0001258602false00012586022024-05-092024-05-09

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 9, 2024
Nelnet_Logo_color.jpg
NELNET, INC.
(Exact name of registrant as specified in its charter)
Nebraska001-3192484-0748903
(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer Identification No.)
121 South 13th Street, Suite 100
Lincoln,Nebraska68508
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (402) 458-2370
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, Par Value $0.01 per ShareNNINew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.                        ☐



Item 2.02 Results of Operations and Financial Condition.
On May 9, 2024, Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended March 31, 2024. A copy of the press release is furnished as Exhibit 99.1 to this report. In addition, a copy of the supplemental financial information for the quarter ended March 31, 2024, which was made available on the Company's website at www.nelnetinvestors.com on May 9, 2024 in connection with the press release, is furnished as Exhibit 99.2 to this report.
The above information and Exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall such information and Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. In addition, information on the Company's website is not incorporated by reference into this report and should not be considered part of this report.
Certain statements contained in the exhibits furnished with this report may be considered forward looking in nature and are subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated, estimated, or expected. Among the key risks and uncertainties that may have a direct bearing on the Company's future operating results, performance, or financial condition expressed or implied by the forward-looking statements are the matters discussed in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024. Although the Company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits. The following exhibits are furnished as part of this report:
Exhibit
No.
Description
99.1
99.2
104Cover Page Interactive Data File (formatted as Inline XBRL and included as Exhibit 101).






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 hereunto duly authorized.
Dated: May 9, 2024
NELNET, INC.
By:    /s/ JAMES D. KRUGER
Name:    James D. Kruger
Title:    Chief Financial Officer




Nelnet Reports First Quarter 2024 Results
LINCOLN, Neb., May 9, 2024 - Nelnet (NYSE: NNI) today reported GAAP net income of $73.2 million, or $1.97 per share, for the first quarter of 2024, compared with GAAP net income of $26.5 million, or $0.71 per share, for the same period a year ago.
Net income, excluding derivative market value adjustments1, was $67.2 million, or $1.81 per share, for the first quarter of 2024, compared with $54.9 million, or $1.47 per share, for the same period in 2023.
“We are extremely pleased with the results of the first quarter,” said Jeff Noordhoek, chief executive officer of Nelnet. “Our core businesses performed well in an uncertain environment. We continue to look for market opportunities to capitalize on our strong liquidity position, including investing in our current businesses, loan acquisitions, strategic acquisitions and investments, and capital management initiatives. Year to date, we have repurchased almost 818,000 shares of our common stock at a price we believe is extremely attractive.”
Nelnet has four reportable operating segments, earning interest income on loans in its Asset Generation and Management (AGM) and Nelnet Bank segments, both part of the company's Nelnet Financial Services (NFS) division, and fee-based revenue in its Loan Servicing and Systems and Education Technology Services and Payments segments. Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate Activities.
Asset Generation and Management
The AGM operating segment reported loan and investment net interest income of $40.6 million during the first quarter of 2024, compared with $45.5 million for the same period a year ago. The decrease in 2024 was due to the expected runoff of the loan portfolio and a decrease in loan spread2. The average balance of loans outstanding decreased from $14.0 billion for the first quarter of 2023 to $11.6 billion for the same period in 2024.
AGM recognized a provision for loan losses in the first quarter of 2024 of $6.6 million ($5.0 million after tax), compared with $31.9 million ($24.2 million after tax) in the first quarter of 2023. Provision for loan losses is primarily impacted by loans acquired during the period. AGM acquired $80.7 million in loans in the first quarter of 2024, compared with $253.7 million for the same period in 2023.
AGM recognized income of $5.7 million ($4.3 million after tax) related to changes in the fair value of derivative instruments that do not qualify for hedge accounting during the first quarter of 2024, compared with a loss of $37.4 million ($28.4 million after tax) for the same period in 2023.
AGM recognized net income after tax of $25.6 million for the three months ended March 31, 2024, compared with a loss of $0.2 million for the same period in 2023.
Nelnet Bank
As of March 31, 2024, Nelnet Bank had a $483.7 million loan portfolio and total deposits, including intercompany deposits, of $960.6 million. Nelnet Bank recognized net income after tax for the three months ended March 31, 2024 of $0.9 million, compared with a net loss of $0.1 million for the same period in 2023.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was $127.2 million for the first quarter of 2024, compared with $139.2 million for the same period in 2023.
As of March 31, 2024, the company was servicing $532.2 billion in government-owned, FFEL Program, private education, and consumer loans for 15.9 million borrowers, compared with $578.6 billion in servicing volume for 17.3 million borrowers as of March 31, 2023.
The Loan Servicing and Systems segment reported net income after tax of $12.2 million for the three months ended March 31, 2024, compared with $19.2 million for the same period in 2023.

1 Net income, excluding derivative market value adjustments, is a non-GAAP measure. See "Non-GAAP Performance Measures" at the end of this press release and the "Non-GAAP Disclosures" section below for explanatory information and reconciliations of GAAP to non-GAAP financial information.

2 Loan spread represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets.



Education Technology Services and Payments
For the first quarter of 2024, revenue from the Education Technology Services and Payments operating segment was $143.5 million, an increase from $133.6 million for the same period in 2023. Revenue less direct costs to provide services for the first quarter of 2024 was $94.9 million, compared with $85.9 million for the same period in 2023.
Net income after tax for the Education Technology Services and Payments segment was $36.2 million for the three months ended March 31, 2024, compared with $28.7 million for the same period in 2023. Net income for the three months ended March 31, 2024 and 2023 included $7.9 million ($6.0 million after tax) and $6.0 million ($4.6 million after tax) of interest income, respectively.
This segment is subject to seasonal fluctuations. Based on the timing of when revenue is recognized and when expenses are incurred, revenue and operating margin are higher in the first quarter compared with the remainder of the year.
Corporate Activities
Included in corporate activities is the operating results of the company's 45 percent voting membership interest in ALLO Holdings LLC, a holding company for ALLO Communications LLC (ALLO). During the first quarter of 2024, the company recognized a loss on its ALLO voting membership interests investment of $10.7 million ($8.1 million after tax), compared with a loss of $20.2 million ($15.4 million after tax) for the same period in 2023. Absent additional equity contributions, the company will not recognize additional losses for its voting membership interests in ALLO.
Share Repurchases
Year to date through May 9, 2024, the company has repurchased 817,826 Class A common shares for $75.3 million (average price of $92.01 per share), including a total of 396,724 Class A common shares for $35.5 million ($89.41 per share) repurchased during the three months ended March 31, 2024.
Board of Directors Declares Second Quarter Dividend
The Nelnet Board of Directors declared a second-quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.28 per share. The dividend will be paid on June 14, 2024, to shareholders of record at the close of business on May 31, 2024.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of federal securities laws. 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. These statements are based on management's current expectations as of the date of this release and 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. Such risks and uncertainties include, but are not limited to: risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the company under existing and future servicing contracts with the Department of Education, risks related to unfavorable contract modifications or interpretations, and risks related to the company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, FFEL Program, private education, and consumer loans; loan portfolio risks such as prepayment or default risk, credit risk, interest rate basis and repricing risk, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFEL Program, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFEL Program, private education, consumer, and other loans; financing and liquidity risks, including risks of changes in the interest rate 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; 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 disclosure of confidential or personal information and/or damage to reputation resulting from cyber breaches; risks related to use of artificial intelligence; uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations; risks related to the ability of Nelnet Bank to achieve its business objectives and effectively deploy loan and deposit strategies and achieve expected market penetration; risks related to the expected benefits to the company from its continuing investment in ALLO and Hudl, and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities and rising construction costs; risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom) including venture



capital and real estate investments, reinsurance, acquisitions, and other activities (including risks associated with errors that occasionally occur in converting loan servicing portfolios to a new servicing platform), including activities that are intended to diversify the company both within and outside of its historical core education-related businesses; risks from changes in economic conditions and consumer behavior; risks related to the company's ability to adapt to technological change; risks related to the exclusive forum provisions in the company's articles of incorporation; risks related to the company's executive chairman's ability to control matters related to the company through voting rights; risks related to related party transactions; risks and uncertainties associated with climate change; risks related to natural disasters, terrorist activities, or international hostilities; and risks and uncertainties associated with litigation matters and maintaining compliance with the extensive regulatory requirements applicable to the company's businesses, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the company's consolidated financial statements.
For more information, see the "Risk Factors" sections and other cautionary discussions of risks and uncertainties included in documents filed or furnished by the company with the Securities and Exchange Commission. All forward-looking statements in this release are as of the date of this release. Although the company may voluntarily update or revise its forward-looking statements from time to time to reflect actual results or changes in the company's expectations, the company disclaims any commitment to do so except as required by law.
Non-GAAP Performance Measures
The company prepares its financial statements and presents its financial results in accordance with U.S. 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. Reconciliations of GAAP to non-GAAP financial information, and a discussion of why the company believes providing this additional information is useful to investors, is provided in the "Non-GAAP Disclosures" section below.




Consolidated Statements of Operations
(Dollars in thousands, except share data)
(unaudited)
Three months ended
March 31, 2024December 31, 2023March 31, 2023
Interest income:
Loan interest$216,724 227,234 225,243 
Investment interest52,078 48,019 40,725 
Total interest income268,802 275,253 265,968 
Interest expense on bonds and notes payable and bank deposits194,580 205,335 199,449 
Net interest income74,222 69,918 66,519 
Less provision for loan losses10,928 10,924 34,275 
Net interest income after provision for loan losses63,294 58,994 32,244 
Other income (expense):
Loan servicing and systems revenue127,201 128,816 139,227 
Education technology services and payments revenue143,539 106,052 133,603 
Solar construction revenue13,726 11,982 8,651 
Other, net17,015 (27,493)(14,071)
(Loss) gain on sale of loans, net(41)6,987 11,812 
Impairment expense— (26,951)— 
Derivative market value adjustments and derivative settlements, net9,721 (8,654)(14,074)
Total other income (expense), net311,161 190,739 265,148 
Cost of services:
Cost to provide education technology services and payments48,610 39,379 47,704 
Cost to provide solar construction services14,229 23,371 8,299 
Total cost of services62,839 62,750 56,003 
Operating expenses:
Salaries and benefits143,875 152,917 152,710 
Depreciation and amortization16,769 22,004 16,627 
Other expenses56,845 51,697 40,785 
Total operating expenses217,489 226,618 210,122 
Income (loss) before income taxes94,127 (39,635)31,267 
Income tax (expense) benefit(23,119)9,722 (8,250)
Net income (loss)71,008 (29,913)23,017 
Net loss attributable to noncontrolling interests2,202 21,359 3,470 
Net income (loss) attributable to Nelnet, Inc.$73,210 (8,554)26,487 
Earnings per common share:
Net income (loss) attributable to Nelnet, Inc. shareholders - basic and diluted$1.97 (0.23)0.71 
Weighted average common shares outstanding - basic and diluted37,156,971 37,354,406 37,344,604 




Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
March 31, 2024December 31, 2023March 31, 2023
Assets:
Loans and accrued interest receivable, net$11,829,078 13,108,204 14,561,108 
Cash, cash equivalents, and investments2,101,373 2,039,080 2,175,144 
Restricted cash and investments797,217 875,348 710,469 
Goodwill and intangible assets, net200,699 202,848 237,690 
Other assets470,295 511,165 398,198 
Total assets$15,398,662 16,736,645 18,082,609 
Liabilities:
Bonds and notes payable$10,582,513 11,828,393 13,438,416 
Bank deposits802,061 743,599 675,767 
Other liabilities756,308 942,738 745,097 
Total liabilities12,140,882 13,514,730 14,859,280 
Equity:
Total Nelnet, Inc. shareholders' equity3,305,862 3,262,621 3,229,683 
Noncontrolling interests(48,082)(40,706)(6,354)
Total equity3,257,780 3,221,915 3,223,329 
Total liabilities and equity$15,398,662 16,736,645 18,082,609 
Contacts:
Media, Ben Kiser, 402.458.3024, or Investors, Phil Morgan, 402.458.3038, both of Nelnet, Inc.




Non-GAAP Disclosures
(Dollars in thousands, except share data)
(unaudited)
Non-GAAP financial measures disclosed by management are meant to provide additional information and insight relative to business trends to investors and, in certain cases, to present financial information as measured by rating agencies and other users of financial information. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies. 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.
Net income, excluding derivative market value adjustments
Three months ended March 31,
20242023
GAAP net income attributable to Nelnet, Inc.$73,210 26,487 
Realized and unrealized derivative market value adjustments (a)(7,964)37,411 
Tax effect (b)1,911 (8,979)
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $67,157 54,919 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$1.97 0.71 
Realized and unrealized derivative market value adjustments (a)(0.21)1.00 
Tax effect (b)0.05 (0.24)
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $1.81 1.47 

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



For Release: May 9, 2024
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the first quarter 2024
(All dollars are in thousands, except per share amounts, unless otherwise noted)
The following information should be read in connection with Nelnet, Inc.'s (the “Company's”) press release for first quarter 2024 earnings, dated May 9, 2024, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the "Q1 2024 10-Q Quarterly 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 Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report"), and include such risks and uncertainties as:
risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and future servicing contracts with the Department, risks related to unfavorable contract modifications or interpretations, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or FFELP), private education, and consumer loans;
loan portfolio risks such as prepayment risk, credit risk, interest rate basis and repricing risk, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans;
financing and liquidity risks, including risks of changes in the interest rate 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;
risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors;
risks related to use of artificial intelligence;
uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
risks related to the ability of Nelnet Bank to achieve its business objectives and effectively deploy loan and deposit strategies and achieve expected market penetration;
risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities and rising construction costs;
risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom) including venture capital and real estate investments, reinsurance, acquisitions, and other activities (including risks associated with errors that occasionally occur in converting loan servicing portfolios to a new servicing platform), including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;
risks and uncertainties associated with climate change; and
risks and uncertainties associated with litigation matters and maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company’s consolidated financial statements.
All forward-looking statements contained in this supplement 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.
1


Consolidated Statements of Operations
(Dollars in thousands, except share data)
(unaudited)
Three months ended
March 31, 2024December 31, 2023March 31, 2023
Interest income:
Loan interest$216,724 227,234 225,243 
Investment interest52,078 48,019 40,725 
Total interest income268,802 275,253 265,968 
Interest expense on bonds and notes payable and bank deposits194,580 205,335 199,449 
Net interest income74,222 69,918 66,519 
Less provision for loan losses10,928 10,924 34,275 
Net interest income after provision for loan losses63,294 58,994 32,244 
Other income (expense):
Loan servicing and systems revenue127,201 128,816 139,227 
Education technology services and payments revenue143,539 106,052 133,603 
Solar construction revenue13,726 11,982 8,651 
Other, net17,015 (27,493)(14,071)
(Loss) gain on sale of loans, net(41)6,987 11,812 
Impairment expense— (26,951)— 
Derivative settlements, net1,757 853 23,337 
Derivative market value adjustments, net7,964 (9,507)(37,411)
Total other income (expense), net311,161 190,739 265,148 
Cost of services:
Cost to provide education technology services and payments48,610 39,379 47,704 
Cost to provide solar construction services14,229 23,371 8,299 
Total cost of services62,839 62,750 56,003 
Operating expenses:
Salaries and benefits143,875 152,917 152,710 
Depreciation and amortization16,769 22,004 16,627 
Other expenses56,845 51,697 40,785 
Total operating expenses217,489 226,618 210,122 
Income (loss) before income taxes94,127 (39,635)31,267 
Income tax (expense) benefit(23,119)9,722 (8,250)
Net income (loss)71,008 (29,913)23,017 
Net loss attributable to noncontrolling interests2,202 21,359 3,470 
Net income (loss) attributable to Nelnet, Inc.$73,210 (8,554)26,487 
Earnings per common share:
Net income (loss) attributable to Nelnet, Inc. shareholders - basic and diluted$1.97 (0.23)0.71 
Weighted average common shares outstanding - basic and diluted37,156,971 37,354,406 37,344,604 

2


Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
March 31, 2024December 31, 2023March 31, 2023
Assets:
Loans and accrued interest receivable, net$11,829,078 13,108,204 14,561,108 
Cash, cash equivalents, and investments2,101,373 2,039,080 2,175,144 
Restricted cash and investments797,217 875,348 710,469 
Goodwill and intangible assets, net200,699 202,848 237,690 
Other assets470,295 511,165 398,198 
Total assets$15,398,662 16,736,645 18,082,609 
Liabilities:
Bonds and notes payable$10,582,513 11,828,393 13,438,416 
Bank deposits802,061 743,599 675,767 
Other liabilities756,308 942,738 745,097 
Total liabilities12,140,882 13,514,730 14,859,280 
Equity:
Total Nelnet, Inc. shareholders' equity3,305,862 3,262,621 3,229,683 
Noncontrolling interests(48,082)(40,706)(6,354)
Total equity3,257,780 3,221,915 3,223,329 
Total liabilities and equity$15,398,662 16,736,645 18,082,609 

3


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 payments. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in a fiber communications company (ALLO), early-stage and emerging growth companies (venture capital investments), real estate, reinsurance, and renewable energy (solar). The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank.
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
March 31, 2024December 31, 2023March 31, 2023
GAAP net income (loss) attributable to Nelnet, Inc.$73,210 (8,554)26,487 
Realized and unrealized derivative market value adjustments(7,964)9,507 37,411 
Tax effect (a)1,911 (2,282)(8,979)
Non-GAAP net income (loss) attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$67,157 (1,329)54,919 
Earnings per share:
GAAP net income (loss) attributable to Nelnet, Inc.$1.97 (0.23)0.71 
Realized and unrealized derivative market value adjustments(0.21)0.25 1.00 
Tax effect (a)0.05 (0.06)(0.24)
Non-GAAP net income (loss) attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$1.81 (0.04)1.47 

(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 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.

4


Operating Segments
The Company's reportable operating segments are described in note 1 of the notes to consolidated financial statements included in the 2023 Annual Report. They include:
Loan Servicing and Systems (LSS) - referred to as Nelnet Diversified Services (NDS)
Education Technology Services and Payments (ETSP) - referred to as Nelnet Business Services (NBS)
Asset Generation and Management (AGM), part of the Nelnet Financial Services (NFS) division
Nelnet Bank, part of the NFS division
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, through 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 from its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow. Nelnet Bank operates as an internet industrial bank franchise focused on the private education and unsecured consumer loan markets, with a home office in Salt Lake City, Utah. Other operating segments included in the NFS division include the Company's U.S. Securities and Exchange Commission (SEC)-registered investment advisor subsidiary, property and casualty reinsurance activities, investment activities in real estate, and investment debt securities (primarily student loan and other asset-backed securities) and interest expense incurred on debt used to finance such investments.
Other business activities and operating segments that are not reportable and not part of the NFS division are combined and included in Corporate and Other Activities ("Corporate"). Corporate also includes interest income earned on cash balances held at the corporate level and interest expense incurred on unsecured corporate related debt transactions, certain investment activities including its investment in ALLO and early-stage and emerging growth companies (venture capital investments), and certain shared service activities that are allocated to each operating segment based on estimated use of such activities and services. In addition, Corporate includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.

5


The information below presents the operating results (net income (loss) before taxes) for each of the Company's reportable and certain other operating segments reconciled to the consolidated financial statements for the three months ended March 31, 2024 and 2023.
Three months ended March 31,Certain Items Impacting Comparability and Other Information
(All dollar amounts below are pre-tax)
20242023
NDS$15,990 25,219 
A decrease in before tax operating margin due primarily to a decrease in loan servicing and systems revenue, partially offset by a decrease in salaries and benefits resulting from restructure charges incurred during the first quarter of 2023 and staff reductions in 2023.
NBS47,635 37,637 
An increase in before tax operating margin, excluding net interest income, due to increased revenue while maintaining a consistent cost structure.
The recognition of $7.9 million of interest income in 2024 compared with $6.0 million in 2023 due to higher interest rates.
Nelnet Financial Services division:
AGM33,743 (221)
A net gain of $5.7 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in 2024 compared with a net loss of $37.4 million in 2023.
A decrease of $21.1 million in net interest income due to a decrease in core loan spread in 2024 compared with 2023.
A decrease of $5.1 million in net interest income due to the decrease in the average balance of loans in 2024 compared with 2023.
The recognition of $6.6 million in provision for loan losses in 2024 compared with $31.9 million in 2023.
The recognition of a net gain of $11.8 million in 2023 from the sale of loans.
The recognition of $21.8 million of investment interest in 2024 compared with $13.8 million in 2023 due to an increase in interest earned on the Company's partial ownership in loan securitizations that are accounted for as held-to-maturity beneficial interest investments.
Nelnet Bank1,147 (93)
NFS Other Operating Segments:
WRCM1,346 1,458 
Represents investment advisory services through Whitetail Rock Capital Management, LLC (WRCM), the Company's SEC-registered investment advisor subsidiary, under various arrangements.
Nelnet Insurance Services2,066 422 
Represents primarily the operating results of the Company's reinsurance treaties on property and casualty policies.
Real estate investments(2,042)1,109 
Represents the operating results of the Company's real estate investments and administrative costs to manage this portfolio. Losses/gains recognized for each period relate primarily to the Company's proportionate share of earnings/losses on real estate investments accounted for under the equity method.
Investment securities12,392 2,188 
The recognition of $12.2 million of net interest income in 2024 compared with $6.4 million in 2023 due to higher average yield on interest-earning debt securities (bonds) and a decrease in outstanding debt used to finance such investments.
The recognition of $4.0 million of realized losses on sales of investment securities in 2023.
Corporate:
Unallocated corporate costs(10,045)(12,989)
ALLO investment(8,593)(17,882)
The recognition of a net loss from the ALLO voting membership interest investment of $10.7 million in 2024 compared with $20.2 million in 2023. Absent additional equity contributions, the Company will not recognize additional losses for its voting membership interests in ALLO.
The recognition of income of $2.4 million and $2.2 million in 2024 and 2023, respectively, on the $155.0 million (as of March 31, 2024) outstanding preferred membership interests of ALLO. The preferred membership interests of ALLO held by the Company historically earned a preferred annual return of 6.25% that increased to 10.00% on April 1, 2024.
Nelnet Renewable Energy(1,533)(6,701)
The recognition of a loss in the solar construction business of $4.0 million in 2024 compared with $3.1 million in 2023.
The recognition of a net gain from tax solar investments of $3.0 million in 2024 compared with a net loss of $1.9 million in 2023.
Other corporate activities2,019 1,120 
Net income before taxes94,127 31,267 
Income tax expense(23,119)(8,250)
Net loss attributable to noncontrolling interests2,202 3,470 
The majority of noncontrolling interests represents losses attributed to noncontrolling membership interests in the Company’s Nelnet Renewable Energy operating segment, which were $2.3 million and $3.5 million in 2024 and 2023, respectively.
Net income$73,210 26,487 
6


Segment Reporting
The following tables present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.
 Three months ended March 31, 2024
Nelnet Financial Services
Loan Servicing and SystemsEducation Technology Services and PaymentsAsset
Generation and
Management
Nelnet BankNFS Other Operating SegmentsCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,894 7,866 231,463 17,064 15,616 3,815 (8,915)268,802 
Interest expense— — 190,905 9,497 2,418 676 (8,915)194,580 
Net interest income1,894 7,866 40,558 7,567 13,198 3,139 — 74,222 
Less provision for loan losses— — 6,555 4,373 — — — 10,928 
Net interest income after provision for loan losses1,894 7,866 34,003 3,194 13,198 3,139 — 63,294 
Other income (expense):
Loan servicing and systems revenue127,201 — — — — — — 127,201 
Intersegment revenue6,886 49 — — — — (6,935)— 
Education technology services and payments revenue— 143,539 — — — — — 143,539 
Solar construction revenue— — — — — 13,726 — 13,726 
Other, net710 — 4,983 375 12,941 (1,994)— 17,015 
(Loss) gain on sale of loans, net— — (41)— — — — (41)
Impairment expense— — — — — — — — 
Derivative settlements, net— — 1,555 202 — — — 1,757 
Derivative market value adjustments, net— — 5,706 2,258 — — — 7,964 
Total other income (expense), net134,797 143,588 12,203 2,835 12,941 11,732 (6,935)311,161 
Cost of services:
Cost to provide education technology services and payments— 48,610 — — — — — 48,610 
Cost to provide solar construction services— — — — — 14,229 — 14,229 
Total cost of services— 48,610 — — — 14,229 — 62,839 
Operating expenses:
Salaries and benefits76,722 40,167 1,195 2,721 358 23,521 (807)143,875 
Depreciation and amortization5,109 2,683 — 260 — 8,716 — 16,769 
Other expenses19,538 7,558 3,418 1,128 11,802 13,402 — 56,845 
Intersegment expenses, net19,332 4,801 7,850 773 217 (26,845)(6,128)— 
Total operating expenses120,701 55,209 12,463 4,882 12,377 18,794 (6,935)217,489 
Income (loss) before income taxes15,990 47,635 33,743 1,147 13,762 (18,152)— 94,127 
Income tax (expense) benefit(3,838)(11,435)(8,099)(259)(3,274)3,785 — (23,119)
Net income (loss)12,152 36,200 25,644 888 10,488 (14,367)— 71,008 
Net loss (income) attributable to noncontrolling interests— 17 — — (120)2,305 — 2,202 
Net income (loss) attributable to Nelnet, Inc.$12,152 36,217 25,644 888 10,368 (12,062)— 73,210 
7


Three months ended December 31, 2023
Nelnet Financial Services
Loan Servicing and SystemsEducation Technology Services and PaymentsAsset
Generation and
Management
Nelnet BankNFS Other Operating SegmentsCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,651 6,725 239,798 16,767 20,376 3,315 (13,379)275,253 
Interest expense— — 204,179 9,863 4,887 (216)(13,379)205,335 
Net interest income1,651 6,725 35,619 6,904 15,489 3,531 — 69,918 
Less provision for loan losses— — 8,286 2,638 — — — 10,924 
Net interest income after provision for loan losses1,651 6,725 27,333 4,266 15,489 3,531 — 58,994 
Other income (expense):
Loan servicing and systems revenue128,816 — — — — — — 128,816 
Intersegment revenue6,931 55 — — — — (6,986)— 
Education technology services and payments revenue— 106,052 — — — — — 106,052 
Solar construction revenue— — — — — 11,982 — 11,982 
Other, net688 — 4,329 (298)11,561 (43,774)— (27,493)
(Loss) gain on sale of loans, net— — 6,987 — — — — 6,987 
Impairment expense— (4,310)— — — (22,641)— (26,951)
Derivative settlements, net— — 648 205 — — — 853 
Derivative market value adjustments, net— — (4,927)(4,580)— — — (9,507)
Total other income (expense), net136,435 101,797 7,037 (4,673)11,561 (54,433)(6,986)190,739 
Cost of services:
Cost to provide education technology services and payments— 39,379 — — — — — 39,379 
Cost to provide solar construction services— — — — — 23,371 — 23,371 
Total cost of services— 39,379 — — — 23,371 — 62,750 
Operating expenses:
Salaries and benefits83,874 39,256 1,099 2,194 413 26,844 (763)152,917 
Depreciation and amortization4,858 2,895 — 259 — 13,993 — 22,004 
Other expenses17,757 8,070 2,645 1,298 6,949 14,980 — 51,697 
Intersegment expenses, net20,598 5,625 8,035 161 136 (28,332)(6,223)— 
Total operating expenses127,087 55,846 11,779 3,912 7,498 27,485 (6,986)226,618 
Income (loss) before income taxes10,999 13,297 22,591 (4,319)19,552 (101,758)— (39,635)
Income tax (expense) benefit(2,640)(3,190)(5,422)1,066 (4,656)24,565 — 9,722 
Net income (loss)8,359 10,107 17,169 (3,253)14,896 (77,193)— (29,913)
Net loss (income) attributable to noncontrolling interests— (4)— — (151)21,514 — 21,359 
Net income (loss) attributable to Nelnet, Inc.$8,359 10,103 17,169 (3,253)14,745 (55,679)— (8,554)



















8


 Three months ended March 31, 2023
Nelnet Financial Services
Loan Servicing and SystemsEducation Technology Services and PaymentsAsset
Generation and
Management
Nelnet BankNFS Other Operating SegmentsCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,037 6,036 234,719 12,259 18,660 2,539 (9,282)265,968 
Interest expense— — 189,198 7,214 11,827 491 (9,282)199,449 
Net interest income1,037 6,036 45,521 5,045 6,833 2,048 — 66,519 
Less provision for loan losses— — 31,858 2,417 — — — 34,275 
Net interest income after provision for loan losses1,037 6,036 13,663 2,628 6,833 2,048 — 32,244 
Other income (expense):
Loan servicing and systems revenue139,227 — — — — — — 139,227 
Intersegment revenue7,790 56 — — — — (7,846)— 
Education technology services and payments revenue— 133,603 — — — — — 133,603 
Solar construction revenue— — — — — 8,651 — 8,651 
Other, net608 — 2,845 210 (741)(16,993)— (14,071)
(Loss) gain on sale of loans, net— — 11,812 — — — — 11,812 
Impairment expense— — — — — — — — 
Derivative settlements, net— — 23,337 — — — — 23,337 
Derivative market value adjustments, net— — (37,411)— — — — (37,411)
Total other income (expense), net147,625 133,659 583 210 (741)(8,342)(7,846)265,148 
Cost of services:
Cost to provide education technology services and payments— 47,704 — — — — — 47,704 
Cost to provide solar construction services— — — — — 8,299 — 8,299 
Total cost of services— 47,704 — — — 8,299 — 56,003 
Operating expenses:
Salaries and benefits84,560 37,913 755 2,064 219 27,200 — 152,710 
Depreciation and amortization4,513 2,578 — — 9,531 — 16,627 
Other expenses13,313 8,063 5,016 782 567 13,044 — 40,785 
Intersegment expenses, net21,057 5,800 8,696 80 129 (27,916)(7,846)— 
Total operating expenses123,443 54,354 14,467 2,931 915 21,859 (7,846)210,122 
Income (loss) before income taxes25,219 37,637 (221)(93)5,177 (36,452)— 31,267 
Income tax (expense) benefit(6,053)(9,066)53 35 (1,209)7,990 — (8,250)
Net income (loss)19,166 28,571 (168)(58)3,968 (28,462)— 23,017 
Net loss (income) attributable to noncontrolling interests— 138 — — (140)3,472 — 3,470 
Net income (loss) attributable to Nelnet, Inc.$19,166 28,709 (168)(58)3,828 (24,990)— 26,487 









9


Loan Servicing and Systems Revenue
The following table presents disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.
Three months ended
March 31, 2024December 31, 2023March 31, 2023
Government loan servicing$105,474 107,709 108,880 
Private education and consumer loan servicing12,620 12,428 12,164 
FFELP loan servicing3,380 3,478 3,368 
Software services4,541 4,132 9,697 
Outsourced services1,186 1,069 5,118 
Loan servicing and systems revenue$127,201 128,816 139,227 
Loan Servicing Volumes
As of
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
Servicing volume (dollars in millions):
Government$495,409 494,691 500,554 519,308 537,291 545,373 
FFELP15,783 17,462 18,400 19,021 19,815 20,226 
Private and consumer21,015 20,493 20,394 20,805 21,484 21,866 
Total$532,207 532,646 539,348 559,134 578,590 587,465 
Number of servicing borrowers:
Government14,328,013 14,503,057 14,543,382 14,898,901 15,518,751 15,777,328 
FFELP656,814 725,866 764,660 788,686 819,791 829,939 
Private and consumer882,256 894,703 896,613 899,095 925,861 951,866 
Total15,867,083 16,123,626 16,204,655 16,586,682 17,264,403 17,559,133 
Number of remote hosted borrowers:65,295 70,580 103,396 716,908 5,048,324 6,135,760 
Education Technology Services and Payments Revenue
The following table presents disaggregated revenue by servicing offering for the Education Technology Services and Payments operating segment.
Three months ended
March 31, 2024December 31, 2023March 31, 2023
Tuition payment plan services$38,880 30,091 34,187 
Payment processing47,786 37,143 44,041 
Education technology services56,021 37,957 54,787 
Other852 861 588 
Education technology services and payments revenue$143,539 106,052 133,603 
As discussed further in the Company's 2023 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 before tax operating margin are higher in the first quarter compared with the remainder of the year.
10


Solar Construction Revenue
The following table presents disaggregated revenue by service offering related to solar construction revenue.
Three months ended
March 31, 2024December 31, 2023March 31, 2023
Commercial revenue$11,578 7,418 5,876 
Residential revenue (a)2,148 4,564 2,775 
Solar construction revenue$13,726 11,982 8,651 
(a)    On April 12, 2024, the Company announced a change in its solar engineering, procurement, and construction operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations. As a result, residential revenue will decline in future periods as existing customer contracts are completed. For the year ended December 31, 2023, the Company earned $11.8 million in residential revenue.
Other Income (Expense)
The following table presents the components of "other, net" in "other income (expense)" on the consolidated statements of operations:
 Three months ended
 March 31, 2024December 31, 2023March 31, 2023
Reinsurance premiums$12,780 9,428 535 
Borrower late fee income3,133 2,363 2,247 
Gain (loss) from solar investments, net2,971 (33,221)(1,947)
ALLO preferred return2,409 2,299 2,249 
Administration/sponsor fee income1,546 1,613 1,772 
Investment advisory services (WRCM)1,508 1,876 1,612 
Loss from ALLO voting membership interest investment(10,693)(15,601)(20,213)
Investment activity, net(1,298)(419)(3,577)
Other4,659 4,169 3,251 
Other, net$17,015 (27,493)(14,071)
Derivative Settlements
The following table summarizes the components of "derivative settlements, net" included in the consolidated statements of operations.
 Three months ended
 March 31, 2024December 31, 2023March 31, 2023
1:3 basis swaps$365 364 859 
Interest rate swaps - floor income hedges (a)1,190 284 22,478 
Interest rate swaps - Nelnet Bank202 205 — 
Total derivative settlements - income$1,757 853 23,337 
(a)    On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements. Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400.0 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.

11


Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable and allowance for loan losses consisted of the following:
As ofAs ofAs of
 March 31, 2024December 31, 2023March 31, 2023
Non-Nelnet Bank:
Federally insured loans:
Stafford and other$2,546,852 2,936,174 3,229,778 
Consolidation7,836,200 8,750,033 9,701,781 
Total10,383,052 11,686,207 12,931,559 
Private education loans261,582 277,320 241,515 
Consumer and other loans155,308 85,935 309,546 
Non-Nelnet Bank loans10,799,942 12,049,462 13,482,620 
Nelnet Bank:
Federally insured loans— — 63,399 
Private education loans364,766 360,520 355,705 
Consumer and other loans118,957 72,352 19,903 
Nelnet Bank loans483,723 432,872 439,007 
Accrued interest receivable684,095 764,385 800,400 
Loan discount, net of unamortized loan premiums and deferred origination costs(32,674)(33,872)(26,215)
Allowance for loan losses:
Non-Nelnet Bank:
Federally insured loans(61,723)(68,453)(79,331)
Private education loans(14,736)(15,750)(15,175)
Consumer and other loans(18,761)(11,742)(35,317)
Non-Nelnet Bank allowance for loan losses(95,220)(95,945)(129,823)
Nelnet Bank:
Federally insured loans— — (160)
Private education loans(3,660)(3,347)(2,894)
Consumer and other loans(7,128)(5,351)(1,827)
Nelnet Bank allowance for loan losses(10,788)(8,698)(4,881)
$11,829,078 13,108,204 14,561,108 
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 ofAs ofAs of
March 31, 2024December 31, 2023March 31, 2023
Non-Nelnet Bank:
Federally insured loans (a)0.59 %0.59 %0.61 %
Private education loans5.63 %5.68 %6.28 %
Consumer and other loans12.08 %13.66 %11.41 %
Nelnet Bank:
Federally insured loans (a)— — 0.25 %
Private education loans1.00 %0.93 %0.81 %
Consumer and other loans5.99 %7.40 %9.18 %
(a)    As of March 31, 2024, December 31, 2023, and March 31, 2023, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 21.7%, 21.8%, and 22.3%, respectively, and for Nelnet Bank was 10.1% as of March 31, 2023.
12


Loan Activity
The following table sets forth the activity of the Company's loan portfolios:
 Three months ended
 March 31, 2024December 31, 2023March 31, 2023
Non-Nelnet Bank:
Beginning balance$12,049,462 12,735,621 14,169,771 
Loan acquisitions:
Federally insured student loans— 57,753 2,980 
Private education loans— 36 — 
Consumer and other loans80,730 138,575 250,706 
Total loan acquisitions80,730 196,364 253,686 
Repayments, claims, capitalized interest, participations, and other, net(350,496)(286,483)(410,239)
Loans lost to external parties(779,655)(349,890)(268,696)
Loans sold(200,099)(246,150)(261,902)
Ending balance$10,799,942 12,049,462 13,482,620 
Nelnet Bank:
Beginning balance$432,872 468,813 419,795 
Loan acquisitions and originations:
Private education loans16,715 11,945 14,226 
Consumer and other loans56,847 30,201 19,632 
Total loan acquisitions and originations73,562 42,146 33,858 
Repayments(22,711)(20,518)(14,529)
Loans sold to AGM— (57,569)(117)
Ending balance$483,723 432,872 439,007 
The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2024, the Company’s ownership correlates to approximately $1.79 billion included in these securitizations. The loans held in these securitizations are not included in the above table.

13


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.
Three months ended
 March 31, 2024December 31, 2023March 31, 2023
Variable loan yield, gross7.99 %7.75 %7.12 %
Consolidation rebate fees(0.80)(0.80)(0.81)
Discount accretion, net of premium and deferred origination costs amortization0.09 0.06 0.05 
Variable loan yield, net7.28 7.01 6.36 
Loan cost of funds - interest expense(6.50)(6.40)(5.53)
Loan cost of funds - derivative settlements (a) (b)0.01 0.01 0.03 
Variable loan spread0.79 0.62 0.86 
Fixed rate floor income, gross0.01 0.00 0.03 
Fixed rate floor income - derivative settlements (a) (c)0.04 0.01 0.68 
Fixed rate floor income, net of settlements on derivatives0.05 0.01 0.71 
Core loan spread0.84 %0.63 %1.57 %
Average balance of AGM's loans$11,561,50412,500,817 13,991,241 
Average balance of AGM's debt outstanding11,387,40011,993,699 13,364,876 
(a)    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 "Derivative Settlements" included in this supplement for the net settlement activity recognized by the Company for each type of derivative for the periods presented in the 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
March 31, 2024December 31, 2023March 31, 2023
Core loan spread0.84 %0.63 %1.57 %
Derivative settlements (1:3 basis swaps)(0.01)(0.01)(0.03)
Derivative settlements (fixed rate floor income)(0.04)(0.01)(0.68)
Loan spread0.79 %0.61 %0.86 %

(b)    Derivative settlements consist of net settlements received related to the Company’s 1:3 basis swaps.
(c)    Derivative settlements consist of net settlements received related to the Company’s floor income interest rate swaps.
The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread. In an increasing interest rate environment, student loan spread on FFELP loans increases in the short term because of the timing of interest rate resets on the Company's assets occurring daily in contrast to the timing of the interest rate resets on the Company's debt occurring either monthly or quarterly.
Variable loan spread was lower during the three months ended March 31, 2024 compared with the same period in 2023 due to a significant increase in short-term rates during the first quarter of 2023 compared with an insignificant change in rates for the same period in 2024.
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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
 March 31, 2024December 31, 2023March 31, 2023
Fixed rate floor income, gross$180 153 1,110 
Derivative settlements (a)1,190 284 22,478 
Fixed rate floor income, net$1,370 437 23,588 
Fixed rate floor income contribution to spread, net0.05 %0.01 %0.71 %
(a)    Derivative settlements consist of net settlements received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
The decrease in gross fixed rate floor income for the three months ended March 31, 2024 compared with the same period in 2023 was due to higher interest rates in 2024 compared with 2023.
The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income. On March 15, 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives). Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements. Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400.0 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.
The decrease in net derivative settlements received by the Company during the three months ended March 31, 2024, compared with the same period in 2023, was due to a decrease in the notional amount of derivatives outstanding and less favorable terms on the $400.0 million of notional derivatives entered into in 2023 compared with the $2.8 billion notional derivatives that were terminated due to an increase in interest rates from when the terminated derivatives were initially executed.
Fixed Rate Floor Income
The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of March 31, 2024.
Fixed interest rate rangeBorrower/lender weighted average yieldEstimated variable conversion rate (a)Loan balance
8.0 - 8.99%8.25%5.61%$161,073 
> 9.0%
9.06%6.42%106,942 
  $268,015 
(a)    The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of March 31, 2024, the weighted average estimated variable conversion rate was 5.93% and the short-term interest rate was 556 basis points.

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v3.24.1.u1
Document
May 09, 2024
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date May 09, 2024
Entity Registrant Name NELNET, INC
Entity Central Index Key 0001258602
Entity Incorporation, State or Country Code NE
Entity File Number 001-31924
Entity Tax Identification Number 84-0748903
Entity Address, Address Line One 121 South 13th Street, Suite 100
Entity Address, City or Town Lincoln,
Entity Address, State or Province NE
Entity Address, Postal Zip Code 68508
City Area Code 402
Local Phone Number 458-2370
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Class A Common Stock, Par Value $0.01 per Share
Trading Symbol NNI
Security Exchange Name NYSE
Entity Emerging Growth Company false