NELNET INC

(a)The Company utilized $14.1 million and $8.6 million of federal and state tax credits related primarily to renewable energy during the three months ended March 31, 2025 and 2024, respectively.

Supplemental disclosures of non-cash activities regarding the Company's acquisition of certain student loan trusts are contained in note 3.

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

NELNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

1. Basis of Financial Reporting

The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company” or "Nelnet") as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2024 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results for the year ending December 31, 2025. The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report").

2. Reclassification and Immaterial Error Corrections

During the second quarter of 2024, the Company identified certain immaterial errors in the previously issued consolidated financial statements that have been corrected to conform to the March 31, 2025 presentation.

Loan Sales

The Company determined the reversal of provision for loan losses resulting from the sale of loans should be presented as a reduction to the provision for loan losses rather than the historical presentation as a gain/(loss) on sale of loans included in "other income (expense)" on the consolidated statements of income. Prior period amounts have been corrected to conform to the current period presentation resulting in a reclassification of $0.1 million for the three months ended March 31, 2024. This correction had no impact on previously reported consolidated assets, liabilities, equity, net income, and cash flows from operating activities.

Solar Tax Equity Investments

The Company relies on audited financial statements provided by third parties to record its share of earnings or losses on its solar tax equity investments. The Company determined that the Hypothetical Liquidation at Book Value (HLBV) method of accounting was not consistently adopted by all third parties in such audited financial statements for those solar tax equity investments made under a lease pass-through structure. The adoption of the HLBV method of accounting accelerates accounting losses in the initial years of the investment but has no impact on the overall economics of the transaction. During the second quarter of 2024, the Company fully adopted HLBV accounting for these investments and prior period amounts have been corrected, resulting in an increase in solar investment losses included in "other, net" in "other income (expense)" on the consolidated statements of income of $0.2 million for the three months ended March 31, 2024, offset by an increase in "net loss attributable to noncontrolling interests" of $0.4 million. The after-tax net income impact to Nelnet, Inc. was an increase of $0.2 million for the three months ended March 31, 2024. Consolidated "total equity" on the consolidated balance sheet was reduced $21.8 million as of December 31, 2023, which reflects the cumulative impact of this correction through such date.

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

Loans and accrued interest receivable consisted of the following:

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.

(a) 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 20.2% and 20.6% as of March 31, 2025 and December 31, 2024, respectively, and for Nelnet Bank was 16.3% as of March 31, 2025.

Student Loan Trust Acquisitions

In March 2025, the Company acquired the ownership interests in certain trusts giving the Company rights to the residual interest. The trusts included $646.9 million (par value) of federally insured Stafford and consolidation loans funded to term with $721.3 million (par value) of bonds and notes payable, $32.2 million of cash and restricted cash, and $27.4 million of other net assets. The Company has consolidated these trusts on its consolidated balance sheet as the Company is the primary beneficiary of the trusts. Upon acquisition, the Company recorded the student loans and bonds and notes payable at fair value, resulting in the recognition of a student loan net discount of $6.6 million and a bonds and notes payable discount of $31.1 million. These net discounts will be accreted using the effective interest method over the lives of the underlying assets and liabilities.

Activity in the Allowance for Loan Losses

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

The following table summarizes annualized net charge-offs as a percentage of average loans for each of the Company's loan portfolios.

(a) Decrease in annualized net charge-offs as a percentage of average loans was due to a change in mix of consumer loan portfolios that resulted in a portfolio of loans with an overall higher credit quality in 2025 as compared with 2024 and Nelnet Bank exiting a consumer loan program in December 2024 that had previously incurred significant charge-offs.

The Company recorded a provision for loan losses for the three months ended March 31, 2025 due primarily to the establishment of an initial allowance for loans originated and acquired during the period.

The Company recorded a negative provision for loan losses for the three months ended March 31, 2024 for its Non-Nelnet Bank federally insured and private education loan portfolios primarily due to the amortization of these portfolios. The primary item impacting provision for loan losses for Non-Nelnet Bank consumer loans and Nelnet Bank's loan portfolios for the three months ended March 31, 2024 was the establishment of an initial allowance for loans originated and acquired during the period.

Unfunded Loan Commitments

As of March 31, 2025 and December 31, 2024, Nelnet Bank had a liability of approximately $198,000 and $326,000, respectively, related to $28.8 million and $40.7 million, respectively, of unfunded private education, consumer, and other loan commitments. When a new loan commitment is made, the Company records an allowance that is included in "other liabilities" on the consolidated balance sheet by recording a provision for loan losses. When the loan is funded, the Company transfers the liability to the allowance for loan losses. Below is a reconciliation of the provision for loan losses reported in the consolidated statements of income.

Key Credit Quality Indicators

Loan Status and Delinquencies

Key credit quality indicators for the Company’s federally insured, private education, consumer, and other loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but for purposes of the following tables, do not include those loans while they are in forbearance). The following table presents the Company’s loan status and delinquency amounts.

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

FICO Scores

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

Nelnet Bank Private Education Loans

Nelnet Bank Consumer and Other Loans

(a) Loans with no FICO score available or required refers to loans issued to borrowers for which the Company cannot obtain a FICO score or are not required to under a special purpose credit program. Management proactively assesses the risk and size of this loan category and, when necessary, takes actions to mitigate the credit risk.

Nonaccrual Status

The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of March 31, 2025 and December 31, 2024, was not material.

Amortized Cost Basis by Origination Year

The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of March 31, 2025 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the Federal Family Education Loan Program (the "FFEL Program" or FFELP) and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all of the Company’s federally insured loans were originated prior to July 1, 2010.

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

4. Bonds and Notes Payable

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

Warehouse Facilities

The Company funds a portion of its loan acquisitions using warehouse facilities. Loan warehousing allows the Company to buy and manage loans prior to transferring them into more permanent financing arrangements. The following table summarizes the Company's warehouse facilities as of March 31, 2025.

(a) On January 31, 2025, the Company extended the liquidity provisions and final maturity date on this facility to July 31, 2025 and July 31, 2026, respectively.

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

(c) On March 31, 2025, the Company extended the liquidity provisions and final maturity date on this facility to May 1, 2025 and May 1, 2026, respectively, and on April 10, 2025, extended the liquidity provisions and final maturity to May 1, 2026 and May 1, 2027, respectively.

Unsecured Line of Credit

The Company has a $495.0 million unsecured line of credit that has a maturity date of September 22, 2026. As of March 31, 2025, no amount was outstanding on the line of credit and $495.0 million was available for future use.

Debt Repurchases

The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. As of March 31, 2025, the Company holds $97.4 million (par value) of its own FFELP asset-backed securities.

5. Derivative Financial Instruments

Non-Nelnet Bank Derivatives

The Company uses settled-to-market derivative financial instruments to manage interest rate risk. Derivative instruments used as part of the Company's interest rate risk management strategy are further described in note 5 of the notes to consolidated financial statements included in the 2024 Annual Report.

Basis Swaps

The following table summarizes the Company’s outstanding basis swaps as of March 31, 2025 and December 31, 2024 used to hedge its basis risk and repricing risk on a portion of its FFELP student loan assets. For these derivative instruments, the Company receives payments indexed to three-month SOFR and makes payments based on the one-month SOFR index (plus or minus a spread) as defined in the agreements (the "Basis Swaps").

Interest Rate Swaps – Floor Income Hedges

The following table summarizes the outstanding derivative instruments used by the Company as of March 31, 2025 and December 31, 2024 to economically hedge loans earning fixed rate floor income.

(a) For all interest rate derivatives, the Company receives payments based on SOFR, the majority of which reset quarterly.

(b) This $50 million notional amount derivative has a forward effective start date in January 2026.

(c) A $50 million notional amount derivative maturing in 2030 has a forward effective start date in November 2025.

Nelnet Bank Derivatives

Interest Rate Swaps

The following table summarizes the outstanding non-centrally cleared derivative instruments used by Nelnet Bank as of March 31, 2025 and December 31, 2024, to hedge exposure to variability in cash flows related to variable rate intercompany deposits.

(a) For all interest rate derivatives, the Company receives monthly or quarterly payments based on SOFR that resets daily.

(b) These $25 million notional amount derivatives have forward effective start dates in April 2026 and May 2026, respectively.

(c) This $25 million notional amount derivative has a forward effective start date in February 2027.

(d) This $25 million notional amount derivative has a forward effective start date in November 2025.

Consolidated Financial Statement Impact Related to Derivatives

Balance Sheets

Unlike the Company's Non-Nelnet Bank derivatives, Nelnet Bank's derivatives are not cleared post-execution at a regulated clearinghouse. As such, the Company records these derivative instruments in the consolidated balance sheets on a gross basis as either an asset (included in "other assets") or liability (included in "other liabilities") measured at fair value. The following table summarizes the fair value of the Company's Nelnet Bank derivatives as reflected in the consolidated balance sheets.

Statements of Income

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

6. Investments and Notes Receivable

“Total investments and notes receivable” consisted of the following:

(a) Represent investments held in third-party trusts as collateral for the Company’s reinsurance business.

(b) As sponsor of certain private education loan securitizations, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement. The bonds purchased to satisfy the risk retention requirement are included in the above table. The Company must retain these investment securities until the latest of (i) the date the aggregate outstanding principal balance of the loans in the securitization is 33% or less of the initial loan balance, and (ii) the date the aggregate outstanding principal balance of the bonds is 33% or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party.

(c) The Company has an investment in Agile Sports Technologies, Inc. (doing business as “Hudl”). During the first quarter of 2025, the Company acquired additional ownership interests in Hudl for $3.8 million from existing Hudl investors. This transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities. Accordingly, the Company did not adjust its carrying value of its Hudl investment to the transaction value. As of March 31, 2025, the carrying amount of the Company's investment in Hudl is $172.5 million. David S. Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl.

(d) The Company has both a voting and preferred membership interest investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO").

The Company's voting membership interest in ALLO is accounted for under the HLBV method of accounting. Under the HLBV method of accounting, the Company recognized $10.7 million of losses during the three months ended March 31, 2024, reducing the carrying value of the voting membership interest investment to $0. Absent additional equity contributions with respect to ALLO's voting membership interest, the Company will not recognize additional losses for its voting membership interest in ALLO.

As of March 31, 2025, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $225.6 million and $8.4 million, respectively. The Company earns a preferred return of 13.50% and 20.00% on $169.1 million and $56.5 million, respectively, of the Company's preferred membership interests of ALLO. The Company recognized income on its ALLO preferred membership interests of $8.4 million and $2.4 million during the three months ended March 31, 2025 and 2024, respectively.

The income statement activity from the Company's investment in ALLO is included in "other, net" in "other income (expense)" on the consolidated statements of income.

In April 2025, the Company executed a transaction that is expected to close in late May 2025. Upon closing, the Company expects all of its outstanding preferred membership interests, including the preferred return accrued on such membership interests, to be redeemed by ALLO. In addition, a portion of its voting membership interest will also be redeemed. The Company expects to receive aggregate cash proceeds of approximately $410 million from ALLO and recognize a pre-tax gain of approximately $175 million as a result of this transaction. See note 16 for additional information.

(e) The Company has partial ownership in certain consumer, private education, and federally insured student loan securitizations, which are accounted for as held-to-maturity beneficial interest investments. As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2025, the Company's ownership correlates to approximately $1.10 billion, $440 million, and $280 million of consumer, private education, and federally insured student loans, respectively, included in these securitizations.

The Company recorded an additional $1.5 million allowance for credit losses (and related provision expense) during the three months ended March 31, 2025 on these investments. This expense is included in "impairment expense and provision for beneficial interests" on the consolidated statement of income.

(f) The Company invests in solar tax equity investments through investment partnerships. Due to the management and control of each of these investment partnerships, such partnerships that invest in tax equity investments are consolidated on the Company’s consolidated financial statements, with the third-party co-investor’s portion being presented as noncontrolling interests. As of March 31, 2025, the Company has invested a total of $309.9 million and its third-party investors have invested $280.4 million in tax equity investments that remain outstanding in renewable energy solar partnerships that support the development and operations of solar projects. The carrying value of the Company’s investment in a solar project is reduced by tax credits earned when the solar project is placed in service. As of March 31, 2025, the Company and its third-party co-investors have earned $331.0 million and $265.1 million, respectively, of tax credits on those projects that remain outstanding. The solar investment negative carrying value on the consolidated balance sheet of $167.0 million as of March 31, 2025 represents the sum of total tax credits earned on solar projects placed in service through March 31, 2025 and the calculated HLBV cumulative net losses being larger than the total investment contributions made by the Company and its syndication partners on such projects. The solar investment negative carrying value as of March 31, 2025, excluding the portion owned by syndication partners that is reflected as "noncontrolling interests" on the consolidated balance sheet, was $94.0 million.

The Company accounts for its solar investments using the HLBV method of accounting. For the majority of the Company’s solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. The following table presents (i) the Company's recognized HLBV losses and gains recognized from sales of certain investments at the end of the contractual agreement (typically five years), which include losses and gains attributable to third-party noncontrolling interest investors (syndication partners), included in “other, net” in "other income (expense)" on the consolidated statements of income, (ii) solar net losses and gains attributed to noncontrolling interest investors included in “net loss attributable to noncontrolling interests” on the consolidated statements of income, and (iii) the Company's recognized net gain excluding amounts attributed to noncontrolling interest investors (such amount reflecting the before tax net income impact of such solar tax equity investments to the Company).

The following table presents, by remaining contractual maturity, the amortized cost and fair value of debt securities as of March 31, 2025:

(a) The Company's beneficial interest in loan securitizations are not due at a single maturity date.

The following table summarizes the unrealized positions for held-to-maturity asset-backed securities investments and the beneficial interest in loan securitizations as of March 31, 2025:

The following table presents securities classified as available-for-sale that have gross unrealized losses as of March 31, 2025 and the fair value of such securities as of March 31, 2025. These securities are segregated between investments that had been in a continuous unrealized loss position for less than twelve months and twelve months or more, based on the point in time that the fair value declined below the amortized cost basis. All securities in the table below have been evaluated to determine if a credit loss exists. As part of that assessment, the Company concluded it currently has the intent and ability to retain these investments, andnone of the unrealized losses were due to credit losses.

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

7. Intangible Assets

Intangible assets consisted of the following:

The Company recorded amortization expense on its intangible assets of $1.5 million and $2.1 million for the three months ended March 31, 2025 and 2024, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of March 31, 2025, the Company estimates it will record amortization expense as follows:

8. Goodwill

The following table presents the carrying amount of goodwill as of March 31, 2025 and December 31, 2024 by reportable operating segment:

9. Bank Deposits

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

As of March 31, 2025 and December 31, 2024, Nelnet Bank had intercompany deposits from Nelnet, Inc. and its subsidiaries totaling $68.6 million and $68.5 million, respectively, including a $40.0 million pledged deposit from Nelnet, Inc. as required under a Capital and Liquidity Maintenance Agreement with the FDIC. All intercompany deposits held at Nelnet Bank are eliminated for consolidated financial reporting purposes.

The following table presents certificates of deposit remaining maturities as of March 31, 2025:

Retail and other savings deposits include deposits from Educational 529 College Savings and Health Savings plans, retirement savings plans, Short Term Federal Investment Trust (STFIT), and FDIC sweep deposits. These deposits are large interest-bearing omnibus accounts structured to allow FDIC insurance to flow through to underlying individual depositors. The deposits exceeding the FDIC insurance limits as of March 31, 2025 were $44.7 million, the majority of which are intercompany deposits from Nelnet, Inc. and its subsidiaries. Union Bank, a related party, is the program manager for certain of the Educational 529 College Savings plans and trustee for the STFIT.

10. Earnings per Common Share

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

11. Segment Reporting

See note 16 of the notes to consolidated financial statements included in the 2024 Annual Report for a description of the Company's operating segments. The following tables present the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.

(a) Other expenses for each reportable segment includes:

LSS - communications, professional fees, collection costs, software, and computer services and subscriptions.

ETSP - advertising, professional fees, analysis fees, computer services and subscriptions, and travel.

AGM - trustee fees and professional fees.

Nelnet Bank - marketing, consulting and professional fees, software, insurance, and management fee expense.

(a) Other expenses for each reportable segment includes:

LSS - occupancy, communications, professional fees, software, and computer services and subscriptions.

ETSP - advertising, professional fees, analysis fees, computer services and subscriptions, travel, and provision for losses.

AGM - trustee fees and professional fees.

Nelnet Bank - consulting and professional fees, software, and insurance.

12. Disaggregated Revenue

The following tables present disaggregated revenue for the Company's fee-based operating segments.

Loan Servicing and Systems

Education Technology Services and Payments

Solar Construction

(a) In April 2024, the Company announced a change in its solar engineering, procurement, and construction operations to focus exclusively on the commercial solar market and will discontinue its residential solar operations. As a result, residential revenue will decline from historical amounts as existing customer contracts are completed.

Other Income (Expense)

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

13. Reinsurance

The following table presents reinsurance premiums written and earned and loss reserves, commissions, and broker fees.

The Company’s loss reserve balance, net of amounts ceded to reinsurers, was $46.0 million and $33.1 million as of March 31, 2025 and December 31, 2024, respectively, which is included in "other liabilities" on the consolidated balance sheets.

14. Major Customer

Government Loan Servicing

The Company earns loan servicing revenue from a servicing contract with the Department of Education (the "Department"). Revenue earned by the Company related to this contract was $87.4 million and $105.5 million for the three months ended March 31, 2025 and 2024, respectively.

The Company's legacy student loan servicing contract with the Department was scheduled to expire on December 14, 2023. In April 2023, Nelnet Servicing received a contract award from the Department, pursuant to which it was selected to provide continued servicing capabilities for the Department's student aid recipients under a new Unified Servicing and Data Solution (USDS) contract which replaced the legacy Department student loan servicing contract.

The USDS contract became effective in April 2023 and has afive-year base period, with 2 two-year and 1 one-year possible extensions. The Department's total loan servicing volume of existing borrowers was allocated by the Department to the Company and four other third-party servicers that were awarded a USDS contract. Servicing under the USDS contract went live on April 1, 2024 and the Company recognized revenue in accordance with this new contract beginning in the second quarter of 2024. The Company earned revenue for servicing borrowers under the legacy servicing contract with the Department through March 31, 2024. The Company earns less revenue from the Department on a per borrower blended basis under the new USDS servicing contract as compared with the legacy servicing contract.

15. Fair Value

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

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

The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets. The methodologies for estimating the fair value of financial assets and liabilities are described in note 24 of the notes to consolidated financial statements included in the 2024 Annual Report.

16. Subsequent Event - Partial Redemption of ALLO Investment

Nelnet has both a voting and preferred membership interest investment in ALLO. On April 18, 2025, ALLO executed a financing transaction that will result in gross proceeds to ALLO of $500 million (the “Financing”). In conjunction with the Financing, on April 18, 2025, Nelnet, ALLO, and certain other ALLO investors entered into a Membership Unit Redemption Agreement (the “Redemption Agreement”) pursuant to which ALLO will redeem certain of its membership interests from certain investors in ALLO, including Nelnet (the “Transaction”).

As part of the Transaction, ALLO will redeem all of Nelnet's outstanding preferred membership interests, including the preferred return accrued on such membership interests as of the closing date. In addition, ALLO will redeem a portion of Nelnet’s voting membership interest of ALLO. The Transaction is expected to close in late May 2025, subject to customary closing conditions.

Upon closing, Nelnet expects to receive aggregate cash proceeds of approximately $410 million from ALLO for these redemptions and recognize a pre-tax gain of approximately $175 million.

Immediately following the closing of the Transaction, Nelnet will not own any preferred membership interests of ALLO, but will maintain a significant voting equity investment in ALLO. Nelnet’s ownership of ALLO will decrease from 45% to approximately 26%. Nelnet will continue to account for its remaining voting membership interest of ALLO under the HLBV method of accounting, with the carrying value of such interest remaining at $0 as of the closing date of the Transaction.