0001258602false00012586022023-11-072023-11-07

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)
November 7, 2023
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 November 7, 2023, Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended September 30, 2023. 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 September 30, 2023, which was made available on the Company's website at www.nelnetinvestors.com on November 7, 2023 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, 2022 filed with the SEC on February 28, 2023. 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: November 7, 2023
NELNET, INC.
By:    /s/ JAMES D. KRUGER
Name:    James D. Kruger
Title:    Chief Financial Officer




Nelnet Reports Third Quarter 2023 Results
LINCOLN, Neb., November 7, 2023 - Nelnet (NYSE: NNI) today reported GAAP net income of $45.3 million, or $1.21 per share, for the third quarter of 2023, compared with GAAP net income of $104.8 million, or $2.80 per share, for the same period a year ago.
Net income, excluding derivative market value adjustments1, was $42.9 million, or $1.15 per share, for the third quarter of 2023, compared with $64.5 million, or $1.73 per share, for the same period in 2022.
“While Nelnet’s earnings are affected by the anticipated runoff of our legacy student loan portfolio, we continue to be pleased with the growth opportunities in our core fee-based businesses,” said Jeff Noordhoek, chief executive officer of Nelnet. “During the quarter, all federal student loan borrowers were asked to begin making payments for the first time since the pandemic began in March 2020. This unprecedented event, along with frequent program changes, has generated extraordinary call volume and web traffic. After supporting borrowers for more than 45 years, we remain committed and are working hard to be part of the solution with the help of our federal partners.”
Nelnet operates four primary business segments, earning interest income on loans in its Asset Generation and Management (AGM) and Nelnet Bank segments, and fee-based revenue in its Loan Servicing and Systems and Education Technology, Services, and Payment Processing segments. Other business activities and operating segments that are not reportable are combined and included in corporate activities. Corporate activities also includes income earned on the majority of the company's investments.
Asset Generation and Management
The AGM operating segment reported net interest income of $51.5 million during the third quarter of 2023, compared with $62.9 million for the same period a year ago. The decrease in 2023 was due to the expected runoff of the loan portfolio and a decrease in loan spread2. The average balance of loans outstanding decreased from $15.5 billion for the third quarter of 2022 to $13.2 billion for the same period in 2023.
AGM recognized net income after tax of $30.8 million for the three months ended September 30, 2023, compared with $85.0 million for the same period in 2022.
AGM recognized income of $1.2 million ($0.9 million after tax) related to changes in the fair value of derivative instruments that do not qualify for hedge accounting, compared with income of $53.0 million ($40.3 million after tax) for the same period in 2022.
Nelnet Bank
As of September 30, 2023, Nelnet Bank had a $468.8 million loan portfolio and total deposits, including intercompany deposits, of $947.4 million. Nelnet Bank recognized net income after tax for the quarter ended September 30, 2023 of $1.7 million, compared with $0.8 million for the same period in 2022.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was $127.9 million for the third quarter of 2023, compared with $134.2 million for the same period in 2022.
As of September 30, 2023, the company was servicing $539.3 billion in government-owned, FFEL Program, private education, and consumer loans for 16.2 million borrowers, compared with $590.4 billion in servicing volume for 17.5 million borrowers as of September 30, 2022.
The Loan Servicing and Systems segment reported net income after tax of $18.6 million for the three months ended September 30, 2023, compared with $16.7 million for the same period in 2022. Operating margin improved in 2023 compared with 2022 due to a decrease in operating expenses, primarily salaries and benefits. The company reduced staff in the first and second quarters of 2023 to manage expenses due to the postponement of the return to repayment for federal student loan borrowers and lower pricing and reduced servicing volume for the company's federal servicing contracts. In August 2023, the company began to hire additional associates to support borrowers returning to repayment.

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 Payment Processing
For the third quarter of 2023, revenue from the Education Technology, Services, and Payment Processing operating segment was $113.8 million, an increase from $106.9 million for the same period in 2022. Revenue less direct costs to provide services for the third quarter of 2023 was $70.1 million, compared with $64.2 million for the same period in 2022.
Net income after tax for the Education Technology, Services, and Payment Processing segment was $16.8 million for the three months ended September 30, 2023, compared with $14.1 million for the same period in 2022. Net income for the three months ended September 30, 2023 and 2022 included $8.9 million ($6.8 million after tax) and $3.7 million ($2.8 million after tax) of interest income, respectively. The increase in interest income was due to an increase in interest rates in 2023 compared with 2022.
Corporate Activities
During the third quarter of 2023, the company recognized a loss of $17.3 million ($13.1 million after tax) on its 45 percent voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (ALLO), compared with a loss of $17.6 million ($13.4 million after tax) for the same period in 2022.
Also included in corporate activities is the operating results of GRNE Solar (GRNE) that was acquired by the company on July 1, 2022. GRNE is a solar contracting company that provides full-service engineering, procurement, and construction (EPC) services to residential homes and commercial entities. GRNE incurred a net loss after tax of $3.0 million during the third quarter of 2023.
The company recognized net investment and interest income of $8.6 million ($6.5 million after tax) for the three months ended September 30, 2023, compared with $14.5 million ($11.0 million after tax) for the same period in 2022.
During the third quarter of 2023, the company recognized an impairment charge of $5.0 million ($3.8 million after tax) related to real estate leases as the company continues to downsize its facility footprint as a result of associates continuing to work from home.
Board of Directors Declares Fourth Quarter Dividend
The Nelnet Board of Directors declared a fourth-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 December 15, 2023, to shareholders of record at the close of business on December 1, 2023.
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 and risks related to the company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, FFEL Program, private education, and consumer loans; loan portfolio risks such as credit risk, 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, 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; 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; 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, 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; 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; concerns about the downgrade of the U.S. credit rating; risks related to natural disasters, terrorist activities, or international hostilities; and risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the company's businesses.
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 Income
(Dollars in thousands, except share data)
(unaudited)
Three months endedNine months ended
September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Interest income:
Loan interest$236,423 243,045 176,244 704,712 422,327 
Investment interest48,128 40,982 26,889 129,835 57,589 
Total interest income284,551 284,027 203,133 834,547 479,916 
Interest expense on bonds and notes payable and bank deposits207,159 233,148 126,625 639,756 248,347 
Net interest income77,392 50,879 76,508 194,791 231,569 
Less provision for loan losses10,659 9,592 9,665 54,526 18,640 
Net interest income after provision for loan losses66,733 41,287 66,843 140,265 212,929 
Other income (expense):
Loan servicing and systems revenue127,892 122,020 134,197 389,138 395,438 
Education technology, services, and payment processing revenue113,796 109,858 106,894 357,258 310,211 
Solar construction revenue6,301 4,735 9,358 19,687 9,358 
Other, net(211)(7,011)2,225 (21,293)24,750 
Gain on sale of loans, net5,362 15,511 2,627 32,685 5,616 
Impairment and other expense, net(4,974)— 121 (4,974)(6,163)
Derivative market value adjustments and derivative settlements, net3,957 2,070 63,262 (8,047)251,210 
Total other income (expense), net252,123 247,183 318,684 764,454 990,420 
Cost of services:
Cost to provide education technology, services, and payment processing services43,694 40,407 42,676 131,804 109,073 
Cost to provide solar construction services7,783 9,122 5,968 25,204 5,968 
Total cost of services51,477 49,529 48,644 157,008 115,041 
Operating expenses:
Salaries and benefits141,204 144,706 147,198 438,620 438,010 
Depreciation and amortization21,835 18,652 18,772 57,114 53,978 
Other expenses51,370 45,997 43,858 138,154 120,297 
Total operating expenses214,409 209,355 209,828 633,888 612,285 
Income before income taxes52,970 29,586 127,055 113,823 476,023 
Income tax expense(10,734)(10,491)(26,586)(29,475)(107,765)
Net income42,236 19,095 100,469 84,348 368,258 
Net loss attributable to noncontrolling interests3,096 9,172 4,329 15,738 8,315 
Net income attributable to Nelnet, Inc.$45,332 28,267 104,798 100,086 376,573 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$1.21 0.75 2.80 2.67 9.99 
Weighted average common shares outstanding - basic and diluted37,498,073 37,468,397 37,380,493 37,437,587 37,708,425 



Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
September 30, 2023December 31, 2022September 30, 2022
Assets:
Loans and accrued interest receivable, net$13,867,557 15,243,889 15,876,251 
Cash, cash equivalents, and investments2,133,378 2,230,063 2,126,712 
Restricted cash604,855 1,239,470 980,131 
Goodwill and intangible assets, net228,812 240,403 242,401 
Other assets388,080 420,219 338,038 
Total assets$17,222,682 19,374,044 19,563,533 
Liabilities:
Bonds and notes payable$12,448,109 14,637,195 15,042,595 
Bank deposits718,053 691,322 580,825 
Other liabilities797,365 845,625 773,754 
Total liabilities13,963,527 16,174,142 16,397,174 
Equity:
Total Nelnet, Inc. shareholders' equity3,294,981 3,198,959 3,180,614 
Noncontrolling interests(35,826)943 (14,255)
Total equity3,259,155 3,199,902 3,166,359 
Total liabilities and equity$17,222,682 19,374,044 19,563,533 
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 September 30,
20232022
GAAP net income attributable to Nelnet, Inc.$45,332 104,798 
Realized and unrealized derivative market value adjustments (a)(3,140)(52,991)
Tax effect (b)754 12,718 
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $42,946 64,525 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$1.21 2.80 
Realized and unrealized derivative market value adjustments (a)(0.08)(1.42)
Tax effect (b)0.02 0.35 
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments $1.15 1.73 

(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. 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: November 7, 2023
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the third quarter 2023
(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 third quarter 2023 earnings, dated November 7, 2023, and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the "Q3 2023 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, 2022 (the "2022 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 U.S. Department of Education (the "Department") 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 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, 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;
•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;
•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; and
•risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses.
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 Income
(Dollars in thousands, except share data)
(unaudited)
Three months ended Nine months ended
September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Interest income:
Loan interest$236,423 243,045 176,244 704,712 422,327 
Investment interest48,128 40,982 26,889 129,835 57,589 
Total interest income284,551 284,027 203,133 834,547 479,916 
Interest expense on bonds and notes payable and bank deposits207,159 233,148 126,625 639,756 248,347 
Net interest income77,392 50,879 76,508 194,791 231,569 
Less provision for loan losses10,659 9,592 9,665 54,526 18,640 
Net interest income after provision for loan losses66,733 41,287 66,843 140,265 212,929 
Other income (expense):
Loan servicing and systems revenue127,892 122,020 134,197 389,138 395,438 
Education technology, services, and payment processing revenue113,796 109,858 106,894 357,258 310,211 
Solar construction revenue6,301 4,735 9,358 19,687 9,358 
Other, net(211)(7,011)2,225 (21,293)24,750 
Gain on sale of loans, net5,362 15,511 2,627 32,685 5,616 
Impairment and other expense, net(4,974)— 121 (4,974)(6,163)
Derivative settlements, net817 65 10,271 24,219 12,085 
Derivative market value adjustments, net3,140 2,005 52,991 (32,266)239,125 
Total other income (expense), net252,123 247,183 318,684 764,454 990,420 
Cost of services:
Cost to provide education technology, services, and payment processing services43,694 40,407 42,676 131,804 109,073 
Cost to provide solar construction services7,783 9,122 5,968 25,204 5,968 
Total cost of services51,477 49,529 48,644 157,008 115,041 
Operating expenses:
Salaries and benefits141,204 144,706 147,198 438,620 438,010 
Depreciation and amortization21,835 18,652 18,772 57,114 53,978 
Other expenses51,370 45,997 43,858 138,154 120,297 
Total operating expenses214,409 209,355 209,828 633,888 612,285 
Income before income taxes52,970 29,586 127,055 113,823 476,023 
Income tax expense(10,734)(10,491)(26,586)(29,475)(107,765)
Net income42,236 19,095 100,469 84,348 368,258 
Net loss attributable to noncontrolling interests3,096 9,172 4,329 15,738 8,315 
Net income attributable to Nelnet, Inc.$45,332 28,267 104,798 100,086 376,573 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$1.21 0.75 2.80 2.67 9.99 
Weighted average common shares outstanding - basic and diluted37,498,073 37,468,397 37,380,493 37,437,587 37,708,425 

2

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
September 30, 2023December 31, 2022September 30, 2022
Assets:
Loans and accrued interest receivable, net$13,867,557 15,243,889 15,876,251 
Cash, cash equivalents, and investments2,133,378 2,230,063 2,126,712 
Restricted cash604,855 1,239,470 980,131 
Goodwill and intangible assets, net228,812 240,403 242,401 
Other assets388,080 420,219 338,038 
Total assets$17,222,682 19,374,044 19,563,533 
Liabilities:
Bonds and notes payable$12,448,109 14,637,195 15,042,595 
Bank deposits718,053 691,322 580,825 
Other liabilities797,365 845,625 773,754 
Total liabilities13,963,527 16,174,142 16,397,174 
Equity:
Total Nelnet, Inc. shareholders' equity3,294,981 3,198,959 3,180,614 
Noncontrolling interests(35,826)943 (14,255)
Total equity3,259,155 3,199,902 3,166,359 
Total liabilities and equity$17,222,682 19,374,044 19,563,533 

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 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 endedNine months ended
September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
GAAP net income attributable to Nelnet, Inc.$45,332 28,267 104,798 100,086 376,573 
Realized and unrealized derivative market value adjustments(3,140)(2,005)(52,991)32,266 (239,125)
Tax effect (a)754 481 12,718 (7,744)57,390 
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$42,946 26,743 64,525 124,608 194,838 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$1.21 0.75 2.80 2.67 9.99 
Realized and unrealized derivative market value adjustments(0.08)(0.05)(1.42)0.86 (6.34)
Tax effect (a)0.02 0.01 0.35 (0.20)1.52 
Non-GAAP net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$1.15 0.71 1.73 3.33 5.17 

(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 2022 Annual Report. They include:
•Loan Servicing and Systems (LSS) - referred to as Nelnet Diversified Services (NDS)
•Education Technology, Services, and Payment Processing (ETS&PP) - referred to as Nelnet Business Services (NBS)
•Asset Generation and Management (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 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 business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate"). Corporate also includes income earned on the majority of the Company’s investments, interest expense incurred on unsecured and other corporate related debt 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 such activities and services. In addition, Corporate includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.
The information below presents the operating results (net income (loss) before taxes) for each reportable operating segment and Corporate and Other Activities for the three and nine months ended September 30, 2023 and 2022.
Three months ended September 30,Nine months ended September 30,Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
2023202220232022
NDS$24,469 21,914 66,713 47,494 
•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. Margin was also positively impacted in 2023 due to $4.8 million of deconversion revenue recognized in the third quarter of 2023 related to a remote hosted servicing customer leaving the Company's platform.
NBS22,123 18,655 77,803 66,454 
•The recognition of $8.9 million and $20.2 million of interest income for the three and nine months ended September 30, 2023, respectively, compared with $3.7 million and $4.9 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.
5

AGM40,562 111,872 58,041 424,647 
•A net gain of $1.2 million and net loss of $35.3 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting for the three and nine months ended September 30, 2023, respectively, compared with a net gain of $53.0 million and $239.1 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 $24.0 million and $38.7 million in net interest income due to a decrease in core loan spread for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022.
•A decrease of $4.9 million and $24.2 million in net interest income due to the decrease in the average balance of loans for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022.
•The recognition of $18.1 million and $47.7 million of investment interest for the three and nine months ended September 30, 2023, respectively, compared with $10.3 million and $28.1 million for the same periods in 2022 due to an increase of interest earned on restricted cash due to higher interest rates.
•The recognition of $5.4 million and $32.7 million in gains from the sale of loans for the three and nine months ended September 30, 2023, respectively, compared with $2.6 million and $5.6 million for the same periods in 2022.
•The recognition of $8.7 million and $48.7 million in provision for loan losses for the three and nine months ended September 30, 2023, respectively, compared with $9.2 million and $17.2 million for the same periods in 2022.
Nelnet Bank2,299 1,055 3,951 2,489 
Corporate(36,483)(26,442)(92,686)(65,061)
•An increase of $4.2 million and $25.1 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 nine months ended September 30, 2023, respectively, compared with the same periods in 2022.
•The recognition of net investment income of $0.3 million and losses of $4.5 million for the three and nine months ended September 30, 2023, respectively, compared with net investment income of $10.5 million and $37.2 million for the same periods in 2022.
•The recognition of $4.9 million and $16.2 million of losses from the Company's acquisition of GRNE Solar on July 1, 2022 for the three and nine months ended September 30, 2023, respectively, compared with losses of $0.7 million for both the comparable periods in 2022.
•The recognition of an impairment charge of $4.7 million in the third quarter of 2023 related to real estate leases as the Company continues to downsize its facility footprint as a result of associates working from home compared with $6.2 million in the second quarter of 2022 related primarily to a venture capital investment.
Income before income taxes52,970 127,055 113,823 476,023 
Income tax expense(10,734)(26,586)(29,475)(107,765)
Net loss attributable to noncontrolling interests3,096 4,329 15,738 8,315 
Net income$45,332 104,798 100,086 376,573 
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 September 30, 2023
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,098 8,934 248,878 15,171 16,253 (5,783)284,551 
Interest expense— — 197,393 9,456 6,093 (5,783)207,159 
Net interest income1,098 8,934 51,485 5,715 10,160 — 77,392 
Less provision for loan losses— — 8,732 1,927 — — 10,659 
Net interest income after provision for loan losses1,098 8,934 42,753 3,788 10,160 — 66,733 
Other income (expense):
Loan servicing and systems revenue127,892 — — — — — 127,892 
Intersegment revenue6,944 77 — — — (7,021)— 
Education technology, services, and payment processing revenue— 113,796 — — — — 113,796 
Solar construction revenue— — — — 6,301 — 6,301 
Other, net687 — 2,776 565 (4,238)— (211)
Gain on sale of loans, net— — 5,362 — — — 5,362 
Impairment and other expense, net(296)— — — (4,678)— (4,974)
Derivative settlements, net— — 621 196 — — 817 
Derivative market value adjustments, net— — 1,192 1,948 — — 3,140 
Total other income (expense), net135,227 113,873 9,951 2,709 (2,615)(7,021)252,123 
Cost of services:
Cost to provide education technology, services, and payment processing services— 43,694 — — — — 43,694 
Cost to provide solar construction services— — — — 7,783 — 7,783 
Total cost of services— 43,694 — — 7,783 — 51,477 
Operating expenses:
Salaries and benefits73,310 39,776 1,242 2,520 25,019 (663)141,204 
Depreciation and amortization5,023 3,030 — 259 13,522 — 21,835 
Other expenses15,629 8,309 2,952 1,290 23,192 — 51,370 
Intersegment expenses, net17,894 5,875 7,948 129 (25,488)(6,358)— 
Total operating expenses111,856 56,990 12,142 4,198 36,245 (7,021)214,409 
Income (loss) before income taxes24,469 22,123 40,562 2,299 (36,483)— 52,970 
Income tax (expense) benefit(5,872)(5,307)(9,735)(552)10,732 — (10,734)
Net income (loss)18,597 16,816 30,827 1,747 (25,751)— 42,236 
Net (income) loss attributable to noncontrolling interests— (6)— — 3,102 — 3,096 
Net income (loss) attributable to Nelnet, Inc.$18,597 16,810 30,827 1,747 (22,649)— 45,332 
7

Three months ended June 30, 2023
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,058 5,268 253,763 13,661 25,855 (15,578)284,027 
Interest expense— — 232,313 8,171 8,242 (15,578)233,148 
Net interest income1,058 5,268 21,450 5,490 17,613 — 50,879 
Less provision for loan losses— — 8,099 1,493 — — 9,592 
Net interest income after provision for loan losses1,058 5,268 13,351 3,997 17,613 — 41,287 
Other income (expense):
Loan servicing and systems revenue122,020 — — — — — 122,020 
Intersegment revenue7,246 65 — — — (7,311)— 
Education technology, services, and payment processing revenue— 109,858 — — — — 109,858 
Solar construction revenue— — — — 4,735 — 4,735 
Other, net605 — 1,319 620 (9,553)— (7,011)
Gain on sale of loans, net— — 15,511 — — — 15,511 
Impairment and other expense, net— — — — — — — 
Derivative settlements, net— — (18)83 — — 65 
Derivative market value adjustments, net— — 897 1,108 — — 2,005 
Total other income (expense), net129,871 109,923 17,709 1,811 (4,818)(7,311)247,183 
Cost of services:
Cost to provide education technology, services, and payment processing services— 40,407 — — — — 40,407 
Cost to provide solar construction services— — — — 9,122 — 9,122 
Total cost of services— 40,407 — — 9,122 — 49,529 
Operating expenses:
Salaries and benefits76,141 38,351 1,096 2,297 26,965 (145)144,706 
Depreciation and amortization4,863 2,815 — 51 10,923 — 18,652 
Other expenses13,818 9,692 4,115 1,624 16,747 — 45,997 
Intersegment expenses, net19,079 5,884 8,145 92 (26,034)(7,166)— 
Total operating expenses113,901 56,742 13,356 4,064 28,601 (7,311)209,355 
Income (loss) before income taxes17,028 18,042 17,704 1,744 (24,928)— 29,586 
Income tax (expense) benefit(4,086)(4,327)(4,249)(396)2,567 — (10,491)
Net income (loss)12,942 13,715 13,455 1,348 (22,361)— 19,095 
Net (income) loss attributable to noncontrolling interests— (19)— — 9,191 — 9,172 
Net income (loss) attributable to Nelnet, Inc.$12,942 13,696 13,455 1,348 (13,170)— 28,267 



















8

 Three months ended September 30, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$831 3,707 182,932 7,551 10,860 (2,748)203,133 
Interest expense— — 120,009 3,298 6,067 (2,748)126,625 
Net interest income831 3,707 62,923 4,253 4,793 — 76,508 
Less provision for loan losses— — 9,215 450 — — 9,665 
Net interest income after provision for loan losses831 3,707 53,708 3,803 4,793 — 66,843 
Other income (expense):
Loan servicing and systems revenue134,197 — — — — — 134,197 
Intersegment revenue8,281 8 — — — (8,289)— 
Education technology, services, and payment processing revenue— 106,894 — — — — 106,894 
Solar construction revenue— — — — 9,358 — 9,358 
Other, net596 — 4,627 566 (3,564)— 2,225 
Gain on sale of loans, net— — 2,627 — — — 2,627 
Impairment and other expense, net— — — — 121 — 121 
Derivative settlements, net— — 10,271 — — — 10,271 
Derivative market value adjustments, net— — 52,991 — — — 52,991 
Total other income (expense), net143,074 106,902 70,516 566 5,915 (8,289)318,684 
Cost of services:
Cost to provide education technology, services, and payment processing services— 42,676 — — — — 42,676 
Cost to provide solar construction services— — — — 5,968 — 5,968 
Total cost of services— 42,676 — — 5,968 — 48,644 
Operating expenses:
Salaries and benefits82,067 34,950 653 1,814 27,713 — 147,198 
Depreciation and amortization5,784 2,532 — 4 10,452 — 18,772 
Other expenses16,654 7,034 3,349 1,427 15,395 — 43,858 
Intersegment expenses, net17,486 4,762 8,350 69 (22,378)(8,289)— 
Total operating expenses121,991 49,278 12,352 3,314 31,182 (8,289)209,828 
Income (loss) before income taxes21,914 18,655 111,872 1,055 (26,442)— 127,055 
Income tax (expense) benefit(5,259)(4,475)(26,849)(246)10,244 — (26,586)
Net income (loss)16,655 14,180 85,023 809 (16,198)— 100,469 
Net (income) loss attributable to noncontrolling interests— (61)— — 4,390 — 4,329 
Net income (loss) attributable to Nelnet, Inc.$16,655 14,119 85,023 809 (11,808)— 104,798 





9

Nine months ended September 30, 2023
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$3,193 20,237 737,359 41,092 63,307 (30,643)834,547 
Interest expense— — 618,905 24,841 26,653 (30,643)639,756 
Net interest income3,193 20,237 118,454 16,251 36,654 — 194,791 
Less provision for loan losses— — 48,689 5,837 — — 54,526 
Net interest income after provision for loan losses3,193 20,237 69,765 10,414 36,654 — 140,265 
Other income (expense):
Loan servicing and systems revenue389,138 — — — — — 389,138 
Intersegment revenue21,980 198 — — — (22,178)— 
Education technology, services, and payment processing revenue— 357,258 — — — — 357,258 
Solar construction revenue— — — — 19,687 — 19,687 
Other, net1,900 — 6,939 1,395 (31,526)— (21,293)
Gain on sale of loans, net— — 32,685 — — — 32,685 
Impairment and other expense, net(296)— — — (4,678)— (4,974)
Derivative settlements, net— — 23,940 279 — — 24,219 
Derivative market value adjustments, net— — (35,323)3,057 — — (32,266)
Total other income (expense), net412,722 357,456 28,241 4,731 (16,517)(22,178)764,454 
Cost of services:
Cost to provide education technology, services, and payment processing services— 131,804 — — — — 131,804 
Cost to provide solar construction services— — — — 25,204 — 25,204 
Total cost of services— 131,804 — — 25,204 — 157,008 
Operating expenses:
Salaries and benefits234,012 116,040 3,093 6,881 79,403 (808)438,620 
Depreciation and amortization14,400 8,424 — 315 33,976 — 57,114 
Other expenses42,760 26,063 12,083 3,696 53,550 — 138,154 
Intersegment expenses, net58,030 17,559 24,789 302 (79,310)(21,370)— 
Total operating expenses349,202 168,086 39,965 11,194 87,619 (22,178)633,888 
Income (loss) before income taxes66,713 77,803 58,041 3,951 (92,686)— 113,823 
Income tax (expense) benefit(16,011)(18,700)(13,930)(913)20,080 — (29,475)
Net income (loss)50,702 59,103 44,111 3,038 (72,606)— 84,348 
Net (income) loss attributable to noncontrolling interests— 113 — — 15,625 — 15,738 
Net income (loss) attributable to Nelnet, Inc.$50,702 59,216 44,111 3,038 (56,981)— 100,086 

10

Nine months ended September 30, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,144 4,920 441,926 15,792 21,087 (4,953)479,916 
Interest expense44 — 235,720 5,792 11,745 (4,953)248,347 
Net interest income1,100 4,920 206,206 10,000 9,342 — 231,569 
Less provision for loan losses— — 17,178 1,462 — — 18,640 
Net interest income after provision for loan losses1,100 4,920 189,028 8,538 9,342 — 212,929 
Other income (expense):
Loan servicing and systems revenue395,438 — — — — — 395,438 
Intersegment revenue25,142 16 — — — (25,158)— 
Education technology, services, and payment processing revenue— 310,211 — — — — 310,211 
Solar construction revenue— — — — 9,358 — 9,358 
Other, net1,946 — 16,270 2,224 4,309 — 24,750 
Gain on sale of loans, net— — 5,616 — — — 5,616 
Impairment and other expense, net— — — — (6,163)— (6,163)
Derivative settlements, net— — 12,085 — — — 12,085 
Derivative market value adjustments, net— — 239,125 — — — 239,125 
Total other income (expense), net422,526 310,227 273,096 2,224 7,504 (25,158)990,420 
Cost of services:
Cost to provide education technology, services, and payment processing services— 109,073 — — — — 109,073 
Cost to provide solar construction services— — — — 5,968 — 5,968 
Total cost of services— 109,073 — — 5,968 — 115,041 
Operating expenses:
Salaries and benefits257,259 98,356 1,858 5,082 75,455 — 438,010 
Depreciation and amortization16,056 7,544 — 11 30,366 — 53,978 
Other expenses46,375 19,549 9,925 3,009 41,438 — 120,297 
Intersegment expenses, net56,442 14,171 25,694 171 (71,320)(25,158)— 
Total operating expenses376,132 139,620 37,477 8,273 75,939 (25,158)612,285 
Income (loss) before income taxes47,494 66,454 424,647 2,489 (65,061)— 476,023 
Income tax (expense) benefit(11,399)(15,947)(101,915)(574)22,070 — (107,765)
Net income (loss)36,095 50,507 322,732 1,915 (42,991)— 368,258 
Net (income) loss attributable to noncontrolling interests— (8)— — 8,323 — 8,315 
Net income (loss) attributable to Nelnet, Inc.$36,095 50,499 322,732 1,915 (34,668)— 376,573 



11

Loan Servicing and Systems Revenue
The following table presents disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.
Three months endedNine months ended
September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Government loan servicing$100,154 95,736 104,428 304,769 312,368 
Private education and consumer loan servicing12,330 12,063 12,198 36,556 37,194 
FFELP loan servicing3,304 3,554 4,127 10,226 12,386 
Software services9,416 5,962 8,229 25,076 23,536 
Outsourced services2,688 4,705 5,215 12,511 9,954 
Loan servicing and systems revenue$127,892 122,020 134,197 389,138 395,438 
Loan Servicing Volumes
As of
September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022		March 31,
2022		December 31,
2021
Servicing volume (dollars in millions):
Government$500,554 519,308 537,291 545,373 545,546 542,398 507,653 478,402 
FFELP18,400 19,021 19,815 20,226 22,412 24,224 25,646 26,916 
Private and consumer20,394 20,805 21,484 21,866 22,461 22,838 23,433 23,702 
Total$539,348 559,134 578,590 587,465 590,419 589,460 556,732 529,020 
Number of servicing borrowers:
Government14,543,382 14,898,901 15,518,751 15,777,328 15,657,942 15,426,607 14,727,860 14,196,520 
FFELP764,660 788,686 819,791 829,939 910,188 977,785 1,034,913 1,092,066 
Private and consumer896,613 899,095 925,861 951,866 979,816 998,454 1,030,863 1,065,439 
Total16,204,655 16,586,682 17,264,403 17,559,133 17,547,946 17,402,846 16,793,636 16,354,025 
Number of remote hosted borrowers:103,396 716,908 5,048,324 6,135,760 6,025,377 5,738,381 5,487,943 4,799,368 
Education Technology, Services, and Payment Processing
The following table presents disaggregated revenue by servicing offering for the Education Technology, Services, and Payment Processing operating segment.
Three months endedNine months ended
September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Tuition payment plan services$30,223 30,825 25,779 95,235 84,131 
Payment processing50,848 31,827 47,957 126,716 113,996 
Education technology and services31,793 46,216 32,548 132,796 110,755 
Other932 990 610 2,511 1,329 
Education technology, services, and payment processing revenue$113,796 109,858 106,894 357,258 310,211 
As discussed further in the Company's 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 before tax operating margin are higher in the first quarter compared with the remainder of the year.
12

Other Income (Expense)
The following table presents the components of "other, net" in "other income (expense)" on the consolidated statements of income:
 Three months endedNine months ended
 September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
ALLO preferred return$2,299 2,274 2,164 6,822 6,420 
Borrower late fee income2,220 2,168 2,824 6,635 7,693 
Administration/sponsor fee income1,712 1,697 1,920 5,180 6,055 
Investment advisory services1,633 1,639 1,612 4,884 4,375 
Loss from ALLO voting membership interest investment(17,293)(12,169)(17,562)(49,676)(47,633)
Loss from solar investments(3,605)(7,929)(4,216)(13,481)(7,100)
Investment activity, net(1,016)(3,574)10,701 (8,169)40,626 
Other13,839 8,883 4,782 26,512 14,314 
Other, net$(211)(7,011)2,225 (21,293)24,750 
Derivative Settlements
The following table summarizes the components of "derivative settlements, net" included in the consolidated statements of income.
 Three months endedNine months ended
 September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
1:3 basis swaps$386 (65)(1,085)1,180 242 
Interest rate swaps - floor income hedges (a)235 47 11,356 22,760 11,843 
Interest rate swaps - Nelnet Bank196 83 — 279 — 
Total derivative settlements - income$817 65 10,271 24,219 12,085 
(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 of 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 derivatives used to hedge loans earning fixed rate floor income 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.

13

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
 September 30, 2023December 31, 2022September 30, 2022
Non-Nelnet Bank:
Federally insured loans:
Stafford and other$3,104,569 3,389,178 3,298,138 
Consolidation9,194,415 10,177,295 11,002,253 
Total12,298,984 13,566,473 14,300,391 
Private education loans293,004 252,383 262,183 
Consumer and other loans143,633 350,915 231,441 
Non-Nelnet Bank loans12,735,621 14,169,771 14,794,015 
Nelnet Bank:
Federally insured loans59,261 65,913 72,905 
Private education loans359,941 353,882 356,571 
Consumer and other loans49,611 — — 
Nelnet Bank loans468,813 419,795 429,476 
Accrued interest receivable806,854 816,864 793,838 
Loan discount, net of unamortized loan premiums and deferred origination costs(33,638)(30,714)(22,021)
Allowance for loan losses:
Non-Nelnet Bank:
Federally insured loans(72,043)(83,593)(87,778)
Private education loans(16,944)(15,411)(15,577)
Consumer and other loans(14,022)(30,263)(13,290)
Non-Nelnet Bank allowance for loan losses(103,009)(129,267)(116,645)
Nelnet Bank:
Federally insured loans(148)(170)(164)
Private education loans(3,083)(2,390)(2,248)
Consumer and other loans(3,853)— — 
Nelnet Bank allowance for loan losses(7,084)(2,560)(2,412)
Loans and accrued interest receivable, net$13,867,557 15,243,889 15,876,251 
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
September 30, 2023December 31, 2022September 30, 2022
Non-Nelnet Bank:
Federally insured loans (a)0.59 %0.62 %0.61 %
Private education loans5.78 %6.11 %5.94 %
Consumer and other loans9.76 %8.62 %5.74 %
Nelnet Bank:
Federally insured loans (a)0.25 %0.26 %0.22 %
Private education loans0.86 %0.68 %0.63 %
Consumer and other loans7.77 %— — 
(a)    As of September 30, 2023, December 31, 2022, and September 30, 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 21.9%, 22.4%, and 22.3%, respectively, and for Nelnet Bank was 10.0%, 10.3%, and 8.9%, respectively.
14

Loan Activity
The following table sets forth the activity of the Company's loan portfolios:
 Three months endedNine months ended
 September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Non-Nelnet Bank:
Beginning balance$13,239,125 13,482,620 15,855,137 14,169,771 17,441,790 
Loan acquisitions:
Federally insured student loans2,880 512,611 896 518,471 54,845 
Private education loans77,365 — 667 77,365 8,177 
Consumer and other loans29,413 59,972 120,465 340,091 256,998 
Total loan acquisitions109,658 572,583 122,028 935,927 320,020 
Repayments, claims, capitalized interest, participations, and other, net(322,013)(443,068)(385,312)(1,175,320)(1,310,913)
Loans lost to external parties(229,342)(214,734)(768,923)(712,772)(1,609,728)
Loans sold(61,807)(158,276)(28,915)(481,985)(47,154)
Ending balance$12,735,621 13,239,125 14,794,015 12,735,621 14,794,015 
Nelnet Bank:
Beginning balance$444,488 439,007 423,553 419,795 257,901 
Loan acquisitions and originations:
Private education loans19,756 7,359 21,167 41,341 226,713 
Consumer and other loans22,966 13,168 — 55,766 — 
Total loan acquisitions and originations42,722 20,527 21,167 97,107 226,713 
Repayments(18,382)(15,046)(15,244)(47,957)(51,011)
Loans sold to AGM(15)— — (132)(4,127)
Ending balance$468,813 444,488 429,476 468,813 429,476 
The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of September 30, 2023, the Company’s ownership correlates to approximately $660 million, $540 million, and $350 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.

15

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 endedNine months ended
 September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Variable loan yield, gross7.70 %7.73 %5.05 %7.51 %3.76 %
Consolidation rebate fees(0.80)(0.80)(0.84)(0.80)(0.85)
Discount accretion, net of premium and deferred origination costs amortization0.06 0.06 0.02 0.05 0.03 
Variable loan yield, net6.96 6.99 4.23 6.76 2.94 
Loan cost of funds - interest expense (a)(6.14)(5.94)(3.11)(5.86)(1.95)
Loan cost of funds - derivative settlements (b) (c)0.01 (0.00 )(0.03)0.01 0.00 
Variable loan spread0.83 1.05 1.09 0.91 0.99 
Fixed rate floor income, gross0.01 0.01 0.19 0.02 0.45 
Fixed rate floor income - derivative settlements (b) (d)0.01 0.00 0.30 0.23 0.10 
Fixed rate floor income, net of settlements on derivatives0.02 0.01 0.49 0.25 0.55 
Core loan spread0.85 %1.06 %1.58 %1.16 %1.54 %
Average balance of AGM's loans$13,157,15213,616,889 15,466,505 13,588,427 16,371,092 
Average balance of AGM's debt outstanding12,527,77113,011,224 15,060,823 12,964,890 15,905,170 
(a)    In the second quarter of 2023, the Company redeemed certain asset-backed debt securities prior to their maturity, resulting in the recognition of $25.9 million in interest expense from the write-off of the remaining unamortized debt discount associated with these bonds at the time of redemption. This expense was excluded from the table above.
(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 "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 endedNine months ended
September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Core loan spread0.85 %1.06 %1.58 %1.16 %1.54 %
Derivative settlements (1:3 basis swaps)(0.01)0.00 0.03 (0.01)(0.00 )
Derivative settlements (fixed rate floor income)(0.01)(0.00 )(0.30)(0.23)(0.10)
Loan spread0.83 %1.06 %1.31 %0.92 %1.44 %

(c)    Derivative settlements consist of net settlements received (paid) related to the Company’s 1:3 basis swaps.
(d)    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 that occurs either monthly or quarterly.

16

Variable loan spread decreased during the three and nine months ended September 30, 2023 compared to the same periods in 2022 due to a significant increase in short-term rates during each of the first three quarters of 2022 compared with the increase in rates for the same periods in 2023.
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 endedNine months ended
 September 30, 2023June 30, 2023September 30, 2022September 30, 2023September 30, 2022
Fixed rate floor income, gross$450 456 7,585 2,016 54,870 
Derivative settlements (a)235 47 11,356 22,760 11,843 
Fixed rate floor income, net$685 503 18,941 24,776 66,713 
Fixed rate floor income contribution to spread, net0.02 %0.01 %0.49 %0.25 %0.55 %
(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 in 2023 compared with the 2022 was 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 (as discussed under "Derivative Settlements" included in this supplement).
The decrease in net derivative settlements received by the Company during the three months ended September 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 nine months ended September 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
The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of September 30, 2023.
Fixed interest rate rangeBorrower/lender weighted average yieldEstimated variable conversion rate (a)Loan balance
8.0 - 8.99%8.24%5.60%$209,696 
> 9.0%
9.05%6.41%127,221 
  $336,917 
(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 30, 2023, the weighted average estimated variable conversion rate was 5.91% and the short-term interest rate was 541 basis points.
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.
17
v3.23.3
Document
Nov. 07, 2023
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Nov. 07, 2023
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
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