What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 411 added, 600 removed, 510 unchanged (66% of the section changed)

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

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three and nine months ended September 30, 2024 and 2023.

(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three months ended March 31, 2025 and 2024.

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

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These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the 2024 Annual Report and include such risks and uncertainties as:

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

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

• risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and future servicing contracts with the Department, risks related to unfavorable contract modifications or interpretations, risks related to consistently meeting service requirements to avoid the assessment of performance penalties, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, FFEL Program, private education, and consumer loans;

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

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

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• risks related to use of artificial intelligence;

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

• uncertainties inherent in forecasting future cash flows from student loan assets, including investment interests therein, and related asset-backed securitizations;

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

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

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

• risks related to the expected benefits to the Company from its continuing investment in ALLO, and risks related to solar tax equity investments, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;

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

• risks and uncertainties associated with climate change;

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

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

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

Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by law.

The Company is a diversified hybrid holding company with primary businesses being consumer lending, loan servicing, payments, and technology - all with a large customer emphasis in the education space.

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

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

Reclassifications and Immaterial Error Corrections

The accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations gives effect to the immaterial error corrections made to the previously reported consolidated financial statements for the three and nine months ended September 30, 2023.

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).

In the Nelnet Financial Services division, which includes Nelnet Bank, the Company is also actively expanding its private education, consumer, and other loan portfolios.

Reclassification and Immaterial Error Corrections

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

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However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance.

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

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

2024 2023 2024 2023

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

Three months ended March 31,

GAAP net income attributable to Nelnet, Inc.

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GAAP net income attributable to Nelnet, Inc.

$ 0.07 1.18 3.29 2.61

Realized and unrealized derivative market value adjustments (a) 0.17 (0.22)

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"Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the respective period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.

The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria is met.

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

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.

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

Consequently, the Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management and represents what earnings would have been had these derivatives qualified for hedge accounting.

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

(b) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.

Recent Development - Partial Redemption of ALLO Investment

The Company has both a voting and preferred membership interest investment in ALLO.

The Company's 45% voting membership interest in ALLO is accounted for under the Hypothetical Liquidation at Book Value (HLBV) method of accounting and as of March 31, 2025 has a carrying value of $0.

As of March 31, 2025, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $225.6 million and $8.4 million, respectively.

The Company earns a preferred return of 13.50% and 20.00% on $169.1 million and $56.5 million, respectively, of the Company's preferred membership interests of ALLO.

In April 2025, the Company entered into an agreement pursuant to which ALLO will redeem certain of its membership interests.

The Company expects ALLO to redeem all of the Company's outstanding preferred membership interests, including the accrued preferred return earned through the closing date, and a portion of the Company's voting membership interest.

The transaction is expected to close in late May 2025.

The Company expects to receive cash proceeds of approximately $410.0 million from ALLO for these redemptions and recognize a pre-tax gain of approximately $175.0 million.

As a result of this transaction, Nelnet's ownership of ALLO will decrease from 45% to approximately 26%.

Nelnet will continue to account for its remaining voting membership interest of ALLO under the HLBV method of accounting, with the carrying value of such interest remaining at $0 as of the closing date of the transaction.

Operating Segments

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

Corporate also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured and secured corporate related debt transactions, certain investment activities including its investment in ALLO and early-stage and emerging growth companies (venture capital investments), and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services.

Corporate also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions, certain investment

activities including its investment in ALLO, early-stage and emerging growth companies (venture capital investments), and solar tax equity investments, the operating results of the Company's solar engineering, procurement, and construction business, and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services.

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

The information below presents the operating results (net income (loss) before taxes) for each of the Company's reportable and certain other operating segments reconciled to the consolidated financial statements for the three and nine months ended September 30, 2024 and 2023.

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

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

Three months ended March 31, Certain Items Impacting Comparability

(All dollar amounts below are pre-tax)

2024 2023 2024 2023

NDS $ (4,549) 24,469 13,686 66,713 • 2024 results have been negatively impacted by a decrease in revenue and increase in expenses.

Revenue has been adversely impacted based on the Company earning less revenue under the new government servicing contract that began on April 1, 2024, in addition to servicing fewer borrowers.

Operating expenses have been elevated due to costs incurred for the completion of the transfer of direct loan servicing volume to one platform, making platform enhancements for the new student loan servicing contract, preparation of the conversion of the Discover private education student loan servicing portfolio, which is expected to be completed during the fourth quarter of 2024, and increase in postage and communication costs due to borrowers returning to repayment on September 1, 2023.

The Company expects this segment's operating results will improve in future periods as the full impact of its cost-saving measures take effect and new third-party servicing opportunities convert to the Company's platform.

NBS 26,813 22,123 100,046 77,803 • An increase in before tax operating margin due to increased revenue while maintaining a consistent cost structure.

NDS $ 18,512 15,990 • An increase in before tax operating margin due to an increase in private education and consumer loan servicing volume and a decrease in total expenses obtained through cost-saving measures.

This was partially offset by a decrease in government loan servicing revenue due to lower revenue earned on a per borrower blended basis under the new government servicing contract (which the Company began recognizing revenue under on April 1, 2024).

NBS 47,462 47,635 • ETSP revenue increased to $147.3 million for the three months ended March 31, 2025 compared with $143.5 million for the same period in 2024.

However, NBS experienced a decrease in before tax operating margin due to a decrease in FACTS education services revenue and an increase in operating expenses to support the growth in the customer base and investments in the development of new technologies.

Net income and before tax operating margin will continue to be impacted by these items throughout 2025 compared with 2024.

Nelnet Financial Services division:

AGM (16,346) 40,562 41,710 58,041 • The recognition of $29.0 million and $5.9 million in provision for beneficial interest related to certain loan securitization investments in the three months ended September 30, 2024 and June 30, 2024, respectively.

Over the life of these securitizations, the Company still anticipates attractive returns on the overall pool of these investments.

• The recognition of a non-cash expense of $5.6 million and $25.9 million in the three months ended September 30, 2024 and June 30, 2023, respectively, as the result of writing off the remaining unamortized debt discount in connection with the redemption of certain asset-backed debt securities prior to their maturity.

• The recognition of $12.0 million and $2.3 million in provision for loan losses for the three months ended September 30, 2024 and 2023, respectively, and provision of $14.2 million and negative provision of $1.0 million for the nine months ended September 30, 2024 and 2023, respectively.

• A decrease of $5.9 million in net loan interest income, including derivative settlements (core loan interest income), for the three months ended September 30, 2024 compared with the same period in 2023 due to a decrease in the average balance of loans partially offset by an increase in core loan spread, and a decrease of $55.4 million for the nine months ended September 30, 2024 compared with the same period in 2023 due to a decrease in the average balance of loans and core loan spread.

• A net loss of $9.5 million and net income of $1.2 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three months ended September 30, 2024 and 2023, respectively, and a net loss of $2.9 million and $35.3 million for the nine months ended September 30, 2024 and 2023, respectively.

• The recognition of $1.7 million in losses from the sale of loans for the nine months ended September 30, 2024 compared with $16.8 million in the same period of 2023.

Nelnet Bank (4,758) 2,299 (7,330) 3,951 • The recognition of provision for loan losses of $6.1 million for the three months ended September 30, 2024 compared with $1.9 million for the same period in 2023, and $18.4 million for the nine months ended September 30, 2024 compared with $5.8 million for the same period in 2023.

• A net loss of $3.6 million and net income of $1.9 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three months ended September 30, 2024 and 2023, respectively, and a net loss of $0.8 million and net income of $3.1 million for the nine months ended September 30, 2024 and 2023, respectively.

NFS other operating segments 14,038 9,220 44,325 31,321 • An increase in net interest income and net gains related to the Company's investment securities.

Unallocated corporate costs (10,287) (20,915) (29,389) (47,986) • Decrease due to the Company's focus on reducing its cost structure and continued focus on allocating costs to operating segments based on use of such services.

ALLO investment 6,606 (15,559) 1,953 (44,528) • The recognition of no loss in the three months ended September 30, 2024 compared with a loss of $17.3 million for the same period in 2023 and a loss of $10.7 million in the nine months ended September 30, 2024 compared with $49.7 million for the same period in 2023 from the ALLO voting membership interest investment.

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.

• The recognition of income of $4.8 million on the Company's preferred membership interests in ALLO for the three months ended September 30, 2024 compared with $2.3 million for the same period in 2023 and $11.4 million for the nine months ended September 30, 2024 compared with $6.8 million for the same period in 2023.

Nelnet Renewable Energy - GRNE (10,125) (4,864) (18,913) (16,169) • Since the acquisition of GRNE Solar in 2022, it has incurred low and, in some cases, negative margins on certain solar construction projects.

During the third quarter of 2024, the Company recorded an expense of $8.8 million related to estimated losses on legacy construction projects.

The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.

Due to the complexity and long-term nature of existing construction contracts, the Company may continue to incur low and/or negative margins to complete these projects.

• In April 2024, the Company announced a change in its solar construction operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations.

During the second quarter of 2024, the Company recognized non-cash impairment charges of $1.9 million on certain assets related to the residential operations and $1.6 million in severance costs and commissions paid for cancelled contracts.

• The Company believes its solar construction business is making progress in repositioning the business for long-term profitable success.

Nelnet Renewable Energy - Tax equity investments/ syndication/ administration (8,509) (8,736) (8,775) (24,237) • The recognition of net losses from tax solar investments of $11.3 million in the three months ended September 30, 2024 compared with $6.5 million for the same period in 2023 and $11.1 million in the nine months ended September 30, 2024 compared with $19.5 million for the same period in 2023.

These losses include losses attributable to third-party non-controlling interest investors.

AGM 29,834 33,743 • The recognition of $13.0 million and $6.5 million in provision for loan losses for the three months ended March 31, 2025 and 2024, respectively.

Increase was due to an increase of loan acquisitions in the first quarter of 2025.

• A decrease of $9.1 million in investment interest income for the three months ended March 31, 2025 compared with the same period in 2024, due to a decrease of interest earned on restricted cash driven by lower balances and a decrease in interest rates and a decrease of interest income from beneficial interest investments.

• A net loss of $3.8 million and net income of $5.7 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three months ended March 31, 2025 and 2024, respectively.

• An increase in net loan interest income of $16.6 million for the three months ended March 31, 2025 compared with the same period in 2024, due to an increase in loan spread driven by an increase in consumer loans funded with operating cash (versus funded with debt), partially offset by a decrease in the average balance of loans.

Nelnet Bank 1,952 1,147 • An increase of $4.8 million in net interest income for the three months ended March 31, 2025 compared with the same period in 2024 due to an increase in the average balance of loans and investments and an increase in net interest margin.

• A net loss of $2.5 million and net income of $2.3 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three months ended March 31, 2025 and 2024, respectively.

• The recognition of $2.3 million and $4.4 million of provision for loan losses for the three months ended March 31, 2025 and 2024, respectively.

NFS other operating segments 10,060 13,762 • Net interest income earned on investment debt securities (primarily student loan and other asset-backed securities) was $6.8 million for the three months ended March 31, 2025 compared with $12.2 million for the same period in 2024.

Unallocated corporate costs (9,988) (10,045)

Solar tax equity investments 1,205 2,314 • Includes operating results of the Company's tax equity investments in renewable energy solar partnerships.

The Company accounts for these investments under the HLBV method of accounting, which commonly results in accelerated losses in the initial years of the investment.

In the periods presented, these HLBV net losses are offset by gains recognized from sales of certain investments at the end of the contractual agreement (typically five years).

These losses are also offset by revenue earned by the Company related to management, consulting, and performance fees provided on tax equity investments made by third parties.

Due to the recognition pattern (accelerated losses in initial years and gains upon sale at the end of the contractual agreement), these investments may create volatility in earnings.

• These results include results attributable to third-party noncontrolling interest investors.

See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

These losses are partially offset by revenue earned by the Company related to management, consulting, and performance fees provided on tax equity investments made by third parties.

Other corporate activities 4,892 1,520 12,829 2,909 • Includes operating results of the Company's venture capital investments and other corporate activities.

Increase in 2024 compared with 2023 was due to venture capital activities.

Net (loss) income before taxes (2,223) 50,119 150,141 107,819

Income tax benefit (expense) 282 (10,512) (37,653) (28,785)

Net loss attributable to noncontrolling interests 4,329 4,747 8,398 18,705 • The majority of noncontrolling interests represents losses attributed to noncontrolling membership interests in the Company’s Nelnet Renewable Energy operating segment.

Nelnet Renewable Energy - solar construction (6,575) (4,037) • Since the acquisition of GRNE Solar in 2022, the Company has incurred low and, in some cases, negative margins on certain legacy solar construction projects.

The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.

Uncertain economic conditions have impacted the costs to complete existing construction contracts and new construction projects being initiated which may continue to negatively impact margins and revenue, respectively, in future periods.

ALLO investment 8,416 (8,593) • The recognition of no loss in the three months ended March 31, 2025 compared with a loss of $10.7 million for the same period in 2024 related to the Company's ALLO voting membership interest investment.

The loss recognized in the first quarter of 2024 reduced the Company's carrying value of its voting membership interest to $0.

Absent additional equity contributions with respect to ALLO's voting membership interest, the Company will not recognize additional losses for its voting membership interest in ALLO.

• The recognition of income of $8.4 million on the Company's preferred membership interests in ALLO for the three months ended March 31, 2025 compared with $2.4 million for the same period in 2024.

Venture capital investments 4,220 (704) • Includes operating results of the Company's venture capital investments.

During the first quarter of 2025, the Company recognized income, net of losses, of $2.1 million from equity method investees, $1.7 million related to the periodic adjustment of certain fund investments to their respective fair value, and $0.6 million on certain measurement alternative investments as a result of observable price changes.

Other corporate activities 946 2,723

Eliminations/reclassifications 97 —

Net income before taxes 106,140 93,937

Income tax expense (25,010) (23,181)

Net loss attributable to noncontrolling interests 1,430 2,652 • The majority of noncontrolling interests represents losses attributed to noncontrolling membership interests related to the Company’s solar tax equity investments.

Net income $ 82,560 73,408

CONSOLIDATED RESULTS OF OPERATIONS

An analysis of the Company's consolidated operating results for the three and nine months ended September 30, 2024 compared with the same periods in 2023 is provided below.

An analysis of the Company's consolidated operating results for the three months ended March 31, 2025 compared with the same period in 2024 is provided below.

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

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

Three months ended Nine months ended

September 30, September 30,

Three months ended

2025 2024 Additional information

Loan interest $ 190,211 236,423 609,064 704,712 Decrease was due to decreases in the average balance of loans partially offset by an increase in the gross yield earned on loans.

Loan interest $ 166,439 216,724 Decrease was due to a decrease in the average balance of loans and gross yield earned on loans.

Investment interest 41,389 52,078 Includes income from unrestricted interest-earning deposits and investments, and restricted cash in asset-backed securitizations.

Increase was due to an increase in the average balances and interest rates and, for the nine months ended September 30, 2024, an increase in interest earned on the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.

Decrease was due to a decrease of interest earned on restricted cash in asset-backed securitizations due to lower balances and a decrease in interest rates and a decrease in interest earned on the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.

Total interest income 207,828 268,802

Interest expense 168,328 207,159 539,367 639,756 Decrease was due to a decrease in the average balance of debt outstanding partially offset by an increase in cost of funds.

In addition, the Company recognized a $5.6 million and $25.9 million non-cash expense during the third quarter of 2024 and the second quarter of 2023, respectively, as the result of writing off the remaining unamortized debt discount related to the redemption of certain asset-backed debt securities prior to their maturity.

Interest expense 125,114 194,580 Decrease was due to a decrease in the average balance of debt outstanding and decrease in cost of funds.

Net interest income 82,714 74,222

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ETSP revenue 147,330 143,539 See ETSP operating segment - results of operations.

Solar construction revenue 19,321 6,301 42,741 19,687 Represents revenue earned from GRNE Solar providing solar construction services, including design and installations of residential and commercial solar systems.

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.

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

Reinsurance premiums earned 24,687 12,780 Represents premiums earned, net of ceded portion, from reinsurance treaties on property and casualty policies.

Increase was primarily due to an increase in overall property volume and new business.

Solar construction revenue 3,995 13,726 Represents revenue earned from Nelnet Renewable Energy (NRE) providing solar construction services, including design and installations of commercial solar systems.

Other, net 23,694 4,082 See table below for the components of "other, net."

Loss on sale of loans (107) (1,022) (1,685) (16,776) The Company recognized losses from selling portfolios of loans.

See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Impairment expense and provision for beneficial interests (29,052) (4,974) (36,865) (4,974) The Company established a provision of $29.0 million and $5.9 million for beneficial interest in loan securitization investments during the third quarter and second quarter of 2024, respectively.

The Company also recognized a non-cash impairment charge of $1.9 million during the second quarter of 2024 related to the discontinuation of residential solar operations.

During the third quarter of 2023, the Company recognized an expense of $5.0 million related to operating lease assets and associated leasehold improvements.

See note 9 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Gain (loss) on sale of loans, net 909 (141) The Company recognizes gains/losses from selling loans.

See NFS division - results of operations - AGM operating segment.

Derivative settlements, net 746 1,757 The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility.

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

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

To minimize the Company's exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio ($2.8 billion notional amount) on March 15, 2023.

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

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

See NFS division - results of operations - AGM and Nelnet Bank operating segments - for additional information.

Derivative market value adjustments, net (6,324) 7,964 Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.

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

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

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

To minimize the Company's exposure to market volatility and increase liquidity, the Company terminated this derivative portfolio ($2.8 billion notional amount) on March 15, 2023.

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

Total other income (expense), net 315,778 310,908

Cost of services:

Cost of services and expenses:

Loan servicing contract fulfillment and acquisition costs 1,633 — Represents 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.

Cost to provide education technology services and payments 48,047 48,610 Represents direct costs to provide payment processing and instructional services in ETSP.

See ETSP operating segment - results of operations.

Cost to provide solar construction services 26,815 7,783 49,115 25,204 Represents direct costs to provide solar construction services.

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

During the third quarter of 2024, the Company recorded an expense of $8.8 million related to estimated losses on legacy construction projects.

Cost to provide solar construction services 7,828 14,229 Represents direct costs related to NRE providing solar construction services.

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

The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.

Due to the complexity and long-term nature of existing construction contracts, the Company may continue to incur low and/or negative margins to complete these projects.

Total cost of services 57,508 62,839

Operating expenses:

Salaries and benefits 146,192 141,204 429,701 438,620 Increase for the quarterly period was primarily due to the recognition of $4.1 million restructuring charge related to staff reductions announced in June 2024 in LSS.

Decrease for the nine month period was primarily due to staff reductions in the first half of 2023 in LSS to manage expenses due to delays in the government's student debt relief and return to repayment programs and lower pricing and reduced servicing volume for LSS's Department servicing contract, partially offset by an increase in ETSP due to annual merit pay increases and an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.

Salaries and benefits 138,223 143,875 Decrease was primarily due to staff reductions announced in June 2024 in LSS after the completion of required servicing platform enhancements for the new government servicing contract and the transfer of direct loan serving volume to one platform.

These staff reductions took place during the second half of 2024.

Depreciation and amortization 9,255 16,769 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.

Other expenses 61,642 51,370 178,278 138,154 Includes expenses such as postage and distribution, consulting and professional fees, occupancy, communications, reinsurance loss reserve and acquisitions costs, and certain information technology-related costs.

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

Decrease was primarily due to reduction in depreciation due to prior year non-cash impairment charges recognized for lease, buildings, and associated improvements as the Company continues to evaluate the use of office space as it modifies its hybrid work model for associates.

Reinsurance losses and underwriting expenses 22,212 11,317 Represents case reserve, estimated loss reserve, and amortization of acquisition costs, which consist primarily of commissions and brokerage expenses, net of ceded portion, from reinsurance treaties on property and casualty policies.

Increase was primarily due to an increase in overall property volume and new business.

Other expenses 48,226 45,528 Includes expenses such as postage and distribution, consulting and professional fees, occupancy, servicing fees, marketing, travel, communications, and certain information technology-related costs.

Total operating expenses 217,916 217,489

(Loss) income before income taxes (2,223) 50,119 150,141 107,819

Income tax (benefit) expense (282) 10,512 37,653 28,785 The year to date effective tax rate was 23.75% for the nine months ended September 30, 2024 compared with 22.75% for the same period in 2023.

Net (loss) income (1,941) 39,607 112,488 79,034

Impairment expense and provision for beneficial interests 1,591 37 During 2025, the Company recorded an additional allowance of $1.5 million for credit losses (and related provision expense) related to the Company's beneficial interest in certain loan securitizations.

See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Total expenses 277,015 280,365

Income before income taxes 106,140 93,937

Income tax expense 25,010 23,181 The effective tax rate was 23.25% and 24.00% for the three months ended March 31, 2025 and 2024, respectively.

The Company expects its tax rate will range between 22% and 24% for the remainder of 2025.

Net income 81,130 70,756

Net loss attributable to noncontrolling interests 1,430 2,652 Represents the net income/loss attributable to the holders of noncontrolling membership interests.

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

The majority is attributed to noncontrolling membership interests related to the Company's solar tax equity investments.

Net income attributable to Nelnet, Inc.

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

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

Three months ended March 31,

2025 2024 Additional information

Reinsurance premiums $ 16,619 6,287 44,250 10,638 See NFS division - results of operations - NFS other operating segments.

Investment activity, net (a) 8,529 (1,003) 7,447 (8,155) See note (b) below for additional information.

ALLO preferred return $ 8,416 2,409 See Corporate - results of operations.

Investment activity, net (a) 5,161 (1,298) See note (b) below for additional information.

Borrower late fee income 1,587 3,133 See NFS division - results of operations - AGM operating segment.

Administration/sponsor fee income 1,420 1,712 4,448 5,180 See NFS division - results of operations - AGM operating segment.

Investment advisory services (WRCM) 1,473 1,508 See NFS division - results of operations - NFS other operating segments.

Administration/sponsor fee income 1,305 1,546 See NFS division - results of operations - AGM operating segment.

Gain from solar investments, net (a) 456 2,780 See Corporate - results of operations and note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

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

Loss from solar investments, net (a) (11,238) (6,456) (11,068) (19,485) See Corporate - results of operations.

Other 5,296 4,697

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

Three months ended September 30,

NFS - AGM $ — 1,778 — 1,778 — (1,883) — (1,883)

NFS - Nelnet Bank — 219 589 808 — (16) 565 549

NFS - Other Operating Segments 2,116 — 1,349 3,465 75 — 885 960

Corporate — 2,478 — 2,478 — (629) — (629)

$ 2,116 4,475 1,938 8,529 75 (2,528) 1,450 (1,003)

Nine months ended September 30,

Three months ended March 31,

NFS - AGM $ — 1,047 — 1,047 — 322 — 322

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Loan Servicing Volumes

September 30,

2024 June 30,

2024 March 31,

2025 December 31,

3 unchanged sentences

2024 December 31,

Servicing volume

(dollars in millions):

Servicing volume (dollars in millions):

Government $ 482,786 489,877 492,142 489,298 495,409 494,691

9 unchanged sentences

1,427,800 842,200 662,075 133,681 65,295 70,580

Government Loan Servicing

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

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

In April 2023, Nelnet Servicing received a contract award from the Department, pursuant to which it was selected to provide continued servicing capabilities for the Department's student aid recipients under a new Unified Servicing and Data Solution (USDS) contract (the "New Government Servicing Contract") which replaced the legacy Department student loan servicing contract.

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

The Department's total loan servicing volume of existing borrowers was allocated by the Department to Nelnet Servicing and four other third-party servicers that were awarded a USDS contract.

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

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

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

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

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

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

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

The Company began earning remote hosted servicing revenue from this new customer during the second quarter of 2024.

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

Department of Education Debt Relief

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

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

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

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

Revenue earned under the New

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

Private Education Loan Servicing

On July 17, 2024, Discover Financial Services (Discover) announced the sale of its approximately $10 billion private education student loan portfolio, representing approximately 400,000 borrowers, to partnerships managed by two global investment firms, with Firstmark Services, a division of the Company, assuming responsibility for servicing the portfolio upon the sale.

The conversion of these loans to the Company’s platform began in September 2024 with the majority of loan conversions anticipated to be completed in the fourth quarter of 2024.

Summary and Comparison of Operating Results

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

Three months ended March 31,

2025 2024 Additional information

Interest income $ 894 1,098 4,046 3,193 Decrease in the three months ended September 30, 2024 compared with the same period in 2023 was due to decrease in average balance of loan repayment funds held in custody for lenders.

Increase in the nine months ended September 30, 2024 compared with the same period in 2023 was due to higher interest rates partially offset by a decrease in average balance of loan repayment funds held in custody for lenders.

Interest income $ 721 1,894 Represents interest income on cash balances primarily collected from borrower remittances that are subsequently disbursed to servicing customers (lenders).

Decrease was due to decrease in average balance of loan repayment funds held in custody for lenders and a decrease in interest rates.

Loan servicing and systems revenue 120,741 127,201 See table below for additional information.

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

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

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

Other income 112 710 Represents revenue earned from providing administrative support services.

Impairment expense — (296) — (296) The Company recorded an impairment charge in the third quarter of 2023 related to certain facilities, as a result of the Company's on-going evaluation of the use of office space when a large number of associates continued to work remotely.

Total other income 126,537 134,797

Salaries and benefits 76,820 73,310 224,172 234,012 Decrease in the nine months ended September 30, 2024 compared with the same period in 2023 was due to the Company being fully staffed at the beginning of 2023 with contact center operations and support associates as the Company prepared for expiration of the federal student loan payment pause under the CARES Act.

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

In June 2024, the Company announced an additional 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 New Government Servicing Contract.

Approximately 220 associates were notified their positions were being eliminated.

The Company estimates incurring a charge of $7.1 million related to these staff reductions, of which $2.1 million and $4.1 million was recognized during the second and third quarters of 2024, respectively.

The remaining expense will be recognized during the fourth quarter of 2024.

Increase in the three months ended September 30, 2024 compared with the same period in 2023 was due to the recognition of the $4.1 million restructure charge related to staff reductions announced in June 2024.

Depreciation and amortization 4,854 5,023 15,304 14,400

Other expenses 19,663 15,629 59,861 42,760 Increase was due to additional postage and communication costs due to borrowers returning to repayment on September 1, 2023, and an increase in computer services and subscription costs.

Contract fulfillment and acquisition costs 1,633 — Represents 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.

Salaries and benefits 69,574 76,722 Decrease was due to staff reductions announced in June 2024 after the completion of required servicing platform enhancements for the new government servicing contract and the transfer of direct loan servicing volume to one platform.

These staff reductions took place during the second half of 2024.

Depreciation 2,654 5,109 Decrease was due to certain information technology activities moved to cloud computing and incurred at the corporate level and such costs are classified as other expenses and intercompany expenses, respectively.

Postage expense 7,575 10,605 Decrease was due to a non-recurring volume based credit earned from the Company's mail provider and recognized in the first quarter of 2025.

The volume increase was a result of additional mailings as borrowers returned to repayment under the government servicing contract and consumer borrower growth.

Other expenses 10,832 8,933 The total of other expenses and intercompany expenses decreased due to moving to one platform in 2024 and continued focus on expense reductions.

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

Intersegment expenses 16,478 19,332

Total operating expenses 107,113 120,701

(Loss) income before income taxes (4,549) 24,469 13,686 66,713

Income tax benefit (expense) 1,092 (5,872) (3,284) (16,011) Represents income tax expense/benefit at an effective tax rate of 24%.

Net (loss) income $ (3,457) 18,597 10,402 50,702

Before tax operating margin (4.0) % 18.1 % 3.8 % 16.2 % Before tax operating margin represents before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income.

Total expenses 108,746 120,701

Income before income taxes 18,512 15,990

Income tax expense (4,443) (3,838) Represents income tax expense at an effective tax rate of 24%.

Net income $ 14,069 12,152

Before tax operating margin 14.8 % 11.9 % Before tax operating margin is a measure of before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes divided by the total of loan servicing and systems revenue (less contract fulfillment and acquisition costs), intersegment servicing revenue, and other income.

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

Before tax operating margin decreased in 2024 compared with 2023 due primarily to a decrease in loan servicing and systems revenue as described in the table below, while operating expenses increased period over period.

Operating expenses have been elevated due to costs incurred for the completion of the transfer of direct loan servicing volume to one platform, making platform enhancements for the new student loan servicing contract with the Department, preparation of the conversion of the Discover portfolio, and an increase in postage and communication costs due to borrowers returning to repayment on September 1, 2023.

The Company expects before tax operating margin to continue to be lower than historical prior year results for the remainder of 2024 until the full impact of its cost-saving measures take effect and revenue is generated from servicing the entire Discover portfolio after its full conversion to the Company's platform during the fourth quarter of 2024.

Before tax operating margin increased due to an increase in private education and consumer loan servicing volume and a decrease in total expenses obtained through cost-saving measures executed in 2024.

This was partially offset by a decrease in government loan servicing revenue due to lower revenue earned on a per borrower blended basis under the new government servicing contract.

Loan servicing and systems revenue

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

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

Three months ended March 31,

2025 2024 Additional information

Government loan servicing $ 85,215 100,154 277,705 304,769 Represents revenue from the Company's servicing contracts with the Department.

The Company recognized revenue under the New Government Servicing Contract beginning April 1, 2024.

Decrease in the three months ended September 30, 2024 compared with the same period in 2023 was due to lower revenue earned on a per borrower blended basis under the new contract and a decrease in the number of borrowers serviced.

Decrease in the nine months ended September 30, 2024 compared with the same period in 2023 was also due to the legacy servicing contract reduction of the monthly fee earned per borrower on certain borrower statuses by $0.19 effective April 1, 2023 and a decrease of borrowers serviced due to the Department transferring one million of the Company's existing borrowers to another third-party servicer during the second and third quarters of 2023.

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

Private education and consumer loan servicing 13,057 12,330 38,634 36,556 Increase in the three months ended September 30, 2024 compared with the same period in 2023 was due to an increase in backup servicing volume and conversion revenue recognized from the Discover portfolio.

Increase in the nine months ended September 30, 2024 compared with the same period in 2023 was also due to rate increases based on contractual consumer price index changes.

Government loan servicing $ 87,358 105,474 Represents revenue from the Company's servicing contract with the Department.

The Company recognized revenue under the new government servicing USDS contract beginning April 1, 2024.

Decrease was due to lower revenue earned on a per borrower blended basis under the new contract as compared with the government legacy contract and a decrease in the number of borrowers serviced.

The Company expects the number of borrowers serviced under this contract will continue to decrease as volume is transferred from the Company to its remote hosted servicing customer.

Private education and consumer loan servicing 22,696 12,620 Increase was due to an increase in loan servicing volume from the conversion of Discover Financial Services and SoFi Lending Corp.

loan portfolios during the fourth quarter of 2024 and first quarter of 2025.

FFELP loan servicing 2,633 3,380 Represents revenue from servicing third-party customers' FFELP portfolios.

1 unchanged sentence

Software services 6,992 4,541 Represents revenue from providing remote hosted servicing software to certain Department and other servicers and providing diversified technology services.

Decrease was primarily due to (i) the transfer of all Department remote hosted borrowers to other third-party servicers throughout 2023 under the Department's legacy servicing contracts and (ii) the recognition of $4.8 million of revenue in the third quarter of 2023 associated with deconversion of remote hosted borrowers from a customer leaving the Company's platform.

This decrease was partially offset by the Company beginning to recognize revenue in the second quarter of 2024 from a new remote hosted servicing customer awarded a USDS contract.

Increase was primarily due to the Company's recognition of revenue beginning in the second quarter of 2024 from a new remote hosted servicing customer awarded a USDS contract.

The Company expects software services revenue to increase in future periods as additional volume is transferred from the Company to this new remote hosted servicing customer.

Outsourced services 1,062 1,186 Represents revenue from providing contact center and back office operational outsourcing services.

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

Loan servicing and systems revenue $ 120,741 127,201

3 unchanged sentences

Summary and Comparison of Operating Results

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

Three months ended March 31,

2025 2024 Additional information

Interest income $ 6,939 7,866 Represents interest income on tuition funds held in custody for schools.

Increase was due to higher balances and interest rates.

Decrease was due to a decrease in interest rates partially offset by higher balances.

Education technology services and payments revenue

3 unchanged sentences

Cost of services 48,047 48,610 See table below for additional information.

Salaries and benefits 41,053 39,776 121,956 116,040 Increase in the three months ended September 30, 2024 compared with the same period in 2023 was due to annual merit pay increases.

Increase in the nine months ended September 30, 2024 compared with the same period in 2023 was also due to an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.

Salaries and benefits 41,741 40,167 Increase was due to an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.

Depreciation and amortization 2,430 2,683

Other expenses 7,614 8,309 23,772 26,063 Decrease was due to a decrease in consulting and professional services resulting from reduced outsourced work and an improvement in allowance for doubtful accounts period over period.

Decrease was partially offset by an increase in technology services.

Other expenses 9,048 7,558 Increase was due to an increase in technology services and professional fees.

Intersegment expenses, net 5,605 4,801 Represents costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Total operating expenses 58,824 55,209

Total expenses 106,871 103,819

Income before income taxes 47,462 47,635

1 unchanged sentence

Net income 36,060 36,200

Net loss (income) attributable to noncontrolling interests 54 (6) 101 113

Net income $ 20,417 16,810 76,112 59,216

Net loss attributable to noncontrolling interests 45 17 Amounts for noncontrolling interests reflect the net loss attributable to the holders of minority membership interests in NextGen.

In April 2025, the Company acquired the remaining 20.0% of NextGen for $3.9 million.

Net income $ 36,105 36,217 The Company expects net income to be impacted in 2025 compared with 2024 due to a decrease in contribution from FACTS education services as a result of the end of funding of the EANS program in 2024 as described in the revenue table below and an increase in operating expenses to support the growth in the customer base and investments in the development of new technologies.

Education technology services and payments revenue

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

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

Three months ended March 31,

2025 2024 Additional information

Tuition payment plan services $ 40,072 38,880 Increase was due to a higher number of payment plans in the K-12 and higher education markets for both new and existing customers.

Payment processing 55,813 50,848 137,926 126,716 Increase was due to increase in payment volumes for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.

Education technology services 30,080 31,793 133,306 132,796 Decrease in the three months ended September 30, 2024 compared with the same period in 2023 was due to a decrease in FACTS learning management services revenue as a result of the wind down of economic aid provided to private schools in response to the COVID 19 pandemic.

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

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

Future instructional services revenue will be adversely impacted compared to recent historical results as a result of the EANS programs ending.

Revenue earned under the EANS programs was $2.4 million and $21.4 million for the three and nine month ended September 30, 2024 compared with $8.1 million and $40.3 million for the same periods in 2023, respectively.

The decrease in FACTS learning management services revenue as a result of the decrease in EANS revenue was partially offset by an increase in non-EANS professional development and instructional services provided to both new and existing customers.

Increase in the nine months ended September 30, 2024 compared with the same period in 2023 was due to an increase in revenue from the Company’s school information system software and application and enrollment services.

This increase was partially offset by a decrease in FACTS learning management services revenue as described above.

Other 627 932 2,693 2,511

Payment processing 51,536 47,786 Increase was due to an increase in payment volumes for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.

Education technology services 55,695 56,021 Decrease was due to a decrease in FACTS education services revenue which resulted from the wind down of economic aid provided to private schools in response to the COVID 19 pandemic.

Instructional services revenue provided to private schools has been funded by the Emergency Assistance to Non-Public Schools (EANS) program.

The EANS II program funding ended on September 30, 2024.

Although schools still have allocated funds to spend, future instructional services revenue will be adversely impacted compared to recent historical results as a result of the EANS funding ending in 2024.

Revenue earned under the EANS program was $10.1 million for the three months ended March 31, 2024 compared with $1.6 million for the three months ended March 31, 2025.

This decrease was partially offset by an increase in revenue from the Company’s professional development services, financial aid management, enrollment services, and instructional services from non-EANS funding sources.

Education technology services and payments revenue 147,330 143,539

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

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

Before tax operating margin, excluding net interest income, decreased due to a decrease in FACTS education services revenue and an increase in operating expenses to support the growth in the customer base and investments in the development of new technologies.

Before tax operating margin will continue to be impacted by these items throughout 2025 compared with 2024.

Net interest income (7.0) (8.3)

3 unchanged sentences

Loan Portfolio

As of September 30, 2024, the AGM operating segment had a $9.5 billion loan portfolio, consisting primarily of federally insured loans.

For a summary of the Company’s loan portfolio as of September 30, 2024 and December 31, 2023, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of March 31, 2025, the AGM operating segment had a $9.3 billion loan portfolio, consisting primarily of federally insured loans.

For a summary of the Company’s loan portfolio as of March 31, 2025 and December 31, 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Activity

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

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

2024 2023 2024 2023

Beginning balance $ 9,910,617 13,239,125 12,049,462 14,169,771

FFELP Private Consumer and other Total

Three months ended March 31, 2025

Balance as of December 31, 2024 $ 8,388,564 221,744 345,560 8,955,868

Loan acquisitions 702,800 — 129,787 832,587

Federally insured student loans 104,914 2,880 104,914 518,471

Private education loans — 77,365 — 77,365

Consumer and other loans 129,202 29,413 405,211 340,091

Total loan acquisitions 234,116 109,658 510,125 935,927

Repayments, claims, capitalized interest, participations, and other, net (230,558) (12,535) (93,984) (337,077)

1 unchanged sentence

Loans sold (131,758) — (148) (131,906)

Ending balance $ 9,549,589 12,735,621 9,549,589 12,735,621

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

As of the latest remittance reports filed by the various trusts prior to or as of September 30, 2024, the Company’s ownership correlates to approximately $1.99 billion of loans included in these securitizations.

Balance as of March 31, 2025 $ 8,670,284 208,507 381,215 9,260,006

Three months ended March 31, 2024

Balance as of December 31, 2023 $ 11,686,207 277,320 85,935 12,049,462

Loan acquisitions — — 80,730 80,730

Repayments, claims, capitalized interest, participations, and other, net (324,953) (14,591) (10,952) (350,496)

Loans lost to external parties (778,508) (1,147) — (779,655)

Loans sold (199,694) — (405) (200,099)

Balance as of March 31, 2024 $ 10,383,052 261,582 155,308 10,799,942

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

As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2025, the Company’s ownership correlates to approximately $1.82 billion of loans included in these securitizations.

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

Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment interest" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.

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

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

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

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

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

Publicly available negotiated rulemaking sessions occurred in the fourth quarter of 2023 and the first quarter of 2024, including a session to discuss broad forgiveness for borrowers “experiencing financial hardship” (financial hardship).

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

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

The April 2024 draft publication did not include financial hardship regulations to provide forgiveness for borrowers (including borrowers with privately-held FFELP loans);

however, the Biden-Harris Administration released the text of the financial hardship Notice of Proposed Rulemaking on October 25, 2024.

The proposed rule is expected to be included in the Code of Federal Regulations in the coming weeks with a 30-day comment period.

Publication of the final rule will likely

depend on the outcome of the November 2024 election.

As of the date of this filing, the Biden-Harris Administration is preemptively prohibited from implementing any final rules born of the April 2024 draft publication due to an injunction ordered by the 8 th Circuit Court of Appeals.

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

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

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

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

The new income-driven repayment regulations were effective July 1, 2024;

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

Two groups of states sued to block implementation of the SAVE program.

As of the date of this filing, SAVE is not operational due to an injunction ordered by the 8th Circuit Court of Appeals.

In response to the injunction, the Biden-Harris Administration placed approximately 8 million borrowers enrolled in the SAVE program into administrative forbearance.

During the forbearance period, borrowers will not have to make student loan payments, and no interest will accrue, however, the months in forbearance will not count toward any forgiveness.

The Biden-Harris Administration announced a six-month extension of the SAVE forbearance in late October 2024.

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

Prepayments could significantly increase if the federal government and/or the Department initiate servicing contract modifications that impede the standing of States to challenge administrative actions, additional loan forgiveness or cancellation, other repayment options or plans, or consolidation loan programs.

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

However, the Company has experienced a significant decrease in FFELP borrowers consolidating their loans into the Federal Direct Loan Program since August 2024 that has resulted in prepayment rates on the Company’s FFELP portfolio being more consistent with longer-term historical rates.

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

For a summary of the allowance as a percentage of the ending balance and loan status and delinquency amounts for each of AGM's loan portfolios as of September 30, 2024 and December 31, 2023;

and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three and nine months ended September 30, 2024 and 2023, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

For a summary of the allowance as a percentage of the ending balance, loan status, delinquency amounts, and other key credit quality indicators for each of AGM’s loan portfolios as of March 31, 2025 and December 31, 2024;

and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three months ended March 31, 2025 and 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Spread Analysis

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

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

2024 2023 2024 2023

Three months ended March 31,

Variable loan yield, gross 7.43 % 7.99 %

2 unchanged sentences

Variable loan yield, net 6.51 7.28

Loan cost of funds - interest expense (a) (6.44) (6.14) (6.48) (5.86)

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

Loan cost of funds - interest expense (5.39) (6.50)

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

Variable loan spread 1.13 0.79

Fixed rate floor income, gross 0.04 0.01

Fixed rate floor income - derivative settlements (b) (d) 0.05 0.01 0.04 0.23

Fixed rate floor income - derivative settlements (a) (c) 0.02 0.04

Fixed rate floor income, net of settlements on derivatives 0.06 0.05

2 unchanged sentences

Average balance of AGM's debt outstanding 8,451,699 11,387,400

(a) The Company recognized $5.6 million and $25.9 million in non-cash interest expense during the third quarter of 2024 and the second quarter of 2023, respectively, as a result of writing off the remaining unamortized debt discount related to the redemption of certain asset-backed debt securities prior to their maturity.

This non-cash expense was excluded from the respective periods in the table above.

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

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

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

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

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

2024 2023 2024 2023

Three months ended March 31,

Core loan spread 1.19 % 0.84 %

2 unchanged sentences

Loan spread 1.16 % 0.79 %

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

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

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

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

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This also results in student loan spread decreasing in the short term in a decreasing interest rate environment.

Variable loan spread was higher during the three months ended March 31, 2025 compared with the same period in 2024 due to an increase in consumer loans funded by the Company with operating cash (versus funded with debt).

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

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

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

2024 2023 2024 2023

Fixed rate floor income, gross $ 225 450 563 2,016

Derivative settlements (a) 1,200 235 3,583 22,760

Fixed rate floor income, net $ 1,425 685 4,146 24,776

Fixed rate floor income contribution to spread, net 0.06 % 0.02 % 0.05 % 0.25 %

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

The decrease in gross fixed rate floor income for the three and nine months ended September 30, 2024 compared with the same periods in 2023 was due to higher interest rates in 2024 compared with 2023.

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

On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).

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

Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of

$400.0 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.

The increase in net derivative settlements received by the Company in the three months ended September 30, 2024, compared with the same period in 2023, was due to an increase in the notional amount of derivatives outstanding.

The decrease in net derivative settlements received by the Company during the nine months ended September 30, 2024, compared with the same period in 2023, was due to a decrease in the notional amount of derivatives outstanding and less favorable terms on the $400.0 million of notional derivatives entered into in 2023 compared with the $2.8 billion notional derivatives that were terminated due to an increase in interest rates from when the terminated derivatives were initially executed.

See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM's federally insured student loans earning fixed rate floor income.

Summary and Comparison of Operating Results

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

Three months ended March 31,

2025 2024 Additional information

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Loan interest $ 154,469 209,628 See table below for additional analysis.

Investment interest 18,970 18,062 54,513 47,726 Increase in the three and nine months ended September 30, 2024 compared with the same periods in 2023 was due to an increase of interest earned on restricted cash due to higher balances and interest rates.

Increase in the nine months ended September 30, 2024 compared with the same period in 2023 was also due to an increase of interest earned on the Company's beneficial interest investments.

Investment interest 12,769 21,835 Represents primarily investment interest earned on beneficial interest investments and restricted cash included in student loan securitizations and other secured borrowings.

Decrease was due to a decrease of interest earned on restricted cash due to lower balances and a decrease in interest rates and a decrease of interest earned on beneficial interest investments.

AGM earned $8.7 million and $13.1 million of interest income on beneficial interest investments for the three months ended March 31, 2025 and 2024, respectively.

Total interest income 167,238 231,463

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and (ii) AGM issued bonds held by Nelnet, Inc.

Increase in the three months ended September 30, 2024 compared with the same period in 2023 was due to an increase in interest rates and an increase in the weighted average balance of outstanding AGM issued bonds held by Nelnet, Inc.

Decrease for the nine months ended September 30, 2024 compared with the same period in 2023 was due to a decrease in the weighted average balance of outstanding AGM issued bonds held by Nelnet, Inc., partially offset by an increase in interest rates.

Decrease was due to a decrease in interest rates and a decrease in the weighted average balance of outstanding AGM issued bonds held by Nelnet, Inc.

Intercompany interest is eliminated for consolidated financial reporting purposes.

Net interest income 52,935 40,558

Less provision (negative provision) for loan losses 11,968 2,348 14,199 (772) See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for factors impacting provision (negative provision) for loan losses for the periods presented.

Less provision for loan losses 13,012 6,455 See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for factors impacting provision for loan losses for the periods presented.

Net interest income after provision for loan losses 39,923 34,103

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See "Overview - Consolidated Results of Operations" for further detail included in other income.

Loss on sale of loans (107) (1,022) (1,685) (16,776) The Company recognized losses from selling portfolios of loans.

See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Provision for beneficial interests (28,952) — (34,863) — During the second and third quarters of 2024, the Company recorded an allowance for credit losses (and related provision expense) related to the Company's beneficial interest in certain loan securitizations.

See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Decrease was primarily due to a decrease in borrower late fees due to the continued amortization of the Company's FFELP portfolio.

Gain (loss) on sale of loans, net 909 (141) The Company recognizes gains/losses from selling portfolios of loans.

See above under "Loan Activity" for loans sold during the three months ended March 31, 2025 and 2024.

Derivative settlements, net 582 1,555 The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility.

Derivative settlements for each applicable period should be evaluated with the Company's net interest income as reflected in the table below.

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

The decrease in net derivative settlements received by the Company for the nine months ended September 30, 2024 compared with the same period in 2023 was due to the termination of the floor income interest rate swaps ($2.8 billion notional amount) in March 2023.

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

Derivative market value adjustments, net (3,795) 5,706 Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP.

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To minimize the Company's exposure to market volatility and increase liquidity, AGM terminated its portfolio of floor income interest rate swaps ($2.8 billion notional amount) in March 2023.

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

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

Total other income, net 1,691 12,103

Salaries and benefits 1,220 1,242 3,529 3,093 Increase in the nine months ended September 30, 2024 compared with the same period in 2023 was due to additional headcount as the Company actively expands into new asset loan classes.

Other expenses 2,775 2,952 9,985 12,083 Represents primarily servicing fees paid to third parties.

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

Intersegment expenses 6,482 7,948 21,491 24,789 Represents fees paid to LSS for the servicing of the majority of AGM’s loans.

These amounts exceed the actual cost of servicing the loans.

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

Decrease was due to a decrease in servicing fees due to the amortization of the FFELP student loan portfolio serviced by LSS.

Total operating expenses 10,477 12,142 35,005 39,965

(Loss) income before income taxes (16,346) 40,562 41,710 58,041

Income tax benefit (expense) 3,923 (9,735) (10,010) (13,930) Represents income tax expense at an effective tax rate of 24%.

Net (loss) income $ (12,423) 30,827 31,700 44,111

Salaries and benefits 1,221 1,195

Servicing fees 6,911 8,951 Represents servicing fees paid to (i) third parties and (ii) LSS for the servicing of AGM’s loans.

The amounts paid to LSS exceed the actual cost of servicing the loans.

Decrease was due to the amortization of the FFELP student loan portfolio, the majority of which is serviced by LSS.

Intercompany servicing expense of $4.9 million and $6.6 million during the three months ended March 31, 2025 and 2024, respectively, was eliminated for consolidated financial reporting purposes.

Other expenses 888 1,109

Intersegment expenses 1,250 1,208 Includes costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Total operating expenses 10,270 12,463 Total operating expenses were 43 basis points of the average balance of loans in each of 2025 and 2024, respectively.

Provision for beneficial interests 1,510 — During 2025, the Company recorded an additional allowance for credit losses (and related provision expense) related to the Company's beneficial interest in certain loan securitizations.

See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

Total expenses 11,780 12,463

Income before income taxes 29,834 33,743

Income tax expense (7,156) (8,099) Represents income tax expense at an effective tax rate of 24%.

Net income 22,678 25,644

Net income attributable to noncontrolling interests (17) —

Net income $ 22,661 25,644

Additional information:

GAAP net (loss) income $ (12,423) 30,827 31,700 44,111 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP financial information.

GAAP net income $ 22,661 25,644 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP financial information.

Increase in net income, excluding derivative market value adjustments, was due to an increase in net loan interest income and a decrease in intercompany interest expense, partially offset by a decrease in investment interest income and an increase in provision for loan losses.

Derivative market value adjustments, net 3,795 (5,706)

Tax effect (911) 1,369

Non-GAAP net (loss) income, excluding derivative market value adjustments $ (5,189) 29,921 33,885 70,956

Non-GAAP net income, excluding derivative market value adjustments $ 25,545 21,307

Net loan interest income, including settlements on derivatives

The following table summarizes the components of "loan interest," "loan interest expense," and "derivative settlements, net."

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

Three months ended March 31,

2025 2024 Additional information

Variable interest income, gross $ 200,528 254,569 643,714 763,933 Decrease was due to a decrease in the average balance of loans partially offset by an increase in the gross yield earned on loans.

Variable interest income, gross $ 175,306 230,217 Decrease was due to a decrease in the average balance of loans and gross yield earned on loans.

Consolidation rebate fees (18,748) (23,057) Decrease was due to a decrease in the average consolidation loan balance.

Premium and deferred origination costs amortization, net of discount accretion (495) 1,940 3,500 5,437 Net premium amortization in the three months ended September 30, 2024 was due to consumer loans purchased at a premium during the third quarter of 2024.

Net discount accretion for the other periods presented was due to the Company's purchases of loans at a net discount over the last several years.

Premium and deferred origination costs amortization, net of discount accretion (3,064) 2,288 Net premium amortization in the three months ended March 31, 2025 was due to consumer and other loans purchased at a premium during 2024 and the first quarter of 2025 that have a short estimated life, offset by purchases of loans at a net discount over the last several years that have substantially longer estimated lives.

Net discount accretion for the three months ended March 31, 2024 was due to the Company's purchases of loans at a net discount over the last several years.

Variable interest income, net 153,494 209,448

Interest on bonds and notes payable (156,050) (194,098) (504,509) (594,764) Decrease was due to a decrease in the average balance of debt outstanding, partially offset by an increase in cost of funds.

In addition, the Company recognized a $5.6 million and $25.9 million non-cash expense during the third quarter of 2024 and second quarter of 2023, respectively, as the result of writing off the remaining unamortized debt discount related to the redemption of certain asset-backed debt securities prior to their maturity.

Interest on bonds and notes payable (112,411) (184,145) Decrease was due to a decrease in the average balance of debt outstanding and cost of funds.

Derivative settlements, net (a) 153 365 Represents net derivative settlements received related to the Company’s basis swaps.

Variable loan interest margin, net of settlements on derivatives 41,236 25,668

Fixed rate floor income, gross 225 450 563 2,016 Decrease was due to higher interest rates.

Fixed rate floor income, gross 975 180 Increase was due to lower interest rates.

Derivative settlements, net (a) 429 1,190 Represents net derivative settlements received related to the Company's floor income interest rate swaps.

2 unchanged sentences

(a) Net loan interest income, including derivative settlements (core loan interest income) is a non-GAAP financial measure.

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

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

See note 5 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the 2025 and 2024 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 5 and in this table.

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Loan Portfolio

As of September 30, 2024, Nelnet Bank had a $559.9 million loan portfolio, consisting of $352.7 million of private education loans and $207.2 million of consumer and other loans.

As of March 31, 2025, Nelnet Bank had a $761.6 million loan portfolio.

For a summary of the Company’s loan portfolio as of March 31, 2025 and December 31, 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Activity

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

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

2024 2023 2024 2023

Beginning balance $ 542,351 444,488 432,872 419,795

FFELP Private Consumer and other Total

Three months ended March 31, 2025

Balance as of December 31, 2024 $ — 482,445 162,152 644,597

Loan acquisitions and originations 111,002 29,041 4,555 144,598

Private education loans 10,843 19,756 28,948 41,341

Consumer and other loans 36,409 22,966 176,257 55,766

Total loan acquisitions and originations 47,252 42,722 205,205 97,107

Repayments (815) (22,035) (4,712) (27,562)

Loans sold to AGM — (15) — (132)

Ending balance $ 559,872 468,813 559,872 468,813

Subsequent to the end of the third quarter, on October 4, 2024, Nelnet Bank purchased a residual trust that included $133 million of private education loans, $7 million in cash and other assets, and $54 million of debt that finances the assets.

Nelnet Bank used deposits to fund the approximately $74 million acquisition price.

The trust will be consolidated as part of the bank's financial statements.

Balance as of March 31, 2025 $ 110,187 489,451 161,995 761,633

Three months ended March 31, 2024

Balance as of December 31, 2023 $ — 360,520 72,352 432,872

Loan acquisitions and originations — 16,715 56,847 73,562

Repayments — (12,469) (10,242) (22,711)

Balance as of March 31, 2024 $ — 364,766 118,957 483,723

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

For a summary of the allowance as a percentage of the ending balance and loan status, delinquency amounts, and other key credit quality indicators for each of Nelnet Bank's loan portfolios as of September 30, 2024 and December 31, 2023;

and the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three and nine months ended September 30, 2024 and 2023, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of September 30, 2024, Nelnet Bank had $1.15 billion of deposits.

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

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

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

As of September 30, 2024, Nelnet Bank’s deposits included $77.7 million from Nelnet, Inc.

For a summary of the allowance as a percentage of the ending balance, loan status, delinquency amounts, and other key credit quality indicators for each of Nelnet Bank's loan portfolios as of March 31, 2025 and December 31, 2024;

and the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three months ended March 31, 2025 and 2024, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

As of March 31, 2025, Nelnet Bank had $1.38 billion of deposits, which included $68.6 million from Nelnet, Inc.

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

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

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

For a summary of deposits as of March 31, 2025 and December 31, 2024, see note 9 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Average Balance Sheet

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

Three months ended September 30, (a)

Nine months ended September 30, (a)

2024 2023 2024 2023

Balance Rate Balance Rate Balance Rate Balance Rate

Three months ended March 31, (a)

Balance Rate Balance Rate

Average assets

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Retail and other deposits 962,954 4.21 544,136 4.90

Federal funds purchased and other borrowed money 10,404 4.69 — —

Total interest-bearing liabilities 1,295,453 3.73 % 909,136 4.11 %

2 unchanged sentences

Total liabilities and equity $ 1,485,617 $ 1,054,708

Net interest margin 3.46 % 3.00 %

(a) Calculated using average daily balances.

Summary and Comparison of Operating Results

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

Three months ended March 31,

2025 2024 Additional information

1 unchanged sentence

Loan interest $ 11,971 7,096 Represents interest earned on loans.

Increase was due to an increase in the balance of loans and interest rates.

Increase was due to an increase in the balance and mix of loans.

Investment interest 12,496 9,968 Represents interest earned on cash and investments.

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

Increase was due to an increase of these balances, partially offset by a decrease in interest rates.

Total interest income 24,467 17,064

Interest expense 12,077 9,497 Represents interest expense on deposits.

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

Increase was due to an increase in the balance of deposits, partially offset by a decrease in interest rates.

Net interest income 12,390 7,567

Provision for loan losses 6,143 1,927 18,352 5,837 Increase in provision for loan losses was due to the mix of loans and an increase in the notional amount of loans acquired and originated in 2024 compared with 2023.

Provision for loan losses 2,325 4,373 Decrease was due to the mix of loans originated, acquired, and outstanding during each period.

See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

1 unchanged sentence

Other income, net 142 375 Represents primarily net gains and income from investments.

Derivative settlements, net 281 196 690 279 Nelnet Bank's use of derivatives is to hedge its exposure related to variable rate intercompany deposits to minimize volatility from future changes in interest rates.

Derivative settlements, net 164 202 Nelnet Bank uses derivatives to hedge its exposure related to variable rate intercompany deposits to minimize volatility from future changes in interest rates.

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

6 unchanged sentences

Salaries and benefits 2,816 2,721 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.

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

Depreciation 339 260

Other expenses 2,570 1,290 5,765 3,696 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain technology-related costs, insurance, and marketing.

Servicing fees 667 233 Represents primarily fees paid to LSS for servicing certain of Nelnet Bank's loans.

Intercompany servicing of $0.5 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively, was eliminated for consolidated financial reporting purposes.

Other expenses 1,358 1,111 Represents various expenses such as marketing, consulting and professional fees, software, insurance, and management fees.

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

Intersegment expenses 759 129 2,252 302 Represents fees paid to LSS for servicing certain of Nelnet Bank's loans.

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

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

The shared service and support costs incurred by the Company related to Nelnet Bank and not allocated to Nelnet Bank were $1.6 million and $5.1 million for the three and nine months ended September 30, 2023, respectively.

Intersegment expenses 710 557 Intersegment expenses include costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.

Total operating expenses 5,890 4,882

(Loss) income before income taxes (4,758) 2,299 (7,330) 3,951

Income tax benefit (expense) 1,143 (552) 1,800 (913) Represents income tax expense at an effective tax rate of 24.0% for the three months ended September 30, 2024 and 2023, respectively, and 24.6% and 23.1% for the nine months ended September 30, 2024 and 2023, respectively.

Net (loss) income $ (3,615) 1,747 (5,530) 3,038

Income before income taxes 1,952 1,147

Income tax expense (434) (259) Represents income tax expense at an effective tax rate of 22.2% and 22.6% for the three months ended March 31, 2025 and 2024, respectively.

Net income $ 1,518 888

Additional information:

Net (loss) income $ (3,615) 1,747 (5,530) 3,038

Net income $ 1,518 888

See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional details about non-GAAP financial information.

1 unchanged sentence

Tax effect (607) 542

Net (loss) income, excluding derivative market value adjustments $ (843) 267 (4,927) 715

Net income (loss), excluding derivative market value adjustments $ 3,440 (828)

NFS Other Operating Segments

3 unchanged sentences

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

Three months ended September 30, 2024

Investment interest $ 4 1,354 95 10,962 12,415

Interest expense — (463) — (1,782) (2,245)

Net interest income 4 891 95 9,180 10,170

Other income, net 1,399 18,046 2,116 809 22,370

Salaries and benefits (54) (138) (206) — (398)

Other expenses (69) (17,803) (31) (1) (17,904)

Intersegment expenses, net (4) (52) (109) (35) (200)

Income (loss) before income taxes 1,276 944 1,865 9,953 14,038

Income tax (expense) benefit (276) (227) (450) (2,388) (3,341)

Net loss (income) attributable to noncontrolling interests (128) — 11 — (117)

Net income (loss) $ 872 717 1,426 7,565 10,580

Three months ended September 30, 2023

Investment interest $ 3 411 141 12,466 13,021

Interest expense — — — (5,661) (5,661)

Net interest income 3 411 141 6,805 7,360

Other income, net 1,639 7,277 75 870 9,861

Salaries and benefits (54) (89) (145) — (288)

Other expenses (83) (7,441) 4 (2) (7,522)

Intersegment expenses, net (3) (82) (106) — (191)

Income (loss) before income taxes 1,502 76 (31) 7,673 9,220

Income tax (expense) benefit (325) (18) 7 (1,841) (2,177)

Net loss (income) attributable to noncontrolling interests (150) — 1 — (149)

Net income (loss) $ 1,027 58 (23) 5,832 6,894

Nine months ended September 30, 2024

Three months ended March 31, 2025

Investment interest $ 4 1,994 — 6,822 8,820

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Net interest income 4 1,225 — 6,821 8,050

Reinsurance premiums earned — 24,687 — — 24,687

Other income, net 1,473 574 (1,643) 706 1,110

Salaries and benefits (32) (249) (197) — (478)

Reinsurance losses and underwriting expenses — (22,212) — — (22,212)

Other expenses (63) (677) (31) (1) (772)

Intersegment expenses, net (4) (109) (99) (32) (244)

Impairment expense — — (81) — (81)

Income (loss) before income taxes 1,378 3,239 (2,051) 7,494 10,060

Income tax (expense) benefit (298) (777) 489 (1,799) (2,385)

Net loss (income) attributable to noncontrolling interests (403) — 37 — (366)

Net (income) loss attributable to noncontrolling interests (138) — 14 — (124)

Net income (loss) $ 942 2,462 (1,548) 5,695 7,551

Nine months ended September 30, 2023

Three months ended March 31, 2024

Investment interest $ 3 818 141 14,654 15,616

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

Reinsurance premiums earned — 12,780 — — 12,780

Other income, net 1,477 286 (1,794) 192 161

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

Reinsurance losses and underwriting expenses — (11,317) — — (11,317)

Other expenses (75) (340) (70) — (485)

Intersegment expenses, net (4) (47) (130) (36) (217)

Impairment expense — — — — —

Income (loss) before income taxes 1,346 2,066 (2,042) 12,392 13,762

Income tax (expense) benefit (291) (496) 487 (2,974) (3,274)

Net loss (income) attributable to noncontrolling interests (447) — 29 — (418)

Net (income) loss attributable to noncontrolling interests (135) — 15 — (120)

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

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

WRCM earned management and performance fees of $1.4 million and $1.6 million for the three months ended September 30, 2024 and 2023, respectively, and $4.4 million and $4.9 million for the nine months ended September 30, 2024 and 2023, respectively.

WRCM earned management and performance fees of $1.5 million for each of the three months ended March 31, 2025 and 2024.

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

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

The following table presents net premiums, which are included in "other income, net" in the table above, and net loss reserve, commissions, and broker fees, which are included in "other expenses" in the table above:

Three months ended Nine months ended

September 30, September 30,

2024 2023 2024 2023

Reinsurance assumed $ 33,585 12,965 88,978 21,994

Reinsurance ceded (16,966) (6,678) (44,728) (11,356)

Net premiums $ 16,619 6,287 44,250 10,638

Reinsurance assumed $ 33,195 12,349 77,712 19,876

Reinsurance ceded (16,433) (6,335) (38,646) (10,179)

Net loss reserve, commissions, and broker fees $ 16,762 6,014 39,066 9,697

Increase in insurance premiums in the first quarter of 2025 compared with the same period in 2024 was primarily due to an increase in overall property volume and new business.

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

The Company recognized net gains from its real estate investments of $2.1 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and net losses of $1.5 million for the nine months ended September 30, 2024 compared with a gain of $0.5 million for the same period in 2023, which are included in "other income, net" in the table above.

The net results recognized relates primarily to the Company's proportionate share of certain real estate investments accounted for under the equity method.

The net gain for the third quarter of 2024 also includes a $2.8 million gain from the sale of a real estate investment.

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

The Company recognized net losses from its real estate investments of $1.6 million and $1.8 million for the three months ended March 31, 2025 and 2024, respectively, which are included in "other income, net" in the table above.

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

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

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

The decrease in interest income and interest expense in 2024 compared with 2023 was due to a decrease in the average balance of investments and debt outstanding, respectively.

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate and Market Risk - Investments," which provides additional detail on the Company's investment portfolio and debt used to finance such investments.

The decrease in interest income and interest expense in 2025 compared with 2024 was primarily due to a decrease in the average balance of investments and debt outstanding, respectively, and a decrease in interest rates.

As of December 31, 2024, the majority of debt used to finance such investments had been repaid.

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate and Market Risk - Investments," which provides additional detail on NFS's investment debt securities.

CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS

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Summary and Comparison of Operating Results

Nelnet Renewable Energy (b)

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

Three months ended September 30, 2024

Shared services (a) Solar tax equity investments (b) Nelnet Renewable Energy (c) ALLO investment (d) Venture capital investments (e) Other Total

Three months ended March 31, 2025

Investment interest $ — 5 — — — 2,307 2,312

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Other income, net 619 1,730 — 8,416 4,492 2,981 18,238

Impairment expense — — — — (100) — (100)

Cost to provide solar construction services — — (7,828) — — — (7,828)

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Intersegment expenses, net 24,816 (65) (399) — (40) (257) 24,055

(Loss) income before income taxes (10,287) (8,509) (10,125) 6,606 2,136 2,756 (17,423)

Income tax benefit (expense) 2,469 988 2,430 (1,585) (513) 126 3,915

Net loss attributable to noncontrolling interests — 4,392 — — — — 4,392

Net (loss) income $ (7,818) (3,129) (7,695) 5,021 1,623 2,882 (9,116)

Three months ended September 30, 2023

Investment interest $ — — 36 — — 3,196 3,232

Interest expense — — (108) — — (324) (432)

Net interest income (expense) — — (72) — — 2,872 2,800

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

Other income, net 728 (5,153) 48 (14,908) (629) 2,964 (16,950)

Impairment expense — — — — — — —

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

Salaries and benefits (21,537) (686) (971) — (237) (1,300) (24,731)

Depreciation and amortization (9,917) — (3,501) — — (104) (13,522)

Other expenses (12,110) (276) (892) (651) (16) (1,725) (15,670)

Intersegment expenses, net 26,599 (2,621) 2,006 — (18) (287) 25,679

(Loss) income before income taxes (9,988) 1,205 (6,575) 8,416 4,220 946 (1,776)

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Net (loss) income $ (7,591) 2,150 (4,997) 6,396 3,207 1,492 657

Nelnet Renewable Energy (b)

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

Nine months ended September 30, 2024

Three months ended March 31, 2024

Investment interest $ — — 19 — — 3,796 3,815

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Other income, net 706 2,877 42 (8,236) (389) 2,853 (2,147)

Impairment expense — — (1,865) — (137) — (2,002)

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

3 unchanged sentences

Intersegment expenses, net 27,528 291 (758) (1) (19) (196) 26,845

(Loss) income before income taxes (29,389) (8,775) (18,913) 1,953 4,848 7,981 (42,295)

Income tax benefit (expense) 7,053 424 4,142 (469) (1,164) (1,560) 8,426

Net loss attributable to noncontrolling interests — 7,009 1,654 — — — 8,663

Net (loss) income $ (22,336) (1,342) (13,117) 1,484 3,684 6,421 (25,206)

Nine months ended September 30, 2023

Investment interest $ — — 136 — — 8,690 8,826

Interest expense — — (805) — — (988) (1,793)

Net interest income (expense) — — (669) — — 7,702 7,033

Solar construction revenue — — 19,687 — — — 19,687

Other income, net 2,130 (18,183) 112 (42,483) (2,280) 8,087 (52,617)

Impairment expense — — — — (37) — (37)

Cost to provide solar construction services — — (25,204) — — — (25,204)

Salaries and benefits (67,923) (2,356) (3,638) (30) (643) (4,096) (78,686)

Depreciation and amortization (27,965) — (5,696) — — (315) (33,976)

Other expenses (31,958) (1,116) (1,679) (2,014) (201) (4,359) (41,327)

Intersegment expenses, net 82,408 (2,582) 918 (1) (39) (947) 79,757

(Loss) income before income taxes (10,045) 2,314 (4,037) (8,593) (704) 2,723 (18,342)

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

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

As of September 30, 2024, the Company has invested a total of $543.7 million (which includes $241.4 million syndicated to third-party investors) in solar tax equity investments that remain outstanding.

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

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

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

Nelnet Renewable Energy recognized net losses on its tax equity investments of $11.2 million and $6.5 million for the three months ended September 30, 2024 and 2023, respectively, and $11.1 million and $19.5 million for the nine months ended September 30, 2024 and 2023, respectively.

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

The amount of net losses attributable to third-party noncontrolling interest investors for the three months ended September 30, 2024 and 2023 was $3.9 million and $3.3 million, respectively, and $5.6 million and $14.7 million for the nine months

ended September 30, 2024 and 2023, respectively.

Amounts applicable to noncontrolling interest investors are reflected in “net loss attributable to noncontrolling interests” in the table above.

Nelnet Renewable Energy syndicates tax equity investments to third parties and earns management and performance fees.

Management fee income recognized by Nelnet Renewable Energy was $0.9 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively, and $2.5 million and $1.3 million for the nine months ended September 30, 2024 and 2023, respectively, which is included in "other income, net" in the table above.

During the third quarter of 2024, Nelnet Renewable Energy also recognized solar consulting revenue of $4.2 million.

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

Since the acquisition of 80% of GRNE Solar's ownership interests in 2022, it has incurred low and, in some cases, negative margins on certain projects.

During the third quarter of 2024, the Company recorded an expense of $8.8 million related to estimated losses on legacy construction projects.

(b) Includes operating results of the Company's tax equity investments in renewable energy solar partnerships.

The Company accounts for these investments under the HLBV method of accounting, which commonly results in accelerated losses in the initial years of the investment.

In the periods presented, these HLBV net losses are offset by gains recognized from sales of certain investments at the end of the contractual agreement (typically five years).

These losses are also offset by revenue earned by the Company related to management, consulting, and performance fees provided on tax equity investments made by third parties.

Due to the recognition pattern

(accelerated losses in initial years and gains upon sale at the end of the contractual agreement), these investments may create volatility in earnings.

For additional information on the results of this operating segment, see note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

(c) Nelnet Renewable Energy (NRE) is the Company’s solar construction business that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities.

The Company entered this business from its acquisition of 80% of GRNE Solar in June 2022.

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

The Company has a handful of remaining legacy construction contracts to complete, down from over 30 at the beginning of 2024.

Due to the complexity and long-term nature of existing construction contracts, the Company may continue to incur low and/or negative margins to complete these projects.

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.

As a result, residential revenue will continue to decline from recent historical amounts as existing customer contracts are completed.

Residential solar construction revenue was $0.6 million and $2.1 million for the three months ended September 30, 2024 and 2023, respectively, and $3.3 million and $7.3 million for the nine months ended September 30, 2024 and 2023, respectively.

In addition, during the second quarter of 2024, the Company recognized non-cash impairment charges of $1.9 million on certain solar facilities and inventory related to the residential solar operations, which is reflected in "impairment expense" in the table above, and $1.6 million in severance costs and commissions paid for cancelled projects, which is included in "salaries and benefits" in the table above.

For additional information, see note 9 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

In April 2024, the Company announced a change in its solar EPC operations to focus exclusively on the commercial solar market and discontinued its residential solar operations.

As a result, residential revenue will decline from recent historical amounts as existing customer contracts are completed.

Residential solar construction revenue was $1.8 million for the three months ended March 31, 2024.

The amount of residential construction revenue earned in 2025 was insignificant.

On June 30, 2024, the Company acquired the remaining 20% of GRNE Solar for $0.3 million.

(c) Represents primarily the Company's share of loss on its voting membership interests and income on its preferred membership interest in ALLO.

The Company accounts for its approximately 45% voting membership interests in ALLO under the HLBV method of accounting.

Under the HLBV method of accounting on its ALLO voting membership interests investment, the Company recognized no losses in the third quarter of 2024 compared with losses of $17.3 million for the same period in 2023 and losses of $10.7 million for the nine months ended September 30, 2024 compared with $49.7 million for the same period in 2023.

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

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.

As of September 30, 2024, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $184.0 million and $11.4 million, respectively.

The Company historically earned a preferred annual return of 6.25% that increased to 10.00% on April 1, 2024 for $155.0 million of preferred membership interests of ALLO held by the Company.

During the second and third quarter of 2024, the Company purchased an additional $29.0 million of preferred membership interests of ALLO, which earn a preferred annual return of 20.0%.

The Company recognized income on its ALLO preferred membership interests of $4.8 million and $2.3 million for the three months ended September 30, 2024 and 2023, respectively, and $11.4 million and $6.8 million for the nine months ended September 30, 2024 and 2023, respectively.

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

As part of the ALLO recapitalization transaction completed in 2020, the Company and SDC (a third-party global digital infrastructure investor and member of ALLO) entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.

The Company adjusts the balance of this contingent liability each reporting period.

For the three and nine months ended September 30, 2024, the Company reduced the obligation resulting in an expense reduction of $2.1 million and $1.5 million, respectively, and for the three and nine months ended September 30, 2023, recognized expense of $0.7 million and $2.0 million, respectively, which is included in “other expenses” in the table above.

(d) Represents the operating results of the Company’s venture capital investments, including Hudl, which the Company accounts for using the measurement alternative method, and the administrative costs to manage this portfolio.

(d) Represents primarily the Company's share of loss on its voting membership interest and income on its preferred membership interests in ALLO.

For additional information on the results of these investments, see note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

In April 2025, the Company entered into an agreement pursuant to which ALLO will redeem certain of its membership interests.

The Company expects ALLO to redeem all of the Company's outstanding preferred membership interests, including the accrued preferred return on such membership interests through the closing date, and a portion of the Company's voting membership interest.

The transaction is expected to close in late May 2025.

As a result of this transaction, the Company expects to receive cash proceeds of approximately $410 million and recognize a pre-tax gain of approximately $175 million.

For additional information on this transaction, see note 16 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

(e) Represents the operating results of the Company’s venture capital investments, including Hudl which the Company accounts for using the measurement alternative method, and the administrative costs to manage this portfolio.

LIQUIDITY AND CAPITAL RESOURCES

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As such, a minimal amount of debt and equity capital is allocated to these segments and any liquidity or capital needs are satisfied using cash flow from operations.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million in November 2020 and the Company has contributed an additional $65.0 million to Nelnet Bank since its inception, including $30.0 million year to date through November 7, 2024.

Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.

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

See “Liquidity Impact Related to Nelnet Bank” included below for additional information.

Therefore, the Liquidity and Capital Resources discussion is concentrated on the Company’s liquidity and capital needs to meet existing debt obligations in the Asset Generation and Management operating segment and the Company's other initiatives to pursue additional strategic investments.

Therefore, the Liquidity and Capital Resources discussion is concentrated on the Company’s liquidity and capital needs to meet existing debt obligations in the Nelnet Financial Services division, which includes the Asset Generation and Management and Nelnet Bank reportable operating segments, and the Company's other initiatives to pursue additional strategic investments.

Sources of Liquidity

As of September 30, 2024, the Company's sources of liquidity included:

As of March 31, 2025, the Company's sources of liquidity included:

Cash and cash equivalents $ 220,517

3 unchanged sentences

AFS debt securities held at Nelnet Bank - at fair value (a) (652,967)

AFS private education loan debt securities - held as risk retention - at fair value (b) (227,289)

Restricted investments (49,755)

AFS private education and consumer loan debt securities - held as risk retention - at fair value (b) (216,980)

Restricted investments (c) (123,518)

Unencumbered AFS debt securities (investments) - at fair value 164,597

Unencumbered private, consumer, and other loans (Non-Nelnet Bank) - at par 327,744

Unencumbered repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (c) 309,469

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

Sources of liquidity as of September 30, 2024

Unencumbered repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (d) 97,419

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

Sources of liquidity as of March 31, 2025

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

(b) The Company is sponsor for certain securitizations and as sponsor, is required to provide a certain level of risk retention.

(b) The Company is sponsor for certain private education and consumer loan securitizations and as sponsor, is required to provide a certain level of risk retention.

To satisfy this requirement, the Company has purchased bonds issued in the securitizations.

The Company is required to retain these bonds as described under the caption “Repurchase Agreement” below.

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

The majority of the purchased bonds reflected in the table above relate to private education loan securitizations.

For these securitizations, the Company is required to retain these bonds 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 these bonds to a third party.

The Company estimates these bonds will be restricted from trading until approximately the first half of 2027.

(d) 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.

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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.

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

As of September 30, 2024, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

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

As of March 31, 2025, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use.

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

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

Recent Development - Partial Redemption of ALLO Investment

The Company has both a voting and preferred membership interest investment in ALLO.

In April 2025, the Company entered into an agreement pursuant to which ALLO will redeem certain of its membership interests.

The transaction is expected to close in late May 2025.

The Company expects to receive cash proceeds of approximately $410 million from ALLO for these redemptions and recognize a pre-tax gain of approximately $175 million.

See note 16 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information about this transaction.

The Company has historically generated positive cash flow from operations.

During the nine months ended September 30, 2024 and 2023, the Company generated $482.4 million and $352.6 million, respectively, in cash from operating activities.

The increase in 2024 compared with 2023 was due to:

• An increase in net income;

• Payments of $4.4 million to the Company's clearinghouse for margin payments on derivatives during the nine months ended September 30, 2024 compared with payments of $210.2 million for the same period in 2023;

• Adjustments to net income for the impact of provision for beneficial interests and provision for loan losses;

• The impact of changes to accrued interest receivable and other assets during the nine months ended September 30, 2024 compared with the same period in 2023.

During the three months ended March 31, 2025 and 2024, the Company generated $91.2 million and $211.6 million, respectively, in cash from operating activities.

The decrease in 2025 compared with 2024 was due to:

• Adjustments to net income for the non-cash change in gain on investments, loan discount and deferred lender fees accretion, and depreciation and amortization;

• The impact of changes to accrued interest receivable, accounts receivable, and other assets during the three months ended March 31, 2025 compared with the same period in 2024.

These factors were partially offset by:

• Adjustments to net income for the non-cash change in loss on investments, derivative market value adjustments, loan discount and deferred lender fees accretion, and depreciation and amortization;

• No proceeds from the termination of derivative instruments during the nine months ended September 30, 2024 compared with $164.1 million for the same period in 2023;

• The impact of changes to other liabilities, accrued interest payable, and accounts receivable during the nine months ended September 30, 2024 compared with the same period in 2023.

• An increase in net income;

• Adjustments to net income for the non-cash change in derivative market value adjustments, deferred income tax expense, and provision for loan losses;

• The impact of changes to other liabilities during the three months ended March 31, 2025 compared with the same period in 2024.

The primary items included in the statement of cash flows for investing activities are the purchase, origination, repayment, and sale of loans, the purchase and sale of available-for-sale securities, and the purchase of other investments (primarily solar investments).

The primary items included in financing activities are proceeds from the issuance of and payments on bonds and notes payable, the change in deposits at Nelnet Bank used to fund loans and investment activity, and repurchases of common stock.

Cash provided by investing activities and used in financing activities for the nine months ended September 30, 2024 was $2.1 billion and $2.7 billion, respectively.

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

The primary items included in financing activities are the payments on bonds and notes payable, the change in deposits at Nelnet Bank used to fund loans and investment activity at Nelnet Bank, and the change in due to customers.

Cash provided by investing activities and used in financing activities for the three months ended March 31, 2025 was $136.4 million and $326.4 million, respectively.

Cash provided by investing activities and used in financing activities for the three months ended March 31, 2024 was $1.09 billion and $1.38 billion, respectively.

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

Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral

Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral - AGM Operating Segment

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

As of September 30, 2024

As of March 31, 2025

Carrying amount

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The majority of AGM’s portfolio of student loans is funded in asset-backed securitizations that are structured to substantially match the maturity of the funded assets, thereby minimizing liquidity risk.

Cash generated from student loans funded in asset-backed securitizations provide the sources of liquidity to satisfy all obligations related to the outstanding bonds and notes issued in such securitizations.

Cash generated from student loans funded in asset-backed securitizations provides the sources of liquidity to satisfy all obligations related to the outstanding bonds and notes issued in such securitizations.

In addition, due to (i) the difference between the yield AGM receives on the loans and cost of financing within these transactions, and (ii) the servicing and administration fees AGM earns from these transactions, AGM has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.

As of September 30, 2024, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM currently expects future undiscounted cash flows from its portfolio to be approximately $1.18 billion as detailed below.

The actual timing of cash flows released from the securitizations could be impacted based on when and if the Company terminates a securitization by exercising clean-up calls on the underlying securities when the assets in such securitization reach a certain threshold.

The forecasted cash flow presented below includes loans funded in asset-backed securitizations as of September 30, 2024, the majority of which are federally insured student loans.

As of September 30, 2024, AGM had $8.4 billion of loans included in

asset-backed securitizations, which represented 87.6% of its total loan portfolio.

The forecasted cash flow does not include cash flows that the Company expects to receive related to loans funded in its warehouse facilities, unencumbered private education, consumer, and other loans funded with operating cash, its ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "investments and notes receivable" on the Company's consolidated balance sheets), loans acquired subsequent to September 30, 2024, and loans owned by Nelnet Bank.

As of March 31, 2025, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM expects future undiscounted cash flows from its portfolio to be approximately $1.02 billion as detailed below.

The actual timing of cash flows released from the securitizations

could be impacted based on when and if the Company terminates a securitization by exercising clean-up calls on the underlying securities when the assets in such securitization reach a certain threshold.

The forecasted cash flow presented below includes loans funded in asset-backed securitizations as of March 31, 2025, the majority of which are federally insured student loans.

As of March 31, 2025, AGM had $8.0 billion of loans included in asset-backed securitizations, which represented 86.1% of its total loan portfolio.

The forecasted cash flow does not include cash flows that the Company expects to receive in relation to loans funded in its warehouse facilities, unencumbered private education, consumer, and other loans funded with operating cash, its ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "other investments and notes receivable, net" on the Company's consolidated balance sheets), loans acquired subsequent to March 31, 2025, and loans owned by Nelnet Bank.

Asset-backed Securitization Cash Flow Forecast

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(dollars in millions)

The forecasted future undiscounted cash flows of approximately $1.18 billion include approximately $0.74 billion (as of September 30, 2024) of overcollateralization included in the asset-backed securitizations.

These excess net asset positions are included in the consolidated balance sheets in the balances of "loans and accrued interest receivable, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.44 billion, or approximately $0.33 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the September 30, 2024 balance.

The forecasted future undiscounted cash flows of approximately $1.02 billion include approximately $0.74 billion (as of March 31, 2025) of overcollateralization included in the asset-backed securitizations.

These excess net asset positions are included in the consolidated balance sheets in the balances of "loans and accrued interest receivable, net" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.28 billion, or approximately $0.21 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the March 31, 2025 balance.

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

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

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

Should any of these factors change, management may revise its assumptions, which in turn would impact the

projected future cash flow.

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

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

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

See "Nelnet Financial Services Division -

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

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

In addition, see Part I, Item 1A, "Risk Factors - Loan Portfolio - Prepayments risk" in the Company's 2023 Annual Report for additional information related to risks associated with loan prepayments.

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

The following table summarizes the estimated impact to the above forecasted cash flows if prepayments were greater than the prepayment rate assumptions used to calculate the forecasted cash flows.

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$0.83 billion

10x $0.43 billion

$0.75 billion

If the entire AGM student loan portfolio prepaid, the Company would receive the full amount of overcollateralization included in the asset-backed securitizations of approximately $0.74 billion (as of September 30, 2024);

however, the Company would not receive the $0.28 billion ($0.21 billion after tax) of estimated future earnings from the portfolio.

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The Company’s cash flow forecast assumes, for the life of the portfolio, a relationship between the various SOFR indices that is implied by the current forward SOFR curves.

If the forecast is computed assuming a spread of an additional 12 basis points between Term SOFR and 30-day average SOFR for the life of the portfolio, the cash flow forecast would be reduced by approximately $10 million to $15 million.

If the forecast is computed assuming a spread of an additional 12 basis points between 3-month Term SOFR and 30-day average SOFR for the life of the portfolio, the cash flow forecast would be reduced by approximately $5 million to $15 million.

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

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

For a summary of the Company's warehouse facilities outstanding as of September 30, 2024, see note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

The Company has been reducing its warehouse capacity based on its estimated future loan purchases and to save on unused facility costs.

For a summary of the Company's warehouse facilities outstanding as of March 31, 2025, see note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

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

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

There were no asset-backed securitization transactions completed during the nine months ended September 30, 2024.

There were no asset-backed securitization transactions completed during the three months ended March 31, 2025.

Other Uses of Liquidity

The Company no longer originates FFELP loans, but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist, including opportunities to purchase private education, consumer, and other loans (or investment interests therein).

Subsequent to the Reconciliation Act of 2010, the Company no longer originates FFELP loans but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist, including opportunities to purchase private education, consumer, and other loans (or investment interests therein).

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

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proceeds from the sale of certain investments;

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

its unsecured line of credit, its Union Bank student loan participation agreement, and its Union Bank student loan asset-backed securities participation agreement (each as described below), and/or

establishing similar secured and unsecured borrowing facilities;

using its existing warehouse facilities (as described above);

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and continuing to access the asset-backed securities market.

Repurchase Agreement

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

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

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

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

The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance sheets as "investments and notes receivable" and as of September 30, 2024, the fair value of these bonds was $227.3 million.

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.

The Company entered into a repurchase agreement with a third party in which a portion of the risk retention investments serve as collateral on the repurchase obligations.

As of September 30, 2024, $108.2 million was outstanding on the Company's repurchase agreement and the maturity dates on this facility vary from November 27, 2024 through December 20, 2024.

The Company is subject to cash margin deficit payment requirements in the event the fair value of the securities subject to the repurchase agreement becomes less than the original purchase price of such securities.

Upon termination or maturity of the repurchase agreement, there can be no assurance that the Company will be able to maintain this or a similar agreement, or find alternative funding if necessary.

If necessary, the Company would expect to use operating cash, consider the sale of unencumbered investments, or borrow on its unsecured line of credit to satisfy any remaining obligations.

Union Bank Participation Agreements

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

As of September 30, 2024, $326.2 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

As of March 31, 2025, $597.2 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

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

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.

The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $900.0 million or an amount in excess of $900.0 million if mutually agreed to by both parties.

The Company can sell participation interests in loans to Union Bank to the extent of availability under the grantor trusts, up to $900.0 million or an amount in excess of $900.0 million if mutually agreed to by both parties.

Loans participated under this agreement have been accounted for by the Company as loan sales.

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

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

As of September 30, 2024, $0.1 million (par value) of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

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

As of March 31, 2025, $0.1 million (par value) of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

Liquidity Impact Related to Beneficial Interest in Loan Securitizations

The Company has partial ownership in consumer, private education, and federally insured student loan third-party securitizations that are classified as "beneficial interest in loan securitizations" and included in "investments and notes receivable" on the Company's consolidated balance sheets.

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 the Company or have been received by the Company as consideration from selling portfolios of loans to unrelated third parties who securitized such loans.

As of the latest remittance reports filed by the various trusts prior to or as of September 30, 2024, the Company's ownership correlates to approximately $1.99 billion of loans included in these securitizations.

Investment interest income earned by the Company from the beneficial interest in loan securitizations is included in "investment income" on the Company's consolidated statements of income and is not a component of the Company's loan interest income.

As of September 30, 2024, the investment balance on the Company's consolidated balance sheet of its beneficial interest in loan securitizations was $218.7 million.

As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2025, the Company's ownership correlates to approximately $1.82 billion of loans included in these securitizations.

As of March 31, 2025, the investment balance on the Company's consolidated balance sheet of its beneficial interest in loan securitizations was $206.4 million.

For a summary of this investment balance, see note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

The Company's partial ownership percentage in each loan securitization grants the Company the right to receive the corresponding percentage of cash flows generated by the securitization.

As of September 30, 2024, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its partial ownership in these securitizations to be approximately $328.2 million.

As of March 31, 2025, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its partial ownership in these securitizations to be approximately $310.2 million.

The vast majority of these cash flows are expected to be received over the next 5 years.

The difference between the total estimated future undiscounted cash flows from these residual interests ($328.2 million) and the investment carrying value ($218.7 million) of $109.5 million, or $83.2 million after income taxes based on the estimated effective tax rate, represents estimated future investment interest income (earnings) from these investments and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the September 30, 2024 balance.

The difference between the total estimated future undiscounted cash flows from these residual interests ($310.2 million) and the investment carrying value ($206.4 million) of $103.8 million, or $78.9 million after income taxes based on the estimated effective tax rate, represents estimated future investment interest income (earnings) from these investments and is expected to be accretive to the Company's balance of consolidated shareholders' equity from the March 31, 2025 balance.

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

If defaults are higher than management's current estimate, the forecasted cash flows and estimated future investment interest income (earnings) from these securitizations would be adversely impacted.

For example, the Company established an allowance of $5.9 million and $29.0 million during the second and third quarter of 2024, respectively, related to certain of the Company's beneficial interest securitization investments.

The Company's change in estimate of future cash flows from the beneficial interest in certain loan securitizations was lower than previously anticipated due to actual and estimated loan defaults within such securitizations.

Liquidity Impact Related to Nelnet Bank

Sources and Needs of Liquidity - Nelnet Bank

Sources of Liquidity

Nelnet Bank launched operations in November 2020.

Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million.

In addition, the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC discussed below.

Nelnet Bank was funded by the Company with an initial capital contribution of $100 million and the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC as discussed below.

The Company has contributed an additional $82 million to Nelnet Bank since its inception.

Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.

Nelnet Bank also has unsecured Federal Funds lines of credit with correspondent banks and has established accounts at the Federal Reserve Bank and the Federal Home Loan Bank.

The growth of Nelnet Bank is primarily driven by its ability to achieve loan growth goals while sustaining credit quality and maintaining cost-efficient funding sources to support its loan growth.

Nelnet Bank utilizes brokered, retail, and other deposits to meet its funding needs and enhance its liquidity position.

The deposits can be term or liquid deposits.

The term deposits have terms from three months to ten years.

Retail, commercial, and institutional deposits are sourced through a direct banking platform and a deposit marketplace and provide diversified funding sources.

Brokered deposits are sourced through a network of brokers and provide a stable source of funding.

In addition, Nelnet Bank accepts certain deposits considered non-brokered that are held in large accounts structured to allow FDIC insurance to flow through to underlying individual depositors.

The deposits are diversified with deposits from Educational 529 College Savings and Health Savings plans, STFIT, and FDIC sweep deposits.

Regulatory Capital

Prior to Nelnet Bank’s launch of operations, Nelnet Bank, Nelnet, Inc.

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and (iv) establish and maintain a pledged deposit of $40.0 million with Nelnet Bank.

Under the regulatory framework for prompt corrective action, Nelnet Bank is subject to various regulatory capital requirements administered by the FDIC and the UDFI and must meet specific capital standards.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on Nelnet Bank’s business, results of operations, or financial condition.

On January 1, 2020, the Community Bank Leverage Ratio (CBLR) framework, as issued jointly by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC, became effective.

Any banking organization with total consolidated assets of less than $10 billion, limited amounts of certain types of assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9% may opt into the CBLR framework quarterly.

The CBLR framework allows banks to satisfy capital standards and be considered "well capitalized" under the prompt corrective action framework if their leverage ratio is greater than 9%, unless the banking organization's federal banking agency determines that the banking organization's risk profile warrants a more stringent leverage ratio.

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

Nelnet Bank has opted into the CBLR framework for the quarter ended September 30, 2024 with a leverage ratio of 12.4%.

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

Since inception, the Company has made additional contributions of $65.0 million to Nelnet Bank, including $30.0 million year to date through November 7, 2024.

Based on Nelnet Bank's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to the bank in future periods.

Liquidity Impact Related to Nelnet Renewable Energy

The Company’s Nelnet Renewable Energy business makes solar tax equity investments in renewable energy solar partnerships.

Through September 30, 2024, the Company has invested a total of $543.7 million (which includes $241.4 million syndicated to third-party investors) in tax equity investments that remain outstanding.

These investments provide a federal income tax credit under the Internal Revenue Code, equaling 30% to 40% of the eligible project cost, with the tax credit available when the project is placed-in-service.

The Company is allowed to reduce its tax estimates paid to the U.S.

As of March 31, 2025, Nelnet Bank's leverage ratio of capital to total assets was 12.6%.

Liquidity Impact Related to Solar Tax Equity Investments

The Company makes solar tax equity investments in renewable energy solar partnerships that support the development and operations of solar projects.

As of March 31, 2025, the Company has funded a total of $309.9 million in tax equity investments which remain outstanding for itself and $280.4 million on behalf of its syndication partners, for a funded total of $590.3 million.

These investments provide a federal income tax credit under the Internal Revenue Code, currently equaling 30% to 70% of the eligible project cost, with the tax credit available when the project is placed in service.

The Company is then allowed to reduce its tax estimates paid to the U.S.

Treasury based on the credits earned.

In addition to the credits, the Company structures the investments to receive quarterly distributions of cash from the operating earnings of the solar project for a period of at least five years after the project is placed in service.

After that period, the contractual agreements typically provide for the Company’s entire interest in the projects to be sold at the fair market value of the discounted forecasted future cash flows allocable to the Company.

Based on the timing of when the Company funds a project and decreases its tax estimate to the U.S.

Treasury due to earning of the tax credit, the amount of capital funded to solar tax equity investments at any point in time is not significant and has a minimal impact on the Company’s liquidity.

As of September 30, 2024, the Company is committed to fund an additional $107.9 million on tax equity investments, of which $89.5 million is expected to be provided by syndication partners.

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

The Company plans to fund a portion of its current growth plans in owning solar energy projects using third-party debt and third-party tax equity.

The collateral on any third-party debt would be limited to the assets of the specific solar projects.

Any capital requirements for the origination or purchase of solar projects not funded by third-party debt and third-party tax equity would be provided by the Company using operating cash, borrowings on its unsecured line of credit, and/or the sale of investments.

Liquidity Impact Related to ALLO

Upon the deconsolidation of ALLO on December 21, 2020, the Company recorded its 45% voting membership interests in ALLO at fair value, and accounts for such investment under the HLBV method of accounting.

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

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.

On January 1, 2025, the preferred annual return on the $155.0 million of preferred membership interests of ALLO will increase to 13.5%, commencing July 1, 2025, the return will increase to 15.0%, commencing January 1, 2026, the preferred return will increase to 17.5%, and beginning on January 1, 2027 and on each January 1 of each calendar year thereafter, the annual return will increase by an additional 2.5%.

During the second and third quarter of 2024, the Company purchased an additional $29.0 million of preferred membership interests in ALLO, which earn a preferred annual return of 20.0%.

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

As of September 30, 2024, the accrued and unpaid preferred return was $11.4 million.

If ALLO needs additional capital to support its growth in existing or new markets, the Company has the option to contribute additional capital to maintain its voting equity interest and/or may purchase additional preferred membership interests that include a preferred return.

Based on ALLO's business plan for growth and current financial condition, the Company believes it will make additional capital contributions to ALLO in future periods.

In addition to equity contributions, ALLO has issued debt to fund its growth.

As of September 30, 2024, ALLO has $1.1 billion (par value) of debt outstanding.

As part of the ALLO recapitalization transaction in December 2020, the Company and SDC entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of up to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.

As of September 30, 2024, the estimated fair value of the contingent payment is $8.3 million.

Treasury due to earning of the tax credit, the net amount of capital funded to solar tax equity investments at any point in time is not significant and has a minimal impact on the Company’s liquidity.

As of March 31, 2025, the Company is committed to fund an additional $56.0 million directly in solar tax equity investments and $44.0 million will be funded by its syndication partners, for a total commitment of $100.0 million.

Liquidity Impact Related to Hedging Activities

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All Non-Nelnet Bank over-the-counter derivative contracts executed by the Company are cleared post-execution at a regulated clearinghouse.

Clearing is a process by which a third party, the clearinghouse, steps in between the original counterparties and

guarantees the performance of both, by requiring that each post liquid collateral on an initial (initial margin) and mark-to-market (variation margin) basis to cover the clearinghouse’s potential future exposure in the event of default.

Based on the derivative portfolio outstanding as of September 30, 2024, the Company does not anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse and/or payments to its counterparties for its non-centrally cleared derivatives used by Nelnet Bank.

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.

Nelnet Bank derivative contracts have protection against counterparty risk provided by International Swaps and Derivatives Association, Inc.

The agreements require collateral to be exchanged based on the net fair value of derivatives with each counterparty.

The Company’s exposure related to the Nelnet Bank derivatives is limited to the value of the derivative contracts in a gain position, less any collateral held by us.

Based on the derivative portfolio outstanding as of March 31, 2025, the Company does not anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse and/or payments to its counterparties for its non-centrally cleared derivatives.

Unsecured Line of Credit

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

As of September 30, 2024, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.

As of March 31, 2025, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use.

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

Stock Repurchases

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

As of September 30, 2024, 3,341,735 shares remained authorized for repurchase under the Company's stock repurchase program.

In 2022, the Board of Directors authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2025.

On March 20, 2025, the Board of Directors authorized a new stock repurchase program that will be effective when the now current program expires to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2028.

The five million shares authorized under the new program will include any remaining unpurchased shares from the prior program, which the new program will replace.

As of March 31, 2025, 3,341,735 shares remained authorized for repurchase under the Company's stock repurchase program.

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

Shares repurchased by the Company during the first three quarters of 2024 are shown below, and include shares repurchased under the Company's stock repurchase program and shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares.

Certain of these repurchases were made pursuant to trading plans adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.

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

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

Shares repurchased by the Company during the three months ended March 31, 2025 are shown below.

For additional information on stock repurchases during the first quarter of 2025, see "Stock Repurchases" under Part II, Item 2 of this report.

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

Quarter ended March 31, 2025 38,491 $ 4,458 115.81

Quarter ended June 30, 2024 487,980 46,842 95.99

Quarter ended September 30, 2024 5,259 576 109.62

Total 889,963 $ 82,887 93.14

(a) The average price of shares repurchased includes excise taxes.

On September 13, 2024, the Company paid a third quarter 2024 cash dividend on the Company's Class A and Class B common stock of $0.28 per share.

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

The fourth quarter cash dividend will be paid on December 16, 2024 to shareholders of record at the close of business on December 2, 2024.

On March 14, 2025, the Company paid a first quarter 2025 cash dividend on the Company's Class A and Class B common stock of $0.28 per share.

In addition, the Company's Board of Directors has declared a second quarter 2025 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.28 per share.

The second quarter cash dividend will be paid on June 16, 2025 to shareholders of record at the close of business on June 2, 2025.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

CRITICAL ACCOUNTING ESTIMATES

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

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the need to make estimates about the effect of matters that are inherently uncertain.

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

For additional information regarding changes in the Company’s allowance for loan losses for the three and nine months ended September 30, 2024 and 2023, see the caption “Activity in the Allowance for Loan Losses” in note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Management has identified the allowance for loan losses as a critical accounting estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Allowance for Loan Losses” in the Company’s 2024 Annual Report.

For additional information regarding changes in the Company’s allowance for loan losses for the three months ended March 31, 2025 and 2024, see the caption “Activity in the Allowance for Loan Losses” in note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

There have been no material changes to the Company’s critical accounting policy and estimate since December 31, 2024.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the FASB issued accounting guidance which improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit (referred to as the “significant expense principle”).

This guidance will be effective for the Company for the year ending December 31, 2024 annual financial statements, with early adoption permitted.

The guidance will be applied retrospectively for all prior periods presented in the financial statements.

The Company intends to adopt the standard when it becomes effective for the year ending December 31, 2024 annual financial statements.

While the Company is continuing to evaluate the impact this pronouncement will have on its ongoing financial reporting, it currently believes there will be limited impacts to the disclosures included in the notes to consolidated financial statements due to the segment expense detail already disclosed for each reportable segment.

In December 2023, the FASB issued accounting guidance to address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

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The Company intends to adopt the standard when it becomes effective for the year ending December 31, 2025.

Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to consolidated financial statements.

Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.

In November 2024, the FASB issued accounting guidance to increase disclosure requirements primarily through enhanced disclosures about types of expenses (including employee compensation, depreciation, and amortization) in commonly presented expense captions.

This guidance will be effective for the Company for fiscal years beginning after December 15, 2026.

The guidance is required to be applied prospectively with the option for retrospective application.

Management is currently evaluating the impact this guidance will have on the disclosures included in the notes to the consolidated financial statements.

There are no other recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company's consolidated financial statements and related disclosures.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis