properties and solar fields. During 2024, all such loans were paid in full. F - 34 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 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 December 31, 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) $ 600,000 564,796 35,204 1/31/2025 1/31/2026 note (b) $ 40,769 FFELP (c) 375,000 288,369 86,631 4/1/2025 4/1/2026 92 % 24,186 $ 975,000 853,165 121,835 $ 64,955 Consumer (d) $ 100,000 5,000 95,000 11/13/2026 11/13/2027 70 % $ 2,111 Consumer (e) 125,000 85,000 40,000 1/1/2026 8/1/2026 60 % - 80 % 20,441 $ 225,000 90,000 135,000 $ 22,552 (a) During 2024, this facility was amended resulting in a reduction of the maximum financing amount from $ 1.25 billion to $ 600 million and extending the expiration of liquidity provisions and final maturity date to January 31, 2025 and January 31, 2026, respectively. On January 31, 2025, the Company extended the liquidity provisions and final maturity date on this facility to July 31, 2025 and July 31, 2026, respectively. (b) This facility has a static advance rate until the expiration date of the liquidity provisions. The maximum advance rates for this facility are 90 % to 96 %, and the minimum advance rates are 84 % to 90 %. In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor. The loans would then be funded at this new advance rate until the final maturity date of the facility. (c) During 2024, this facility was amended resulting in a reduction of the maximum financing amount from $ 432 million to $ 375 million, and extending the expiration of liquidity provisions and final maturity date to April 1, 2025 and April 1, 2026, respectively. (d) During 2024, this facility was amended resulting in a reduction of the maximum financing amount from $ 200 million to $ 100 million and extending the expiration of liquidity provisions and final maturity date to November 13, 2026 and November 13, 2027, respectively. (e) On July 1, 2024, the Company closed on this $ 125 million consumer loan facility. Asset-backed securitizations The Company has historically relied upon asset-backed securitizations as its most significant source of funding for loans. The net cash flow the Company receives from the securitized loans generally represents the excess amounts, if any, generated by the underlying loans over the amounts required to be paid to the bondholders, after deducting servicing fees and any other expenses relating to the securitizations. The Company’s rights to cash flow from securitized loans are subordinate to bondholder interests, and the securitized loans may fail to generate any cash flow beyond what is due to bondholders. The bonds and notes payable are primarily secured by the loans receivable, related accrued interest, and by the amounts on deposit in the accounts established under the respective financing agreements. On November 16, 2023, the Company completed a $ 189.6 million (par value) private education loan asset-backed securitization. The notes issued have a final maturity date of November 25, 2053. There were no asset-backed securitization transactions completed during the year ended December 31, 2024. 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 December 31, 2024, no amount was outstanding on the line of credit and $ 495.0 million was available for future use. The line of credit agreement contains certain financial covenants that, if not met, lead to an event of default under the agreement. The covenants, which exclude Nelnet Bank, include, among others, maintaining: • A minimum consolidated net worth • A limitation on recourse indebtedness to adjusted EBITDA (over the last four rolling quarters) • A limitation on recourse and non-recourse indebtedness • A limitation on the amount of private education, consumer, and other (non-FFELP) loans in the Company’s portfolio • A limitation on permitted investments, including business acquisitions that are not in one of the Company's existing lines of business F - 35 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) As of December 31, 2024, the Company was in compliance with all of these requirements. Many of these covenants are duplicated in the Company's other lending facilities, including its warehouse facilities. The Company's operating line of credit does not have any covenants related to unsecured debt ratings. However, changes in the Company's ratings have modest implications on the pricing level at which the Company obtains funds. A default on the Company's other debt facilities would result in an event of default on the Company's unsecured line of credit that would result in the outstanding balance on the line of credit, if any, becoming immediately due and payable. Repurchase Agreement The Company had a repurchase agreement with a non-affiliated third party, the proceeds of which were collateralized by certain private education loan asset-backed securities (bond investments). The outstanding balance of this facility was paid in full during the fourth quarter of 2024. Nelnet Bank Nelnet Bank has unsecured Federal Funds lines of credit with correspondent banks totaling $ 50.0 million at a stated interest rate at the time of borrowing. Nelnet Bank has also established accounts at the Federal Reserve Bank (FRB) and the Federal Home Loan Bank (FHLB), which are secured and accept pledges of eligible securities. In addition, FFELP and private education loans are accepted as collateral for FRB borrowings. As of December 31, 2024 and 2023, Nelnet Bank had no amounts drawn on its Federal Funds, FRB, or FHLB lines of credit. As of December 31, 2024, the Bank has $ 115.8 million of collateral pledged with the FRB that it may borrow against. Debt Covenants Certain bond resolutions and related credit agreements contain, among other requirements, covenants relating to restrictions on additional indebtedness, limits as to direct and indirect administrative expenses, and maintaining certain financial ratios. The Company is in compliance with all covenants of the bond indentures and related credit agreements as of December 31, 2024. Maturity Schedule Bonds and notes outstanding as of December 31, 2024 are due in varying amounts as shown below. 2025 $ 100 2026 938,165 2027 5,000 2028 — 2029 — 2030 and thereafter 7,415,186 $ 8,358,451 Generally, the Company's secured financing instruments can be redeemed on any interest payment date at par plus accrued interest. Subject to certain provisions, all bonds and notes are subject to redemption prior to maturity at the option of certain lending subsidiaries. Debt Repurchases The following table summarizes the Company's repurchases of its own debt. Gains/losses recorded by the Company from the repurchase of debt are included in “other, net” in "other income (expense)" on the Company’s consolidated statements of income. Year ended December 31, 2024 2023 2022 Purchase price $ ( 7,585 ) ( 5,112 ) ( 67,081 ) Par value 7,671 5,941 69,133 Remaining unamortized cost of issuance ( 32 ) ( 14 ) ( 821 ) Gain, net of losses $ 54 815 1,231 F - 36 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 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 December 31, 2024, the Company holds $ 97.5 million (par value) of its own FFELP asset-backed securities. Debt Redemptions During 2024 and 2023, the Company redeemed $ 364.6 million and $ 188.6 million, respectively, of FFELP loan asset-backed debt securities (bonds and notes payable) prior to their maturity. The remaining unamortized debt discount associated with these bonds was written-off, resulting in a $ 6.3 million and $ 25.9 million non-cash expense recognized in 2024 and 2023, respectively. The expense related to the acceleration of unamortized debt discount costs 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. The Company is exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of the Company's assets do not match the interest rate characteristics of the funding for those assets. The Company periodically reviews the mismatch related to the interest rate characteristics of its assets and liabilities together with the Company's outlook as to current and future market conditions. Based on those factors, the Company uses settled-to-market derivative instruments as part of its overall risk management strategy. Settled-to-market derivative instruments used as part of the Company's interest rate risk management strategy are discussed below. Basis Swaps The Company earns interest on the majority of its FFELP student loan assets based on a 30-day average SOFR index while a portion of its FFELP loan assets is funded with 90-day average SOFR and 3-month CME term SOFR. Prior to the discontinuation of LIBOR on June 30, 2023, interest earned on the majority of the Company's FFELP student loan assets was indexed to the one-month LIBOR rate. Meanwhile, the Company funded a portion of its FFELP loan assets with three-month LIBOR indexed floating rate securities. The differing interest rate characteristics of the Company's loan assets versus the liabilities funding these assets results in basis risk, which impacts the Company's excess spread earned on its loans. The Company also faces repricing risk due to the timing of the interest rate resets on its liabilities, which may occur as infrequently as once a quarter, in contrast to the timing of the interest rate resets on its assets, which generally occur daily. As of December 31, 2024, the Company’s AGM operating segment had $ 7.9 billion, $ 0.3 billion, and $ 0.3 billion of FFELP loans indexed to the 30-day average SOFR rate, three-month commercial paper rate, and the three-month treasury bill rate, respectively, the indices for which reset daily, and $ 2.0 billion of debt indexed to 90-day average SOFR and 3-month CME term SOFR, the indices for which reset quarterly, and $ 5.0 billion of debt indexed to 30-day average SOFR and 1-month CME term SOFR, the indices for which reset monthly. The Company has used derivative instruments to hedge its basis risk and repricing risk. The Company has entered into basis swaps in which the Company receives and pays the term adjusted 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"). F - 37 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The following table summarizes the Company’s 1:3 Basis Swaps outstanding: As of December 31, 2024 2023 Maturity Notional amount Notional amount 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 December 31, 2024 and 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 FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the Special Allowance Payments (SAP) formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its student loan portfolio with variable rate debt. In low and/or certain declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, these student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income. Depending on the type of loan and when it was originated, the borrower rate is either fixed to term or is reset to an annual rate each July 1. As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate floor income. All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for these loans to the Department. Absent the use of derivative instruments, a rise in interest rates may reduce the amount of floor income received and this may have an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas. In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced. As of December 31, 2024, 2023, and 2022, the Company had $ 0.4 billion, $ 0.3 billion, and $ 0.9 billion, respectively, of FFELP student loan assets that were earning fixed rate floor income. The following table summarizes the outstanding derivative instruments used by the Company as of December 31, 2024 and 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 cash proceeds of $ 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. F - 38 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Nelnet Bank Derivatives Interest Rate Swaps Non-centrally cleared derivative instruments are used by Nelnet Bank to hedge the exposure to variability in cash flows of variable rate intercompany deposits primarily to minimize the exposure to volatility in cash flows from future changes in interest rates. Nelnet Bank has structured these derivatives so that each is economically effective; however, because these derivatives are hedging intercompany deposits, the derivative instruments are not eligible for hedge accounting in the consolidated financial statements. As a result, the change in market value of these derivative instruments is reported in current period earnings and presented in "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income. The following table summarizes the outstanding derivative instruments used by Nelnet Bank to hedge exposure to variability in cash flows related to variable rate intercompany deposits. As of December 31, 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. As of December 31, 2024 2023 2024 2023 Fair value of asset derivatives Fair value of liability derivatives Interest rate swaps - Nelnet Bank $ 3,232 452 53 1,976 F - 39 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 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. Year ended December 31, 2024 2023 2022 Settlements: 1:3 basis swaps $ 929 1,544 ( 206 ) Interest rate swaps - floor income hedges 4,288 23,044 33,149 Interest rate swaps - Nelnet Bank 917 484 — Total settlements - income 6,134 25,072 32,943 Change in fair value: 1:3 basis swaps ( 860 ) ( 567 ) 2,262 Interest rate swaps - floor income hedges 6,282 ( 39,683 ) 229,429 Interest rate swaps - Nelnet Bank 4,702 ( 1,523 ) — Total change in fair value - income (expense) 10,124 ( 41,773 ) 231,691 Derivative market value adjustments and derivative settlements, net - income (expense) $ 16,258 ( 16,701 ) 264,634 Derivative Instruments - Market Risk Interest rate movements have an impact on the amount of variation margin and collateral the Company may be required to pay to its third-party clearinghouse and counterparties, respectively. The Company attempts to manage market risk associated with interest rates by establishing and monitoring limits as to the types and degree of risk that may be undertaken. The Company's derivative portfolio and hedging strategy is reviewed periodically by its internal risk committee, Board of Directors' Risk and Finance Committee, and Nelnet Bank’s Board of Directors (for Nelnet Bank derivatives). With the Company's current derivative portfolio, the Company does not currently anticipate any movement in interest rates having a material impact on its liquidity or capital resources, nor expects future movements in interest rates to have a material impact on its ability to meet variation margin and collateral payments . F - 40 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 6. Investments and Notes Receivable A summary of the Company's “total investments and notes receivable” follows: As of December 31, 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 Investments (at fair value): Available-for-sale asset-backed securities Non-Nelnet Bank: FFELP loan $ 188,386 5,804 ( 896 ) 193,294 271,479 4,883 ( 5,393 ) 270,969 FFELP loan and other debt securities - restricted (a) 98,914 3,151 ( 78 ) 101,987 16,993 1,069 ( 93 ) 17,969 Private education loan (b) 237,288 — ( 18,118 ) 219,170 281,791 — ( 28,874 ) 252,917 Other debt securities 32,552 2,500 — 35,052 41,693 2,020 ( 1,275 ) 42,438 Total Non-Nelnet Bank 557,140 11,455 ( 19,092 ) 549,503 611,956 7,972 ( 35,635 ) 584,293 Nelnet Bank: FFELP loan (c) 231,543 6,060 ( 270 ) 237,333 304,555 4,488 ( 2,286 ) 306,757 Private education loan 1,596 — — 1,596 17,083 20 ( 10 ) 17,093 Other debt securities 296,944 1,775 ( 1,325 ) 297,394 49,284 117 ( 1,641 ) 47,760 Total Nelnet Bank 530,083 7,835 ( 1,595 ) 536,323 370,922 4,625 ( 3,937 ) 371,610 Total available-for-sale asset-backed securities $ 1,087,223 19,290 ( 20,687 ) 1,085,826 982,878 12,597 ( 39,572 ) 955,903 Equity securities 74,494 50,907 Total investments at fair value 1,160,320 1,006,810 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 (c) 203,439 149,938 Private education loan asset-backed securities 7,335 8,100 Total Nelnet Bank 210,774 158,038 Total held-to-maturity investments 210,774 162,738 Venture capital, funds, and other: Measurement alternative (d) 200,782 194,084 Equity method 170,258 91,464 Total venture capital and funds 371,040 285,548 Real estate: Equity method 131,745 103,811 Investment in ALLO: Voting interest/equity method (e) — 10,693 Preferred membership interest (f) 225,614 155,047 Total investment in ALLO 225,614 165,740 Beneficial interest in loan securitizations (g): Consumer loans, net of allowance for credit losses of $ 38,590 as of December 31, 2024 142,764 134,113 Private education loans, net of allowance for credit losses of $ 901 as of December 31, 2024 52,824 68,372 Federally insured student loans 18,221 22,594 Total beneficial interest in loan securitizations, net of allowance 213,809 225,079 Solar (h) ( 155,048 ) ( 146,040 ) Notes receivable 32,258 53,747 Tax liens, affordable housing, and other 10,184 7,243 Total other investments and notes receivable (not measured at fair value) 1,040,376 857,866 Total investments and notes receivable $ 2,200,696 $ 1,864,676 F - 41 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) (a) Represent investments held in third-party trusts as collateral for the Company’s reinsurance business. (b) In December 2020, Wells Fargo announced the sale of its approximately $ 10 billion portfolio of private education loans. The Company entered into a joint venture with other investors to acquire the loans. Under the terms of the joint venture agreements, the Company serves as the sponsor and administrator for the loan securitizations completed by the joint venture to permanently finance the loans acquired. As sponsor of the loan securitizations, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement. The bonds purchased to satisfy the risk retention requirement are included in the above table and as of December 31, 2024, the par value and fair value of these securities was $ 237.3 million and $ 219.2 million, respectively. The Company must retain these investment securities until the latest of (i) the date the aggregate outstanding principal balance of the loans in the securitization is 33 % or less of the initial loan balance, and (ii) the date the aggregate outstanding principal balance of the bonds is 33 % or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party. (c) 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. (d) The Company has an investment in Agile Sports Technologies, Inc. (doing business as “Hudl”). During the fourth quarter of 2024, the Company acquired additional ownership interests in Hudl for $ 3.3 million from existing Hudl investors. This transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities. Accordingly, the Company did not adjust its carrying value of its Hudl investment to the transaction value. As of December 31, 2024, the carrying amount of the Company's investment in Hudl is $ 168.7 million. David S. Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl. The Company's equity ownership interests in Hudl consist of preferred stock with certain liquidation preferences that are considered substantive. Accordingly, for accounting purposes, the Company's equity ownership interests are not considered in-substance common stock and the Company is accounting for its equity investment in Hudl using the measurement alternative method. (e) The Company recognized losses under the HLBV method of accounting on its ALLO voting membership interests investment of $ 10.7 million, $ 65.3 million, and $ 68.0 million during the years ended December 31, 2024, 2023, and 2022, 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. (f) As of December 31, 2024, the outstanding preferred membership interests of ALLO held by the Company was $ 225.6 million. The Company earns a preferred return on these interests. The accrued preferred return capitalizes to preferred membership interests annually on each December 31. 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. On December 31, 2024, $ 14.1 million of accrued preferred return was capitalized to preferred membership interests. The preferred annual return on the updated balance of $ 169.1 million preferred membership interests increased to 13.50 % on January 1, 2025. During 2024, the Company purchased an additional $ 53.1 million of preferred membership interests of ALLO, which earn a preferred annual return of 20.00 %. Including the accrued preferred return of $ 3.4 million that was capitalized on December 31, 2024, the updated balance of preferred membership interests that earns at 20.00 % was $ 56.5 million as of December 31, 2024. The Company recognized income on its ALLO preferred membership interests of $ 17.5 million, $ 9.1 million, and $ 8.6 million during the years ended December 31, 2024, 2023, and 2022, respectively. This income is included in "other, net" in "other income (expense)" on the consolidated statements of income. (g) 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 December 31, 2024, the Company's ownership correlates to approximately $ 1.19 billion, $ 465 million, and $ 315 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations. During 2024, 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, the Company recorded a $ 39.5 million allowance for credit losses (and related provision expense) related to these investments. F - 42 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) (h) 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 solar 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 December 31, 2024, the Company has invested a total of $ 314.8 million and its third-party investors have invested $ 271.4 million in tax equity investments that remain outstanding in renewable energy solar partnerships that support the development and operations of solar projects throughout the country. 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 December 31, 2024, the Company has earned $ 585.9 million of tax credits on those projects that remain outstanding, which includes $ 260.9 million earned by syndication partners. The solar investment negative carrying value on the consolidated balance sheet of $ 155.0 million as of December 31, 2024 represents the sum of total tax credits earned on solar projects placed in service through December 31, 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 December 31, 2024, excluding the portion owned by syndication partners that is reflected as "noncontrolling interests" on the consolidated balance sheet, was $ 87.9 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). Year ended December 31, 2024 2023 2022 Net losses $ ( 6,477 ) ( 59,645 ) ( 16,708 ) Less: net losses attributed to noncontrolling interest investors (syndication partners) 4,599 37,875 17,680 Net (losses) gains, excluding activity attributed to noncontrolling interest investors $ ( 1,878 ) ( 21,770 ) 972 F - 43 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The following table presents, by remaining contractual maturity, the amortized cost and fair value of debt securities as of December 31, 2024: As of December 31, 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 Non-Nelnet Bank: FFELP loan $ — 13,743 5,332 169,311 188,386 FFELP loan and other debt securities - restricted — 10,253 17,863 70,798 98,914 Private education loan — — — 237,288 237,288 Other debt securities — 100 9,481 22,971 32,552 Total Non-Nelnet Bank — 24,096 32,676 500,368 557,140 Fair value — 24,397 32,924 492,182 549,503 Nelnet Bank: FFELP loan 47,419 22,157 27,490 134,477 231,543 Private education loan — — — 1,596 1,596 Other debt securities — 40,361 58,826 197,757 296,944 Total Nelnet Bank 47,419 62,518 86,316 333,830 530,083 Fair value 47,815 62,703 86,556 339,249 536,323 Total available-for-sale asset-backed securities at amortized cost $ 47,419 86,614 118,992 834,198 1,087,223 Total available-for-sale asset-backed securities at fair value $ 47,815 87,100 119,480 831,431 1,085,826 Held-to-maturity investments Nelnet Bank: FFELP loan asset-backed securities $ — 2,759 1,136 199,544 203,439 Private education loan asset-backed securities — — — 7,335 7,335 Total held-to-maturity investments at amortized cost $ — 2,759 1,136 206,879 210,774 Total held-to-maturity investments at fair value $ — 2,827 1,160 212,177 216,164 Beneficial interest in loan securitizations (a): Amortized cost $ — — — — 213,809 Fair value $ — — — — 229,510 (a) The Company's beneficial interest in loan securitizations is not due at a single maturity date. The following table summarizes the unrealized positions for held-to-maturity asset-backed securities investments and the beneficial interest in loan securitizations as of December 31, 2024: Carrying value Gross unrealized gains Gross unrealized losses Fair value Asset-backed and other securities $ 210,774 5,432 ( 42 ) 216,164 Beneficial interest in loan securitizations 213,809 17,004 ( 1,303 ) 229,510 F - 44 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The following table presents securities classified as available-for-sale that have gross unrealized losses on December 31, 2024 and the fair value of such securities as of December 31, 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 December 31, 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 Non-Nelnet Bank: FFELP loan $ ( 2 ) 4,065 ( 894 ) 60,500 ( 896 ) 64,565 FFELP loan and other debt securities - restricted ( 24 ) 7,843 ( 54 ) 2,463 ( 78 ) 10,306 Private education loan — — ( 18,118 ) 219,170 ( 18,118 ) 219,170 Total Non-Nelnet Bank ( 26 ) 11,908 ( 19,066 ) 282,133 ( 19,092 ) 294,041 Nelnet Bank: FFELP loan ( 69 ) 30,297 ( 201 ) 16,586 ( 270 ) 46,883 Other debt securities ( 46 ) 15,029 ( 1,279 ) 14,058 ( 1,325 ) 29,087 Total Nelnet Bank ( 115 ) 45,326 ( 1,480 ) 30,644 ( 1,595 ) 75,970 Total available-for-sale asset-backed securities $ ( 141 ) 57,234 ( 20,546 ) 312,777 ( 20,687 ) 370,011 The following table summarizes the gross proceeds received and gross realized gains and losses related to sales of available-for-sale asset-backed securities. Year ended December 31, 2024 2023 2022 Gross proceeds from sales $ 445,946 963,117 511,124 Gross realized gains $ 5,775 4,517 6,702 Gross realized losses ( 1,241 ) ( 8,021 ) ( 800 ) Net gains (losses) $ 4,534 ( 3,504 ) 5,902 7. Business Combinations NGWeb Solutions, LLC On April 30, 2022, the Company acquired 30 % of the ownership interests of NGWeb Solutions, LLC ("NextGen") for total cash consideration of $ 9.2 million. NextGen provides software solutions primarily to higher education institutions to enable administrators to efficiently manage online forms, scholarships, employment, online timesheets, and other specialized processes that require signed authorizations and interactions with student information. Prior to the acquisition, the Company owned 50 % of the ownership interests of NextGen and accounted for this investment under the equity method. As a result of the acquisition, the previously held 50 % ownership interests was remeasured to its fair value as of the April 30, 2022 date of acquisition of the additional 30 % of the ownership interests, resulting in a $ 15.2 million revaluation gain, which is included in "other, net" in "other income (expense)" on the consolidated statements of income. For segment reporting, this gain is included in Corporate and Other Activities. Subsequent to the acquisition, the Company has consolidated the operating results of NextGen and such results are included in the Education Technology Services and Payments reportable operating segment. F - 45 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. Cash and cash equivalents $ 1,885 Accounts receivable 1,315 Property and equipment 800 Other assets 201 Intangible assets 15,250 Excess cost over fair value of net assets acquired (goodwill) 15,937 Other liabilities ( 4,550 ) Net assets acquired 30,838 Minority interest ( 6,291 ) Remeasurement of previously held investment ( 15,342 ) Total consideration paid by the Company $ 9,205 The $ 15.3 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 14 years. The intangible assets that made up this amount include customer relationships of $ 12.8 million ( 15 -year useful life), computer software of $ 1.7 million ( 5 -year useful life), and a trade name of $ 0.8 million ( 10 -year useful life). The $ 15.9 million of goodwill was assigned to the NextGen reporting unit that is included in the Education Technology Services and Payments operating segment and is not expected to be deductible for tax purposes. The amount allocated to goodwill was primarily attributed to the synergies and economies of scale expected from combining the operations of the Company and NextGen. The pro forma impacts of the NextGen acquisition on the Company's historical results prior to the acquisition were not material. GRNE Solar On July 1, 2022, the Company acquired 80 % of the ownership interests of two subsidiaries of GRNE Solutions, LLC named GRNE-Nelnet, LLC (GRNE) and ENRG-Nelnet, LLC (ENRG) (collectively referred to as "GRNE Solar") for total cash consideration of $ 28.9 million. GRNE designed and installed residential and commercial solar systems in the Midwest. ENRG owned certain assets that generated and sold solar energy. The acquisition diversifies the Company's position in the renewable energy space to include solar construction. For segment reporting, the operating results of GRNE Solar (now referred to as Nelnet Renewable Energy) are included in Corporate and Other Activities. As part of the acquisition, the Company agreed to pay $ 5.0 million in future capital contributions on behalf of the minority interest members. Any amount of the $ 5.0 million not paid as capital contributions to GRNE Solar by June 30, 2025 was to be paid by the Company directly to the minority interest members. On the acquisition date, the Company recorded a liability and increased goodwill by $ 5.0 million as a result of the future capital contribution commitment. The future capital contribution commitment had been fully satisfied as of December 31, 2023. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. Cash and cash equivalents $ 1,742 Restricted cash 2,200 Accounts receivable 3,983 Property and equipment 8,720 Other assets 2,296 Intangible assets 11,683 Excess cost over fair value of net assets acquired (goodwill) 13,873 Bonds and notes payable ( 750 ) Other liabilities ( 7,624 ) Net assets acquired 36,123 Minority interest ( 7,225 ) Total consideration paid by the Company $ 28,898 F - 46 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The $ 11.7 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 8 years. The intangible assets that made up this amount include a trade name of $ 8.1 million ( 10 -year useful life), customer relationships of $ 1.1 million ( 3 -year useful life), and other separately identified intangibles of $ 2.5 million ( 5 -year useful life). The $ 18.9 million of goodwill was assigned to the GRNE operating segment that is included in Corporate and Other Activities for segment reporting and is expected to be deductible for tax purposes. The amount allocated to goodwill was attributed to synergies from combining the operations of the Company and GRNE Solar and intangible assets that do not qualify for separate recognition. The pro forma impacts of the GRNE Solar acquisition on the Company's historical results prior to the acquisition were not material. In June 2024, the Company acquired the remaining 20 % of GRNE Solar for $ 0.3 million. 8. Intangible Assets Intangible assets consisted of the following: Weighted average remaining useful life as of December 31, 2024 (months) As of December 31, 2024 2023 Amortizable intangible assets, net: Customer relationships (net of accumulated amortization of $ 54,644 and $ 46,573 , respectively) 97 $ 34,960 43,031 Trade names (net of accumulated amortization of $ 205 and $ 8,268 , respectively) 88 565 642 Computer software (net of accumulated amortization of $ 917 and $ 574 , respectively) 28 803 1,146 Total amortizable intangible assets, net 95 $ 36,328 44,819 The Company recorded amortization expense on its intangible assets of $ 8.5 million, $ 17.0 million, and $ 15.0 million during the years ended December 31, 2024, 2023, and 2022, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of December 31, 2024, the Company estimates it will record amortization expense as follows: 2025 $ 6,099 2026 6,012 2027 5,714 2028 5,354 2029 4,008 2030 and thereafter 9,141 $ 36,328 9. Goodwill The change in the carrying amount of goodwill by reportable operating segment was as follows: Nelnet Financial Services Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management (a) Nelnet Bank NFS Other Operating Segments Corporate and Other Activities Total Goodwill as of December 31, 2022 $ 23,639 92,507 41,883 — — 18,873 176,902 Impairment (see note 11) — — — — — ( 18,873 ) ( 18,873 ) Goodwill as of December 31, 2023 and 2024 $ 23,639 92,507 41,883 — — — 158,029 (a) As a result of the Reconciliation Act of 2010, the Company no longer originates new FFELP loans, and net interest income from the Company's existing FFELP loan portfolio will decline over time as the Company's portfolio pays down. As a result, as this revenue stream winds down, goodwill impairment will be triggered for the FFELP Portfolio reporting unit (included in the AGM operating segment) due to the passage of time and depletion of projected cash flows stemming from its FFELP student loan portfolio. Management believes the elimination of FFELP loan originations will not have an adverse impact on the fair value of the Company's other reporting units. F - 47 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 10. Property and Equipment Property and equipment consisted of the following: As of December 31, Useful life 2024 2023 Computer equipment and software 1 - 5 years $ 280,947 260,224 Building and building improvements 5 - 48 years 50,078 50,747 Office furniture and equipment 1 - 10 years 17,598 17,197 Solar facilities 5 - 35 years 10,398 12,850 Transportation equipment 5 - 10 years 7,012 7,101 Leasehold improvements 1 - 15 years 6,153 6,149 Land — 3,214 3,279 Construction in progress — 17,591 23,245 392,991 380,792 Accumulated depreciation ( 297,806 ) ( 253,784 ) Total property and equipment, net $ 95,185 127,008 The Company recorded depreciation expense on its property and equipment of $ 49.6 million, $ 62.1 million, and $ 59.1 million during the years ended December 31, 2024, 2023, and 2022, respectively. F - 48 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 11. 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 during 2024, 2023, and 2022. 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 Year ended December 31, 2024 Investments - beneficial interest in loan securitizations (a) $ — — 39,491 — — — 39,491 Property and equipment - solar facilities (b) — — — — — 1,170 1,170 Leases, buildings, and associated improvements (c) 736 — — — — — 736 Other assets - solar inventory (b) — — — — — 695 695 Investments - venture capital and funds (d) — — — — — 537 537 $ 736 — 39,491 — — 2,402 42,629 Year ended December 31, 2023 Leases, buildings, and associated improvements (c) $ 296 — — — — 4,678 4,974 Investments - venture capital and funds (d) — — — — — 2,060 2,060 Goodwill (e) — — — — — 18,873 18,873 Property and equipment - internally developed software — 4,310 — — — — 4,310 Intangible assets (e) — — — — — 1,708 1,708 $ 296 4,310 — — — 27,319 31,925 Year ended December 31, 2022 Leases, buildings, and associated improvements (c) $ 1,774 — — — — 998 2,772 Investments - venture capital and funds (d) — — — — — 6,561 6,561 Property and equipment - internally developed software 3,737 — — 214 — — 3,951 Intangible asset — 2,239 — — — — 2,239 $ 5,511 2,239 — 214 — 7,559 15,523 (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 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. (c) The Company continues to evaluate the use of office space as it modifies its hybrid work model for associates. As a result, the Company recorded non-cash impairment charges related to operating lease assets and associated leasehold improvements and to building and building improvements. The Corporate and Other Activities amount for the year ended December 31, 2023 includes a $ 2.4 million lease termination fee paid to Union Bank, a related party. (d) The Company recorded non-cash impairment charges related to several of its venture capital investments accounted for under the measurement alternative method. F - 49 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) (e) As part of the November 2023 annual goodwill impairment assessment completed in conjunction with the Company’s annual November budget process, the Company determined it was more likely than not that the estimated fair value of the GRNE operating segment was less than its carrying amount. As part of the quantitative assessment, the Company used the discounted cash flow method under the income approach to estimate the fair value of the reporting unit, which concluded that the estimated fair value was less than its carrying amount. As a result, the Company recorded a non-cash impairment charge in the fourth quarter of 2023. No remaining goodwill is attributable to the GRNE operating segment. The Company also recorded a non-cash impairment charge for GRNE operating segment’s remaining intangible assets. 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 incurred a charge of $ 7.1 million related to these staff reductions, which is included in "salaries and benefits" in the consolidated statements of income. The charge was recognized over the service period through December 31, 2024. In March 2023, the Company announced a reduction in staff due to the Department’s March 2023 announcement to reduce the monthly fee earned by the Company under its legacy Department student loan servicing contract and the notification by the Department in February 2023 of its intention to transfer up to one million of the Company’s existing Department servicing borrowers to another servicer. Approximately 550 associates who work in LSS, including some in related shared services that support LSS, were notified their positions were being eliminated. The Company incurred a charge of $ 4.3 million related to the staff reductions, which is included in "salaries and benefits" in the consolidated statements of income. The charge was primarily recognized in the first and second quarters of 2023. As a result of the decommissioning of the Great Lakes’ platform in the fourth quarter of 2023, the Company incurred a charge of $ 3.5 million related to staff reductions, including some in related shared services that support LSS, which is included in "salaries and benefits" in the consolidated statements of income, that was recognized in the fourth quarter of 2023. 12. Bank Deposits The following table summarizes Nelnet Bank’s interest-bearing deposits, excluding intercompany deposits. As of December 31, 2024 and 2023, Nelnet Bank had intercompany deposits from Nelnet, Inc. and its subsidiaries totaling $ 68.5 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. As of December 31, 2024 2023 Retail and other savings $ 916,475 520,017 Brokered CDs, net of brokered deposit fees 247,872 203,522 Retail and other CDs, net of issuance fees 21,784 20,060 Total interest-bearing deposits $ 1,186,131 743,599 Brokered deposit fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. The Bank recognized deposit issuance fee expense, which includes brokered deposit fees, of $ 0.3 million, $ 0.2 million, and $ 0.3 million during the years ended December 31, 2024, 2023, and 2022, respectively. Fees paid to third parties related to these deposits were $ 0.4 million and $ 0.6 million during the years ended December 31, 2024 and 2022, respectively. There were no fees paid to third parties for the year ended December 31, 2023. F - 50 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The following table presents certificates of deposit remaining maturities as of December 31, 2024: One year or less $ 3,451 After one year to two years 146,397 After two years to three years 75,004 After three years to four years 348 After four years to five years 44,456 After five years — Total $ 269,656 Retail and other savings deposits include deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trust (STFIT), and FDIC sweep deposits. 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 December 31, 2024 and 2023 were $ 44.3 million and $ 44.2 million, respectively, the majority of which are intercompany deposits from Nelnet, Inc. and its subsidiaries. Accrued interest on deposits was $ 1.3 million and $ 0.7 million as of December 31, 2024 and 2023, respectively, which is included in “accrued interest payable” on the consolidated balance sheets. 13. Shareholders’ Equity Classes of Common Stock The Company's common stock is divided into two classes. The Class B common stock has ten votes per share and the Class A common stock has one vote per share on all matters to be voted on by the Company's shareholders. Each Class B share is convertible at any time at the holder's option into one Class A share. With the exception of the voting rights and the conversion feature, the Class A and Class B shares are identical in terms of other rights, including dividend and liquidation rights. Stock Repurchases The Company has a stock repurchase program that expires on May 8, 2025 in which it can repurchase up to five million shares of its Class A common stock on the open market, through private transactions, or otherwise. As of December 31, 2024, 3.3 million shares may still be purchased under the Company's stock repurchase program. Shares repurchased by the Company during 2024, 2023, and 2022 are shown in the table below. In accordance with the corporate laws of the state in which the Company is incorporated, all shares repurchased by the Company are legally retired upon acquisition by the Company. Total shares repurchased Purchase price (in thousands) Average price of shares repurchased (per share) (a) Year ended December 31, 2024 894,108 $ 83,290 $ 93.15 Year ended December 31, 2023 336,943 28,028 83.18 Year ended December 31, 2022 1,162,533 97,685 84.03 (a) The average price of shares repurchased for the years ended December 31, 2024 and 2023 includes excise taxes. F - 51 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 14. Earnings per Common Share Presented below is a summary of 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. Year ended December 31, 2024 2023 2022 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 180,498 3,547 184,045 87,936 1,890 89,826 399,124 7,775 406,899 Denominator: Weighted-average common shares outstanding - basic and diluted 35,936,337 706,196 36,642,533 36,629,437 787,184 37,416,621 36,884,548 718,485 37,603,033 Earnings per share - basic and diluted $ 5.02 5.02 5.02 2.40 2.40 2.40 10.82 10.82 10.82 Unvested restricted stock awards are the Company's only potential common shares and, accordingly, there were no awards that were antidilutive and not included in average shares outstanding for the diluted earnings per share calculation. As of December 31, 2024, a cumulative amount of 169,087 shares have been deferred by non-employee directors under the Directors Stock Compensation Plan and will become issuable upon the termination of service by the respective non-employee director on the board of directors. These shares are included in the Company's weighted average shares outstanding calculation. 15. Income Taxes The Company is subject to income taxes in the United States and certain foreign countries. Significant judgment is required in evaluating the Company's tax positions and determining the provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As required by the ASC Topic 740, Income Taxes , the Company recognizes in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such change. As of December 31, 2024, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $ 18.2 million, which is included in “other liabilities” on the consolidated balance sheet. Of this total, $ 14.4 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. The Company currently anticipates uncertain tax positions will decrease by $ 4.4 million prior to December 31, 2025 as a result of a lapse of applicable statutes of limitations, settlements, correspondence with examining authorities, and recognition or measurement considerations with federal and state jurisdictions; however, actual developments in this area could differ from those expected. Of the anticipated $ 4.4 million decrease, $ 3.5 million, if recognized, would favorably affect the Company's effective tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows: F - 52 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Year ended December 31, 2024 2023 Gross balance - beginning of year $ 17,084 16,835 Additions based on tax positions of prior years 2,081 819 Additions based on tax positions related to the current year 2,397 2,242 Settlements with taxing authorities — ( 247 ) Reductions for tax positions of prior years ( 885 ) ( 460 ) Reductions due to lapse of applicable statutes of limitations ( 2,495 ) ( 2,105 ) Gross balance - end of year $ 18,182 17,084 All the reductions shown in the table above that are due to prior year tax positions and the lapse of statutes of limitations impacted the effective tax rate. The Company's policy is to recognize interest and penalties accrued on uncertain tax positions as part of interest expense and other expense, respectively. As of December 31, 2024 and 2023, $ 5.6 million and $ 4.8 million in accrued interest and penalties, respectively, were included in “other liabilities” on the consolidated balance sheets. The Company recognized interest expense of $ 0.9 million and $ 0.8 million, and interest benefits of $ 1.1 million related to uncertain tax positions for the years ended December 31, 2024, 2023, and 2022, respectively. The impact to the consolidated statements of income related to penalties for uncertain tax positions was not significant for the years 2024, 2023, and 2022. The impact of timing differences and tax attributes are considered when calculating interest and penalty accruals associated with the unrecognized tax benefits. The Company and its subsidiaries file a consolidated federal income tax return in the U.S. and the Company or one of its subsidiaries files income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2021. The Company is no longer subject to U.S. state and local income tax examinations by tax authorities prior to 2018. The provision for income taxes consists of the following components: Year ended December 31, 2024 2023 2022 Current: Federal $ 66,295 65,952 67,649 State 7,849 5,732 10,984 Foreign 146 32 ( 49 ) Total current provision 74,290 71,716 78,584 Deferred: Federal ( 18,716 ) ( 42,073 ) 32,298 State ( 2,786 ) ( 10,270 ) 2,198 Foreign ( 119 ) 12 20 Total deferred provision ( 21,621 ) ( 52,331 ) 34,516 Provision for income tax expense $ 52,669 19,385 113,100 The differences between the income tax provision computed at the statutory federal corporate tax rate and the financial statement provision for income taxes are shown below: Year ended December 31, 2024 2023 2022 Tax expense at federal rate 21.0 % 21.0 % 21.0 % Increase (decrease) resulting from: State tax, net of federal income tax benefit 2.1 ( 0.6 ) 2.8 Tax credits ( 1.8 ) ( 4.1 ) ( 0.6 ) Change in valuation allowance 0.1 0.4 ( 0.5 ) Other 0.9 1.1 ( 0.9 ) Effective tax rate 22.3 % 17.8 % 21.8 % F - 53 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following: As of December 31, 2024 2023 Deferred tax assets: Tax credit carryforwards $ 30,252 12,190 Student loans 20,354 16,489 Deferred revenue 18,322 17,399 Accrued expenses 15,129 9,623 Stock compensation 6,541 6,584 Intangible assets 4,778 987 Net operating losses 4,556 4,563 Lease liability 2,685 2,929 Other 428 — Total gross deferred tax assets 103,045 70,764 Less state tax valuation allowance ( 703 ) ( 562 ) Net deferred tax assets 102,342 70,202 Deferred tax liabilities: Partnership basis 71,509 71,423 Debt and equity investments 12,015 4,711 Basis in certain derivative contracts 11,614 26,139 Depreciation 6,229 9,526 Prepaid expenses 5,615 — Lease right of use asset 2,573 2,770 Loan origination services 2,026 2,635 Securitization 170 267 Other — 3,784 Total gross deferred tax liabilities 111,751 121,255 Net deferred tax asset (liability) $ ( 9,409 ) ( 51,053 ) The Company has performed an evaluation of the recoverability of deferred tax assets. In assessing the realizability of the Company's deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible or eligible for utilization of a tax credit carryforward. Management considers the scheduled reversals of deferred tax liabilities, projected taxable income, carry back opportunities, and tax planning strategies in making the assessment of the amount of the valuation allowance. With the exception of a portion of the Company's state net operating losses, it is management's opinion that it is more likely than not that the deferred tax assets will be realized and should not be reduced by a valuation allowance. The amount of deferred tax assets considered realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. As of December 31, 2024 and 2023, net deferred tax liabilities of $ 30.4 million and $ 72.9 million, respectively, and net deferred tax assets of $ 21.0 million and $ 21.8 million, respectively, were included in “other liabilities” and “other assets,” respectively, on the consolidated balance sheets. As of December 31, 2024 and 2023, the Company had a current income tax receivable of $ 61.8 million and $ 67.4 million, respectively, that is included in “other assets" on the consolidated balance sheets. F - 54 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 16. Segment Reporting The Company's reportable operating segments include: • Loan Servicing and Systems • Education Technology Services and Payments • Asset Generation and Management, part of the NFS division as described below • Nelnet Bank, part of the NFS division as described below The Company earns fee-based revenue through its Loan Servicing and Systems and Education Technology Services and Payments operating segments; and earns net interest income on its loan portfolio in its Asset Generation and Management and Nelnet Bank operating segments. The Company’s operating segments are defined by the products and services they offer and the types of customers they serve, and they reflect the manner in which financial information is currently evaluated by management. See note 1 for a description of each operating segment, including the primary products and services offered. The management reporting process measures the performance of the Company’s operating segments based on the management structure of the Company, as well as the methodology used by management to evaluate performance and allocate resources. The Company’s executive officers (the "chief operating decision maker") evaluate the performance of the Company’s operating segments based on their financial results prepared in conformity with U.S. GAAP. In November 2023, the FASB issued accounting guidance which improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit (referred to as the “significant expense principle”). The Company adopted the standard effective for the year ended December 31, 2024 annual financial statements. The guidance is applied retrospectively for all prior periods presented in the financial statements. There is limited impact to the Company’s financial statement disclosures due to the segment expense detail previously disclosed for each reportable segment. The Nelnet Financial Services division includes the reportable segments of AGM and Nelnet Bank and the following other non-reportable operating segments. The operating results of the below items are included as a reconciling item from the operating results of the Company’s reportable segments to the consolidated financial statements. • The operating results of WRCM, the Company's SEC-registered investment advisor subsidiary • The operating results of Nelnet Insurance Services, which primarily includes multiple reinsurance treaties on property and casualty policies • The operating results of the Company’s investment activities in real estate • The operating results of the Company’s investment debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments The accounting policies of the Company’s operating segments are the same as those described in the summary of significant accounting policies. Intersegment revenues are charged by a segment that provides a product or service to another segment. Intersegment revenues and expenses are included within each segment consistent with the income statement presentation provided to management. Income taxes are allocated based on 24 % of income before taxes for each individual operating segment, except for Nelnet Bank, which reflects Nelnet Bank’s actual tax expense/benefit as allocated and reflected in its Call Report filed with the Federal Deposit Insurance Corporation. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities. Other business activities and operating segments that are not reportable and not part of the NFS division, as described in note 1, are combined and included in Corporate and Other Activities. Segment Results The following tables present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements. F - 55 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Year ended December 31, 2024 Reportable Segments Reconciling Items Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank Total Reportable Segments NFS Other Operating Segments Corporate and Other Activities Eliminations/ Reclassifications Total Interest income: Loan interest $ — — 749,117 38,381 787,498 — — — 787,498 Investment interest 4,877 29,891 68,302 45,992 149,062 54,357 11,773 ( 29,291 ) 185,901 Total interest income 4,877 29,891 817,419 84,373 936,560 54,357 11,773 ( 29,291 ) 973,399 Interest expense — — 654,346 44,859 699,205 8,837 1,787 ( 29,291 ) 680,537 Net interest income 4,877 29,891 163,073 39,514 237,355 45,520 9,986 — 292,862 Less provision (negative provision) for loan losses — — 27,691 26,916 54,607 — — — 54,607 Net interest income after provision for loan losses 4,877 29,891 135,382 12,598 182,748 45,520 9,986 — 238,255 Other income (expense): LSS revenue 482,408 — — — 482,408 — — — 482,408 Intersegment revenue 24,493 220 — — 24,713 — — ( 24,713 ) — ETSP revenue — 486,962 — — 486,962 — — — 486,962 Reinsurance premiums earned — — — — — 62,923 — — 62,923 Solar construction revenue — — — — — — 56,569 — 56,569 Other, net 2,769 — 15,879 2,951 21,599 8,313 31,613 77 61,602 Loss on sale of loans, net — — ( 1,643 ) — ( 1,643 ) — — — ( 1,643 ) Derivative settlements, net — — 5,217 917 6,134 — — — 6,134 Derivative market value adjustments, net — — 5,422 4,702 10,124 — — — 10,124 Total other income (expense), net 509,670 487,182 24,875 8,570 1,030,297 71,236 88,182 ( 24,636 ) 1,165,079 Cost of services and expenses: Total cost of services 1,889 172,763 — — 174,652 — 77,673 — 252,325 Salaries and benefits 300,366 164,716 4,784 11,122 480,988 1,587 96,148 ( 1,792 ) 576,931 Depreciation and amortization 19,475 10,531 — 1,282 31,288 — 26,828 — 58,116 Reinsurance losses and underwriting expenses — — — — — 55,246 — — 55,246 Postage expense 36,820 36,820 ( 36,820 ) — Servicing fees 31,591 1,373 32,964 ( 32,964 ) — Other expenses (a) 43,282 32,281 4,152 6,972 86,687 3,352 53,581 45,883 189,503 Intersegment expenses, net 71,482 18,886 5,037 2,361 97,766 853 ( 99,599 ) 980 — Total operating expenses 471,425 226,414 45,564 23,110 766,513 61,038 76,958 ( 24,713 ) 879,796 Impairment expense and provision for beneficial interests 736 — 39,491 — 40,227 — 2,402 — 42,629 Total expenses 474,050 399,177 85,055 23,110 981,392 61,038 157,033 ( 24,713 ) 1,174,750 Income (loss) before income taxes 40,497 117,896 75,202 ( 1,942 ) 231,653 55,718 ( 58,865 ) 77 228,584 Income tax (expense) benefit ( 9,719 ) ( 28,333 ) ( 18,048 ) 579 ( 55,521 ) ( 13,261 ) 16,114 — ( 52,669 ) Net income (loss) 30,778 89,563 57,154 ( 1,363 ) 176,132 42,457 ( 42,751 ) 77 175,915 Net loss (income) attributable to noncontrolling interests — 158 — — 158 ( 463 ) 8,512 ( 77 ) 8,130 Net income (loss) attributable to Nelnet, Inc. $ 30,778 89,721 57,154 ( 1,363 ) 176,290 41,994 ( 34,239 ) — 184,045 Total assets as of December 31, 2024 $ 193,390 600,790 10,037,688 1,449,034 12,280,902 903,837 842,692 ( 249,678 ) 13,777,753 (a) Other expenses for each reportable segment includes: LSS - occupancy, communications, professional fees, collection costs, analysis fees, software, computer services and subscriptions, and travel. ETSP - advertising, professional fees, analysis fees, computer services and subscriptions, travel, and provision for losses. AGM - trustee fees and professional fees. Bank - marketing, consulting and professional fees, software, and insurance. F - 56 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Year ended December 31, 2023 Reportable Segments Reconciling Items Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank Total Reportable Segments NFS Other Operating Segments Corporate and Other Activities Eliminations/ Reclassifications Total Interest income: Loan interest $ — — 910,139 21,806 931,945 — — — 931,945 Investment interest 4,845 26,962 67,019 36,053 134,879 74,857 12,141 ( 44,021 ) 177,855 Total interest income 4,845 26,962 977,158 57,859 1,066,824 74,857 12,141 ( 44,021 ) 1,109,800 Interest expense — — 823,084 34,704 857,788 29,747 1,578 ( 44,021 ) 845,091 Net interest income 4,845 26,962 154,074 23,155 209,036 45,110 10,563 — 264,709 Less provision (negative provision) for loan losses — — ( 360 ) 8,475 8,115 — — — 8,115 Net interest income after provision for loan losses 4,845 26,962 154,434 14,680 200,921 45,110 10,563 — 256,594 Other income (expense): LSS revenue 517,954 — — — 517,954 — — — 517,954 Intersegment revenue 28,911 253 — — 29,164 — — ( 29,164 ) — ETSP revenue — 463,311 — — 463,311 — — — 463,311 Reinsurance premiums earned — — — — — 20,067 — — 20,067 Solar construction revenue — — — — — — 31,669 — 31,669 Other, net 2,587 — 11,269 1,095 14,951 6,581 ( 95,859 ) — ( 74,327 ) Loss on sale of loans, net — — ( 17,662 ) — ( 17,662 ) — — — ( 17,662 ) Derivative settlements, net — — 24,588 484 25,072 — — — 25,072 Derivative market value adjustments, net — — ( 40,250 ) ( 1,523 ) ( 41,773 ) — — — ( 41,773 ) Total other income (expense), net 549,452 463,564 ( 22,055 ) 56 991,017 26,648 ( 64,190 ) ( 29,164 ) 924,311 Cost of services and expenses: Total cost of services — 171,183 — — 171,183 — 48,576 — 219,759 Salaries and benefits 317,885 155,296 4,191 9,074 486,446 1,130 105,531 ( 1,571 ) 591,537 Depreciation and amortization 19,257 11,319 — 574 31,150 — 47,969 — 79,118 Reinsurance losses and underwriting expenses — — — — — 16,781 — — 16,781 Postage expense 21,194 21,194 ( 21,194 ) — Servicing fees 37,389 509 37,898 ( 37,898 ) — Other expenses (a) 39,323 34,133 4,988 4,994 83,438 2,391 56,307 30,935 173,070 Intersegment expenses, net 78,628 23,184 5,175 ( 47 ) 106,940 584 ( 108,088 ) 564 — Total operating expenses 476,287 223,932 51,743 15,104 767,066 20,886 101,719 ( 29,164 ) 860,506 Impairment expense and provision for beneficial interests 296 4,310 — — 4,606 — 27,319 — 31,925 Total expenses 476,583 399,425 51,743 15,104 942,855 20,886 177,614 ( 29,164 ) 1,112,190 Income (loss) before income taxes 77,714 91,101 80,636 ( 368 ) 249,083 50,872 ( 231,241 ) — 68,715 Income tax (expense) benefit ( 18,651 ) ( 21,891 ) ( 19,353 ) 153 ( 59,742 ) ( 12,073 ) 52,429 — ( 19,385 ) Net income (loss) 59,063 69,210 61,283 ( 215 ) 189,341 38,799 ( 178,812 ) — 49,330 Net loss (income) attributable to noncontrolling interests — 109 — — 109 ( 568 ) 40,955 — 40,496 Net income (loss) attributable to Nelnet, Inc. $ 59,063 69,319 61,283 ( 215 ) 189,450 38,231 ( 137,857 ) — 89,826 Total assets as of December 31, 2023 $ 294,376 490,296 13,488,420 991,252 15,264,344 1,115,292 873,843 ( 541,095 ) 16,712,384 (a) Other expenses for each reportable segment includes: LSS - occupancy, communications, professional fees, collection costs, analysis fees, software, computer services and subscriptions, and travel. ETSP - advertising, professional fees, analysis fees, software, computer services and subscriptions, travel, and provision for losses. AGM - trustee fees and professional fees. Bank - marketing, consulting and professional fees, software, and insurance. F - 57 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Year ended December 31, 2022 Reportable Segments Reconciling Items Loan Servicing and Systems Education Technology Services and Payments Asset Generation and Management Nelnet Bank Total Reportable Segments NFS Other Operating Segments Corporate and Other Activities Eliminations/ Reclassifications Total Interest income: Loan interest $ — — 638,628 12,577 651,205 — — — 651,205 Investment interest 2,722 9,377 37,929 13,396 63,424 40,377 2,199 ( 14,399 ) 91,601 Total interest income 2,722 9,377 676,557 25,973 714,629 40,377 2,199 ( 14,399 ) 742,806 Interest expense 44 — 411,900 11,055 422,999 21,974 ( 436 ) ( 14,399 ) 430,137 Net interest income 2,678 9,377 264,657 14,918 291,630 18,403 2,635 — 312,669 Less provision (negative provision) for loan losses — — 33,133 1,840 34,973 — — — 34,973 Net interest income after provision for loan losses 2,678 9,377 231,524 13,078 256,657 18,403 2,635 — 277,696 Other income (expense): LSS revenue 535,459 — — — 535,459 — — — 535,459 Intersegment revenue 33,170 81 — — 33,251 — — ( 33,251 ) — ETSP revenue — 408,543 — — 408,543 — — — 408,543 Reinsurance premiums earned — — — — — 157 — — 157 Solar construction revenue — — — — — — 24,543 — 24,543 Other, net 2,543 — 21,170 2,625 26,338 35,102 ( 43,732 ) — 17,709 Loss on sale of loans, net — — ( 8,565 ) — ( 8,565 ) — — — ( 8,565 ) Derivative settlements, net — — 32,943 — 32,943 — — — 32,943 Derivative market value adjustments, net — — 231,691 — 231,691 — — — 231,691 Total other income (expense), net 571,172 408,624 277,239 2,625 1,259,660 35,259 ( 19,189 ) ( 33,251 ) 1,242,480 Cost of services and expenses: Total cost of services — 148,403 — — 148,403 — 19,971 — 168,374 Salaries and benefits 344,809 133,428 2,524 6,948 487,709 880 100,990 — 589,579 Depreciation and amortization 24,255 10,184 — 15 34,454 — 39,623 — 74,077 Reinsurance losses and underwriting expenses — — — — — 154 — — 154 Postage expense 12,570 12,570 ( 12,570 ) — Servicing fees 41,791 292 42,083 ( 42,083 ) — Other expenses (a) 47,104 30,104 6,884 3,925 88,017 2,298 57,788 22,520 170,624 Intersegment expenses, net 75,145 19,538 2,839 ( 48 ) 97,474 ( 1,166 ) ( 95,190 ) ( 1,118 ) — Total operating expenses 503,883 193,254 54,038 11,132 762,307 2,166 103,211 ( 33,251 ) 834,434 Impairment expense and provision for beneficial interests 5,511 2,239 — 214 7,964 — 7,559 — 15,523 Total expenses 509,394 343,896 54,038 11,346 918,674 2,166 130,741 ( 33,251 ) 1,018,331 Income (loss) before income taxes 64,456 74,105 454,725 4,357 597,643 51,496 ( 147,295 ) — 501,845 Income tax (expense) benefit ( 15,470 ) ( 17,785 ) ( 109,134 ) ( 1,013 ) ( 143,402 ) ( 12,237 ) 42,538 — ( 113,100 ) Net income (loss) 48,986 56,320 345,591 3,344 454,241 39,259 ( 104,757 ) — 388,745 Net loss (income) attributable to noncontrolling interests — ( 3 ) — — ( 3 ) ( 515 ) 18,672 — 18,154 Net income (loss) attributable to Nelnet, Inc. $ 48,986 56,317 345,591 3,344 454,238 38,744 ( 86,085 ) — 406,899 Total assets as of December 31, 2022 $ 273,072 484,976 15,945,762 918,716 17,622,526 1,499,785 888,869 ( 655,924 ) 19,355,256 (a) Other expenses for each reportable segment includes: LSS - occupancy, communications, professional fees, collection costs, software, computer services and subscriptions, travel, and provision for losses. ETSP - advertising, professional fees, analysis fees, software, computer services and subscriptions, and travel. AGM - trustee fees and professional fees. Bank - marketing, consulting and professional fees, computer services and subscriptions, and insurance. F - 58 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 17. Disaggregated Revenue and Deferred Revenue The following provides additional revenue recognition information for the Company’s fee-based operating segments. Loan Servicing and Systems Revenue Loan servicing and systems revenue consists of the following items: • Loan servicing revenue - Loan servicing revenue consideration is determined from individual contracts with customers and is calculated monthly based on the dollar value of loans, number of loans, number of borrowers serviced for each customer, or number of transactions. Loan servicing requires a significant level of integration and the individual components are not considered distinct. The Company performs various services, including, but not limited to, (i) application processing, (ii) monthly servicing, (iii) conversion processing, and (iv) fulfillment services, during each distinct service period. Even though the mix and quantity of activities that the Company performs each period may differ, the nature of the activities are substantially the same. Revenue is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits. The Company may incur contract fulfillment or acquisition costs and records such costs within “costs incurred to provide loan servicing” in the consolidated statements of income. • Software services revenue - Software services revenue consideration is determined from individual contracts with customers and includes license and maintenance fees associated with loan software products, generally in a remote hosted environment, and computer and software consulting. Usage-based revenue, based on each loan or unique borrower, from remote hosted licenses is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits. Revenue from any non-refundable up-front fee is recognized ratably over the contract period, as the fee relates to set-up activities that provide no incremental benefit to the customers. Computer and software consulting is also capable of being distinct and accounted for as a separate performance obligation. Revenue allocated to computer and software consulting is recognized as services are provided. • Outsourced services revenue - Outsourced services revenue consideration is determined from individual contracts with customers and is calculated monthly based on the volume of services. Revenue is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits. The following table presents disaggregated revenue by service offering: Year ended December 31, 2024 2023 2022 Government loan servicing $ 380,921 412,478 423,066 Private education and consumer loan servicing 63,453 48,984 49,210 FFELP loan servicing 12,212 13,704 16,016 Software services 21,032 29,208 33,409 Outsourced services 4,790 13,580 13,758 Loan servicing and systems revenue $ 482,408 517,954 535,459 Costs incurred to provide loan servicing is primarily the amortization of previously capitalized contract fulfillment costs. The costs were pre-contract costs incurred to enhance the resources of the Company to satisfy future performance obligations and are expected to be recovered. The contract fulfillment costs were $ 21.1 million as of December 31, 2024 which is included in "other assets" on the consolidated balance sheets. Education Technology Services and Payments Revenue Education technology services and payments revenue consists of the following items: • Tuition payment plan services - Tuition payment plan services consideration is determined from individual plan agreements, which are governed by plan service agreements, and includes access to a remote hosted environment and management of payment processing. The management of payment processing is considered a distinct performance obligation when sold with the remote hosted environment. Revenue for each performance obligation is allocated to the F - 59 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) distinct service period, the academic school term, and recognized ratably over the service period as customers simultaneously receive and consume benefits. • Payment processing - Payment processing consideration is determined from individual contracts with customers and includes electronic transfer and credit card processing, reporting, virtual terminal solutions, and specialized integrations to business software for education and non-education markets. Volume-based revenue from payment processing is allocated and recognized to the distinct service period, based on when each transaction is completed, and recognized as control transfers as customers simultaneously receive and consume benefits. The electronic transfer and credit card processing consideration is recognized as revenue on a gross basis as the Company is the principal in the delivery of the payment processing. The Company has concluded it is the principal as it controls the services before delivery to the educational institution or business, it is primarily responsible for the delivery of the services, and it has discretion in setting prices charged to its customers. In addition, the Company has the unilateral ability to accept or reject a transaction based on criteria established by the Company. The Company is liable for the costs of processing the transactions and records such costs within "cost to provide education technology services and payments" in the consolidated statements of income. • Education technology services - Education technology services consideration is determined from individual contracts with customers and is based on the services selected by the customer. Services in K-12 private and faith-based markets primarily includes (i) assistance with financial needs assessment, (ii) school information system software that automates administrative processes such as admissions, enrollment, scheduling, cafeteria management, attendance, and grade book management, and (iii) professional development and educational instruction services. Revenue for these services is recognized for the consideration the Company has a right to invoice, the amount of which corresponds directly with the value provided to the customer based on the performance completed. Services provided to the higher education market include payment technology and processing that allow for electronic billing and payment of campus charges. These services are considered distinct performance obligations. Revenue for each performance obligation is allocated to the distinct service period, typically a month or based on when each transaction is completed, and recognized as control transfers as customers simultaneously receive and consume benefits. The Company incurs direct costs to provide professional development and educational instructional services and records such costs within "cost to provide education technology services and payments" in the consolidated statements of income. The following table presents disaggregated revenue by service offering: Year ended December 31, 2024 2023 2022 Tuition payment plan services $ 135,851 125,326 110,802 Payment processing 179,043 163,859 148,212 Education technology services 169,065 170,754 146,679 Other 3,003 3,372 2,850 Education technology services and payments revenue $ 486,962 463,311 408,543 Cost to provide education technology services and payments is primarily associated with providing professional development and educational instruction and payment processing services. Items included in the cost to provide professional development and educational instruction services include salaries and benefits and third-party professional services directly related to providing these services to teachers, school leaders, and students. For payment processing services, interchange and payment network fees are charged by the card associations or payment networks. Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Solar Construction Revenue Solar construction revenue is derived principally from individual contracts with customers for engineering, procurement, and construction (EPC) of solar facilities for both commercial and residential customers. Solar construction is a single performance obligation which requires a significant level of integration. The individual materials and installation (the inputs) are not considered distinct and are integrated into the solar facilities (the combined output). Revenue for this service is recognized based on the project progress to date. Progress towards completion of the contract is measured by the percentage of total costs incurred to date compared with the estimated total costs to complete the contract. The Company recognizes changes in estimated total costs on a cumulative catch-up basis in the period in which the changes are identified. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially F - 60 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) satisfied in prior periods. Changes in estimates may also result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. Nelnet Renewable Energy will recognize a contract asset or liability depending on the progression of the project to date compared with the amount billed to date. The following table presents disaggregated revenue by customer type. The amounts listed for 2022 reflect activity subsequent to the GRNE Solar acquisition on July 1, 2022. Year ended December 31, 2024 Year ended December 31, 2023 Period from July 1, 2022 - December 31, 2022 Commercial revenue $ 53,269 20,969 17,677 Residential revenue (a) 3,300 10,700 6,866 Solar construction revenue $ 56,569 31,669 24,543 (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. Cost to provide solar construction services include direct costs associated with completing a solar facility, including labor, third-party contractor fees, permitting, engineering fees, and construction material. If the Company estimates that a project will have costs in excess of revenue, the Company will recognize the total loss in the period it is identified. Other Income (Expense) The following table presents the components of "other, net" in “other income (expense)” on the consolidated statements of income: Year ended December 31, 2024 2023 2022 ALLO preferred return $ 17,486 9,120 8,584 Investment activity, net 12,438 ( 8,586 ) 51,493 Borrower late fee income 8,828 8,997 10,809 Investment advisory services (WRCM) 5,934 6,760 6,026 Administration/sponsor fee income 5,823 6,793 7,898 Management fee revenue 2,769 2,587 2,543 Loss from ALLO voting membership interest investment ( 10,693 ) ( 65,277 ) ( 67,966 ) Loss from solar investments, net ( 6,477 ) ( 59,645 ) ( 16,708 ) Other 25,494 24,924 15,030 Other, net $ 61,602 ( 74,327 ) 17,709 • Borrower late fee income - Late fee income is earned primarily by the education lending subsidiaries in the AGM operating segment. Revenue is allocated to the distinct service period, based on when each transaction is completed. • Investment advisory services - Investment advisory services are provided by WRCM, the Company's SEC-registered investment advisor subsidiary, under various arrangements. The Company earns monthly fees based on the monthly outstanding balance of investments and certain performance measures, which are recognized monthly as the uncertainty of the transaction price is resolved. • Administration/sponsor fee income - Administration and sponsor fee income is earned by the AGM operating segment as administrator and sponsor for certain securitizations. Revenue is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits. • Management fee revenue - Management fee revenue is earned by the LSS operating segment for providing administrative support. Revenue is allocated to the distinct service period, based on when each transaction is completed. F - 61 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Deferred Revenue Activity in the deferred revenue balance, which is included in "other liabilities" on the consolidated balance sheets, is shown below: Loan Servicing and Systems Education Technology Services and Payments Corporate and Other Activities Total Balance as of December 31, 2021 $ 2,416 36,744 2,010 41,170 Deferral of revenue 2,607 138,086 13,963 154,656 Recognition of revenue ( 2,713 ) ( 129,433 ) ( 12,940 ) ( 145,086 ) Business acquisitions — 3,917 1,997 5,914 Balance as of December 31, 2022 2,310 49,314 5,030 56,654 Deferral of revenue 3,954 149,815 53,019 206,788 Recognition of revenue ( 2,808 ) ( 147,405 ) ( 40,676 ) ( 190,889 ) Balance as of December 31, 2023 3,456 51,724 17,373 72,553 Deferral of revenue 34,827 155,688 41,548 232,063 Recognition of revenue ( 6,719 ) ( 156,251 ) ( 53,361 ) ( 216,331 ) Balance as of December 31, 2024 $ 31,564 51,161 5,560 88,285 18. Reinsurance Reinsurance premiums written and earned and loss reserves, commissions, and broker fees for the years ended December 31, 2024 and 2023 is summarized below. Reinsurance activity for the year ended December 31, 2022 was not material. Year ended December 31, 2024 2023 Premiums written: Assumed $ 164,858 85,261 Ceded ( 82,055 ) ( 43,685 ) Net premiums written $ 82,803 41,576 Premiums earned: Assumed $ 125,876 41,603 Ceded ( 62,953 ) ( 21,536 ) Net premiums earned $ 62,923 20,067 Loss reserve, commissions, and broker fees: Assumed $ 109,860 34,756 Ceded ( 54,614 ) ( 17,975 ) Net loss reserve, commissions, and broker fees $ 55,246 16,781 The Company’s loss reserve balance, net of amounts ceded to reinsurers, was $ 33.1 million and $ 8.7 million as of December 31, 2024 and 2023, respective, which is included in "other liabilities" on the consolidated balance sheets. F - 62 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 19. Major Customer Government Loan Servicing The Company earns loan servicing revenue from a servicing contract with the Department. Revenue earned by the Company related to this contract was $ 380.9 million, $ 412.5 million, and $ 423.1 million for the years ended December 31, 2024, 2023, and 2022, 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 which replaced the legacy Department student loan servicing contract. The USDS contract became effective in April 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. Servicing under the USDS 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. 20. Leases The following table presents supplemental balance sheet information related to leases: As of December 31, 2024 2023 Operating lease ROU assets, which is included in " other assets " on the consolidated balance sheets $ 11,016 13,565 Operating lease liabilities, which is included in " other liabilities " on the consolidated balance sheets $ 11,522 14,291 The following table presents components of lease expense: Year ended December 31, 2024 2023 2022 Rental expense, which is included in “other expenses” on the consolidated statements of income (a) $ 5,423 7,495 6,841 (a) Includes short-term and variable lease costs, which are immaterial. Weighted average remaining lease term and discount rate are shown below: As of December 31, 2024 2023 Weighted average remaining lease term (years) 5.07 5.36 Weighted average discount rate 4.90 % 4.72 % Maturity of lease liabilities are shown below: 2025 $ 3,545 2026 2,481 2027 2,319 2028 1,275 2029 1,175 2030 and thereafter 2,331 Total lease payments 13,126 Imputed interest ( 1,604 ) Total $ 11,522 F - 63 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 21. Defined Contribution Benefit Plan The Company has a 401(k) savings plan that covers substantially all of its employees. Employees may contribute up to 100 % of their pre-tax salary, subject to IRS limitations. The Company matches up to 100 % on the first 3 % of contributions and 50 % on the next 2 %. The Company made contributions to the plan of $ 13.4 million, $ 14.2 million, and $ 12.9 million during the years ended December 31, 2024, 2023, and 2022, respectively. 22. Stock Based Compensation Plans Restricted Stock Plan The following table summarizes restricted stock activity: Year ended December 31, 2024 2023 2022 Number of RSUs Weighted Average Grant-Date Fair Value Number of RSUs Weighted Average Grant-Date Fair Value Number of RSUs Weighted Average Grant-Date Fair Value Non-vested shares at beginning of year 786,762 $ 77.52 752,622 $ 70.84 660,166 $ 62.84 Granted 146,045 98.69 239,041 91.50 272,212 84.07 Vested ( 168,187 ) 72.99 ( 156,569 ) 66.81 ( 136,076 ) 59.31 Canceled ( 74,555 ) 80.55 ( 48,332 ) 77.40 ( 43,680 ) 68.23 Non-vested shares at end of year 690,065 82.77 786,762 77.52 752,622 70.84 As of December 31, 2024, there was $ 28.2 million of unrecognized compensation cost included in equity on the consolidated balance sheet related to restricted stock, which is expected to be recognized as compensation expense in future periods as shown in the table below. 2025 $ 10,621 2026 6,460 2027 4,080 2028 2,597 2029 1,755 2030 and thereafter 2,681 $ 28,194 For the years ended December 31, 2024, 2023, and 2022, the Company recognized compensation expense of $ 11.7 million, $ 16.2 million, and $ 13.9 million, respectively, related to shares issued under the restricted stock plan, which is included in "salaries and benefits" on the consolidated statements of income. Employee Share Purchase Plan The Company has an employee share purchase plan pursuant to which employees are entitled to purchase Class A common stock from payroll deductions at a 15 % discount from market value up to a maximum purchase price of $ 25,000 . During the years ended December 31, 2024, 2023, and 2022, the Company recognized compensation expense of $ 0.2 million, $ 0.1 million, and $ 0.1 million, respectively, in connection with issuing 26,884 shares, 26,585 shares, and 26,011 shares, respectively, under this plan, which is included in "salaries and benefits" on the consolidated statements of income. Directors Compensation Plan The Company has a compensation plan for directors pursuant to which directors can elect to receive their annual retainer fees in the form of cash or Class A common stock. If a director elects to receive Class A common stock, the number of shares of Class A common stock that are awarded is equal to the amount of the annual retainer fee otherwise payable in cash divided by 85 % of the fair market value of a share of Class A common stock on the date the fee is payable. Directors who choose to receive Class A common stock may also elect to defer receipt of the Class A common stock until termination of their service on the board of directors. The following table presents the number of shares awarded under this plan for the years ended December 31, 2024, 2023, and 2022. F - 64 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Shares issued - not deferred Shares issued- deferred Total Year ended December 31, 2024 6,919 10,023 16,942 Year ended December 31, 2023 6,782 10,022 16,804 Year ended December 31, 2022 11,861 12,937 24,798 As of December 31, 2024, a cumulative amount of 169,087 shares have been deferred by directors and will be issued upon the termination of their service on the board of directors. These shares are included in the Company's weighted average shares outstanding calculation. For the years ended December 31, 2024, 2023, and 2022, the Company recognized $ 1.6 million, $ 1.7 million, and $ 1.8 million, respectively, of expense related to this plan (which includes fees paid in both cash and stock), which is included in "other expenses" on the consolidated statements of income. 23. Related Parties (dollar amounts in this note are not in thousands) Transactions with Union Bank and Trust Company Union Bank is controlled by Farmers & Merchants Investment Inc. (“F&M”), which owns a majority of Union Bank's common stock and a minority share of Union Bank's non-voting, non-convertible preferred stock. Michael S. Dunlap, Executive Chairman and a member of the board of directors and a significant shareholder of the Company, along with his spouse and children, owns or controls a significant portion of the stock of F&M, and Mr. Dunlap's sister, Angela L. Muhleisen, along with her children, also owns or controls a significant portion of F&M stock. Mr. Dunlap serves as a Director and Co-Chairperson of F&M, and as a Director of Union Bank. Ms. Muhleisen serves as a Director and Co-Chairperson of F&M and as a Director, Chairperson, and member of the executive committee of Union Bank. Union Bank is deemed to have beneficial ownership of a significant number of shares of the Company because it serves in a capacity of trustee or account manager for various trusts and accounts holding shares of the Company, and may share voting and/or investment power with respect to such shares. Mr. Dunlap and Ms. Muhleisen beneficially own a significant percent of the voting rights of the Company's outstanding common stock. The Company has entered into certain contractual arrangements with Union Bank. These transactions are summarized below. Loan Purchases The Company purchased $ 104.2 million (par value) and $ 467.6 million (par value) of federally insured loans in 2024 and 2023, respectively, from Union Bank. The Company purchased $ 8.1 million (par value) of private education loans in 2022 from Union Bank. The premium paid by the Company on the private loan acquisitions was $ 0.2 million in 2022. The premiums paid by the Company for loan purchases in 2024 and 2023 were insignificant. Loan Servicing The Company serviced $ 143.6 million, $ 173.8 million, and $ 203.4 million of FFELP and private education loans for Union Bank as of December 31, 2024, 2023, and 2022, respectively. Servicing revenue earned by the Company from servicing loans for Union Bank was $ 0.2 million, $ 0.3 million, and $ 0.4 million in 2024, 2023, and 2022, respectively. Funding - Participation Agreements The Company maintains an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans. The Company uses this facility as a source to fund FFELP student loans. As of December 31, 2024 and 2023, $ 687.1 million and $ 295.1 million, respectively, of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. This agreement provides beneficiaries of Union Bank's grantor trusts with access to investments in interests in student loans, while providing liquidity to the Company on a short-term basis. The Company can sell participation interests in loans to Union Bank to the extent of availability under the grantor trusts, up to $ 900 million or an amount in excess of $ 900 million if mutually agreed to by both parties. Loans participated under this agreement have been accounted for by the Company as loan sales. Accordingly, the participation interests sold are not included on the Company's consolidated balance sheets. F - 65 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The Company maintains an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in FFELP loan asset-backed securities (investments). As of December 31, 2024 and 2023, $ 0.1 million of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The FFELP loan asset-backed securities under this agreement have been accounted for by the Company as a secured borrowing. Funding - Real Estate 401 Building, LLC (“401 Building”) is an entity that was established in 2015 for the sole purpose of acquiring, developing, and owning a commercial real estate property in Lincoln, Nebraska. The Company owns 50 % of 401 Building. On May 1, 2018, Union Bank, as lender, received a $ 1.5 million promissory note from 401 Building. The promissory note carries an interest rate of 6.00 % and has a maturity date of December 1, 2032. 330-333, LLC (“330-333”) is an entity that was established in 2016 for the sole purpose of acquiring, developing, and owning a commercial real estate property in Lincoln, Nebraska. The Company owns 50 % of 330-333. On October 22, 2019, Union Bank, as lender, received a $ 162,000 promissory note from 330-333. The promissory note carries an interest rate of 6.00 % and has a maturity date of December 1, 2032. TDP Phase III (“TDP”) is an entity that was established in 2015 for the sole purpose of acquiring, developing, and owning a commercial real estate property in Lincoln, Nebraska. The Company owns 25 % of TDP. On December 30, 2022, Union Bank, as lender, received a $ 20.0 million promissory note from TDP. The promissory note carries an interest rate of 5.85 % and has a maturity date of January 1, 2028. As of December 31, 2024, the outstanding balance of the note was $ 18.9 million. Operating Cash Accounts The majority of the Company's cash operating accounts are maintained at Union Bank. The Company also invests amounts in the Short Term Federal Investment Trust (STFIT) of the Student Loan Trust Division of Union Bank, which are included in “cash and cash equivalents - held at a related party” and “restricted cash - due to customers” on the consolidated balance sheets. As of December 31, 2024 and 2023, the Company had $ 511.1 million and $ 459.1 million, respectively, invested in the STFIT or deposited at Union Bank in operating accounts, of which $ 365.4 million and $ 325.9 million as of December 31, 2024 and 2023, respectively, represented cash collected for customers. Interest income earned by the Company on the amounts invested in the STFIT and in cash operating accounts in 2024, 2023, and 2022, was $ 5.2 million, $ 4.7 million, and $ 1.2 million, respectively. Educational 529 College Savings Plan The Company provides certain Educational 529 College Savings Plan administration services to certain college savings plans (the “College Savings Plans”) through a contract with Union Bank, as the program manager. Union Bank is entitled to a fee as program manager pursuant to its program management agreement with the College Savings Plans. For the years ended December 31, 2024, 2023, and 2022, the Company has received fees of $ 2.7 million, $ 2.5 million, and $ 2.1 million, respectively, from Union Bank related to the administration services provided to the College Savings Plans. Additionally, Union Bank, as the program manager for the College Savings Plans, has agreed to allocate plan bank deposits to Nelnet Bank. As of December 31, 2024 and 2023, Nelnet Bank had $ 269.1 million and $ 413.2 million, respectively, in deposits from the funds offered under the College Savings Plans. STFIT Deposits at Nelnet Bank The Union Bank Trust Department (STFIT) held a deposit balance at Nelnet Bank for $ 0.1 million and $ 52.1 million as of December 31, 2024 and December 31, 2023, respectively. Lease Arrangements Prior to the lease agreement expiration in 2023, Union Bank leased approximately 4,100 square feet in the Company's corporate headquarters building. Union Bank paid the Company approximately $ 55,000 and $ 82,000 for commercial rent and storage income during 2023 and 2022, respectively. F - 66 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) During 2023, the Company entered into a lease agreement with Union Bank for office space in Omaha, Nebraska. The Company paid Union Bank $ 1.1 million in rent pursuant to this agreement prior to terminating the lease in 2023, at which time the Company paid a $ 2.4 million termination fee to Union Bank. Other Fees Paid to Union Bank During the years ended December 31, 2024, 2023, and 2022, the Company paid Union Bank approximately $ 373,000 , $ 592,000 , and $ 177,000 , respectively, in investment custodial and correspondent services for Nelnet Bank, cash and flexible spending accounts management, and trustee and health savings account maintenance fees. Other Fees Received from Union Bank During the years ended December 31, 2024, 2023, and 2022, Union Bank paid the Company approximately $ 348,000 , $ 351,000 , and $ 342,000 , respectively, under certain employee sharing arrangements. 401(k) Plan Administration Union Bank administers the Company's 401(k) defined contribution plan. Fees paid to Union Bank to administer the plan are paid by the plan participants and were approximately $ 776,000 , $ 852,000 , and $ 793,000 during the years ended December 31, 2024, 2023, and 2022, respectively. Investment Services Union Bank has established various trusts whereby Union Bank serves as trustee for the purpose of purchasing, holding, managing, and selling investments in student loan asset-backed securities. WRCM, an SEC-registered investment advisor and a non-wholly owned subsidiary of the Company, has a management agreement with Union Bank under which WRCM performs various advisory and management services on behalf of Union Bank with respect to investments in securities by the trusts, including identifying securities for purchase or sale by the trusts. The agreement provides that Union Bank will pay to WRCM annual fees of 10 basis points to 25 basis points on the outstanding balance of the investments in the trusts. As of December 31, 2024, the outstanding balance of investments in the trusts was $ 2.2 billion. In addition, Union Bank will pay additional fees to WRCM which equal a share of the gains from the sale of securities from the trusts or securities being called prior to the full contractual maturity. For the years ended December 31, 2024, 2023, and 2022, the Company earned $ 3.8 million, $ 5.5 million, and $ 4.9 million, respectively, of fees under this agreement. WRCM also has management agreements with Union Bank under which it is designated to serve as investment advisor with respect to the assets (principally Nelnet stock) within several trusts established by Mr. Dunlap and his spouse, and Ms. Muhleisen. Union Bank serves as trustee for the trusts. Per the terms of the agreements, Union Bank pays WRCM five basis points of the aggregate value of the assets of the trusts as of the last day of each calendar quarter. As of December 31, 2024, WRCM was the investment advisor with respect to a total 450,097 shares and 4.2 million shares of the Company's Class A and Class B common stock, respectively, held directly by these trusts. For the years ended December 31, 2024, 2023, and 2022, the Company earned approximately $ 257,000 , $ 249,000 , and $ 216,000 , respectively, of fees under these agreements. WRCM has established private investment funds for the primary purpose of purchasing, selling, investing, and trading, directly or indirectly, in student loan asset-backed securities, and to engage in financial transactions related thereto. Mr. Dunlap, Jeffrey R. Noordhoek (an executive officer of the Company), Ms. Muhleisen, and WRCM have invested in certain of these funds. Based upon the current level of holdings by non-affiliated limited partners, the management agreements provide non-affiliated limited partners the ability to remove WRCM as manager without cause. WRCM earns 50 basis points annually on the outstanding balance of the investments in these funds, of which WRCM pays approximately 50 % of such amount to Union Bank as custodian. As of December 31, 2024, the outstanding balance of investments in these funds was $ 106.6 million. The Company paid Union Bank $ 0.3 million in each of 2024, 2023, and 2022 as custodian of the funds. Transactions with Agile Sports Technologies, Inc. (doing business as "Hudl") David Graff, who has served on the Company's Board of Directors since 2014, is CEO, co-founder, and a director of Hudl. As of December 31, 2024, the Company and Mr. Dunlap, along with his children, held a combined direct and indirect equity ownership interests in Hudl of approximately 22 % and 4 %, respectively. In December 2024 and February 2023, the Company purchased stock from existing Hudl shareholders for total consideration of $ 3.3 million and $ 31.5 million, respectively. See note 6 for additional information on the 2024 transaction and the Company’s accounting for its investment in Hudl. F - 67 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The Company makes investments to further diversify the Company both within and outside of its historical core education-related businesses, including investments in real estate. Recent real estate investments have been focused on the development of commercial properties in the Midwest, and particularly in Lincoln, Nebraska, where the Company's headquarters are located. The Company owns 25 % of TDP, which is the entity that developed and owns a building in Lincoln's Haymarket District that is the headquarters of Hudl, where Hudl is the primary tenant and Nelnet is a tenant. During 2024, 2023, and 2022, the Company paid Hudl approximately $ 594,000 , $ 558,000 , and $ 158,000 respectively, to provide lunches for Nelnet’s associates in Hudl’s employee cafeteria and use of certain common area in the building. Solar Tax Equity Investments The Company has co-invested in Company-managed limited liability companies with related parties that invest in solar tax equity investment (as summarized below). As part of these transactions, the Company receives management and performance fees under a management agreement. Entity/Relationship Investment amount Revenue recognized by the Company from management and performance fees (a) 2024 2023 2022 2024 2023 2022 Union Bank $ 4,200,568 18,456,829 4,881,063 435,255 152,757 66,568 F&M — — 3,487,000 148,167 123,077 123,077 North Central Bancorp, Inc. (directly and indirectly owned by F&M, Mr. Dunlap, and Ms. Muhleisen) 787,606 2,212,394 — 94,019 42,769 30,769 Infovisa, Inc. (directly and indirectly owned by F&M, Mr. Dunlap, and Ms. Muhleisen) 262,535 737,465 507,781 23,314 12,234 8,369 Farm and Home Insurance Agency, Inc. (indirectly owned by Mr. Dunlap and Ms. Muhleisen) 1,261,305 737,465 — 15,682 7,846 3,846 (a) In addition to the co-investments identified above, the related parties in the above table have also invested directly in tax equity solar investments in which are managed by the Company, and the Company receives management and performance fees on such activity. The fees recognized by the Company for these projects are included in the above table. Stock Repurchase On November 13, 2023, the Company repurchased, in a privately negotiated transaction under the Company’s existing stock repurchase program, a total of 283,112 shares of the Company’s Class A common stock from certain family members of Mr. Dunlap. The shares were repurchased at a discount to the closing market price of the Company’s Class A common stock as of November 10, 2023, and the transaction was separately approved by the Company’s Board of Directors and its Nominating and Corporate Governance Committee. F - 68 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) 24. Fair Value The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. There were no transfers into or out of level 1, level 2, or level 3 for the years ended December 31, 2024 and 2023. As of December 31, 2024 As of December 31, 2023 Level 1 Level 2 Total Level 1 Level 2 Total Assets: Investments (a): Asset-backed debt securities - available-for-sale $ 100 1,085,726 1,085,826 99 955,804 955,903 Equity securities 455 — 455 73 — 73 Equity securities measured at net asset value (b) 74,039 50,834 Total investments 555 1,085,726 1,160,320 172 955,804 1,006,810 Derivative instruments (c) — 3,232 3,232 — 452 452 Total assets $ 555 1,088,958 1,163,552 172 956,256 1,007,262 Liabilities: Derivative instruments (c) $ — 53 53 — 1,976 1,976 Total liabilities $ — 53 53 — 1,976 1,976 (a) Investments represent investments recorded at fair value on a recurring basis. Level 1 investments are measured based upon quoted prices and as of December 31, 2024 and 2023, include investments traded on an active exchange and a single U.S. Treasury security. Level 2 investments include student loan asset-backed, mortgage-backed, collateralized loan obligation, and other consumer loan-backed securities. The fair value for the Level 2 securities is determined using indicative quotes from broker-dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms issued by companies with comparable credit risk. (b) 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. (c) Nelnet Bank derivatives are accounted for at fair value on a recurring basis. The fair value of derivative financial instruments is determined using a market approach in which derivative pricing models use the stated terms of the contracts and observable yield curves and volatilities from active markets. When determining the fair value of derivatives, Nelnet Bank takes into account counterparty credit risk for positions where it is exposed to the counterparty on a net basis by assessing exposure net of collateral held. The net exposures for each counterparty are adjusted based on market information available for the specific counterparty. F - 69 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets: As of December 31, 2024 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 10,008,165 9,443,461 — — 10,008,165 Accrued loan interest receivable 549,283 549,283 — 549,283 — Cash and cash equivalents 194,518 194,518 194,518 — — Investments at fair value 1,160,320 1,160,320 555 1,085,726 — Investments - held-to-maturity asset-backed securities 216,164 210,774 — 216,164 — Notes receivable 32,258 32,258 — 32,258 — Beneficial interest in loan securitizations 229,510 213,809 — — 229,510 Restricted cash 332,100 332,100 332,100 — — Restricted cash – due to customers 404,402 404,402 404,402 — — Derivative instruments 3,232 3,232 — 3,232 — Financial liabilities: Bonds and notes payable 8,343,565 8,309,797 — 8,343,565 — Accrued interest payable 21,046 21,046 — 21,046 — Bank deposits 1,172,707 1,186,131 744,721 427,986 — Due to customers 478,469 478,469 478,469 — — Derivative instruments 53 53 — 53 — 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 — The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring basis are previously discussed. The remaining financial assets and liabilities were estimated using the following methods and assumptions: Loans Receivable Fair values for loans receivable were determined by modeling loan cash flows using stated terms of the assets and internally developed assumptions. The significant assumptions used to project cash flows are prepayment speeds, default rates, cost of F - 70 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) funds, required return on equity, and future interest rate and index relationships. A number of significant inputs into the models are internally derived and not observable to market participants. Investments - Held to Maturity Fair values for investments classified as held to maturity were determined by using indicative quotes from broker-dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms issued by companies with comparable credit risk. Notes Receivable Fair values for notes receivable were determined by using model-derived valuations with observable inputs, including current market rates. Beneficial Interest in Loan Securitizations Fair values for beneficial interest in loan securitizations were determined by modeling securitization cash flows and internally developed assumptions. The significant assumptions used to project cash flows are prepayment speeds, default rates, cost of funds, required return on equity, and future interest rate and index relationships. A number of significant inputs into the models are internally derived and not observable to market participants. Cash and Cash Equivalents, Restricted Cash, Restricted Cash – Due to Customers, Accrued Loan Interest Receivable, Accrued Interest Payable, and Due to Customers The carrying amount approximates fair value due to the variable rate of interest and/or the short maturities of these instruments. Bonds and Notes Payable The fair value of student loan asset-backed securitizations and warehouse facilities was determined from quotes from broker-dealers or through standard bond pricing models using the stated terms of the borrowings, observable yield curves, market credit spreads, and weighted average life of underlying collateral. For all other bonds and notes payable, the carrying amount approximates fair value due to the variable rate of interest and/or the short maturities of these instruments. Bank Deposits Some of the Company’s deposits are fixed-rate and the fair value for these deposits are estimated using discounted cash flows based on rates currently offered for deposits of similar maturities. These are level 2 valuations. The fair value of the remaining deposits equals the amounts payable on demand at the balance sheet date and are reported at their carrying value. These are level 1 valuations. Limitations The fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Therefore, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. Changes in assumptions could significantly affect the estimates. 25. Commitments and Contingencies The Company is subject to various claims, lawsuits, and proceedings that arise in the normal course of business. These matters frequently involve disputes with other business entities and claims by student loan borrowers disputing the manner in which their student loans have been serviced or the accuracy of reports to credit bureaus, claims by student loan borrowers or other consumers alleging that state or Federal privacy, cybersecurity, and other consumer protection laws have been violated in the process of servicing loans or conducting other business activities. In addition, from time to time, the Company receives information and document requests or demands from state or federal regulators concerning its business practices. The Company cooperates with these inquiries and responds to the requests or demands. While the Company cannot predict the ultimate outcome of any claim, regulatory examination, inquiry, or investigation, the Company believes its activities have materially complied with applicable law, including the Higher Education Act, the rules and regulations adopted by the Department thereunder, and the Department's guidance regarding those rules and regulations, and applicable consumer protection laws and F - 71 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) regulations. On the basis of present information, anticipated insurance coverage, and advice received from counsel, it is the opinion of the Company's management that the disposition or ultimate determination of claims, lawsuits, and proceedings such as those discussed above will not have a material adverse effect on the Company's business, financial position, or results of operations. 26. Condensed Parent Company Financial Statements The following represents the condensed balance sheets as of December 31, 2024 and 2023 and condensed statements of income, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2024 for Nelnet, Inc. The Company is limited in the amount of funds that can be transferred to it by its subsidiaries through intercompany loans, advances, or cash dividends. These limitations relate to the restrictions by trust indentures under the lending subsidiaries debt financing arrangements. Balance Sheets (Parent Company Only) As of December 31, 2024 and 2023 2024 2023 Assets: Cash and cash equivalents $ 55,515 31,153 Investments at fair value 490,001 588,958 Other investments and notes receivable 545,066 482,377 Investment in subsidiary debt 75,231 287,192 Restricted cash 49,257 61,527 Investment in subsidiaries 2,054,583 1,939,776 Notes receivable from subsidiaries 64,955 102,694 Other assets 131,040 128,903 Total assets $ 3,465,648 3,622,580 Liabilities: Notes payable, net of debt issuance costs $ ( 986 ) 206,520 Other liabilities 114,715 159,438 Total liabilities 113,729 365,958 Equity: Nelnet, Inc. shareholders' equity: Common stock 363 371 Additional paid-in capital 7,389 3,096 Retained earnings 3,340,540 3,270,403 Accumulated other comprehensive earnings (loss), net 1,470 ( 20,119 ) Total Nelnet, Inc. shareholders' equity 3,349,762 3,253,751 Noncontrolling interests 2,157 2,871 Total equity 3,351,919 3,256,622 Total liabilities and shareholders' equity $ 3,465,648 3,622,580 F - 72 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Statements of Income (Parent Company Only) Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 Investment interest income $ 58,829 86,696 50,465 Interest expense on bonds and notes payable 8,790 31,142 21,489 Net interest income 50,039 55,554 28,976 Other income (expense): Other, net 32,956 ( 57,959 ) ( 42,625 ) Equity in subsidiaries income 110,381 101,885 227,596 Derivative market value adjustments and derivative settlements, net 10,639 ( 15,662 ) 264,634 Total other income (expense), net 153,976 28,264 449,605 Operating expenses 2,870 5,445 14,552 Impairment expense 537 2,060 6,561 Total expenses 3,407 7,505 21,113 Income before income taxes 200,608 76,313 457,468 Income tax (expense) benefit ( 17,277 ) 13,303 ( 50,607 ) Net income 183,331 89,616 406,861 Net loss attributable to noncontrolling interests 714 210 38 Net income attributable to Nelnet, Inc. $ 184,045 89,826 406,899 Statements of Comprehensive Income (Parent Company Only) Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 Net income $ 183,331 89,616 406,861 Other comprehensive income (loss): Net changes related to equity in subsidiaries other comprehensive income (loss) $ 8,091 9,473 ( 11,188 ) Net changes related to available-for-sale debt securities: Unrealized holding gains (losses) arising during period, net 19,242 6,412 ( 42,793 ) Reclassification of (gains) losses recognized in net income, net ( 1,481 ) 3,818 ( 3,894 ) Income tax effect ( 4,263 ) 13,498 ( 2,456 ) 7,774 11,205 ( 35,482 ) Other comprehensive income (loss) 21,589 17,247 ( 46,670 ) Comprehensive income 204,920 106,863 360,191 Comprehensive loss attributable to noncontrolling interests 714 210 38 Comprehensive income attributable to Nelnet, Inc. $ 205,634 107,073 360,229 F - 73 NELNET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share amounts, unless otherwise noted) Statements of Cash Flows (Parent Company Only) Years ended December 31, 2024, 2023, and 2022 2024 2023 2022 Net income attributable to Nelnet, Inc. $ 184,045 89,826 406,899 Net loss attributable to noncontrolling interest ( 714 ) ( 210 ) ( 38 ) Net income 183,331 89,616 406,861 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 621 620 619 Derivative market value adjustments ( 5,422 ) 40,250 ( 231,691 ) Proceeds from termination of derivative instruments — 164,079 91,786 Proceeds from (payments to) clearinghouse - initial and variation margin, net 2,374 ( 213,923 ) 148,691 Equity in earnings of subsidiaries ( 110,381 ) ( 101,885 ) ( 227,596 ) (Gain) loss on investments, net ( 28,875 ) 64,584 51,175 Proceeds from sale of equity securities, net of purchases 7 75 42,841 Deferred income tax (benefit) expense ( 42,741 ) ( 71,424 ) 39,872 Non-cash compensation expense 12,045 16,476 14,176 Impairment expense 537 2,060 6,561 Changes in operating assets and liabilities: Decrease (increase) in other assets 5,459 ( 18,181 ) 14,816 (Decrease) increase in other liabilities ( 4,611 ) 11,049 10,590 Total adjustments ( 170,987 ) ( 106,220 ) ( 38,160 ) Net cash provided by (used in) operating activities 12,344 ( 16,604 ) 368,701 Cash flows from investing activities: Purchases of available-for-sale securities ( 168,117 ) ( 206,927 ) ( 713,681 ) Proceeds from sales of available-for-sale securities 278,372 569,670 435,937 Proceeds from beneficial interest in private loan securitization 7,001 6,783 345 Capital distributions from subsidiaries, net 28,539 355,790 7,340 Decrease (increase) in notes receivable from subsidiaries 37,739 ( 35,682 ) ( 66,698 ) Proceeds from (payments on) subsidiary debt, net 211,961 122,999 ( 36,104 ) Purchases of other investments and issuances of notes receivable ( 128,583 ) ( 60,707 ) ( 122,236 ) Proceeds from other investments and repayments of notes receivable 63,080 32,732 20,358 Net cash provided by (used in) investing activities 329,992 784,658 ( 474,739 ) Cash flows from financing activities: Payments on notes payable ( 208,101 ) ( 954,163 ) ( 7,002 ) Proceeds from issuance of notes payable 37 199,855 233,194 Payments of debt issuance costs — — ( 10 ) Dividends paid ( 40,836 ) ( 39,419 ) ( 36,608 ) Repurchases of common stock ( 83,290 ) ( 28,028 ) ( 97,685 ) Proceeds from issuance of common stock 1,946 1,780 1,633 Issuance of noncontrolling interest — 2,580 — Net cash (used in) provided by financing activities ( 330,244 ) ( 817,395 ) 93,522 Net increase (decrease) in cash, cash equivalents, and restricted cash 12,092 ( 49,341 ) ( 12,516 ) Cash, cash equivalents, and restricted cash, beginning of period 92,680 142,021 154,537 Cash, cash equivalents, and restricted cash, end of period $ 104,772 92,680 142,021 Cash disbursements made for: Interest $ 10,732 34,895 14,649 Income taxes, net of refunds and credits $ 15,238 47,589 57,705 Non-cash investing and financing activities: (Contributions to) distributions from subsidiary, net $ ( 27,292 ) 6,888 ( 6,068 ) Issuance of noncontrolling interest $ — 220 — F - 74