NELNET INC 10-Q

ITEM 1. FINANCIAL STATEMENTS NELNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (unaudited) As of As of March 31, 2021 December 31, 2020 Assets: Loans and accrued interest receivable (net of allowance for loan losses of $ 157,394 and $ 175,698 , respectively) $ 19,737,530 20,185,656 Cash and cash equivalents: Cash and cash equivalents - not held at a related party 50,586 33,292 Cash and cash equivalents - held at a related party 93,643 87,957 Total cash and cash equivalents 144,229 121,249 Investments 973,099 992,940 Restricted cash 609,881 553,175 Restricted cash - due to customers 193,081 283,971 Accounts receivable (net of allowance for doubtful accounts of $ 2,091 and $ 1,824 , respectively) 80,283 76,460 Goodwill 142,092 142,092 Intangible assets, net 66,718 75,070 Property and equipment, net 130,450 123,527 Other assets 89,845 92,020 Total assets $ 22,167,208 22,646,160 Liabilities: Bonds and notes payable $ 18,754,715 19,320,726 Accrued interest payable 5,527 28,701 Bank deposits 111,830 54,633 Other liabilities 315,454 312,280 Due to customers 230,581 301,471 Total liabilities 19,418,107 20,017,811 Commitments and contingencies Equity: Nelnet, Inc. shareholders' equity: Preferred stock, $ 0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding — — Common stock: Class A, $ 0.01 par value. Authorized 600,000,000 shares; issued and outstanding 27,367,797 shares and 27,193,154 shares, respectively 274 272 Class B, convertible, $ 0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,154,171 shares and 11,155,571 shares, respectively 112 112 Additional paid-in capital 5,859 3,794 Retained earnings 2,736,923 2,621,762 Accumulated other comprehensive earnings 9,022 6,102 Total Nelnet, Inc. shareholders' equity 2,752,190 2,632,042 Noncontrolling interests ( 3,089 ) ( 3,693 ) Total equity 2,749,101 2,628,349 Total liabilities and equity $ 22,167,208 22,646,160 Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities: Loans and accrued interest receivable $ 19,575,058 20,132,996 Restricted cash 551,983 499,223 Bonds and notes payable ( 18,888,943 ) ( 19,355,375 ) Accrued interest payable and other liabilities ( 67,348 ) ( 83,127 ) Net assets of consolidated education and other lending variable interest entities $ 1,170,750 1,193,717 See accompanying notes to consolidated financial statements. 2 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) (unaudited) Three months ended March 31, 2021 2020 Interest income: Loan interest $ 124,117 181,793 Investment interest 4,986 7,398 Total interest income 129,103 189,191 Interest expense: Interest on bonds and notes payable and bank deposits 27,773 134,118 Net interest income 101,330 55,073 Less (negative provision) provision for loan losses ( 17,048 ) 76,299 Net interest income after provision for loan losses 118,378 ( 21,226 ) Other income/expense: Loan servicing and systems revenue 111,517 112,735 Education technology, services, and payment processing revenue 95,258 83,675 Communications revenue — 18,181 Other ( 4,604 ) 8,281 Gain on sale of loans — 18,206 Impairment expense and provision for beneficial interests, net 2,436 ( 34,087 ) Derivative market value adjustments and derivative settlements, net 34,505 ( 16,365 ) Total other income/expense 239,112 190,626 Cost of services: Cost to provide education technology, services, and payment processing services 27,052 22,806 Cost to provide communications services — 5,582 Total cost of services 27,052 28,388 Operating expenses: Salaries and benefits 115,791 119,878 Depreciation and amortization 20,184 27,648 Other expenses 36,698 43,384 Total operating expenses 172,673 190,910 Income (loss) before income taxes 157,765 ( 49,898 ) Income tax (expense) benefit ( 34,861 ) 10,133 Net income (loss) 122,904 ( 39,765 ) Net loss (income) attributable to noncontrolling interests 694 ( 767 ) Net income (loss) attributable to Nelnet, Inc. $ 123,598 ( 40,532 ) Earnings per common share: Net income (loss) attributable to Nelnet, Inc. shareholders - basic and diluted $ 3.20 ( 1.01 ) Weighted average common shares outstanding - basic and diluted 38,603,555 39,955,514 See accompanying notes to consolidated financial statements. 3 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in thousands) (unaudited) Three months ended March 31, 2021 2020 Net income (loss) $ 122,904 ( 39,765 ) Other comprehensive income (loss): Net changes related to foreign currency translation adjustments $ 1 — Net changes related to available-for-sale debt securities: Unrealized gains (losses) during period, net 4,349 ( 3,015 ) Reclassification of (gains) losses to net income, net ( 508 ) 235 Income tax effect ( 922 ) 2,919 667 ( 2,113 ) Other comprehensive income (loss) 2,920 ( 2,113 ) Comprehensive income (loss) 125,824 ( 41,878 ) Comprehensive loss (income) attributable to noncontrolling interests 694 ( 767 ) Comprehensive income (loss) attributable to Nelnet, Inc. $ 126,518 ( 42,645 ) See accompanying notes to consolidated financial statements. 4 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands, except share data) (unaudited) Nelnet, Inc. Shareholders Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) earnings Noncontrolling interests Total equity Class A Class B 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 — — — — — — — — — 26 26 Net (loss) income — — — — — — — ( 40,532 ) — 767 ( 39,765 ) Other comprehensive loss — — — — — — — — ( 2,113 ) — ( 2,113 ) Distribution to noncontrolling interests — — — — — — — — — ( 55 ) ( 55 ) Cash dividends on Class A and Class B common stock - $ 0.20 per share — — — — — — — ( 7,946 ) — — ( 7,946 ) Issuance of common stock, net of forfeitures — 148,422 — — 1 — 2,940 — — — 2,941 Compensation expense for stock based awards — — — — — — 1,738 — — — 1,738 Repurchase of common stock — ( 24,885 ) — — — — ( 1,253 ) — — — ( 1,253 ) Impact of adoption of new accounting standard — — — — — — — ( 18,867 ) — — ( 18,867 ) 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 Balance as of December 31, 2020 — 27,193,154 11,155,571 $ — 272 112 3,794 2,621,762 6,102 ( 3,693 ) 2,628,349 Issuance of noncontrolling interests — — — — — — — — — 1,400 1,400 Net income (loss) — — — — — — — 123,598 — ( 694 ) 122,904 Other comprehensive income — — — — — — — — 2,920 — 2,920 Distribution to noncontrolling interests — — — — — — — — — ( 102 ) ( 102 ) Cash dividends on Class A and Class B common stock - $ 0.22 per share — — — — — — — ( 8,437 ) — — ( 8,437 ) Issuance of common stock, net of forfeitures — 199,442 — — 2 — 2,089 — — — 2,091 Compensation expense for stock based awards — — — — — — 1,985 — — — 1,985 Repurchase of common stock — ( 26,199 ) — — — — ( 2,009 ) — — — ( 2,009 ) Conversion of common stock — 1,400 ( 1,400 ) — — — — — — — — Balance as of March 31, 2021 — 27,367,797 11,154,171 $ — 274 112 5,859 2,736,923 9,022 ( 3,089 ) 2,749,101 See accompanying notes to consolidated financial statements. 5 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited) Three months ended March 31, 2021 2020 Net income (loss) attributable to Nelnet, Inc. $ 123,598 ( 40,532 ) Net (loss) income attributable to noncontrolling interests ( 694 ) 767 Net income (loss) 122,904 ( 39,765 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 38,415 48,763 Loan discount accretion ( 7,218 ) ( 9,442 ) (Negative provision) provision for loan losses ( 17,048 ) 76,299 Derivative market value adjustments ( 38,809 ) 20,602 Proceeds from (payments to) clearinghouse - initial and variation margin, net 38,081 ( 20,386 ) Gain from sale of loans — ( 18,206 ) Loss from investments, net 13,849 4,046 Purchases of equity securities - trading ( 13,512 ) — Deferred income tax expense (benefit) 15,405 ( 26,000 ) Non-cash compensation expense 2,052 1,857 (Negative provision) provision for beneficial interests and impairment expense ( 2,436 ) 34,087 Increase in loan and investment accrued interest receivable ( 114 ) ( 33,167 ) (Increase) decrease in accounts receivable ( 3,831 ) 52,185 Decrease in other assets, net 5,147 31,363 Decrease (increase) in the carrying amount of ROU asset 1,418 ( 1,000 ) Decrease in accrued interest payable ( 23,174 ) ( 3,411 ) Decrease in other liabilities ( 10,375 ) ( 42,047 ) Decrease in the carrying amount of lease liability ( 1,247 ) ( 2,382 ) Decrease in due to customers ( 70,849 ) ( 217,851 ) Net cash provided by (used in) operating activities 48,658 ( 144,455 ) Cash flows from investing activities, net of acquisition: Purchases and originations of loans ( 152,329 ) ( 409,404 ) Purchases of loans from a related party ( 19,731 ) ( 41,217 ) Net proceeds from loan repayments, claims, and capitalized interest 637,275 517,347 Proceeds from sale of loans — 90,461 Purchases of available-for-sale securities ( 44,335 ) ( 29,658 ) Proceeds from sales of available-for-sale securities 18,077 22,197 Proceeds from beneficial interest in loan securitizations 8,603 11,264 Purchases of other investments ( 71,590 ) ( 32,892 ) Proceeds from other investments 110,290 3,135 Purchases of property and equipment ( 17,898 ) ( 25,561 ) Net cash provided by investing activities $ 468,362 105,672 6 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Three months ended March 31, 2021 2020 Cash flows from financing activities: Payments on bonds and notes payable $ ( 584,303 ) ( 1,263,204 ) Proceeds from issuance of bonds and notes payable 7,800 1,193,388 Payments of debt issuance costs ( 614 ) ( 4,854 ) Increase in bank deposits, net 57,197 — Dividends paid ( 8,437 ) ( 7,946 ) Repurchases of common stock ( 2,009 ) ( 1,253 ) Proceeds from issuance of common stock 381 411 Issuance of noncontrolling interests 1,940 — Distribution to noncontrolling interests ( 102 ) ( 22 ) Net cash used in financing activities ( 528,147 ) ( 83,480 ) Effect of exchange rate changes on cash ( 77 ) — Net decrease in cash, cash equivalents, and restricted cash ( 11,204 ) ( 122,263 ) Cash, cash equivalents, and restricted cash, beginning of period 958,395 1,222,601 Cash, cash equivalents, and restricted cash, end of period $ 947,191 1,100,338 Supplemental disclosures of cash flow information: Cash disbursements made for interest $ 39,686 125,184 Cash disbursements made for income taxes, net of refunds and credits received (a) $ 199 80 Cash disbursements made for operating leases $ 2,098 2,702 Non-cash operating, investing, and financing activity: ROU assets obtained in exchange for lease obligations $ 740 1,411 Receipt of beneficial interest in consumer loan securitizations $ — 38,490 Distribution to noncontrolling interest $ — 33 (a) For the three months ended March 31, 2021 and 2020, respectively, the Company utilized $ 2.0 million and $ 9.4 million, respectively, of federal and state tax credits related primarily to renewable energy. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total of the amounts reported in the consolidated statements of cash flows. As of As of As of As of March 31, 2021 December 31, 2020 March 31, 2020 December 31, 2019 Total cash and cash equivalents $ 144,229 121,249 204,844 133,906 Restricted cash 609,881 553,175 675,589 650,939 Restricted cash - due to customers 193,081 283,971 219,905 437,756 Cash, cash equivalents, and restricted cash $ 947,191 958,395 1,100,338 1,222,601 See accompanying notes to consolidated financial statements. 7 NELNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts, unless otherwise noted) (unaudited) 1. Basis of Financial Reporting The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2020 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 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, 2021 are not necessarily indicative of the results for the year ending December 31, 2021. 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, 2020 (the "2020 Annual Report"). 2. Loans and Accrued Interest Receivable and Allowance for Loan Losses Loans and accrued interest receivable consisted of the following: As of As of March 31, 2021 December 31, 2020 Federally insured student loans: Stafford and other $ 4,283,566 4,383,000 Consolidation 14,321,817 14,746,173 Total 18,605,383 19,129,173 Private education loans 314,048 320,589 Private education loans - Nelnet Bank 79,231 17,543 Consumer loans 110,792 109,346 19,109,454 19,576,651 Accrued interest receivable 794,561 794,611 Loan discount, net of unamortized loan premiums and deferred origination costs ( 9,091 ) ( 9,908 ) Allowance for loan losses: Federally insured loans ( 121,846 ) ( 128,590 ) Private education loans ( 20,670 ) ( 19,529 ) Private education loans - Nelnet Bank ( 744 ) ( 323 ) Consumer loans ( 14,134 ) ( 27,256 ) $ 19,737,530 20,185,656 8 Activity in the Allowance for Loan Losses The following table presents the activity in the allowance for loan losses by portfolio segment. Balance at beginning of period Impact of ASC 326 adoption Provision (negative provision) for loan losses Charge-offs Recoveries Initial allowance on loans purchased with credit deterioration (a) Loan sales Balance at end of period Three months ended March 31, 2021 Federally insured loans $ 128,590 — ( 7,483 ) ( 61 ) — 800 — 121,846 Private education loans 19,529 — 1,431 ( 493 ) 202 — 1 20,670 Private education loans - Nelnet Bank 323 — 422 — — — ( 1 ) 744 Consumer loans 27,256 — ( 11,418 ) ( 1,950 ) 246 — — 14,134 $ 175,698 — ( 17,048 ) ( 2,504 ) 448 800 — 157,394 Three months ended March 31, 2020 Federally insured loans $ 36,763 72,291 39,323 ( 6,318 ) — 4,700 — 146,759 Private education loans 9,597 4,797 9,800 ( 1,330 ) 192 — — 23,056 Consumer loans 15,554 13,926 27,176 ( 4,350 ) 247 — ( 13,500 ) 39,053 $ 61,914 91,014 76,299 ( 11,998 ) 439 4,700 ( 13,500 ) 208,868 a) During the three months ended March 31, 2021 and 2020, the Company acquired $ 54.0 million (par value) and $ 291.2 million (par value), respectively, of federally insured rehabilitation loans that met the definition of PCD loans when they were purchased by the Company. Beginning in March 2020, the coronavirus disease 2019 ("COVID-19") pandemic has caused significant disruptions in the U.S. and world economies. 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 economic conditions. The Company recorded a negative provision for loan losses for its federally insured and consumer loan portfolios for the three months ended March 31, 2021 due to management's estimate of certain continued improved economic conditions (including the improvement in certain macroeconomic variables (unemployment rates, gross domestic product, and consumer price index) used in the Company's loan loss models) as of March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020. The Company recorded a provision expense on its private education loan portfolio during the three months ended March 31, 2021 as a result of an increase of loans in forbearance, which was partially offset by management's estimate of certain continued improved economic conditions as of March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020. 9 Loan Status and Delinquencies The key credit quality indicators for the Company's federally insured, private education, and consumer loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The table below shows the Company’s loan status and delinquency amounts. As of March 31, 2021 As of December 31, 2020 As of March 31, 2020 Federally insured loans: Loans in-school/grace/deferment $ 1,006,605 5.4 % $ 1,036,028 5.4 % $ 1,111,139 5.5 % Loans in forbearance 1,936,553 10.4 1,973,175 10.3 2,131,735 10.6 Loans in repayment status: Loans current 13,787,038 88.0 % 13,683,054 84.9 % 14,618,767 86.3 % Loans delinquent 31-60 days 425,599 2.7 633,411 3.9 581,665 3.4 Loans delinquent 61-90 days 234,871 1.5 307,936 1.9 405,575 2.4 Loans delinquent 91-120 days 125,471 0.8 800,257 5.0 267,145 1.6 Loans delinquent 121-270 days 1,026,050 6.6 674,975 4.2 756,241 4.5 Loans delinquent 271 days or greater 63,196 0.4 20,337 0.1 312,785 1.8 Total loans in repayment 15,662,225 84.2 100.0 % 16,119,970 84.3 100.0 % 16,942,178 83.9 100.0 % Total federally insured loans 18,605,383 100.0 % 19,129,173 100.0 % 20,185,052 100.0 % Accrued interest receivable 791,199 791,453 763,924 Loan discount, net of unamortized premiums and deferred origination costs ( 14,608 ) ( 14,505 ) ( 5,732 ) Allowance for loan losses ( 121,846 ) ( 128,590 ) ( 146,759 ) Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 19,260,128 $ 19,777,531 $ 20,796,485 Private education loans: Loans in-school/grace/deferment $ 10,405 3.3 % $ 5,049 1.6 % $ 4,783 1.7 % Loans in forbearance 7,567 2.4 2,359 0.7 11,428 4.2 Loans in repayment status: Loans current 292,840 98.9 % 310,036 99.0 % 252,611 97.9 % Loans delinquent 31-60 days 1,343 0.5 1,099 0.4 1,606 0.6 Loans delinquent 61-90 days 843 0.3 675 0.2 961 0.4 Loans delinquent 91 days or greater 1,050 0.3 1,371 0.4 2,821 1.1 Total loans in repayment 296,076 94.3 100.0 % 313,181 97.7 100.0 % 257,999 94.1 100.0 % Total private education loans 314,048 100.0 % 320,589 100.0 % 274,210 100.0 % Accrued interest receivable 2,303 2,131 1,716 Loan premium, net of unaccreted discount 2,673 2,691 ( 138 ) Allowance for loan losses ( 20,670 ) ( 19,529 ) ( 23,056 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 298,354 $ 305,882 $ 252,732 Private education loans - Nelnet Bank: Loans in-school/grace/deferment $ 82 0.1 % $ — — % Loans in forbearance 29 — 29 0.2 Loans in repayment status: Loans current 79,120 100.0 % 17,514 100.0 % Loans delinquent 31-60 days — — — — Loans delinquent 61-90 days — — — — Loans delinquent 91 days or greater — — — — Total loans in repayment 79,120 99.9 100.0 % 17,514 99.8 100.0 % Total private education loans 79,231 100.0 % 17,543 100.0 % Accrued interest receivable 125 26 Loan premium, net of unaccreted discount 999 266 Allowance for loan losses ( 744 ) ( 323 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 79,611 $ 17,512 10 Consumer loans: Loans in deferment $ 306 0.3 % $ 829 0.8 % $ — Loans in repayment status: Loans current 108,126 97.9 % 105,650 97.4 % 141,840 97.3 % Loans delinquent 31-60 days 760 0.7 954 0.9 1,525 1.0 Loans delinquent 61-90 days 577 0.5 804 0.7 851 0.6 Loans delinquent 91 days or greater 1,023 0.9 1,109 1.0 1,587 1.1 Total loans in repayment 110,486 99.7 100.0 % 108,517 99.2 100.0 % 145,803 100.0 % Total consumer loans 110,792 100.0 % 109,346 100.0 % 145,803 Accrued interest receivable 934 1,001 1,133 Loan premium 1,845 1,640 1,108 Allowance for loan losses ( 14,134 ) ( 27,256 ) ( 39,053 ) Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 99,437 $ 84,731 $ 108,991 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, 2020 and March 31, 2021, was not material. 11 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, 2021 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, 2021 2020 2019 2018 2017 Prior years Total Private education loans: Loans in school/grace/deferment $ 216 2,159 4,948 — — 3,082 10,405 Loans in forbearance — 488 1,288 131 — 5,660 7,567 Loans in repayment status: Loans current 1,069 101,577 67,914 636 — 121,644 292,840 Loans delinquent 31-60 days — 10 114 — — 1,219 1,343 Loans delinquent 61-90 days — — 59 — — 784 843 Loans delinquent 91 days or greater — — 120 — — 930 1,050 Total loans in repayment 1,069 101,587 68,207 636 — 124,577 296,076 Total private education loans $ 1,285 104,234 74,443 767 — 133,319 314,048 Accrued interest receivable 2,303 Loan premium, net of unaccreted discount 2,673 Allowance for loan losses ( 20,670 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 298,354 Private education loans - Nelnet Bank: Loans in school/grace/deferment $ 82 — — — — — 82 Loans in forbearance — 29 — — — — 29 Loans in repayment status: Loans current 62,647 16,473 — — — — 79,120 Loans delinquent 31-60 days — — — — — — — Loans delinquent 61-90 days — — — — — — — Loans delinquent 91 days or greater — — — — — — — Total loans in repayment 62,647 16,473 — — — — 79,120 Total private education loans $ 62,729 16,502 — — — — 79,231 Accrued interest receivable 125 Loan premium, net of unaccreted discount 999 Allowance for loan losses ( 744 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 79,611 Consumer loans: Loans in deferment $ — 33 177 96 — — 306 Loans in repayment status: Loans current 18,713 51,409 18,771 17,360 1,873 — 108,126 Loans delinquent 31-60 days — 339 272 120 29 — 760 Loans delinquent 61-90 days — 311 185 64 17 — 577 Loans delinquent 91 days or greater — 312 297 404 10 — 1,023 Total loans in repayment 18,713 52,371 19,525 17,948 1,929 — 110,486 Total consumer loans $ 18,713 52,404 19,702 18,044 1,929 — 110,792 Accrued interest receivable 934 Loan premium 1,845 Allowance for loan losses ( 14,134 ) Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 99,437 12 3. Bonds and Notes Payable The following tables summarize the Company’s outstanding debt obligations by type of instrument: As of March 31, 2021 Carrying amount Interest rate range Final maturity Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations: Bonds and notes based on indices $ 16,716,369 0.19 % - 2.11 % 5/27/25 - 10/25/68 Bonds and notes based on auction 747,075 1.07 % - 2.15 % 3/22/32 - 11/26/46 Total FFELP variable-rate bonds and notes 17,463,444 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 915,947 1.42 % - 3.45 % 10/25/67 / 8/27/68 FFELP warehouse facilities 247,018 0.23 % 5/20/22 / 2/26/24 Private education loan warehouse facility 158,197 0.26 % 2/13/23 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 44,844 1.65 % / 1.86 % 12/26/40 / 6/25/49 Fixed-rate bonds and notes issued in private education loan asset-backed securitization 35,196 3.60 % / 5.35 % 12/26/40 / 12/28/43 Unsecured line of credit — — 12/16/24 Other borrowings 118,537 0.81 % / 1.86 % 5/4/21 / 5/30/22 18,983,183 Discount on bonds and notes payable and debt issuance costs ( 228,468 ) Total $ 18,754,715 As of December 31, 2020 Carrying amount Interest rate range Final maturity Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations: Bonds and notes based on indices $ 17,127,643 0.28 % - 2.05 % 5/27/25 - 10/25/68 Bonds and notes based on auction 749,925 1.12 % - 2.14 % 3/22/32 - 11/26/46 Total FFELP variable-rate bonds and notes 17,877,568 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 923,076 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP warehouse facilities 252,165 0.27 % / 0.31 % 5/20/22 / 2/26/23 Private education loan warehouse facility 150,397 0.28 % 2/13/22 Consumer loan warehouse facility 25,809 0.28 % 4/23/22 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 49,025 1.65 % / 1.90 % 12/26/40 / 6/25/49 Fixed-rate bonds and notes issued in private education loan asset-backed securitization 37,251 3.60 % / 5.35 % 12/26/40 / 12/28/43 Unsecured line of credit 120,000 1.65 % 12/16/24 Other borrowings 123,558 0.84 % / 1.90 % 5/4/21 / 5/30/22 19,558,849 Discount on bonds and notes payable and debt issuance costs ( 238,123 ) Total $ 19,320,726 13 FFELP Warehouse Facilities The Company funds the majority of its FFELP loan acquisitions using its FFELP warehouse facilities. 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, 2021, the Company had two FFELP warehouse facilities as summarized below. NFSLW-I NHELP-II (a) Total Maximum financing amount $ 260,000 50,000 310,000 Amount outstanding 247,018 — 247,018 Amount available $ 12,982 50,000 62,982 Expiration of liquidity provisions May 20, 2021 February 26, 2022 Final maturity date May 20, 2022 February 26, 2024 Advanced as equity support $ 20,529 — 20,529 (a) On February 26, 2021, the Company extended the expiration of liquidity provisions and the maturity date for this warehouse facility an additional year to February 26, 2022 and February 26, 2024, respectively. Private Education Loan Warehouse Facility During 2020, the Company obtained a private education loan warehouse facility that had an aggregate maximum financing amount available of $ 200.0 million. On February 12, 2021, the Company decreased the maximum financing amount available for this facility to $ 175.0 million and extended the liquidity provisions and final maturity date to February 13, 2022 and February 13, 2023, respectively. As of March 31, 2021, $ 158.2 million was outstanding under this warehouse facility and $ 16.8 million was available for future funding. The facility has an advance rate of 80 to 90 percent and, as of March 31, 2021, the Company had $ 17.0 million advanced as equity support under this facility. Consumer Loan Warehouse Facility The Company had a $ 100.0 million consumer loan warehouse facility. On March 31, 2021, the Company terminated 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, 2021, no amount was outstanding on the line of credit and $ 455.0 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 The Company has an agreement with Union Bank and Trust Company ("Union Bank"), a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loan asset-backed securities. As of March 31, 2021, $ 113.5 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. Accrued Interest Liability During the first quarter of 2021, the Company reversed a historical accrued interest liability of $ 23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest on bonds and notes payable and bank deposits" in the consolidated statements of operations. 14 4. Derivative Financial Instruments The Company uses derivative financial instruments to manage interest rate risk. Derivative instruments used as part of the Company's risk management strategy are further described in note 6 of the notes to consolidated financial statements included in the 2020 Annual Report. A tabular presentation of such derivatives outstanding as of March 31, 2021 and December 31, 2020 is presented below. Basis Swaps The following table summarizes the Company’s outstanding basis swaps as of March 31, 2021 and December 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"). Maturity Notional amount 2021 $ 250,000 2022 2,000,000 2023 750,000 2024 1,750,000 2026 1,150,000 2027 250,000 $ 6,150,000 The weighted average rate paid by the Company on the 1:3 Basis Swaps as of March 31, 2021 and December 31, 2020 was one-month LIBOR plus 9.1 basis points. 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, 2021 As of December 31, 2020 Maturity Notional amount Weighted average fixed rate paid by the Company (a) Notional amount Weighted average fixed rate paid by the Company (a) 2021 $ 600,000 2.15 % $ 600,000 2.15 % 2022 (b) 500,000 0.94 500,000 0.94 2023 900,000 0.62 900,000 0.62 2024 (c) 2,500,000 0.35 2,000,000 0.32 2025 500,000 0.35 500,000 0.35 $ 5,000,000 0.67 % $ 4,500,000 0.70 % (a) For all interest rate derivatives, the Company receives discrete three-month LIBOR. (b) $ 250.0 million of the derivatives outstanding at March 31, 2021 and December 31, 2020 have forward effective start dates in June 2021. (c) $ 500.0 million of the derivatives outstanding at March 31, 2021 and December 31, 2020 have forward effective start dates in June 2021. 15 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, 2021 2020 Settlements: 1:3 basis swaps $ ( 19 ) 2,112 Interest rate swaps - floor income hedges ( 4,285 ) 2,125 Total settlements - (expense) income ( 4,304 ) 4,237 Change in fair value: 1:3 basis swaps 2,799 1,558 Interest rate swaps - floor income hedges 36,010 ( 22,160 ) Total change in fair value - income (expense) 38,809 ( 20,602 ) Derivative market value adjustments and derivative settlements, net - income (expense) $ 34,505 ( 16,365 ) 16 5. Investments A summary of the Company's investments follows: As of March 31, 2021 As of December 31, 2020 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value Investments (at fair value): Student loan asset-backed and other debt securities - available-for-sale (a) $ 367,343 11,879 ( 9 ) 379,213 340,578 8,042 ( 13 ) 348,607 Equity securities 53,044 10,430 ( 3,621 ) 59,853 36,227 8,768 ( 2,954 ) 42,041 Total investments (at fair value) $ 420,387 22,309 ( 3,630 ) 439,066 376,805 16,810 ( 2,967 ) 390,648 Other Investments (not measured at fair value): Venture capital and funds: Measurement alternative 145,440 144,795 Equity method (b) 59,583 14,018 Other 1,328 894 Total venture capital and funds 206,351 159,707 Real estate Equity method 49,527 50,291 Notes receivable (c) 17,344 847 Total real estate 66,871 51,138 Investment in ALLO: Voting interest/equity method (d) 107,177 129,396 Preferred membership interest and accrued and unpaid preferred return (e) 131,237 228,916 Total investment in ALLO 238,414 358,312 Solar (f) ( 34,091 ) ( 30,373 ) Beneficial interest in federally insured loan securitizations (g) 29,228 30,377 Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $ 4,449 as of December 31, 2020 (g) 22,936 27,954 Tax liens and affordable housing 4,324 5,177 Total investments (not measured at fair value) 534,033 602,292 Total investments $ 973,099 $ 992,940 (a) As of March 31, 2021, $ 113.5 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) In December of 2020, Wells Fargo announced the sale of its approximately $ 10.0 billion portfolio of private education student loans representing approximately 445,000 borrowers. The Company has entered into agreements to participate in a joint venture to acquire the portfolio. As of March 31, 2021, the Company has invested $ 44.7 million in the joint venture and is accounting for this investment under the equity method of accounting. (c) On February 26, 2021, the Company received a $ 13.0 million promissory note from Telegraph Flats, LLC ("Telegraph Flats"). The Company owns 50 % of Telegraph Flats. Telegraph Flats is an entity that was established for the sole purpose of acquiring, developing, and owning a multi-family and commercial real estate property in Lincoln, Nebraska. The promissory note carries an interest rate of one-month LIBOR plus 1.75 % and has a maturity date of August 26, 2021. (d) The Company accounts for its voting membership interests in ALLO Communications LLC ("ALLO") under the Hypothetical Liquidation at Book Value ("HLBV") method of accounting. The HLBV method of accounting is used by the Company for equity method investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership or voting interests. The Company applies 17 the HLBV method using a balance sheet approach. A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the Company’s share of the earnings or losses from the equity investment for the period. Because the Company will be able to utilize certain tax losses related to ALLO’s operations, the equity investment agreements for the Company have liquidation rights and priorities that are sufficiently different from the voting membership interests percentages such that the HLBV method of accounting was deemed appropriate. Accordingly, the recognition of earnings or losses during any reporting period related to the Company’s equity investment in ALLO may or may not reflect its voting membership interests percentage and could vary substantially from those calculated based on the Company’s voting membership interests in ALLO. During the three month period ended March 31, 2021, the Company recognized a loss of $ 22.2 million under the HLBV method of accounting on its ALLO voting membership interests investment. Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers. The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under generally accepted accounting principles. Applying the HLBV method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years. (e) The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 percent. During the three months ended March 31, 2021, the Company recognized income on its ALLO preferred membership interests of $ 2.3 million. On January 19, 2021, ALLO closed on certain private debt financing facilities from unrelated third-party lenders providing for aggregate financing of up to $ 230.0 million. With proceeds from this transaction, ALLO redeemed a portion of its non-voting preferred membership interests held by the Company in exchange for an aggregate redemption price payment to the Company of $ 100.0 million. Under the October 2020 recapitalization agreements for ALLO, the parties have agreed to use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause ALLO to redeem, on or before April 2024, the remaining preferred membership interests of ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests. (f) The Company makes investments in entities that promote renewable energy sources (solar). The Company's investments in these entities generate a return primarily through the realization of federal income tax credits, operating cash flows, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods which range from 5 to 6 years. As of March 31, 2021, the Company has funded $ 151.8 million in solar investments. The carrying value of the Company's solar investments are reduced by tax credits earned when the solar project is placed in service. The solar investment balance at March 31, 2021 represents total tax credits earned on solar projects placed in service through March 31, 2021 being larger than total payments made by the Company on such projects. The Company is committed to fund an additional $ 42.8 million on these projects. 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. During the three months ended March 31, 2021 and 2020, the Company recognized pre-tax losses of $ 1.7 million and $ 2.8 million, respectively, on its solar investments. These losses are included in "other" in "other income/expense" on the consolidated statements of operations. (g) 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 March 31, 2021, the Company's ownership correlates to approximately $ 500 million and $ 230 million of federally insured and consumer loans, respectively, included in these securitizations. During the first quarter of 2020, the Company recorded a $ 26.3 million provision charge related to the Company's beneficial interest in consumer loan securitizations due to distressed economic conditions resulting from the COVID-19 pandemic. Due to improved economic conditions, the Company has reduced the allowance for credit losses related to the consumer loan beneficial interests, including reducing such allowance by $ 2.4 million during the first quarter of 2021. As of March 31, 2021, the Company no longer has an allowance for credit losses associated with the consumer loan beneficial interests. The activity related to the allowance for credit losses related to the consumer loan beneficial interests is included in “impairment expense and provision for beneficial interests, net” on the consolidated statements of operations. 18 6. Intangible Assets Intangible assets consisted of the following: Weighted average remaining useful life as of March 31, 2021 (months) As of As of March 31, 2021 December 31, 2020 Amortizable intangible assets, net: Customer relationships (net of accumulated amortization of $ 90,282 and $ 83,419 , respectively) 102 $ 60,110 66,974 Computer software (net of accumulated amortization of $ 2,082 and $ 4,127 , respectively) 33 5,775 6,430 Trade names (net of accumulated amortization of $ 4,288 and $ 3,455 , respectively) 3 833 1,666 Total - amortizable intangible assets, net 95 $ 66,718 75,070 The Company recorded amortization expense on its intangible assets of $ 8.4 million and $ 7.4 million during the three months ended March 31, 2021 and 2020, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of March 31, 2021, the Company estimates it will record amortization expense as follows: 2021 (April 1 - December 31) $ 14,690 2022 9,939 2023 9,830 2024 7,457 2025 4,644 2026 and thereafter 20,158 $ 66,718 7. Goodwill The carrying amount of goodwill as of December 31, 2020 and March 31, 2021 by reportable operating segment was as follows: Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management Nelnet Bank Corporate and Other Activities Total Goodwill balance $ 23,639 76,570 41,883 — — 142,092 8. Property and Equipment Property and equipment consisted of the following: As of As of Useful life March 31, 2021 December 31, 2020 Computer equipment and software 1 - 5 years $ 188,378 172,664 Building and building improvements 5 - 48 years 52,806 52,444 Office furniture and equipment 1 - 10 years 22,502 21,899 Leasehold improvements 1 - 15 years 9,167 9,168 Transportation equipment 5 - 10 years 4,857 4,857 Land — 3,642 3,642 Construction in progress — 20,549 18,478 301,901 283,152 Accumulated depreciation ( 171,451 ) ( 159,625 ) Total property and equipment, net $ 130,450 123,527 The Company recorded depreciation expense on its property and equipment of $ 11.8 million and $ 20.3 million during the three months ended March 31, 2021 and 2020, respectively . 19 9. Earnings per Common Share Presented below is a summary of the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Three months ended March 31, 2021 2020 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income (loss) attributable to Nelnet, Inc. $ 121,766 1,832 123,598 ( 39,974 ) ( 558 ) ( 40,532 ) Denominator: Weighted-average common shares outstanding - basic and diluted 38,031,267 572,288 38,603,555 39,405,454 550,060 39,955,514 Earnings per share - basic and diluted $ 3.20 3.20 3.20 ( 1.01 ) ( 1.01 ) ( 1.01 ) 20 10. Segment Reporting See note 15 of the notes to consolidated financial statements included in the 2020 Annual Report for a description of the Company's operating segments. 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, 2021 Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications (a) Asset Generation and Management Nelnet Bank Corporate and Other Activities Eliminations Total Total interest income $ 34 263 — 126,402 1,376 1,246 ( 218 ) 129,103 Interest expense 23 — — 26,950 194 824 ( 218 ) 27,773 Net interest income (expense) 11 263 — 99,452 1,182 422 — 101,330 Less (negative provision) provision for loan losses — — — ( 17,470 ) 422 — — ( 17,048 ) Net interest income after provision for loan losses 11 263 — 116,922 760 422 — 118,378 Other income/expense: Loan servicing and systems revenue 111,517 — — — — — — 111,517 Intersegment revenue 8,268 3 — — — — ( 8,271 ) — Education technology, services, and payment processing revenue — 95,258 — — — — — 95,258 Communications revenue — — — — — — — — Other 1,113 — — 445 22 ( 6,184 ) — ( 4,604 ) Gain on sale of loans — — — — — — — — Impairment expense and provision for beneficial interests, net — — — 2,436 — — — 2,436 Derivative settlements, net — — — ( 4,304 ) — — — ( 4,304 ) Derivative market value adjustments, net — — — 38,809 — — — 38,809 Total other income/expense 120,898 95,261 — 37,386 22 ( 6,184 ) ( 8,271 ) 239,112 Cost of services: Cost to provide education technology, services, and payment processing services — 27,052 — — — — — 27,052 Cost to provide communications services — — — — — — — — Total cost of services — 27,052 — — — — — 27,052 Operating expenses: Salaries and benefits 66,458 25,941 — 495 1,488 21,409 — 115,791 Depreciation and amortization 8,192 3,071 — — — 8,920 — 20,184 Other expenses 13,285 4,822 — 3,777 545 14,272 — 36,698 Intersegment expenses, net 16,890 3,664 — 8,427 3 ( 20,713 ) ( 8,271 ) — Total operating expenses 104,825 37,498 — 12,699 2,036 23,888 ( 8,271 ) 172,673 Income (loss) before income taxes 16,084 30,974 — 141,609 ( 1,254 ) ( 29,650 ) — 157,765 Income tax (expense) benefit (b) ( 3,860 ) ( 7,434 ) — ( 33,987 ) 286 10,133 — ( 34,861 ) Net income (loss) 12,224 23,540 — 107,622 ( 968 ) ( 19,517 ) — 122,904 Net loss (income) attributable to noncontrolling interests — — — — — ( 17 ) 711 694 Net income (loss) attributable to Nelnet, Inc. $ 12,224 23,540 — 107,622 ( 968 ) ( 19,534 ) 711 123,598 Total assets as of March 31, 2021 $ 191,910 372,315 — 20,367,532 296,908 1,148,560 ( 210,017 ) 22,167,208 (a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements. See note 2 of the notes to consolidated financial statements included in the 2020 Annual Report for a description of the transaction and a summary of the deconsolidation impact. Accordingly, there are no operating results for the (former) Communications operating segment in 2021. (b) Income taxes for the Nelnet Bank operating segment reflect Nelnet Bank's actual tax expense/benefit as allocated and reflected in its Call Report filed with the Federal Deposit Insurance Corporation. Income taxes for all other operating segments are allocated based on 24 % of that segment's income before taxes. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities. 21 Three months ended March 31, 2020 Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset Generation and Management Nelnet Bank (a) Corporate and Other Activities Eliminations Total Total interest income $ 317 1,991 — 185,926 — 1,555 ( 598 ) 189,191 Interest expense 44 17 — 133,249 — 1,407 ( 598 ) 134,118 Net interest income (expense) 273 1,974 — 52,677 — 148 — 55,073 Less (negative provision) provision for loan losses — — — 76,299 — — — 76,299 Net interest income after provision for loan losses 273 1,974 — ( 23,622 ) — 148 — ( 21,226 ) Other income/expense: Loan servicing and systems revenue 112,735 — — — — — — 112,735 Intersegment revenue 11,054 11 — — — — ( 11,065 ) — Education technology, services, and payment processing revenue — 83,675 — — — — — 83,675 Communications revenue — — 18,181 — — — — 18,181 Other 2,630 — 353 3,215 — 2,083 — 8,281 Gain on sale of loans — — — 18,206 — — — 18,206 Impairment expense and provision for beneficial interests, net — — — ( 26,303 ) — ( 7,783 ) — ( 34,087 ) Derivative settlements, net — — — 4,237 — — — 4,237 Derivative market value adjustments, net — — — ( 20,602 ) — — — ( 20,602 ) Total other income/expense 126,419 83,686 18,534 ( 21,247 ) — ( 5,700 ) ( 11,065 ) 190,626 Cost of services: Cost to provide education technology, services, and payment processing services — 22,806 — — — — — 22,806 Cost to provide communications services — — 5,582 — — — — 5,582 Total cost of services — 22,806 5,582 — — — — 28,388 Operating expenses: Salaries and benefits 70,493 23,696 5,416 443 — 19,830 — 119,878 Depreciation and amortization 8,848 2,387 10,507 — — 5,907 — 27,648 Other expenses 17,489 6,092 3,689 3,717 — 12,398 — 43,384 Intersegment expenses, net 16,239 3,327 624 11,916 — ( 21,041 ) ( 11,065 ) — Total operating expenses 113,069 35,502 20,236 16,076 — 17,094 ( 11,065 ) 190,910 Income (loss) before income taxes 13,623 27,352 ( 7,284 ) ( 60,945 ) — ( 22,646 ) — ( 49,898 ) Income tax (expense) benefit ( 3,269 ) ( 6,565 ) 1,748 14,627 — 3,592 — 10,133 Net income (loss) 10,354 20,787 ( 5,536 ) ( 46,318 ) — ( 19,054 ) — ( 39,765 ) Net loss (income) attributable to noncontrolling interests — — — — — ( 767 ) — ( 767 ) Net income (loss) attributable to Nelnet, Inc. $ 10,354 20,787 ( 5,536 ) ( 46,318 ) — ( 19,821 ) — ( 40,532 ) Total assets as of March 31, 2020 $ 223,021 302,631 301,440 21,905,150 — 679,390 ( 131,004 ) 23,280,628 (a) Nelnet Bank launched operations on November 2, 2020. Accordingly, there are no operating results for the Nelnet Bank operating segment in the three months ended March 31, 2020. 22 11. Disaggregated Revenue The following tables provide disaggregated revenue by service offering and/or customer type for the Company's fee-based reportable operating segments (except ALLO). Loan Servicing and Systems Three months ended March 31, 2021 2020 Government servicing - Nelnet $ 34,872 38,650 Government servicing - Great Lakes 43,302 46,446 Private education and consumer loan servicing 8,548 8,609 FFELP servicing 4,670 5,614 Software services 8,454 11,318 Outsourced services 11,671 2,098 Loan servicing and systems revenue $ 111,517 112,735 Education Technology, Services, and Payment Processing Three months ended March 31, 2021 2020 Tuition payment plan services $ 29,550 31,587 Payment processing 33,038 31,742 Education technology and services 32,322 20,054 Other 348 292 Education technology, services, and payment processing revenue $ 95,258 83,675 Other Income/Expense The following table provides the components of "other" in "other income/expense" on the consolidated statements of operations: Three months ended March 31, 2021 2020 Income/gains from investments, net $ 8,498 ( 1,025 ) Investment advisory services 2,697 2,802 ALLO preferred return 2,321 — Management fee revenue 1,113 2,630 Borrower late fee income 442 3,188 Loss from ALLO voting membership interests investment ( 22,219 ) — Loss from solar investments ( 1,679 ) ( 2,839 ) Other 4,223 3,525 $ ( 4,604 ) 8,281 23 12. Major Customer Nelnet Servicing, LLC ("Nelnet Servicing") and Great Lakes Educational Loan Services, Inc. ("Great Lakes"), subsidiaries of the Company, each earn loan servicing revenue from a servicing contract with the Department of Education (the "Department"). Revenue earned by Nelnet Servicing related to this contract was $ 34.9 million and $ 38.7 million for the three months ended March 31, 2021 and 2020, respectively. Revenue earned by Great Lakes related to this contract was $ 43.3 million and $ 46.4 million for the three months ended March 31, 2021 and 2020, respectively. The current servicing contracts with the Department are currently scheduled to expire on June 14, 2021, but provide the potential for an additional six-month extension at the Department’s discretion through December 14, 2021. The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, provides that the Department may extend the period of performance for the servicing contracts scheduled to expire on December 14, 2021 for up to two additional years to December 14, 2023. The Department is conducting a contract procurement process entitled Next Generation Financial Services Environment (“NextGen”) for a new framework for the servicing of all student loans owned by the Department. On January 15, 2019, the Department issued solicitations for certain NextGen components, including the NextGen Enhanced Processing Solution (“EPS”), which was for a technology servicing system and certain processing functions the Department planned to use under NextGen to service the Department's student loan customers, and the NextGen Business Processing Operations (“BPO”), which is for the back office and call center operational functions for servicing the Department's student loan customers. On June 24, 2020, the Department awarded and signed contracts with five other companies in connection with the BPO solicitation. On July 10, 2020, the Department cancelled the solicitation for the EPS component. In the Department's description of its cancellation of the EPS solicitation component, the Department indicated that it continues to be committed to the goals and vision of NextGen, and that it would be introducing a new solicitation to continue the NextGen strategy in the future. On October 28, 2020, the Department issued a new federal loan servicing solicitation for an Interim Servicing Solution ("ISS"). ISS was a follow-on to the existing contracts, which would award a full system and servicing solution to two providers. Under ISS, the selected providers would have provided the technology platform to host the Department's student loan portfolio; customer service (including contact centers) and back-office processing; digital engagement layer including borrower-facing website and mobile-applications; intake, imaging, and fulfillment; and portfolio-level operations. As the companies awarded BPO contracts are onboarded, contact center and back-office operations would have shifted from the ISS contract to the BPO providers. The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the NextGen process, including that any new federal student loan servicing environment shall provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance, and directed the suspension of awarding any ISS contract for at least 90 days. On January 9, 2021, the Department suspended the ISS solicitation. In the Department’s description of the suspension, it indicated that in consideration of the Consolidated Appropriations Act, 2021, the Government is reassessing its needs and will amend or cancel the subject solicitation in the future. 24 13. Fair Value The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. As of March 31, 2021 As of December 31, 2020 Level 1 Level 2 Total Level 1 Level 2 Total Assets: Investments: Student loan asset-backed debt securities - available-for-sale $ — 379,110 379,110 — 348,504 348,504 Equity securities (a) 28,296 — 28,296 10,114 — 10,114 Equity securities measured at net asset value (b) 31,557 31,927 Debt securities - available-for-sale 103 — 103 103 — 103 Total investments 28,399 379,110 439,066 10,217 348,504 390,648 Total assets $ 28,399 379,110 439,066 10,217 348,504 390,648 (a) As of March 31, 2021, $ 13.5 million and $ 14.8 million of equity securities were classified as trading and available-for-sale, respectively. All equity securities as of December 31, 2020 were classified as available-for-sale. (b) 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: As of March 31, 2021 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 20,247,318 18,942,969 — — 20,247,318 Accrued loan interest receivable 794,561 794,561 — 794,561 — Cash and cash equivalents 144,229 144,229 144,229 — — Investments (at fair value) 439,066 439,066 28,399 379,110 — Beneficial interest in loan securitizations 71,514 52,164 — — 71,514 Restricted cash 609,881 609,881 609,881 — — Restricted cash – due to customers 193,081 193,081 193,081 — — Financial liabilities: Bonds and notes payable 18,968,284 18,754,715 — 18,968,284 — Accrued interest payable 5,527 5,527 — 5,527 — Bank deposits 111,398 111,830 45,147 66,251 — Due to customers 230,581 230,581 230,581 — — As of December 31, 2020 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 20,454,132 19,391,045 — — 20,454,132 Accrued loan interest receivable 794,611 794,611 — 794,611 — Cash and cash equivalents 121,249 121,249 121,249 — — Investments (at fair value) 390,648 390,648 10,217 348,504 — Beneficial interest in loan securitizations 58,709 58,331 — — 58,709 Restricted cash 553,175 553,175 553,175 — — Restricted cash – due to customers 283,971 283,971 283,971 — — Financial liabilities: Bonds and notes payable 19,270,810 19,320,726 — 19,270,810 — Accrued interest payable 28,701 28,701 — 28,701 — Bank deposits 54,599 54,633 48,422 6,177 — Due to customers 301,471 301,471 301,471 — — The methodologies for estimating the fair value of financial assets and liabilities are described in note 22 of the notes to consolidated financial statements included in the 2020 Annual Report. 25