UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-31924

NELNET, INC.

(Exact name of registrant as specified in its charter)


Nebraska		84-0748903
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

121 South 13th Street, Suite 100
Lincoln,	Nebraska	68508
(Address of principal executive offices)		(Zip Code)

(402) 458-2370

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, Par Value $0.01 per Share	NNI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October~~July 31, ~~2022,~~2023, there were ~~26,437,070~~26,650,991 and ~~10,673,659~~10,668,460 shares of Class A Common Stock and Class B Common Stock, par value $0.01 per share, outstanding, respectively (excluding a total of 11,305,731 shares of Class A Common Stock held by wholly owned subsidiaries).

NELNET, INC.

FORM 10-Q

INDEX

~~September~~June 30, ~~2022~~2023


PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements	2
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3235
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6267
	Item 4.	Controls and Procedures	6672

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	6673
	Item 1A.	Risk Factors	6673
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7073
	Item 5.	Other Information	74
	Item 6.	Exhibits	7074

Signatures			7175

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


NELNET, INC. AND SUBSIDIARIES	NELNET, INC. AND SUBSIDIARIES				NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS	CONSOLIDATED BALANCE SHEETS				CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)	(Dollars in thousands, except share data)				(Dollars in thousands, except share data)
(unaudited)	(unaudited)				(unaudited)
		As of		As of		As of		As of
		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Assets:	Assets:				Assets:
Loans and accrued interest receivable (net of allowance for loan losses of $119,057 and $127,113, respectively)		$	15,876,251	18,335,197
Loans and accrued interest receivable (net of allowance for loan losses of $114,263 and $131,827, respectively)					Loans and accrued interest receivable (net of allowance for loan losses of $114,263 and $131,827, respectively)	$	14,360,612	15,243,889
Cash and cash equivalents:	Cash and cash equivalents:				Cash and cash equivalents:
Cash and cash equivalents - not held at a related party	Cash and cash equivalents - not held at a related party	30,800		30,128	Cash and cash equivalents - not held at a related party	24,834		24,584
Cash and cash equivalents - held at a related party	Cash and cash equivalents - held at a related party	32,398		95,435	Cash and cash equivalents - held at a related party	96,935		93,562
Total cash and cash equivalents	Total cash and cash equivalents	63,198		125,563	Total cash and cash equivalents	121,769		118,146
Investments and notes receivable	Investments and notes receivable	2,063,514		1,588,919	Investments and notes receivable	2,006,306		2,111,917
Restricted cash	Restricted cash	799,212		741,981	Restricted cash	484,223		945,159
Restricted cash - due to customers	Restricted cash - due to customers	180,919		326,645	Restricted cash - due to customers	208,033		294,311
Accounts receivable (net of allowance for doubtful accounts of $3,195 and $1,160, respectively)		121,945		163,315
Accounts receivable (net of allowance for doubtful accounts of $4,855 and $3,079, respectively)					Accounts receivable (net of allowance for doubtful accounts of $4,855 and $3,079, respectively)	135,690		194,851
Goodwill	Goodwill	172,033		142,092	Goodwill	176,902		176,902
Intangible assets, net	Intangible assets, net	70,368		52,029	Intangible assets, net	57,293		63,501
Property and equipment, net	Property and equipment, net	127,094		119,413	Property and equipment, net	130,451		122,526
Other assets	Other assets	88,999		82,887	Other assets	126,353		102,842

Total assets	Total assets	$	19,563,533	21,678,041	Total assets	$	17,807,632	19,374,044
Liabilities:	Liabilities:				Liabilities:
Bonds and notes payable	Bonds and notes payable	$	15,042,595	17,631,089	Bonds and notes payable	$	13,070,140	14,637,195
Accrued interest payable	Accrued interest payable	21,796		4,566	Accrued interest payable	35,926		36,049
Bank deposits	Bank deposits	580,825		344,315	Bank deposits	731,046		691,322
Other liabilities	Other liabilities	445,606		379,231	Other liabilities	423,454		461,259
Due to customers	Due to customers	306,352		366,002	Due to customers	299,552		348,317

Total liabilities	Total liabilities	16,397,174		18,725,203	Total liabilities	14,560,118		16,174,142
Commitments and contingencies	Commitments and contingencies				Commitments and contingencies
Equity:	Equity:				Equity:
Nelnet, Inc. shareholders' equity:	Nelnet, Inc. shareholders' equity:				Nelnet, Inc. shareholders' equity:
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding	Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding	—		—	Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding	—		—
Common stock:	Common stock:				Common stock:
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 26,483,298 shares and 27,239,654 shares, respectively		265		272
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,673,659 shares and 10,676,642 shares, respectively		107		107
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 26,646,490 shares and 26,461,651 shares, respectively					Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 26,646,490 shares and 26,461,651 shares, respectively	266		265
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,668,460 shares					Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,668,460 shares	107		107
Additional paid-in capital	Additional paid-in capital	837		1,000	Additional paid-in capital	10,114		1,109
Retained earnings	Retained earnings	3,208,044		2,940,523	Retained earnings	3,270,250		3,234,844
Accumulated other comprehensive (loss) earnings, net		(28,639)		9,304
Accumulated other comprehensive loss, net					Accumulated other comprehensive loss, net	(21,458)		(37,366)
Total Nelnet, Inc. shareholders' equity	Total Nelnet, Inc. shareholders' equity	3,180,614		2,951,206	Total Nelnet, Inc. shareholders' equity	3,259,279		3,198,959
Noncontrolling interests	Noncontrolling interests	(14,255)		1,632	Noncontrolling interests	(11,765)		943
Total equity	Total equity	3,166,359		2,952,838	Total equity	3,247,514		3,199,902
Total liabilities and equity	Total liabilities and equity	$	19,563,533	21,678,041	Total liabilities and equity	$	17,807,632	19,374,044

Supplemental information - assets and liabilities of consolidated education lending variable interest entities:
Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities:					Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities:
Loans and accrued interest receivable	Loans and accrued interest receivable	$	15,173,335	17,981,414	Loans and accrued interest receivable	$	13,756,107	14,585,491
Restricted cash	Restricted cash	712,435		674,073	Restricted cash	451,792		867,961

Bonds and notes payable	Bonds and notes payable	(14,725,098)		(17,462,456)	Bonds and notes payable	(12,999,867)		(14,233,586)
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	(96,004)		(36,276)	Accrued interest payable and other liabilities	(192,978)		(145,309)

Net assets of consolidated education lending variable interest entities		$	1,064,668	1,156,755
Net assets of consolidated education and other lending variable interest entities					Net assets of consolidated education and other lending variable interest entities	$	1,015,054	1,074,557

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES	NELNET, INC. AND SUBSIDIARIES						NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME	CONSOLIDATED STATEMENTS OF INCOME						CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)	(Dollars in thousands, except share data)						(Dollars in thousands, except share data)
(unaudited)	(unaudited)						(unaudited)
		Three months ended			Nine months ended			Three months ended			Six months ended
		September 30,			September 30,			June 30,			June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Interest income:	Interest income:						Interest income:
Loan interest	Loan interest	$	176,244	124,096	422,327	370,219	Loan interest	$	243,045	134,706	468,288	246,083
Investment interest	Investment interest	26,889		12,558	57,589	29,122	Investment interest	40,982		16,881	81,707	30,700
Total interest income	Total interest income	203,133		136,654	479,916	399,341	Total interest income	284,027		151,587	549,995	276,783
Interest expense on bonds and notes payable and bank deposits	Interest expense on bonds and notes payable and bank deposits	126,625		50,176	248,347	127,939	Interest expense on bonds and notes payable and bank deposits	233,148		73,642	432,597	121,721
Net interest income	Net interest income	76,508		86,478	231,569	271,402	Net interest income	50,879		77,945	117,398	155,062
Less provision (negative provision) for loan losses		9,665		5,827	18,640	(10,847)
Less provision for loan losses							Less provision for loan losses	9,592		9,409	43,867	8,974
Net interest income after provision for loan losses	Net interest income after provision for loan losses	66,843		80,651	212,929	282,249	Net interest income after provision for loan losses	41,287		68,536	73,531	146,088
Other income/expense:
Other income (expense):							Other income (expense):
Loan servicing and systems revenue	Loan servicing and systems revenue	134,197		112,351	395,438	335,961	Loan servicing and systems revenue	122,020		124,873	261,247	261,241
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	106,894		85,324	310,211	257,284	Education technology, services, and payment processing revenue	109,858		91,031	243,462	203,317

Solar construction revenue	Solar construction revenue	9,358		—	9,358	—	Solar construction revenue	4,735		—	13,386	—
Other		2,225		11,867	24,750	30,183
Gain on sale of loans		2,627		3,444	5,616	18,715

Impairment expense and provision for beneficial interests, net		121		(14,159)	(6,163)	(12,223)
Other, net							Other, net	(7,011)		12,647	(21,083)	22,524
Gain on sale of loans, net							Gain on sale of loans, net	15,511		—	27,323	2,989
Impairment expense							Impairment expense	—		(6,284)	—	(6,284)
Derivative market value adjustments and derivative settlements, net	Derivative market value adjustments and derivative settlements, net	63,262		1,351	251,210	28,868	Derivative market value adjustments and derivative settlements, net	2,070		45,024	(12,005)	187,949
Total other income/expense		318,684		200,178	990,420	658,788
Total other income (expense), net							Total other income (expense), net	247,183		267,291	512,330	671,736
Cost of services:	Cost of services:						Cost of services:
Cost to provide education technology, services, and payment processing services	Cost to provide education technology, services, and payment processing services	42,676		31,335	109,073	80,063	Cost to provide education technology, services, and payment processing services	40,407		30,852	88,110	66,397

Cost to provide solar construction services	Cost to provide solar construction services	5,968		—	5,968	—	Cost to provide solar construction services	9,122		—	17,422	—
Total cost of services	Total cost of services	48,644		31,335	115,041	80,063	Total cost of services	49,529		30,852	105,532	66,397
Operating expenses:	Operating expenses:						Operating expenses:
Salaries and benefits	Salaries and benefits	147,198		128,592	438,010	363,351	Salaries and benefits	144,706		141,398	297,416	290,813
Depreciation and amortization	Depreciation and amortization	18,772		15,710	53,978	56,129	Depreciation and amortization	18,652		18,250	35,279	35,206

Other expenses	Other expenses	43,858		38,324	120,297	107,611	Other expenses	45,997		36,940	86,781	76,439
Total operating expenses	Total operating expenses	209,828		182,626	612,285	527,091	Total operating expenses	209,355		196,588	419,476	402,458
Income before income taxes	Income before income taxes	127,055		66,868	476,023	333,883	Income before income taxes	29,586		108,387	60,853	348,969
Income tax expense	Income tax expense	26,586		15,649	107,765	76,747	Income tax expense	10,491		25,483	18,741	81,180
Net income	Net income	100,469		51,219	368,258	257,136	Net income	19,095		82,904	42,112	267,789
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	4,329		1,919	8,315	3,467	Net loss attributable to noncontrolling interests	9,172		2,225	12,642	3,987
Net income attributable to Nelnet, Inc.	Net income attributable to Nelnet, Inc.	$	104,798	53,138	376,573	260,603	Net income attributable to Nelnet, Inc.	$	28,267	85,129	54,754	271,776
Earnings per common share:	Earnings per common share:						Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	2.80	1.38	9.99	6.74	Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	0.75	2.26	1.46	7.18
Weighted average common shares outstanding - basic and diluted	Weighted average common shares outstanding - basic and diluted	37,380,493		38,595,721	37,708,425	38,646,892	Weighted average common shares outstanding - basic and diluted	37,468,397		37,710,214	37,406,843	37,875,108

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES	NELNET, INC. AND SUBSIDIARIES										NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME										CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)	(Dollars in thousands)										(Dollars in thousands)
(unaudited)	(unaudited)										(unaudited)
		Three months ended September 30,					Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
		2022			2021		2022		2021			2023			2022		2023		2022
Net income	Net income		$	100,469		51,219		368,258		257,136	Net income		$	19,095		82,904		42,112		267,789
Other comprehensive income (loss):	Other comprehensive income (loss):										Other comprehensive income (loss):
Net changes related to foreign currency translation adjustments	Net changes related to foreign currency translation adjustments	$	18			(9)		19		(9)	Net changes related to foreign currency translation adjustments	$	—			(8)		(3)		1
Net changes related to available-for-sale debt securities:	Net changes related to available-for-sale debt securities:										Net changes related to available-for-sale debt securities:
Unrealized holding gains (losses) arising during period, net	Unrealized holding gains (losses) arising during period, net	4,790			4,524		(45,730)		11,770		Unrealized holding gains (losses) arising during period, net	8,649			(33,822)		17,300		(50,520)
Reclassification of gains recognized in net income, net of losses		(578)			(1,173)		(4,220)		(2,052)
Reclassification of (gains) losses recognized in net income, net											Reclassification of (gains) losses recognized in net income, net	(918)			(849)		4,064		(3,642)
Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity											Amortization of net unrealized loss on securities transferred from available-for-sale to held-to-maturity	70			—		70		—
Income tax effect											Income tax effect	(1,872)	5,929		8,321	(26,350)	(5,144)	16,290	12,999	(41,163)
Net changes related to equity method investee's other comprehensive income:											Net changes related to equity method investee's other comprehensive income:
Loss on cash flow hedges											Loss on cash flow hedges	(501)			—		(499)		—
Income tax effect	Income tax effect	(1,011)	3,201		(804)	2,547	11,988	(37,962)	(2,332)	7,386	Income tax effect	120	(381)		—	—	120	(379)	—	—
Other comprehensive income (loss)	Other comprehensive income (loss)		3,219			2,538		(37,943)		7,377	Other comprehensive income (loss)		5,548			(26,358)		15,908		(41,162)
Comprehensive income	Comprehensive income		103,688			53,757		330,315		264,513	Comprehensive income		24,643			56,546		58,020		226,627
Comprehensive loss attributable to noncontrolling interests	Comprehensive loss attributable to noncontrolling interests		4,329			1,919		8,315		3,467	Comprehensive loss attributable to noncontrolling interests		9,172			2,225		12,642		3,987
Comprehensive income attributable to Nelnet, Inc.	Comprehensive income attributable to Nelnet, Inc.		$	108,017		55,676		338,630		267,980	Comprehensive income attributable to Nelnet, Inc.		$	33,815		58,771		70,662		230,614

See accompanying notes to consolidated financial statements.

																						NELNET, INC. AND SUBSIDIARIES																															CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY		(Dollars in thousands, except share data)	(unaudited)
		Nelnet, Inc. Shareholders																								Nelnet, Inc. Shareholders
		Preferred stock shares	Common stock shares		Preferred stock				Class A common stock	Class B common stock		Additional paid-in capital	Retained earnings			Accumulated other comprehensive (loss) earnings		Noncontrolling interests			Total equity					Preferred stock shares		Common stock shares				Preferred stock			Class A common stock			Class B common stock			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Noncontrolling interests			Total equity
			Class A	Class B											Class A					Class B
Balance as of June 30, 2021		—	27,494,942	11,054,171			$	—			275			111			10,158		2,812,315				10,941					(5,182)		2,828,618
Balance as of March 31, 2022																							Balance as of March 31, 2022		—		27,151,270		10,674,892		$		—			272			107			1,208			3,092,226			(5,500)			(3,250)			3,085,063
Issuance of noncontrolling interests	Issuance of noncontrolling interests	—	—	—	—				—	—		—	—			—		4,935			4,935			Issuance of noncontrolling interests		—		—		—		—			—			—			—			—			—			9,275			9,275
Net income (loss)	Net income (loss)	—	—	—	—				—	—		—	53,138			—		(1,919)			51,219			Net income (loss)		—		—		—		—			—			—			—			85,129			—			(2,225)			82,904
Other comprehensive income		—	—	—	—				—	—		—	—			2,538		—			2,538
Distribution to noncontrolling interests		—	—	—	—				—	—		—	—			—		(125)			(125)
Cash dividends on Class A and Class B common stock - $0.22 per share		—	—	—	—				—	—		—	(8,407)			—		—			(8,407)
Issuance of common stock, net of forfeitures		—	29,805	—	—				—	—		493	—			—		—			493
Compensation expense for stock based awards		—	—	—	—				—	—		2,770	—			—		—			2,770
Repurchase of common stock		—	(341,094)	—	—				(3)	—		(11,828)	(13,247)			—		—			(25,078)

Conversion of common stock		—	372,717	(372,717)	—				4	(4)		—	—			—		—			—

Balance as of September 30, 2021		—	27,556,370	10,681,454	$	—			276	107		1,593	2,843,799			13,479		(2,291)			2,856,963

Balance as of June 30, 2022		—	26,613,733	10,674,892	$	—			266	107		1,180	3,127,687			(31,858)		(6,237)			3,091,145
Issuance of noncontrolling interests		—	—	—	—				—	—		—	—			—		14,018			14,018
Net income (loss)		—	—	—	—				—	—		—	104,798			—		(4,329)			100,469
Other comprehensive income		—	—	—	—				—	—		—	—			3,219		—			3,219
Other comprehensive loss																							Other comprehensive loss		—		—		—		—			—			—			—			—			(26,358)			—			(26,358)
Distribution to noncontrolling interests	Distribution to noncontrolling interests	—	—	—	—				—	—		—	—			—		(17,707)			(17,707)			Distribution to noncontrolling interests		—		—		—		—			—			—			—			—			—			(10,037)			(10,037)
Cash dividends on Class A and Class B common stock - $0.24 per share	Cash dividends on Class A and Class B common stock - $0.24 per share	—	—	—	—				—	—		—	(8,925)			—		—			(8,925)			Cash dividends on Class A and Class B common stock - $0.24 per share		—		—		—		—			—			—			—			(8,973)			—			—			(8,973)
Issuance of common stock, net of forfeitures	Issuance of common stock, net of forfeitures	—	38,192	—	—				1	—		476	—			—		—			477			Issuance of common stock, net of forfeitures		—		20,720		—		—			—			—			2,116			—			—			—			2,116
Compensation expense for stock based awards	Compensation expense for stock based awards	—	—	—	—				—	—		3,631	—			—		—			3,631			Compensation expense for stock based awards		—		—		—		—			—			—			3,187			—			—			—			3,187
Repurchase of common stock	Repurchase of common stock	—	(169,860)	—	—				(2)	—		(4,450)	(9,841)			—		—			(14,293)			Repurchase of common stock		—		(558,257)		—		—			(6)			—			(5,331)			(40,695)			—			—			(46,032)
Conversion of common stock		—	1,233	(1,233)	—				—	—		—	—			—		—			—
Other		—	—	—	—				—	—		—	(5,675)			—		—			(5,675)

Balance as of September 30, 2022		—	26,483,298	10,673,659	$	—			265	107		837	3,208,044			(28,639)		(14,255)			3,166,359

Balance as of June 30, 2022																							Balance as of June 30, 2022		—		26,613,733		10,674,892		$	—		266			107			1,180			3,127,687			(31,858)			(6,237)			3,091,145

Balance as of March 31, 2023																							Balance as of March 31, 2023		—		26,623,662		10,668,460		$	—		266			107			4,639			3,251,677			(27,006)			(6,354)			3,223,329
Issuance of noncontrolling interests																							Issuance of noncontrolling interests		—		—		—		—			—			—			—			—			—			11,703			11,703
Net income (loss)																							Net income (loss)		—		—		—		—			—			—			—			28,267			—			(9,172)			19,095
Other comprehensive income																							Other comprehensive income		—		—		—		—			—			—			—			—			5,548			—			5,548
Distribution to noncontrolling interests																							Distribution to noncontrolling interests		—		—		—		—			—			—			—			—			—			(7,942)			(7,942)
Cash dividends on Class A and Class B common stock - $0.26 per share																							Cash dividends on Class A and Class B common stock - $0.26 per share		—		—		—		—			—			—			—			(9,694)			—			—			(9,694)
Issuance of common stock, net of forfeitures																							Issuance of common stock, net of forfeitures		—		27,562		—		—			—			—			2,056			—			—			—			2,056
Compensation expense for stock based awards																							Compensation expense for stock based awards		—		—		—		—			—			—			3,884			—			—			—			3,884
Repurchase of common stock																							Repurchase of common stock		—		(4,734)		—		—			—			—			(465)			—			—			—			(465)

Balance as of June 30, 2023																							Balance as of June 30, 2023		—		26,646,490		10,668,460		$	—		266			107			10,114			3,270,250			(21,458)			(11,765)			3,247,514

See accompanying notes to consolidated financial statements.

																																																								NELNET, INC. AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY	(Dollars in thousands, except share data)	(unaudited)
		Nelnet, Inc. Shareholders																									Nelnet, Inc. Shareholders
		Preferred stock shares		Common stock shares				Preferred stock		Class A common stock			Class B common stock	Additional paid-in capital	Retained earnings			Accumulated other comprehensive (loss) earnings		Noncontrolling interests			Total equity				Preferred stock shares		Common stock shares				Preferred stock			Class A common stock			Class B common stock			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Noncontrolling interests			Total equity
			Class A		Class B												Class A					Class B
Balance as of December 31, 2020			—		27,193,154		11,155,571				$	—		272		112			3,794		2,621,762			6,102					(3,693)		2,628,349
Balance as of December 31, 2021																								Balance as of December 31, 2021		—		27,239,654		10,676,642		$		—			272			107			1,000			2,940,523			9,304			1,632			2,952,838
Issuance of noncontrolling interests	Issuance of noncontrolling interests	—		—		—		—		—			—	—	—			—		11,823			11,823		Issuance of noncontrolling interests		—		—		—		—			—			—			—			—			—			11,279			11,279
Net income (loss)	Net income (loss)	—		—		—		—		—			—	—	260,603			—		(3,467)			257,136		Net income (loss)		—		—		—		—			—			—			—			271,776			—			(3,987)			267,789
Other comprehensive income		—		—		—		—		—			—	—	—			7,377		—			7,377
Other comprehensive loss																								Other comprehensive loss		—		—		—		—			—			—			—			—			(41,162)			—			(41,162)
Distribution to noncontrolling interests	Distribution to noncontrolling interests	—		—		—		—		—			—	—	—			—		(6,954)			(6,954)		Distribution to noncontrolling interests		—		—		—		—			—			—			—			—			—			(15,161)			(15,161)
Cash dividends on Class A and Class B common stock - $0.66 per share		—		—		—		—		—			—	—	(25,319)			—		—			(25,319)
Cash dividends on Class A and Class B common stock - $0.48 per share																								Cash dividends on Class A and Class B common stock - $0.48 per share		—		—		—		—			—			—			—			(18,035)			—			—			(18,035)
Issuance of common stock, net of forfeitures	Issuance of common stock, net of forfeitures	—		261,760		—		—		3			—	4,406	—			—		—			4,409		Issuance of common stock, net of forfeitures		—		310,639		—		—			3			—			6,498			—			—			—			6,501
Compensation expense for stock based awards	Compensation expense for stock based awards	—		—		—		—		—			—	7,628	—			—		—			7,628		Compensation expense for stock based awards		—		—		—		—			—			—			6,027			—			—			—			6,027
Repurchase of common stock	Repurchase of common stock	—		(372,661)		—		—		(4)			—	(14,235)	(13,247)			—		—			(27,486)		Repurchase of common stock		—		(938,310)		—		—			(9)			—			(12,345)			(66,577)			—			—			(78,931)

Conversion of common stock	Conversion of common stock	—		474,117		(474,117)		—		5			(5)	—	—			—		—			—		Conversion of common stock		—		1,750		(1,750)		—			—			—			—			—			—			—			—

Balance as of September 30, 2021		—		27,556,370		10,681,454		$	—	276			107	1,593	2,843,799			13,479		(2,291)			2,856,963
Balance as of June 30, 2022																								Balance as of June 30, 2022		—		26,613,733		10,674,892		$	—		266			107			1,180			3,127,687			(31,858)			(6,237)			3,091,145

Balance as of December 31, 2021		—		27,239,654		10,676,642		$	—	272			107	1,000	2,940,523			9,304		1,632			2,952,838
Balance as of December 31, 2022																								Balance as of December 31, 2022		—		26,461,651		10,668,460		$	—		265			107			1,109			3,234,844			(37,366)			943			3,199,902
Issuance of noncontrolling interests	Issuance of noncontrolling interests	—		—		—		—		—			—	—	—			—		25,297			25,297		Issuance of noncontrolling interests		—		—		—		—			—			—			—			—			—			12,904			12,904
Net income (loss)	Net income (loss)	—		—		—		—		—			—	—	376,573			—		(8,315)			368,258		Net income (loss)		—		—		—		—			—			—			—			54,754			—			(12,642)			42,112
Other comprehensive loss		—		—		—		—		—			—	—	—			(37,943)		—			(37,943)
Other comprehensive income																								Other comprehensive income		—		—		—		—			—			—			—			—			15,908			—			15,908
Distribution to noncontrolling interests	Distribution to noncontrolling interests	—		—		—		—		—			—	—	—			—		(32,869)			(32,869)		Distribution to noncontrolling interests		—		—		—		—			—			—			—			—			—			(12,970)			(12,970)
Cash dividends on Class A and Class B common stock - $0.72 per share		—		—		—		—		—			—	—	(26,960)			—		—			(26,960)
Cash dividends on Class A and Class B common stock - $0.52 per share																								Cash dividends on Class A and Class B common stock - $0.52 per share		—		—		—		—			—			—			—			(19,348)			—			—			(19,348)
Issuance of common stock, net of forfeitures	Issuance of common stock, net of forfeitures	—		348,831		—		—		4			—	6,974	—			—		—			6,978		Issuance of common stock, net of forfeitures		—		226,086		—		—			1			—			5,119			—			—			—			5,120
Compensation expense for stock based awards	Compensation expense for stock based awards	—		—				—		—			—	9,659	—			—		—			9,659		Compensation expense for stock based awards		—		—		—		—			—			—			7,653			—			—			—			7,653
Repurchase of common stock	Repurchase of common stock	—		(1,108,170)		—		—		(11)			—	(16,796)	(76,417)			—		—			(93,224)		Repurchase of common stock		—		(41,247)		—		—			—			—			(3,767)			—			—			—			(3,767)

Conversion of common stock		—		2,983		(2,983)		—		—			—	—	—			—		—			—
Other		—		—		—		—		—			—	—	(5,675)			—		—			(5,675)

Balance as of September 30, 2022		—		26,483,298		10,673,659		$	—	265			107	837	3,208,044			(28,639)		(14,255)			3,166,359

Balance as of June 30, 2023																								Balance as of June 30, 2023		—		26,646,490		10,668,460		$	—		266			107			10,114			3,270,250			(21,458)			(11,765)			3,247,514

See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES	NELNET, INC. AND SUBSIDIARIES				NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS				CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)	(Dollars in thousands)				(Dollars in thousands)
(unaudited)	(unaudited)				(unaudited)
		Nine months ended				Six months ended
		September 30,				June 30,
		2022		2021		2023		2022
Net income attributable to Nelnet, Inc.	Net income attributable to Nelnet, Inc.	$	376,573	260,603	Net income attributable to Nelnet, Inc.	$	54,754	271,776
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	(8,315)		(3,467)	Net loss attributable to noncontrolling interests	(12,642)		(3,987)
Net income	Net income	368,258		257,136	Net income	42,112		267,789
Adjustments to reconcile net income to net cash provided by operating activities, net of business acquisitions:
Adjustments to reconcile net income to net cash provided by operating activities, net of business acquisition:					Adjustments to reconcile net income to net cash provided by operating activities, net of business acquisition:
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs	Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs	113,655		113,651	Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs	93,573		74,080
Loan discount accretion	Loan discount accretion	(27,963)		(25,048)	Loan discount accretion	(15,412)		(19,554)
Provision (negative provision) for loan losses		18,640		(10,847)
Provision for loan losses					Provision for loan losses	43,867		8,974
Derivative market value adjustments	Derivative market value adjustments	(239,125)		(44,455)	Derivative market value adjustments	35,407		(186,135)

Proceeds from termination of derivative instruments, net		91,786		—
Proceeds from termination of derivative instruments					Proceeds from termination of derivative instruments	164,079		68,021

Proceeds from clearinghouse - initial and variation margin, net of payments		227,448		41,033
(Payments to) proceeds from clearinghouse - initial and variation margin, net					(Payments to) proceeds from clearinghouse - initial and variation margin, net	(209,886)		133,622

Gain on sale of loans		(5,616)		(18,715)
Loss (gain) on investments, net		13,605		(293)
(Gain) loss from repurchases of debt, net		(1,231)		3,964
Gain on sale of loans, net					Gain on sale of loans, net	(27,323)		(2,989)
Loss on investments, net					Loss on investments, net	47,260		3,207

Proceeds from sale (purchases) of equity securities, net		42,863		(41,591)
Deferred income tax expense		57,633		33,078

Proceeds from sale of equity securities, net					Proceeds from sale of equity securities, net	75		42,398
Deferred income tax (benefit) expense					Deferred income tax (benefit) expense	(16,144)		49,890
Non-cash compensation expense	Non-cash compensation expense	9,872		7,824	Non-cash compensation expense	7,810		6,171
Provision for beneficial interests and impairment expense, net		6,163		12,223
Increase in loan and investment accrued interest receivable		(16,206)		(41,931)
Decrease (increase) in accounts receivable		47,514		(2,137)
(Increase) decrease in other assets, net		(73,291)		35,381
Impairment expense					Impairment expense	—		6,284
(Increase) decrease in loan and investment accrued interest receivable					(Increase) decrease in loan and investment accrued interest receivable	(4,884)		184
Decrease in accounts receivable					Decrease in accounts receivable	59,142		44,786
Increase in other assets, net					Increase in other assets, net	(11,480)		(9,086)
Decrease in the carrying amount of ROU asset, net	Decrease in the carrying amount of ROU asset, net	4,476		5,652	Decrease in the carrying amount of ROU asset, net	2,390		2,735
Increase (decrease) in accrued interest payable		17,230		(24,260)
Increase in other liabilities, net		5,388		41,040
(Decrease) increase in accrued interest payable					(Decrease) increase in accrued interest payable	(123)		8,397
Decrease in other liabilities					Decrease in other liabilities	(8,916)		(12,200)
Decrease in the carrying amount of lease liability	Decrease in the carrying amount of lease liability	(4,227)		(5,158)	Decrease in the carrying amount of lease liability	(2,568)		(2,860)

Net cash provided by operating activities	Net cash provided by operating activities	656,872		336,547	Net cash provided by operating activities	198,979		483,714
Cash flows from investing activities, net of business acquisitions:
Cash flows from investing activities:					Cash flows from investing activities:
Purchases and originations of loans	Purchases and originations of loans	(539,118)		(1,145,775)	Purchases and originations of loans	(411,868)		(396,486)
Purchases of loans from a related party	Purchases of loans from a related party	(8,242)		(21,476)	Purchases of loans from a related party	(467,519)		(7,675)
Net proceeds from loan repayments, claims, and capitalized interest	Net proceeds from loan repayments, claims, and capitalized interest	2,955,097		2,010,645	Net proceeds from loan repayments, claims, and capitalized interest	1,348,827		1,792,930
Proceeds from sale of loans	Proceeds from sale of loans	38,559		85,906	Proceeds from sale of loans	290,957		15,278
Purchases of available-for-sale securities	Purchases of available-for-sale securities	(944,588)		(521,565)	Purchases of available-for-sale securities	(296,468)		(735,140)
Proceeds from sales of available-for-sale securities	Proceeds from sales of available-for-sale securities	450,457		104,520	Proceeds from sales of available-for-sale securities	577,548		319,752
Proceeds from beneficial interest in loan securitizations	Proceeds from beneficial interest in loan securitizations	17,754		30,811	Proceeds from beneficial interest in loan securitizations	13,237		13,212
Purchases of other investments and issuance of notes receivable	Purchases of other investments and issuance of notes receivable	(192,773)		(166,664)	Purchases of other investments and issuance of notes receivable	(140,129)		(147,400)
Proceeds from other investments	Proceeds from other investments	42,524		209,634	Proceeds from other investments	14,403		23,955

Purchases of held-to-maturity debt securities					Purchases of held-to-maturity debt securities	(2,889)		—
Redemption of held-to-maturity debt securities					Redemption of held-to-maturity debt securities	1,487		—
Purchases of property and equipment	Purchases of property and equipment	(44,423)		(42,594)	Purchases of property and equipment	(37,253)		(34,152)

Business acquisitions, net of cash acquired		(35,973)		—
Business acquisition, net of cash acquired					Business acquisition, net of cash acquired	—		(7,320)

Net cash provided by investing activities	Net cash provided by investing activities	1,739,274		543,442	Net cash provided by investing activities	890,333		836,954


NELNET, INC. AND SUBSIDIARIES	NELNET, INC. AND SUBSIDIARIES				NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)	CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)				CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
		Nine months ended				Six months ended
		September 30,				June 30,
		2022		2021		2023		2022
Cash flows from financing activities, net of business acquisitions:
Cash flows from financing activities:					Cash flows from financing activities:
Payments on bonds and notes payable	Payments on bonds and notes payable	$	(3,035,082)	(2,479,582)	Payments on bonds and notes payable	$	(2,417,622)	(1,695,697)
Proceeds from issuance of bonds and notes payable	Proceeds from issuance of bonds and notes payable	413,391		1,738,405	Proceeds from issuance of bonds and notes payable	806,148		159,931
Payments of debt issuance costs	Payments of debt issuance costs	(1,160)		(6,778)	Payments of debt issuance costs	(2,214)		(851)

Increase in bank deposits, net	Increase in bank deposits, net	236,510		146,018	Increase in bank deposits, net	39,724		244,159
(Decrease) increase in due to customers	(Decrease) increase in due to customers	(59,467)		53,146	(Decrease) increase in due to customers	(48,728)		43,544
Dividends paid	Dividends paid	(26,960)		(25,319)	Dividends paid	(19,348)		(18,035)
Repurchases of common stock	Repurchases of common stock	(93,224)		(27,486)	Repurchases of common stock	(3,767)		(78,931)
Proceeds from issuance of common stock	Proceeds from issuance of common stock	1,206		1,108	Proceeds from issuance of common stock	890		801

Issuance of noncontrolling interests	Issuance of noncontrolling interests	19,380		13,905	Issuance of noncontrolling interests	14,018		5,142
Distribution to noncontrolling interests	Distribution to noncontrolling interests	(1,153)		(548)	Distribution to noncontrolling interests	(1,920)		(699)
Net cash used in financing activities	Net cash used in financing activities	(2,546,559)		(587,131)	Net cash used in financing activities	(1,632,819)		(1,340,636)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(447)		(175)	Effect of exchange rate changes on cash	(84)		(179)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(150,860)		292,683
Net decrease in cash, cash equivalents, and restricted cash					Net decrease in cash, cash equivalents, and restricted cash	(543,591)		(20,147)
Cash, cash equivalents, and restricted cash, beginning of period	Cash, cash equivalents, and restricted cash, beginning of period	1,194,189		958,395	Cash, cash equivalents, and restricted cash, beginning of period	1,357,616		1,194,189
Cash, cash equivalents, and restricted cash, end of period	Cash, cash equivalents, and restricted cash, end of period	$	1,043,329	1,251,078	Cash, cash equivalents, and restricted cash, end of period	$	814,025	1,174,042


Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:				Supplemental disclosures of cash flow information:
Cash disbursements made for interest	Cash disbursements made for interest	$	196,278	117,336	Cash disbursements made for interest	$	386,686	89,281
Cash disbursements made for income taxes, net of refunds and credits received (a)	Cash disbursements made for income taxes, net of refunds and credits received (a)	$	37,467	10,921	Cash disbursements made for income taxes, net of refunds and credits received (a)	$	43,510	21,137
Cash disbursements made for operating leases	Cash disbursements made for operating leases	$	5,221	6,003	Cash disbursements made for operating leases	$	3,476	3,538
Non-cash operating, investing, and financing activity:
Noncash operating, investing, and financing activity:					Noncash operating, investing, and financing activity:

ROU assets obtained in exchange for lease obligations	ROU assets obtained in exchange for lease obligations	$	5,981	4,026	ROU assets obtained in exchange for lease obligations	$	18,485	746
Receipt of beneficial interest in consumer loan securitizations		$	8,336	23,506
Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans					Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans	$	53,896	3,660
Receipt of asset-backed investment securities as consideration from sale of loans					Receipt of asset-backed investment securities as consideration from sale of loans	$	58,182	—
Distribution to noncontrolling interests	Distribution to noncontrolling interests	$	31,716	6,406	Distribution to noncontrolling interests	$	11,050	14,462
Issuance of noncontrolling interests	Issuance of noncontrolling interests	$	5,917	2,082	Issuance of noncontrolling interests	$	1,114	6,137

(a) The Company utilized ~~$9.4~~$13.9 million and ~~$22.2~~$4.1 million of federal and state tax credits related primarily to renewable energy during the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

~~Supplemental disclosures of noncash activities regarding the Company's business acquisitions are contained in note 6.~~

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total of the amounts reported in the consolidated statements of cash flows.


		As of		As of	As of	As of		As of		As of	As of	As of
		September 30, 2022		December 31, 2021	September 30, 2021	December 31, 2020		June 30, 2023		December 31, 2022	June 30, 2022	December 31, 2021
Total cash and cash equivalents	Total cash and cash equivalents	$	63,198	125,563	191,936	121,249	Total cash and cash equivalents	$	121,769	118,146	128,499	125,563
Restricted cash	Restricted cash	799,212		741,981	764,089	553,175	Restricted cash	484,223		945,159	754,693	741,981
Restricted cash - due to customers	Restricted cash - due to customers	180,919		326,645	295,053	283,971	Restricted cash - due to customers	208,033		294,311	290,850	326,645
Cash, cash equivalents, and restricted cash	Cash, cash equivalents, and restricted cash	$	1,043,329	1,194,189	1,251,078	958,395	Cash, cash equivalents, and restricted cash	$	814,025	1,357,616	1,174,042	1,194,189

See accompanying notes to consolidated financial statements.

NELNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts, unless otherwise noted)

(unaudited)

1. Basis of Financial Reporting

The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of ~~September~~June 30, ~~2022~~2023 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, ~~2021~~2022 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles ~~("GAAP")~~(GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results for the year ending December 31, ~~2022.~~2023. The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~"2021~~"2022 Annual Report").

~~Reclassification of Prior Period Cash Flows Presentation~~

Prior to June 30, 2022, the line item in the Company's consolidated statements of cash flows for changes during a period in amounts "due to customers" was presented in cash flows from operating activities. Beginning in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, the Company corrected this presentation in its statements of cash flows to show this activity as a financing activity. This correction had no impact on the Company's previously reported consolidated net income, total assets (including cash and cash equivalents), liabilities, and equity, and while the correction had a corresponding impact on the amounts of cash flows from operating and financing activities, it had no impact on the net increase or decrease in cash for previously reported periods. The Company has concluded that the correction was not material from a combined quantitative and qualitative perspective to its previously issued interim financial statements, or its previously issued financial statements for 2021, 2020, and 2019.

2. Loans and Accrued Interest Receivable and Allowance for Loan Losses

Loans and accrued interest receivable consisted of the following:


		As of		As of		As of		As of
		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Non-Nelnet Bank:	Non-Nelnet Bank:				Non-Nelnet Bank:
Federally insured student loans:
Federally insured loans:					Federally insured loans:
Stafford and other	Stafford and other	$	3,298,138	3,904,000	Stafford and other	$	3,245,540	3,389,178
Consolidation	Consolidation	11,002,253		13,187,047	Consolidation	9,574,202		10,177,295
Total	Total	14,300,391		17,091,047	Total	12,819,742		13,566,473
Private education loans	Private education loans	262,183		299,442	Private education loans	230,056		252,383
Consumer and other loans	Consumer and other loans	231,441		51,301	Consumer and other loans	189,327		350,915
Non-Nelnet Bank loans	Non-Nelnet Bank loans	14,794,015		17,441,790	Non-Nelnet Bank loans	13,239,125		14,169,771
Nelnet Bank:	Nelnet Bank:				Nelnet Bank:
Federally insured student loans		72,905		88,011
Federally insured loans					Federally insured loans	61,501		65,913

Private education loans	Private education loans	356,571		169,890	Private education loans	352,319		353,882

Consumer and other loans					Consumer and other loans	30,668		—
Nelnet Bank loans	Nelnet Bank loans	429,476		257,901	Nelnet Bank loans	444,488		419,795

Accrued interest receivable	Accrued interest receivable	793,838		788,552	Accrued interest receivable	818,709		816,864
Loan discount, net of unamortized loan premiums and deferred origination costs	Loan discount, net of unamortized loan premiums and deferred origination costs	(22,021)		(25,933)	Loan discount, net of unamortized loan premiums and deferred origination costs	(27,447)		(30,714)

Allowance for loan losses:	Allowance for loan losses:				Allowance for loan losses:
Non-Nelnet Bank:	Non-Nelnet Bank:				Non-Nelnet Bank:
Federally insured loans	Federally insured loans	(87,778)		(103,381)	Federally insured loans	(74,061)		(83,593)
Private education loans	Private education loans	(15,577)		(16,143)	Private education loans	(14,322)		(15,411)
Consumer and other loans	Consumer and other loans	(13,290)		(6,481)	Consumer and other loans	(20,005)		(30,263)
Non-Nelnet Bank allowance for loan losses	Non-Nelnet Bank allowance for loan losses	(116,645)		(126,005)	Non-Nelnet Bank allowance for loan losses	(108,388)		(129,267)
Nelnet Bank:	Nelnet Bank:				Nelnet Bank:
Federally insured loans	Federally insured loans	(164)		(268)	Federally insured loans	(154)		(170)
Private education loans	Private education loans	(2,248)		(840)	Private education loans	(2,905)		(2,390)

Consumer and other loans					Consumer and other loans	(2,816)		—
Nelnet Bank allowance for loan losses	Nelnet Bank allowance for loan losses	(2,412)		(1,108)	Nelnet Bank allowance for loan losses	(5,875)		(2,560)
		$	15,876,251	18,335,197		$	14,360,612	15,243,889

The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.


		As of		As of			As of		As of
		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Non-Nelnet Bank:	Non-Nelnet Bank:					Non-Nelnet Bank:
Federally insured student loans (a)		0.61	%	0.60	%
Federally insured loans (a)						Federally insured loans (a)	0.58	%	0.62	%
Private education loans	Private education loans	5.94	%	5.39	%	Private education loans	6.23	%	6.11	%
Consumer and other loans (b)		5.74	%	12.63	%
Consumer and other loans						Consumer and other loans	10.57	%	8.62	%
Nelnet Bank:	Nelnet Bank:					Nelnet Bank:
Federally insured student loans (a)		0.22	%	0.30	%
Federally insured loans (a)						Federally insured loans (a)	0.25	%	0.26	%
Private education loans	Private education loans	0.63	%	0.49	%	Private education loans	0.82	%	0.68	%

Consumer and other loans						Consumer and other loans	9.18	%	—

(a) As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was ~~22.3%~~21.7% and ~~22.2%~~22.4%, respectively, and for Nelnet Bank was ~~8.9%~~10.0% and ~~12.1%~~10.3%, respectively.

~~(b) During 2022, the~~Loan Sales

The Company ~~purchased home equity~~has sold portfolios of loans that generally have lower default rates than unsecured consumer loans. As such, the allowance for loan losses as a percentage of the ending loan balance has decreased as of September 30, 2022 as compared to ~~December 31, 2021.~~

~~Gain on Sale of Loans~~

~~On January 26, 2022 and July 7, 2022, the Company sold $18.1 million (par value) and $28.9 million (par value) of consumer loans, respectively, to an~~ unrelated third ~~party~~parties who securitized such loans. ~~The Company recognized a gain of $3.0 million (pre-tax) and $2.6 million (pre-tax), respectively, as part of these transactions.~~ As partial consideration received for the ~~consumer~~ loans sold, the Company received ~~a 6.6 percent and 7.6 percent~~ residual interest ~~respectively,~~ in the ~~consumer~~ loan securitizations that are included in "investments and notes receivable" on the Company's consolidated balance sheets. The following table summarizes the loans sold and gains/losses recognized by the Company during the six months ended June 30, 2023 and 2022.


	Loans sold (par value)		Gain (loss)	Loan type	Residual interest received in securitization
	Six months ended June 30, 2023
January 31	$	97,350	(1,441)	Home equity	64.8	%	(a)
January 31	42,275		4,350	Consumer	13.3
March 2	122,277		8,903	Consumer	24.6		(a)

April 4	5,633		659	Consumer	—
April 13	24,980		3,123	Consumer	11.3
May 2	127,663		11,729	Consumer	26.5

	$	420,178	27,323
	Six months ended June 30, 2022
January 26	$	18,125	2,989	Consumer	6.6	%
June 30	114		—	Home equity	—



	$	18,239	2,989

(a) In addition to receiving a residual interest in the securitizations, the Company also received $14.5 million and $43.7 million of asset-backed investment securities as part of the January 31 and March 2, 2023 transactions, respectively, that are included in "investments and notes receivable" on the Company's consolidated balance sheet.

Activity in the Allowance for Loan Losses

The following table presents the activity in the allowance for loan losses by portfolio segment.

Balance at beginning of period Provision (negative provision) for loan losses Charge-offs Recoveries Initial allowance on loans purchased with credit deterioration (a) Loan sales Balance at end of period
Three months ended September 30, 2022
Non-Nelnet Bank:
Federally insured loans $ 92,593 888 (5,715) — 12 — 87,778
Private education loans 15,253 1,154 (1,066) 236 — — 15,577
Consumer and other loans 10,576 7,173 (1,021) 147 — (3,585) 13,290
Nelnet Bank:
Federally insured loans 258 (94) — — — — 164
Private education loans 1,744 504 — — — — 2,248
$ 120,424 9,625 (7,802) 383 12 (3,585) 119,057
Three months ended September 30, 2021
Non-Nelnet Bank:
Federally insured loans $ 120,802 4,452 (10,330) — 935 — 115,859
Private education loans 19,403 (1,208) (954) 113 — (301) 17,053
Consumer and other loans 4,702 2,696 (1,133) 187 — (2,023) 4,429
Nelnet Bank:
Federally insured loans 245 44 — — — — 289
Private education loans 567 (157) — 4 — — 414
$ 145,719 5,827 (12,417) 304 935 (2,324) 138,044
Nine months ended September 30, 2022
Non-Nelnet Bank
Federally insured loans $ 103,381 505 (16,264) — 156 — 87,778
Private education loans 16,143 1,971 (3,072) 531 — 4 15,577
Consumer and other loans 6,481 14,702 (2,489) 465 — (5,869) 13,290
Nelnet Bank
Federally insured loans 268 (102) (2) — — — 164
Private education loans 840 1,499 (87) — — (4) 2,248
$ 127,113 18,575 (21,914) 996 156 (5,869) 119,057
Nine months ended September 30, 2021
Non-Nelnet Bank
Federally insured loans $ 128,590 (3,428) (11,563) — 2,260 — 115,859
Private education loans 19,529 (781) (1,850) 454 — (299) 17,053
Consumer and other loans 27,256 (7,016) (4,547) 668 — (11,932) 4,429
Nelnet Bank
Federally insured loans — 289 — — — — 289
Private education loans 323 89 — 4 — (2) 414
$ 175,698 (10,847) (17,960) 1,126 2,260 (12,233) 138,044

(a) During the three months ended September 30, 2022 and 2021, and nine months ended September 30, 2022 and 2021, the Company acquired $0.9 million (par value), $64.6 million (par value), $11.6 million (par value), and $153.3 million (par value), respectively, of federally insured rehabilitation loans that met the definition of purchased loans with credit deterioration ("PCD loans") when they were purchased by the Company.


	Balance at beginning of period		Provision (negative provision) for loan losses	Charge-offs	Recoveries	Initial allowance on loans purchased with credit deterioration	Loan sales	Balance at end of period
	Three months ended June 30, 2023
Non-Nelnet Bank:
Federally insured loans	$	79,331	—	(5,270)	—	—	—	74,061
Private education loans	15,175		—	(1,069)	216	—	—	14,322
Consumer and other loans	35,317		8,099	(2,881)	441	—	(20,971)	20,005
Nelnet Bank:
Federally insured loans	160		(4)	(2)	—	—	—	154
Private education loans	2,894		517	(506)	—	—	—	2,905
Consumer and other loans	1,827		989	—	—	—	—	2,816
	$	134,704	9,601	(9,728)	657	—	(20,971)	114,263
	Three months ended June 30, 2022
Non-Nelnet Bank:
Federally insured loans	$	95,995	2,365	(5,788)	—	21	—	92,593
Private education loans	14,622		1,217	(707)	118	—	3	15,253
Consumer and other loans	5,710		5,245	(531)	152	—	—	10,576
Nelnet Bank:
Federally insured loans	247		13	(2)	—	—	—	258
Private education loans	1,251		569	(73)	—	—	(3)	1,744

	$	117,825	9,409	(7,101)	270	21	—	120,424

	Six months ended June 30, 2023
Non-Nelnet Bank:
Federally insured loans	$	83,593	2,411	(11,949)	—	6	—	74,061
Private education loans	15,411		240	(1,709)	380	—	—	14,322
Consumer and other loans	30,263		37,306	(5,148)	661	—	(43,077)	20,005
Nelnet Bank:
Federally insured loans	170		(12)	(4)	—	—	—	154
Private education loans	2,390		1,129	(614)	—	—	—	2,905
Consumer and other loans	—		2,816	—	—	—	—	2,816
	$	131,827	43,890	(19,424)	1,041	6	(43,077)	114,263

	Six months ended June 30, 2022
Non-Nelnet Bank:
Federally insured loans	$	103,381	(383)	(10,549)	—	144	—	92,593
Private education loans	16,143		817	(2,006)	295	—	4	15,253
Consumer and other loans	6,481		7,529	(1,469)	319	—	(2,284)	10,576
Nelnet Bank:
Federally insured loans	268		(8)	(2)	—	—	—	258
Private education loans	840		995	(87)	—	—	(4)	1,744

	$	127,113	8,950	(14,113)	614	144	(2,284)	120,424

The ~~Company recorded a negative~~primary item impacting provision for loan losses ~~for its federally insured loan portfolio during~~was the ~~first quarter of 2022 due to the amortization of the portfolio and an increase in expected prepayments as a result~~establishment of an ~~initiative offered by the Department of Education (the “Department”)~~initial allowance for ~~Federal Family Education Loan Program ("FFELP" or "FFEL Program") borrowers to consolidate their~~consumer loans into Federal Direct Loan Program loans with the Department by October 31, 2022 to qualify for loan forgiveness under the Public Service Loan Forgiveness program. The Company recorded a provision for loan losses on its consumer loan portfolio during the first quarter of 2022 as a result of loansoriginated and acquired during the ~~period.~~periods presented above.

The Company recorded a provision for loan losses for its federally insured, private education, consumer, and other loan portfolios during the second and third quarters of 2022 due to management's estimate of declining economic conditions. In addition, the Company recorded provision for loan losses on its consumer and other loan and Nelnet Bank private education loan portfolios during these periodsfollowing table summarizes annualized net charge-offs as a ~~result~~percentage of average loans ~~acquired and originated during the period. The provision~~ for ~~loan losses recognized by the Company for its federally insured loan portfolio during these periods was partially offset due to the continued amortization~~each of the ~~portfolio.~~Company's loan portfolios.


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Non-Nelnet Bank:
Federally insured loans	0.16	%	0.14	%	0.18	%	0.13	%
Private education loans	1.45	%	0.85	%	1.11	%	1.22	%
Consumer and other loans	4.07	%	1.51	%	3.22	%	3.24	%
Nelnet Bank:
Federally insured loans	0.01	%	0.01	%	0.01	%	0.00	%
Private education loans	0.57	%	0.09	%	0.35	%	0.06	%
Consumer and other loans	—		—		—		—

Unfunded ~~Private Education~~ Loan Commitments

As of ~~September~~June 30, ~~2022,~~2023, Nelnet Bank has a liability of approximately ~~$76,000~~$62,000 related to ~~$4.3~~$4.1 million of unfunded private education and consumer loan commitments. The liability for unfunded loan commitments is included in "other liabilities" on the consolidated balance ~~sheet.~~sheets. During the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, Nelnet Bank recognized negative provision for loan losses of approximately ~~$65,000~~$23,000 and provision for loan losses of approximately $24,000, respectively, related to unfunded loan commitments.

Loan Modifications to Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures, whicheliminates the troubled debt restructurings recognition and measurement guidance and instead requires an entity to evaluate whether the modification represents a new loan or a continuation of an existing loan. The guidance also enhances the disclosure requirements for certain modifications of receivables made to borrowers experiencing financial difficulty and vintage disclosures reflecting gross charge-offs by year of origination.

Under the Higher Education Act, FFELP loan borrowers may be granted a deferment or forbearance for a period of time based on need. In addition, eligible borrowers may qualify for income-driven repayment plans offered by the Department. Because FFELP loan modifications are driven by the Higher Education Act, the Company does not consider these events as part of its loan modification programs. Administrative forbearances (e.g. bankruptcy, military service, death and disability, and disaster forbearance) are required by law and therefore are also not considered as part of the Company's loan modification programs. The Company does offer payment delays in the form of deferments or forbearances on certain private education and consumer loan programs for short-term periods. The Company generally considers payment delays to be insignificant when the delay is 3 months or less. The amortized cost of the Company’s private education and consumer loans in which the borrower is experiencing financial difficulty and the financial effect of such loan modifications is not material.

Key Credit Quality Indicators

Loan Status and Delinquencies

Key credit quality indicators for the ~~Company's~~Company’s federally insured, private education, consumer, and other loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The following table ~~below shows~~presents the Company’s loan status and delinquency amounts.


		As of September 30, 2022						As of December 31, 2021						As of September 30, 2021							As of June 30, 2023						As of December 31, 2022						As of June 30, 2022
Federally insured loans - Non-Nelnet Bank:	Federally insured loans - Non-Nelnet Bank:																			Federally insured loans - Non-Nelnet Bank:
Loans in-school/grace/deferment	Loans in-school/grace/deferment	$	719,724	5.0	%			$	829,624	4.9	%			$	909,228	5.0	%			Loans in-school/grace/deferment	$	612,357	4.8	%			$	637,919	4.7	%			$	763,957	4.9	%
Loans in forbearance	Loans in forbearance	1,384,709		9.7				1,118,667		6.5				1,826,082		10.1				Loans in forbearance	930,629		7.3				1,103,181		8.1				1,246,882		8.1
Loans in repayment status:	Loans in repayment status:																			Loans in repayment status:
Loans current	Loans current	10,454,046				85.7	%	12,847,685				84.9	%	13,525,751				88.1	%	Loans current	9,609,634				85.2	%	10,173,859				86.0	%	11,551,817				86.1	%
Loans delinquent 31-60 days	Loans delinquent 31-60 days	431,471				3.6		895,656				5.9		548,670				3.6		Loans delinquent 31-60 days	496,953				4.4		415,305				3.5		464,234				3.5
Loans delinquent 61-90 days	Loans delinquent 61-90 days	261,616				2.1		352,449				2.3		286,681				1.9		Loans delinquent 61-90 days	360,728				3.2		253,565				2.2		309,252				2.3
Loans delinquent 91-120 days	Loans delinquent 91-120 days	185,753				1.5		251,075				1.7		163,447				1.1		Loans delinquent 91-120 days	157,685				1.4		180,029				1.5		187,452				1.4
Loans delinquent 121-270 days	Loans delinquent 121-270 days	540,555				4.4		592,449				3.9		467,441				3.0		Loans delinquent 121-270 days	457,100				4.1		534,410				4.5		638,189				4.7
Loans delinquent 271 days or greater	Loans delinquent 271 days or greater	322,517				2.7		203,442				1.3		354,188				2.3		Loans delinquent 271 days or greater	194,656				1.7		268,205				2.3		267,828				2.0
Total loans in repayment	Total loans in repayment	12,195,958		85.3		100.0	%	15,142,756		88.6		100.0	%	15,346,178		84.9		100.0	%	Total loans in repayment	11,276,756		87.9		100.0	%	11,825,373		87.2		100.0	%	13,418,772		87.0		100.0	%
Total federally insured loans	Total federally insured loans	14,300,391		100.0	%			17,091,047		100.0	%			18,081,488		100.0	%			Total federally insured loans	12,819,742		100.0	%			13,566,473		100.0	%			15,429,611		100.0	%
Accrued interest receivable	Accrued interest receivable	786,494						784,716						831,142						Accrued interest receivable	810,489						808,150						775,337
Loan discount, net of unamortized premiums and deferred origination costs	Loan discount, net of unamortized premiums and deferred origination costs	(25,381)						(28,309)						(23,229)						Loan discount, net of unamortized premiums and deferred origination costs	(33,764)						(35,468)						(26,674)
Allowance for loan losses	Allowance for loan losses	(87,778)						(103,381)						(115,859)						Allowance for loan losses	(74,061)						(83,593)						(92,593)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses	Total federally insured loans and accrued interest receivable, net of allowance for loan losses	$	14,973,726					$	17,744,073					$	18,773,542					Total federally insured loans and accrued interest receivable, net of allowance for loan losses	$	13,522,406					$	14,255,562					$	16,085,681

Private education loans - Non-Nelnet Bank:	Private education loans - Non-Nelnet Bank:																			Private education loans - Non-Nelnet Bank:
Loans in-school/grace/deferment	Loans in-school/grace/deferment	$	15,556	5.9	%			$	9,661	3.2	%			$	10,282	3.2	%			Loans in-school/grace/deferment	$	10,440	4.6	%			$	12,756	5.1	%			$	15,403	5.6	%
Loans in forbearance	Loans in forbearance	2,745		1.1				3,601		1.2				3,554		1.1				Loans in forbearance	1,874		0.8				2,017		0.8				2,447		0.9
Loans in repayment status:	Loans in repayment status:																			Loans in repayment status:
Loans current	Loans current	238,926				98.0	%	280,457				98.0	%	300,231				98.3	%	Loans current	212,522				97.6	%	232,539				97.9	%	250,268				98.1	%
Loans delinquent 31-60 days	Loans delinquent 31-60 days	2,014				0.8		2,403				0.8		1,870				0.6		Loans delinquent 31-60 days	1,643				0.7		2,410				1.0		1,980				0.8
Loans delinquent 61-90 days	Loans delinquent 61-90 days	992				0.4		976				0.3		912				0.3		Loans delinquent 61-90 days	1,253				0.6		767				0.3		782				0.3
Loans delinquent 91 days or greater	Loans delinquent 91 days or greater	1,950				0.8		2,344				0.9		2,363				0.8		Loans delinquent 91 days or greater	2,324				1.1		1,894				0.8		2,063				0.8
Total loans in repayment	Total loans in repayment	243,882		93.0		100.0	%	286,180		95.6		100.0	%	305,376		95.7		100.0	%	Total loans in repayment	217,742		94.6		100.0	%	237,610		94.1		100.0	%	255,093		93.5		100.0	%
Total private education loans	Total private education loans	262,183		100.0	%			299,442		100.0	%			319,212		100.0	%			Total private education loans	230,056		100.0	%			252,383		100.0	%			272,943		100.0	%
Accrued interest receivable	Accrued interest receivable	2,207						1,960						2,076						Accrued interest receivable	2,196						2,146						2,058
Loan discount, net of unamortized premiums		(185)						(1,123)						(1,496)
Loan premium, net of unaccreted discount																				Loan premium, net of unaccreted discount	183						(38)						94
Allowance for loan losses	Allowance for loan losses	(15,577)						(16,143)						(17,053)						Allowance for loan losses	(14,322)						(15,411)						(15,253)
Total private education loans and accrued interest receivable, net of allowance for loan losses	Total private education loans and accrued interest receivable, net of allowance for loan losses	$	248,628					$	284,136					$	302,739					Total private education loans and accrued interest receivable, net of allowance for loan losses	$	218,113					$	239,080					$	259,842

Consumer and other loans - Non-Nelnet Bank:																				Consumer and other loans - Non-Nelnet Bank:
Loans in deferment																				Loans in deferment	$	102	0.1	%			$	109	0.0	%			$	64	0.0	%
Loans in repayment status:																				Loans in repayment status:
Loans current																				Loans current	181,864				96.1	%	346,812				98.9	%	150,812				98.9	%
Loans delinquent 31-60 days																				Loans delinquent 31-60 days	2,794				1.5		1,906				0.5		515				0.3
Loans delinquent 61-90 days																				Loans delinquent 61-90 days	2,533				1.3		764				0.2		435				0.3
Loans delinquent 91 days or greater																				Loans delinquent 91 days or greater	2,034				1.1		1,324				0.4		757				0.5
Total loans in repayment																				Total loans in repayment	189,225		99.9		100.0	%	350,806		100.0		100.0	%	152,519		100.0		100.0	%
Total consumer and other loans																				Total consumer and other loans	189,327		100.0	%			350,915		100.0	%			152,583		100.0	%
Accrued interest receivable																				Accrued interest receivable	2,246						3,658						1,376
Loan premium, net of unaccreted discount																				Loan premium, net of unaccreted discount	750						(588)						(1,965)
Allowance for loan losses																				Allowance for loan losses	(20,005)						(30,263)						(10,576)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses																				Total consumer and other loans and accrued interest receivable, net of allowance for loan losses	$	172,318					$	323,722					$	141,418

1213


		As of September 30, 2022							As of December 31, 2021							As of September 30, 2021
Consumer and other loans - Non-Nelnet Bank:
Loans in deferment		$	29	0.0	%				$	43	0.1	%				$	18	0.0	%
Loans in repayment status:
Loans current		228,827				98.9	%		49,697				97.0	%		35,744				96.6	%
Loans delinquent 31-60 days		1,019				0.4			414				0.8			319				0.9
Loans delinquent 61-90 days		427				0.2			322				0.6			243				0.7
Loans delinquent 91 days or greater		1,139				0.5			825				1.6			670				1.8
Total loans in repayment		231,412		100.0		100.0	%		51,258		99.9		100.0	%		36,976		100.0		100.0	%
Total consumer and other loans		231,441		100.0	%				51,301		100.0	%				36,994		100.0	%
Accrued interest receivable		2,561							396							280
Loan discount, net of unamortized premiums		(1,847)							913							664
Allowance for loan losses		(13,290)							(6,481)							(4,429)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses		$	218,865						$	46,129						$	33,509

								As of June 30, 2023							As of December 31, 2022								As of June 30, 2022
Federally insured loans - Nelnet Bank (a):	Federally insured loans - Nelnet Bank (a):																					Federally insured loans - Nelnet Bank (a):
Loans in-school/grace/deferment	Loans in-school/grace/deferment	$	274	0.4	%				$	330	0.4	%				$	283	0.3	%			Loans in-school/grace/deferment	$	239	0.4	%			$	241	0.4	%			$	283	0.4	%
Loans in forbearance	Loans in forbearance	2,551		3.5					1,057		1.2					1,722		1.8				Loans in forbearance	665		1.1				981		1.5				1,029		1.3
Loans in repayment status:	Loans in repayment status:																					Loans in repayment status:
Loans current	Loans current	68,970				98.4	%		85,599				98.8	%		91,366				99.4	%	Loans current	59,041				97.5	%	63,225				97.8	%	74,883				98.4	%
Loans delinquent 30-59 days	Loans delinquent 30-59 days	353				0.5			816				1.0			277				0.3		Loans delinquent 30-59 days	320				0.5		436				0.7		587				0.8
Loans delinquent 60-89 days	Loans delinquent 60-89 days	130				0.2			—				—			35				0.0		Loans delinquent 60-89 days	301				0.5		466				0.7		165				0.2
Loans delinquent 90-119 days	Loans delinquent 90-119 days	5				0.0			—				—			45				0.1		Loans delinquent 90-119 days	372				0.6		222				0.3		245				0.3
Loans delinquent 120-270 days	Loans delinquent 120-270 days	508				0.7			209				0.2			202				0.2		Loans delinquent 120-270 days	448				0.7		183				0.3		236				0.3
Loans delinquent 271 days or greater	Loans delinquent 271 days or greater	114				0.2			—				—			—				—		Loans delinquent 271 days or greater	115				0.2		159				0.2		—				—
Total loans in repayment	Total loans in repayment	70,080		96.1		100.0	%		86,624		98.4		100.0	%		91,925		97.9		100.0	%	Total loans in repayment	60,597		98.5		100.0	%	64,691		98.1		100.0	%	76,116		98.3		100.0	%
Total federally insured loans	Total federally insured loans	72,905		100.0	%				88,011		100.0	%				93,930		100.0	%			Total federally insured loans	61,501		100.0	%			65,913		100.0	%			77,428		100.0	%
Accrued interest receivable	Accrued interest receivable	1,607							1,216							1,177						Accrued interest receivable	1,973						1,758						1,381
Loan premium	Loan premium	23							26							28						Loan premium	18						20						23
Allowance for loan losses	Allowance for loan losses	(164)							(268)							(289)						Allowance for loan losses	(154)						(170)						(258)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses	Total federally insured loans and accrued interest receivable, net of allowance for loan losses	$	74,371						$	88,985						$	94,846					Total federally insured loans and accrued interest receivable, net of allowance for loan losses	$	63,338					$	67,521					$	78,574

Private education loans - Nelnet Bank (a):	Private education loans - Nelnet Bank (a):																					Private education loans - Nelnet Bank (a):
Loans in-school/grace/deferment	Loans in-school/grace/deferment	$	10,888	3.1	%				$	150	0.1	%				$	82	0.1	%			Loans in-school/grace/deferment	$	16,996	4.8	%			$	11,580	3.3	%			$	1,160	0.3	%
Loans in forbearance	Loans in forbearance	524		0.1					460		0.3					193		0.2				Loans in forbearance	1,797		0.5				864		0.2				1,236		0.4
Loans in repayment status:	Loans in repayment status:																					Loans in repayment status:
Loans current	Loans current	344,469				99.8	%		169,157				99.9	%		98,120				100.0	%	Loans current	332,205				99.6	%	340,830				99.8	%	343,148				99.8	%
Loans delinquent 30-59 days	Loans delinquent 30-59 days	197				0.1			51				0.0			—				—		Loans delinquent 30-59 days	691				0.2		167				0.1		169				0.1
Loans delinquent 60-89 days	Loans delinquent 60-89 days	79				0.0			—				—			—				—		Loans delinquent 60-89 days	241				0.1		32				0.0		412				0.1
Loans delinquent 90 days or greater	Loans delinquent 90 days or greater	414				0.1			72				0.1			—				—		Loans delinquent 90 days or greater	389				0.1		409				0.1		—				—
Total loans in repayment	Total loans in repayment	345,159		96.8		100.0	%		169,280		99.6		100.0	%		98,120		99.7		100.0	%	Total loans in repayment	333,526		94.7		100.0	%	341,438		96.5		100.0	%	343,729		99.3		100.0	%
Total private education loans	Total private education loans	356,571		100.0	%				169,890		100.0	%				98,395		100.0	%			Total private education loans	352,319		100.0	%			353,882		100.0	%			346,125		100.0	%
Accrued interest receivable	Accrued interest receivable	969							264							156						Accrued interest receivable	1,591						1,152						539
Deferred origination costs, net of unaccreted discount	Deferred origination costs, net of unaccreted discount	5,369							2,560							1,430						Deferred origination costs, net of unaccreted discount	5,366						5,360						5,909
Allowance for loan losses	Allowance for loan losses	(2,248)							(840)							(414)						Allowance for loan losses	(2,905)						(2,390)						(1,744)
Total private education loans and accrued interest receivable, net of allowance for loan losses	Total private education loans and accrued interest receivable, net of allowance for loan losses	$	360,661						$	171,874						$	99,567					Total private education loans and accrued interest receivable, net of allowance for loan losses	$	356,371					$	358,004					$	350,829

Consumer and other loans - Nelnet Bank (a):																						Consumer and other loans - Nelnet Bank (a):
Loans in deferment																						Loans in deferment	$	6	—	%
Loans in repayment status:																						Loans in repayment status:
Loans current																						Loans current	30,120				98.2	%
Loans delinquent 30-59 days																						Loans delinquent 30-59 days	277				0.9
Loans delinquent 60-89 days																						Loans delinquent 60-89 days	205				0.7
Loans delinquent 90 days or greater																						Loans delinquent 90 days or greater	60				0.2
Total loans in repayment																						Total loans in repayment	30,662		100.0		100.0	%
Total consumer and other loans																						Total consumer and other loans	30,668		100.0	%
Accrued interest receivable																						Accrued interest receivable	214
Loan premium																						Loan premium	—
Allowance for loan losses																						Allowance for loan losses	(2,816)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses																						Total consumer and other loans and accrued interest receivable, net of allowance for loan losses	$	28,066

(a) For the periods presented for Nelnet Bank, the delinquency bucket periods conform with the delinquency bucket periods reflected in Nelnet Bank's Call Reports filed with the Federal Deposit Insurance Corporation.

1314

FICO Scores - Nelnet Bank Private Education Loans

An additional key credit quality indicator for Nelnet Bank private education loans is FICO scores at the time of origination. The following tables highlight the gross principal balance of Nelnet Bank's private education loan portfolio, by year of origination, stratified by FICO score at the time of origination.


		Loan balance as of September 30, 2022						Loan balance as of June 30, 2023
		Nine months ended September 30, 2022		2021	2020	Total		Six months ended June 30, 2023		2022	2021	2020	Total
FICO at origination:	FICO at origination:						FICO at origination:
Less than 705	Less than 705	$	5,105	5,516	350	10,971	Less than 705	$	1,731	5,869	5,100	342	13,042
705 - 734	705 - 734	21,916		10,745	537	33,198	705 - 734	3,936		22,881	9,776	506	37,099
735 - 764	735 - 764	34,495		17,107	1,485	53,087	735 - 764	4,109		34,497	15,794	1,401	55,801
765 - 794	765 - 794	57,481		32,421	1,639	91,541	765 - 794	1,938		54,989	29,021	1,531	87,479
Greater than 794	Greater than 794	88,097		73,190	6,487	167,774	Greater than 794	5,896		82,963	64,415	5,624	158,898
		$	207,094	138,979	10,498	356,571		$	17,610	201,199	124,106	9,404	352,319


		Loan balance as of December 31, 2021					Loan balance as of December 31, 2022
		2021		2020	Total		2022		2021	2020	Total
FICO at origination:	FICO at origination:					FICO at origination:
Less than 705	Less than 705	$	6,481	100	6,581	Less than 705	$	5,898	5,389	348	11,635
705 - 734	705 - 734	11,697		276	11,973	705 - 734	23,392		10,543	542	34,477
735 - 764	735 - 764	18,611		1,072	19,683	735 - 764	35,456		16,686	1,473	53,615
765 - 794	765 - 794	36,274		1,467	37,741	765 - 794	57,141		31,035	1,622	89,798
Greater than 794	Greater than 794	86,141		7,771	93,912	Greater than 794	87,959		70,135	6,263	164,357
		$	159,204	10,686	169,890		$	209,846	133,788	10,248	353,882

Nonaccrual Status

The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, ~~2021~~2022 and ~~September~~June 30, ~~2022,~~2023, was not material.

Amortized Cost Basis by Origination Year

The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of ~~September~~June 30, ~~2022~~2023 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all the Company’s federally insured loans were originated prior to July 1, 2010.


		Nine months ended September 30, 2022		2021	2020	2019	2018	Prior years	Total			Six months ended June 30, 2023		2022	2021	2020	2019	Prior years	Total
Private education loans - Non-Nelnet Bank:	Private education loans - Non-Nelnet Bank:										Private education loans - Non-Nelnet Bank:
Loans in school/grace/deferment		$	2,051	7,282	1,664	2,956	101	1,502	15,556
Loans in-school/grace/deferment											Loans in-school/grace/deferment	$	—	1,390	4,831	1,122	1,907	1,190	10,440
Loans in forbearance	Loans in forbearance	—		30	423	1,244	134	914	2,745		Loans in forbearance	—		—	62	311	451	1,050	1,874
Loans in repayment status:	Loans in repayment status:										Loans in repayment status:
Loans current	Loans current	3,877		2,912	55,156	42,006	172	134,803	238,926		Loans current	115		4,270	4,610	49,726	39,948	113,853	212,522
Loans delinquent 31-60 days	Loans delinquent 31-60 days	—		11	9	174	38	1,782	2,014		Loans delinquent 31-60 days	—		12	3	221	95	1,312	1,643
Loans delinquent 61-90 days	Loans delinquent 61-90 days	—		35	202	76	—	679	992		Loans delinquent 61-90 days	—		—	—	311	71	871	1,253
Loans delinquent 91 days or greater	Loans delinquent 91 days or greater	—		—	13	—	—	1,937	1,950		Loans delinquent 91 days or greater	—		29	5	100	110	2,080	2,324
Total loans in repayment	Total loans in repayment	3,877		2,958	55,380	42,256	210	139,201	243,882		Total loans in repayment	115		4,311	4,618	50,358	40,224	118,116	217,742
Total private education loans	Total private education loans	$	5,928	10,270	57,467	46,456	445	141,617	262,183		Total private education loans	$	115	5,701	9,511	51,791	42,582	120,356	230,056
Accrued interest receivable	Accrued interest receivable								2,207		Accrued interest receivable								2,196
Loan discount, net of unamortized premiums									(185)
Loan premium, net of unaccreted discount											Loan premium, net of unaccreted discount								183
Allowance for loan losses	Allowance for loan losses								(15,577)		Allowance for loan losses								(14,322)
Total private education loans and accrued interest receivable, net of allowance for loan losses	Total private education loans and accrued interest receivable, net of allowance for loan losses								$	248,628	Total private education loans and accrued interest receivable, net of allowance for loan losses								$	218,113
Gross charge-offs - six months ended June 30, 2023											Gross charge-offs - six months ended June 30, 2023	$	—	—	5	2	381	1,321	1,709

Consumer and other loans - Non-Nelnet Bank:
Loans in deferment		$	20	—	—	—	9	—	29
Loans in repayment status:
Loans current		190,237		32,198	1,682	2,419	2,272	19	228,827
Loans delinquent 31-60 days		535		320	60	76	28	—	1,019
Loans delinquent 61-90 days		328		73	3	13	10	—	427
Loans delinquent 91 days or greater		151		441	14	189	344	—	1,139
Total loans in repayment		191,251		33,032	1,759	2,697	2,654	19	231,412
Total consumer and other loans		$	191,271	33,032	1,759	2,697	2,663	19	231,441
Accrued interest receivable									2,561
Loan discount, net of unamortized premiums									(1,847)
Allowance for loan losses									(13,290)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses									$	218,865

Private education loans - Nelnet Bank (a):
Loans in school/grace/deferment		$	8,239	1,215	1,434	—	—	—	10,888
Loans in forbearance		221		211	92	—	—	—	524
Loans in repayment status:
Loans current		198,423		137,074	8,972	—	—	—	344,469
Loans delinquent 30-59 days		132		65	—	—	—	—	197
Loans delinquent 60-89 days		79		—	—	—	—	—	79
Loans delinquent 90 days or greater		—		414	—	—	—	—	414
Total loans in repayment		198,634		137,553	8,972	—	—	—	345,159
Total private education loans		$	207,094	138,979	10,498	—	—	—	356,571
Accrued interest receivable									969
Deferred origination costs, net of unaccreted discount									5,369
Allowance for loan losses									(2,248)
Total private education loans and accrued interest receivable, net of allowance for loan losses									$	360,661


	Six months ended June 30, 2023		2022	2021	2020	2019	Prior years	Total
Consumer and other loans - Non-Nelnet Bank:
Loans in deferment	$	43	40	19	—	—	—	102
Loans in repayment status:
Loans current	120,588		53,714	5,662	457	956	487	181,864
Loans delinquent 31-60 days	1,040		1,565	153	24	8	4	2,794
Loans delinquent 61-90 days	1,458		770	227	20	50	8	2,533
Loans delinquent 91 days or greater	337		970	131	61	199	336	2,034
Total loans in repayment	123,423		57,019	6,173	562	1,213	835	189,225
Total consumer and other loans	$	123,466	57,059	6,192	562	1,213	835	189,327
Accrued interest receivable								2,246
Loan premium, net of unaccreted discount								750
Allowance for loan losses								(20,005)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses								$	172,318
Gross charge-offs - six months ended June 30, 2023	$	265	4,272	439	27	55	90	5,148


Private education loans - Nelnet Bank (a):
Loans in-school/grace/deferment	$	2,787	11,980	1,168	1,061	—	—	16,996
Loans in forbearance	—		969	828	—	—	—	1,797
Loans in repayment status:
Loans current	14,772		187,799	121,291	8,343	—	—	332,205
Loans delinquent 30-59 days	—		391	300	—	—	—	691
Loans delinquent 60-89 days	31		48	162	—	—	—	241
Loans delinquent 90 days or greater	20		12	357	—	—	—	389
Total loans in repayment	14,823		188,250	122,110	8,343	—	—	333,526
Total private education loans	$	17,610	201,199	124,106	9,404	—	—	352,319
Accrued interest receivable								1,591
Deferred origination costs, net of unaccreted discount								5,366
Allowance for loan losses								(2,905)
Total private education loans and accrued interest receivable, net of allowance for loan losses								$	356,371
Gross charge-offs - six months ended June 30, 2023	$	—	614	—	—	—	—	614



Consumer and other loans - Nelnet Bank (a):
Loans in deferment	$	6	—	—	—	—	—	6
Loans in repayment status:
Loans current	29,547		518	55	—	—	—	30,120
Loans delinquent 30-59 days	277		—	—	—	—	—	277
Loans delinquent 60-89 days	205		—	—	—	—	—	205
Loans delinquent 90 days or greater	60		—	—	—	—	—	60
Total loans in repayment	30,089		518	55	—	—	—	30,662
Total consumer and other loans	$	30,095	518	55	—	—	—	30,668
Accrued interest receivable								214
Loan premium								—
Allowance for loan losses								(2,816)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses								$	28,066
Gross charge-offs - six months ended June 30, 2023	$	—	—	—	—	—	—	—

1516

3. Bonds and Notes Payable

The following tables summarize the Company’s outstanding debt obligations by type of instrument:


		As of September 30, 2022					As of June 30, 2023
		Carrying amount		Interest rate range	Final maturity		Carrying amount		Interest rate range	Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:	Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:					Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices	Bonds and notes based on indices	$	13,056,109	2.89% - 5.08%	8/26/30 - 9/25/69	Bonds and notes based on indices	$	10,494,458	5.37% - 7.15%	8/26/30 - 9/25/69
Bonds and notes based on auction	Bonds and notes based on auction	208,660		0.00% - 2.82%	3/22/32 - 8/27/46	Bonds and notes based on auction	91,335		0.00% - 6.18%	3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes	Total FFELP variable-rate bonds and notes	13,264,769				Total FFELP variable-rate bonds and notes	10,585,793
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations	Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations	646,956		1.42% - 3.45%	10/25/67 - 8/27/68	Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations	519,156		1.42% - 3.45%	10/25/67 - 8/27/68
FFELP loan warehouse facility		249,543		3.20%	11/22/23
FFELP loan warehouse facilities						FFELP loan warehouse facilities	1,530,429		5.15% - 5.42%	11/22/24 / 4/2/25
Private education loan warehouse facility	Private education loan warehouse facility	86,154		3.07%	10/31/23	Private education loan warehouse facility	42,200		5.37%	12/31/23

Consumer loan warehouse facility						Consumer loan warehouse facility	32,324		5.44%	11/14/25
Variable-rate bonds and notes issued in private education loan asset-backed securitizations	Variable-rate bonds and notes issued in private education loan asset-backed securitizations	22,161		4.65% / 4.83%	12/26/40 / 6/25/49	Variable-rate bonds and notes issued in private education loan asset-backed securitizations	16,628		6.65%	6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization	Fixed-rate bonds and notes issued in private education loan asset-backed securitization	24,056		3.60% / 5.35%	12/26/40 / 12/28/43	Fixed-rate bonds and notes issued in private education loan asset-backed securitization	19,606		5.35%	12/28/43
Unsecured line of credit	Unsecured line of credit	—		—	9/22/26	Unsecured line of credit	—		—	9/22/26
Participation agreement	Participation agreement	399,744		3.77%	5/4/23	Participation agreement	6,781		5.84%	5/4/24
Repurchase agreements	Repurchase agreements	506,968		0.97% - 4.26%	10/7/22 - 11/27/24	Repurchase agreements	415,514		5.81% - 6.47%	7/26/23 - 11/27/24

Other - due to related party	Other - due to related party	743		3.55% - 5.35%	11/22/22 - 10/14/28	Other - due to related party	6,174		3.55% - 6.05%	3/1/24 - 11/15/30
		15,201,094					13,174,605
Discount on bonds and notes payable and debt issuance costs	Discount on bonds and notes payable and debt issuance costs	(158,499)				Discount on bonds and notes payable and debt issuance costs	(104,465)
Total	Total	$	15,042,595			Total	$	13,070,140

As of December 31, 2021
Carrying
amount
Interest rate
range
Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices $ 15,887,295 0.23% - 2.10% 5/27/25 - 9/25/69
Bonds and notes based on auction 248,550 0.00% - 1.09% 3/22/32 - 8/27/46
Total FFELP variable-rate bonds and notes 16,135,845
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 772,935 1.42% - 3.45% 10/25/67 - 8/27/68
FFELP loan warehouse facility 5,048 0.21% 5/22/23
Private education loan warehouse facility 107,011 0.24% 2/13/23
Variable-rate bonds and notes issued in private education loan asset-backed securitizations 31,818 1.65% / 1.85% 12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization 28,613 3.60% / 5.35% 12/26/40 / 12/28/43
Unsecured line of credit — — 9/22/26
Participation agreement 253,969 0.78% 5/4/22
Repurchase agreements 483,848 0.66% - 1.46% 5/27/22 - 12/20/23
Secured line of credit 5,000 1.91% 5/30/22
17,824,087
Discount on bonds and notes payable and debt issuance costs (192,998)
Total $ 17,631,089


	As of December 31, 2022
	Carrying amount		Interest rate range	Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices	$	11,868,190	4.47% - 6.39%	8/26/30 - 9/25/69
Bonds and notes based on auction	178,960		0.00% - 4.02%	3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes	12,047,150
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations	594,051		1.42% - 3.45%	10/25/67 - 8/27/68
FFELP loan warehouse facility	978,956		4.69% / 4.71%	5/22/24
Private education loan warehouse facility	64,356		4.72%	12/31/23
Consumer loan warehouse facility	89,000		4.73%	11/14/25
Variable-rate bonds and notes issued in private education loan asset-backed securitizations	19,865		5.90% / 6.14%	12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization	23,032		3.60% / 5.35%	12/26/40 / 12/28/43
Unsecured line of credit	—		—	9/22/26
Participation agreement	395,432		5.02%	5/4/23
Repurchase agreements	567,254		0.97% - 5.60%	1/4/23 - 11/27/24

Other - due to related party	6,187		3.55% - 6.05%	3/1/24 - 11/15/30
	14,785,283
Discount on bonds and notes payable and debt issuance costs	(148,088)
Total	$	14,637,195

1617

Warehouse Facilities

The Company funds a portion of its loan acquisitions using warehouse facilities. Loan warehousing allows the Company to buy and manage loans prior to transferring them into more permanent financing arrangements. The following table summarizes the Company's warehouse facilities as of June 30, 2023.

~~FFELP loan warehouse~~


Type of loans	Maximum financing amount		Amount outstanding	Amount available	Expiration of liquidity provisions	Final maturity date	Advance rate		Advanced as equity support
FFELP (a)	$	1,250,000	1,119,030	130,970	11/22/2023	11/22/2024	note (b)		$	99,220
FFELP (c)	432,000		411,399	20,601	4/2/2024	4/2/2025	92	%	34,497
	$	1,682,000	1,530,429	151,571					$	133,717
Private (d)	42,200		42,200	—	8/31/2023	12/31/2023	—		18,720
Consumer	250,000		32,324	217,676	11/14/2024	11/14/2025	70	%	13,901

(a) On March 31, 2023, this facility

~~As of September 30, 2022,~~ was amended to increase the ~~Company’s FFELP warehouse facility had an~~ aggregate maximum financing amount available ~~of $300.0 million that~~from $1.20 billion to $1.25 billion. On May 22, 2023, this facility was ~~increased from $25.0 million per a July 29, 2022 amendment~~amended to extend the ~~facility. A May 2022 amendment extended the~~expiration of liquidity provisions and final maturity date to November 22, ~~2022~~2023 and November 22, ~~2023,~~2024, respectively. As

(b) This facility has a static advance rate until the expiration date of ~~September 30, 2022, $249.5 million was outstanding under~~the liquidity provisions. The maximum advance rates for this facility ~~$50.5 million was available for future funding,~~are 90% to 96%, and the minimum advance rates are 84% to 90%. In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor. The loans would then be funded at this new advance rate until the final maturity date of the facility.

~~Private education loan warehouse~~FFELP facility. On May 25, 2023, this facility

~~As of September 30, 2022,~~ was amended to increase the ~~Company's private education warehouse facility had an aggregate~~ maximum financing amount ~~available of $175.0~~from $250.0 million ~~and an advance rate of 80~~ to ~~90 percent.~~$432.0 million.

(d) On June 30, ~~2022, the Company~~2023, this facility was amended ~~the facility~~ to extend the expiration of liquidity provisions ~~through October 31, 2022 and final maturity date~~ to ~~October~~August 31, 2023. ~~As of September 30, 2022, $86.2 million was outstanding~~No additional amounts can be borrowed under this ~~warehouse facility, $88.8 million was available for future funding, and the Company had $9.8 million advanced as equity support.~~facility.

Unsecured Line of Credit

The Company has a $495.0 million unsecured line of credit that has a maturity date of September 22, 2026. As of ~~September~~June 30, ~~2022,~~2023, no amount was outstanding on the line of credit and $495.0 million was available for future use. The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $737.5 million, subject to certain conditions.

Participation Agreement

The Company has an agreement with Union Bank and Trust Company ("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 FFELP loan asset-backed ~~securities.~~securities (bond investments). As of ~~September~~June 30, ~~2022, $399.7~~2023, $6.8 million (par value) of FFELP loan asset-backed securities 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. On May 4, ~~2022,~~2023, the agreement automatically renewed for another year through May 4, ~~2023.~~2024. The Company can participate FFELP loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $400.0 million or an amount in excess of $400.0 million if mutually agreed to by both parties. The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its discretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities. As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance ~~sheet~~sheets as "investments and notes receivable" and the participation interests outstanding have been accounted for by the Company as a secured borrowing.

See note 5 for additional information about the FFELP loan asset-backed securities investments serving as collateral under this participation agreement.

Repurchase Agreements

On May 3, 2021 and June 23, 2021, the Company entered into repurchase agreements with non-affiliated third parties, the proceeds of which are collateralized by certain private education and FFELP loan asset-backed ~~securities.~~securities (bond investments). The first agreement has various maturity dates through November 27, 2024 or earlier if either party provides 180 days’ prior written notice, and the maturity date of the second agreement ~~has various maturity dates through January 13,~~(as of June 30, 2023) was July 26, 2023. Subsequent to June 30, 2023, the remaining outstanding balance of this facility was paid in full. Under the first agreement, the Company is subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities on any scheduled reset date, and under the second agreement, the Company was subject to margin deficit payment requirements if the fair value of the securities subject to the agreement was less than the original purchase price

of such securities and the counter-party provided notice requiring such payment. Included in “bonds and notes payable” in the consolidated balance sheets as of ~~September~~June 30, ~~2022~~2023 was ~~$218.0~~$347.6 million subject to the first agreement and ~~$289.0~~$67.9 million subject to the second agreement.

See note 5 and below under "Debt Repurchases" for additional information about the private education and FFELP loan asset-backed securities investments, respectively, serving as collateral for these repurchase agreements.

~~Accrued Interest Liability~~Nelnet Bank

~~During~~Nelnet Bank has unsecured Federal Funds lines of credit with correspondent banks totaling $30.0 million at a stated interest rate at the ~~first quarter~~time of ~~2021,~~borrowing. Nelnet Bank has also established an account at the ~~Company reversed~~Federal Reserve Bank (FRB), the Federal Home Loan Bank (FHLB), and an additional $10.0 million Federal Funds line of credit with a ~~historical accrued interest liability~~correspondent bank which must be fully collateralized. The FRB, FHLB, and secured Federal Funds line of ~~$23.8~~credit accepts pledges of eligible securities. In addition, FFELP and private education loans are accepted as collateral for FRB borrowings. As of June 30, 2023 and December 31, 2022, Nelnet Bank had no amounts drawn on their Federal Funds, FRB, or FHLB lines of credit. As of June 30, 2023, the Bank has $20.0 million ~~on certain bonds, which liability~~of collateral pledged with the Company determined was no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income.

FRB that it may borrow against.

Debt Repurchases

The following table summarizes the Company's repurchases of its own debt. Gains/losses recorded by the Company from the repurchase of debt are included in ~~"other"~~"other, net" in "other ~~income/expense"~~income (expense)" on the Company's consolidated statements of income.


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Purchase price	Purchase price	$	(13,563)	(184,827)	(67,081)	(205,269)	Purchase price	$	—	(35,643)	(828)	(54,096)
Par value	Par value	13,903		184,781	69,133	204,597	Par value	—		36,700	908	55,229
Remaining unamortized cost of issuance	Remaining unamortized cost of issuance	(180)		(3,222)	(821)	(3,292)	Remaining unamortized cost of issuance	—		(17)	(2)	(62)
Gain (loss)		$	160	(3,268)	1,231	(3,964)
Gain							Gain	$	—	1,040	78	1,071

The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. As of ~~September~~June 30, ~~2022,~~2023, the Company holds ~~$431.5~~$253.7 million (par value) of its own FFELP loan asset-backed securities. As of ~~September~~June 30, ~~2022, $230.6~~2023, $197.5 million (par value) of the Company's repurchased FFELP loan asset-backed securities were serving as collateral on amounts outstanding under the Company's repurchase agreements (as discussed above).

In April 2023, the Company redeemed $188.6 million of FFELP loan asset-backed debt securities (bonds and notes payable) prior to their maturity, of which the Company owned $140.5 million of the bonds that were redeemed. The remaining unamortized debt discount associated with these bonds at the time of redemption was written-off, resulting in a $25.9 million non-cash expense recognized in April 2023. This expense is included in "interest expense on bonds and notes payable and bank deposits" on the consolidated statements of income.

4. Derivative Financial Instruments

The Company uses derivative financial instruments primarily to manage interest rate risk. Derivative instruments used as part of the Company's interest rate risk management strategy are further described in note 6 of the notes to consolidated financial statements included in the ~~2021~~2022 Annual Report. A tabular presentation of such derivatives outstanding as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 is presented below.

Non-Nelnet Bank Derivatives

Basis Swaps

The following table summarizes the Company’s outstanding basis swaps, ~~as of September 30, 2022 and December 31, 2021,~~ in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").


Maturity	Maturity	Notional amount			Maturity	Notional amount
		As of		As of		As of		As of
		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
2022		$	1,000,000	2,000,000
2023	2023	750,000		750,000	2023	$	—	750,000
2024	2024	1,750,000		1,750,000	2024	1,750,000		1,750,000
2026	2026	1,150,000		1,150,000	2026	1,150,000		1,150,000
2027	2027	250,000		250,000	2027	250,000		250,000

		$	4,900,000	5,900,000
						$	3,150,000	3,900,000

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was one-month LIBOR plus ~~9.4~~10.1 basis points and ~~9.1~~9.7 basis points, respectively.

Interest Rate Swaps – Floor Income Hedges

The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.


		As of September 30, 2022						As of December 31, 2021									As of June 30, 2023					As of December 31, 2022 (a)
Maturity	Maturity	Notional amount				Weighted average fixed rate paid by the Company (a)		Notional amount				Weighted average fixed rate paid by the Company (a)		Maturity			Notional amount			Weighted average fixed rate paid by the Company (b)		Notional amount		Weighted average fixed rate paid by the Company (b)

2022				$	—					—	%				$	500,000			0.94	%
2023		—				—		900,000				0.62
2024	2024	2,000,000				0.35		2,500,000				0.35		2024			$	—		—	%	$	2,000,000	0.35	%
2025		—				—		500,000				0.35

2026	2026	500,000				1.02		500,000				1.02		2026			—			—		500,000		1.02
2030 (c)														2030 (c)			50,000			3.44		—		—
2031	2031	100,000				1.53		100,000				1.53��		2031			—			—		100,000		1.53
2032														2032			—			—		200,000		2.92

		$	2,600,000			0.52	%	$	5,000,000			0.55	%				$	50,000		3.44	%	$	2,800,000	0.70	%

(a) On March 15, 2023, to minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from the clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.

(b) For the interest rate derivative maturing in 2030, the Company receives payments based on Secured Overnight Financing Rate (SOFR) that resets quarterly. For the interest rate derivative maturing in 2032, the Company was to receive payments based on SOFR that reset quarterly. For all other interest rate derivatives, the Company received payments based on three-month LIBOR that reset quarterly.

Nelnet Bank Derivatives

Interest Rate Swaps

Derivative instruments are used by Nelnet Bank to hedge the exposure to variability in cash flows of variable rate intercompany deposits primarily to minimize the exposure to volatility in cash flows from future changes in interest rates. Nelnet Bank has structured these derivatives so that each is economically effective; however, because these derivatives are hedging intercompany deposits, the derivative instruments are not eligible for hedge accounting in the consolidated financial statements.

As a result, the change in market value of these derivative instruments is reported in current period earnings and presented in "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income.

The following table summarizes the outstanding derivative instruments used by Nelnet Bank to hedge exposure to variability in cash flows related to variable rate intercompany deposits as of June 30, 2023.


	As of June 30, 2023
Maturity	Notional amount		Weighted average fixed rate paid by the Company (a)
2028	$	40,000	3.33	%
2030 (b)	25,000		2.97





	$	65,000	3.19	%

(a) For all interest rate derivatives, the Company receives ~~discrete three-month LIBOR.~~payments based on SOFR that reset quarterly.

~~In March 2022,~~(b) This derivative with a $25 million notional amount has a forward effective start date in April 2026.

Unlike the Company's Non-Nelnet Bank derivatives, Nelnet Bank's derivatives are not cleared post-execution at a regulated clearinghouse. As such, the Company ~~terminated $650~~records these derivative instruments in the consolidated balance sheets on a gross basis as either an asset or liability measured at fair value. As of June 30, 2023, the gross fair value of Nelnet Bank's interest rate swap derivatives was $1.1 million (an asset) that is included in ~~notional amount of derivatives ($500 million and $150 million that had maturity dates in 2022 and 2023, respectively) for net payments of $0.1 million. On April 29, 2022,~~"other assets" on the Company terminated $1.25 billion in notional amount of derivatives ($500 million, $250 million, and $500 million that had maturity dates in 2023, 2024, and 2025, respectively) for total proceeds of $68.1 million. On August 26, 2022, the Company terminated $500 million in notional amount of derivatives ($250 million that had maturity dates in each of 2023 and 2024) for total proceeds of $23.8 million.consolidated balance sheet.

Consolidated Financial Statement Impact Related to Derivatives ~~- Statements of Income~~

The following table summarizes the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income.


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Settlements:	Settlements:						Settlements:
1:3 basis swaps	1:3 basis swaps	$	(1,085)	(700)	242	(939)	1:3 basis swaps	$	(65)	931	794	1,327
Interest rate swaps - floor income hedges	Interest rate swaps - floor income hedges	11,356		(5,209)	11,843	(14,648)	Interest rate swaps - floor income hedges	47		3,692	22,525	487
Interest rate swaps - Nelnet Bank							Interest rate swaps - Nelnet Bank	83		—	83	—

Total settlements - income (expense)		10,271		(5,909)	12,085	(15,587)
Total settlements - income							Total settlements - income	65		4,623	23,402	1,814
Change in fair value:	Change in fair value:						Change in fair value:
1:3 basis swaps	1:3 basis swaps	189		1,061	929	2,755	1:3 basis swaps	235		(148)	211	741
Interest rate swaps - floor income hedges	Interest rate swaps - floor income hedges	52,802		6,199	238,196	41,700	Interest rate swaps - floor income hedges	662		40,549	(36,726)	185,394

Interest rate swaps - Nelnet Bank							Interest rate swaps - Nelnet Bank	1,108		—	1,108	—

Total change in fair value - income		52,991		7,260	239,125	44,455
Derivative market value adjustments and derivative settlements, net - income		$	63,262	1,351	251,210	28,868
Total change in fair value - income (expense)							Total change in fair value - income (expense)	2,005		40,401	(35,407)	186,135
Derivative market value adjustments and derivative settlements, net - income (expense)							Derivative market value adjustments and derivative settlements, net - income (expense)	$	2,070	45,024	(12,005)	187,949

1921

5. Investments and Notes Receivable

~~A summary of the Company's investments~~Investments and notes receivable ~~follows:~~consisted of the following:


		As of September 30, 2022							As of December 31, 2021
		Amortized cost		Gross unrealized gains	Gross unrealized losses (a)	Fair value			Amortized cost	Gross unrealized gains		Gross unrealized losses	Fair value			As of June 30, 2023										As of December 31, 2022
								Amortized cost			Gross unrealized gains				Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains			Gross unrealized losses		Fair value
Investments (at fair value):	Investments (at fair value):																				Investments (at fair value):
FFELP loan asset-backed securities- available-for-sale (b)		$	783,676	7,767	(6,434)	785,009			480,691	14,710		(719)	494,682
Private education loan asset-backed securities - available-for-sale (c)		352,500		—	(34,599)	317,901			414,286	507		(2,241)	412,552
Other debt securities - available-for-sale		279,589		357	(4,785)	275,161			22,435	—		—	22,435
Total available-for-sale debt securities		$	1,415,765	8,124	(45,818)	1,378,071			917,412	15,217		(2,960)	929,669
Available-for-sale asset-backed securities															Available-for-sale asset-backed securities
Non-Nelnet Bank:															Non-Nelnet Bank:
FFELP loan (a)															FFELP loan (a)	$	329,256		5,064		(6,372)		327,948			463,861		3,498	(11,105)	456,254
Private education loan (b)															Private education loan (b)	307,084			—		(25,238)		281,846			335,903		—	(29,438)	306,465
Other debt securities															Other debt securities	59,631			3,050		(670)		62,011			158,589		151	(3,790)	154,950
Total Non-Nelnet Bank															Total Non-Nelnet Bank	695,971			8,114		(32,280)		671,805			958,353		3,649	(44,333)	917,669
Nelnet Bank:															Nelnet Bank:
FFELP loan (c)															FFELP loan (c)	257,418			1,378		(2,430)		256,366			349,855		955	(8,853)	341,957
Private education loan															Private education loan	1,707			—		(92)		1,615			1,941		—	(122)	1,819
Other debt securities															Other debt securities	120,471			161		(2,344)		118,288			131,481		18	(3,907)	127,592
Total Nelnet Bank															Total Nelnet Bank	379,596			1,539		(4,866)		376,269			483,277		973	(12,882)	471,368
Total available-for-sale asset-backed securities															Total available-for-sale asset-backed securities	$	1,075,567		9,653		(37,146)		1,048,074			1,441,630		4,622	(57,215)	1,389,037
Equity securities	Equity securities					39,214							71,986		Equity securities								39,576							39,082
Total investments (at fair value)						1,417,285							1,001,655

Total investments at fair value															Total investments at fair value								1,087,650							1,428,119
Other Investments and Notes Receivable (not measured at fair value):	Other Investments and Notes Receivable (not measured at fair value):														Other Investments and Notes Receivable (not measured at fair value):
Other debt securities - held-to-maturity						8,440							8,200
Held to maturity investments															Held to maturity investments
Non-Nelnet Bank:															Non-Nelnet Bank:
Debt securities (d)															Debt securities (d)								4,700							18,554
Nelnet Bank:															Nelnet Bank:
FFELP loan asset-backed securities (c)															FFELP loan asset-backed securities (c)								150,840							—
Other debt securities															Other debt securities								241							220
Total Nelnet Bank															Total Nelnet Bank								151,081							220
Total held to maturity investments															Total held to maturity investments								155,781							18,774
Venture capital and funds:	Venture capital and funds:														Venture capital and funds:
Measurement alternative						159,437							157,609
Measurement alternative (e) (f)															Measurement alternative (e) (f)								193,001							160,052
Equity method	Equity method					81,231							67,840		Equity method								109,988							89,332

Total venture capital and funds	Total venture capital and funds					240,668							225,449		Total venture capital and funds								302,989							249,384
Real estate:	Real estate:														Real estate:
Equity method	Equity method					81,820							47,226		Equity method								85,284							80,364

Investment in ALLO:	Investment in ALLO:														Investment in ALLO:
Voting interest/equity method (d)						74,271							87,247
Preferred membership interest and accrued and unpaid preferred return (e)						143,763							137,342
Voting interest/equity method (g)															Voting interest/equity method (g)								43,588							67,538
Preferred membership interest and accrued and unpaid preferred return (h)															Preferred membership interest and accrued and unpaid preferred return (h)								150,449							145,926
Total investment in ALLO	Total investment in ALLO					218,034							224,589		Total investment in ALLO								194,037							213,464
Beneficial interest in loan securitizations (f):
Private education loans, including accrued interest						77,447							66,008
Consumer loans						27,617							28,366
Beneficial interest in loan securitizations (i):															Beneficial interest in loan securitizations (i):
Consumer loans and other															Consumer loans and other								96,635							39,249
Private education loans															Private education loans								71,322							75,261
Federally insured student loans	Federally insured student loans					24,844							25,768		Federally insured student loans								23,017							24,228
Total beneficial interest in loan securitizations	Total beneficial interest in loan securitizations					129,908							120,142		Total beneficial interest in loan securitizations								190,974							138,738
Solar (g)						(71,000)							(42,457)
Solar (j)															Solar (j)								(72,455)							(55,448)
Notes receivable	Notes receivable					32,124							—		Notes receivable								54,931							31,106
Tax liens, affordable housing, and other	Tax liens, affordable housing, and other					6,235							4,115		Tax liens, affordable housing, and other								7,115							7,416
Total investments (not measured at fair value)	Total investments (not measured at fair value)					646,229							587,264		Total investments (not measured at fair value)								918,656							683,798
Total investments and notes receivable	Total investments and notes receivable					$	2,063,514						$	1,588,919	Total investments and notes receivable								$	2,006,306						$	2,111,917

(a) As of September 30, 2022, the aggregate fair value of available-for-sale debt securities with unrealized losses was $1.0 billion. The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.

~~(b) As of September 30, 2022, $399.7 million (par value)~~A portion of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 3 under "Participation Agreement."

~~(c)~~ As of ~~September~~June 30, ~~2022, $350.9~~2023, the par value and fair value of these securities was $6.8 million ~~(par value)~~and $6.3 million, respectively.

(b) A portion of private education loan asset-backed securities ~~are~~were subject to a repurchase ~~agreements~~agreement with a third ~~parties,~~party, as discussed in note 3 under ~~“Repurchase~~"Repurchase Agreements.”" As of June 30, 2023, the par value and fair value of these securities was $307.6 million and $281.8 million, respectively.

(c) On March 31, 2023, securities at Nelnet Bank with a fair value of $149.2 million were transferred from available-for-sale to held to maturity. The securities were reclassified at fair value at the time of the transfer, and such transfer represented a non-cash transaction. Accumulated other comprehensive income as of March 31, 2023 included pre-tax unrealized losses of $3.7 million related to the transfer. These unrealized losses are being amortized, consistent with the amortization of any discounts on such securities, over the remaining lives of the respective securities as an adjustment of yield.

(d) On March 31, 2023, certain Non-Nelnet Bank debt securities were transferred from held to maturity to available-for-sale.

(e) The Company has an investment in Agile Sports Technologies, Inc. (doing business as “Hudl”) that is included in “venture capital and funds” in the above table. On February ~~25,~~6, 2023, the Company acquired additional ownership interests in Hudl for $31.5 million. Such ownership interests were purchased by the Company from certain existing Hudl investors. The Company accounts for its investment in Hudl using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions. The February 6, 2023 transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities, and the price was privately negotiated between the Company and the selling parties. Accordingly, the Company did not adjust its carrying value of its Hudl investment to the February 2023 transaction value. As of June 30, 2023, the carrying amount of the Company's investment in Hudl is $165.5 million, and the Company's equity ownership interests did not materially change as a result of the February 6, 2023 transaction. David S. Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl.

(f) During the second quarter of 2022, the Company recorded an impairment charge of $5.4 million related primarily to one of its venture capital investments accounted for under the measurement alternative method. The impairment expense is included in "impairment expense" on the consolidated statements of income.

(g) During the first quarter of 2023, the Company contributed ~~$34.7~~$8.4 million of additional equity to ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO"). As a result of this equity contribution, the Company's voting membership interests percentage in ALLO did not materially change.

The Company accounts for its voting membership interests in ALLO under the Hypothetical Liquidation at Book Value ~~("HLBV")~~(HLBV) method of accounting. During the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~pre-tax~~ losses of ~~$17.6~~$12.2 million and ~~$10.5~~$16.9 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment, and during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~pre-tax~~ losses of ~~$47.6~~$32.4 million and ~~$31.6~~$30.1 million, respectively. Income and losses from the Company's investment in ALLO are included in ~~"other"~~"other, net" in "other ~~income/expense"~~income (expense)" on the consolidated statements of income.

~~(e)~~(h) As of ~~September~~June 30, ~~2022,~~2023, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was ~~$137.3~~$145.9 million and ~~$6.4~~$4.5 million, respectively. The preferred membership interests of ALLO held by the Company earn a preferred annual return of ~~6.25 percent.~~6.25%. The Company recognized ~~pre-tax~~ income on its ALLO preferred membership interests of ~~$2.2~~$2.3 million and ~~$2.0~~$2.1 million during the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$6.4~~$4.5 million and $4.3 million during ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021.~~respectively. This income is included in ~~"other"~~"other, net" in "other ~~income/expense"~~income (expense)" on the consolidated statements of income.

~~(f)~~(i) The Company has partial ownership in certain consumer, private education, ~~consumer,~~ and federally insured student loan securitizations. As of the latest remittance reports filed by the various trusts prior to or as of ~~September~~June 30, ~~2022,~~2023, the Company's ownership correlates to approximately ~~$630~~$680 million, ~~$150~~$560 million, and ~~$420~~$360 million of consumer, private education, ~~consumer,~~ and federally insured student loans, respectively, included in these securitizations.

~~(g)~~(j) As of ~~September~~June 30, ~~2022,~~2023, the Company has funded a total of ~~$252.1~~$312.9 million in solar investments, which includes ~~$81.3~~$120.0 million funded by syndication partners. The carrying value of the Company’s investment in a solar project is reduced by tax credits earned when the solar project is ~~placed in service.~~placed-in-service. The solar investment balance ~~at September~~as of June 30, ~~2022~~2023 represents the sum of total tax credits earned on solar projects ~~placed in service~~placed-in-service through ~~September~~June 30, ~~2022~~2023 and the calculated HLBV net losses being larger than the total ~~payments~~investment contributions made by the Company on such projects. As of ~~September~~June 30, ~~2022,~~2023, the Company is committed to fund an additional ~~$42.8~~$319.2 million on ~~these projects,~~tax equity investments, of which ~~$35.1~~$120.5 million ~~will~~is expected to be provided by syndication partners.

The Company accounts for its solar investments using the HLBV method of accounting. For the majority of the Company’s solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. The Company recognized ~~pre-tax~~ losses on its solar investments of ~~$4.2~~$7.9 million and ~~$3.4~~$1.9 million during the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$7.1~~$9.9 million and ~~$7.4~~$2.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. These losses, which include losses attributable to third-party noncontrolling interest investors (syndication partners), are included in ~~“other”~~“other, net” in "other ~~income/expense"~~income (expense)" on the consolidated statements of income. ~~Losses from solar investments include~~Solar losses ~~attributable~~attributed to ~~third-party minority~~noncontrolling interest investors ~~(syndication partners) that are included~~was $7.4 million and $2.0 million for the three months ended June 30, 2023 and 2022, respectively, and $10.1 million and $3.9 million during the six months ended June 30, 2023 and 2022, respectively, and is reflected in “net loss attributable to noncontrolling interests” in the consolidated statements of income. Solar losses attributed to minority interest investors was $4.1 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $8.0 million and $4.0 million for the nine months ended September 30, 2022 and 2021, respectively.

~~Impairment Expense~~

During the second quarter of 2022, the Company recorded an impairment charge of $5.4 million related primarily to one of its venture capital investments accounted for under the measurement alternative method. The impairment expense is included in "impairment expense and provision for beneficial interests, net" on the consolidated statements of income.

~~6. Business Combinations~~

~~NGWeb Solutions, LLC~~

On April 30, 2022, the Company acquired 30 percent of the ownership interests of NGWeb Solutions, LLC ("NextGen") for total cash consideration of $9.2 million. NextGen provides software solutions primarily to higher education institutions to enable administrators to efficiently manage online forms, scholarships, employment, online timesheets, and other specialized processes that require signed authorizations and interactions with student information.

Prior to the acquisition, the Company owned 50 percent of the ownership interests of NextGen and accounted for this investment under the equity method. As a result of the acquisition, the previously held 50 percent ownership interests was remeasured to its fair value as of the April 30, 2022 date of acquisition of the additional 30 percent of the ownership interests, resulting in a $15.2 million revaluation gain, which is included in "other" in "other income/expense" on the consolidated statements of income. For segment reporting, this gain is included in Corporate and Other Activities. Subsequent to the acquisition, the Company has consolidated the operating results of NextGen and such results are included in the Education Technology, Services, and Payment Processing reportable segment.

The following table summarizes the final estimated fair values of the assets acquired and liabilities assumed at the acquisition date. During the three months ended September 30, 2022, the Company recognized certain adjustments to the provisional amounts recorded on the acquisition date that were needed to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The net impact of these adjustments had no impact on operating results.

2123


~~Cash and cash equivalents~~	$	~~1,885~~
~~Accounts receivable~~	~~1,315~~
~~Property and equipment~~	~~800~~
~~Other assets~~	~~201~~
~~Intangible assets~~	~~15,250~~
~~Excess cost over fair value of net assets acquired (goodwill)~~	~~15,937~~
~~Other liabilities~~	~~(4,550)~~
~~Net assets acquired~~	~~30,838~~
~~Minority interest~~	~~(6,291)~~
~~Remeasurement of previously held investment~~	~~(15,342)~~
~~Total consideration paid by the Company~~	$	~~9,205~~

The following table presents, by remaining contractual maturity, the amortized cost and fair value of debt securities at June 30, 2023:

The $15.3 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 14 years. The intangible assets that made up this amount include customer relationships of $12.8 million (15-year useful life), computer software of $1.7 million (5-year useful life) and a trade name of $0.8 million (10-year useful life).

The $15.9 million of goodwill is not expected to be deductible for tax purposes. The amount allocated to goodwill was primarily attributed to the synergies and economies of scale expected from combining the operations of the Company and NextGen.

~~The pro forma impacts of the NextGen acquisition on the Company's historical results prior to the acquisition were not material.~~

~~GRNE Solar~~

On July 1, 2022, the Company acquired 80 percent of the ownership interests of two subsidiaries of GRNE Solutions, LLC named GRNE-Nelnet, LLC ("GRNE") and ENRG-Nelnet, LLC ("ENRG") (collectively referred to as "GRNE Solar") for total cash consideration of $30.4 million. GRNE designs and installs residential, commercial, and utility-scale solar systems in the Midwest. ENRG owns certain assets that generate and sell solar energy. The acquisition diversifies the Company's position in the renewable energy space to include solar construction. For segment reporting, the operating results of GRNE Solar are included in Corporate and Other Activities.


	As of June 30, 2023
	1 year or less		After 1 year through 5 years	After 5 years through 10 years	After 10 years	Total
Available-for-sale asset-backed securities
Non-Nelnet Bank:
FFELP loan	$	24,742	11,841	48,079	244,594	329,256
Private education loan	—		—	—	307,084	307,084
Other debt securities	—		99	—	59,532	59,631
Total Non-Nelnet Bank	24,742		11,940	48,079	611,210	695,971
Fair value	24,735		11,915	46,921	588,234	671,805
Nelnet Bank:
FFELP loan	37,270		—	44,458	175,690	257,418
Private education loan	—		—	—	1,707	1,707
Other debt securities	2,112		19,490	50,919	47,950	120,471
Total Nelnet Bank	39,382		19,490	95,377	225,347	379,596
Fair value	38,911		19,370	93,795	224,193	376,269
Total available-for-sale asset-backed securities at amortized cost	$	64,124	31,430	143,456	836,557	1,075,567
Total available-for-sale asset-backed securities at fair value	$	63,646	31,285	140,716	812,427	1,048,074
Held to maturity investments
Non-Nelnet Bank:
Debt securities	$	4,700	—	—	—	4,700
Fair value	4,700		—	—	—	4,700
Nelnet Bank:
FFELP loan asset-backed securities	—		3,678	—	147,162	150,840
Other debt securities	241		—	—	—	241
Total Nelnet Bank	241		3,678	—	147,162	151,081
Fair value	241		3,743	—	147,853	151,837
Total held-to-maturity investments at amortized cost	$	4,941	3,678	—	147,162	155,781
Total held-to-maturity investments at fair value	$	4,941	3,743	—	147,853	156,537

The following table ~~summarizes~~presents securities classified as available-for-sale that have gross unrealized losses at June 30, 2023 and the ~~estimated~~ fair ~~values~~value of such securities as of June 30, 2023. These securities are segregated between investments that had been in a continuous unrealized loss position for less than twelve months and twelve months or more, based on the point in time that the fair value declined below the amortized cost basis. All securities in the table below have been evaluated to determine if a credit loss exists. As part of that assessment, the Company concluded it currently has the intent and ability to retain these investments, and none of the ~~assets acquired and liabilities assumed at the acquisition date.~~unrealized losses were due to credit losses.


~~Cash and cash equivalents~~	$	~~1,742~~
~~Accounts receivable~~	~~4,941~~
~~Property and equipment~~	~~8,720~~
~~Other assets~~	~~3,092~~
~~Intangible assets~~	~~11,683~~
~~Excess cost over fair value of net assets acquired (goodwill)~~	~~14,004~~
~~Bonds and notes payable~~	~~(750)~~
~~Other liabilities~~	~~(5,438)~~
~~Net assets acquired~~	~~37,994~~
~~Minority interest~~	~~(7,599)~~
~~Total consideration paid by the Company~~	$	~~30,395~~

The $11.7 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 8 years. The intangible assets that made up this amount include a trade name of $8.1 million (10-year useful life), customer relationships of $1.1 million (3-year useful life), and other separably identified intangibles of $2.4 million (5-year useful life).

The $14.0 million of goodwill is expected to be deductible for tax purposes. The amount allocated to goodwill was attributed to synergies from combining the operations of the Company and GRNE Solar and intangible assets that do not qualify for separate recognition.

~~The pro forma impacts of the GRNE Solar acquisition on the Company's historical results prior to the acquisition were not material.~~


	As of June 30, 2023
	Unrealized loss position less than 12 months			Unrealized loss position 12 months or more		Total
Available-for-sale asset-backed securities	Unrealized loss		Fair value	Unrealized loss	Fair value	Unrealized loss	Fair value
Non-Nelnet Bank:
FFELP loan	$	(6,349)	208,144	(23)	532	(6,372)	208,676
Private education loan	(4,304)		71,534	(20,934)	210,312	(25,238)	281,846
Other debt securities	(670)		24,304	—	—	(670)	24,304
Total Non-Nelnet Bank	(11,323)		303,982	(20,957)	210,844	(32,280)	514,826
Nelnet Bank:
FFELP loan	(827)		89,190	(1,603)	88,972	(2,430)	178,162
Private education loan	(92)		1,616	—	—	(92)	1,616
Other debt securities	(293)		30,671	(2,051)	57,692	(2,344)	88,363
Total Nelnet Bank	(1,212)		121,477	(3,654)	146,664	(4,866)	268,141
Total available-for-sale asset-backed securities	$	(12,535)	425,459	(24,611)	357,508	(37,146)	782,967

2224

7.The following table summarizes the gross proceeds received and gross realized gains and losses related to sales of available-for-sale asset-backed securities.


	Three months ended			Six months ended
	June 30,			June 30,
	2023		2022	2023	2022
Gross proceeds from sales	$	85,375	205,772	577,548	319,752

Gross realized gains	$	920	909	2,194	3,874
Gross realized losses	(2)		(60)	(6,258)	(232)
Net gains (losses)	$	918	849	(4,064)	3,642

6. Intangible Assets

Intangible assets consisted of the following:

Weighted average remaining useful life as of
September 30, 2022 (months)
As of As of
September 30, 2022 December 31, 2021
Amortizable intangible assets, net:
Customer relationships (net of accumulated amortization of $49,709 and $97,398, respectively) 112 $ 55,385 47,894
Trade names (net of accumulated amortization of $312) 117 8,598 —
Computer software (net of accumulated amortization of $3,730 and $3,669, respectively) 30 4,190 4,135
Other (net of accumulated amortization of $245) 57 2,195 —
Total - amortizable intangible assets, net 106 $ 70,368 52,029


	Weighted average remaining useful life as of June 30, 2023 (months)
		As of		As of
		June 30, 2023		December 31, 2022
Amortizable intangible assets, net:
Customer relationships (net of accumulated amortization of $43,178 and $55,116, respectively)	107	$	47,529	51,738
Trade names (net of accumulated amortization of $2,085 and $617, respectively)	16	6,825		8,293
Computer software (net of accumulated amortization of $400 and $6,400, respectively)	46	1,320		1,520
Other (net of accumulated amortization of $821 and $490, respectively)	48	1,619		1,950
Total - amortizable intangible assets, net	93	$	57,293	63,501

The Company recorded amortization expense on its intangible assets of ~~$3.3~~$3.5 million and $2.9 million for the three months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021, and $8.6~~$6.2 million and ~~$19.9~~$5.3 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of ~~September~~June 30, ~~2022,~~2023, the Company estimates it will record amortization expense as follows:


2022 (October 1 - December 31)		$	3,509
2023		13,222
2023 (July 1 - December 31)				2023 (July 1 - December 31)	$	10,765
2024	2024	10,691		2024	8,775
2025	2025	7,604		2025	7,141
2026	2026	7,259		2026	6,294
2027 and thereafter		28,083
2027				2027	5,814
2028 and thereafter				2028 and thereafter	18,504
		$	70,368		$	57,293

8.7. Goodwill

The following table presents the carrying amount of goodwill as of June 30, 2023 and December 31, 2022 by reportable operating ~~segment was as follows:~~segment:

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management Nelnet Bank Corporate and Other Activities Total
Balance as of December 31, 2021 and March 31, 2022 $ 23,639 76,570 41,883 — — 142,092
Goodwill acquired during the period (NextGen) — 7,025 — — — 7,025
Balance as of June 30, 2022 23,639 83,595 41,883 — — 149,117
Goodwill acquired during the period (GRNE Solar) — — — — 14,004 14,004
NextGen purchase price allocation adjustment — 8,912 — — — 8,912
Balance as of September 30, 2022 $ 23,639 92,507 41,883 — 14,004 172,033


	Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Total








Goodwill balance	$	23,639	92,507	41,883	—	18,873	176,902

2325

8. Bank Deposits

Deposits are interest-bearing deposits and consist of brokered certificates of deposit (CDs) and retail and other savings deposits and CDs. Retail and other deposits include savings deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trusts (STFIT), and commercial and institutional CDs. Union Bank, a related party, is the program manager for the College Savings plans and trustee for the STFIT Trust. CDs are accounts that have a stipulated maturity and interest rate. For savings accounts, the depositor may be required to give written notice of any intended withdrawal no less than seven days before the withdrawal is made. Generally, early withdrawal of brokered CDs is prohibited (except in the case of death or legal incapacity).

Nelnet Bank has intercompany deposits from Nelnet, Inc. and its subsidiaries totaling $140.4 million, including a $40.0 million pledged deposit from Nelnet, Inc. as required under a Capital and Liquidity Maintenance Agreement with the FDIC. All intercompany deposits held at Nelnet Bank are eliminated for consolidated financial reporting purposes.

The following table summarizes Nelnet Bank’s interest-bearing deposits, excluding intercompany deposits:


	As of		As of
	June 30, 2023		December 31, 2022
Brokered CDs, net of brokered deposit fees	$	203,418	254,817
Retail and other savings (529, STFIT, and HSA)	504,858		410,556
Retail and other CDs (commercial and institutional)	22,770		25,949
Total interest-bearing deposits	$	731,046	691,322

The following table presents certificates of deposit remaining maturities as of June 30, 2023:




After two years to three years	$	151,559
After three years to four years	74,282
After four years to five years	347

Total	$	226,188

The Educational 529 College Savings, STFIT, and Health Savings plan deposits are large interest-bearing omnibus accounts structured to allow FDIC insurance to flow through to underlying individual depositors. Except for the pledged deposit from Nelnet, Inc. and an earmarked deposit required for intercompany transactions, there were no deposits exceeding the FDIC insurance limits as of June 30, 2023 and December 31, 2022.

9. Earnings per Common Share

~~Presented below is a summary of~~The following table presents the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.


		Three months ended September 30,								Three months ended June 30,
		2022				2021				2023				2022
		Common shareholders		Unvested restricted stock shareholders	Total	Common shareholders	Unvested restricted stock shareholders	Total		Common shareholders		Unvested restricted stock shareholders	Total	Common shareholders	Unvested restricted stock shareholders	Total
Numerator:	Numerator:								Numerator:
Net income attributable to Nelnet, Inc.	Net income attributable to Nelnet, Inc.	$	102,763	2,035	104,798	52,245	893	53,138	Net income attributable to Nelnet, Inc.	$	27,665	602	28,267	83,485	1,644	85,129
Denominator:	Denominator:								Denominator:
Weighted-average common shares outstanding - basic and diluted	Weighted-average common shares outstanding - basic and diluted	36,654,781		725,712	37,380,493	37,947,257	648,464	38,595,721	Weighted-average common shares outstanding - basic and diluted	36,670,933		797,464	37,468,397	36,981,990	728,224	37,710,214
Earnings per share - basic and diluted	Earnings per share - basic and diluted	$	2.80	2.80	2.80	1.38	1.38	1.38	Earnings per share - basic and diluted	$	0.75	0.75	0.75	2.26	2.26	2.26
		Nine months ended September 30,								Six months ended June 30,
		2022				2021				2023				2022
		Common shareholders		Unvested restricted stock shareholders	Total	Common shareholders	Unvested restricted stock shareholders	Total		Common shareholders		Unvested restricted stock shareholders	Total	Common shareholders	Unvested restricted stock shareholders	Total
Numerator:	Numerator:								Numerator:
Net income attributable to Nelnet, Inc.	Net income attributable to Nelnet, Inc.	$	369,479	7,094	376,573	256,416	4,187	260,603	Net income attributable to Nelnet, Inc.	$	53,611	1,143	54,754	266,735	5,041	271,776
Denominator:	Denominator:								Denominator:
Weighted-average common shares outstanding - basic and diluted	Weighted-average common shares outstanding - basic and diluted	36,998,100		710,325	37,708,425	38,025,898	620,994	38,646,892	Weighted-average common shares outstanding - basic and diluted	36,625,819		781,024	37,406,843	37,172,606	702,502	37,875,108
Earnings per share - basic and diluted	Earnings per share - basic and diluted	$	9.99	9.99	9.99	6.74	6.74	6.74	Earnings per share - basic and diluted	$	1.46	1.46	1.46	7.18	7.18	7.18

2427

10. Segment Reporting

See note 1517 of the notes to consolidated financial statements included in the ~~2021~~2022 Annual Report for a description of the Company's operating segments. The following tables ~~include~~present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.


		Three months ended September 30, 2022							Three months ended June 30, 2023
		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations		Total		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations	Total
Total interest income	Total interest income	$	831	3,707	182,932	7,551	10,860	(2,748)		203,133	Total interest income	$	1,058	5,268	253,763	13,661	25,855	(15,578)	284,027
Interest expense	Interest expense	—		—	120,009	3,298	6,067	(2,748)		126,625	Interest expense	—		—	232,313	8,171	8,242	(15,578)	233,148
Net interest income	Net interest income	831		3,707	62,923	4,253	4,793	—		76,508	Net interest income	1,058		5,268	21,450	5,490	17,613	—	50,879
Less provision (negative provision) for loan losses		—		—	9,215	450	—	—		9,665
Less provision for loan losses											Less provision for loan losses	—		—	8,099	1,493	—	—	9,592
Net interest income after provision for loan losses	Net interest income after provision for loan losses	831		3,707	53,708	3,803	4,793	—		66,843	Net interest income after provision for loan losses	1,058		5,268	13,351	3,997	17,613	—	41,287
Other income/expense:
Other income (expense):											Other income (expense):
Loan servicing and systems revenue	Loan servicing and systems revenue	134,197		—	—	—	—	—		134,197	Loan servicing and systems revenue	122,020		—	—	—	—	—	122,020
Intersegment revenue	Intersegment revenue	8,281		8	—	—	—	(8,289)		—	Intersegment revenue	7,246		65	—	—	—	(7,311)	—
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	—		106,894	—	—	—	—		106,894	Education technology, services, and payment processing revenue	—		109,858	—	—	—	—	109,858

Solar construction revenue	Solar construction revenue	—		—	—	—	9,358	—		9,358	Solar construction revenue	—		—	—	—	4,735	—	4,735
Other		596		—	4,627	566	(3,564)	—		2,225
Gain on sale of loans		—		—	2,627	—	—	—		2,627

Impairment expense and provision for beneficial interests, net		—		—	—	—	121	—		121
Other, net											Other, net	605		—	1,319	620	(9,553)	—	(7,011)
Gain on sale of loans, net											Gain on sale of loans, net	—		—	15,511	—	—	—	15,511
Impairment expense											Impairment expense	—		—	—	—	—	—	—
Derivative settlements, net	Derivative settlements, net	—		—	10,271	—	—	—		10,271	Derivative settlements, net	—		—	(18)	83	—	—	65
Derivative market value adjustments, net	Derivative market value adjustments, net	—		—	52,991	—	—	—		52,991	Derivative market value adjustments, net	—		—	897	1,108	—	—	2,005
Total other income/expense		143,074		106,902	70,516	566	5,915	(8,289)		318,684
Total other income (expense), net											Total other income (expense), net	129,871		109,923	17,709	1,811	(4,818)	(7,311)	247,183
Cost of services:	Cost of services:										Cost of services:
Cost to provide education technology, services, and payment processing services	Cost to provide education technology, services, and payment processing services	—		42,676	—	—	—	—		42,676	Cost to provide education technology, services, and payment processing services	—		40,407	—	—	—	—	40,407
Cost to provide solar construction services	Cost to provide solar construction services	—		—	—	—	5,968	—		5,968	Cost to provide solar construction services	—		—	—	—	9,122	—	9,122
Total cost of services	Total cost of services	—		42,676	—	—	5,968	—		48,644	Total cost of services	—		40,407	—	—	9,122	—	49,529
Operating expenses:	Operating expenses:										Operating expenses:
Salaries and benefits	Salaries and benefits	82,067		34,950	653	1,814	27,713	—		147,198	Salaries and benefits	76,141		38,351	1,096	2,297	26,965	(145)	144,706
Depreciation and amortization	Depreciation and amortization	5,784		2,532	—	4	10,452	—		18,772	Depreciation and amortization	4,863		2,815	—	51	10,923	—	18,652
Other expenses	Other expenses	16,654		7,034	3,349	1,427	15,395	—		43,858	Other expenses	13,818		9,692	4,115	1,624	16,747	—	45,997
Intersegment expenses, net	Intersegment expenses, net	17,486		4,762	8,350	69	(22,378)	(8,289)		—	Intersegment expenses, net	19,079		5,884	8,145	92	(26,034)	(7,166)	—
Total operating expenses	Total operating expenses	121,991		49,278	12,352	3,314	31,182	(8,289)		209,828	Total operating expenses	113,901		56,742	13,356	4,064	28,601	(7,311)	209,355
Income (loss) before income taxes	Income (loss) before income taxes	21,914		18,655	111,872	1,055	(26,442)	—		127,055	Income (loss) before income taxes	17,028		18,042	17,704	1,744	(24,928)	—	29,586
Income tax (expense) benefit	Income tax (expense) benefit	(5,259)		(4,475)	(26,849)	(246)	10,244	—		(26,586)	Income tax (expense) benefit	(4,086)		(4,327)	(4,249)	(396)	2,567	—	(10,491)
Net income (loss)	Net income (loss)	16,655		14,180	85,023	809	(16,198)	—		100,469	Net income (loss)	12,942		13,715	13,455	1,348	(22,361)	—	19,095
Net (income) loss attributable to noncontrolling interests	Net (income) loss attributable to noncontrolling interests	—		(61)	—	—	4,390	—		4,329	Net (income) loss attributable to noncontrolling interests	—		(19)	—	—	9,191	—	9,172
Net income (loss) attributable to Nelnet, Inc.	Net income (loss) attributable to Nelnet, Inc.	$	16,655	14,119	85,023	809	(11,808)	—		104,798	Net income (loss) attributable to Nelnet, Inc.	$	12,942	13,696	13,455	1,348	(13,170)	—	28,267

Total assets as of September 30, 2022		$	235,858	440,859	16,374,493	884,089	2,360,882	(732,648)		19,563,533
Total assets as of June 30, 2023											Total assets as of June 30, 2023	$	173,926	482,922	14,667,357	1,005,043	2,091,500	(613,116)	17,807,632

2528


		Three months ended September 30, 2021							Three months ended June 30, 2022
		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations		Total		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations	Total
Total interest income	Total interest income	$	31	344	131,781	2,061	2,609	(172)		136,654	Total interest income	$	246	874	140,396	5,212	6,235	(1,376)	151,587
Interest expense	Interest expense	24		—	48,662	421	1,242	(172)		50,176	Interest expense	20		—	69,708	1,639	3,652	(1,376)	73,642
Net interest income	Net interest income	7		344	83,119	1,640	1,367	—		86,478	Net interest income	226		874	70,688	3,573	2,583	—	77,945
Less provision (negative provision) for loan losses		—		—	5,940	(113)	—	—		5,827
Less provision for loan losses											Less provision for loan losses	—		—	8,827	582	—	—	9,409
Net interest income after provision for loan losses	Net interest income after provision for loan losses	7		344	77,179	1,753	1,367	—		80,651	Net interest income after provision for loan losses	226		874	61,861	2,991	2,583	—	68,536
Other income/expense:
Other income (expense):											Other income (expense):
Loan servicing and systems revenue	Loan servicing and systems revenue	112,351		—	—	—	—	—		112,351	Loan servicing and systems revenue	124,873		—	—	—	—	—	124,873
Intersegment revenue	Intersegment revenue	8,621		3	—	—	—	(8,624)		—	Intersegment revenue	8,381		7	—	—	—	(8,388)	—
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	—		85,324	—	—	—	—		85,324	Education technology, services, and payment processing revenue	—		91,031	—	—	—	—	91,031

Solar construction revenue	Solar construction revenue	—		—	—	—	—	—		—	Solar construction revenue	—		—	—	—	—	—	—
Other		727		13	(7,275)	450	17,952	—		11,867
Gain on sale of loans		—		—	3,444	—	—	—		3,444

Impairment expense and provision for beneficial interests, net		(13,243)		—	—	—	(916)	—		(14,159)
Other, net											Other, net	611		—	5,133	157	6,747	—	12,647
Gain on sale of loans, net											Gain on sale of loans, net	—		—	—	—	—	—	—
Impairment expense											Impairment expense	—		—	—	—	(6,284)	—	(6,284)
Derivative settlements, net	Derivative settlements, net	—		—	(5,909)	—	—	—		(5,909)	Derivative settlements, net	—		—	4,623	—	—	—	4,623
Derivative market value adjustments, net	Derivative market value adjustments, net	—		—	7,260	—	—	—		7,260	Derivative market value adjustments, net	—		—	40,401	—	—	—	40,401
Total other income/expense		108,456		85,340	(2,480)	450	17,036	(8,624)		200,178
Total other income (expense), net											Total other income (expense), net	133,865		91,038	50,157	157	463	(8,388)	267,291
Cost of services:	Cost of services:										Cost of services:
Cost to provide education technology, services, and payment processing services	Cost to provide education technology, services, and payment processing services	—		31,335	—	—	—	—		31,335	Cost to provide education technology, services, and payment processing services	—		30,852	—	—	—	—	30,852
Cost to provide solar construction services	Cost to provide solar construction services	—		—	—	—	—	—		—	Cost to provide solar construction services	—		—	—	—	—	—	—
Total cost of services	Total cost of services	—		31,335	—	—	—	—		31,335	Total cost of services	—		30,852	—	—	—	—	30,852
Operating expenses:	Operating expenses:										Operating expenses:
Salaries and benefits	Salaries and benefits	75,305		29,119	542	890	22,735	—		128,592	Salaries and benefits	83,220		32,120	614	1,714	23,729	—	141,398
Depreciation and amortization	Depreciation and amortization	4,245		2,762	—	—	8,702	—		15,710	Depreciation and amortization	5,318		2,698	—	4	10,230	—	18,250
Other expenses	Other expenses	12,738		4,804	5,420	445	14,918	—		38,324	Other expenses	13,507		6,750	3,543	899	12,241	—	36,940
Intersegment expenses, net	Intersegment expenses, net	19,217		3,672	8,652	32	(22,949)	(8,624)		—	Intersegment expenses, net	18,558		4,805	8,513	57	(23,545)	(8,388)	—
Total operating expenses	Total operating expenses	111,505		40,357	14,614	1,367	23,406	(8,624)		182,626	Total operating expenses	120,603		46,373	12,670	2,674	22,655	(8,388)	196,588
Income (loss) before income taxes	Income (loss) before income taxes	(3,042)		13,992	60,085	836	(5,003)	—		66,868	Income (loss) before income taxes	13,488		14,687	99,348	474	(19,609)	—	108,387
Income tax (expense) benefit	Income tax (expense) benefit	730		(3,358)	(14,421)	(200)	1,600	—		(15,649)	Income tax (expense) benefit	(3,237)		(3,525)	(23,844)	(106)	5,228	—	(25,483)
Net income (loss)	Net income (loss)	(2,312)		10,634	45,664	636	(3,403)	—		51,219	Net income (loss)	10,251		11,162	75,504	368	(14,381)	—	82,904
Net (income) loss attributable to noncontrolling interests	Net (income) loss attributable to noncontrolling interests	—		—	—	—	1,919	—		1,919	Net (income) loss attributable to noncontrolling interests	—		53	—	—	2,172	—	2,225
Net income (loss) attributable to Nelnet, Inc.	Net income (loss) attributable to Nelnet, Inc.	$	(2,312)	10,634	45,664	636	(1,484)	—		53,138	Net income (loss) attributable to Nelnet, Inc.	$	10,251	11,215	75,504	368	(12,209)	—	85,129

Total assets as of September 30, 2021		$	238,602	415,178	20,001,997	413,155	1,740,060	(406,253)		22,402,739
Total assets as of June 30, 2022											Total assets as of June 30, 2022	$	240,437	546,235	17,388,228	864,659	2,273,216	(688,762)	20,624,013

2629


		Nine months ended September 30, 2022							Six months ended June 30, 2023
		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations		Total		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations	Total
Total interest income	Total interest income	$	1,144	4,920	441,926	15,792	21,087	(4,953)		479,916	Total interest income	$	2,095	11,304	488,482	25,920	47,054	(24,860)	549,995
Interest expense	Interest expense	44		—	235,720	5,792	11,745	(4,953)		248,347	Interest expense	—		—	421,511	15,385	20,560	(24,860)	432,597
Net interest income	Net interest income	1,100		4,920	206,206	10,000	9,342	—		231,569	Net interest income	2,095		11,304	66,971	10,535	26,494	—	117,398
Less provision (negative provision) for loan losses		—		—	17,178	1,462	—	—		18,640
Less provision for loan losses											Less provision for loan losses	—		—	39,957	3,910	—	—	43,867
Net interest income after provision for loan losses	Net interest income after provision for loan losses	1,100		4,920	189,028	8,538	9,342	—		212,929	Net interest income after provision for loan losses	2,095		11,304	27,014	6,625	26,494	—	73,531
Other income/expense:
Other income (expense):											Other income (expense):
Loan servicing and systems revenue	Loan servicing and systems revenue	395,438		—	—	—	—	—		395,438	Loan servicing and systems revenue	261,247		—	—	—	—	—	261,247
Intersegment revenue	Intersegment revenue	25,142		16	—	—	—	(25,158)		—	Intersegment revenue	15,036		121	—	—	—	(15,157)	—
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	—		310,211	—	—	—	—		310,211	Education technology, services, and payment processing revenue	—		243,462	—	—	—	—	243,462

Solar construction revenue	Solar construction revenue	—		—	—	—	9,358	—		9,358	Solar construction revenue	—		—	—	—	13,386	—	13,386
Other		1,946		—	16,270	2,224	4,309	—		24,750
Gain on sale of loans		—		—	5,616	—	—	—		5,616

Impairment expense and provision for beneficial interests, net		—		—	—	—	(6,163)	—		(6,163)
Other, net											Other, net	1,213		—	4,164	830	(27,287)	—	(21,083)
Gain on sale of loans, net											Gain on sale of loans, net	—		—	27,323	—	—	—	27,323
Impairment expense											Impairment expense	—		—	—	—	—	—	—
Derivative settlements, net	Derivative settlements, net	—		—	12,085	—	—	—		12,085	Derivative settlements, net	—		—	23,319	83	—	—	23,402
Derivative market value adjustments, net	Derivative market value adjustments, net	—		—	239,125	—	—	—		239,125	Derivative market value adjustments, net	—		—	(36,515)	1,108	—	—	(35,407)
Total other income/expense		422,526		310,227	273,096	2,224	7,504	(25,158)		990,420
Total other income (expense), net											Total other income (expense), net	277,496		243,583	18,291	2,021	(13,901)	(15,157)	512,330
Cost of services:	Cost of services:										Cost of services:
Cost to provide education technology, services, and payment processing services	Cost to provide education technology, services, and payment processing services	—		109,073	—	—	—	—		109,073	Cost to provide education technology, services, and payment processing services	—		88,110	—	—	—	—	88,110

Cost to provide solar construction services	Cost to provide solar construction services	—		—	—	—	5,968	—		5,968	Cost to provide solar construction services	—		—	—	—	17,422	—	17,422
Total cost of services	Total cost of services	—		109,073	—	—	5,968	—		115,041	Total cost of services	—		88,110	—	—	17,422	—	105,532
Operating expenses:	Operating expenses:										Operating expenses:
Salaries and benefits	Salaries and benefits	257,259		98,356	1,858	5,082	75,455	—		438,010	Salaries and benefits	160,701		76,264	1,851	4,361	54,384	(145)	297,416
Depreciation and amortization	Depreciation and amortization	16,056		7,544	—	11	30,366	—		53,978	Depreciation and amortization	9,377		5,393	—	56	20,454	—	35,279
Other expenses	Other expenses	46,375		19,549	9,925	3,009	41,438	—		120,297	Other expenses	27,131		17,755	9,131	2,406	30,358	—	86,781
Intersegment expenses, net	Intersegment expenses, net	56,442		14,171	25,694	171	(71,320)	(25,158)		—	Intersegment expenses, net	40,136		11,684	16,841	173	(53,822)	(15,012)	—
Total operating expenses	Total operating expenses	376,132		139,620	37,477	8,273	75,939	(25,158)		612,285	Total operating expenses	237,345		111,096	27,823	6,996	51,374	(15,157)	419,476
Income (loss) before income taxes	Income (loss) before income taxes	47,494		66,454	424,647	2,489	(65,061)	—		476,023	Income (loss) before income taxes	42,246		55,681	17,482	1,650	(56,203)	—	60,853
Income tax (expense) benefit	Income tax (expense) benefit	(11,399)		(15,947)	(101,915)	(574)	22,070	—		(107,765)	Income tax (expense) benefit	(10,139)		(13,393)	(4,196)	(362)	9,348	—	(18,741)
Net income (loss)	Net income (loss)	36,095		50,507	322,732	1,915	(42,991)	—		368,258	Net income (loss)	32,107		42,288	13,286	1,288	(46,855)	—	42,112
Net (income) loss attributable to noncontrolling interests	Net (income) loss attributable to noncontrolling interests	—		(8)	—	—	8,323	—		8,315	Net (income) loss attributable to noncontrolling interests	—		119	—	—	12,523	—	12,642
Net income (loss) attributable to Nelnet, Inc.	Net income (loss) attributable to Nelnet, Inc.	$	36,095	50,499	322,732	1,915	(34,668)	—		376,573	Net income (loss) attributable to Nelnet, Inc.	$	32,107	42,407	13,286	1,288	(34,332)	—	54,754

Total assets as of September 30, 2022		$	235,858	440,859	16,374,493	884,089	2,360,882	(732,648)		19,563,533
Total assets as of June 30, 2023											Total assets as of June 30, 2023	$	173,926	482,922	14,667,357	1,005,043	2,091,500	(613,116)	17,807,632

2730


		Nine months ended September 30, 2021							Six months ended June 30, 2022
		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations		Total		Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Asset Generation and Management	Nelnet Bank	Corporate and Other Activities	Eliminations	Total
Total interest income	Total interest income	$	95	818	388,149	5,479	5,379	(578)		399,341	Total interest income	$	313	1,213	258,994	8,241	10,227	(2,205)	276,783
Interest expense	Interest expense	70		—	124,282	1,007	3,158	(578)		127,939	Interest expense	44		—	115,711	2,494	5,678	(2,205)	121,721
Net interest income	Net interest income	25		818	263,867	4,472	2,221	—		271,402	Net interest income	269		1,213	143,283	5,747	4,549	—	155,062
Less provision (negative provision) for loan losses		—		—	(11,225)	378	—	—		(10,847)
Less provision for loan losses											Less provision for loan losses	—		—	7,963	1,011	—	—	8,974
Net interest income after provision for loan losses	Net interest income after provision for loan losses	25		818	275,092	4,094	2,221	—		282,249	Net interest income after provision for loan losses	269		1,213	135,320	4,736	4,549	—	146,088
Other income/expense:
Other income (expense):											Other income (expense):
Loan servicing and systems revenue	Loan servicing and systems revenue	335,961		—	—	—	—	—		335,961	Loan servicing and systems revenue	261,241		—	—	—	—	—	261,241
Intersegment revenue	Intersegment revenue	25,369		9	—	—	—	(25,378)		—	Intersegment revenue	16,860		10	—	—	—	(16,870)	—
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	—		257,284	—	—	—	—		257,284	Education technology, services, and payment processing revenue	—		203,317	—	—	—	—	203,317

Solar construction revenue	Solar construction revenue	—		—	—	—	—	—		—	Solar construction revenue	—		—	—	—	—	—	—
Other		2,541		13	(4,514)	475	31,668	—		30,183
Gain on sale of loans		—		—	18,715	—	—	—		18,715

Impairment expense and provision for beneficial interests, net		(13,243)		—	2,436	—	(1,416)	—		(12,223)
Other, net											Other, net	1,350		—	11,644	1,659	7,872	—	22,524
Gain on sale of loans, net											Gain on sale of loans, net	—		—	2,989	—	—	—	2,989
Impairment expense											Impairment expense	—		—	—	—	(6,284)	—	(6,284)
Derivative settlements, net	Derivative settlements, net	—		—	(15,587)	—	—	—		(15,587)	Derivative settlements, net	—		—	1,814	—	—	—	1,814
Derivative market value adjustments, net	Derivative market value adjustments, net	—		—	44,455	—	—	—		44,455	Derivative market value adjustments, net	—		—	186,135	—	—	—	186,135
Total other income/expense		350,628		257,306	45,505	475	30,252	(25,378)		658,788
Total other income (expense), net											Total other income (expense), net	279,451		203,327	202,582	1,659	1,588	(16,870)	671,736
Cost of services:	Cost of services:										Cost of services:
Cost to provide education technology, services, and payment processing services	Cost to provide education technology, services, and payment processing services	—		80,063	—	—	—	—		80,063	Cost to provide education technology, services, and payment processing services	—		66,397	—	—	—	—	66,397

Cost to provide solar construction services	Cost to provide solar construction services	—		—	—	—	—	—		—	Cost to provide solar construction services	—		—	—	—	—	—	—
Total cost of services	Total cost of services	—		80,063	—	—	—	—		80,063	Total cost of services	—		66,397	—	—	—	—	66,397
Operating expenses:	Operating expenses:										Operating expenses:
Salaries and benefits	Salaries and benefits	210,151		82,154	1,594	3,956	65,496	—		363,351	Salaries and benefits	175,192		63,406	1,205	3,268	47,742	—	290,813
Depreciation and amortization	Depreciation and amortization	20,411		8,789	—	—	26,927	—		56,129	Depreciation and amortization	10,272		5,013	—	7	19,914	—	35,206
Other expenses	Other expenses	39,296		14,063	12,763	1,227	40,265	—		107,611	Other expenses	29,721		12,514	6,576	1,584	26,045	—	76,439
Intersegment expenses, net	Intersegment expenses, net	52,241		10,856	25,627	72	(63,419)	(25,378)		—	Intersegment expenses, net	38,955		9,410	17,344	102	(48,941)	(16,870)	—
Total operating expenses	Total operating expenses	322,099		115,862	39,984	5,255	69,269	(25,378)		527,091	Total operating expenses	254,140		90,343	25,125	4,961	44,760	(16,870)	402,458
Income (loss) before income taxes	Income (loss) before income taxes	28,554		62,199	280,613	(686)	(36,796)	—		333,883	Income (loss) before income taxes	25,580		47,800	312,777	1,434	(38,623)	—	348,969
Income tax (expense) benefit	Income tax (expense) benefit	(6,853)		(14,928)	(67,347)	151	12,230	—		(76,747)	Income tax (expense) benefit	(6,139)		(11,472)	(75,066)	(328)	11,826	—	(81,180)
Net income (loss)	Net income (loss)	21,701		47,271	213,266	(535)	(24,566)	—		257,136	Net income (loss)	19,441		36,328	237,711	1,106	(26,797)	—	267,789
Net (income) loss attributable to noncontrolling interests	Net (income) loss attributable to noncontrolling interests	—		—	—	—	3,467	—		3,467	Net (income) loss attributable to noncontrolling interests	—		53	—	—	3,934	—	3,987
Net income (loss) attributable to Nelnet, Inc.	Net income (loss) attributable to Nelnet, Inc.	$	21,701	47,271	213,266	(535)	(21,099)	—		260,603	Net income (loss) attributable to Nelnet, Inc.	$	19,441	36,381	237,711	1,106	(22,863)	—	271,776

Total assets as of September 30, 2021		$	238,602	415,178	20,001,997	413,155	1,740,060	(406,253)		22,402,739
Total assets as of June 30, 2022											Total assets as of June 30, 2022	$	240,437	546,235	17,388,228	864,659	2,273,216	(688,762)	20,624,013

2831

11. Disaggregated Revenue

The following tables ~~provide~~present disaggregated revenue by service offering ~~and/~~or customer type for the Company's fee-based ~~reportable~~ operating segments.

Loan Servicing and Systems


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Government servicing		$	104,428	84,084	312,368	241,497
Government loan servicing							Government loan servicing	$	95,736	98,815	204,618	207,940
Private education and consumer loan servicing	Private education and consumer loan servicing	12,198		13,198	37,194	34,563	Private education and consumer loan servicing	12,063		12,122	24,225	24,995
FFELP servicing		4,127		4,557	12,386	13,930
FFELP loan servicing							FFELP loan servicing	3,554		4,011	6,921	8,259
Software services	Software services	8,229		6,952	23,536	22,779	Software services	5,962		7,907	15,660	15,308
Outsourced services and other		5,215		3,560	9,954	23,192
Outsourced services							Outsourced services	4,705		2,018	9,823	4,739
Loan servicing and systems revenue	Loan servicing and systems revenue	$	134,197	112,351	395,438	335,961	Loan servicing and systems revenue	$	122,020	124,873	261,247	261,241

Education Technology, Services, and Payment Processing


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Tuition payment plan services	Tuition payment plan services	$	25,779	23,618	84,131	79,706	Tuition payment plan services	$	30,825	27,637	65,012	58,352
Payment processing	Payment processing	47,957		39,852	113,996	97,898	Payment processing	31,827		27,968	75,868	66,039
Education technology and services	Education technology and services	32,548		21,295	110,755	78,752	Education technology and services	46,216		34,956	101,004	78,207
Other	Other	610		559	1,329	928	Other	990		470	1,578	719
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	$	106,894	85,324	310,211	257,284	Education technology, services, and payment processing revenue	$	109,858	91,031	243,462	203,317

Solar Construction

GRNE Solar was acquired on July 1, 2022; accordingly, there are no results for the three and six months ended June 30, 2022.


	Three months ended June 30, 2023		Six months ended June 30, 2023




Commercial revenue	$	2,004	8,238
Residential revenue	2,406		5,181
Other	325		(33)
Solar construction revenue	$	4,735	13,386

Other ~~Income/Expense~~Income (Expense)

The following table ~~provides~~presents the components of ~~"other"~~"other, net" in "other ~~income/expense"~~income (expense)" on the consolidated statements of income:


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Income/gains from investments, net		$	10,701	16,050	40,685	40,141
ALLO preferred return							ALLO preferred return	$	2,274	2,140	4,523	4,257
Borrower late fee income	Borrower late fee income	2,824		514	7,693	1,698	Borrower late fee income	2,168		2,436	4,414	4,867
ALLO preferred return		2,164		2,043	6,420	6,384
Administration/sponsor fee income	Administration/sponsor fee income	1,920		1,670	6,055	1,670	Administration/sponsor fee income	1,697		2,012	3,468	4,134
Investment advisory services	Investment advisory services	1,612		2,400	4,375	6,242	Investment advisory services	1,639		1,482	3,251	2,764
Loss from ALLO voting membership interest investment	Loss from ALLO voting membership interest investment	(17,562)		(10,495)	(47,633)	(31,620)	Loss from ALLO voting membership interest investment	(12,169)		(16,941)	(32,382)	(30,071)
Loss from solar investments	Loss from solar investments	(4,216)		(3,393)	(7,100)	(7,375)	Loss from solar investments	(7,929)		(1,854)	(9,876)	(2,884)
Investment activity, net							Investment activity, net	(3,574)		18,091	(7,154)	29,924

Other	Other	4,782		3,078	14,255	13,043	Other	8,883		5,281	12,673	9,533
		$	2,225	11,867	24,750	30,183
Other, net							Other, net	$	(7,011)	12,647	(21,083)	22,524

12. Major Customer

~~The~~Government Loan Servicing

Nelnet Servicing, LLC (Nelnet Servicing) and Great Lakes Educational Loan Services, Inc. (Great Lakes), both subsidiaries of the Company, ~~earns~~are two of the current six private sector entities that have student loan ~~servicing revenue from~~ servicing contracts with the Department. ~~Revenues~~Revenue earned by the Company related to these contracts ~~are set forth in~~was $95.7 million and $98.8 million for the ~~"Government servicing" line item~~three months ended June 30, 2023 and 2022, respectively, and $204.6 million and $207.9 million for the six months ended June 30, 2023 and 2022, respectively. The Company also licensed its hosted servicing software to two of the ~~"Loan~~six servicers for the Department.

Contract Modifications and Award

Effective April 1, 2023, the Department modified the student loan servicing contracts between the Department and each of Nelnet Servicing and ~~Systems" table in note 11.~~Great Lakes (the “servicing contracts”) to reduce the monthly fee under the servicing contracts by $0.19 per borrower on certain borrower statuses.

The Company's current student loan servicing contracts with the Department ~~are~~were scheduled to expire on December 14, 2023. In ~~2017,~~April 2023, Nelnet Diversified Solutions, LLC (NDS), a subsidiary of the Company, received a contract award from the Department, ~~initiated a contract procurement process referred~~pursuant to ~~as the Next Generation Financial Services Environment for a new framework~~which NDS was selected to provide continued servicing capabilities for the ~~servicing of all~~Department's student ~~loans owned by the Department. The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the process, including that any~~aid recipients under a new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance. In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution (USDS) contract (the "New Government Servicing Contract") which will replace the existing legacy Department student loan servicing contracts.

The New Government Servicing Contract is effective April 24, 2023 and has a five year base period, with 2 two-year and 1 one-year possible extensions. The Department's total loan servicing volume of more than 37 million existing borrowers will be allocated by the Department to NDS and four other third-party servicers that were awarded a USDS contract based on service and performance levels. Under the New Government Servicing Contract, NDS will begin immediately to make required servicing platform enhancements, for which NDS will be compensated from the Department on certain of these investments. In April 2023, the Department indicated that servicing under the USDS contracts will go live in 2024 and it will extend the current legacy servicing contracts from December 14, 2023 to December 2024. Until servicing under the USDS contracts goes live, the Company will continue to earn revenue for servicing borrowers under its current legacy servicing contracts with the Department.

The new USDS servicing contracts have multiple revenue components with tiered pricing based on borrower volume, while revenue earned under the legacy servicing contracts is primarily based on borrower status. Assuming borrower volume remains consistent under the USDS servicing contract, the Company expects revenue earned on a per borrower blended basis will decrease under the USDS contract versus the current legacy contracts. However, consistent with the current legacy contracts, the Company expects to earn additional revenue from the Department under the USDS servicing contract for change requests, consolidations, and other support services. As discussed below, during the second quarter of 2023, the Company completed the transfer of Great Lakes direct loan servicing volume to the Nelnet servicing platform. The associated cost savings with moving government borrowers to one servicing platform will be partially offset under the USDS contract as the Company will incur additional costs for cybersecurity and other system specifications as required under the new contract.

Loan Volume Transfers - Full Service Borrowers

In February 2023, the Department notified the Company of its intention to transfer up to one million of the Company’s existing Department servicing borrowers to another third-party servicer. This transfer decision was not based on the Company's performance. These transfers began in the second quarter of 2023 and were completed in July 2023.

In addition, the Company completed the transfer of active borrowers of Great Lakes direct loan servicing volume to the Nelnet servicing platform (the GreatNet Federal servicing platform) during the second quarter of 2023. The Company anticipates the decommissioning of the Great Lakes' platform to be completed by the end of 2023. Therefore, potential associated cost savings as a result of transferring direct loan servicing volume to one platform will not be recognized in operating results until 2024.

Loan Volume Transfers - Remote Hosted Servicing Borrowers

Edfinancial Services, LLC ("~~USDS"~~Edfinancial"), a current servicer for the ~~new~~Department, utilized Nelnet Servicing's platform to service their loans for the Department (remote hosted servicing ~~framework.~~customer). In the fourth quarter of 2022, Nelnet Servicing and Edfinancial reached an agreement on a decommission schedule transferring Edfinancial’s direct loan servicing volume to another third-party servicing platform. As of December 31, 2022, Edfinancial was servicing 4.5 million borrowers for the Department on the Company’s platform. The Company ~~responded~~began transferring Edfinancial's servicing volume to another servicing platform in the ~~USDS~~first quarter of 2023 which reduced the number of Edfinancial's borrowers serviced on the Company's platform

2933

~~solicitation. The~~to 3.5 million borrowers as of March 31, 2023 and 579,000 borrowers as of June 30, 2023. Edfinancial's remaining borrowers were transferred off of the Company's platform in July 2023.

In February 2023, the Company’s other remote hosted servicing customer notified the Company ~~cannot predict~~ the ~~timing, nature, or ultimate outcome~~Department intended to move that customer’s servicing borrowers to a different third-party servicing platform. This transfer decision was the result of this ~~or any other contract procurement process by~~customer not being one of the ~~Department.~~servicers awarded a USDS contract. As of March 31, 2023, this remote hosted servicing customer was servicing 1.4 million borrowers for the Department on the Company's platform. The majority of this volume was transferred to another third-party servicing platform during the second quarter of 2023, and the remaining borrowers were transferred off of the Company's platform in July 2023.

OnAs a result of the transfers discussed above, the Company has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.

Department of Education Debt Relief

In August ~~24,~~ 2022, the Department ~~issued~~announced a bulletin titled “Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation to Smooth Transition to Repayment” (the “August 24, 2022 Bulletin”). The August 24, 2022 Bulletin indicates the Department willbroad based student debt relief plan that would provide targeted student debt cancellation to borrowers with loans held by the Department and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwisewith unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant. ~~On October 21, 2022, the U.S. Court of Appeals for the Eighth Circuit issued a temporary administrative stay of~~Federal courts blocked implementation of the Department's broad based student debt relief plan ~~in response~~and on June 30, 2023, the Supreme Court struck down the Department's plan. While the current version of the Department's forgiveness plan has been invalidated, the Department recently announced that it has begun a new rulemaking process to ~~a legal challenge that was initiated by~~consider other ~~parties (not the Company).~~

~~As of September 30, 2022, the Company was servicing 15.7 million borrowers under its government servicing contracts.~~ways to provide debt relief to borrowers. The Company cannot ~~currently estimate how many borrowers meet~~predict the ~~eligibility requirements and other terms and conditions for one-time debt relief~~timing, nature, or ultimate outcome of any future potential student loan forgiveness programs as a result of the rulemaking process. Revenue earned under the ~~August 24, 2022 Bulletin and subsequent publicly available guidance provided by the Department. However, revenue earned by the Company under its~~current Department servicing contracts will ~~be negatively impacted~~decrease in future periods if the ~~Department’s student debt relief plan or other~~Department successfully implements broad based loan ~~forgiveness is implemented.~~forgiveness.

13. Fair Value

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.


		As of September 30, 2022			As of December 31, 2021			As of June 30, 2023					As of December 31, 2022
		Level 1		Level 2	Total	Level 1	Level 2		Total		Level 1		Level 2	Total	Level 1	Level 2	Total
Assets:	Assets:									Assets:
Investments:	Investments:									Investments:
FFELP loan asset-backed debt securities - available-for-sale		$	—	785,009	785,009	—	494,682		494,682
Private education loan asset-backed debt securities - available-for-sale		—		317,901	317,901	—	412,552		412,552
Other debt securities - available-for-sale		100		275,061	275,161	100	22,335		22,435
Asset-backed debt securities - available-for-sale										Asset-backed debt securities - available-for-sale	$	99	1,047,975	1,048,074	100	1,388,937	1,389,037
Equity securities	Equity securities	7,254		—	7,254	63,154	—		63,154	Equity securities	105		—	105	6,719	—	6,719
Equity securities measured at net asset value (a)	Equity securities measured at net asset value (a)				31,960				8,832	Equity securities measured at net asset value (a)				39,471			32,363
Total investments	Total investments	7,354		1,377,971	1,417,285	63,254	929,569		1,001,655	Total investments	204		1,047,975	1,087,650	6,819	1,388,937	1,428,119
Derivative instruments (b)										Derivative instruments (b)	—		1,108	1,108	—	—	—
Total assets	Total assets	$	7,354	1,377,971	1,417,285	63,254	929,569		1,001,655	Total assets	$	204	1,049,083	1,088,758	6,819	1,388,937	1,428,119

(a) In accordance with the Fair Value Measurements Topic of the FASB Accounting Standards Codification, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(b) Nelnet Bank derivatives are accounted for at fair value on a recurring basis. The fair value of derivative financial instruments is determined using a market approach in which derivative pricing models use the stated terms of the contracts and observable yield curves and volatilities from active markets. When determining the fair value of derivatives, Nelnet Bank takes into account counterparty credit risk for positions where it is exposed to the counterparty on a net basis by assessing exposure net of collateral held. The net exposures for each counterparty are adjusted based on market information available for the specific counterparty.

The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets:


		As of September 30, 2022							As of June 30, 2023
		Fair value		Carrying value	Level 1	Level 2	Level 3		Fair value		Carrying value	Level 1	Level 2	Level 3
Financial assets:	Financial assets:							Financial assets:
Loans receivable	Loans receivable	$	15,390,107	15,082,413	—	—	15,390,107	Loans receivable	$	13,809,016	13,541,903	—	—	13,809,016
Accrued loan interest receivable	Accrued loan interest receivable	793,838		793,838	—	793,838	—	Accrued loan interest receivable	818,709		818,709	—	818,709	—
Cash and cash equivalents	Cash and cash equivalents	63,198		63,198	63,198	—	—	Cash and cash equivalents	121,769		121,769	121,769	—	—
Investments (at fair value)	Investments (at fair value)	1,417,285		1,417,285	7,354	1,377,971	—	Investments (at fair value)	1,087,650		1,087,650	204	1,047,975	—

Investments - held to maturity								Investments - held to maturity	156,537		155,781	—	156,537	—
Notes receivable								Notes receivable	54,931		54,931	—	54,931	—
Beneficial interest in loan securitizations	Beneficial interest in loan securitizations	143,128		129,908	—	—	143,128	Beneficial interest in loan securitizations	228,603		190,974	—	—	228,603
Restricted cash	Restricted cash	799,212		799,212	799,212	—	—	Restricted cash	484,223		484,223	484,223	—	—
Restricted cash – due to customers	Restricted cash – due to customers	180,919		180,919	180,919	—	—	Restricted cash – due to customers	208,033		208,033	208,033	—	—

Derivative instruments								Derivative instruments	1,108		1,108	—	1,108	—
Financial liabilities:	Financial liabilities:							Financial liabilities:
Bonds and notes payable	Bonds and notes payable	14,653,852		15,042,595	—	14,653,852	—	Bonds and notes payable	12,724,618		13,070,140	—	12,724,618	—
Accrued interest payable	Accrued interest payable	21,796		21,796	—	21,796	—	Accrued interest payable	35,926		35,926	—	35,926	—
Bank deposits	Bank deposits	550,834		580,825	208,811	342,023	—	Bank deposits	704,116		731,046	449,297	254,819	—
Due to customers	Due to customers	306,352		306,352	306,352	—	—	Due to customers	299,552		299,552	299,552	—	—


		As of December 31, 2021							As of December 31, 2022
		Fair value		Carrying value	Level 1	Level 2	Level 3		Fair value		Carrying value	Level 1	Level 2	Level 3
Financial assets:	Financial assets:							Financial assets:
Loans receivable	Loans receivable	$	18,576,272	17,546,645	—	—	18,576,272	Loans receivable	$	14,586,794	14,427,025	—	—	14,586,794
Accrued loan interest receivable	Accrued loan interest receivable	788,552		788,552	—	788,552	—	Accrued loan interest receivable	816,864		816,864	—	816,864	—
Cash and cash equivalents	Cash and cash equivalents	125,563		125,563	125,563	—	—	Cash and cash equivalents	118,146		118,146	118,146	—	—
Investments (at fair value)	Investments (at fair value)	1,001,655		1,001,655	63,254	929,569	—	Investments (at fair value)	1,428,119		1,428,119	6,819	1,388,937	—

Investments - held to maturity								Investments - held to maturity	18,996		18,774	—	18,996	—
Notes receivable								Notes receivable	31,106		31,106	—	31,106	—
Beneficial interest in loan securitizations	Beneficial interest in loan securitizations	142,391		120,142	—	—	142,391	Beneficial interest in loan securitizations	162,360		138,738	—	—	162,360
Restricted cash	Restricted cash	741,981		741,981	741,981	—	—	Restricted cash	945,159		945,159	945,159	—	—
Restricted cash – due to customers	Restricted cash – due to customers	326,645		326,645	326,645	—	—	Restricted cash – due to customers	294,311		294,311	294,311	—	—

Financial liabilities:	Financial liabilities:							Financial liabilities:
Bonds and notes payable	Bonds and notes payable	17,819,902		17,631,089	—	17,819,902	—	Bonds and notes payable	14,088,666		14,637,195	—	14,088,666	—
Accrued interest payable	Accrued interest payable	4,566		4,566	—	4,566	—	Accrued interest payable	36,049		36,049	—	36,049	—
Bank deposits	Bank deposits	342,463		344,315	184,897	157,566	—	Bank deposits	664,573		691,322	355,282	309,291	—
Due to customers	Due to customers	366,002		366,002	366,002	—	—	Due to customers	348,317		348,317	348,317	—	—

The methodologies for estimating the fair value of financial assets and liabilities are described in note 2224 of the notes to consolidated financial statements included in the ~~2021~~2022 Annual Report.

ITEM 2. 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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. All dollars are in thousands, except per share amounts, unless otherwise noted.)

The following discussion and analysis provides information that the Company’s management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company. The discussion should be read in conjunction with the Company’s consolidated financial statements included in the ~~2021~~2022 Annual Report.

Forward-looking and cautionary statements

This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The

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

The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the ~~2021~~2022 Annual Report ~~the "Risk Factors" section of this report, and elsewhere in this report,~~ and include such risks and uncertainties as:

•risks and uncertainties related to the duration, ultimate severity, and continuing impacts of the coronavirus disease 2019 (“COVID-19”) pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on various activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;

•risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and ~~any~~ future servicing contracts with the U.S. Department of Education (the "Department"), which current contracts accounted for 29 percent of the Company's revenue in 2021, risks to the Company related to the Biden-Harris Administration's student debt relief plan announced on August 24, 2022 that may significantly decrease the number of borrowers serviced and revenue earned by the Company under such contracts, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the Company may not be successful in obtaining any of such potential new contracts, 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")~~FFELP), private education, and consumer loans;

•loan portfolio risks such as interest rate basis and repricing risk, ~~resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets,~~ the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans, and risks from changes in levels of loan prepayment or default rates;

•financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from recent market volatility resulting from rising interest rates and other economic pressures and from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay repayment of the associated bonds, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;environment;

•risks from changes in the terms of education loans and in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets, such as changes resulting from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and the expected decline over time in FFELP loan interest income due to the discontinuation of new FFELP loan originations in 2010 and government initiatives or proposals to consolidate existing FFELP loans to Federal Direct Loan Program loans, otherwise encourage or allow FFELP loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs;budgets;

•risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to a disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;vendors;

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

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

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

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

•risks and uncertainties associated with climate change, including extreme weather events and related natural disasters, which could result in increased loan portfolio credit risks and other asset and operational risks, as well as risks and uncertainties associated with efforts to address climate change; and

•risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, reputational and other risks, including the risk of increased regulatory costs resulting from the politicization of student loan servicing, 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.businesses.

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.

3336

OVERVIEW

The Company is a diverse, innovative company with a purpose to serve others and a vision to make dreams possible. The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in early-stage and emerging growth companies, real estate, and renewable energy (solar). The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank.

GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments

The Company prepares its financial statements and presents its financial results in accordance with GAAP. 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,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
GAAP net income attributable to Nelnet, Inc.	GAAP net income attributable to Nelnet, Inc.	$	104,798	53,138	376,573	260,603	GAAP net income attributable to Nelnet, Inc.	$	28,267	85,129	54,754	271,776
Realized and unrealized derivative market value adjustments	Realized and unrealized derivative market value adjustments	(52,991)		(7,260)	(239,125)	(44,455)	Realized and unrealized derivative market value adjustments	(2,005)		(40,401)	35,407	(186,135)
Tax effect (a)	Tax effect (a)	12,718		1,742	57,390	10,669	Tax effect (a)	481		9,696	(8,498)	44,672
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)		$	64,525	47,620	194,838	226,817
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)							Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)	$	26,743	54,424	81,663	130,313

Earnings per share:	Earnings per share:						Earnings per share:
GAAP net income attributable to Nelnet, Inc.	GAAP net income attributable to Nelnet, Inc.	$	2.80	1.38	9.99	6.74	GAAP net income attributable to Nelnet, Inc.	$	0.75	2.26	1.46	7.18
Realized and unrealized derivative market value adjustments	Realized and unrealized derivative market value adjustments	(1.42)		(0.19)	(6.34)	(1.15)	Realized and unrealized derivative market value adjustments	(0.05)		(1.07)	0.95	(4.91)
Tax effect (a)	Tax effect (a)	0.35		0.04	1.52	0.28	Tax effect (a)	0.01		0.25	(0.23)	1.17
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)		$	1.73	1.23	5.17	5.87
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)							Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)	$	0.71	1.44	2.18	3.44

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

(b) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. "Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.

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; however, the Company’s derivative instruments do not qualify for hedge ~~accounting.~~accounting in the consolidated financial statements. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the Company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.

The Company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations. Accordingly, the Company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the Company’s performance and in presentations with credit rating agencies, lenders, and investors. 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. 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.

3437

Operating Segments

The Company's reportable operating segments are described in note 1 of the notes to consolidated financial statements included in the ~~2021~~2022 Annual Report. They include:

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

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

•Asset Generation and Management ~~("AGM")~~(AGM)

•Nelnet Bank

The Company earns fee-based revenue through its NDS and NBS reportable operating segments. The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM reportable operating segment. This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes. The Company actively works to maximize the amount and timing of cash flows generated byfrom its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.

On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation ("FDIC") and for a bank charter from the Utah Department of Financial Institutions ("UDFI") in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. Nelnet Bank operates as an internet industrial bank franchise focused on the private education and unsecured consumer loan ~~marketplace,~~markets, with a home office in Salt Lake City, Utah.

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate"). Corporate ~~and Other Activities~~ also includes income earned on ~~certain~~the majority of the Company’s investments, ~~and~~ interest expense incurred on unsecured and other corporate related debt ~~transactions. On July 1, 2022, the Company purchased 80 percent~~transactions, and certain shared service activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These shared services are allocated to each operating segment based on estimated use of ~~the ownership interests of GRNE Solar. See note 6 of the notes~~such activities and services. In addition, Corporate includes corporate costs and overhead functions not allocated to ~~consolidated financial statements included under Part I, Item 1 of this report. The~~ operating ~~results from this acquisition are also included~~segments, including executive management, investments in ~~Corporate.~~innovation, and other holding company organizational costs.

The information below ~~provides~~presents the operating results ~~(income~~(net income (loss) before ~~income~~ taxes) for each reportable operating segment and Corporate and Other Activities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. See "Results of Operations" for each reportable operating segment and Corporate and Other Activities under this Item 2 for additional detail.

Three months ended September 30,
2022 2021 Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS $ 21,914 (3,042)
•The recognition of an impairment charge of $13.2 million in the third quarter of 2021 related primarily to building and building improvement assets due to an evaluation of the use of office space as a large number of employees continued to work from home as a result of the COVID-19 pandemic
NBS 18,655 13,992
•The recognition of $3.7 million of interest income in the third quarter of 2022 as compared to $0.3 million in the same period of 2021 due to higher interest rates
AGM 111,872 60,085
•A net gain of $53.0 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the third quarter of 2022 as compared to a net gain of $7.3 million for the same period in 2021
•An increase of $6.2 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
•A decrease of $14.3 million in net interest income due to the decrease in the average balance of FFELP loans in the third quarter of 2022 as compared to 2021
•The recognition of a $6.3 million investment loss during the third quarter of 2021
Nelnet Bank 1,055 836
Corporate (26,442) (5,003)
•The recognition of a net loss of $17.6 million in the third quarter of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $10.5 million for the same period in 2021
•Investment income of $10.5 million in the third quarter of 2022 as compared to $21.9 million for the same period in 2021. In 2022, the Company recognized $5.9 million in gains from the sale of real estate investments, as compared to $11.2 million in 2021. In addition, the Company recognized $5.8 million in net realized and unrealized gains from marketable securities in 2021.
Income before income taxes 127,055 66,868
Income tax expense (26,586) (15,649)
Net loss attributable to noncontrolling interests 4,329 1,919
Net income $ 104,798 53,138


	Three months ended June 30,			Six months ended June 30,		Certain Items Impacting Comparability (All dollar amounts below are pre-tax)
	2023		2022	2023	2022
NDS	$	17,028	13,488	42,246	25,580	•An increase in before tax operating margin in 2023 compared with 2022 due to a decrease in operating expenses, primarily salaries and benefits. In 2022, the Company was fully staffed in preparation for the resumption of federal student loan payments once the CARES Act suspension was to expire. The expiration of the CARES Act was extended multiple times throughout 2022. The Company reduced staff in the first and second quarters of 2023 to manage expenses due to the delays in the government's student debt relief and return to repayment programs and lower pricing and reduced servicing volume for the Company's Department servicing contracts.
NBS	18,042		14,687	55,681	47,800	•The recognition of $5.3 million and $11.3 million of interest income for the three and six months ended June 30, 2023, respectively, compared with $0.9 million and $1.2 million for the same periods in 2022, due to higher interest rates. •A decrease in before tax operating margin, excluding net interest income, in 2023 compared with 2022 due to additional investments in the development of new services and technologies and superior customer experiences to align with the Company's strategies to grow, retain, and diversify revenue. Additionally, the Company has had significant growth in FACTS Education Solutions instructional services revenue which has a lower before tax operating margin compared to the rest of the Company's services.

3538

Nine months ended September 30,
2022 2021 Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS $ 47,494 28,554
•The recognition of an impairment charge of $13.2 million in the third quarter of 2021 related primarily to building and building improvement assets due to an evaluation of the use of office space as a large number of employees continued to work from home as a result of the COVID-19 pandemic
NBS 66,454 62,199
•The recognition of $4.9 million of interest income in the first three quarters of 2022 as compared to $0.8 million in the same period of 2021 due to higher interest rates
AGM 424,647 280,613
•A net gain of $239.1 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first three quarters of 2022 as compared to a net gain of $44.5 million for the same period in 2021
•A decrease of $23.8 million in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid
•The recognition of provision for loan losses of $17.2 million in the first three quarters of 2022 as compared to negative provision of $11.2 million for the same period in 2021
•The recognition of $18.7 million of gains from the sale of loans during the first three quarters of 2021 compared to $5.6 million for the same period in 2022
•An increase of $13.5 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
•A decrease of $32.4 million in net interest income due to the decrease in the average balance of FFELP loans in the first three quarters of 2022 as compared to 2021
Nelnet Bank 2,489 (686)
Corporate (65,061) (36,796)
•The recognition of a net loss of $47.6 million for the first three quarters of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $31.6 million for the same period in 2021
•Investment income of $37.2 million for the first three quarters of 2022 as compared to $43.7 million for the same period in 2021. Investment income in 2022 included $13.5 million in gains from the sale of real estate investments and a $15.2 million gain as a result of the revaluation of the Company's previously held 50 percent ownership interests in NextGen. In 2021, the Company recognized $22.2 million from the sale of real estate investments and $6.3 million in net realized and unrealized gains from marketable securities.
•The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)
Income before income taxes 476,023 333,883
Income tax expense (107,765) (76,747)
Net loss attributable to noncontrolling interests 8,315 3,467
Net income $ 376,573 260,603

~~Recent Developments~~

On August 24, 2022, the Department issued a bulletin titled “Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation to Smooth Transition to Repayment” (the “August 24, 2022 Bulletin”). The August 24, 2022 Bulletin extends the CARES Act repayment pause on Department held student loans through December 31, 2022 and indicates the Department will provide targeted student debt cancellation to borrowers with loans held by the Department, and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.

Following the initial announcement, the Department provided more specific publicly available guidance on the student debt relief plan through the website of the Department’s Office of Federal Student Aid (“FSA”) on September 29, 2022, which guidance was subsequently revised and published in the Federal Register on October 12, 2022. As of November 7, 2022, the following guidance on loan forgiveness was provided on the FSA website (information on the FSA website is not incorporated by reference in this report):

•~~All loans eligible for the CARES Act student loan payment pause are also eligible for debt relief, including loans held by the Department and guaranty agencies~~


AGM	17,704		99,348	17,482	312,777	•A net gain of $0.9 million and net loss of $36.5 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three and six months ended June 30, 2023, respectively, compared with a net gain of $40.4 million and $186.1 million for the same periods in 2022. •The recognition of a $25.9 million non-cash expense in the second quarter of 2023 as the result of redeeming certain asset-backed debt securities prior to their maturity and writing off the remaining unamortized debt discount at the time of redemption. •A decrease of $18.7 million and $15.2 million in net interest income due to a decrease in core loan spread for the three and six months ended June 30, 2023, respectively, compared with the same periods in 2022. •A decrease of $7.5 million and $19.8 million in net interest income due to the decrease in the average balance of loans for the three and six months ended June 30, 2023, respectively, compared with the same periods in 2022. •The recognition of $15.5 million and $27.3 million in gains from the sale of loans for the three and six months ended June 30, 2023, respectively, compared with no gains and $3.0 million for the same periods in 2022. •The recognition of $8.1 million and $40.0 million in provision for loan losses for the three and six months ended June 30, 2023, respectively, compared with $8.8 million and $8.0 million for the same periods in 2022.
Nelnet Bank	1,744		474	1,650	1,434
Corporate	(24,928)		(19,609)	(56,203)	(38,623)	•An increase of $14.5 million and $20.9 million in net interest income from the Company's cash and investment (bond) portfolio due to an increase in interest rates for the three and six months ended June 30, 2023, respectively, compared with the same periods in 2022. •The recognition of net investment losses of $1.6 million and $4.8 million for the three and six months ended June 30, 2023, respectively, compared with net investment income of $18.3 million and $26.7 million for the same periods in 2022. In the second quarter or 2022, the Company recognized a $15.2 million gain as a result of the revaluation of the Company's previously held 50% ownership interest in NGWeb Solutions, LLC ("NextGen") (previously accounted for under the equity method) as a result of the Company purchasing an additional 30% ownership interests. •The recognition of a net loss of $12.2 million and $32.4 million related to the Company’s equity investment in ALLO for the three and six months ended June 30, 2023, respectively, compared with a net loss of $16.9 million and $30.1 million for the same periods in 2022. •The recognition of $8.2 million and $11.3 million of losses for the three and six months ended June 30, 2023, respectively, from the Company's acquisition of GRNE Solar on July 1, 2022. •The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment.
Income before income taxes	29,586		108,387	60,853	348,969
Income tax expense	(10,491)		(25,483)	(18,741)	(81,180)
Net loss attributable to noncontrolling interests	9,172		2,225	12,642	3,987
Net income	$	28,267	85,129	54,754	271,776

•As of September 29, 2022, borrowers with federal student loans not held by the Department cannot obtain one-time debt relief by consolidating those loans into Federal Direct Loan Program loans by the Department

•Borrowers with FFEL Program loans not held by the Department and who applied to consolidate into the Federal Direct Loan Program prior to September 29, 2022, are eligible for one-time debt relief through the Federal Direct Loan Program, subject to meeting the other terms and conditions

•~~The Department has indicated it is assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by the Department, including FFEL Program loans~~

On October 21, 2022, the U.S. Court of Appeals for the Eighth Circuit issued a temporary administrative stay of implementation of the Department's student debt relief plan in response to a legal challenge that was initiated by other parties (not the Company).

In view of this recent announcement and guidance by the Department, the Company does not currently expect there to be significant FFELP loan consolidation activity specifically as a result of the one-time student debt relief plan announced in the August 24, 2022 Bulletin. However, since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act payment pause on Department held loans and the initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs. Sustained higher FFELP loan prepayments will impact net interest income in the Company’s AGM operating segment, FFELP servicing revenue in the Company’s LSS operating segment, investment advisory services revenue earned by the Company’s SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on the Company’s FFELP loan asset-backed securities investments in future periods.

In addition, as of September 30, 2022, the Company was servicing 15.7 million borrowers under its government servicing contracts. The Company cannot currently estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the August 24, 2022 Bulletin and subsequent guidance provided by the Department. However, revenue earned by the Company under its contracts will be negatively impacted if the Department’s student debt relief plan or other broad based loan forgiveness is implemented.

See Part II, Item 1A, “Risk Factors - Our largest fee-based customer, the Department of Education, represented 29 percent of our revenue in 2021. Failure to extend the Department contracts or obtain new Department contracts in the Department's current or other procurement processes, our inability to consistently surpass competitor performance metrics, unfavorable contract modifications or interpretations, or the loss of servicing borrower volume due to broad based debt cancellation by the Department, could significantly lower servicing revenue and hinder future service opportunities.” and “- Our loan portfolio is subject to prepayment risk, which could reduce the expected cash flows and earnings on our portfolio.” in this report for additional information.

~~Impact of COVID-19~~

The COVID-19 pandemic has had a significant impact on the economic environment globally and in the U.S. There is uncertainty as to the length and breadth of the impact to the U.S. economy and, consequently, on the Company. As a related matter, on August 24, 2022, the Department announced that the suspension under the CARES Act on federal student loan payments and interest accruals on all loans owned by the Department was extended through December 31, 2022.

For a further overview discussion of the impact of the COVID-19 pandemic on the Company, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview - Recent Transactions/Developments - COVID-19" in the 2021 Annual Report. In addition, for an additional discussion regarding the risks associated with COVID-19, see Part I, Item 1A. "Risk Factors - Operations - The COVID-19 pandemic has adversely impacted our results of operations, and either directly or indirectly through impacts on economic conditions or government policy could adversely impact our results of operations, businesses, financial condition, and/or cash flows going forward." in the 2021 Annual Report.

3739

CONSOLIDATED RESULTS OF OPERATIONS

An analysis of the Company's consolidated operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared towith the same periods in ~~2021~~2022 is provided below.

The Company’s operating results are primarily driven by the performance of its existing loan portfolio and the revenues generated by its fee-based businesses and the costs to provide such services. The performance of the Company’s portfolio is driven by net interest income (which includes financing costs) and losses related to credit quality of the assets, along with the cost to administer and service the assets and related debt.

The Company operates as distinct reportable operating segments as described above. For a reconciliation of the reportable segment operating results to the consolidated results of operations, see note 10 of the notes to consolidated financial statements included under Part I, Item 1 of this report. 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				Three months ended			Six months ended
		September 30,			September 30,				June 30,			June 30,
		2022		2021	2022	2021	Additional information		2023		2022	2023	2022	Additional information
Loan interest	Loan interest	$	176,244	124,096	422,327	370,219	Increase was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans and in gross fixed rate floor income.	Loan interest	$	243,045	134,706	468,288	246,083	Increase was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans and in gross fixed rate floor income.
Investment interest	Investment interest	26,889		12,558	57,589	29,122	Includes income from interest-earning deposits and investments and funds in asset-backed securitizations. Increase was due to an increase in interest earning investments and an increase in interest rates in 2022 as compared to 2021.	Investment interest	40,982		16,881	81,707	30,700	Includes income from interest-earning deposits and investments and restricted cash in asset-backed securitizations. Increase was due to an increase in interest earning investments and an increase in interest rates.
Total interest income	Total interest income	203,133		136,654	479,916	399,341		Total interest income	284,027		151,587	549,995	276,783
Interest expense	Interest expense	126,625		50,176	248,347	127,939	Increase was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding. In addition, during the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013.	Interest expense	233,148		73,642	432,597	121,721	Increase was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding. In addition, during the second quarter of 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of a $25.9 million non-cash expense from the write-off of the remaining debt discount associated with these bonds at the time of redemption.
Net interest income	Net interest income	76,508		86,478	231,569	271,402		Net interest income	50,879		77,945	117,398	155,062
Less provision (negative provision) for loan losses		9,665		5,827	18,640	(10,847)	Represents the current period provision (negative provision) to reflect the lifetime expected credit losses related to the Company's loan portfolio. See note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report for the activity in the Company's allowance for loan losses.
Less provision for loan losses								Less provision for loan losses	9,592		9,409	43,867	8,974	Represents the current period provision to reflect the lifetime expected credit losses related to the Company's loan portfolio. The primary item impacting provision for loan losses was the establishment of an initial allowance for consumer loans originated and acquired during the periods presented.
Net interest income after provision for loan losses	Net interest income after provision for loan losses	66,843		80,651	212,929	282,249		Net interest income after provision for loan losses	41,287		68,536	73,531	146,088
Other income/expense:
Other income (expense):								Other income (expense):
LSS revenue	LSS revenue	134,197		112,351	395,438	335,961	See LSS operating segment - results of operations.	LSS revenue	122,020		124,873	261,247	261,241	See LSS operating segment - results of operations.
ETS&PP revenue	ETS&PP revenue	106,894		85,324	310,211	257,284	See ETS&PP operating segment - results of operations.	ETS&PP revenue	109,858		91,031	243,462	203,317	See ETS&PP operating segment - results of operations.

Solar construction revenue	Solar construction revenue	9,358		—	9,358	—	On July 1, 2022, the Company acquired 80 percent of the ownership interests of GRNE Solar. GRNE Solar designs and installs residential, commercial, and utility-scale solar systems. The acquisition diversifies the Company's position in the renewable energy space to include solar construction.	Solar construction revenue	4,735		—	13,386	—	On July 1, 2022, the Company acquired 80% of the ownership interests of GRNE Solar. GRNE Solar designs and installs residential, commercial, and utility-scale solar systems. The acquisition diversifies the Company's position in the renewable energy space to include solar construction.
Other		2,225		11,867	24,750	30,183	See table below for the components of "other."
Gain on sale of loans		2,627		3,444	5,616	18,715	The Company sold $18.1 million (par value) and $28.9 million (par value) of consumer loans in January 2022 and July 2022, respectively, and recognized a gain of $3.0 million and $2.6 million, respectively. The Company also sold $77.4 million (par value) and $18.4 million (par value) of consumer loans in May 2021 and September 2021, respectively, and recognized gains of $15.3 million and $3.2 million, respectively.

Impairment expense and provision for beneficial interests, net		121		(14,159)	(6,163)	(12,223)	During the third quarter of 2021, the Company evaluated the use of office space as a large number of employees continued to work from home due to COVID-19. As a result of this evaluation, the Company recorded an impairment charge during the third quarter of 2021 of $14.2 million. The impairment charge related primarily to building and operating lease assets. During the second quarter of 2022, the Company recorded impairment expense of $6.3 million related primarily to a venture capital investment and certain real estate leases.
Other, net								Other, net	(7,011)		12,647	(21,083)	22,524	See table below for the components of "other, net."
Gain on sale of loans, net								Gain on sale of loans, net	15,511		—	27,323	2,989	The Company sold $261.9 million (par value) and $158.3 million (par value) of consumer and other loans in the first and second quarter of 2023, respectively and recognized net gains of $11.8 million and $15.5 million, respectively. The Company also sold $18.1 million (par value) of consumer loans in the first quarter of 2022 and recognized a gain of $3.0 million.
Impairment expense								Impairment expense	—		(6,284)	—	(6,284)	During the second quarter of 2022, the Company recorded impairment expense of $6.3 million related primarily to a venture capital investment.
Derivative settlements, net	Derivative settlements, net	10,271		(5,909)	12,085	(15,587)	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. See AGM operating segment - results of operations.	Derivative settlements, net	65		4,623	23,402	1,814	The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income. The majority of derivative settlements received by the Company was from the Company's derivatives used to hedge loans earning fixed rate floor income. To minimize the Company's exposure to market volatility, the Company terminated this derivative portfolio on March 15, 2023.
Derivative market value adjustments, net	Derivative market value adjustments, net	52,991		7,260	239,125	44,455	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 related to the changes in fair value of the Company's floor income interest rate swaps. Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.	Derivative market value adjustments, net	2,005		40,401	(35,407)	186,135	Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. The majority of the derivative market value adjustments were related to the changes in fair value of the Company's floor income interest rate swaps. Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps. To minimize the Company's exposure to market volatility, the Company terminated this derivative portfolio on March 15, 2023. As such, the Company expects the derivative market value adjustments in future periods will be less substantial.
Total other income/expense		318,684		200,178	990,420	658,788

3840

Cost of services:
Cost to provide education technology, services, and payment processing services 42,676 31,335 109,073 80,063 Represents primarily direct costs to provide payment processing and instructional services in the ETS&PP operating segment. Increase in 2022 compared to 2021 was primarily due to additional instructional services costs. See ETS&PP operating segment - results of operations.
Cost to provide solar construction services 5,968 — 5,968 — As noted above, the Company acquired GRNE Solar on July 1, 2022. These amounts represent direct costs related to GRNE providing solar construction services.
Total cost of services 48,644 31,335 115,041 80,063
Operating expenses:
Salaries and benefits 147,198 128,592 438,010 363,351 Increase was due to an increase in headcount in the (i) LSS operating segment as the Company has been required to prepare for the resumption of federal student loan payments upon the expiration of the CARES Act borrower relief provisions, which have been extended several times; and (ii) ETS&PP operating segment to support the growth of its customer base and the investment in the development of new technologies.
Depreciation and amortization 18,772 15,710 53,978 56,129 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.
Other expenses 43,858 38,324 120,297 107,611 Other expenses includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs. Increase was due to (i) an increase in expenses in the LSS operating segment due to growth of borrowers under the government servicing contracts; and (ii) an increase in expenses in the ETS&PP operating segment due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies, and an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID-19 pandemic.
Total operating expenses 209,828 182,626 612,285 527,091
Income before income taxes 127,055 66,868 476,023 333,883
Income tax expense 26,586 15,649 107,765 76,747 The effective tax rate was 20.2% and 22.7% for the three months ended September 30, 2022 and 2021, respectively, and 22.2% and 22.7% for the nine months ended September 30, 2022 and 2021, respectively.
Net income 100,469 51,219 368,258 257,136
Net loss attributable to noncontrolling interests 4,329 1,919 8,315 3,467 Amounts for noncontrolling interests primarily reflect the net income/loss attributable to the holders of minority membership interests in Whitetail Rock Capital Management, LLC and multiple solar entities.
Net income attributable to Nelnet, Inc. $ 104,798 53,138 376,573 260,603

~~The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income.~~

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Income/gains from investments, net (a) $ 10,701 16,050 40,685 40,141
Borrower late fee income (b) 2,824 514 7,693 1,698
ALLO preferred return (c) 2,164 2,043 6,420 6,384
Administration/sponsor fee income (d) 1,920 1,670 6,055 1,670
Investment advisory services (e) 1,612 2,400 4,375 6,242
Loss from ALLO voting membership interest investment (f) (17,562) (10,495) (47,633) (31,620)
Loss from solar investments (g) (4,216) (3,393) (7,100) (7,375)
Other 4,782 3,078 14,255 13,043
Other income $ 2,225 11,867 24,750 30,183

(a) The Company recognized net income/gains from its real estate and venture capital investment portfolios of $9.7 million during both the three months ended September 30, 2022 and 2021, respectively, and $26.6 million and $32.3 million during the nine months ended September 30, 2022 and 2021, respectively. The majority of these gains were from the sale of investments, and thus are not recurring.

In addition, during the second quarter of 2022, the Company recognized a $15.2 million (pre-tax) gain as a result of the revaluation of its previously held 50 percent ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests in NextGen on April 30, 2022.

The remaining amount of income/gains from investments recognized by the Company and included in the table above relate to gains/losses from sales of debt and equity securities and the remeasurement of certain equity securities measured at fair value.


Total other income (expense), net	247,183		267,291	512,330	671,736
Cost of services:
Cost to provide education technology, services, and payment processing services	40,407		30,852	88,110	66,397	Represents direct costs to provide payment processing and instructional services in ETS&PP. Increase was primarily due to additional instructional services costs. See ETS&PP operating segment - results of operations.
Cost to provide solar construction services	9,122		—	17,422	—	As noted above, the Company acquired GRNE Solar on July 1, 2022. These amounts represent direct costs related to GRNE providing solar construction services.
Total cost of services	49,529		30,852	105,532	66,397
Operating expenses:
Salaries and benefits	144,706		141,398	297,416	290,813	Increase was due to an increase in headcount in ETS&PP to support the growth of its customer base and the investment in the development of new technologies. This increase was partially offset by staff reductions in LSS in the first and second quarters of 2023 to manage expenses due to delays in the government's student debt relief and return to repayment programs and lower pricing and reduced servicing volume for LSS's Department servicing contracts. In addition, increase was due to the acquisition of GRNE Solar on July 1, 2022.
Depreciation and amortization	18,652		18,250	35,279	35,206	Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions.
Other expenses	45,997		36,940	86,781	76,439	Includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs. Increase was due to an increase in expenses in ETS&PP due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies, and an increase in costs for travel and in-person hosted conferences that had previously subsided due to the COVID-19 pandemic.
Total operating expenses	209,355		196,588	419,476	402,458
Income before income taxes	29,586		108,387	60,853	348,969
Income tax expense	10,491		25,483	18,741	81,180	The effective tax rate was 27.1% and 23.0% for the three months ended June 30, 2023 and 2022, respectively, and 25.5% and 23.0% for the six months ended June 30, 2023 and 2022, respectively. The increase in the effective tax rate in 2023 compared with 2022 was due to an increase in the Company's state effective tax rate due to the composition of income earned in certain states. The Company expects its effective tax rate will range between 24% and 25% for the remainder of 2023.
Net income	19,095		82,904	42,112	267,789
Net loss attributable to noncontrolling interests	9,172		2,225	12,642	3,987	Amounts for noncontrolling interests reflect the net income/loss attributable to the holders of noncontrolling membership interests in WRCM, NextGen, multiple solar entities (including GRNE Solar), and multiple entities investing in federal opportunity zone programs.
Net income attributable to Nelnet, Inc.	$	28,267	85,129	54,754	271,776

Additional information:						See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.
Net income attributable to Nelnet, Inc.	$	28,267	85,129	54,754	271,776
Derivative market value adjustments, net	(2,005)		(40,401)	35,407	(186,135)
Tax effect	481		9,696	(8,498)	44,672
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments	$	26,743	54,424	81,663	130,313

3941

~~(b) Represents borrower late fees earned primarily by~~The following table summarizes the ~~AGM operating segment. The increase~~components of "other, net" in borrower late fees for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 was due to the Company suspending substantially all borrower late fees effective March 13, 2020 to provide borrowers relief as a result of the COVID-19 pandemic. The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans).

~~(c) Represents the Company's~~"other income (expense)" on its preferred membership interests in ALLO, which was deconsolidated from the Company's financial statements in December 2020. As of September 30, 2022 and 2021, the amount of preferred membership interests held by the Company was $137.3 million and $129.7 million, respectively, which earns a preferred annual return of 6.25 percent.

(d) Represents fee income earned by the AGM operating segment as administrator and sponsor for the securitizations completed during 2021 by the joint venture to purchase and securitize private education loans sold by Wells Fargo.

(e) 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 earns annual fees of 10 basis points to 25 basis points on the majority of the outstanding balance of asset-backed securities under management and a share of the gains from the sale of asset-backed securities or asset-backed securities being called prior to the full contractual maturity for which it provides advisory services. As of September 30, 2022, the outstanding balance of asset-backed securities under management subject to these arrangements was $3.0 billion, of which all of such securities were FFELP student loan asset-backed securities. In addition, WRCM earns annual management fees of five basis points for Nelnet stock under management (with the Nelnet stock primarily shares of Class B common stock held in various trust estates).

(f) Represents the Company's share of loss on its voting membership interests in ALLO. Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers. The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP. Applying the Hypothetical Liquidation at Book Value ("HLBV") method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years.

(g) Represents the Company's share of income or loss from solar investments under the HLBV method of accounting. For the majority of the Company's solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. Losses from solar investments include losses attributable to third-party minority interest investors of $4.1 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $8.0 million and $4.0 million for the nine months ended September 30, 2022 and 2021, respectively, that are included in "net loss attributable to noncontrolling interests" in the consolidated statements of income.


	Three months ended June 30,			Six months ended June 30,
	2023		2022	2023	2022	Additional information
ALLO preferred return	$	2,274	2,140	4,523	4,257	See Corporate - results of operations.
Borrower late fee income	2,168		2,436	4,414	4,867	See AGM operating segment - results of operations.
Administration/sponsor fee income	1,697		2,012	3,468	4,134	See AGM operating segment - results of operations.
Investment advisory services	1,639		1,482	3,251	2,764	See Corporate - results of operations.
Loss from ALLO voting membership interest investment	(12,169)		(16,941)	(32,382)	(30,071)	See Corporate - results of operations.
Loss from solar investments	(7,929)		(1,854)	(9,876)	(2,884)	See Corporate - results of operations.
Investment activity, net	(3,574)		18,091	(7,154)	29,924	See Corporate - results of operations and note (a) below for additional information.


Other	8,883		5,281	12,673	9,533
Other, net	$	(7,011)	12,647	(21,083)	22,524

(a) The Company anticipates fluctuations in future periodic earnings resulting from investment sales and valuation adjustments. Investment activity by operating segment and investment type follows:


	Real Estate		Venture Capital	Equity / Bonds	Total	Real Estate	Venture Capital	Equity / Bonds	Total
	Three months ended June 30,
	2023					2022
Corporate	$	(1,090)	(956)	406	(1,640)	3,629	17,318	(2,649)	18,298
AGM	—		(2,545)	—	(2,545)	—	(352)	—	(352)
Nelnet Bank	—		(10)	621	611	—	(15)	160	145
	$	(1,090)	(3,511)	1,027	(3,574)	3,629	16,951	(2,489)	18,091


	Six months ended June 30,
	2023					2022
Corporate	$	(314)	(892)	(3,636)	(4,842)	7,980	22,194	(3,465)	26,709
AGM	—		(2,649)	(476)	(3,125)	—	1,575	—	1,575
Nelnet Bank	—		(272)	1,085	813	—	372	1,268	1,640
	$	(314)	(3,813)	(3,027)	(7,154)	7,980	24,141	(2,197)	29,924

LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS

Loan Servicing Volumes


		As of										As of
		December 31, 2020		March 31, 2021	June 30, 2021	September 30, 2021	December 31, 2021	March 31, 2022	June 30, 2022	September 30, 2022		December 31, 2021		March 31, 2022	June 30, 2022	September 30, 2022	December 31, 2022	March 31, 2023	June 30, 2023
Servicing volume (dollars in millions):	Servicing volume (dollars in millions):										Servicing volume (dollars in millions):
Government	Government	$	443,248	453,681	452,450	461,054	478,402	507,653	542,398	545,546	Government	$	478,402	507,653	542,398	545,546	545,373	537,291	519,308
FFELP	FFELP	30,763		30,084	29,361	28,244	26,916	25,646	24,224	22,412	FFELP	26,916		25,646	24,224	22,412	20,226	19,815	19,021
Private and consumer	Private and consumer	16,226		21,397	24,758	24,229	23,702	23,433	22,838	22,461	Private and consumer	23,702		23,433	22,838	22,461	21,866	21,484	20,805
Total	Total	$	490,237	505,162	506,569	513,527	529,020	556,732	589,460	590,419	Total	$	529,020	556,732	589,460	590,419	587,465	578,590	559,134

Number of servicing borrowers:	Number of servicing borrowers:										Number of servicing borrowers:
Government	Government	13,251,930		13,301,364	13,253,051	13,570,056	14,196,520	14,727,860	15,426,607	15,657,942	Government	14,196,520		14,727,860	15,426,607	15,657,942	15,777,328	15,518,751	14,898,901
FFELP	FFELP	1,300,677		1,233,461	1,198,863	1,150,214	1,092,066	1,034,913	977,785	910,188	FFELP	1,092,066		1,034,913	977,785	910,188	829,939	819,791	788,686
Private and consumer	Private and consumer	636,136		882,477	1,039,537	1,097,252	1,065,439	1,030,863	998,454	979,816	Private and consumer	1,065,439		1,030,863	998,454	979,816	951,866	925,861	899,095
Total	Total	15,188,743		15,417,302	15,491,451	15,817,522	16,354,025	16,793,636	17,402,846	17,547,946	Total	16,354,025		16,793,636	17,402,846	17,547,946	17,559,133	17,264,403	16,586,682

Number of remote hosted borrowers:	Number of remote hosted borrowers:	6,555,841		4,307,342	4,338,570	4,548,541	4,799,368	5,487,943	5,738,381	6,025,377	Number of remote hosted borrowers:	4,799,368		5,487,943	5,738,381	6,025,377	6,135,760	5,048,324	716,908

Government Loan Servicing

~~The Company's~~Nelnet Servicing, LLC (Nelnet Servicing) and Great Lakes Educational Loan Services, Inc. (Great Lakes), both subsidiaries of the Company, are two of the current six private sector entities that have student loan servicing contracts with the Department ~~are~~to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department. The Company currently licenses its hosted servicing software to two of the six servicers for the Department.

Contract Modifications and Award

Effective April 1, 2023, the Department modified the student loan servicing contracts between the Department and each of Nelnet Servicing and Great Lakes (the “servicing contracts”) to reduce the monthly fee under the servicing contracts by $0.19 per borrower on certain borrower statuses.

The Company's current student loan servicing contracts with the Department were scheduled to expire on December 14, 2023. In ~~2017,~~April 2023, Nelnet Diversified Solutions, LLC (NDS), a subsidiary of the Company, received a contract award from the Department, ~~initiated a contract procurement process referred~~pursuant to ~~as the Next Generation Financial Services Environment for a new framework~~which NDS was selected to provide continued servicing capabilities for the ~~servicing of all~~Department's student ~~loans owned by the Department. The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the process, including that any~~aid recipients under a new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance. In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution ~~("USDS"~~(USDS) contract (the "New Government Servicing Contract") which will replace the existing legacy Department student loan servicing contracts.

Loan Volume Transfers - Full Service Borrowers

In July 2021, the Pennsylvania Higher Education Assistance Agency ~~("PHEAA"), a servicer for the Department,~~(PHEAA) announced ~~that it will~~its exit from the federal student loan servicing business. All applicable student loans serviced for the Department by PHEAA ~~will be~~were transferred to successor ~~servicers by December 2022. At the time of this announcement, PHEAA serviced approximately 8.5 million borrowers under its contract.~~servicers. As of December 31, 2021 ~~March 31, 2022, June 30, 2022,~~ and ~~September 30,~~ 2022, approximately 603,000 ~~1,175,000, 1,905,000,~~ and ~~1,909,000~~1,910,000 PHEAA borrowers, respectively, have been ~~transitioned~~transferred from PHEAA to the Company's platform. In addition, over this same time period, PHEAA borrowers were transferred to other servicers ~~that~~to which the Company ~~provides~~provided its servicing system (remote hosted servicing customers).

In February 2023, the Department notified the Company of its intention to transfer up to one million of the Company’s existing Department servicing borrowers to another third-party servicer. This ~~has increased~~transfer decision was not based on the Company's performance. These transfers began in the second quarter of 2023 and were completed in July 2023.

Loan Volume Transfers - Remote Hosted Servicing Borrowers

Edfinancial Services, LLC ("Edfinancial"), a current servicer for the Department, utilized Nelnet Servicing's platform to service their loans for the Department (remote hosted servicing customer). In the fourth quarter of 2022, Nelnet Servicing and Edfinancial reached an agreement on a decommission schedule transferring Edfinancial’s direct loan servicing volume to another third-party servicing platform. As of December 31, 2022, Edfinancial was servicing 4.5 million borrowers for the Department on the Company’s platform. The Company began transferring Edfinancial's servicing volume to another servicing platform in the first quarter of 2023 which reduced the number of Edfinancial's borrowers serviced on the Company's platform to 3.5 million borrowers as of March 31, 2023 and 579,000 borrowers as of June 30, 2023. Edfinancial's remaining borrowers were transferred off of the Company's platform in July 2023.

In February 2023, the Company’s other remote hosted servicing customer notified the Company the Department intended to move that customer’s servicing borrowers to a different third-party servicing platform. This transfer decision was the result of this customer not being one of the servicers awarded a USDS contract. As of March 31, 2023, this remote hosted servicing customer was servicing 1.4 million borrowers for the Department on the Company's platform. The majority of this volume was transferred to another third-party servicing platform during the second quarter of 2023, and the remaining borrowers were transferred off of the Company's platform in July 2023.

As a result of the transfers discussed above, the Company has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.

Department of Education Debt Relief

In August 2022, the Department announced a broad based student debt relief plan that would provide targeted student debt cancellation to borrowers with loans held by the Department with unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant. Federal courts blocked implementation of the Department's broad based student debt relief plan and on June 30, 2023, the Supreme Court struck down the Department's plan. While the current version of the Department's forgiveness plan has been invalidated, the Department recently announced that it has begun a new rulemaking process to consider other ways to provide debt relief to borrowers. The Company cannot predict the timing, nature, or ultimate outcome of any future potential student loan forgiveness programs as ~~reflected~~a result of the rulemaking process. Revenue earned under the current Department servicing contracts will decrease in future periods if the ~~table above.~~Department successfully implements broad based loan forgiveness.

The CARES Act

Under the CARES Act, beginning in March 2020, federal student loan payments and interest accruals were suspended for all borrowers that had loans owned by the Department. As a result of the CARES Act, the Company receives less servicing revenue per borrower from the Department based on the borrower forbearance status than what was earned on such accounts prior to these provisions. ~~On April 6, 2022, the Department extended~~After multiple extensions of the student loans payment pause under the CARES Act, ~~from May 1, 2022 to~~the payment and interest accrual suspension will end August 31, ~~2022,~~2023, and borrowers are scheduled to return to repayment on ~~August 24, 2022,~~September 1, 2023. Once borrowers transition back to repayment under the legacy government contracts, the Company anticipates revenue per borrower from the Department ~~extended such payment pause~~will increase from ~~August 31, 2022 to December 31, 2022. Prior to~~ the ~~April 2022 extension (during~~current CARES Act levels.

During the fourth quarter of 2021 and first quarter of ~~2022),~~2022, the Company earned additional revenue from the Department based on incremental work, including outbound engagement, being performed by the Company to support the anticipated Department

borrowers coming out of forbearance. Effective May 1, 2022, the Department increased the monthly per borrower CARES Act forbearance rate paid to its servicers to compensate them for supplemental outreach to certain borrowers and to support the transition of borrowers back to repayment. ~~Once borrowers transition back to repayment,~~Effective April 1, 2023, the Department decreased the monthly per borrower CARES Act forbearance rate by $0.19 per borrower (as discussed above).

Reduction in Staff

On January 18, 2023, the Company ~~anticipates revenue per borrower from~~announced a reduction in staff to manage expenses due to delays in the ~~Department will increase to pre-CARES Act levels.~~

~~Department of Education Loan Forgiveness~~

~~The Department's August 24, 2022 Bulletin announcing a broad based~~government's student debt relief ~~plan indicates~~and return to repayment programs under the ~~Department will provide targeted student debt cancellation~~CARES Act. Approximately 350 associates who were hired within the prior six months were laid off with a 60 day notice period and approximately 210 associates were immediately terminated for performance.

On March 23, 2023, the Company announced a reduction in staff due to ~~borrowers with loans held~~the March 2023 government servicing contract price modifications (as discussed above) and the notification by the Department in February 2023 of its intention to transfer up to one million of the Company's existing Department servicing borrowers to another servicer (as discussed above). Approximately 550 associates who work in LSS, including some in related shared services areas that support LSS, were notified their positions were being eliminated. The Company estimates incurring a charge of $4.3 million related to the staff reductions, of which $2.7 million was recognized in the first quarter of 2023. The remaining expense was incurred primarily during the second quarter of 2023.

Summary and ~~that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married~~Comparison of Operating Results


	Three months ended June 30,					Six months ended June 30,
	2023			2022		2023		2022		Additional information
Net interest income	$	1,058		226		2,095		269		Increase in 2023 compared with 2022 was due to higher interest rates.
Loan servicing and systems revenue	122,020			124,873		261,247		261,241		See table below for additional information.
Intersegment servicing revenue	7,246			8,381		15,036		16,860		Represents revenue earned by LSS from servicing loans for AGM and Nelnet Bank. Decrease in 2023 compared with 2022 was due to the continued amortization of AGM's FFELP portfolio. FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Other income	605			611		1,213		1,350		Represents revenue earned from providing administrative support and marketing services.

Total other income	129,871			133,865		277,496		279,451
Salaries and benefits	76,141			83,220		160,701		175,192		Decrease in 2023 compared with 2022 was due to the Company being fully staffed with contact center operations and support associates in 2022 in preparation for the resumption of federal student loan payments and other activities after the CARES Act suspension. During the first and second quarters of 2023, the Company reduced staff to manage expenses due to delays in the government's student debt relief and return to repayment programs and lower pricing and reduced servicing volume for government servicing contracts. See "Reduction in Staff" above for additional details.
Depreciation and amortization	4,863			5,318		9,377		10,272
Other expenses	13,818			13,507		27,131		29,721		Decrease in the first half of 2023 compared with 2022 was due to a decrease in professional fees and facility costs. Over the last year, the Company has reduced its office space as a large number of employees continue to work from home.
Intersegment expenses	19,079			18,558		40,136		38,955		Represent 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	113,901			120,603		237,345		254,140
Income before income taxes	17,028			13,488		42,246		25,580
Income tax expense	(4,086)			(3,237)		(10,139)		(6,139)		Represents income tax expense at an effective tax rate of 24%.
Net income	$	12,942		10,251		32,107		19,441




Before tax operating margin	13.1		%	10.1	%	15.2	%	9.2	%	Before tax operating margin represents before tax operating profitability as a percentage of revenue, and for LSS is calculated as income before income taxes divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue. The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it provides additional information to facilitate an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods. Before tax operating margin increased in 2023 compared with 2022 due primarily to a decrease in salaries and benefits expense as described above.

4145

couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant. On October 21, 2022, the U.S. Court of Appeals for the Eighth Circuit issued a temporary administrative stay of implementation of the Department's student debt relief plan in response to a legal challenge that was initiated by other parties (not the Company).

The Company cannot currently estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the Department's announcement. If there was a broad $10,000 or $20,000 per borrower forgiveness on all government owned loans, the Company estimates it would decrease the number of borrowers serviced (based on the borrower loan information as of September 30, 2022) by approximately 4.4 million borrowers and 7.5 million borrowers, respectively. The actual impact to the number of borrowers serviced is expected to be less than these amounts due to annual income ceilings for borrowers to qualify for forgiveness and the impact of whether a Pell Grant was received on the amount of forgiveness for a borrower.

Revenue earned under the current Department servicing contracts, and software services revenue earned in providing remote hosted services to other Department servicers, will decrease in future periods if the Department's student debt relief plan or other broad based loan forgiveness is implemented.

~~Private Education Loan Servicing~~

In December 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education student loans representing approximately 445,000 borrowers. In conjunction with the sale, the Company was selected as servicer of the portfolio. During March 2021, approximately 261,000 borrowers were converted to the Company's servicing platform, with the vast majority of the remaining borrowers converted in the second quarter of 2021.

~~Summary and Comparison of Operating Results~~

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021 Additional information
Net interest income $ 831 7 1,100 25 Increase was due to higher interest rates in 2022 as compared to 2021.
Loan servicing and systems revenue 134,197 112,351 395,438 335,961 See table below for additional information.
Intersegment servicing revenue 8,281 8,621 25,142 25,369 Represents revenue earned by the LSS operating segment from servicing loans for the AGM and Nelnet Bank operating segments. Decrease in 2022 compared to 2021 was due to the continued amortization of AGM's FFELP portfolio. Decrease was partially offset by ending COVID-19 pandemic borrower relief policies, which increased servicing activities performed for AGM. FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Other income 596 727 1,946 2,541 Represents revenue earned from providing administrative support and marketing services.
Impairment expense — (13,243) — (13,243) During the third quarter of 2021, the Company evaluated use of office space as a large number of employees continued to work from home due to COVID-19. As a result of this evaluation, the Company recorded a non-cash impairment charge to certain building and building improvement assets during the third quarter of 2021.
Total other income 143,074 108,456 422,526 350,628
Salaries and benefits 82,067 75,305 257,259 210,151 Increase in 2022 compared to 2021 was due to the Company hiring contact center operations and support associates to prepare for the resumption of federal student loan payments and other activities after the CARES Act suspension expires. The CARES Act suspension was expected to expire on January 31, 2022 and has been extended three additional times to May 1, 2022, August 31, 2022, and again to December 31, 2022.
Depreciation and amortization 5,784 4,245 16,056 20,411 Includes amortization of intangible assets from the Great Lakes acquisition in February 2018 of which the majority of such assets became fully amortized as of June 30, 2021. Amortization of intangible assets for the nine months ended September 30, 2022 and 2021 was $1.1 million and $11.6 million, respectively. Excluding amortization of intangible assets, the increase in 2022 compared to 2021 was due to scaling of the Company's servicing platform for the PHEAA loan volume transferred to its platform.
Other expenses 16,654 12,738 46,375 39,296 Increase in 2022 compared to 2021 was due to additional costs associated with the growth of borrowers under the government servicing contracts.
Intersegment expenses 17,486 19,217 56,442 52,241 Intersegment expenses represent 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 121,991 111,505 376,132 322,099
Income (loss) before income taxes 21,914 (3,042) 47,494 28,554
Income tax (expense) benefit (5,259) 730 (11,399) (6,853) Represents income tax (expense) benefit at an effective tax rate of 24%.
Net income (loss) $ 16,655 (2,312) 36,095 21,701

GAAP before tax operating margin 15.3 % (2.5) % 11.2 % 7.9 %
Before tax operating margin, excluding impairment and amortization expense, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the LSS segment is calculated as income before income taxes (excluding impairment and amortization expense) divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue. The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it 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, excluding impairment and amortization expense, decreased in the nine months ended September 30, 2022 compared to the same period in 2021 due to increased operating expenses, primarily salaries and benefits, as the Company prepared for a January 31, 2022 expiration of the federal student loan payment pause under the CARES Act, which has been extended three additional times to May 1, 2022, August 31, 2022, and again to December 31, 2022.
Impairment expense — 10.9 % — 3.6 %
Amortization expense 0.3 % 0.5 % 0.3 % 3.2 %
Non-GAAP before tax operating margin, excluding impairment and amortization expense 15.6 % 8.9 % 11.5 % 14.7 %

Loan servicing and systems revenue

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021 Additional information
Government servicing $ 104,428 84,084 312,368 241,497 Represents revenue from the Company's Department servicing contracts. Increase in 2022 compared to 2021 was due to (i) an increase in the number of borrowers serviced, including PHEAA borrowers transferred to the Company's servicing platform; (ii) a per borrower rate increase beginning September 1, 2021 to reflect the increase in the cost of labor (Employment Cost Index) per the provisions of the contract; and (iii) a CARES Act forbearance rate increase effective May 1, 2022. Increase in the nine months ended September 30, 2022 compared to the same period in 2021 was also due to (i) the recognition of $9.1 million of revenue in the first quarter of 2022 for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers; and (ii) the recognition of $10.5 million of revenue in the first quarter of 2022 related to the discharge of borrowers under the Total and Permanent Disability ("TPD") discharge program. The Company earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program.
Private education and consumer loan servicing 12,198 13,198 37,194 34,563 Increase for the nine months ended September 30, 2022 compared to the same period in 2021 was due to the addition of the former Wells Fargo private education loan borrowers converted to the Company's servicing platform during March and the second quarter of 2021. Excluding revenue earned on the former Wells Fargo portfolio, revenue for 2022 decreased compared to 2021. The decrease in revenue was due to a decrease in servicing volume and client requested enhanced delinquency services.
FFELP servicing 4,127 4,557 12,386 13,930 Decrease in 2022 compared to 2021 was due to a decrease in the number of borrowers serviced. Over time, FFELP servicing revenue will continue to decrease as third-party customers' FFELP portfolios pay off. Since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of borrower relief under the CARES Act and an initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.
Software services 8,229 6,952 23,536 22,779 Increase in 2022 compared to 2021 is due to an increase in the number of remote hosted servicing borrowers primarily from the transfer of PHEAA borrowers to these servicing customers. This increase was partially offset during the nine months ended September 30, 2022 compared to the same period in 2021 due to many of the services provided under the Company's remote hosted servicing and system support contract with Great Lakes' former parent, representing 2.3 million borrowers, expiring on January 31, 2021.
Outsourced services and other 5,215 3,560 9,954 23,192 The majority of this revenue relates to providing contact center and back office operational outsourcing services. In 2021, these services included assisting state agencies with COVID-19 specific activities. Revenue from providing COVID-19 related services to state agencies was $1.3 million and $16.3 million during the three and nine months ended September 30, 2021. Excluding COVID-19 specific activities, outsourced services revenue has increased in 2022 as compared to 2021 due to additional outsourced opportunities, including assisting existing Department servicers as they wind down their operations.
Loan servicing and systems revenue $ 134,197 112,351 395,438 335,961


	Three months ended June 30,			Six months ended June 30,
	2023		2022	2023	2022	Additional information
Government loan servicing	$	95,736	98,815	204,618	207,940	Represents revenue from the Company's Department servicing contracts. Decrease in the three and six months ended June 30, 2023 compared with the same periods in 2022 was due to (i) the monthly fee earned per borrower on certain borrower statuses being reduced by $0.19 effective April 1, 2023; and (ii) a decrease of borrowers in June 2023 as part of the Department's plan to transfer up to one million of the Company's existing borrowers to another third-party servicer. Decrease in the first half of 2023 compared with the same period in 2022 was also due to (i) the recognition of $6.7 million of revenue in the first quarter of 2022 for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers; and (ii) the recognition of $10.5 million of revenue in the first quarter of 2022 related to the discharge of borrowers under the Total and Permanent Disability (TPD) discharge program (the Company earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program). The decrease in revenue for the first half of 2023 compared with the same period in 2022 was partially offset by (i) an increase in borrowers serviced due to the PHEAA servicing volume transferred to the Company's platform in 2022; (ii) a per borrower CARES Act forbearance rate increase on May 1, 2022; and (iii) a per borrower rate increase on certain statuses on September 1, 2022 (5.0%) to reflect the increase in the cost of labor (Employment Cost Index) per the provisions of the contracts.
Private education and consumer loan servicing	12,063		12,122	24,225	24,995	Decrease in 2023 compared with 2022 was due to a decrease in servicing volume and client requested enhanced delinquency services.
FFELP loan servicing	3,554		4,011	6,921	8,259	Decrease in 2023 compared with 2022 was due to a decrease in the number of borrowers serviced. Over time, FFELP servicing revenue will continue to decrease as third-party customers' FFELP portfolios pay off. Since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of borrower relief under the CARES Act and initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.
Software services	5,962		7,907	15,660	15,308	Decrease in the three months ended June 30, 2023 compared with the same period in 2022 was due to the transfer of remote hosted borrowers to other third-party servicers. See “Government Loan Servicing - Loan Volume Transfers - Remote Hosted Servicing Borrowers” above for additional details. Increase in the six months ended June 30, 2023 compared with the same period in 2022 was due to annual rate increases on Department remote hosted servicing customers, contract programming associated with loan transfers and change requests, and growth in LSS's technology outsourcing opportunities. These increases were offset by the transfer of remote hosted borrowers to other third-party servicers. As a result of the transfers, the Company has no remaining Department remote hosted servicing borrowers on its platform and software services revenue will be negatively impacted in future periods.
Outsourced services	4,705		2,018	9,823	4,739	Represents primarily revenue to provide contact center and back office operational outsourcing services. Increase in 2023 compared with 2022 was due to additional outsourced opportunities, including assisting existing Department servicers as operations transition from exiting servicers. Contracts for support provided to Department servicers expired at the end of July 2023.
Loan servicing and systems revenue	$	122,020	124,873	261,247	261,241

4346

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

As discussed further in the Company's ~~2021~~2022 Annual Report, this segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year. Based on the timing of revenue recognition and when expenses are incurred, revenue and ~~pre-tax~~before tax operating margin are higher in the first quarter as compared towith the remainder of the year.

Summary and Comparison of Operating Results


		Three months ended September 30,			Nine months ended September 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021	Additional information		2023		2022	2023	2022	Additional information
Interest income		$	3,707	344	4,920	818	Represents interest income on tuition funds held in custody for schools. Increase was due to higher interest rates in 2022 as compared to 2021.
Net interest income								Net interest income	$	5,268	874	11,304	1,213	Represents interest income on tuition funds held in custody for schools. Increase in 2023 compared with 2022 was due to higher interest rates.
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	106,894		85,324	310,211	257,284	See table below for additional information.	Education technology, services, and payment processing revenue	109,858		91,031	243,462	203,317	See table below for additional information.
Intersegment revenue	Intersegment revenue	8		3	16	9		Intersegment revenue	65		7	121	10
Other		—		13	—	13

Total other income	Total other income	106,902		85,340	310,227	257,306		Total other income	109,923		91,038	243,583	203,327
Cost of services	Cost of services	42,676		31,335	109,073	80,063	See table below for additional information.	Cost of services	40,407		30,852	88,110	66,397	See table below for additional information.
Salaries and benefits	Salaries and benefits	34,950		29,119	98,356	82,154	Increase in 2022 compared to 2021 was 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	38,351		32,120	76,264	63,406	Increase in 2023 compared with 2022 was due to an increase in headcount to support the growth of the customer base and the investment in the development of new technologies.
Depreciation and amortization	Depreciation and amortization	2,532		2,762	7,544	8,789	Represents primarily amortization of intangible assets from prior business acquisitions. Amortization of intangible assets related to business acquisitions was $2.2 million and $2.6 million for the three months ended September 30, 2022 and 2021, respectively, and $6.8 million and $8.3 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization of intangible assets is expected to increase in future periods as a result of the recent business acquisition of NextGen. See note 6 of the notes to the consolidated financial statements included under Part I, Item 1 of this report.	Depreciation and amortization	2,815		2,698	5,393	5,013	Represents primarily amortization of intangible assets from prior business acquisitions and depreciation of capitalized software development costs.

Other expenses	Other expenses	7,034		4,804	19,549	14,063	Increase was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies. Increase was also due to an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID pandemic.	Other expenses	9,692		6,750	17,755	12,514	Increase in 2023 compared with 2022 was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies. Increase was also due to an increase in costs for travel and in-person hosted conferences that previously subsided due to the COVID pandemic. In addition, during the second quarter of 2023 the Company increased its allowance for uncollectible accounts due to the age of certain receivables primarily driven by economic conditions and the increase in volume of FACTS Education Solutions instructional services revenue.
Intersegment expenses, net	Intersegment expenses, net	4,762		3,672	14,171	10,856	Intersegment expenses represent 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, net	5,884		4,805	11,684	9,410	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	Total operating expenses	49,278		40,357	139,620	115,862		Total operating expenses	56,742		46,373	111,096	90,343
Income before income taxes	Income before income taxes	18,655		13,992	66,454	62,199		Income before income taxes	18,042		14,687	55,681	47,800
Income tax expense	Income tax expense	(4,475)		(3,358)	(15,947)	(14,928)	Represents income tax expense at an effective tax rate of 24%.	Income tax expense	(4,327)		(3,525)	(13,393)	(11,472)	Represents income tax expense at an effective tax rate of 24%.
Net income	Net income	14,180		10,634	50,507	47,271		Net income	13,715		11,162	42,288	36,328
Net income attributable to noncontrolling interests		(61)		—	(8)	—	Amounts for noncontrolling interests reflect the net income attributable to the holders of minority membership interests in NextGen, of which the Company became the majority owner on April 30, 2022. See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.
Net income attributable to Nelnet, Inc.		$	14,119	10,634	50,499	47,271
Net (income) loss attributable to noncontrolling interests								Net (income) loss attributable to noncontrolling interests	(19)		53	119	53	Amounts for noncontrolling interests reflect the net (income) loss attributable to the holders of minority membership interests in NextGen, of which the Company became the majority owner on April 30, 2022.
Net income								Net income	$	13,696	11,215	42,407	36,381

4447

Education technology, services, and payment processing revenue

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


		Three months ended September 30,					Nine months ended September 30,				Three months ended June 30,					Six months ended June 30,
		2022			2021		2022	2021	Additional information		2023			2022		2023		2022		Additional information
Tuition payment plan services	Tuition payment plan services	$	25,779		23,618		84,131	79,706	Revenue increased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 due to a higher number of payment plans in the K-12 market. In addition, revenue for the three months ended September 30, 2022 increased compared to the same period in 2021 due to a higher number of payment plans for institutions of higher education.	Tuition payment plan services	$	30,825		27,637		65,012		58,352		Increase in 2023 compared with 2022 was due to a higher number of payment plans in the K-12 and higher education market for both new and existing customers.
Payment processing	Payment processing	47,957			39,852		113,996	97,898	Payment volumes in 2022 increased as compared to 2021 for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.	Payment processing	31,827			27,968		75,868		66,039		Increase in 2023 compared with 2022 was due to increase in payment volumes for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.
Education technology and services	Education technology and services	32,548			21,295		110,755	78,752	Increase in 2022 compared to 2021 was due to an increase in revenues from the Company’s school information system software, enrollment and communication products, revenue from the NextGen acquisition, and FACTS Education Solutions instructional and professional development services. FACTS Education Solutions instructional services revenue was the largest component of this increase, driven by the Emergency Assistance to Non-Public Schools (“EANS”) program which provides funds to non-public schools through September 2024 to address the impact the COVID-19 pandemic has had or continues to have on school students and teachers.	Education technology and services	46,216			34,956		101,004		78,207		Increase in 2023 compared with 2022 was due to an increase in revenue from the Company’s school information system software, enrollment and communication services, the NextGen acquisition completed in April 2022, and FACTS Education Solutions instructional and professional development services. FACTS Education Solutions instructional services revenue was the largest component of this increase, driven by the Emergency Assistance to Non-Public Schools (EANS) program which provides funds to non-public schools through September 2024 to address the impact COVID-19 has had or continues to have on students and teachers.
Other	Other	610			559		1,329	928		Other	990			470		1,578		719
Education technology, services, and payment processing revenue	Education technology, services, and payment processing revenue	106,894			85,324		310,211	257,284		Education technology, services, and payment processing revenue	109,858			91,031		243,462		203,317
Cost of services	Cost of services	42,676			31,335		109,073	80,063	Costs primarily relate to payment processing revenue and such costs decrease/increase in relationship to payment volumes. Costs to provide instructional services are also included as a component of this expense and were the primary driver of the increase in 2022 compared to 2021 due to the increase in instructional services resulting from the EANS program as noted for Education technology and services revenue above.	Cost of services	40,407			30,852		88,110		66,397		Represents costs relating to payment processing revenue and such costs decrease/increase in relationship to payment volumes. Costs to provide instructional services are also a component of this expense and were the primary driver of the increase in 2023 compared with 2022 due to the increase in instructional services resulting from the EANS program as noted above. In addition, the cost of providing instructional services has increased as a percentage of revenue in 2023 compared with 2022.
Net revenue	Net revenue	$	64,218		53,989		201,138	177,221		Net revenue	$	69,451		60,179		155,352		136,920

Before tax operating margin		23.3		%	25.3	%	30.6%	34.6%	Before tax operating margin is a measure of before tax operating profitability as a percentage of revenue, and for the ETS&PP segment is calculated as income before income taxes less interest income divided by net revenue. 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. The decrease in margin for 2022 as compared to 2021 was due to investments in (i) the development of new services and technologies; and (ii) superior customer experiences to align with the Company’s strategies to grow, retain, and diversify revenues.
GAAP before tax operating margin										GAAP before tax operating margin	26.0		%	24.4	%	35.8	%	34.9	%	Before tax operating margin, excluding net interest income, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the ETS&PP segment is calculated as income before income taxes less interest income divided by net revenue. The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it facilitates an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods. Before tax operating margin, excluding net interest income, decreased in 2023 compared with 2022 due to investments in (i) the development of new services and technologies; and (ii) superior customer experiences to align with the Company’s strategies to grow, retain, and diversify revenues. Additionally, the Company has had significant growth in FACTS Education Solutions instructional services revenue which has a lower before tax operating margin compared to the rest of the Company's services. The Company anticipates before tax operating margin, excluding net interest income, will be impacted over the next several years as it continues to invest in the development of new services and customer experiences but could see some improvement when the EANS program ends in September 2024.
Net interest income										Net interest income	(7.6)			(1.4)		(7.2)		(0.9)
Non-GAAP before tax operating margin, excluding net interest income										Non-GAAP before tax operating margin, excluding net interest income	18.4		%	23.0	%	28.6	%	34.0	%

4548

ASSET GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS

Loan Portfolio

As of ~~September~~June 30, ~~2022,~~2023, the AGM operating segment had a ~~$14.8~~$13.2 billion loan portfolio, consisting primarily of federally insured loans. For a summary of the Company’s loan portfolio as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

Loan Activity

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


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Beginning balance	Beginning balance	$	15,855,137	19,331,725	17,441,790	19,559,108	Beginning balance	$	13,482,620	16,618,627	14,169,771	17,441,790
Loan acquisitions:	Loan acquisitions:						Loan acquisitions:
Federally insured student loans	Federally insured student loans	896		70,844	54,845	833,313	Federally insured student loans	512,611		43,747	515,591	53,949
Private education loans	Private education loans	667		1,680	8,177	88,131	Private education loans	—		6,484	—	7,510
Consumer and other loans	Consumer and other loans	120,465		20,939	256,998	61,319	Consumer and other loans	59,972		118,012	310,678	136,534
Total loan acquisitions	Total loan acquisitions	122,028		93,463	320,020	982,763	Total loan acquisitions	572,583		168,243	826,269	197,993
Repayments, claims, capitalized interest, participations, and other, net	Repayments, claims, capitalized interest, participations, and other, net	(385,312)		(818,554)	(1,310,913)	(1,415,249)	Repayments, claims, capitalized interest, participations, and other, net	(443,068)		(478,461)	(853,307)	(925,601)
Loans lost to external parties	Loans lost to external parties	(768,923)		(145,270)	(1,609,728)	(587,841)	Loans lost to external parties	(214,734)		(453,158)	(483,430)	(840,806)
Loans sold	Loans sold	(28,915)		(23,670)	(47,154)	(101,087)	Loans sold	(158,276)		(114)	(420,178)	(18,239)

Ending balance	Ending balance	$	14,794,015	18,437,694	14,794,015	18,437,694	Ending balance	$	13,239,125	15,855,137	13,239,125	15,855,137

The Company has ~~also purchased~~ partial ownership in certain consumer, private education, ~~consumer,~~ 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~~June 30, ~~2022,~~2023, the Company’s ownership correlates to approximately ~~$630~~$680 million, ~~$150~~$560 million, and ~~$420~~$360 million of consumer, private education, ~~consumer,~~ and federally insured student loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.

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

Allowance for Loan Losses, Loan Delinquencies, and Loan ~~Delinquencies~~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~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022; and the activity in AGM's allowance for loan losses and net charge-offs as a percentage of average loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, and a summary of AGM's loan status and delinquency amounts as of September 30,~~ 2022, ~~December 31, 2021, and September 30, 2021,~~ see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

4649

Loan Spread Analysis

The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets. The spread amounts included in the following table are calculated by using the notional dollar values found in the table under the caption "Net interest income after provision for loan losses, net of settlements on derivatives" below, divided by the average balance of loans or debt outstanding.


		Three months ended September 30,					Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
		2022			2021		2022		2021			2023			2022		2023		2022
Variable loan yield, gross	Variable loan yield, gross	5.05		%	2.61	%	3.76	%	2.65	%	Variable loan yield, gross	7.73		%	3.59	%	7.42	%	3.16	%
Consolidation rebate fees	Consolidation rebate fees	(0.84)			(0.85)		(0.85)		(0.84)		Consolidation rebate fees	(0.80)			(0.85)		(0.81)		(0.85)
Discount accretion, net of premium and deferred origination costs amortization	Discount accretion, net of premium and deferred origination costs amortization	0.02			0.03		0.03		0.01		Discount accretion, net of premium and deferred origination costs amortization	0.06			0.03		0.05		0.03
Variable loan yield, net	Variable loan yield, net	4.23			1.79		2.94		1.82		Variable loan yield, net	6.99			2.77		6.66		2.34
Loan cost of funds - interest expense (a) (b)		(3.11)			(0.99)		(1.95)		(1.03)
Loan cost of funds - derivative settlements (c) (d)		(0.03)			(0.02)		0.00		(0.01)
Loan cost of funds - interest expense (a)											Loan cost of funds - interest expense (a)	(5.94)			(1.73)		(5.73)		(1.41)
Loan cost of funds - derivative settlements (b) (c)											Loan cost of funds - derivative settlements (b) (c)	(0.00		)	0.02		0.01		0.02
Variable loan spread	Variable loan spread	1.09			0.78		0.99		0.78		Variable loan spread	1.05			1.06		0.94		0.95
Fixed rate floor income, gross	Fixed rate floor income, gross	0.19			0.75		0.45		0.75		Fixed rate floor income, gross	0.01			0.46		0.03		0.57
Fixed rate floor income - derivative settlements (c) (e)		0.30			(0.11)		0.10		(0.10)
Fixed rate floor income - derivative settlements (b) (d)											Fixed rate floor income - derivative settlements (b) (d)	0.00			0.09		0.34		0.01
Fixed rate floor income, net of settlements on derivatives	Fixed rate floor income, net of settlements on derivatives	0.49			0.64		0.55		0.65		Fixed rate floor income, net of settlements on derivatives	0.01			0.55		0.37		0.58
Core loan spread	Core loan spread	1.58		%	1.42	%	1.54	%	1.43	%	Core loan spread	1.06		%	1.61	%	1.31	%	1.53	%

Average balance of AGM's loans	Average balance of AGM's loans	$	15,466,505		19,084,320		16,371,092		19,178,788		Average balance of AGM's loans	$	13,616,889		16,437,861		13,804,065		16,823,385
Average balance of AGM's debt outstanding	Average balance of AGM's debt outstanding	15,060,823			18,863,730		15,905,170		18,890,832		Average balance of AGM's debt outstanding	13,011,224			15,923,648		13,187,073		16,335,310

(a) In the ~~first~~second quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income and the impact of this reduction to interest expense was excluded from the table above.

~~(b) In the third quarter of 2021,~~2023, the Company redeemed certain asset-backed debt securities prior to their ~~legal~~ maturity, resulting in the recognition of ~~$1.5~~$25.9 million in interest expense from the write-off of ~~all~~the remaining unamortized debt ~~issuance costs related to~~discount associated with these bonds at the ~~initial issuance~~time of ~~such bonds.~~redemption. This expense was excluded from the table above.

~~(c)~~(b) Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms. 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. The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the Company’s net interest income (loan spread) as presented in this table. 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. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance. See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on the Company's Non-Nelnet Bank derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the ~~2022~~2023 and ~~2021~~2022 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 4 and in this table.

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,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Core loan spread	Core loan spread	1.58	%	1.42	%	1.54	%	1.43	%	Core loan spread	1.06	%	1.61	%	1.31	%	1.53	%
Derivative settlements (1:3 basis swaps)	Derivative settlements (1:3 basis swaps)	0.03		0.02		(0.00	)	0.01		Derivative settlements (1:3 basis swaps)	0.00		(0.02)		(0.01)		(0.02)
Derivative settlements (fixed rate floor income)	Derivative settlements (fixed rate floor income)	(0.30)		0.11		(0.10)		0.10		Derivative settlements (fixed rate floor income)	(0.00	)	(0.09)		(0.34)		(0.01)
Loan spread	Loan spread	1.31	%	1.55	%	1.44	%	1.54	%	Loan spread	1.06	%	1.50	%	0.96	%	1.50	%

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

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

4750

~~A trend analysis of AGM's core and variable loan spreads is summarized below.~~

The interest earned on a large portion of AGM's FFELP student loan assets is indexed to the one-month LIBOR rate. AGM funds a portion of its assets with three-month LIBOR indexed floating rate securities. The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread. ~~The table above (the right axis) shows~~In addition, the ~~difference between AGM's liability base rate and the one-month LIBOR rate by quarter.~~

~~Variable loan spread increased during the three and nine months ended September 30, 2022 compared~~Company faces repricing risk due to the ~~same periods in 2021 due to a significant increase in short-term interest rates during each~~timing of the ~~first three quarters~~interest rate resets on its liabilities, which may occur as infrequently as once a quarter, in contrast to the timing of ~~2022.~~the interest rate resets on its assets, which generally occur daily. In an increasing interest rate environment, student loan spread ~~increases due to the timing of interest rate resets~~ on ~~the Company's assets occurring daily in contrast to the timing of the interest resets on the Company's debt that occurs either monthly or quarterly.~~

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

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,					Three months ended June 30,					Six months ended June 30,
		2022			2021		2022		2021			2023			2022		2023		2022
Fixed rate floor income, gross	Fixed rate floor income, gross	$	7,585		35,850		54,870		108,029		Fixed rate floor income, gross	$	456		18,292		1,567		47,285
Derivative settlements (a)	Derivative settlements (a)	11,356			(5,209)		11,843		(14,648)		Derivative settlements (a)	47			3,692		22,525		487
Fixed rate floor income, net	Fixed rate floor income, net	$	18,941		30,641		66,713		93,381		Fixed rate floor income, net	$	503		21,984		24,092		47,772
Fixed rate floor income contribution to spread, net	Fixed rate floor income contribution to spread, net	0.49		%	0.64	%	0.55	%	0.65	%	Fixed rate floor income contribution to spread, net	0.01		%	0.55	%	0.37	%	0.58	%

(a) Derivative settlements consist of net settlements received ~~(paid)~~ 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~~six months ended ~~September~~June 30, ~~2022~~2023 compared towith the same periods in ~~2021~~2022 was due to higher interest rates in ~~2022 as~~2023 compared ~~to 2021. Subsequent to September 30, 2022 (on November 2, 2022), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise~~

~~as a result of inflationary pressures in the U.S. economy; increases in interest rates will reduce the amount of gross fixed rate floor income the Company is currently receiving.~~with 2022.

The Company ~~has~~had a significant portfolio of derivative instruments in which the Company ~~pays~~paid a fixed rate and ~~receives~~received a floating rate to economically hedge loans earning fixed rate floor income. On March 15, 2023, to minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements. In June 2023, the Company entered into a derivative with a notional amount of $50.0 million to hedge a portion of loans remaining that earn fixed rate floor income.

The decrease in net derivative settlements received by the Company during the three months ended June 30, 2023, compared with the same period in 2022, was due to the termination of the fixed rate floor derivatives in March 2023. The increase in net derivative settlements received by the Company during the ~~three and nine~~six months ended ~~September~~June 30, ~~2022, as~~2023, compared ~~to net derivative settlements paid during~~with the same ~~periods~~period in ~~2021,~~2022, was due to an increase in ~~interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.~~

~~See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail~~settlements on the ~~Company’s portfolio earning fixed rate floor income and the~~Company's derivatives ~~used by the Company to hedge these loans.~~

~~Interest Rate Risk - Replacement of LIBOR~~outstanding during this period as a ~~Benchmark Rate~~result of an increase in interest rates.

As of September 30, 2022, the interest earned on a principal amount of $13.3 billion of AGM's FFELP student loan asset portfolio was indexed to one-month LIBOR, and the interest paid on a principal amount of $13.1 billion of AGM’s FFELP student loan asset-backed debt securities was indexed to one-month or three-month LIBOR. In addition, the Company’s derivative financial instrument transactions used to manage LIBOR interest rate risks are indexed to LIBOR. The market transition away from the LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets, as well as the Company’s LIBOR-indexed derivative instruments. See Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.

On March 15, 2022, the President signed into law, as part of the Consolidated Appropriations Act, 2022, the Adjustable Interest Rate (LIBOR) Act (the "LIBOR Act"), which provides a framework for addressing the discontinuation of LIBOR under federal law. The LIBOR Act provides a statutory mechanism to automatically replace LIBOR with a benchmark rate based on the Secured Overnight Financing Rate ("SOFR"), including any applicable tenor adjustment, for certain contracts that reference LIBOR and do not contain sufficient fallback provisions. Parties remain free to agree on a different benchmark replacement rate, and the Company has worked and will continue to work with its asset-backed securitization investors to amend transaction documents to address the discontinuation of LIBOR. On July 19, 2022, the Federal Reserve issued a notice of proposed rulemaking for proposed regulations to implement the LIBOR Act, as required by its terms.

The LIBOR Act also amends the Higher Education Act to substitute the current special allowance payment rate-setting mechanism for FFELP loans from the one-month LIBOR to the 30-day average SOFR in effect for each of the days in an applicable quarter, adjusted daily by adding a tenor spread adjustment. Transition of the rate-setting mechanism for special allowance payments from LIBOR to SOFR is expected to occur prior to June 30, 2023.

4951

Summary and Comparison of Operating Results


		Three months ended September 30,			Nine months ended September 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021	Additional information		2023		2022	2023	2022	Additional information
Net interest income after provision for loan losses	Net interest income after provision for loan losses	$	53,708	77,179	189,028	275,092	See table below for additional analysis.	Net interest income after provision for loan losses	$	13,351	61,861	27,014	135,320	See table below for additional analysis.
Other income (expense)		4,627		(7,275)	16,270	(4,514)	Other income includes primarily borrower late fees, income from providing administration activities for third-parties, and income from AGM's investment in a joint venture. Borrower late fees for the three months ended September 30, 2022 and 2021 were $2.8 million and $0.5 million, respectively, and for the nine months ended September 30, 2022 and 2021 were $7.7 million and $1.7 million, respectively. The Company suspended borrower late fees in March 2020 to provide borrowers relief as a result of the COVID-19 pandemic. The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans). The Company recognized revenue of $1.9 million and $1.7 million for the three months ended September 30, 2022 and 2021, respectively, and $6.1 million and $1.7 million for the nine months ended September 30, 2022 and 2021, respectively, as administrator and sponsor for the securitizations completed during 2021 by the joint venture to purchase and securitize private education loans sold by Wells Fargo. The Company also recognized losses of $0.3 million and $6.3 million for the three months ended September 30, 2022 and 2021, respectively, and income of $1.3 million and a loss of $5.0 million for the nine months ended September 30, 2022 and 2021, respectively, related to its investment in the joint venture.
Gain on sale of loans		2,627		3,444	5,616	18,715	The Company sold $18.1 million (par value) and $28.9 million (par value) of consumer loans in January 2022 and July 2022, respectively, and recognized a gain of $3.0 million and $2.6 million, respectively. The Company also sold $77.4 million (par value) and $18.4 million (par value) of consumer loans in May 2021 and September 2021, respectively, and recognized gains of $15.3 million and $3.2 million, respectively.
Impairment expense and provision for beneficial interests, net		—		—	—	2,436	In the first quarter of 2021, due to improved economic conditions, the Company recorded a negative provision of $2.4 million related to its remaining allowance on a consumer loan securitization beneficial interest investment. Such allowance was initially recorded in March 2020 as a result of the COVID-19 pandemic.
Other income, net								Other income, net	1,319		5,133	4,164	11,644	Represents primarily borrower late fees, income from providing administration activities for third parties, gain/losses from repurchases of debt, and income/losses from AGM's investment in joint ventures. AGM recognized joint venture losses of $2.5 million and $2.6 million for the three and six months ended June 30, 2023, respectively, compared with losses of $0.4 million and income of $1.6 million for the same periods in 2022.
Gain on sale of loans, net								Gain on sale of loans, net	15,511		—	27,323	2,989	The Company sold $261.9 million (par value) and $158.3 million (par value) of consumer and other loans in the first and second quarter of 2023, respectively, and recognized net gains of $11.8 million and $15.5 million, respectively. The Company also sold $18.1 million (par value) of consumer loans in the first quarter of 2022 and recognized a gain of $3.0 million.

Derivative settlements, net	Derivative settlements, net	10,271		(5,909)	12,085	(15,587)	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.	Derivative settlements, net	(18)		4,623	23,319	1,814	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 2023 was from the Company's derivative portfolio used to hedge loans earning fixed rate floor income. This derivative portfolio was terminated on March 15, 2023 to minimize the Company's exposure to market volatility.
Derivative market value adjustments, net	Derivative market value adjustments, net	52,991		7,260	239,125	44,455	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 2022 and 2021 related to the changes in fair value of the Company's floor income interest rate swaps. Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.	Derivative market value adjustments, net	897		40,401	(36,515)	186,135	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 2023 and 2022 related to the changes in fair value of the Company's floor income interest rate swaps. Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps. On March 15, 2023, AGM terminated its portfolio of floor income interest rate swaps to minimize the Company's exposure to market volatility. As such, the Company expects the derivative market value adjustments in future periods will be less substantial.
Total other income/expense		70,516		(2,480)	273,096	45,505
Total other income, net								Total other income, net	17,709		50,157	18,291	202,582
Salaries and benefits	Salaries and benefits	653		542	1,858	1,594		Salaries and benefits	1,096		614	1,851	1,205	Increase in 2023 compared with 2022 was due to additional headcount as the Company actively expands into new asset loan classes.
Other expenses	Other expenses	3,349		5,420	9,925	12,763	The primary component of other expenses is servicing fees paid to third parties. The decrease in 2022 as compared to 2021 was due to a decrease in AGM's loan portfolio. These decreases were partially offset by increased costs due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in 2022 as compared to 2021.	Other expenses	4,115		3,543	9,131	6,576	Represents primarily servicing fees paid to third parties. Also includes certain professional and legal fees. Increase in 2023 compared with 2022 was due to incurring additional professional fees as the Company actively expands into new asset loan classes.
Intersegment expenses	Intersegment expenses	8,350		8,652	25,694	25,627	Amounts include fees paid to the LSS operating segment for the servicing of AGM’s loan portfolio. These amounts exceed the actual cost of servicing the loans. The increase in servicing fees for the nine months ended September 30, 2022 as compared to the same period in 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in 2022 as compared to 2021. These increases were partially offset by the expected amortization of AGM's FFELP portfolio. 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.	Intersegment expenses	8,145		8,513	16,841	17,344	Represents fees paid to LSS for the servicing of AGM’s loan portfolio. These amounts exceed the actual cost of servicing the loans. Intersegment expenses also includes costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
Total operating expenses	Total operating expenses	12,352		14,614	37,477	39,984	Total operating expenses were 32 basis points and 31 basis points of the average balance of loans for the three months ended September 30, 2022 and 2021, respectively, and 31 basis points and 28 basis points for the nine months ended September 30, 2022 and 2021, respectively. The increase in operating expenses as a percent of the average balance of loans in 2022 as compared to 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in 2022 as compared to 2021.	Total operating expenses	13,356		12,670	27,823	25,125	Total operating expenses were 39 basis points and 31 basis points of the average balance of loans for the three months ended June 30, 2023 and 2022, respectively, and 40 basis points and 30 basis points for the six months ended June 30, 2023 and 2022, respectively. The increase in operating expenses as a percent of the average balance of loans in 2023 compared with 2022 was due to an increase in costs as the Company actively expands into new asset loan classes.
Income before income taxes	Income before income taxes	111,872		60,085	424,647	280,613		Income before income taxes	17,704		99,348	17,482	312,777
Income tax expense	Income tax expense	(26,849)		(14,421)	(101,915)	(67,347)	Represents income tax expense at an effective tax rate of 24%.	Income tax expense	(4,249)		(23,844)	(4,196)	(75,066)	Represents income tax expense at an effective tax rate of 24%.
Net income	Net income	$	85,023	45,664	322,732	213,266		Net income	$	13,455	75,504	13,286	237,711
Additional information:	Additional information:							Additional information:
Net income	Net income	$	85,023	45,664	322,732	213,266	See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.	Net income	$	13,455	75,504	13,286	237,711	See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional details about non-GAAP net income, excluding derivative market value adjustments.
Derivative market value adjustments, net	Derivative market value adjustments, net	(52,991)		(7,260)	(239,125)	(44,455)		Derivative market value adjustments, net	(897)		(40,401)	36,515	(186,135)
Tax effect	Tax effect	12,718		1,742	57,390	10,669		Tax effect	215		9,696	(8,764)	44,672
Net income, excluding derivative market value adjustments	Net income, excluding derivative market value adjustments	$	44,750	40,146	140,997	179,480		Net income, excluding derivative market value adjustments	$	12,773	44,799	41,037	96,248

5052

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


		Three months ended September 30,			Nine months ended September 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021	Additional information		2023		2022	2023	2022	Additional information
Variable interest income, gross	Variable interest income, gross	$	196,910	126,270	459,575	379,705	Increase in 2022 compared to 2021 was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.	Variable interest income, gross	$	262,771	146,911	509,364	262,663	Increase in 2023 compared with 2022 was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.
Consolidation rebate fees	Consolidation rebate fees	(32,612)		(40,340)	(104,335)	(121,662)	Decrease in 2022 compared to 2021 was due to a decrease in the average consolidation loan balance.	Consolidation rebate fees	(27,211)		(34,952)	(55,610)	(71,723)	Decrease in 2023 compared with 2022 was due to a decrease in the average consolidation loan balance.
Discount accretion, net of premium and deferred origination costs amortization	Discount accretion, net of premium and deferred origination costs amortization	737		1,230	3,669	1,776	Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years.	Discount accretion, net of premium and deferred origination costs amortization	1,890		1,474	3,497	2,934	Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years.
Variable interest income, net	Variable interest income, net	165,035		87,160	358,909	259,819		Variable interest income, net	237,450		113,433	457,251	193,874
Interest on bonds and notes payable	Interest on bonds and notes payable	(118,135)		(48,549)	(231,960)	(123,861)	Increase in 2022 compared to 2021 was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding. In addition, during the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds.	Interest on bonds and notes payable	(218,602)		(68,616)	(400,665)	(113,825)	Increase in 2023 compared with 2022 was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding. In addition, during the second quarter of 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of a $25.9 million non-cash expense from the write-off of the remaining debt discount associated with these bonds at the time of redemption.
Derivative settlements, net (a)	Derivative settlements, net (a)	(1,085)		(700)	242	(939)	Derivative settlements include the net settlements (paid) received related to the Company’s 1:3 basis swaps.	Derivative settlements, net (a)	(65)		931	794	1,327	Represents net derivative settlements (paid) received related to the Company’s 1:3 basis swaps.
Variable loan interest margin, net of settlements on derivatives ~~(a)~~	Variable loan interest margin, net of settlements on derivatives ~~(a)~~	45,815		37,911	127,191	135,019		Variable loan interest margin, net of settlements on derivatives ~~(a)~~	18,783		45,748	57,380	81,376
Fixed rate floor income, gross	Fixed rate floor income, gross	7,585		35,850	54,870	108,029	Decrease in 2022 compared to 2021 was due to higher interest rates in 2022 as compared to 2021. Subsequent to September 30, 2022 (on November 2, 2022), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise as a result of inflationary pressures in the U.S. economy; increases in interest rates will reduce the amount of fixed rate floor income the Company is currently receiving.	Fixed rate floor income, gross	456		18,292	1,567	47,285	Decrease in 2023 compared with 2022 was due to higher interest rates.
Derivative settlements, net (a)	Derivative settlements, net (a)	11,356		(5,209)	11,843	(14,648)	Derivative settlements include the settlements received (paid) related to the Company's floor income interest rate swaps. The increase in net derivative settlements received by the Company during 2022, as compared to net derivative settlements paid during 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.	Derivative settlements, net (a)	47		3,692	22,525	487	Represents net derivative settlements received related to the Company's floor income interest rate swaps. On March 15, 2023, to minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income. The decrease in net derivative settlements received by the Company during the three months ended June 30, 2023, compared with the same period in 2022, was due to the termination of the fixed rate floor derivatives in March 2023. The increase in net derivative settlements received by the Company during the six months ended June 30, 2023, compared with the same period in 2022, was due to an increase in settlements on the Company's derivatives outstanding during this period as a result of an increase in interest rates.
Fixed rate floor income, net of settlements on derivatives	Fixed rate floor income, net of settlements on derivatives	18,941		30,641	66,713	93,381		Fixed rate floor income, net of settlements on derivatives	503		21,984	24,092	47,772
Core loan interest income (a)	Core loan interest income (a)	64,756		68,552	193,904	228,400		Core loan interest income (a)	19,286		67,732	81,472	129,148
Investment interest	Investment interest	10,312		8,771	28,147	20,301	Increase in 2022 compared to 2021 was due to an increase in the Company's loan beneficial interest investments throughout 2021.	Investment interest	15,857		8,671	29,664	17,835	Increase in 2023 compared with 2022 was due to an increase of interest earned on restricted cash due to higher interest rates.
Intercompany interest	Intercompany interest	(1,874)		(113)	(3,760)	(421)		Intercompany interest	(13,711)		(1,092)	(20,846)	(1,886)	Increase in 2023 compared with 2022 was due to an increase in the balance of borrowings and higher rates.
(Provision) negative provision for loan losses - federally insured loans	(Provision) negative provision for loan losses - federally insured loans	(888)		(4,452)	(505)	3,428	The Company has recognized provision for loan losses during the three and nine months ended September 30, 2022 due to management's estimate of declining economic conditions, as well as establishing an initial allowance for loans acquired and originated during the period. See "Allowance for Loan Losses and Loan Delinquencies" included above under "Asset Generation and Management Operating Segment - Results of Operations" and note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.	(Provision) negative provision for loan losses - federally insured loans	—		(2,365)	(2,411)	383	The primary item impacting provision for loan losses was the establishment of an initial allowance for consumer loans acquired during the periods presented. For additional information, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
(Provision) negative provision for loan losses - private education loans		(1,154)		1,208	(1,971)	781
(Provision) negative provision for loan losses - consumer and other loans		(7,173)		(2,696)	(14,702)	7,016
(Provision) for loan losses - private education loans								(Provision) for loan losses - private education loans	—		(1,217)	(240)	(817)	The primary item impacting provision for loan losses was the establishment of an initial allowance for consumer loans acquired during the periods presented. For additional information, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
(Provision) for loan losses - consumer and other loans								(Provision) for loan losses - consumer and other loans	(8,099)		(5,245)	(37,306)	(7,529)
Net interest income after provision for loan losses (net of settlements on derivatives) (a)	Net interest income after provision for loan losses (net of settlements on derivatives) (a)	$	63,979	71,270	201,113	259,505	Decrease for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 was due to (i) a decrease in the average balance of loans; and (ii) an increase in provision for loan losses. These items were partially offset by (i) an increase in core loan spread; (ii) an increase in interest income as a result of an increase in the Company's loan beneficial interest investments; and (iii) for the year to date comparison, the reversal of a historical accrued interest liability on certain bonds in the first quarter of 2021.	Net interest income after provision for loan losses (net of settlements on derivatives) (a)	$	13,333	66,484	50,333	137,134

(a) Core loan interest income and net interest income after provision for loan losses (net of settlements on derivatives) are non-GAAP financial measures. For an explanation of GAAP accounting for derivative settlements and the reasons why the Company reports these non-GAAP measures (and the limitations thereof), see footnote ~~(c)~~(a) to the table immediately under the caption “Loan Spread Analysis” above. See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the ~~2022~~2023 and ~~2021~~2022 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 4 and in this table.

NELNET BANK OPERATING SEGMENT – RESULTS OF OPERATIONS

Loan Portfolio

As of ~~September~~June 30, ~~2022,~~2023, Nelnet Bank had a ~~$429.5~~$444.5 million loan portfolio, consisting of ~~$356.6~~$352.3 million of private education loans, ~~and $72.9~~$61.5 million of FFELP loans, and $30.7 million of consumer and other loans.

For a summary of the allowance as a percentage of the ending balance ~~of each of Nelnet Bank's loan portfolios as of September 30, 2022~~ and ~~December 31, 2021, the activity in Nelnet Bank's allowance for loan losses for the three and nine months ended September 30, 2022 and 2021, and a summary of Nelnet Bank's~~ loan status, delinquency amounts, and other key credit quality indicators of each of Nelnet Bank's loan portfolios as of ~~September~~June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022; and ~~September~~the activity in Nelnet Bank's allowance for loan losses and net charge-offs as a percentage of average loans for the three and six months ended June 30, ~~2021,~~2023 and 2022, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

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

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Beginning balance $ 423,553 190,571 257,901 17,543
Federally insured student loan acquisitions — — — 99,973
Private education loan acquisitions 6,856 — 6,856 —
Private education loan originations 14,311 13,006 219,857 99,161
Repayments (15,244) (10,865) (51,011) (21,863)
Sales to AGM segment — (387) (4,127) (2,489)
Ending balance $ 429,476 192,325 429,476 192,325


	Three months ended June 30,			Six months ended June 30,
	2023		2022	2023	2022
Beginning balance	$	439,007	368,257	419,795	257,901
Loan originations:


Private education loans	7,359		75,204	21,585	205,546
Consumer and other loans	13,168		—	32,800	—
Total loan originations	20,527		75,204	54,385	205,546
Repayments	(15,046)		(17,373)	(29,575)	(35,767)

Loans sold to AGM	—		(2,535)	(117)	(4,127)

Ending balance	$	444,488	423,553	444,488	423,553

Deposits

As of ~~September~~June 30, ~~2022,~~2023, Nelnet Bank had ~~$751.4~~$871.4 million of ~~deposits, of which $170.5 million were deposits from Nelnet, Inc. (the parent company) and its subsidiaries (intercompany), and thus eliminated for consolidated financial reporting purposes.~~deposits. All of Nelnet Bank’s deposits are interest-bearing deposits and consist of brokered certificates of deposit (CDs) and retail and other savings deposits and CDs. Retail and other saving deposits include ~~savings~~ deposits from Educational 529 College Savings and Health Savings plans, Short Term Federal Investment Trust (STFIT), and commercial and institutional CDs. Union Bank, a related party, is the program manager for the Educational 529 College Savings ~~plans.~~plans and trustee for the STFIT.

Nelnet Bank’s deposits include $140.4 million from Nelnet, Inc. (the parent company) and its subsidiaries (intercompany), and thus eliminated for consolidated financial reporting purposes. The intercompany deposits include a pledged deposit of $40.0 million from Nelnet, Inc. as required under the Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating and savings deposits, and ~~Nelnet Business Services~~NBS custodial deposits consisting of collected tuition payments which are subsequently remitted to the appropriate school.

Average Balance Sheet

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


		Three months ended September 30,								Nine months ended September 30,									Three months ended June 30, (a)								Six months ended June 30, (a)
		2022				2021				2022				2021					2023				2022				2023				2022
		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate			Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Average assets	Average assets																	Average assets
Federally insured student loans	Federally insured student loans	$	75,124	3.69	%	$	95,510	1.36	%	$	80,234	2.39	%	$	56,000	1.36	%	Federally insured student loans	$	62,476	6.38	%	$	80,424	2.18	%	$	63,559	6.15	%	$	82,832	1.79	%
Private education loans	Private education loans	350,668		3.31		95,752		3.14		304,174		3.13		75,522		3.19		Private education loans	354,124		3.75		331,584		3.08		354,907		3.68		280,542		3.01
Consumer and other loans																		Consumer and other loans	25,530		13.11		—		—		16,469		12.93		—		—
Cash and investments	Cash and investments	424,899		3.67		206,802		1.87		348,697		2.78		215,213		1.93		Cash and investments	541,618		6.31		354,336		2.53		541,069		6.13		309,965		2.16
Total interest-earning assets	Total interest-earning assets	850,691		3.52	%	398,064		2.05	%	733,105		2.88	%	346,735		2.11	%	Total interest-earning assets	983,748		5.57	%	766,344		2.73	%	976,004		5.36	%	673,339		2.47	%
Non-interest-earning assets	Non-interest-earning assets	8,914				10,452				13,754				8,758				Non-interest-earning assets	7,992				17,144				8,654				16,214
Total assets	Total assets	$	859,605			$	408,516			$	746,859			$	355,493			Total assets	$	991,740			$	783,488			$	984,658			$	689,553
Average liabilities and equity	Average liabilities and equity																	Average liabilities and equity
Brokered deposits	Brokered deposits	$	296,257	1.42	%	$	84,175	0.84	%	$	230,968	1.33	%	$	53,459	0.84	%	Brokered deposits	$	204,158	1.37	%	$	249,830	1.31	%	$	204,781	1.38	%	$	197,783	1.27	%
Intercompany deposits	Intercompany deposits	155,350		2.24		98,436		0.24		121,557		1.32		83,004		0.25		Intercompany deposits	149,120		6.54		137,812		0.83		168,388		5.67		104,380		0.62
Retail and other deposits	Retail and other deposits	293,209		1.84		117,360		0.62		283,386		1.08		112,255		0.61		Retail and other deposits	507,701		3.98		287,656		0.75		480,009		3.89		278,393		0.68
Total interest-bearing liabilities	Total interest-bearing liabilities	744,816		1.76	%	299,971		0.56	%	635,911		1.22	%	248,718		0.54	%	Total interest-bearing liabilities	860,979		3.77	%	675,298		0.97	%	853,178		3.62	%	580,556		0.87	%
Non-interest-bearing liabilities	Non-interest-bearing liabilities	4,106				5,340				5,037				4,178				Non-interest-bearing liabilities	4,890				5,226				5,247				5,509
Equity	Equity	110,683				103,205				105,911				102,597				Equity	125,871				102,964				126,233				103,488
Total liabilities and equity	Total liabilities and equity	$	859,605			$	408,516			$	746,859			$	355,493			Total liabilities and equity	$	991,740			$	783,488			$	984,658			$	689,553

(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 June 30,			Six months ended June 30,
		2022		2021	2022	2021	Additional information		2023		2022	2023	2022	Additional information
Total interest income	Total interest income	$	7,551	2,061	15,792	5,479	Represents interest earned on Nelnet Bank's FFELP and private education student loans, cash, and investments. Increase was due to an increase of these balances and interest rates in 2022 as compared to 2021.	Total interest income	$	13,661	5,212	25,920	8,241	Represents interest earned on loans, cash, and investments. Increase in 2023 compared with 2022 was due to an increase of these balances and interest rates.
Interest expense	Interest expense	3,298		421	5,792	1,007	Represents interest expense on deposits. Increase was due to an increase of deposits and interest rates in 2022 as compared to 2021.	Interest expense	8,171		1,639	15,385	2,494	Represents interest expense on deposits. Increase in 2023 compared with 2022 was due to an increase of deposits and interest rates.
Net interest income	Net interest income	4,253		1,640	10,000	4,472		Net interest income	5,490		3,573	10,535	5,747
Provision (negative provision) for loan losses		450		(113)	1,462	378	Represents the current period provision expense to reflect the current lifetime expected credit losses related to Nelnet Bank's loan portfolio. Increase was due to an increase in loans originated in 2022 as compared to 2021 as well as management's estimate of declining economic conditions.
Provision for loan losses								Provision for loan losses	1,493		582	3,910	1,011	Increase in provision for loan losses was due to the mix of loans, including the mix of loans originated in 2023 compared with 2022. For additional information, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
Net interest income after provision for loan losses	Net interest income after provision for loan losses	3,803		1,753	8,538	4,094		Net interest income after provision for loan losses	3,997		2,991	6,625	4,736
Other income	Other income	566		450	2,224	475	Represents primarily income and gains from investments.	Other income	620		157	830	1,659	Represents primarily net gains and income from investments.

Derivative settlements, net								Derivative settlements, net	83		—	83	—	During the second quarter of 2023, Nelnet Bank entered into 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; however, because the hedged items are intercompany deposits, the derivative instruments are not eligible for hedge accounting in the consolidated financial statements. Accordingly, all changes in fair value of such derivatives are recorded through earnings and presented as "derivative market value adjustments, net" in the statements of operations.
Derivative market value adjustments, net								Derivative market value adjustments, net	1,108		—	1,108	—
Total other income/expense								Total other income/expense	1,811		157	2,021	1,659
Salaries and benefits	Salaries and benefits	1,814		890	5,082	3,956	Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.	Salaries and benefits	2,297		1,714	4,361	3,268	Represents salaries and benefits of Nelnet Bank associates and third-party contract labor. Increase in 2023 compared with 2022 was due to the overall growth of Nelnet Bank activities.
Depreciation	Depreciation	4		—	11	—		Depreciation	51		4	56	7
Other expenses	Other expenses	1,427		445	3,009	1,227	Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses. Increase was due to the overall growth of Nelnet Bank activities.	Other expenses	1,624		899	2,406	1,584	Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses. Increase in 2023 compared with 2022 was due to the overall growth of Nelnet Bank activities.
Intersegment expenses	Intersegment expenses	69		32	171	72	Represents primarily servicing costs paid to the LSS operating segment. Certain shared service and support costs incurred by the Company to support Nelnet Bank are not and will not be reflected as part of the Nelnet Bank operating segment through 2023 (when the bank's de novo period will end). The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank's operating segment were $1.6 million and $0.8 million for the three months ended September 30, 2022 and 2021, respectively, and $4.4 million and $2.5 million for the nine months ended September 30, 2022 and 2021, respectively.	Intersegment expenses	92		57	173	102	Represents primarily servicing costs paid to LSS. Certain shared service and support costs incurred by the Company to support Nelnet Bank are not and will not be reflected as part of Nelnet Bank through 2023 (when the bank’s de novo period will end). The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank’s operating segment were $1.8 million and $1.5 million for the three months ended June 30, 2023 and 2022, respectively, and $3.5 million and $2.8 million for the six months ended June 30, 2023 and 2022, respectively.
Total operating expenses	Total operating expenses	3,314		1,367	8,273	5,255		Total operating expenses	4,064		2,674	6,996	4,961
Income (loss) before income taxes		1,055		836	2,489	(686)
Income tax (expense) benefit		(246)		(200)	(574)	151	Represents income tax (expense) benefit at an effective tax rate of 23.3% and 24.0% for the three months ended September 30, 2022 and 2021, respectively, and 23.1% and 22.0% for the nine months ended September 30, 2022 and 2021, respectively.
Net income (loss)		$	809	636	1,915	(535)
Income before income taxes								Income before income taxes	1,744		474	1,650	1,434
Income tax expense								Income tax expense	(396)		(106)	(362)	(328)	Represents income tax expense at an effective tax rate of 22.7% and 22.3% for the three months ended June 30, 2023 and 2022, respectively, and 21.9% and 22.9% for the six months ended June 30, 2023 and 2022, respectively.
Net income								Net income	$	1,348	368	1,288	1,106
Additional information:								Additional information:
Net income								Net income	$	1,348	368	1,288	1,106	See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional details about non-GAAP net income, excluding derivative market value adjustments.
Derivative market value adjustments, net								Derivative market value adjustments, net	(1,108)		—	(1,108)	—
Tax effect								Tax effect	266		—	266	—
Net income, excluding derivative market value adjustments								Net income, excluding derivative market value adjustments	$	506	368	446	1,106

5355

CORPORATE AND OTHER ACTIVITIES – RESULTS OF OPERATIONS

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities (“Corporate”). The following table summarizes the operating results of these activities.

Income taxes are allocated based on 24% of income (loss) before taxes for each activity. The difference between the Corporate income tax expense and the sum of taxes calculated for each activity is included in income taxes in “other” in the table below.

Summary and Comparison of Operating Results


				Nelnet Renewable Energy (c)
	Shared services (a)		WRCM (b)	Tax equity investments / syndication / administration	GRNE Solar	ALLO investment (d)	Real estate investments (e)	Venture capital investments (f)	Interest income/expense, net (g)	Other	Total
	Three months ended June 30, 2023
Interest income	$	—	3	—	59	—	141	1,214	24,459	(21)	25,855
Interest expense	—		—	—	(422)	—	—	—	(7,527)	(293)	(8,242)
Net interest income	—		3	—	(363)	—	141	1,214	16,932	(314)	17,613
Solar construction revenue	—		—	—	4,735	—	—	—	—	—	4,735
Other, net	921		1,638	(7,929)	58	(9,711)	(1,089)	(957)	192	7,324	(9,553)
Impairment expense	—		—	—	—	—	—	—	—	—	—
Cost to provide solar construction services	—		—	—	(9,122)	—	—	—	—	—	(9,122)
Salaries and benefits	(23,003)		(53)	(878)	(1,471)	—	(57)	(226)	—	(1,277)	(26,965)
Depreciation and amortization	(9,218)		—	—	(1,581)	—	(8)	—	—	(116)	(10,923)
Other expenses	(9,820)		(82)	(97)	47	(1,375)	(31)	(20)	(424)	(4,945)	(16,747)
Intersegment expenses, net	27,145		(3)	(754)	(539)	—	(93)	(12)	(97)	387	26,034
Income (loss) before income taxes	(13,975)		1,503	(9,658)	(8,236)	(11,086)	(1,137)	(1)	16,603	1,059	(24,928)
Income tax (expense) benefit	3,354		(324)	461	1,597	2,661	267	—	(3,985)	(1,464)	2,567
Net (income) loss attributable to noncontrolling interests	—		(151)	7,737	1,582	—	23	—	—	—	9,191
Net income (loss)	$	(10,621)	1,028	(1,460)	(5,057)	(8,425)	(847)	(1)	12,618	(405)	(13,170)

	Three months ended June 30, 2022
Interest income	$	—	—	—	—	—	318	106	5,683	128	6,235
Interest expense	—		—	—	—	—	—	—	(3,220)	(432)	(3,652)
Net interest income	—		—	—	—	—	318	106	2,463	(304)	2,583
Solar construction revenue	—		—	—	—	—	—	—	—	—	—
Other, net	461		1,482	(1,854)	—	(14,801)	3,756	17,293	(2,568)	2,978	6,747
Impairment expense	(875)		—	—	—	—	—	(5,409)	—	—	(6,284)
Cost to provide solar construction services	—		—	—	—	—	—	—	—	—	—
Salaries and benefits	(21,547)		(56)	(308)	—	(71)	(55)	(153)	—	(1,539)	(23,729)
Depreciation and amortization	(10,159)		—	—	—	—	—	—	—	(71)	(10,230)
Other expenses	(9,262)		(82)	(258)	—	—	11	(23)	(692)	(1,935)	(12,241)
Intersegment expenses, net	24,147		(3)	(3)	—	—	(95)	—	(55)	(446)	23,545
Income (loss) before income taxes	(17,235)		1,341	(2,423)	—	(14,872)	3,935	11,814	(852)	(1,317)	(19,609)
Income tax (expense) benefit	4,136		(290)	28	—	3,569	(942)	(2,835)	204	1,358	5,228
Net (income) loss attributable to noncontrolling interests	—		(134)	2,305	—	—	(8)	—	—	9	2,172
Net income (loss)	$	(13,099)	917	(90)	—	(11,303)	2,985	8,979	(648)	50	(12,209)


				Nelnet Renewable Energy (c)
	Shared services (a)		WRCM (b)	Tax equity investments / syndication / administration	GRNE Solar	ALLO investment (d)	Real estate investments (e)	Venture capital investments (f)	Interest income/expense, net (g)	Other	Total
	Six months ended June 30, 2023
Interest income	$	—	5	—	100	—	282	1,884	44,696	87	47,054
Interest expense	—		—	—	(695)	—	—	—	(19,504)	(361)	(20,560)
Net interest income	—		5	—	(595)	—	282	1,884	25,192	(274)	26,494
Solar construction revenue	—		—	—	13,386	—	—	—	—	—	13,386
Other, net	1,547		3,250	(9,877)	102	(27,575)	(289)	(890)	(3,749)	10,194	(27,287)
Impairment expense	—		—	—	—	—	—	—	—	—	—
Cost to provide solar construction services	—		—	—	(17,422)	—	—	—	—	—	(17,422)
Salaries and benefits	(46,387)		(109)	(1,885)	(2,667)	(30)	(138)	(403)	—	(2,765)	(54,384)
Depreciation and amortization	(18,048)		—	—	(2,198)	—	(14)	—	—	(194)	(20,454)
Other expenses	(20,386)		(163)	(918)	(901)	(1,363)	(47)	(185)	(2,642)	(3,753)	(30,358)
Intersegment expenses, net	56,310		(6)	(739)	(1,051)	—	(188)	(22)	(194)	(288)	53,822
Income (loss) before income taxes	(26,964)		2,977	(13,419)	(11,346)	(28,968)	(394)	384	18,607	2,920	(56,203)
Income tax (expense) benefit	6,471		(643)	667	2,207	6,953	87	(92)	(4,466)	(1,836)	9,348
Net (income) loss attributable to noncontrolling interests	—		(297)	10,640	2,151	—	29	—	—	—	12,523
Net income (loss)	$	(20,493)	2,037	(2,112)	(6,988)	(22,015)	(278)	292	14,141	1,084	(34,332)
	Six months ended June 30, 2022
Interest income	$	—	—	—	—	—	607	106	9,286	228	10,227
Interest expense	—		—	—	—	—	—	—	(4,965)	(713)	(5,678)
Net interest income	—		—	—	—	—	607	106	4,321	(485)	4,549
Solar construction revenue	—		—	—	—	—	—	—	—	—	—
Other, net	1,150		2,763	(2,723)	—	(25,815)	8,228	22,195	(3,432)	5,506	7,872
Impairment expense	(875)		—	—	—	—	—	(5,409)	—	—	(6,284)
Cost to provide solar construction services	—		—	—	—	—	—	—	—	—	—
Salaries and benefits	(43,415)		(111)	(566)	—	(155)	(165)	(392)	—	(2,938)	(47,742)
Depreciation and amortization	(19,774)		—	—	—	—	—	—	—	(140)	(19,914)
Other expenses	(21,523)		(182)	(360)	—	(24)	9	(46)	(1,141)	(2,778)	(26,045)
Intersegment expenses, net	49,902		(6)	(6)	—	—	(190)	—	(111)	(648)	48,941
Income (loss) before income taxes	(34,535)		2,464	(3,655)	—	(25,994)	8,489	16,454	(363)	(1,483)	(38,623)
Income tax (expense) benefit	8,288		(533)	(125)	—	6,238	(2,034)	(3,949)	87	3,854	11,826
Net (income) loss attributable to noncontrolling interests	—		(246)	4,174	—	—	(14)	—	—	20	3,934
Net income (loss)	$	(26,247)	1,685	394	—	(19,756)	6,441	12,505	(276)	2,391	(22,863)

(a) Includes corporate activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services. Certain shared service costs incurred to support Nelnet Bank will not be allocated to Nelnet Bank until the end of the Bank’s de novo period (November 2023). The amount allocated to operating segments is reflected as “intersegment expenses, net” in the table above. Also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.

(b) The Company provides investment advisory services through Whitetail Rock Capital Management, LLC (WRCM), the Company's SEC-registered investment advisor subsidiary, under various arrangements. WRCM earned management fees of $1.6 million and $1.5 million during the three months ended June 30, 2023 and 2022, respectively, and $3.2 million and $2.7 million during the six months ended June 30, 2023 and 2022, respectively. Fees earned by WRCM are included in "other, net" in the table above.

(c) Nelnet Renewable Energy, which includes solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar development. As of June 30, 2023, the Company has invested a total of $312.9 million (which includes $120.0 million syndicated to third-party investors) in solar tax equity investments. Due to the management and control of each of these investment partnerships, the tax equity investments are consolidated on the Company’s consolidated financial statements, with the co-investor’s portion being presented as non-controlling interests.

Included in tax equity investments is the Company's share of income or loss from solar investments under the Hypothetical Liquidation at Book Value (HLBV) method of accounting. For the majority of the Company's solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. Nelnet Renewable Energy recognized losses on its tax equity investments of $7.9 million and $1.9 million during the three months ended June 30, 2023 and 2022, respectively, and $9.9 million and $2.9 million during the six months ended June 30, 2023 and 2022, respectively. These losses, which include losses attributable to third-party noncontrolling interest investors, are included in “other, net” in the table above. Solar losses attributable to third-party noncontrolling interest investors was $7.4 million and $2.0 million for the three months ended June 30, 2023 and 2022, respectively, and $10.1 million and $3.9 million for the six months ended June 30, 2023 and 2022, respectively, and are reflected in “net (income) 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 $0.3 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $0.6 million and $0.4 million for the six months ended June 30, 2023 and 2022, respectively, which is included in "other, net" in the table above.

In addition to solar tax equity investments, the Company has a strategy to own solar energy project assets. Accordingly, the Company has begun to execute a multi-faceted approach to originate, acquire, finance, own, and manage these assets. As part of this strategy, on July 1, 2022, the Company acquired 80% of the ownership interest in two subsidiaries of GRNE Solutions, LLC named GRNE-Nelnet, LLC (GRNE) and ENRG-Nelnet, LLC (ENRG) (collectively referred to as “GRNE Solar”).

GRNE is a solar contracting company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities. Since the acquisition of GRNE, it has incurred low and, in some cases, negative margins on certain projects. As existing contracts are completed and revenue from new projects grows as a percent of overall revenue, the Company expects margin to improve in future periods.

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

The Company accounts for its approximately 45% voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO") under the HLBV method of accounting. The Company recognized losses under the HLBV method of accounting on its ALLO voting membership interests investment of $12.2 million and $16.9 million during the three months ended June 30, 2023 and 2022, respectively, and $32.4 million and $30.1 million during the six months ended June 30, 2023 and 2022, respectively. These amounts are reflected in “other, net” in the table above.

As of June 30, 2023, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $145.9 million and $4.5 million, respectively. The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25%. The Company recognized income on its ALLO preferred membership interests of $2.3 million and $2.1 million during the three months ended June 30, 2023 and 2022, respectively, and $4.5 million and $4.3 million during the six months ended June 30, 2023 and 2022, respectively. These amounts are reflected in “other, net” in the table above.

As part of the ALLO recapitalization transaction, the Company and SDC entered into an agreement, in which the Company has contingent payment obligation to pay SDC a contingent payment amount of $25.0 million to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels. The Company recognized an expense of $1.4 million associated with this obligation for the three months ended June 30, 2023, which is included in “other expenses” in the table above.

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

(f) Represents the operating results of the Company’s venture capital investments and the administrative costs to manage this portfolio. In April 2022, the Company recognized a $15.2 million gain as a result of the revaluation of its previously held 50% ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30% ownership interests in NextGen.

(g) Represents interest income earned on cash and investment debt securities (primarily student loan and other asset-backed securities), interest expense incurred on unsecured and certain other corporate related debt transactions, unrealized gains/losses on marketable equity securities, realized gains/losses on marketable equity securities and investment debt securities, and other costs to manage these investments and facilities.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s Loan Servicing and Systems, and Education Technology, Services, and Payment Processing operating segments are non-capital intensive and both produce positive operating cash flows. As such, a minimal amount of debt and equity capital is allocated to these segments and any liquidity or capital needs are satisfied using cash flow from operations.

Nelnet Bank launched operations in November 2020. Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million and the Company contributed an additional $30.0 million to Nelnet Bank during 2022. 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.

Sources of Liquidity

As of ~~September~~June 30, ~~2022,~~2023, the Company's sources of liquidity included:


Cash and cash equivalents	$	~~63,198~~121,769
Less: Cash and cash equivalents held at Nelnet Bank (1)	~~(11,806)~~(15,629)
Net cash and cash equivalents	~~51,392~~106,140

Available-for-sale (AFS) debt securities (investments) - at fair value	~~1,378,071~~1,048,074
Less: AFS debt securities held at Nelnet Bank - at fair value (1)	~~(428,360)~~(376,269)
AFS debt securities serving as collateral on participation agreement - at fair value (2)	~~(383,340)~~(6,303)
AFS debt securities serving as collateral on repurchase agreements - at fair value (3)	~~(315,903)~~(281,846)
~~Net~~AFS restricted debt securities - at fair value	(15,956)
Unencumbered AFS debt securities (investments) - at fair value	~~250,468~~367,700

Unencumbered private, consumer, and other loans (Non-Nelnet Bank) - at par	~~319,997~~231,107

Repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (4)	~~431,460~~253,731
Less: Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreements - at par	~~(230,600)~~(197,500)
Unencumbered repurchased Nelnet issued asset-backed debt securities - at par	~~200,860~~56,231

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

Sources of liquidity as of ~~September~~June 30, ~~2022~~2023	$	~~1,317,717~~1,256,178

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

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

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

(4) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. Certain of these securities serve as collateral on amounts outstanding under the Company's repurchase agreements as reflected in the table above.

(5) The Company has a $495.0 million unsecured line of credit that matures on September 22, 2026. As of ~~September~~June 30, ~~2022,~~2023, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use. The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $737.5 million, subject to certain conditions.

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); strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. The timing and size of these opportunities will vary and will have a direct impact on the Company's cash and investment balances.

Cash Flows

The Company has historically generated positive cash flow from operations. During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company generated ~~$656.9~~$199.0 million and ~~$336.5~~$483.7 million, respectively, in cash from operating activities. ~~See the caption "Reclassification of Prior Period Cash Flows Presentation"~~The decrease in ~~note 1 of the notes to the consolidated financial statements under Part I, Item 1 of this report for additional information. The increase in~~2023 compared with 2022 ~~as compared to 2021~~ was due to:

•~~An increase~~A decrease in net income;

•~~An increase in proceeds from~~Payments to the Company's clearinghouse for margin payments on derivatives for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared ~~to the same period~~with proceeds received in ~~2021;~~

•~~Proceeds from termination of derivative instruments for the nine months ended September 30, 2022 compared to no proceeds from terminations in the same period in 2021;~~

•~~Net proceeds from the sale of equity securities for the nine months ended September 30, 2022 compared to net purchases in the same period in 2021;~~2022;

•Adjustments to net income for the impact of ~~provision for loan losses, gain on sale of loans, gain/loss on investments, and~~ the non-cash change in deferred income ~~taxes;~~taxes and gain on sale of loans; and

•A decrease in net proceeds from the sale of equity securities in 2023 compared to 2022.

These factors were partially offset by:

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

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

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

•The impact of changes to accounts receivable ~~and accrued interest receivable and payable~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2022 as~~2023 compared towith the same period in ~~2021.~~

~~These factors were partially offset by:~~

•~~The adjustments to net income for derivative market value adjustments; and~~

•~~The impact of changes to other assets and other liabilities during the nine months ended September 30, 2022 as compared to the same period in 2021.~~2022.

The primary items included in the statement of cash flows for investing activities are the purchase, origination, and repayment of loans and the purchase and sale of available-for-sale securities. The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable and Nelnet Bank deposits used to fund ~~loans.~~loans and investment activity. Cash provided by investing activities and used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$1.7 billion~~$890.3 million and ~~$2.5~~$1.6 billion, respectively. Cash provided by investing activities and used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$543.4~~$837.0 million and ~~$587.1 million,~~$1.3 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

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


	As of ~~September~~June 30, ~~2022~~2023
	Carrying amount		Final maturity
Bonds and notes issued in asset-backed securitizations	$	~~13,957,942~~11,141,183	8/26/30 - 9/25/69
FFELP, ~~and~~ private education, and consumer loan warehouse facilities	~~335,697~~1,604,953		~~10/~~12/31/23 /- 11/~~22/23~~14/25
	$	~~14,293,639~~12,746,136

Bonds and Notes Issued in Asset-backed Securitizations

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. 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~~June 30, ~~2022,~~2023, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM currently expects future undiscounted cash flows from its portfolio to be approximately ~~$1.66~~$1.37 billion as detailed below.

The forecasted cash flow presented below includes all loans, the majority of which are federally insured student loans, funded in asset-backed securitizations as of ~~September~~June 30, ~~2022.~~2023. As of ~~September~~June 30, ~~2022,~~2023, AGM had ~~$14.1~~$11.3 billion of loans included in asset-backed securitizations, which represented

~~95.3 percent~~ 85.6% 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 ~~consumer~~other loans funded with operating cash, loans acquired subsequent to ~~September~~June 30, ~~2022,~~2023, loans owned by Nelnet Bank, and cash flows relating to the Company's ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "investments and notes receivable" on the Company's consolidated balance sheets).

Asset-backed Securitization Cash Flow Forecast

$~~1.66~~1.37 billion

(dollars in millions)

The forecasted future undiscounted cash flows of approximately ~~$1.66~~$1.37 billion include approximately ~~$1.01~~$0.84 billion (as of ~~September~~June 30, ~~2022)~~2023) of overcollateralization included in the asset-backed securitizations. These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately ~~$0.65~~$0.53 billion, or approximately ~~$0.49~~$0.40 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 ~~September~~June 30, ~~2022~~2023 balance of consolidated shareholders' equity.

The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast. These assumptions are further discussed below.

Prepayments: The primary variable in establishing a life of loan estimate is the level and timing of prepayments. Prepayment rates equal the amount of loans that prepay annually as a percentage of the beginning of period balance, net of scheduled principal payments. A number of factors can affect estimated prepayment rates, including the level of consolidation activity, borrower default rates, and utilization of debt management options such as income-based repayment, deferments, and forbearance. 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 ~~4 percent~~5% for consolidation loans and ~~5 percent~~6% for all other loan types. ~~These prepayment rates are generally consistent with those utilized in the Company’s most recent asset-backed securitization transactions.~~

On April 19, 2022, the Department issued a press release, and the Department's Office of Federal Student Aid ("FSA") posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment ("IDR") plans for federal student loans. In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not

5661

currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan. These changes were reflected in executive actions announced by the Department on October 25, 2022 and final regulations announced by the Department on October 31, 2022. The final regulations are to become effective on July 1, 2023, and the fact sheet accompanying the October 25, 2022 announcement indicates that if a borrower has a commercially held FFEL Program loan, the borrower must apply for consolidation to a Federal Direct Loan Program loan by May 1, 2023 to receive the IDR plan and other benefits set forth in the announcement. These announced changes have increased, and the Company currently believes these announced changes may continue to increase, FFEL Program loan prepayments. In addition, if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could also significantly increase prepayments. For example, sinceSince late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act payment pause on Department held loans and ~~an initiative~~the initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs. If the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could significantly increase prepayments. See note 12 of the notes to the consolidated financial statements included in Part ~~II,~~I, Item ~~1A, "Risk Factors" in~~1 of this report for additional details regarding the federal government's actions with respect to student loan forgiveness and cancellations.

In addition, on July 10, 2023, the Department issued final regulations on income-driven repayment plans for Federal Direct loans. Eligible FFELP borrowers can access the new changes by consolidating their loans into the Federal Direct Loan Program. The new regulations are effective July 1, 2024; however, the Department has elected early implementation for some features starting July 30, 2023. The regulations provide a lower monthly loan payment on a Direct loan by decreasing discretionary income, decreasing the percentage of discretionary income that must be paid toward a Direct loan, and providing the option for married borrowers to exclude their spouse’s income from being factored by filing a separate tax return. Other changes provide for the elimination of accrued interest that is not covered by the monthly payment amount, provide credit towards loan forgiveness that counts certain periods of deferment and forbearance, a shorter loan forgiveness period for borrowers with an original principal balance less than or equal to $12,000, and credit toward loan forgiveness for eligible payments on a Direct or FFELP loan that is repaid by a Direct Consolidation loan. This new income-driven repayment plan may increase consolidation activity in the future as FFELP borrowers consolidate their loans into the Federal Direct Loan Program in order to be eligible for the new income-driven repayment plan.

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

The following table summarizes the estimated impact to the above forecasted cash flows if prepayments were greater than the prepayment rate assumptions used to calculate the forecasted cash flows.

Increase in prepayment rate

Reduction in forecasted cash flow from table above

Forecasted cash flow using increased prepayment rate

$~~0.12~~0.10 billion

$~~1.54~~1.27 billion

$~~0.31~~0.26 billion

$~~1.35~~1.11 billion

10x

$~~0.56~~0.47 billion

$~~1.10~~0.90 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 ~~$1.01~~$0.84 billion (as of ~~September~~June 30, ~~2022)~~2023); however, the Company would not receive the ~~$0.65~~$0.53 billion ($~~0.49~~0.40 billion after tax) of estimated future earnings from the portfolio.

Interest rates: The Company funds a large portion of its student loans with three-month LIBOR indexed floating rate securities. Meanwhile, the interest earned on the Company’s student loan assets is indexed primarily to a one-month LIBOR rate. The different interest rate characteristics of the Company’s loan assets and liabilities funding these assets result in basis risk. The Company’s cash flow forecast assumes three-month LIBOR will exceed one-month LIBOR by 12 basis points for the life of the portfolio, which approximates the historical relationship between these indices. If the forecast is computed assuming a spread of 24 basis points between three-month and one-month LIBOR for the life of the portfolio, the cash flow forecast would be reduced by approximately ~~$60~~$40 million to ~~$80~~$65 million. ~~As the percentage of the Company's outstanding debt financed by three-month LIBOR declines, the Company's basis risk will be reduced. In addition, the~~The Company attempts to mitigate the impact of this basis risk by entering into certain derivative instruments.

The Company uses the current forward interest rate yield curve to forecast cash flows. A change in the forward interest rate curve would impact the future cash flows generated from the portfolio. An increase in future interest rates will reduce the amount of fixed rate floor income the Company is currently receiving. The Company attempts to mitigate the impact of a rise in short-term rates by entering into certain derivative instruments.

~~The forecasted cash flow does not include cash flows the Company expects to pay/receive related to derivative instruments used by the Company to manage interest rate risk.~~

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment" for additional information about various interest rate risks which may impact future cash flows from AGM's loan assets.

~~In addition,~~On June 30, 2023, LIBOR ~~is in the process of being~~was discontinued as a benchmark ~~rate,~~rate. See Item 3, "Quantitative and ~~the market transition away from the current LIBOR framework could result in significant changes to the forecasted cash flows from the Company's asset-backed securitizations. See "Interest Rate~~Qualitative Disclosures About Market Risk - ~~Replacement of~~ LIBOR ~~as a Benchmark Rate" above~~Transition" in this report and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's ~~2021~~2022 Annual ~~Report for additional information.~~Report. The Company does not expect the replacement of LIBOR as a benchmark rate to significantly impact its asset-backed securitization cash flow forecast.

5762

Warehouse Facilities

~~The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facility. Student loan warehousing~~Warehousing allows the Company to buy and manage ~~student~~FFELP, private education, and consumer loans prior to transferring them into more permanent financing arrangements. AsFor a summary of ~~September 30, 2022,~~ the Company's warehouse ~~facility had a maximum financing amount available of $300.0 million, of which $249.5 million was outstanding and $50.5 million was available for additional funding.~~ ~~On November 1, 2022, the Company amended its FFELP warehouse facility and inc~~reased the maximum financing amount available to $1.2 billion and extended the liquidity provisions and final maturity to May 22, 2023 and May 22, 2024, respectively. The increased capacity was used to fund a FFELP loan portfolio of approximately $670 million that was acquired by the Company on November 1, 2022. In the event the liquidity provisions are not extended on the FFELP warehouse facility, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor. The loans would then be funded at this new advance rate until the final maturity datefacilities see note 3 of the ~~facility.~~

~~The Company has a private education loan warehouse facility that, as~~notes to consolidated financial statements included under Part I, Item 1 of September 30, 2022, had an aggregate maximum financing amount available of $175.0 million, an advance rate of 80 to 90 percent, liquidity provisions through October 31, 2022, and a final maturity date of October 31, 2023. As of September 30, 2022, $86.2 million was outstanding under this ~~warehouse facility, $88.8 million was available for future funding, and $9.8 million was advanced as equity support.~~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.

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).

The Company plans to fund additional loan acquisitions and related investments using current cash; ~~using~~ proceeds from the sale of certain investments; ~~using~~ its unsecured line of credit, its Union Bank student loan participation agreement, its Union Bank student loan asset-backed securities participation agreement, and third-party repurchase agreements (each as described below), and/or establishing similar secured and unsecured borrowing facilities; using its existing warehouse facilities (as described above); increasing the capacity under existing and/or establishing new warehouse facilities; and continuing to access the asset-backed securities market.

Repurchase Agreements

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 percent~~8% interest in the loans and has a corresponding ~~8 percent~~8% interest in residual interests in the 2021 securitizations of the loans discussed below. The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility.

During 2021, the Company sponsored four asset-backed securitization transactions to permanently finance a total of $8.7 billion of private education loans sold by Wells Fargo (which represented the total remaining loans originally purchased from Wells Fargo, factoring in borrower payments from the date of purchase). As sponsor, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement. The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance ~~sheet~~sheets as "investments and notes receivable" and as of ~~September~~June 30, ~~2022,~~2023, the fair value of these bonds was ~~$315.9~~$281.8 million. The Company must retain these investment securities until the latest of (i) two years from the closing date of the securitization, (ii) the date the aggregate outstanding principal balance of the loans in the securitization is 33% or less of the initial loan balance, and (iii) the date the aggregate outstanding principal balance of the bonds is 33% or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party. The Company entered into repurchase agreements with third parties, of which a portion of the proceeds from such agreements were used to purchase the asset-backed investments, and such investments serve as collateral on the repurchase obligations.

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

As of ~~September~~June 30, ~~2022, $507.0~~2023, $415.5 million was outstanding on the Company's two repurchase agreements, of which ~~$304.1~~$257.2 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement and

~~$202.9~~ $158.3 million was borrowed to fund repurchased FFELP loan asset-backed securities. The repurchase agreements have various maturity dates (as of ~~September~~June 30, ~~2022) between October 7, 2022 and~~2023) from July 26, 2023 through November 27, ~~2024, but~~2024. Subsequent to June 30, 2023, the Company paid down the outstanding balance of one of the ~~agreements~~facilities, and as of August 7, 2023, the maturity dates on the remaining facility vary from November 20, 2023 through November 27, 2024. The remaining facility is subject to early termination upon required notice provided by the Company or the applicable counterparty prior to the maturity dates. The Company is required to pay additional cash in the event the fair value of the securities subject to athe repurchase agreement becomes less than the original purchase price of such securities.

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

Union Bank Participation Agreement

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~~June 30, ~~2022, $859.3~~2023, $262.7 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. 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. Loans participated under this agreement have been accounted for by the Company as loan sales. Accordingly, the participation interests sold are not included on the Company’s consolidated balance sheets.

Asset-backed Securities Transactions

The Company, through its subsidiaries, has historically funded student loans by completing asset-backed securitizations. Depending on market conditions, the Company ~~currently~~ anticipates continuing to access the asset-backed securitization market. Such asset-backed securitization transactions would be used to refinance student loans included in its warehouse facilities, loans purchased from third parties, and/or student loans in its existing asset-backed securitizations.

There were no asset-backed securitization transactions completed during the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

Liquidity Impact Related to Nelnet Bank

Nelnet Bank launched operations in November 2020. Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million ~~consisting of $55.9~~and the Company contributed an additional $30.0 million ~~of cash and $44.1 million of student loan asset-backed securities.~~to Nelnet Bank during 2022. 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.

Prior to Nelnet Bank’s launch of operations, Nelnet Bank, Nelnet, Inc. (the parent), and Michael S. Dunlap (Nelnet, Inc.’s controlling shareholder) entered into a Capital and Liquidity Maintenance Agreement and a Parent Company Agreement with the FDIC in connection with Nelnet, Inc.’s role as a source of financial strength for Nelnet Bank. As part of the Capital and Liquidity Maintenance Agreement, Nelnet, Inc. is obligated to (i) contribute capital to Nelnet Bank for it to maintain capital levels that meet FDIC requirements for a “well capitalized” bank, including a leverage ratio of capital to total assets of at least ~~12 percent;~~12%; (ii) provide and maintain an irrevocable asset liquidity takeout commitment for the benefit of Nelnet Bank in an amount equal to the greater of either ~~10 percent~~10% of Nelnet Bank’s total assets or such additional amount as agreed to by Nelnet Bank and Nelnet, Inc.; (iii) provide additional liquidity to Nelnet Bank in such amount and duration as may be necessary for Nelnet Bank to meet its ongoing liquidity obligations; 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~~Bank’s business, results of operations, ~~and~~or financial condition. On January 1, 2020, the Community Bank Leverage Ratio ~~("CBLR")~~(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~~June 30, ~~2022~~2023 with a leverage ratio of ~~14.7%~~12.7%.

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

Nelnet ~~Inc. made~~Bank has a portfolio of asset-backed securities investments that were accounted for and classified as available-for-sale. Accordingly, these securities were carried at fair value, with the changes in fair value, net of taxes, carried as a separate component of equity. To reduce Nelnet Bank's market exposure related to decreases in fair value on these investments, on March 31, 2023, securities at Nelnet Bank with a fair value of $149.2 million were transferred from available-for-sale to held to maturity. The securities were reclassified at fair value at the time of the transfer, and such transfer represented a non-cash transaction. Accumulated other comprehensive income as of the date of the transfer (March 31, 2023) included pre-tax unrealized losses of $3.7 million. These unrealized losses will be amortized, consistent with the amortization of any discounts on such securities, over the remaining lives of the respective securities as an adjustment of yield.

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

Liquidity Impact Related to Nelnet ~~Bank~~Renewable Energy

The Company’s Nelnet Renewable Energy business makes solar tax equity investments. Through June 30, 2023, the Company has invested a total of $312.9 million (which includes $120.0 million syndicated to third-party investors) in ~~each~~tax equity investments in renewable energy solar partnerships. These investments provide a federal income tax credit under the ~~second~~Internal Revenue Code, equaling either 26% or 30% of the eligible project costs, 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. Treasury based on the credits earned. Based on the timing of when the Company funds a project and ~~third quarters~~decreases its tax estimate to the U.S. Treasury due to earning of ~~2022~~the tax credit, the amount of ~~$15.0 million.~~capital committed to solar tax equity investments at any point in time is not significant and has a minimal impact on the Company’s liquidity. As of June 30, 2023, the Company is committed to fund an additional $319.2 million on tax equity investments, of which $120.5 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. These assets provide long-term, predictable, and recurring cash flows. Accordingly, the Company has begun to execute a multi-faceted approach to originate, acquire, finance, own, and manage these assets. The Company plans to fund a large portion of its current growth plans in owning solar energy projects using third-party debt and third-party tax equity. The 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 percent~~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. As of ~~September~~June 30, ~~2022,~~2023, the outstanding preferred membership interests of ALLO held by the Company was ~~$137.3~~$145.9 million that earns a preferred annual return of ~~6.25 percent.~~

~~Agreements among the Company, SDC (a third party global digital infrastructure investor),~~6.25%. Accrued and ~~ALLO provide that they will use commercially reasonable efforts (which excludes requiring ALLO~~unpaid preferred returns are converted to ~~raise any~~ additional ~~equity financing or sell any assets) to cause the redemption, on or before April 2024, of the remaining non-voting~~ preferred membership interests ~~in ALLO held by~~each December 31. As of June 30, 2023 the ~~Company, plus the amount of~~ accrued and unpaid preferred return ~~on such interests. However, if~~was $4.5 million. If the non-voting preferred membership interests are not redeemed on or before April 2024, the preferred annual return is increased from ~~6.25 percent~~6.25% to ~~10.00 percent.~~10.00%. In June 2023, ALLO, the Company, and SDC (a third-party global digital infrastructure investor and member of ALLO) agreed to amend the terms of the ALLO non-voting preferred membership units owned by Nelnet. Such amended terms provide that commencing January 1, 2025, the preferred annual return will increase to 13.5%, commencing July 1, 2025, the return will increase to 15.0%, commencing January 1, 2026, the preferred return will increase to 17.5%, and beginning on January 1, 2027 and on each January 1 of each calendar year thereafter, the annual return will increase by an additional 2.5%. In addition, any preferred return accruing on or after January 1, 2025 is expected to be paid on a quarterly basis in cash rather than through an increase to the outstanding preferred membership interests.

As part of the ALLO recapitalization transaction in December 2020, the Company and SDC entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of $25.0 million to $35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels. As of June 30, 2023, the estimated fair value of the contingent payment is $9.0 million.

In June 2023, ALLO closed on an asset-backed securities transaction with an aggregate size of $576.0 million. The proceeds from this transaction were used to refinance the majority of ALLO's prior debt and fund a portion of its current growth plans. If ALLO needs additional capital to support its growth in existing or new markets, the Company has the option to contribute additional capital to maintain its voting equity interest. Although ALLO has obtained ~~third-party~~ debt financing to fund a large portion of its ~~current~~ growth plans, the Company contributed ~~$34.7~~$8.4 million of additional equity to ALLO ~~on February 25, 2022.~~in the first quarter of 2023. As a result of this equity contribution, the Company’s voting membership interests percentage did not materially change. Based on ALLO's business plan for growth and current financial condition, the Company ~~currently~~ believes it ~~may~~will make additional capital contributions to ALLO ~~during the fourth quarter of 2022 and during 2023 and 2024.~~in future periods.

Liquidity Impact Related to Hedging Activities

The Company utilizes derivative instruments to manage interest rate sensitivity. By using derivative instruments, the Company is exposed to market risk which could impact its liquidity.

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.

To minimize the Company's exposure to market volatility, on March 15, 2023, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from the clearinghouse related to variation margin equal to the fair value as of March 15, 2023 of the derivatives used to hedge loans earning fixed rate floor income of $183.2 million, which included $19.1 million related to current period settlements.

Based on the derivative portfolio outstanding as of ~~September~~June 30, ~~2022,~~2023, the Company does not ~~currently~~ 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. However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio, the replacement of LIBOR as a benchmark rate has significant adverse impacts on the Company's derivatives, or if the Company enters into additional derivatives for which the fair value becomes negative, the Company could be required to make variation margin payments to its third-party clearinghouse. The variation margin, if significant, could negatively impact the Company's liquidity and capital resources. In addition, clearing rules require the Company to post amounts of liquid collateral when executing new derivative instruments, which could prevent or limit the Company from utilizing additional derivative instruments to manage interest rate sensitivity and risks. See note 4 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative portfolio.

Other Debt Facilities

As discussed above, the Company has a $495.0 million unsecured line of credit with a maturity date of September 22, 2026. As of ~~September~~June 30, ~~2022,~~2023, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use. Upon the maturity date of this facility, there can be no assurance that the Company will be able to maintain this line of credit, increase or maintain the amount outstanding under the line, or find alternative funding if necessary.

During 2020, the Company entered into an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in federally insured student loan asset-backed securities. As of ~~September~~June 30, ~~2022, $399.7~~2023, $6.8 million (par value) of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. This participation agreement has been accounted for by the Company as a secured borrowing. Upon termination or expiration of this agreement, the Company would expect to use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.

Stock Repurchases

~~In 2019, the~~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 ended May 7, 2022. On May 9, 2022, the Board of Directors

~~authorized a new~~ 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. ~~The five million~~No shares ~~authorized~~were repurchased under this program during the ~~new program include the remaining unpurchased shares from the prior program, which the new program replaced.~~first half of 2023. As of ~~September~~June 30, ~~2022, 4,517,936~~2023, 4,467,021 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~~During the first half of 2023, the Company ~~during~~repurchased 41,247 shares owned and tendered by employees to satisfy tax withholding obligations upon the ~~three months ended March 31, 2022, June 30, 2022, and September 30, 2022~~vesting of restricted shares. These repurchased shares are ~~shown below. For additional information on stock repurchases during~~excluded from the ~~third quarter of 2022, see~~Company's repurchase program. 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, 2022 380,053 $ 32,899 86.56
Quarter ended June 30, 2022 558,257 46,032 82.46
Quarter ended September 30, 2022 169,860 14,293 84.14
Total 1,108,170 $ 93,224 84.12

Dividends

On ~~September~~June 15, ~~2022,~~2023, the Company paid a ~~third~~second quarter ~~2022~~2023 cash dividend on the Company's Class A and Class B common stock of ~~$0.24~~$0.26 per share. In addition, the Company's Board of Directors has declared a ~~fourth~~third quarter ~~2022~~2023 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.26 per share. The ~~fourth~~third quarter cash dividend will be paid on ~~December~~September 15, ~~2022~~2023 to shareholders of record at the close of business on ~~December~~September 1, ~~2022.~~2023.

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

CRITICAL ACCOUNTING POLICIES AND 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. The preparation of these financial statements requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. The Company bases its estimates and judgments on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions. Note 3 of the notes to consolidated financial statements included in the Company’s ~~2021~~2022 Annual Report includes a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements.

On an on-going basis, management evaluates its estimates and judgments, particularly as they relate to accounting policies that management believes are most “critical” —- that is, they are most important to the portrayal of the Company’s financial condition and results of operations and they require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has identified the allowance for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s ~~2021~~2022 Annual Report. For additional information regarding changes in the Company’s allowance for loan losses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report. There have been no material changes to the Company’s critical accounting policy and estimate since December 31, ~~2021.~~2022.

RECENT ACCOUNTING PRONOUNCEMENTS

~~Financial Instruments~~Investments - ~~Credit Losses~~Proportional Amortization Method

In March ~~2022,~~2023, the FASB issued accounting guidance which ~~eliminates~~permits reporting entities to elect to account for their tax equity investments, regardless of the ~~troubled debt restructurings recognition and measurement guidance and instead requires~~tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than at the reporting entity ~~to evaluate whether the modification represents a new loan~~level or ~~a continuation of an existing loan. The guidance also enhances the disclosure requirements~~ for ~~certain modifications of receivables made to borrowers experiencing financial difficulty.~~individual investments. This guidance will be effective for the Company beginning January 1, ~~2023~~2024 with early adoption permitted. ~~The Company is evaluating the impact~~Management believes this pronouncement will not have a material impact on ~~its ongoing~~the Company's consolidated financial ~~reporting.~~statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

LIBOR Transition

On June 30, 2023, the LIBOR administrator ceased publication (on a representative basis) of all USD LIBOR rates. When possible, the Company relied on fallback provisions or negotiated with counterparties to transition financial contracts from LIBOR to SOFR. Due to certain noteholder consent requirements, it was not practicable to modify certain of the Company's asset-backed securities transactions. The SAP formula for the Company's FFELP loans, the majority of which were indexed to one-month LIBOR, were not able to be modified without legislative action. On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the LIBOR Act) was signed into law. The LIBOR Act provides that for contracts that contain no fallback provision or contain fallback provisions that do not identify a specific USD LIBOR benchmark replacement (including the SAP formula for FFELP loans), a benchmark replacement based on SOFR will automatically replace the USD LIBOR benchmark in the contract after June 30, 2023. Following the enactment and implementation of the LIBOR Act, all of the Company's financial instruments which are currently indexed to USD LIBOR have transitioned, or will transition, to SOFR after June 30, 2023. Specifically, after June 30, 2023, the SAP formula for FFELP loans will transition to 30-day Average SOFR and the Company's LIBOR-indexed FFELP asset-backed securities will also transition to a short-term SOFR index. The Company does not expect the transition from LIBOR to SOFR to significantly impact its asset-backed securitization cash flow forecast as discussed under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral - Bonds and Notes Issued in Asset-backed Securitizations." The Company's LIBOR-indexed derivatives will transition to the fallback rate (SOFR) as defined in the individual agreements and/or published industry guidelines, as applicable. For a discussion of the risks related to the LIBOR transition, see Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2022 Annual Report for additional information.

Interest Rate Risk - AGM Operating Segment

AGM’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact AGM due to shifts in market interest rates.

The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:


		As of September 30, 2022				As of December 31, 2021					As of June 30, 2023				As of December 31, 2022
		Dollars		Percent		Dollars		Percent			Dollars		Percent		Dollars		Percent
Fixed-rate loan assets	Fixed-rate loan assets	$	2,015,443	13.6	%	$	7,434,068	42.6	%	Fixed-rate loan assets	$	724,882	5.5	%	$	1,339,900	9.5	%
Variable-rate loan assets	Variable-rate loan assets	12,778,572		86.4		10,007,722		57.4		Variable-rate loan assets	12,514,243		94.5		12,829,871		90.5
Total	Total	$	14,794,015	100.0	%	$	17,441,790	100.0	%	Total	$	13,239,125	100.0	%	$	14,169,771	100.0	%

Fixed-rate debt instruments	Fixed-rate debt instruments	$	671,012	4.7	%	$	801,548	4.7	%	Fixed-rate debt instruments	$	538,762	4.2	%	$	617,083	4.5	%
Variable-rate debt instruments	Variable-rate debt instruments	13,622,627		95.3		16,279,722		95.3		Variable-rate debt instruments	12,207,374		95.8		13,199,327		95.5
Total	Total	$	14,293,639	100.0	%	$	17,081,270	100.0	%	Total	$	12,746,136	100.0	%	$	13,816,410	100.0	%

FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment ~~("SAP")~~(SAP) formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its FFELP student loan portfolio with variable rate debt. In low and/or declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, the Company’s FFELP student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.

Depending on the type of loan and when it was originated, the borrower rate is either fixed to term or is reset to an annual rate each July 1. As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate floor income. All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department.

No variable-rate floor income was earned by the Company in ~~2022~~2023 or ~~2021.~~2022.

A summary of fixed rate floor income earned by the AGM operating segment follows.


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Fixed rate floor income, gross	Fixed rate floor income, gross	$	7,585	35,850	54,870	108,029	Fixed rate floor income, gross	$	456	18,292	1,567	47,285
Derivative settlements (a)	Derivative settlements (a)	11,356		(5,209)	11,843	(14,648)	Derivative settlements (a)	47		3,692	22,525	487
Fixed rate floor income, net	Fixed rate floor income, net	$	18,941	30,641	66,713	93,381	Fixed rate floor income, net	$	503	21,984	24,092	47,772

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

Gross fixed rate floor income decreased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022 as~~2023 compared towith the same periods in ~~2021~~2022 due to higher interest rates in ~~2022 as~~2023 compared ~~to 2021.~~with 2022.

~~Absent the use~~The Company had a significant portfolio of derivative instruments in which the Company paid a rise in interest rates will reduce the amount of floor income received and has an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas. In higher interest rate environments, where the interest rate rises above the borrowerfixed rate and ~~fixed~~received a floating rate ~~loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.~~

~~The Company enters into derivative instruments~~ to economically hedge ~~student~~ loans earning fixed rate floor income. On March 15, 2023, to minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.

The decrease in net derivative settlements received by the Company during the three months ended June 30, 2023, compared with the same period in 2022, was due to the termination of the fixed rate floor derivatives in March 2023. The increase in net derivative settlements received by the Company during the ~~three and nine~~six months ended ~~September~~June 30, ~~2022, as~~2023, compared ~~to net derivative settlements paid during~~with the same ~~periods~~period in ~~2021,~~2022, was due to an increase in settlements on the Company's derivatives outstanding during this period as a result of an increase in interest ~~rates, partially offset by a decrease in the notional amount of derivatives outstanding.~~rates.

6268

~~The following graph depicts fixed rate floor income for a borrower with a fixed rate of 6.75% and a SAP rate of 2.64%:~~

The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of ~~September~~June 30, ~~2022.~~2023.

Fixed interest rate range Borrower/lender weighted average yield Estimated variable conversion rate (a) Loan balance
5.0 - 5.49% 5.35% 2.71% $ 177,056
5.5 - 5.99% 5.68% 3.04% 199,123
6.0 - 6.49% 6.19% 3.55% 245,508
6.5 - 6.99% 6.70% 4.06% 238,899
7.0 - 7.49% 7.17% 4.53% 87,432
7.5 - 7.99% 7.72% 5.08% 167,776
8.0 - 8.99% 8.18% 5.54% 390,549
> 9.0%
9.05% 6.41% 150,258
$ 1,656,601


Fixed interest rate range	Borrower/lender weighted average yield	Estimated variable conversion rate (a)	Loan balance










7.5 - 7.99%	7.87%	5.23%	$	32,997
8.0 - 8.99%	8.20%	5.56%	256,171
> 9.0%	9.05%	6.41%	130,844
			$	420,012

(a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of ~~September~~June 30, ~~2022,~~2023, the weighted average estimated variable conversion rate was ~~4.41%~~5.80% and the short-term interest rate was ~~251~~518 basis points.

~~The following table summarizes~~In June 2023, the ~~outstanding~~Company entered into a derivative ~~instruments as~~with a notional amount of ~~September 30, 2022 used by AGM~~$50.0 million and a maturity date in 2030 to ~~economically~~ hedge a portion of loans ~~earning~~remaining that earn fixed rate floor income.

Maturity Notional amount Weighted average fixed rate paid by the Company (a)
2024 $ 2,000,000 0.35 %
2026 500,000 1.02
2031 100,000 1.53
$ 2,600,000 0.52 %

~~(a) For all interest rate derivatives,~~ Based on the terms of this derivative, the Company pays a weighted average fixed rate of 3.44% and receives ~~discrete three-month LIBOR.~~

payments based on SOFR that resets quarterly.

AGM is also exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of AGM’s assets do not match the interest rate characteristics of the funding for those assets. The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of ~~September~~June 30, ~~2022.~~2023.


Index	Index	Frequency of variable resets	Assets		Funding of student loan assets	Index	Frequency of variable resets	Assets		Funding of student loan assets
1 month LIBOR (a)		Daily	$	13,345,170	—
1 month LIBOR (a) (b)						1 month LIBOR (a) (b)	Daily	$	12,002,100	—
3 month H15 financial commercial paper	3 month H15 financial commercial paper	Daily	509,155		—	3 month H15 financial commercial paper	Daily	414,602		—
3 month Treasury bill	3 month Treasury bill	Daily	446,066		—	3 month Treasury bill	Daily	403,040		—
1 month LIBOR(a)	1 month LIBOR(a)	Monthly	—		8,933,130	1 month LIBOR(a)	Monthly	—		7,239,176
3 month LIBOR (a)		Quarterly	—		4,122,979
3 month LIBOR (a) (b)						3 month LIBOR (a) (b)	Quarterly	—		3,255,282
Asset-backed commercial paper (c)						Asset-backed commercial paper (c)	Varies	—		1,530,429
Fixed rate	Fixed rate	—	—		646,956	Fixed rate	—	—		519,156
Asset-backed commercial paper (b)		Varies	—		249,543
Auction-rate ~~(c)~~(d)	Auction-rate ~~(c)~~(d)	Varies	—		208,660	Auction-rate ~~(c)~~(d)	Varies	—		91,335
Other ~~(d)~~(e)	Other ~~(d)~~(e)	—	1,493,406		1,632,529	Other ~~(d)~~(e)	—	1,248,304		1,432,668
			$	15,793,797	15,793,797			$	14,068,046	14,068,046

(a) Have transitioned, or will transition, to SOFR after June 30, 2023. See "LIBOR Transition" above.

(b) The Company has certain basis swaps outstanding in which the Company receives three-month LIBOR and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps"). The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets. The following table summarizes the 1:3 Basis Swaps outstanding as of ~~September~~June 30, ~~2022.~~2023.


Maturity	Maturity	Notional amount (i)		Maturity	Notional amount (i)
2022		$	1,000,000
2023		750,000
2024	2024	1,750,000		2024	$	1,750,000
2026	2026	1,150,000		2026	1,150,000
2027	2027	250,000		2027	250,000

		$	4,900,000
					$	3,150,000

(i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of ~~September~~June 30, ~~2022~~2023 was one-month LIBOR plus ~~9.4~~10.1 basis points.

~~(b)~~(c) The interest rate on the Company's FFELP warehouse ~~facility~~facilities is indexed to asset-backed commercial paper rates.

~~(c)~~(d) As of ~~September~~June 30, ~~2022,~~2023, the Company was sponsor for ~~$208.7~~$91.3 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" ~~(“Auction~~(the “Auction Rate Securities”). Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents.

~~(d)~~(e) Assets include accrued interest receivable and restricted cash. Funding represents overcollateralization (equity) and other liabilities included in FFELP loan asset-backed securitizations and warehouse ~~facilities.~~facility.

LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets. See ~~"Interest Rate Risk - Repayment of LIBOR as a Benchmark Rate" under Item 2~~"LIBOR Transition" above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's ~~2021~~2022 Annual Report for additional information.

Sensitivity Analysis

The following tables summarize the effect on the Company’s consolidated earnings, based upon a sensitivity analysis performed on ~~AGM's~~AGM’s assets and liabilities assuming hypothetical increases and decreases in interest rates of 100 basis points and 300 basis points while funding spreads remain constant. In addition, a sensitivity analysis was performed assuming the funding index increases 10 basis points and 30 basis points while holding the asset index constant, if the funding index is different than the asset index. The sensitivity analysis was performed on AGM’s variable rate assets (including loans earning fixed rate floor income) and liabilities.


	Interest rates
	Change from increase of 100 basis points				Change from increase of 300 basis points				Change from decrease of 100 basis points				Change from decrease of 300 basis points
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	Three months ended June 30, 2023
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	712	2.4	%	$	3,029	10.2	%	$	314	1.1	%	$	3,762	12.7	%
Impact of derivative settlements (a)	33		0.1		99		0.3		(33)		(0.1)		(99)		(0.3)
Increase (decrease) in net income before taxes	$	745	2.5	%	$	3,128	10.5	%	$	281	1.0	%	$	3,663	12.4	%
Increase (decrease) in basic and diluted earnings per share	$	0.02			$	0.06			$	0.01			$	0.07
	Three months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(5,927)	(5.4)	%	$	(10,505)	(9.7)	%
Impact of derivative settlements	7,729		7.1		23,187		21.4
Increase (decrease) in net income before taxes	$	1,802	1.7	%	$	12,682	11.7	%
Increase (decrease) in basic and diluted earnings per share	$	0.04			$	0.26
	Six months ended June 30, 2023
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	1,484	2.4	%	$	7,432	12.2	%	$	390	0.6	%	$	7,412	12.2	%
Impact of derivative settlements (a)	33		0.1		99		0.2		(33)		(0.1)		(99)		(0.2)
Increase (decrease) in net income before taxes	$	1,517	2.5	%	$	7,531	12.4	%	$	357	0.5	%	$	7,313	12.0	%
Increase (decrease) in basic and diluted earnings per share	$	0.03			$	0.15			$	0.01			$	0.15
	Six months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(16,068)	(4.6)	%	$	(28,152)	(8.1)	%
Impact of derivative settlements	18,455		5.3		55,365		15.9
Increase (decrease) in net income before taxes	$	2,387	0.7	%	$	27,213	7.8	%
Increase (decrease) in basic and diluted earnings per share	$	0.05			$	0.55

(a)On March 15, 2023, the Company terminated its existing derivative portfolio hedging loans earning fixed rate floor income. The ~~analysis includes~~table above excludes the ~~effects~~impact of ~~AGM’s derivative instruments in existence during~~ these ~~periods.~~

Interest rates Asset and funding index mismatches
Change from increase of
100 basis points Change from increase of
300 basis points Increase of
10 basis points Increase of
30 basis points

Dollars Percent Dollars Percent Dollars Percent Dollars Percent
Three months ended September 30, 2022
Effect on earnings:
Decrease in pre-tax net income before impact of derivative settlements $ (2,396) (1.9) % $ (3,702) (2.9) % $ (1,148) (0.9) % $ (3,445) (2.7) %
Impact of derivative settlements 6,553 5.2 19,660 15.5 1,235 1.0 3,705 2.9
Increase (decrease) in net income before taxes $ 4,157 3.3 % $ 15,958 12.6 % $ 87 0.1 % $ 260 0.2 %
Increase (decrease) in basic and diluted earnings per share $ 0.08 $ 0.32 $ 0.00 $ 0.01
Three months ended September 30, 2021
Effect on earnings:
Decrease in pre-tax net income before
   impact of derivative settlements $ (14,394) (21.5) % $ (27,280) (40.8) % $ (1,484) (2.2) % $ (4,453) (6.7) %
Impact of derivative settlements 12,252 18.3 36,756 55.0 1,487 2.2 4,461 6.7
Increase (decrease) in net income
   before taxes $ (2,142) (3.2) % $ 9,476 14.2 % $ 3 0.0 % $ 8 0.0 %
Increase (decrease) in basic and
   diluted earnings per share $ (0.04) $ 0.19 $ 0.00 $ 0.00
Nine months ended September 30, 2022
Effect on earnings:
Decrease in pre-tax net income before
   impact of derivative settlements $ (18,464) (3.9) % $ (31,854) (6.7) % $ (3,609) (0.8) % $ (10,828) (2.3) %
Impact of derivative settlements 25,008 5.3 75,025 15.8 3,912 0.8 11,733 2.5
Increase (decrease) in net income
   before taxes $ 6,544 1.4 % $ 43,171 9.1 % $ 303 0.0 % $ 905 0.2 %
Increase (decrease) in basic and
   diluted earnings per share $ 0.13 $ 0.87 $ 0.00 $ 0.02
Nine months ended September 30, 2021
Effect on earnings:
Decrease in pre-tax net income before
   impact of derivative settlements $ (42,749) (12.8) % $ (79,285) (23.7) % $ (4,659) (1.4) % $ (13,980) (4.2) %
Impact of derivative settlements 30,944 9.3 92,831 27.8 4,474 1.3 13,423 4.0
Increase (decrease) in net income
   before taxes $ (11,805) (3.5) % $ 13,546 4.1 % $ (185) (0.1) % $ (557) (0.2) %
Increase (decrease) in basic and
   diluted earnings per share $ (0.23) $ 0.27 $ 0.00 $ (0.01)
derivatives for the entire period.

6570


	Asset and funding index mismatches
	Increase of 10 basis points				Increase of 30 basis points				Increase of 10 basis points				Increase of 30 basis points
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	Three months ended June 30, 2023								Three months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(1,182)	(4.0)	%	$	(3,547)	(12.0)	%	$	(1,199)	(1.1)	%	$	(3,597)	(3.3)	%
Impact of derivative settlements	785		2.7		2,356		8.0		1,222		1.1		3,664		3.4
Increase (decrease) in net income before taxes	$	(397)	(1.3)	%	$	(1,191)	(4.0)	%	$	23	0.0	%	$	67	0.1	%
Increase (decrease) in basic and diluted earnings per share	$	(0.01)			$	(0.02)			$	0.00			$	0.00






	Six months ended June 30, 2023								Six months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(2,295)	(3.8)	%	$	(6,886)	(11.3)	%	$	(2,461)	(0.7)	%	$	(7,383)	(2.1)	%
Impact of derivative settlements	1,562		2.6		4,686		7.7		2,677		0.8		8,028		2.3
Increase (decrease) in net income before taxes	$	(733)	(1.2)	%	$	(2,200)	(3.6)	%	$	216	0.1	%	$	645	0.2	%
Increase (decrease) in basic and diluted earnings per share	$	(0.01)			$	(0.04)			$	0.00			$	0.01

Interest Rate Risk - Nelnet Bank

To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow. To achieve this objective, the Company manages and mitigates Nelnet ~~Bank's~~Bank’s exposure to fluctuations in market interest rates through several techniques, including managing the maturity, repricing, and mix of fixed and variable rate assets and ~~liabilities.~~liabilities and the use of derivative instruments.

The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits by rate characteristics:


		As of September 30, 2022				As of December 31, 2021					As of June 30, 2023				As of December 31, 2022
		Dollars		Percent		Dollars		Percent			Dollars		Percent		Dollars		Percent
Fixed-rate loan assets	Fixed-rate loan assets	$	343,653	80.0	%	$	191,410	74.2	%	Fixed-rate loan assets	$	372,494			$	341,776
Fixed-rate investments										Fixed-rate investments	98,538				123,809
Total fixed-rate assets										Total fixed-rate assets	471,032		48.5	%	465,585		52.2	%
Variable-rate loan assets	Variable-rate loan assets	85,823		20.0		66,491		25.8		Variable-rate loan assets	71,994				78,019
Total		$	429,476	100.0	%	$	257,901	100.0	%
Variable-rate investments										Variable-rate investments	428,571				347,559
Total variable rate assets										Total variable rate assets	500,565		51.5		425,578		47.8
Total assets										Total assets	$	971,597	100.0	%	$	891,163	100.0	%

Fixed-rate deposits	Fixed-rate deposits	$	372,015	49.5	%	$	344,315	80.9	%	Fixed-rate deposits	$	281,583	32.3	%	$	336,040	42.6	%
Variable-rate deposits		379,355		50.5		81,085		19.1
Total		$	751,370	100.0	%	$	425,400	100.0	%
Variable-rate deposits (a)										Variable-rate deposits (a)	589,839		67.7		453,604		57.4
Total deposits										Total deposits	$	871,422	100.0	%	$	789,644	100.0	%

(a) Nelnet Bank uses derivative instruments to hedge exposure to variability in cash flows of variable rate deposits to minimize the exposure to volatility in cash flows from future changes in interest rates. The derivatives are not reflected in the above table. See note 4 of the notes to the consolidated financial statements included under Part I, Item 1 of this report for a summary of Nelnet Bank's derivatives outstanding as of June 30, 2023.

Interest Rate and Market Risk - Investments

The following table presents the rates earned on the Company’s available-for-sale debt securities (investments) and debt facilities used to fund a portion of such investments. The table below excludes securities (investments) held by Nelnet Bank.


	Average balance		Interest income/ expense	Average yields/ rates		Average balance		Interest income/ expense	Average yields/ rates
	Three months ended June 30,
	2023					2022
Investments:
Asset-backed securities available-for-sale (a) (b)	$	1,076,344	22,911	8.54	%	$	1,258,770	5,104	1.63	%

Debt funding asset-backed securities available-for-sale:
Participation agreement - variable rate (c)	$	76,966	1,094	5.70	%	$	352,804	1,384	1.57	%
Repurchase agreements - variable rate (d)	415,514		6,278	6.06		471,033		1,682	1.43
	$	492,480	7,372	6.00		$	823,837	3,066	1.49

	Six months ended June 30,
	2023					2022
Investments:
Asset-backed securities available-for-sale (a) (b)	$	1,194,475	41,699	7.04	%	$	1,165,545	8,367	1.45	%

Debt funding asset-backed securities available-for-sale:
Participation agreement - variable rate (c)	$	230,889	6,153	5.37	%	$	304,669	1,944	1.29	%
Repurchase agreements - variable rate (d)	463,637		13,046	5.67		437,537		2,713	1.25
	$	694,526	19,199	5.57		$	742,206	4,657	1.27

(a) The Company has repurchased certain of its own FFELP loan asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. The table above includes these repurchased bonds.

(b) The majority of the Company’s asset-backed securities earn floating rates with expected returns of approximately LIBOR + 100 to 350 basis points to maturity. As of June 30, 2023, $258.1 million (par value) of the Company’s asset-backed securities earn a weighted average fixed rate of 3.29%.

(c) Interest incurred by the Company on amounts borrowed under the participation agreement is at a variable rate of LIBOR + 62.5 basis points.

(d) Interest incurred by the Company on amounts borrowed under the repurchase agreements is at a variable rate of LIBOR + 70 to 90 basis points or SOFR + 75 to 140 basis points.

The Company’s portfolio of asset-backed investment securities has limited liquidity, and the Company could incur a significant loss if the investments were sold prior to maturity at an amount less than the original purchase price. As of June 30, 2023, the gross unrealized loss on the Company’s available-for-sale debt securities was $37.1 million, and the aggregate fair value of available-for-sale debt securities with unrealized losses was $783.0 million. The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses. See note 5 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company's principal executive and principal financial officers, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of ~~September~~June 30, ~~2022.~~2023. Based on this evaluation, the Company’s principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of ~~September~~June 30, ~~2022.~~2023.

~~Changes in Internal Control over Financial Reporting~~Stock Repurchases

~~There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended September 30, 2022 that have materially affected, or are reasonably likely~~The Board of Directors has authorized a stock repurchase program to ~~materially affect, the Company’s internal control over financial reporting.~~

~~PART II. OTHER INFORMATION~~

~~ITEM 1. LEGAL PROCEEDINGS~~

~~There have been no material changes from the information referred~~repurchase up to ~~in the Legal Proceedings section~~a total of five million shares of the Company's ~~Annual Report~~Class A common stock during the three-year period ending May 8, 2025. No shares were repurchased under this program during the first half of 2023. As of June 30, 2023, 4,467,021 shares remained authorized for repurchase under the Company's stock repurchase program. Shares may be repurchased from time to time on ~~Form 10-K for~~ the ~~year ended December 31, 2021~~open market, in private transactions (including with related parties), or otherwise, depending on various factors, including share prices and other potential uses of liquidity.

During the first half of 2023, the Company repurchased 41,247 shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares. These repurchased shares are excluded from the Company's repurchase program. See "Stock Repurchases" under Part II, Item 32 of ~~Part I~~this report.

Dividends

On June 15, 2023, the Company paid a second quarter 2023 cash dividend on the Company's Class A and Class B common stock of ~~such Form 10-K.~~

~~ITEM 1A. RISK FACTORS~~$0.26 per share. In addition, the Company's Board of Directors has declared a third quarter 2023 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.26 per share. The third quarter cash dividend will be paid on September 15, 2023 to shareholders of record at the close of business on September 1, 2023.

The ~~following risk factors provide supplements~~Company plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and ~~updates to~~other factors.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the ~~risk factors described~~Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the ~~Company's Annual Report on Form 10-K for the year ended December 31, 2021 in response~~United States. The preparation of these financial statements requires management to ~~Item 1A of Part I of such Form 10-K~~make estimates and the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022 in response to Item 1A of Part II of such Form 10-Qs, in order to provide information regarding (i) the Company's servicing volume and loan portfolio prepayment risks associated with recent announcements and guidance by the Department and FSA related to broad based, income-driven, and other repayment forgiveness or discharge of student loans; and (ii) a recent cybersecurity incident.

Our largest fee-based customer, the Department of Education, represented 29 percent of our revenue in 2021. Failure to extend the Department contracts or obtain new Department contracts in the Department's current or other procurement processes, our inability to consistently surpass competitor performance metrics, unfavorable contract modifications or interpretations, or the loss of servicing borrower volume due to broad based debt cancellation by the Department, could significantly lower servicing revenue and hinder future service opportunities.

~~Our subsidiaries Nelnet Servicing, LLC ("Nelnet Servicing") and Great Lakes Educational Loan Services, Inc. ("Great Lakes") are two of the current seven private sector entities~~assumptions that have student loan servicing contracts with the Department to service loans that include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department. As of September 30, 2022, Nelnet Servicing and Great Lakes were servicing $545.5 billion ofaffect

~~government owned student loans~~the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. The Company bases its estimates and judgments on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions. Note 3 of the notes to consolidated financial statements included in the Company’s 2022 Annual Report includes a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements.

On an on-going basis, management evaluates its estimates and judgments, particularly as they relate to accounting policies that management believes are most “critical” - that is, they are most important to the portrayal of the Company’s financial condition and results of operations and they require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has identified the allowance for ~~15.7 million borrowers.~~loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2022 Annual Report. For additional information regarding changes in the ~~year~~Company’s allowance for loan losses for the three and six months ended June 30, 2023 and 2022, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report. There have been no material changes to the Company’s critical accounting policy and estimate since December 31, ~~2021, we recognized $360.8 million in revenue~~2022.

RECENT ACCOUNTING PRONOUNCEMENTS

Investments - Proportional Amortization Method

In March 2023, the FASB issued accounting guidance which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the ~~Department under these contracts, which represented 29 percent of our revenue, and~~income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than at the reporting entity level or for individual investments. This guidance will be effective for the ~~nine months ended September~~Company beginning January 1, 2024 with early adoption permitted. Management believes this pronouncement will not have a material impact on the Company's consolidated financial statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

LIBOR Transition

On June 30, ~~2022, we recognized $312.4 million in revenue under these contracts.~~

~~Nelnet Servicing's and Great Lakes' student loan servicing~~2023, the LIBOR administrator ceased publication (on a representative basis) of all USD LIBOR rates. When possible, the Company relied on fallback provisions or negotiated with counterparties to transition financial contracts ~~with~~from LIBOR to SOFR. Due to certain noteholder consent requirements, it was not practicable to modify certain of the Department are scheduled to expire on December 14, 2023. In 2017, the Department initiated a contract procurement process referred to as the Next Generation Financial Services Environment for a new frameworkCompany's asset-backed securities transactions. The SAP formula for the ~~servicing~~Company's FFELP loans, the majority of ~~all student loans owned by~~which were indexed to one-month LIBOR, were not able to be modified without legislative action. On March 15, 2022, the ~~Department.~~Adjustable Interest Rate (LIBOR) Act (the LIBOR Act) was signed into law. The ~~Consolidated Appropriations~~LIBOR Act ~~2021 contains~~provides that for contracts that contain no fallback provision or contain fallback provisions ~~directing certain aspects of~~that do not identify a specific USD LIBOR benchmark replacement (including the ~~process, including that any new federal student loan servicing environment is required to provide~~SAP formula for ~~the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers~~FFELP loans), a benchmark replacement based on ~~performance. In~~SOFR will automatically replace the ~~second quarter of 2022,~~USD LIBOR benchmark in the ~~Department released a solicitation entitled Unified Servicing~~contract after June 30, 2023. Following the enactment and ~~Data Solution ("USDS") for the new servicing framework. We responded to the USDS solicitation.~~

In the event that our servicing contracts are not extended beyond the current expiration date, or we are not chosen as a subsequent servicer, loan servicing revenue would decrease significantly. There are significant risks to us and uncertainties regarding the current Department contracts and potential future Department contracts, including the pending and uncertain nature of the current contract procurement process and the Department's prior awards of new contracts to other service providers; risks that we may not be successful in obtaining any new contracts with the Department; and risks and uncertainties as to the terms and requirements under a potential new contract or contracts with the Department. We cannot predict the timing, nature, or ultimate outcome of the current or any other contract procurement process by the Department.

New loan volume is currently allocated among the Department servicers based on certain service level and portfolio performance metrics established by the Department and compared among all loan servicers. The amount of future allocations of new loan volume could be negatively impacted if we are unable to consistently surpass comparable competitor and/or other performance metrics.

In the event the current or any future Department servicing contracts become subject to unfavorable modifications or interpretations by the Department, loan servicing revenue could decrease significantly, performance penalties could be assessed, and/or operating costs to perform the contracts could increase significantly.

Additionally, we are partially dependent on the existing Department contracts to broaden servicing operations with the Department, other federal and state agencies, and commercial clients. The size and importance of these contracts provide us the scale and infrastructure needed to profitably expand into new business opportunities. Failure to extend the Department contracts beyond the current expiration date, or obtain new Department contracts, could significantly hinder future opportunities, as well as result in potential restructuring charges that may be necessary to re-align our cost structure with our servicing operations.

The Department's August 24, 2022 Bulletin announcing a broad based student debt relief plan indicates the Department will provide targeted student debt cancellation to borrowers with loans held by the Department, and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.

As noted above, as of September 30, 2022, we were servicing 15.7 million borrowers under our government servicing contracts. We cannot currently estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the Department's announcement. If there was a broad $10,000 or $20,000 per borrower forgiveness on all government owned loans, we estimate it would decrease the number of borrowers serviced by us (based on the borrower loan information as of September 30, 2022) by approximately 4.4 million borrowers and 7.5 million borrowers, respectively. The actual impact to the number of borrowers serviced is expected to be less than these amounts due to annual income ceilings for borrowers to qualify for forgiveness and the impact of whether a Pell Grant was received on the amount of forgiveness for a borrower.

~~On October 21, 2022, the U.S. Court of Appeals for the Eighth Circuit issued a temporary administrative stay of~~ implementation of the ~~Department's student debt relief plan in response~~LIBOR Act, all of the Company's financial instruments which are currently indexed to USD LIBOR have transitioned, or will transition, to SOFR after June 30, 2023. Specifically, after June 30, 2023, the SAP formula for FFELP loans will transition to 30-day Average SOFR and the Company's LIBOR-indexed FFELP asset-backed securities will also transition to a ~~legal challenge that was initiated~~short-term SOFR index. The Company does not expect the transition from LIBOR to SOFR to significantly impact its asset-backed securitization cash flow forecast as discussed under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by ~~other parties (not us). Revenue earned by us under~~Loan Assets and Related Collateral - Bonds and Notes Issued in Asset-backed Securitizations." The Company's LIBOR-indexed derivatives will transition to the ~~current Department servicing contracts, and software services revenue earned by us~~fallback rate (SOFR) as defined in ~~providing remote hosted services~~the individual agreements and/or published industry guidelines, as applicable. For a discussion of the risks related to ~~other government servicers, will decrease~~the LIBOR transition, see Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in ~~future periods if~~ the ~~Department's student debt relief program or other broad based loan forgiveness is implemented.~~Company's 2022 Annual Report for additional information.

~~Our~~Interest Rate Risk - AGM Operating Segment

AGM’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact AGM due to shifts in market interest rates.

The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:


	As of June 30, 2023				As of December 31, 2022
	Dollars		Percent		Dollars		Percent
Fixed-rate loan assets	$	724,882	5.5	%	$	1,339,900	9.5	%
Variable-rate loan assets	12,514,243		94.5		12,829,871		90.5
Total	$	13,239,125	100.0	%	$	14,169,771	100.0	%

Fixed-rate debt instruments	$	538,762	4.2	%	$	617,083	4.5	%
Variable-rate debt instruments	12,207,374		95.8		13,199,327		95.5
Total	$	12,746,136	100.0	%	$	13,816,410	100.0	%

FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment (SAP) formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its FFELP student loan portfolio with variable rate debt. In low and/or declining interest rate environments, when the fixed borrower rate is ~~subject to prepayment risk, which could reduce~~higher than the ~~expected cash flows and earnings on our portfolio.~~

~~Higher rates of prepayments of~~SAP rate, the Company’s FFELP student loans ~~including consolidations~~earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.

No variable-rate floor income was earned by the ~~Department through~~Company in 2023 or 2022.

A summary of fixed rate floor income earned by the ~~Federal Direct Loan Program or private refinancing programs, would reduce our interest income.~~AGM operating segment follows.

~~Pursuant~~


	Three months ended June 30,			Six months ended June 30,
	2023		2022	2023	2022
Fixed rate floor income, gross	$	456	18,292	1,567	47,285
Derivative settlements (a)	47		3,692	22,525	487
Fixed rate floor income, net	$	503	21,984	24,092	47,772

(a) Derivative settlements consist of settlements received related to the ~~Higher Education Act, borrowers may prepay loans made under the FFEL Program at any time without penalty. Prepayments may result from consolidations of~~Company's derivatives used to hedge student loans earning fixed rate floor income.

Gross fixed rate floor income decreased for the three and six months ended June 30, 2023 compared with the same periods in 2022 due to higher interest rates in 2023 compared with 2022.

The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income. On March 15, 2023, to minimize the Company's exposure to market volatility, the Company terminated its entire derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.

The decrease in net derivative settlements received by the ~~Department through~~Company during the ~~Federal Direct Loan Program or by a lending institution through a private education or unsecured consumer loan, which historically tend~~three months ended June 30, 2023, compared with the same period in 2022, was due to ~~occur more frequently~~the termination of the fixed rate floor derivatives in ~~low interest rate environments; from borrower defaults on federally insured loans, which will result~~March 2023. The increase in ~~the receipt of a guaranty payment; and from voluntary full or partial prepayments; among other things.~~

Legislative and executive action risk exists as Congress and the President evaluate economic stimulus packages and proposals to reauthorize the Higher Education Act. If the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could further increase prepayments and reduce interest income. Future laws, regulations, executive actions, or other policy statements may encourage or force consolidation, create additional income-based repayment or debt forgiveness programs, create broad debt cancellation programs, or establish other policies and programs that impact prepayments on education loans. Even if a broad debt cancellation program only applied to student loans heldnet derivative settlements received by the ~~Department, such program could result~~Company during the six months ended June 30, 2023, compared with the same period in ~~a significant increase in consolidations of FFELP loans~~2022, was due to ~~Federal Direct Loan Program loans and a corresponding increase in prepayments with respect to our FFELP loan portfolio.~~

For example, in October 2021, the Department announced a set of policy changes and released proposed negotiated rulemaking materials relating to the Public Service Loan Forgiveness program under its Federal Direct Loan Program, which we believe resulted in an increase in consolidations of FFELP loans into Federal Direct Loan Program loans held by the Department (which results in the loans no longer being on our balance sheet). In addition, on April 19, 2022, the Department issued a press release, and FSA posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment (“IDR”) plans for federal student loans. In the April 2022 announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan. Further, on July 6, 2022, the Department announced the issuance of proposed regulations that would expand major student loan discharge programs under the Higher Education Act through changes related to borrower defense to repayment where there is a dispute with the higher education institution, the Public Service Loan Forgiveness program, the interest capitalization rules, and closed school discharges, as well as other matters. These changes and proposals were reflected in executive actions announced by the Department on October 25, 2022 and final regulations announced by the Department on October 31, 2022. The final regulations are to become effective on July 1, 2023, and the fact sheet accompanying the October 25, 2022 announcement indicates that if a borrower has a commercially held FFEL Program loan, the borrower must apply for consolidation to a Federal Direct Loan Program loan by May 1, 2023 to receive the IDR plan and other benefits set forth in the announcement. The fact sheet further indicated that the Department will begin forgiving loans in November 2022 for borrowers with Federal Direct Loan Program loans or FFEL Program loans held by the Department that have reached the required 20 or 25 years of payments for forgiveness under IDR plans, which may also have the effect of significantly decreasing the borrower volume under our Department servicing contracts (see the risk factor immediately above).

In addition, the Department's August 24, 2022 Bulletin announced a broad based student debt relief plan for borrowers with loans held by the Department. Following the initial announcement, the Department provided more specific publicly available guidance through the FSA website on September 29, 2022, which guidance was subsequently revised and published in the Federal Register on October 12, 2022. As of November 7, 2022, the following guidance on loan forgiveness was providedsettlements on the ~~FSA website (information on the FSA website is not incorporated by reference~~Company's derivatives outstanding during this period as a result of an increase in ~~this report):~~

•~~All loans eligible for the CARES Act student loan payment pause are also eligible for debt relief, including loans held by the Department and guaranty agencies~~

The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of June 30, 2023.


Fixed interest rate range	Borrower/lender weighted average yield	Estimated variable conversion rate (a)	Loan balance










7.5 - 7.99%	7.87%	5.23%	$	32,997
8.0 - 8.99%	8.20%	5.56%	256,171
> 9.0%	9.05%	6.41%	130,844
			$	420,012

(a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of June 30, 2023, the weighted average estimated variable conversion rate was 5.80% and the short-term interest rate was 518 basis points.

In ~~view~~June 2023, the Company entered into a derivative with a notional amount of $50.0 million and a maturity date in 2030 to hedge a portion of loans remaining that earn fixed rate floor income. Based on the terms of this ~~recent announcement~~derivative, the Company pays a weighted average fixed rate of 3.44% and ~~guidance~~receives payments based on SOFR that resets quarterly.


Index	Frequency of variable resets	Assets		Funding of student loan assets
1 month LIBOR (a) (b)	Daily	$	12,002,100	—
3 month H15 financial commercial paper	Daily	414,602		—
3 month Treasury bill	Daily	403,040		—
1 month LIBOR (a)	Monthly	—		7,239,176
3 month LIBOR (a) (b)	Quarterly	—		3,255,282
Asset-backed commercial paper (c)	Varies	—		1,530,429
Fixed rate	—	—		519,156
Auction-rate (d)	Varies	—		91,335
Other (e)	—	1,248,304		1,432,668
		$	14,068,046	14,068,046

(a) Have transitioned, or will transition, to SOFR after June 30, 2023. See "LIBOR Transition" above.


Maturity	Notional amount (i)
2024	$	1,750,000
2026	1,150,000
2027	250,000








	$	3,150,000

(i) The weighted average rate paid by the ~~Department, we do not currently expect there~~Company on the 1:3 Basis Swaps as of June 30, 2023 was one-month LIBOR plus 10.1 basis points.

(d) As of June 30, 2023, the Company was sponsor for $91.3 million of outstanding asset-backed securities that were set and provide for interest rates to be ~~significant FFELP loan consolidation activity specifically~~periodically reset via a "dutch auction" (the “Auction Rate Securities”). Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a ~~result of~~spread to LIBOR or Treasury Securities, or the ~~one-time student debt relief plan announced~~Net Loan Rate as defined in the August 24, 2022 Bulletin. However, as outlined above, the Department continues to assess whether there are alternative pathways to provide relief to borrowers with student loans not held by the Department, including FFEL Program loans.financing documents.

Since late 2021, we have experienced accelerated run-off of our FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act payment pause on Department held loans(e) Assets include accrued interest receivable 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~~restricted cash. Funding represents overcollateralization (equity) and other programs. We currently believe the recently announced policy changes, executive actions, guidance, and other changes by the Department, other than with respect to the broad based student debt relief plan under the August 24, 2022 Bulletin for borrowers with loans held by the Department, may continue to increase FFEL Program loan prepayments.

~~Sustained higher FFEL Program loan prepayments and/or a significant increase~~liabilities included in FFEL Program loan prepayments could have a materially adverse impact in future periods on net interest income in our AGM operating segment, FFELP servicing revenue in our LSS operating segment, investment advisory services revenue earned by our SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed ~~securities under management,~~securitizations and ~~interest income earned on our FFELP loan asset-backed securities investments.~~

Some variability in prepayment levels is expected, although extraordinary or extended increases in prepayment rates could have a materially adverse effect on our revenues, cash flows, profitability, and business outlook, and, as a result, could materially, adversely affect our business, financial condition, and results of operations.

We cannot otherwise predict how or what programs or policies will be impacted by any actions that the Administration, Congress, or the federal government may take, the timing of when such programs or policies may be implemented, and/or the ultimate outcome thereof. In addition, any changes to government programs or policies may be legally challenged, which may impact the extent and timing these changes may have to the Company's business, financial condition, and results of operations.

~~A cybersecurity incident we recently experienced could result in negative impacts to our business.~~

~~In late July 2022, we determined the customer website portal for the primary loan servicing platform used by our remote hosted servicing clients had~~experienced a cybersecurity incident. We took immediate and extensive steps to secure the system, block the unauthorized activity, address the issue via additional technical and security measures, notify our insurance carriers, and launch a forensic investigation. In August 2022 our investigation confirmed unauthorized access to confidential consumer information of federal student loan borrowers serviced on our platform by Edfinancial Services and Oklahoma Student Loan Authority. Borrower name, address, email address, phone number, and Social Security number information was impacted, but no financial account or payment information was impacted. Loans serviced directly by Nelnet were not impacted by the event. The applicable regulators and affected consumers were notified and identity theft monitoring has been and continues to be offered to those affected. This event could ~~result in liability or expense, decreased revenue, as well as risk and damage to our reputation. Any of these could have a material adverse effect on our business.~~warehouse facility.

LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets. See "LIBOR Transition" above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2022 Annual Report for additional information.

Sensitivity Analysis

The following tables summarize the effect on the Company’s consolidated earnings, based upon a sensitivity analysis performed on AGM’s assets and liabilities assuming hypothetical increases and decreases in interest rates of 100 basis points and 300 basis points while funding spreads remain constant. In addition, a sensitivity analysis was performed assuming the funding index increases 10 basis points and 30 basis points while holding the asset index constant, if the funding index is different than the asset index. The sensitivity analysis was performed on AGM’s variable rate assets (including loans earning fixed rate floor income) and liabilities.


	Interest rates
	Change from increase of 100 basis points				Change from increase of 300 basis points				Change from decrease of 100 basis points				Change from decrease of 300 basis points
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	Three months ended June 30, 2023
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	712	2.4	%	$	3,029	10.2	%	$	314	1.1	%	$	3,762	12.7	%
Impact of derivative settlements (a)	33		0.1		99		0.3		(33)		(0.1)		(99)		(0.3)
Increase (decrease) in net income before taxes	$	745	2.5	%	$	3,128	10.5	%	$	281	1.0	%	$	3,663	12.4	%
Increase (decrease) in basic and diluted earnings per share	$	0.02			$	0.06			$	0.01			$	0.07
	Three months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(5,927)	(5.4)	%	$	(10,505)	(9.7)	%
Impact of derivative settlements	7,729		7.1		23,187		21.4
Increase (decrease) in net income before taxes	$	1,802	1.7	%	$	12,682	11.7	%
Increase (decrease) in basic and diluted earnings per share	$	0.04			$	0.26
	Six months ended June 30, 2023
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	1,484	2.4	%	$	7,432	12.2	%	$	390	0.6	%	$	7,412	12.2	%
Impact of derivative settlements (a)	33		0.1		99		0.2		(33)		(0.1)		(99)		(0.2)
Increase (decrease) in net income before taxes	$	1,517	2.5	%	$	7,531	12.4	%	$	357	0.5	%	$	7,313	12.0	%
Increase (decrease) in basic and diluted earnings per share	$	0.03			$	0.15			$	0.01			$	0.15
	Six months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(16,068)	(4.6)	%	$	(28,152)	(8.1)	%
Impact of derivative settlements	18,455		5.3		55,365		15.9
Increase (decrease) in net income before taxes	$	2,387	0.7	%	$	27,213	7.8	%
Increase (decrease) in basic and diluted earnings per share	$	0.05			$	0.55

(a)On March 15, 2023, the Company terminated its existing derivative portfolio hedging loans earning fixed rate floor income. The table above excludes the impact of these derivatives for the entire period.


	Asset and funding index mismatches
	Increase of 10 basis points				Increase of 30 basis points				Increase of 10 basis points				Increase of 30 basis points
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	Three months ended June 30, 2023								Three months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(1,182)	(4.0)	%	$	(3,547)	(12.0)	%	$	(1,199)	(1.1)	%	$	(3,597)	(3.3)	%
Impact of derivative settlements	785		2.7		2,356		8.0		1,222		1.1		3,664		3.4
Increase (decrease) in net income before taxes	$	(397)	(1.3)	%	$	(1,191)	(4.0)	%	$	23	0.0	%	$	67	0.1	%
Increase (decrease) in basic and diluted earnings per share	$	(0.01)			$	(0.02)			$	0.00			$	0.00






	Six months ended June 30, 2023								Six months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(2,295)	(3.8)	%	$	(6,886)	(11.3)	%	$	(2,461)	(0.7)	%	$	(7,383)	(2.1)	%
Impact of derivative settlements	1,562		2.6		4,686		7.7		2,677		0.8		8,028		2.3
Increase (decrease) in net income before taxes	$	(733)	(1.2)	%	$	(2,200)	(3.6)	%	$	216	0.1	%	$	645	0.2	%
Increase (decrease) in basic and diluted earnings per share	$	(0.01)			$	(0.04)			$	0.00			$	0.01

Interest Rate Risk - Nelnet Bank

To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow. To achieve this objective, the Company manages and mitigates Nelnet Bank’s exposure to fluctuations in market interest rates through several techniques, including managing the maturity, repricing, and mix of fixed and variable rate assets and liabilities and the use of derivative instruments.

The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits by rate characteristics:


	As of June 30, 2023				As of December 31, 2022
	Dollars		Percent		Dollars		Percent
Fixed-rate loan assets	$	372,494			$	341,776
Fixed-rate investments	98,538				123,809
Total fixed-rate assets	471,032		48.5	%	465,585		52.2	%
Variable-rate loan assets	71,994				78,019
Variable-rate investments	428,571				347,559
Total variable rate assets	500,565		51.5		425,578		47.8
Total assets	$	971,597	100.0	%	$	891,163	100.0	%

Fixed-rate deposits	$	281,583	32.3	%	$	336,040	42.6	%
Variable-rate deposits (a)	589,839		67.7		453,604		57.4
Total deposits	$	871,422	100.0	%	$	789,644	100.0	%

Interest Rate and Market Risk - Investments


	Average balance		Interest income/ expense	Average yields/ rates		Average balance		Interest income/ expense	Average yields/ rates
	Three months ended June 30,
	2023					2022
Investments:
Asset-backed securities available-for-sale (a) (b)	$	1,076,344	22,911	8.54	%	$	1,258,770	5,104	1.63	%

Debt funding asset-backed securities available-for-sale:
Participation agreement - variable rate (c)	$	76,966	1,094	5.70	%	$	352,804	1,384	1.57	%
Repurchase agreements - variable rate (d)	415,514		6,278	6.06		471,033		1,682	1.43
	$	492,480	7,372	6.00		$	823,837	3,066	1.49

	Six months ended June 30,
	2023					2022
Investments:
Asset-backed securities available-for-sale (a) (b)	$	1,194,475	41,699	7.04	%	$	1,165,545	8,367	1.45	%

Debt funding asset-backed securities available-for-sale:
Participation agreement - variable rate (c)	$	230,889	6,153	5.37	%	$	304,669	1,944	1.29	%
Repurchase agreements - variable rate (d)	463,637		13,046	5.67		437,537		2,713	1.25
	$	694,526	19,199	5.57		$	742,206	4,657	1.27

(c) Interest incurred by the Company on amounts borrowed under the participation agreement is at a variable rate of LIBOR + 62.5 basis points.

(d) Interest incurred by the Company on amounts borrowed under the repurchase agreements is at a variable rate of LIBOR + 70 to 90 basis points or SOFR + 75 to 140 basis points.

ITEM ~~2. UNREGISTERED SALES OF EQUITY SECURITIES~~4. CONTROLS AND ~~USE OF PROCEEDS~~PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company's principal executive and principal financial officers, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, 2023. Based on this evaluation, the Company’s principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023.

Stock Repurchases

The Board of Directors has authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2025. No shares were repurchased under this program during the first half of 2023. As of June 30, 2023, 4,467,021 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.

Dividends

On June 15, 2023, the Company paid a second quarter 2023 cash dividend on the Company's Class A and Class B common stock of $0.26 per share. In addition, the Company's Board of Directors has declared a third quarter 2023 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.26 per share. The third quarter cash dividend will be paid on September 15, 2023 to shareholders of record at the close of business on September 1, 2023.

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

the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. The Company bases its estimates and judgments on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions. Note 3 of the notes to consolidated financial statements included in the Company’s 2022 Annual Report includes a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements.

On an on-going basis, management evaluates its estimates and judgments, particularly as they relate to accounting policies that management believes are most “critical” - that is, they are most important to the portrayal of the Company’s financial condition and results of operations and they require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has identified the allowance for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2022 Annual Report. For additional information regarding changes in the Company’s allowance for loan losses for the three and six months ended June 30, 2023 and 2022, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report. There have been no material changes to the Company’s critical accounting policy and estimate since December 31, 2022.

RECENT ACCOUNTING PRONOUNCEMENTS

Investments - Proportional Amortization Method

In March 2023, the FASB issued accounting guidance which permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than at the reporting entity level or for individual investments. This guidance will be effective for the Company beginning January 1, 2024 with early adoption permitted. Management believes this pronouncement will not have a material impact on the Company's consolidated financial statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

LIBOR Transition

Interest Rate Risk - AGM Operating Segment

AGM’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact AGM due to shifts in market interest rates.

The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:


	As of June 30, 2023				As of December 31, 2022
	Dollars		Percent		Dollars		Percent
Fixed-rate loan assets	$	724,882	5.5	%	$	1,339,900	9.5	%
Variable-rate loan assets	12,514,243		94.5		12,829,871		90.5
Total	$	13,239,125	100.0	%	$	14,169,771	100.0	%

Fixed-rate debt instruments	$	538,762	4.2	%	$	617,083	4.5	%
Variable-rate debt instruments	12,207,374		95.8		13,199,327		95.5
Total	$	12,746,136	100.0	%	$	13,816,410	100.0	%

FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment (SAP) formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its FFELP student loan portfolio with variable rate debt. In low and/or declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, the Company’s FFELP student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.

No variable-rate floor income was earned by the Company in 2023 or 2022.

A summary of fixed rate floor income earned by the AGM operating segment follows.


	Three months ended June 30,			Six months ended June 30,
	2023		2022	2023	2022
Fixed rate floor income, gross	$	456	18,292	1,567	47,285
Derivative settlements (a)	47		3,692	22,525	487
Fixed rate floor income, net	$	503	21,984	24,092	47,772

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

Gross fixed rate floor income decreased for the three and six months ended June 30, 2023 compared with the same periods in 2022 due to higher interest rates in 2023 compared with 2022.

The decrease in net derivative settlements received by the Company during the three months ended June 30, 2023, compared with the same period in 2022, was due to the termination of the fixed rate floor derivatives in March 2023. The increase in net derivative settlements received by the Company during the six months ended June 30, 2023, compared with the same period in 2022, was due to an increase in settlements on the Company's derivatives outstanding during this period as a result of an increase in interest rates.

The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of June 30, 2023.


Fixed interest rate range	Borrower/lender weighted average yield	Estimated variable conversion rate (a)	Loan balance










7.5 - 7.99%	7.87%	5.23%	$	32,997
8.0 - 8.99%	8.20%	5.56%	256,171
> 9.0%	9.05%	6.41%	130,844
			$	420,012

In June 2023, the Company entered into a derivative with a notional amount of $50.0 million and a maturity date in 2030 to hedge a portion of loans remaining that earn fixed rate floor income. Based on the terms of this derivative, the Company pays a weighted average fixed rate of 3.44% and receives payments based on SOFR that resets quarterly.


Index	Frequency of variable resets	Assets		Funding of student loan assets
1 month LIBOR (a) (b)	Daily	$	12,002,100	—
3 month H15 financial commercial paper	Daily	414,602		—
3 month Treasury bill	Daily	403,040		—
1 month LIBOR (a)	Monthly	—		7,239,176
3 month LIBOR (a) (b)	Quarterly	—		3,255,282
Asset-backed commercial paper (c)	Varies	—		1,530,429
Fixed rate	—	—		519,156
Auction-rate (d)	Varies	—		91,335
Other (e)	—	1,248,304		1,432,668
		$	14,068,046	14,068,046

(a) Have transitioned, or will transition, to SOFR after June 30, 2023. See "LIBOR Transition" above.


Maturity	Notional amount (i)
2024	$	1,750,000
2026	1,150,000
2027	250,000








	$	3,150,000

(i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2023 was one-month LIBOR plus 10.1 basis points.

(d) As of June 30, 2023, the Company was sponsor for $91.3 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (the “Auction Rate Securities”). Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents.

(e) Assets include accrued interest receivable and restricted cash. Funding represents overcollateralization (equity) and other liabilities included in FFELP loan asset-backed securitizations and warehouse facility.

LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets. See "LIBOR Transition" above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2022 Annual Report for additional information.

Sensitivity Analysis


	Interest rates
	Change from increase of 100 basis points				Change from increase of 300 basis points				Change from decrease of 100 basis points				Change from decrease of 300 basis points
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	Three months ended June 30, 2023
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	712	2.4	%	$	3,029	10.2	%	$	314	1.1	%	$	3,762	12.7	%
Impact of derivative settlements (a)	33		0.1		99		0.3		(33)		(0.1)		(99)		(0.3)
Increase (decrease) in net income before taxes	$	745	2.5	%	$	3,128	10.5	%	$	281	1.0	%	$	3,663	12.4	%
Increase (decrease) in basic and diluted earnings per share	$	0.02			$	0.06			$	0.01			$	0.07
	Three months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(5,927)	(5.4)	%	$	(10,505)	(9.7)	%
Impact of derivative settlements	7,729		7.1		23,187		21.4
Increase (decrease) in net income before taxes	$	1,802	1.7	%	$	12,682	11.7	%
Increase (decrease) in basic and diluted earnings per share	$	0.04			$	0.26
	Six months ended June 30, 2023
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	1,484	2.4	%	$	7,432	12.2	%	$	390	0.6	%	$	7,412	12.2	%
Impact of derivative settlements (a)	33		0.1		99		0.2		(33)		(0.1)		(99)		(0.2)
Increase (decrease) in net income before taxes	$	1,517	2.5	%	$	7,531	12.4	%	$	357	0.5	%	$	7,313	12.0	%
Increase (decrease) in basic and diluted earnings per share	$	0.03			$	0.15			$	0.01			$	0.15
	Six months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(16,068)	(4.6)	%	$	(28,152)	(8.1)	%
Impact of derivative settlements	18,455		5.3		55,365		15.9
Increase (decrease) in net income before taxes	$	2,387	0.7	%	$	27,213	7.8	%
Increase (decrease) in basic and diluted earnings per share	$	0.05			$	0.55


	Asset and funding index mismatches
	Increase of 10 basis points				Increase of 30 basis points				Increase of 10 basis points				Increase of 30 basis points
	Dollars		Percent		Dollars		Percent		Dollars		Percent		Dollars		Percent
	Three months ended June 30, 2023								Three months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(1,182)	(4.0)	%	$	(3,547)	(12.0)	%	$	(1,199)	(1.1)	%	$	(3,597)	(3.3)	%
Impact of derivative settlements	785		2.7		2,356		8.0		1,222		1.1		3,664		3.4
Increase (decrease) in net income before taxes	$	(397)	(1.3)	%	$	(1,191)	(4.0)	%	$	23	0.0	%	$	67	0.1	%
Increase (decrease) in basic and diluted earnings per share	$	(0.01)			$	(0.02)			$	0.00			$	0.00






	Six months ended June 30, 2023								Six months ended June 30, 2022
Effect on earnings:
Increase (decrease) in pre-tax net income before impact of derivative settlements	$	(2,295)	(3.8)	%	$	(6,886)	(11.3)	%	$	(2,461)	(0.7)	%	$	(7,383)	(2.1)	%
Impact of derivative settlements	1,562		2.6		4,686		7.7		2,677		0.8		8,028		2.3
Increase (decrease) in net income before taxes	$	(733)	(1.2)	%	$	(2,200)	(3.6)	%	$	216	0.1	%	$	645	0.2	%
Increase (decrease) in basic and diluted earnings per share	$	(0.01)			$	(0.04)			$	0.00			$	0.01

Interest Rate Risk - Nelnet Bank

To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow. To achieve this objective, the Company manages and mitigates Nelnet Bank’s exposure to fluctuations in market interest rates through several techniques, including managing the maturity, repricing, and mix of fixed and variable rate assets and liabilities and the use of derivative instruments.

The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits by rate characteristics:


	As of June 30, 2023				As of December 31, 2022
	Dollars		Percent		Dollars		Percent
Fixed-rate loan assets	$	372,494			$	341,776
Fixed-rate investments	98,538				123,809
Total fixed-rate assets	471,032		48.5	%	465,585		52.2	%
Variable-rate loan assets	71,994				78,019
Variable-rate investments	428,571				347,559
Total variable rate assets	500,565		51.5		425,578		47.8
Total assets	$	971,597	100.0	%	$	891,163	100.0	%

Fixed-rate deposits	$	281,583	32.3	%	$	336,040	42.6	%
Variable-rate deposits (a)	589,839		67.7		453,604		57.4
Total deposits	$	871,422	100.0	%	$	789,644	100.0	%

Interest Rate and Market Risk - Investments


	Average balance		Interest income/ expense	Average yields/ rates		Average balance		Interest income/ expense	Average yields/ rates
	Three months ended June 30,
	2023					2022
Investments:
Asset-backed securities available-for-sale (a) (b)	$	1,076,344	22,911	8.54	%	$	1,258,770	5,104	1.63	%

Debt funding asset-backed securities available-for-sale:
Participation agreement - variable rate (c)	$	76,966	1,094	5.70	%	$	352,804	1,384	1.57	%
Repurchase agreements - variable rate (d)	415,514		6,278	6.06		471,033		1,682	1.43
	$	492,480	7,372	6.00		$	823,837	3,066	1.49

	Six months ended June 30,
	2023					2022
Investments:
Asset-backed securities available-for-sale (a) (b)	$	1,194,475	41,699	7.04	%	$	1,165,545	8,367	1.45	%

Debt funding asset-backed securities available-for-sale:
Participation agreement - variable rate (c)	$	230,889	6,153	5.37	%	$	304,669	1,944	1.29	%
Repurchase agreements - variable rate (d)	463,637		13,046	5.67		437,537		2,713	1.25
	$	694,526	19,199	5.57		$	742,206	4,657	1.27

(c) Interest incurred by the Company on amounts borrowed under the participation agreement is at a variable rate of LIBOR + 62.5 basis points.

(d) Interest incurred by the Company on amounts borrowed under the repurchase agreements is at a variable rate of LIBOR + 70 to 90 basis points or SOFR + 75 to 140 basis points.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company's principal executive and principal financial officers, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, 2023. Based on this evaluation, the Company’s principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes from the information referred to in the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 under Part I, Item 3 of such Form 10-K.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 in response to Part I, Item 1A of such Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock Repurchases

The following table summarizes the repurchases of Class A common stock during the ~~third~~second quarter of ~~2022~~2023 by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934. ~~Certain share repurchases included in the table below were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.~~

Period Total number of shares purchased (a) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (b) Maximum number of shares that may yet be purchased under the plans or programs (b)
July 1 - July 31, 2022 76,211 $ 85.79 76,211 4,607,626
August 1 - August 31, 2022 23,058 85.74 23,058 4,584,568
September 1 - September 30, 2022 70,591 81.84 66,632 4,517,936
Total 169,860 $ 84.14 165,901


Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (b)	Maximum number of shares that may yet be purchased under the plans or programs (b)
April 1 - April 30, 2023	—	$	—	—	4,467,021
May 1 - May 31, 2023	260	91.89		—	4,467,021
June 1 - June 30, 2023	4,474	98.71		—	4,467,021
Total	4,734	$	98.34	—

(a) The total number of shares ~~includes: (i) shares repurchased pursuant to the stock repurchase program discussed in footnote (b) below; and (ii)~~includes shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares. ~~Shares of Class A common stock tendered by employees to satisfy tax withholding obligations included 3,959 shares in September 2022.~~ Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company's shares on the date of vesting.

(b) On May 9, 2022, the Company announced that its 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.

Working capital and dividend restrictions/limitations

The Company's $495.0 million unsecured line of credit, which is available through September 22, 2026, imposes restrictions on the payment of dividends through covenants requiring a minimum consolidated net worth and a minimum level of unencumbered cash, cash equivalent investments, and available borrowing capacity under the line of credit. In addition, trust indentures and other financing agreements governing debt issued by the Company's lending subsidiaries generally have limitations on the amounts of funds that can be transferred to the Company by its subsidiaries through cash dividends at certain times. Further, Nelnet Bank is subject to laws and regulations that restrict the ability of Nelnet Bank to pay dividends to the Company, and authorize regulatory authorities to prohibit or limit the payment of dividends by Nelnet Bank to the Company. These provisions do not currently materially limit the Company's ability to pay dividends, and, based on the Company's current financial condition and recent results of operations, the Company does not currently anticipate that these provisions will materially limit the future payment of dividends.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

The following table describes contracts, instructions, or written plans for the purchase or sale of the Company's securities adopted by the Company's directors or executive officers during the second quarter of 2023, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c), referred to as Rule 10b5-1 trading plans.

Name and Title

Date of Adoption of Rule 10b5-1 Trading Plan

Scheduled Expiration Date of Rule 10b5-1 Trading Plan (a)

Aggregate Number of Securities to Be Purchased or Sold

Jona M. Van Deun

Director

5/16/2023

9/15/2023

Sale of 785 shares of Class A common stock

William J. Munn

Corporate Secretary / Chief Governance Officer / General Counsel

6/1/2023

6/1/2024

Sale of 2,500 shares of Class A common stock

Michael S. Dunlap

Executive Chairman

6/7/2023

7/7/2024

Gift transfer of 40,000 shares of Class A common stock

Kathleen A. Farrell

Director

6/16/2023

6/15/2024

Sale of 1,000 shares of Class A common stock

(a) In each case, a trading plan may also expire on such earlier date as all transactions under the trading plan are completed.

During the second quarter of 2023, none of our directors or executive officers terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

ITEM 6. EXHIBITS


10.1#			Nelnet, Inc. Directors Stock Compensation Plan, as amended and restated as of May 18, 2023, filed as Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on May 22, 2023 and incorporated herein by reference.

10.2#			Nelnet, Inc. Executive Officers Incentive Compensation Plan, as amended and restated as of May 18, 2023, filed as Exhibit 10.2 to the registrant's Current Report on Form 8-K filed on May 22, 2023 and incorporated herein by reference.

10.3*+			Amendment No. 1 to Third Amended and Restated Credit Agreement dated as of June 22, 2023, among Nelnet, Inc., the various lender parties thereto, and U.S. Bank National Association, as Administrative Agent.

10.4*+			Guarantor Consent and Reaffirmation dated as of June 22, 2023, by each of the subsidiaries of Nelnet, Inc. signatories thereto, in favor of U.S. Bank National Association, as Administrative Agent.

10.5*			Amended and Restated Form of Custodian Agreement for Whitetail Rock SLAB Funds by and among the Fund, Whitetail Rock Fund Management, LLC, and Union Bank and Trust Company.

31.1*			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer Jeffrey R. Noordhoek.

31.2*			Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer James D. Kruger.

32**			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*			Inline XBRL Taxonomy Extension Schema Document.

101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


*			Filed herewith
**			Furnished herewith
#			Indicates a management contract or compensatory plan or arrangement.
+			Filed herewith for purposes of providing a complete set of all amendment and restated documents to the Third Amended and Restated Credit Agreement among Nelnet, Inc., U.S. Bank National Association, as Administrative Agent, and the various lender parties thereto.

7074

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NELNET, INC.

Date:

~~November~~August 7, ~~2022~~2023

By:

/s/ JEFFREY R. NOORDHOEK

Name:

Jeffrey R. Noordhoek

Title:

Chief Executive Officer

Principal Executive Officer

Date:

~~November~~August 7, ~~2022~~2023

By:

/s/ JAMES D. KRUGER

Name:

James D. Kruger

Title:

Chief Financial Officer

Principal Financial Officer and Principal Accounting Officer

7175







GAAP before tax operating margin	15.3	%	(2.5)	%	11.2	%	7.9	%	Before tax operating margin, excluding impairment and amortization expense, is a non-GAAP measure of before tax operating profitability as a percentage of revenue, and for the LSS segment is calculated as income before income taxes (excluding impairment and amortization expense) divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue. The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it 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, excluding impairment and amortization expense, decreased in the nine months ended September 30, 2022 compared to the same period in 2021 due to increased operating expenses, primarily salaries and benefits, as the Company prepared for a January 31, 2022 expiration of the federal student loan payment pause under the CARES Act, which has been extended three additional times to May 1, 2022, August 31, 2022, and again to December 31, 2022.
Impairment expense	—		10.9	%	—		3.6	%
Amortization expense	0.3	%	0.5	%	0.3	%	3.2	%
Non-GAAP before tax operating margin, excluding impairment and amortization expense	15.6	%	8.9	%	11.5	%	14.7	%


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

Quarter ended March 31, 2022	380,053	$	32,899	86.56
Quarter ended June 30, 2022	558,257	46,032		82.46
Quarter ended September 30, 2022	169,860	14,293		84.14
Total	1,108,170	$	93,224	84.12