What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 379 added, 138 removed, 847 unchanged (38% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Loans and accrued interest receivable (net of allowance for loan losses of $ 209,445 and

33 unchanged sentences

issued and outstanding

11,271,609 shares

11,171,609 shares and 11,271,609 shares, respectively

Additional paid-in capital 1,867 5,715

15 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share data)

Three months ended

Three months ended Six months ended

June 30, June 30,

2020 2019 2020 2019

Interest income:

28 unchanged sentences

Total operating expenses 185,692 181,115 376,605 360,202

(Loss) income before income taxes ( 49,898 ) 53,038

Income tax benefit (expense) 10,133 ( 11,391 )

Net (loss) income ( 39,765 ) 41,647

Income before income taxes 107,874 30,887 57,976 83,925

Income tax expense 21,264 6,209 11,131 17,600

Net income 86,610 24,678 46,845 66,325

Net income attributable to noncontrolling interests

( 128 ) ( 59 ) ( 895 ) ( 115 )

Net (loss) income attributable to Nelnet, Inc.

Net income attributable to Nelnet, Inc.

$ 86,482 24,619 45,950 66,210

Earnings per common share:

Net (loss) income attributable to Nelnet, Inc.

Net income attributable to Nelnet, Inc.

shareholders - basic and diluted

4 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

Three months ended

Net (loss) income $ ( 39,765 ) 41,647

Other comprehensive loss:

Three months ended Six months ended

June 30, June 30,

2020 2019 2020 2019

Net income $ 86,610 24,678 46,845 66,325

Other comprehensive income (loss):

Available-for-sale securities:

Unrealized holding losses arising during period, net of gains ( 3,015 ) ( 436 )

Reclassification adjustment for losses recognized in net income

Unrealized holding gains (losses) arising during period, net 3,236 ( 537 ) 221 ( 972 )

Reclassification adjustment for (gains) losses recognized in net income, net

( 112 ) — 123 —

Income tax effect ( 750 ) 129 ( 83 ) 233

Total other comprehensive loss ( 2,113 ) ( 331 )

Comprehensive (loss) income ( 41,878 ) 41,316

Total other comprehensive income (loss) 2,374 ( 408 ) 261 ( 739 )

Comprehensive income 88,984 24,270 47,106 65,586

Comprehensive income attributable to noncontrolling interests ( 128 ) ( 59 ) ( 895 ) ( 115 )

Comprehensive (loss) income attributable to Nelnet, Inc.

Comprehensive income attributable to Nelnet, Inc.

$ 88,856 24,211 46,211 65,471

5 unchanged sentences

Class A Class B

Balance as of December 31, 2018 — 28,798,464 11,459,641 $ — 288 115 622 2,299,556 3,883 10,315 2,314,779

Balance as of March 31, 2019 — 28,628,528 11,459,641 $ — 286 115 636 2,321,407 3,552 4,298 2,330,294

Issuance of noncontrolling interests — — — — — — — — — 26 26

2 unchanged sentences

Distribution to noncontrolling interests — — — — — — — — — ( 91 ) ( 91 )

Cash dividend on Class A and Class B common stock - $ 0.18 per share

Cash dividends on Class A and Class B common stock - $ 0.18 per share

— — — — — — — ( 7,172 ) — — ( 7,172 )

2 unchanged sentences

Repurchase of common stock — ( 419,140 ) — — ( 4 ) — ( 1,940 ) ( 21,739 ) — — ( 23,683 )

Impact of adoption of new accounting standard — — — — — — — — — ( 6,077 ) ( 6,077 )

Conversion of common stock — 180,000 ( 180,000 ) — 2 ( 2 ) — — — — —

Balance as of June 30, 2019 — 28,399,526 11,279,641 $ — 284 113 1,670 2,317,115 3,144 4,292 2,326,618

Balance as of March 31, 2020 — 28,582,032 11,271,609 $ — 286 113 9,140 2,310,282 859 5,120 2,325,800

Issuance of noncontrolling interests — — — — — — — — — 26 26

Net income — — — — — — — 86,482 — 128 86,610

Other comprehensive income — — — — — — — — 2,374 — 2,374

Distribution to noncontrolling interests — — — — — — — — — ( 534 ) ( 534 )

Cash dividends on Class A and Class B common stock - $ 0.20 per share

— — — — — — — ( 7,733 ) — — ( 7,733 )

Issuance of common stock, net of forfeitures — 23,853 — — — — 1,660 — — — 1,660

Compensation expense for stock based awards — — — — — — 1,857 — — — 1,857

Repurchase of common stock — ( 1,473,049 ) — — ( 15 ) — ( 10,790 ) ( 56,469 ) — — ( 67,274 )

Conversion of common stock — 100,000 ( 100,000 ) — 1 ( 1 ) — — — — —

Acquisition of noncontrolling interest — — — — — — — ( 1,250 ) — ( 750 ) ( 2,000 )

Balance as of June 30, 2020 — 27,232,836 11,171,609 $ — 272 112 1,867 2,331,312 3,233 3,990 2,340,786

See accompanying notes to consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands, except share data)

Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) earnings Noncontrolling interests Total equity

Class A Class B

Balance as of December 31, 2018 — 28,798,464 11,459,641 $ — 288 115 622 2,299,556 3,883 10,315 2,314,779

Issuance of noncontrolling interests — — — — — — — — — 52 52

Net (loss) income — — — — — — — ( 40,532 ) — 767 ( 39,765 )

Net income — — — — — — — 66,210 — 115 66,325

Other comprehensive loss — — — — — — — — ( 739 ) — ( 739 )

Distribution to noncontrolling interests — — — — — — — — — ( 113 ) ( 113 )

Cash dividend on Class A and Class B common stock - $ 0.20 per share

Cash dividends on Class A and Class B common stock - $ 0.36 per share

— — — — — — — ( 14,403 ) — — ( 14,403 )

3 unchanged sentences

Impact of adoption of new accounting standard — — — — — — — — — ( 6,077 ) ( 6,077 )

Balance as of March 31, 2020 — 28,582,032 11,271,609 $ — 286 113 9,140 2,310,282 859 5,120 2,325,800

Conversion of common stock — 180,000 ( 180,000 ) — 2 ( 2 ) — — — — —

Balance as of June 30, 2019 — 28,399,526 11,279,641 $ — 284 113 1,670 2,317,115 3,144 4,292 2,326,618

Balance as of December 31, 2019 — 28,458,495 11,271,609 $ — 285 113 5,715 2,377,627 2,972 4,382 2,391,094

Issuance of noncontrolling interests — — — — — — — — — 52 52

Net income — — — — — — — 45,950 — 895 46,845

Other comprehensive income — — — — — — — — 261 — 261

Distribution to noncontrolling interests — — — — — — — — — ( 589 ) ( 589 )

Cash dividends on Class A and Class B common stock - $ 0.40 per share

— — — — — — — ( 15,679 ) — — ( 15,679 )

Issuance of common stock, net of forfeitures — 172,275 — — 1 — 4,600 — — — 4,601

Compensation expense for stock based awards — — — — — — 3,595 — — — 3,595

Repurchase of common stock — ( 1,497,934 ) — — ( 15 ) — ( 12,043 ) ( 56,469 ) — — ( 68,527 )

Impact of adoption of new accounting standard — — — — — — — ( 18,867 ) — — ( 18,867 )

Conversion of common stock — 100,000 ( 100,000 ) — 1 ( 1 ) — — — — —

Acquisition of noncontrolling interest — — — — — — — ( 1,250 ) — ( 750 ) ( 2,000 )

Balance as of June 30, 2020 — 27,232,836 11,171,609 $ — 272 112 1,867 2,331,312 3,233 3,990 2,340,786

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Three months ended

Net (loss) income attributable to Nelnet, Inc.

Six months ended

Net income attributable to Nelnet, Inc.

$ 45,950 66,210

Net income attributable to noncontrolling interests

Net (loss) income

46,845 66,325

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs

5 unchanged sentences

Payments to clearinghouse - initial and variation margin, net ( 24,453 ) ( 77,229 )

Gain from sale of loans ( 18,206 ) —

Loss from investments, net 4,046 1,151

Gain on sale of loans ( 18,206 ) ( 1,712 )

Gain from investments, net ( 48,402 ) ( 2,970 )

(Gain) loss on repurchases and extinguishment of debt ( 403 ) 1,801

Deferred income tax benefit ( 14,762 ) ( 15,023 )

4 unchanged sentences

Decrease (increase) in other assets, net 22,992 ( 6,065 )

(Increase) decrease in the carrying amount of ROU asset, net ( 1,000 ) 1,096

(Decrease) increase in accrued interest payable ( 3,411 ) 479

Decrease in the carrying amount of ROU asset 5,948 4,307

Decrease in accrued interest payable ( 14,525 ) ( 5,208 )

Decrease in other liabilities ( 26,817 ) ( 504 )

Decrease in the carrying amount of lease liability, net ( 2,382 ) ( 2,063 )

Decrease in the carrying amount of lease liability ( 4,829 ) ( 4,164 )

Decrease in due to customers ( 169,217 ) ( 90,661 )

19 unchanged sentences

Payments of debt issuance costs ( 5,863 ) ( 5,515 )

Payments to extinguish debt — ( 1,394 )

Dividends paid ( 15,679 ) ( 14,403 )

1 unchanged sentence

Proceeds from issuance of common stock 781 724

Acquisition of noncontrolling interest ( 2,000 ) —

Distribution to noncontrolling interests ( 333 ) ( 113 )

6 unchanged sentences

(Dollars in thousands)

Three months ended

Six months ended

Supplemental disclosures of cash flow information:

Cash disbursements made for interest $ 209,170 354,902

Cash disbursements made (refunds and credits received) for income taxes, net $ 80 ( 9 )

Cash disbursements made for income taxes, net of refunds and credits received $ 7,949 11,529

Cash disbursements made for operating leases $ 5,442 4,792

1 unchanged sentence

ROU assets obtained in exchange for lease obligations $ 3,265 3,298

Receipt of beneficial interest in consumer loan securitization $ 38,490 —

Receipt of beneficial interest in consumer loan securitizations $ 38,490 7,921

Distribution to noncontrolling interest $ 33 —

2 unchanged sentences

As of As of As of As of

March 31, 2020 December 31, 2019 March 31, 2019 December 31, 2018

June 30, 2020 December 31, 2019 June 30, 2019 December 31, 2018

Total cash and cash equivalents $ 67,540 133,906 84,400 121,347

9 unchanged sentences

The accompanying unaudited consolidated financial statements of Nelnet, Inc.

and subsidiaries (the “Company”) as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2019 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.

and subsidiaries (the “Company”) as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2019 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.

1 unchanged sentence

Actual results could differ from those estimates.

Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results for the year ending December 31, 2020.

Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020.

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, 2019 (the "2019 Annual Report").

Reclassifications

Amounts previously reported in the line item "accrued interest receivable" in the Company's consolidated balance sheet have been reclassified to "loans and accrued interest receivable" and "investments" to conform to the current period presentation.

Certain amounts previously reported have been reclassified to conform to the current period presentation.

These reclassifications include:

• Reclassifying the line item "accrued interest receivable" on the Company's consolidated balance sheet to "loans and accrued interest receivable" and "investments";

• Reclassifying "gain on sale of loans" that was previously included in "other income" to a new line item on the Company's consolidated statements of income.

Accounting Standard Adopted in 2020

45 unchanged sentences

The Company has determined that, for modeling current expected credit losses, in general, the Company can reasonably estimate expected losses that incorporate current and forecasted economic conditions up to a one-year period.

After this "reasonable and supportable" period, there is a one-year reversion period to the Company's actual long-term historical loss experience over a full economic life cycle.

After this "reasonable and supportable" period, the Company uses a reversion period to the Company's actual long-term historical loss experience over a full economic life cycle.

Historical credit loss experience provides

38 unchanged sentences

The sum of the loans’ purchase price and allowance for loan losses becomes its initial amortized cost basis.

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized or accreted into interest income over the life of the loan.

Subsequent changes to the allowance for credit losses are recorded through provision expense.

9 unchanged sentences

Loans and accrued interest receivable consisted of the following:

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Federally insured student loans:

17 unchanged sentences

As partial consideration received for the consumer loans sold, the Company received a 31.4 percent residual interest in the consumer loan securitization that is included in "investments" on the Company's consolidated balance sheet.

Subsequent to June 30, 2020, the Company made the decision to sell an additional $ 60.8 million (par value) of consumer loans to an unrelated third party who securitized such loans.

As of June 30, 2020, these loans were classified as held for investment and are included in the table above.

As partial consideration received for the consumer loans sold, the Company received a 25.4 percent residual interest in the consumer loan securitization.

The Company currently anticipates recognizing a gain in the third quarter of 2020 of $ 14.8 million (pre-tax) from the sale of those loans.

Activity in the Allowance for Loan Losses

1 unchanged sentence

Balance at beginning of period Impact of ASC 326 adoption Provision for loan losses Charge-offs Recoveries Initial allowance on loans purchased with credit deterioration (a) Loan sale Balance at end of period

Three months ended March 31, 2020

Three months ended June 30, 2020

Federally insured loans $ 146,759 — ( 1,950 ) ( 6,080 ) — 6,100 — 144,829

2 unchanged sentences

$ 208,868 — 2,999 ( 8,926 ) 404 6,100 — 209,445

Three months ended March 31, 2019

Three months ended June 30, 2019

Federally insured loans $ 40,934 — 2,000 ( 3,878 ) — — — 39,056

2 unchanged sentences

$ 61,778 — 9,000 ( 7,118 ) 431 — ( 1,500 ) 62,591

a) During the three months ended March 31, 2020, the Company acquired $ 291.2 million (par value) of federally insured rehabilitation loans.

Six months ended June 30, 2020

Federally insured loans $ 36,763 72,291 37,373 ( 12,398 ) — 10,800 — 144,829

Private education loans 9,597 4,797 12,121 ( 1,355 ) 375 — — 25,535

Consumer loans 15,554 13,926 29,803 ( 7,170 ) 468 — ( 13,500 ) 39,081

$ 61,914 91,014 79,297 ( 20,923 ) 843 10,800 ( 13,500 ) 209,445

Six months ended June 30, 2019

Federally insured loans $ 42,310 — 4,000 ( 7,254 ) — — — 39,056

Private education loans 10,838 — — ( 1,070 ) 389 — — 10,157

Consumer loans 7,240 — 12,000 ( 4,658 ) 296 — ( 1,500 ) 13,378

$ 60,388 — 16,000 ( 12,982 ) 685 — ( 1,500 ) 62,591

a) During the three and six months ended June 30, 2020, the Company acquired $ 292.7 million (par value) and $ 583.9 million (par value), respectively, of federally insured rehabilitation loans.

These loans met the definition of PCD loans when they were purchased by the Company.

The Company estimated that the expected credit losses relating to these loans was $ 4.7 million at the time of purchase.

The Company estimated that the expected credit losses relating to these loans was $ 6.1 million and $ 10.8 million, respectively, at the time of purchase.

The noncredit discount recorded as part of these acquisitions will be recognized into interest income using an effective yield over the life of the loans.

2 unchanged sentences

Apart from the impact of the adoption of ASC 326 effective January 1, 2020, the Company’s allowance for loan losses increased during the first quarter of 2020 primarily as a result of the COVID-19 pandemic and its effects on current and forecasted economic conditions.

The Company's provision expense for the three months ended June 30, 2020 was also impacted by the Company's estimate of certain improved economic conditions as of June 30, 2020 than what was used by the Company to determine the allowance for loan losses as of March 31, 2020.

These improved economic conditions were partially offset by the Company extending its reversion period (to the Company's actual long-term historical loss experience) as of June 30, 2020, as the Company currently believes the economy will take longer to recover from the COVID-19 pandemic than what was originally estimated as of March 31, 2020.

The Company's total allowance for loan losses of $ 209.4 million at June 30, 2020 represents reserves equal to 0.7 % of the Company's federally insured loans (or 29.1 % of the risk sharing component of the loans that is not covered by the federal guaranty), 8.7 % of the Company's private education loans, and 26.2 % of the Company's consumer loans.

Loan Status and Delinquencies

3 unchanged sentences

The table below shows the Company’s loan status and delinquency amounts.

As of March 31, 2020 As of December 31, 2019 As of March 31, 2019

As of June 30, 2020 As of December 31, 2019 As of June 30, 2019

Federally insured loans:

28 unchanged sentences

Accrued interest receivable 1,961 1,558 1,113

Loan discount, net of unamortized premiums and deferred origination costs ( 138 ) 46 ( 1,063 )

Loan premium, net of unaccreted discount 813 46 ( 880 )

Non-accretable discount (a) — ( 4,362 ) ( 5,008 )

2 unchanged sentences

Consumer loans:

Loans in deferment $ 3,274 2.2 % $ — $ —

Loans in repayment status:

11 unchanged sentences

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law.

The CARES Act, among other things, provides broad relief, effective March 13, 2020, for borrowers that have student loans owned by the Department of Education (the "Department").

This relief package excluded Federal Family Education Program (“FFELP” or “FFEL Program”), private education, and consumer loans.

The CARES Act, among other things, provides broad relief, effective March 13, 2020 through September 30, 2020, for borrowers that have student loans owned by the Department of Education (the "Department").

This relief package excluded Federal Family Education Loan Program ("FFELP" or "FFEL Program"), private education, and consumer loans.

Although the Company's loans are excluded from the provisions of the CARES Act, the Company is providing relief for its borrowers.

For the Company’s federally insured loans, the Company is proactively applying a 90 day, non-capping natural disaster forbearance to any loan that is 31-269 days past due, and to any current loan upon request.

For the Company’s private education loans, the Company is proactively applying a 90 day non-capping natural disaster forbearance to any loan that is 80 days past due, and to any other loan upon request.

In addition, for private education loans, the Company is delaying final demand letters and default activity, while replacing collection calls with borrower outreach on relief options.

For both federally insured and private education loans, all borrower late fees are being waived and borrower payments made after March 13, 2020 are refunded upon a borrower’s request.

All borrower relief activity was implemented in late March and April 2020, using an effective date of March 13, 2020.

The borrower relief activity will continue until July 1, 2020, at which time the Company will review whether such policies should continue.

No negative borrower reporting will be sent to credit bureaus during this time.

For the majority of the Company’s consumer loans, borrowers are generally being offered, upon request, a two-month deferral of payments, with an option of additional deferrals if the COVID-19 crisis continues.

In addition, all fees (non-sufficient funds, late charges, check fees) and credit bureau reporting are currently suspended.

For the Company's federally insured and private education loans, effective March 13, 2020 through June 30, 2020, the Company proactively applied a 90 day natural disaster forbearance to any loan that was 31-269 days past due (for federally insured loans) and 80 days past due (for private education loans), and to any current loan upon request.

Beginning July 1, 2020, the Company discontinued proactively applying 90 day natural disaster forbearances on past due loans.

However, the Company will continue to apply a natural disaster forbearance with an end date of September 30, 2020, to any federally insured and private education loan upon request.

In addition, for private education loans, effective March 13, 2020 through September 30, 2020, the Company is delaying final demand letters and default activity, while replacing collection calls with borrower outreach on relief options.

For both federally insured and private education loans, effective March 13, 2020 through September 30, 2020, borrower late fees are being waived and borrower payments made after March 13, 2020 are refunded upon a borrower's request.

For the majority of the Company's consumer loans, borrowers are generally being offered, upon request and/or documented evidence of financial distress, a two-month deferral of payments, with an option of additional deferrals if the COVID-19 pandemic continues.

In addition, effective March 13, 2020 through September 30, 2020, the majority of fees (non-sufficient funds, late charges, check fees) and credit bureau reporting are currently suspended.

The specific relief terms on the Company's consumer loan portfolio vary depending on the loan program and servicer of such loans.

The Company will continue to review whether additional and/or extended borrower relief policies and activities are needed.

Nonaccrual Status

The Company does not place federally insured loans on nonaccrual status due to the government guaranty.

The amortized cost of private and consumer loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2019 and March 31, 2020, was not material.

The amortized cost of private and consumer loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2019 and June 30, 2020, was not material.

Amortized Cost Basis by Origination Year

The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of March 31, 2020 based on year of origination.

The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of June 30, 2020 based on year of origination.

Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program.

As such, all the Company’s federally insured loans were originated prior to July 1, 2010.

Three months ended March 31, 2020 2019 2018 2017 2016 Prior Years Total

Six months ended June 30, 2020 2019 2018 2017 2016 Prior Years Total

Private education loans:

9 unchanged sentences

Accrued interest receivable 1,961

Loan discount, net of unamortized premiums and deferred origination costs ( 138 )

Loan premium, net of unaccreted discount 813

Allowance for loan losses ( 25,535 )

1 unchanged sentence

Consumer loans:

Loans in deferment $ — 1,352 1,893 29 — — 3,274

Loans in repayment status:

11 unchanged sentences

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

As of March 31, 2020

As of June 30, 2020

Interest rate

22 unchanged sentences

Other borrowings 91,702 0.86 % / 1.93 %

5/4/21 / 5/30/22

Discount on bonds and notes payable and debt issuance costs ( 257,668 )

29 unchanged sentences

Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.

As of March 31, 2020, the Company had two FFELP warehouse facilities as summarized below.

NFSLW-I NHELP-II Total

As of June 30, 2020, the Company had two FFELP warehouse facilities as summarized below.

NFSLW-I (a) NHELP-II (b) Total

Maximum financing amount

3 unchanged sentences

Expiration of liquidity provisions

May 20, 2020 May 31, 2020

Final maturity date May 20, 2021 May 31, 2022

November 20, 2020 February 26, 2021

Final maturity date November 22, 2021 February 26, 2023

Advanced as equity support $ 7,346 8,683 16,029

(a) On May 20, 2020, the Company decreased the maximum financing amount for this warehouse facility to $ 300 million, extended the expiration of liquidity provisions to November 20, 2020, and extended the maturity date to November 22, 2021.

(b) On May 29, 2020, the Company decreased the maximum financing amount for this warehouse facility to $ 250 million, extended the expiration of liquidity provisions to February 26, 2021, and extended the maturity date to February 26, 2023.

Asset-Backed Securitizations

The following table summarizes the asset-backed securitization transactions completed during the first three months of 2020.

The following table summarizes the asset-backed securitization transactions completed during the first six months of 2020.

2020-1 2020-2 2020-3 Total

15 unchanged sentences

Final maturity date 3/26/68 4/25/68 3/26/68

Consumer Loan Warehouse Facility

The Company has a consumer loan warehouse facility that has an aggregate maximum financing amount available of $ 200.0 million, an advance rate of 70 or 75 percent depending on the type of collateral and subject to certain concentration limits, liquidity provisions to April 23, 2021, and a final maturity date of April 23, 2022.

As of March 31, 2020, $ 67.1 million was outstanding under this warehouse facility and $ 132.9 million was available for future funding.

Additionally, as of March 31, 2020, the Company had $ 29.1 million advanced as equity support under this facility.

Private Education Loan Warehouse Facility

1 unchanged sentence

On March 20, 2020, the facility was amended to increase the maximum financing amount to $ 200.0 million.

The facility has an advance rate of 90 percent, liquidity provisions through February 13, 2021, and a final maturity date of February 13, 2022.

As of March 31, 2020, $ 85.5 million was outstanding under this warehouse facility

and $ 114.5 million was available for future funding.

Additionally, as of March 31, 2020, the Company had $ 9.2 million advanced as equity support under this facility.

The facility has an advance rate of 80 to 90 percent, liquidity provisions through February 13, 2021, and a final maturity date of February 13, 2022.

As of June 30, 2020, $ 107.4 million was outstanding under this warehouse facility and $ 92.6 million was available for future funding.

Additionally, as of June 30, 2020, the Company had $ 12.4 million advanced as equity support under this facility.

Consumer Loan Warehouse Facility

As of June 30, 2020, $ 73.6 million was outstanding under this warehouse facility and $ 126.4 million was available for future funding.

Additionally, as of June 30, 2020, the Company had $ 24.7 million advanced as equity support under this facility.

Unsecured Line of Credit

The Company has a $ 455.0 million unsecured line of credit that has a maturity date of December 16, 2024.

As of March 31, 2020, $ 100.0 million was outstanding on the line of credit and $ 355.0 million was available for future use.

As of June 30, 2020, $ 30.0 million was outstanding on the line of credit and $ 425.0 million was available for future use.

The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $ 550.0 million, subject to certain conditions.

Other Borrowings

During the second quarter of 2020, the Company entered into an agreement with Union Bank and Trust Company ("Union Bank"), a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loan asset-backed securities.

As of June 30, 2020, $ 86.7 million of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.

The agreement automatically renews annually and is terminable by either party upon five business days' notice.

The Company can participate student loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $ 100.0 million or an amount in excess of $ 100.0 million if mutually agreed to by both parties.

Student loan asset-backed securities under this agreement have been accounted for by the Company as a secured borrowing.

Derivative Financial Instruments

1 unchanged sentence

Derivative instruments used as part of the Company's risk management strategy are further described in note 5 of the notes to consolidated financial statements included in the 2019 Annual Report.

A tabular presentation of such derivatives outstanding as of March 31, 2020 and December 31, 2019 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of December 31, 2019 and March 31, 2020, in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").

A tabular presentation of such derivatives outstanding as of June 30, 2020 and December 31, 2019 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of December 31, 2019 and June 30, 2020, in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").

Maturity Notional amount

June 30, 2020 December 31, 2019

2020 $ — 1,000,000

2021 250,000 250,000

2022 2,000,000 2,000,000 (a)

1 unchanged sentence

2024 1,750,000 1,750,000

(a) $ 750 million of the notional amount of these derivatives have forward effective start dates in May 2020.

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of March 31, 2020 and December 31, 2019 was one-month LIBOR plus 9.7 basis points.

2026 1,150,000 1,150,000

2027 250,000 250,000

$ 6,150,000 7,150,000

(a) $ 750 million of the notional amount of these derivatives had forward effective start dates in May 2020.

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2020 and December 31, 2019 was one-month LIBOR plus 9.1 basis points and 9.7 basis points, respectively.

Interest Rate Swaps – Floor Income Hedges

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

As of March 31, 2020 As of December 31, 2019

Maturity Notional amount Weighted average fixed rate paid by the Company (a) Notional amount Weighted average fixed rate paid by the Company (a)

As of June 30, 2020 As of December 31, 2019

Maturity Notional amount Weighted average fixed rate paid by the Company (a)(d) Notional amount Weighted average fixed rate paid by the Company (a)

2020 $ — — % $ 1,500,000 1.01 %

1 unchanged sentence

2022 (b) 500,000 0.94 250,000 1.65

2023 150,000 2.25 150,000 2.25

2023 (c) 400,000 1.00 150,000 2.25

$ 1,500,000 1.44 % $ 2,500,000 1.42 %

(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.

(b) These derivatives have forward effective start dates in June 2021.

Excluding these derivatives, the weighted average fixed rate paid by the Company on its floor income derivative portfolio was 1.50 % as of March 31, 2020.

(b) $ 250.0 million of the derivatives outstanding at December 31, 2019 and June 30, 2020 have forward effective start dates in June 2021 and $ 250.0 million of derivatives entered into in May 2020 have forward effective start dates in August 2020.

(d) Excluding the derivatives with forward effective start dates, the weighted average fixed rate paid by the Company as of June 30, 2020, on its $ 750.0 million floor income derivative portfolio was 2.17 %.

Interest Rate Caps

1 unchanged sentence

In the event that the one-month LIBOR or three-month LIBOR rate rises above the applicable strike rate, the Company will receive monthly payments related to the spread difference.

The following table summarizes these derivative instruments as of March 31, 2020.

The following table summarizes these derivative instruments as of June 30, 2020.

Notional Amount Strike rate Maturity date

5 unchanged sentences

September 25, 2020

Consolidated Financial Statement Impact Related to Derivatives - Statements of Operations

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

Three months ended March 31,

Consolidated Financial Statement Impact Related to Derivatives - Statements of Income

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

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

2020 2019 2020 2019

1:3 basis swaps $ 7,129 807 9,242 3,140

10 unchanged sentences

A summary of the Company's investments follows:

As of March 31, 2020 As of December 31, 2019

As of June 30, 2020 As of December 31, 2019

Amortized cost Gross unrealized gains Gross unrealized losses Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value

16 unchanged sentences

56,467 52,588

Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $ 26,303 as of March 31, 2020

Beneficial interest in federally insured loan securitizations (b) 32,396 —

Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $ 24,837 as of June 30, 2020 (b)

24,676 33,187

Beneficial interest in federally insured loan securitization 3,084 —

Tax liens and affordable housing 5,295 6,283

1 unchanged sentence

Total investments $ 449,700 $ 247,099

(a) As of March 31, 2020, there were no individual securities in which the fair value was lower than amortized cost as a result of credit losses.

Accordingly, the Company has not recorded an allowance for credit losses on its available-for-sale debt securities as of March 31, 2020.

In addition, for those securities in which fair value was lower than amortized cost, the Company has the ability to hold and does not intend to sell such securities until the amortized cost is recovered.

(a) As of June 30, 2020, $ 86.7 million (par value) of student loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 3 under "Other Borrowings."

(b) During 2020, the Company has purchased partial ownership in certain federally insured and consumer loan securitizations.

As of the latest remittance reports filed by the various trusts prior to June 30, 2020, the Company's ownership correlates to approximately $ 545 million and $ 270 million of federally insured and consumer loans, respectively, included in these securitizations.

Investment in Agile Sports Technologies, Inc.

(doing business as "Hudl")

On May 20, 2020, the Company made an additional equity investment of approximately $ 26 million in Hudl, as one of the participants in an equity raise completed by Hudl.

Prior to the additional 2020 investment, the Company had direct and indirect equity ownership interests in Hudl of less than 20 %, which did not materially change as a result of this transaction.

The Company accounts for its investment in Hudl using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions.

As a result of Hudl’s equity raise, the Company recognized a $ 51.0 million (pre-tax) gain during the three months ended June 30, 2020 to adjust its carrying value to reflect the May 20, 2020 transaction value.

This gain is included in "other income" on the consolidated statements of income.

Graff, who has served on the Company’s Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl.

Impairment Expense

3 unchanged sentences

Additionally, as of March 31, 2020, the Company identified several venture capital investments, a majority of which were accounted for under the measurement alternative, that were also negatively impacted by the distressed economic conditions resulting from the COVID-19 pandemic during the first quarter of 2020, and estimated that the fair value of such investments was significantly reduced from their previous carrying value.

During the three months ended June 30, 2020, the Company recorded a $ 0.3 million (pre-tax) impairment charge related to a real estate investment.

No additional impairment charges were considered necessary by the Company as of June 30, 2020.

Intangible Assets

A summary of the Company's intangible assets follows:

Weighted average remaining useful life as of March 31, 2020 (months)

March 31, 2020 December 31, 2019

Weighted average remaining useful life as of June 30, 2020 (months)

June 30, 2020 December 31, 2019

Amortizable intangible assets, net:

6 unchanged sentences

Total - amortizable intangible assets, net 78 $ 66,733 81,532

The Company recorded amortization expense on its intangible assets of $ 7.4 million and $ 8.5 million during the three months ended March 31, 2020 and 2019, respectively.

The Company recorded amortization expense on its intangible assets of $ 7.4 million and $ 8.3 million during the three months ended June 30, 2020 and 2019, respectively, and $ 14.8 million and $ 16.8 million during the six months ended June 30, 2020 and 2019, respectively.

The Company will continue to amortize intangible assets over their remaining useful lives.

As of March 31, 2020, the Company estimates it will record amortization expense as follows:

2020 (April 1 - December 31) $ 22,110

As of June 30, 2020, the Company estimates it will record amortization expense as follows:

2020 (July 1 - December 31) $ 16,011

2025 and thereafter 12,649

The carrying amount of goodwill as of December 31, 2019 and March 31, 2020 by reportable operating segment was as follows:

The carrying amount of goodwill as of December 31, 2019 and June 30, 2020 by reportable operating segment was as follows:

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

2 unchanged sentences

A summary of the Company's property and equipment follows:

Useful life March 31, 2020 December 31, 2019

Useful life June 30, 2020 December 31, 2019

Non-communications:

28 unchanged sentences

Total property and equipment, net $ 350,043 348,259

The Company recorded depreciation expense on its property and equipment of $ 20.3 million and $ 15.7 million during the three months ended March 31, 2020 and 2019, respectively.

The Company recorded depreciation expense on its property and equipment of $ 22.0 million and $ 16.2 million during the three months ended June 30, 2020 and 2019, respectively, and $ 42.3 million and $ 31.9 million during the six months ended June 30, 2020 and 2019, respectively.

Earnings per Common Share

2 unchanged sentences

Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.

Three months ended March 31,

Three months ended June 30,

Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total

Net (loss) income attributable to Nelnet, Inc.

Net income attributable to Nelnet, Inc.

$ 85,243 1,239 86,482 24,292 327 24,619

3 unchanged sentences

$ 2.21 2.21 2.21 0.61 0.61 0.61

Six months ended June 30,

Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total

Net income attributable to Nelnet, Inc.

$ 45,305 645 45,950 65,346 864 66,210

Weighted-average common shares outstanding - basic and diluted

39,023,624 555,835 39,579,459 39,685,958 524,829 40,210,787

Earnings per share - basic and diluted

$ 1.16 1.16 1.16 1.65 1.65 1.65

Segment Reporting

1 unchanged sentence

The following tables include the results of each of the Company's operating segments reconciled to the consolidated financial statements.

Three months ended March 31, 2020

Three months ended June 30, 2020

Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset

57 unchanged sentences

$ 11,094 8,885 ( 5,363 ) 39,062 32,802 — 86,482

Total assets as of March 31, 2020 $ 223,021 302,631 301,440 21,905,150 679,390 ( 131,004 ) 23,280,628

Three months ended March 31, 2019

Total assets as of June 30, 2020 $ 221,313 351,392 301,741 21,136,268 732,994 ( 132,500 ) 22,611,208

Three months ended June 30, 2019

Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset

58 unchanged sentences

$ 17,004 8,374 ( 4,932 ) 9,732 ( 5,560 ) — 24,619

Total assets as of March 31, 2019 $ 273,065 294,019 297,196 23,475,113 546,987 ( 164,453 ) 24,721,927

Total assets as of June 30, 2019 $ 267,611 336,896 302,873 22,907,234 595,623 ( 190,437 ) 24,219,800

Six months ended June 30, 2020

Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset

Generation and

Management Corporate and Other Activities Eliminations Total

Total interest income

$ 369 2,411 — 336,509 2,751 ( 967 ) 341,074

Interest expense

73 38 — 217,737 2,485 ( 967 ) 219,366

Net interest income (expense)

296 2,373 — 118,772 266 — 121,708

Less provision for loan losses

— — — 79,297 — — 79,297

Net interest income after provision for loan losses

296 2,373 — 39,475 266 — 42,411

Other income/expense:

Loan servicing and systems revenue

223,778 — — — — — 223,778

Intersegment revenue

19,591 14 — — — ( 19,605 ) —

Education technology, services, and payment processing revenue

— 142,979 — — — — 142,979

Communications revenue

— — 37,179 — — — 37,179

Gain on sale of loans — — — 18,206 — — 18,206

4,544 — 745 3,947 59,172 — 68,408

Impairment expense — — — ( 26,303 ) ( 8,116 ) — ( 34,419 )

Derivative settlements, net

— — — 10,058 — — 10,058

Derivative market value adjustments, net

— — — ( 24,513 ) — — ( 24,513 )

Total other income/expense

247,913 142,993 37,924 ( 18,605 ) 51,056 ( 19,605 ) 441,676

Cost of services:

Cost to provide education technology, services, and payment processing services

— 38,181 — — — — 38,181

Cost to provide communications services

— — 11,325 — — — 11,325

Total cost of services

— 38,181 11,325 — — — 49,506

Operating expenses:

Salaries and benefits

138,894 48,218 10,986 863 40,163 — 239,125

Depreciation and amortization

17,990 4,749 21,330 — 12,972 — 57,041

Other expenses

30,870 8,418 7,463 8,581 25,108 — 80,439

Intersegment expenses, net

32,235 6,756 1,160 20,971 ( 41,517 ) ( 19,605 ) —

Total operating expenses

219,989 68,141 40,939 30,415 36,726 ( 19,605 ) 376,605

Income (loss) before income taxes

28,220 39,044 ( 14,340 ) ( 9,545 ) 14,596 — 57,976

Income tax (expense) benefit

( 6,773 ) ( 9,371 ) 3,442 2,291 ( 720 ) — ( 11,131 )

Net income (loss)

21,447 29,673 ( 10,898 ) ( 7,254 ) 13,876 — 46,845

Net income attributable to noncontrolling interests

— — — — ( 895 ) — ( 895 )

Net income (loss) attributable to Nelnet, Inc.

$ 21,447 29,673 ( 10,898 ) ( 7,254 ) 12,981 — 45,950

Total assets as of June 30, 2020 $ 221,313 351,392 301,741 21,136,268 732,994 ( 132,500 ) 22,611,208

Six months ended June 30, 2019

Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset

Generation and

Management Corporate and Other Activities Eliminations Total

Total interest income

$ 1,047 3,676 3 490,162 4,310 ( 1,824 ) 497,374

Interest expense

19 19 — 372,834 7,685 ( 1,824 ) 378,733

Net interest income (expense)

1,028 3,657 3 117,328 ( 3,375 ) — 118,641

Less provision for loan losses

— — — 16,000 — — 16,000

Net interest income after provision for loan losses

1,028 3,657 3 101,328 ( 3,375 ) — 102,641

Other income/expense:

Loan servicing and systems revenue

228,883 — — — — — 228,883

Intersegment revenue

23,815 — — — — ( 23,815 ) —

Education technology, services, and payment processing revenue

— 139,502 — — — — 139,502

Communications revenue

— — 30,300 — — — 30,300

Gain on sale of loans — — — 1,712 — — 1,712

4,350 — 487 6,701 11,969 — 23,507

Impairment expense — — — — — — —

Derivative settlements, net

— — — 32,007 — — 32,007

Derivative market value adjustments, net

— — — ( 67,635 ) — — ( 67,635 )

Total other income/expense

257,048 139,502 30,787 ( 27,215 ) 11,969 ( 23,815 ) 388,276

Cost of services:

Cost to provide education technology, services, and payment processing services

— 36,930 — — — — 36,930

Cost to provide communications services

— — 9,860 — — — 9,860

Total cost of services

— 36,930 9,860 — — — 46,790

Operating expenses:

Salaries and benefits

132,715 45,830 9,929 760 33,038 — 222,272

Depreciation and amortization

17,671 6,835 15,099 — 9,093 — 48,697

Other expenses

36,047 11,116 7,342 10,044 24,685 — 89,233

Intersegment expenses, net

27,362 6,447 1,380 23,952 ( 35,326 ) ( 23,815 ) —

Total operating expenses

213,795 70,228 33,750 34,756 31,490 ( 23,815 ) 360,202

Income (loss) before income taxes

44,281 36,001 ( 12,820 ) 39,357 ( 22,896 ) — 83,925

Income tax (expense) benefit

( 10,628 ) ( 8,640 ) 3,077 ( 9,446 ) 8,037 — ( 17,600 )

Net income (loss)

33,653 27,361 ( 9,743 ) 29,911 ( 14,859 ) — 66,325

Net income attributable to noncontrolling interests

— — — — ( 115 ) — ( 115 )

Net income (loss) attributable to Nelnet, Inc.

$ 33,653 27,361 ( 9,743 ) 29,911 ( 14,974 ) — 66,210

Total assets as of June 30, 2019 $ 267,611 336,896 302,873 22,907,234 595,623 ( 190,437 ) 24,219,800

Disaggregated Revenue and Deferred Revenue

1 unchanged sentence

Loan Servicing and Systems

Three months ended March 31,

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

2020 2019 2020 2019

Government servicing - Nelnet $ 37,360 40,459 76,010 80,099

6 unchanged sentences

Education Technology, Services, and Payment Processing

Three months ended March 31,

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

2020 2019 2020 2019

Tuition payment plan services $ 22,947 24,655 54,534 54,829

3 unchanged sentences

14,927 14,096 34,980 33,805

262 280 555 578

Education technology, services, and payment processing revenue

1 unchanged sentence

Communications

Three months ended March 31,

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

2020 2019 2020 2019

Internet $ 11,930 9,297 23,125 17,726

1 unchanged sentence

Telephone 2,812 2,395 5,502 4,575

Other 38 16 112 60

Communications revenue $ 18,998 15,758 37,179 30,300

1 unchanged sentence

Business revenue 4,619 3,816 9,091 7,230

Other 170 52 322 115

Communications revenue $ 18,998 15,758 37,179 30,300

The following table provides the components of "other income" on the consolidated statements of operations:

Three months ended March 31,

Borrower late fee income $ 3,188 3,512

Investment advisory services 2,802 711

The following table provides the components of "other income" on the consolidated statements of income:

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

2020 2019 2020 2019

Gain on investments, net of losses $ 53,151 4,258 49,286 3,831

Management fee revenue 1,914 2,277 4,544 4,350

Gain (loss) on investments, net ( 3,864 ) ( 427 )

Investment advisory services 922 731 3,724 1,441

Borrower late fee income 319 3,161 3,506 6,674

Other 3,821 4,013 7,348 7,211

3 unchanged sentences

Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Corporate and Other Activities Total

Three months ended March 31, 2020

Three months ended June 30, 2020

Balance, beginning of period $ 2,195 19,640 3,414 1,640 26,889

2 unchanged sentences

Balance, end of period $ 2,115 19,924 3,728 1,676 27,443

Three months ended March 31, 2019

Three months ended June 30, 2019

Balance, beginning of period $ 3,947 18,498 2,756 1,552 26,753

2 unchanged sentences

Balance, end of period $ 3,315 21,489 3,080 1,611 29,495

Six months ended June 30, 2020

Balance, beginning of period $ 2,712 32,074 3,232 1,628 39,646

Deferral of revenue 1,182 37,420 20,567 1,734 60,903

Recognition of revenue ( 1,779 ) ( 49,570 ) ( 20,071 ) ( 1,686 ) ( 73,106 )

Balance, end of period $ 2,115 19,924 3,728 1,676 27,443

Six months ended June 30, 2019

Balance, beginning of period $ 4,413 30,556 2,551 1,602 39,122

Deferral of revenue 1,880 38,732 17,064 1,577 59,253

Recognition of revenue ( 2,978 ) ( 47,799 ) ( 16,535 ) ( 1,568 ) ( 68,880 )

Balance, end of period $ 3,315 21,489 3,080 1,611 29,495

Major Customer

Nelnet Servicing, LLC ("Nelnet Servicing"), a subsidiary of the Company, earns loan servicing revenue from a servicing contract with the Department.

Revenue earned by Nelnet Servicing related to this contract was $ 38.7 million and $ 39.6 million for the three months ended March 31, 2020 and 2019, respectively.

Revenue earned by Nelnet Servicing related to this contract was $ 37.4 million and $ 40.5 million for the three months ended June 30, 2020 and 2019, and $ 76.0 million and $ 80.1 million for the six months ended June 30, 2020 and 2019, respectively.

In addition, Great Lakes Educational Loan Services, Inc.

("Great Lakes"), which was acquired by the Company on February 7, 2018, also earns loan servicing revenue from a similar servicing contract with the Department.

Revenue earned by Great Lakes related to this contract was $ 46.4 million and $ 47.1 million for the three months ended March 31, 2020 and 2019, respectively.

Revenue earned by Great Lakes related to this contract was $ 45.2 million and $ 46.0 million for the three months ended June 30, 2020 and 2019, and $ 91.7 million and $ 93.1 million for the six months ended June 30, 2020 and 2019, respectively.

Nelnet Servicing and Great Lakes' servicing contracts with the Department previously provided for expiration on June 16, 2019.

Nelnet Servicing and Great Lakes each received extensions from the Department on their contracts through December 14, 2020.

On November 26, 2019, Nelnet Servicing and Great Lakes each received extensions from the Department on their contracts through December 14, 2020.

The most current contract extensions also provide the potential for two additional six-month extensions at the Department's discretion through December 14, 2021.

8 unchanged sentences

On January 10, 2020, the Department released an amendment to the BPO solicitation component and the Company responded on January 30, 2020.

EPS is the transitional technology system and certain processing functions the Department planned to use under NextGen to service the Department's student loan customers for a period of time before eventually moving to OPS in the future.

The EPS solicitation component was for a transitional technology system and certain processing functions the Department planned to use under NextGen to service the Department's student loan customers for a period of time before eventually moving to OPS in the future.

However, on April 3, 2020, the Department cancelled the OPS solicitation component.

BPO is the back office and call center operational functions for servicing the Department's student loan customers.

On March 30, 2020, the Company received a letter from the Department notifying the Company that the Company's proposal in response to the EPS component has been determined to be outside of the competitive range and will receive no further consideration for an award.

The BPO solicitation component is for the back office and call center operational functions for servicing the Department's student loan customers.

On March 30, 2020, the Company received a letter from the Department notifying the Company that the Company's proposal in response to the EPS component had been determined to be outside of the competitive range and would receive no further consideration for an award.

On April 13, 2020, the Company filed a protest with the Government Accountability Office ("GAO") challenging the Department's decision to cancel the OPS solicitation component without amending the EPS solicitation component.

In addition, on April 27, 2020, the Company filed a supplemental protest challenging on a number of bases the Department's competitive range exclusion of the Company's proposal from the EPS solicitation component and requesting that the GAO restore the Company's ability to participate in the EPS solicitation.

The Department has not yet

awarded a contract for the EPS component.

Under applicable law, as of the date of the Company's initial protest filing, the Department is subject to a stay from awarding a contract until all protests are resolved.

The Company cannot predict the timing or nature of the outcome of its protests.

The Department has not yet made an award on the BPO component and the Company cannot predict the timing, nature, or outcome of the BPO solicitation.

If the Department's NextGen EPS decision stands, Nelnet Servicing and Great Lakes will eventually be required to migrate their portfolios onto another provider's system after an award is made, and the Company would ultimately need to restructure the Company's loan servicing segment for long-term success.

If the Company is awarded a BPO contract for operational services, it would partially mitigate the impact of not being awarded the EPS component.

On April 27, 2020, the Company filed a supplemental protest challenging a number of bases for the Department's competitive range exclusion of the Company's proposal from the EPS solicitation component.

On July 10, 2020, the Department cancelled the solicitation for the EPS component.

In its cancellation description, the Department indicated that it continues to be committed to the goals and vision of NextGen, and that it will be introducing a new solicitation to continue the NextGen strategy in the future.

Based on the Department's cancellation of the EPS procurement, on July 14, 2020, the GAO dismissed the Company's protests as moot.

The Company fully intends to compete for the servicing system solution as the Department proceeds with their NextGen strategy.

On June 18, 2020, the Company received a letter from the Department notifying the Company that the Company's proposal in response to the BPO solicitation component was determined to be ineligible for award, claiming the Company's response did not meet certain requirements related to small business participation.

The Company immediately requested a debriefing regarding the Department's basis for this decision.

Prior to providing the Company a debriefing, on June 24, 2020, the Department awarded and signed contracts with five other companies in connection with the BPO solicitation.

On July 13, 2020, the Company filed a protest with the GAO challenging on a number of bases the Department's determination that the Company's BPO response did not meet small business participation requirements.

In addition, on July 20, 2020, the Company filed a supplemental protest challenging the Department's decision to proceed with awards of contracts for the BPO component, when it cancelled the EPS component and a new EPS solicitation is expected to be released.

On July 24, 2020, the Department provided the Company a debriefing regarding the Department's June 18, 2020 decision to eliminate the Company from the BPO competition.

On July 28, 2020, the Company filed a second supplemental protest challenging the Department's BPO decision.

Under applicable law, contract awards to other parties for the BPO component are subject to a stay of performance until the protests are resolved.

A decision by the GAO is due on or before October 22, 2020.

The Company cannot predict the outcome of the current protests regarding the BPO component, or the timing, nature, or ultimate outcome of the Department's NextGen contract procurement process.

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

As of March 31, 2020 As of December 31, 2019

As of June 30, 2020 As of December 31, 2019

Level 1 Level 2 Total Level 1 Level 2 Total

9 unchanged sentences

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

As of March 31, 2020

As of June 30, 2020

Fair value Carrying value Level 1 Level 2 Level 3

27 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements