What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-10 · 427 added, 189 removed, 624 unchanged (50% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Loans and accrued interest receivable (net of allowance for loan losses of $ 145,719 and

37 unchanged sentences

Retained earnings 2,812,315 2,621,762

Accumulated other comprehensive earnings 9,022 6,102

Accumulated other comprehensive earnings, net 10,941 6,102

Total Nelnet, Inc.

12 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,

2021 2020 2021 2020

Interest income:

5 unchanged sentences

Net interest income 83,592 66,635 184,922 121,708

Less (negative provision) provision for loan losses ( 17,048 ) 76,299

Less provision (negative provision) for loan losses 374 2,999 ( 16,674 ) 79,297

Net interest income after provision for loan losses 83,218 63,636 201,596 42,411

17 unchanged sentences

Total operating expenses 171,791 185,692 344,464 376,605

Income (loss) before income taxes 157,765 ( 49,898 )

Income tax (expense) benefit ( 34,861 ) 10,133

Net income (loss) 122,904 ( 39,765 )

Income before income taxes 109,250 107,874 267,015 57,976

Income tax expense 26,237 21,264 61,098 11,131

Net income 83,013 86,610 205,917 46,845

Net loss (income) attributable to noncontrolling interests 854 ( 128 ) 1,548 ( 895 )

Net income (loss) attributable to Nelnet, Inc.

Net income attributable to Nelnet, Inc.

$ 83,867 86,482 207,465 45,950

Earnings per common share:

Net income (loss) attributable to Nelnet, Inc.

Net income attributable to Nelnet, Inc.

shareholders - basic and diluted

4 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

Three months ended March 31,

Net income (loss) $ 122,904 ( 39,765 )

Other comprehensive income (loss):

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

2021 2020 2021 2020

Net income $ 83,013 86,610 205,917 46,845

Other comprehensive income:

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 )

Unrealized gains during period, net 2,897 3,236 7,246 221

Reclassification of (gains) losses to net income, net ( 371 ) ( 112 ) ( 879 ) 123

Income tax effect ( 606 ) 1,920 ( 750 ) 2,374 ( 1,528 ) 4,839 ( 83 ) 261

Other comprehensive income (loss) 2,920 ( 2,113 )

Comprehensive income (loss) 125,824 ( 41,878 )

Other comprehensive income 1,919 2,374 4,839 261

Comprehensive income 84,932 88,984 210,756 47,106

Comprehensive loss (income) attributable to noncontrolling interests 854 ( 128 ) 1,548 ( 895 )

Comprehensive income (loss) attributable to Nelnet, Inc.

Comprehensive income attributable to Nelnet, Inc.

$ 85,786 88,856 212,304 46,211

3 unchanged sentences

(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

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 earnings, net Noncontrolling interests Total equity

Class A Class B

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

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

Issuance of noncontrolling interests — — — — — — — — — 5,488 5,488

Net income (loss) — — — — — — — 83,867 — ( 854 ) 83,013

Other comprehensive income — — — — — — — — 1,919 — 1,919

Distribution to noncontrolling interests — — — — — — — — — ( 6,727 ) ( 6,727 )

Cash dividends on Class A and Class B common stock - $ 0.22 per share

— — — — — — — ( 8,475 ) — — ( 8,475 )

Issuance of common stock, net of forfeitures — 32,513 — — — — 1,824 — — — 1,824

Compensation expense for stock based awards — — — — — — 2,874 — — — 2,874

Repurchase of common stock — ( 5,368 ) — — — — ( 399 ) — — — ( 399 )

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

Balance as of June 30, 2021 — 27,494,942 11,054,171 $ — 275 111 10,158 2,812,315 10,941 ( 5,182 ) 2,828,618

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 earnings, net 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 — — — — — — — — — 52 52

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

Other comprehensive loss — — — — — — — — ( 2,113 ) — ( 2,113 )

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

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

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

5 unchanged sentences

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

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

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

9 unchanged sentences

Conversion of common stock — 101,400 ( 101,400 ) — 1 ( 1 ) — — — — —

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

Balance as of June 30, 2021 — 27,494,942 11,054,171 $ — 275 111 10,158 2,812,315 10,941 ( 5,182 ) 2,828,618

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Three months ended

Net income (loss) attributable to Nelnet, Inc.

Six months ended

Net income attributable to Nelnet, Inc.

$ 207,465 45,950

Net (loss) income attributable to noncontrolling interests

Net income (loss) 122,904 ( 39,765 )

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

( 1,548 ) 895

Net income 205,917 46,845

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

Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 76,754 99,282

4 unchanged sentences

Gain from sale of loans ( 15,271 ) ( 18,206 )

Loss from investments, net 13,849 4,046

Purchases of equity securities - trading ( 13,512 ) —

Loss (gain) from investments, net 812 ( 48,402 )

Loss (gain) from repurchases of debt, net 695 ( 403 )

Purchases of equity securities - trading, net ( 19,764 ) —

Deferred income tax expense (benefit) 18,173 ( 14,762 )

Non-cash compensation expense 4,980 3,581

(Negative provision) provision for beneficial interests and impairment expense ( 2,436 ) 34,087

(Negative provision) provision for beneficial interests and impairment expense, net ( 1,936 ) 34,419

Increase in loan and investment accrued interest receivable ( 40,488 ) ( 123,276 )

1 unchanged sentence

Decrease in other assets, net 32,241 22,992

Decrease (increase) in the carrying amount of ROU asset 1,418 ( 1,000 )

Decrease in the carrying amount of ROU asset 3,962 5,948

Decrease in accrued interest payable ( 23,779 ) ( 14,525 )

Decrease in other liabilities ( 10,375 ) ( 42,047 )

Decrease in other liabilities, net ( 13,663 ) ( 26,817 )

Decrease in the carrying amount of lease liability ( 3,288 ) ( 4,829 )

Decrease in due to customers ( 70,849 ) ( 217,851 )

Increase (decrease) in due to customers 1,746 ( 169,217 )

Net cash provided by (used in) operating activities 187,611 ( 105,601 )

Cash flows from investing activities, net of acquisition:

Cash flows from investing activities:

Purchases and originations of loans ( 1,040,573 ) ( 872,987 )

4 unchanged sentences

Proceeds from sales of available-for-sale securities 38,511 23,372

Proceeds from beneficial interest in loan securitizations 8,603 11,264

Proceeds from and sale of beneficial interest in loan securitizations 19,077 21,765

Purchases of other investments

2 unchanged sentences

Purchases of property and equipment ( 28,784 ) ( 46,994 )

Net cash provided by investing activities $ 468,362 105,672

Net cash (used in) provided by investing activities $ ( 243,422 ) 717,286

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three months ended

Six months ended

Cash flows from financing activities:

6 unchanged sentences

Proceeds from issuance of common stock 689 781

Acquisition of noncontrolling interest — ( 2,000 )

Issuance of noncontrolling interests 7,480 —

Distribution to noncontrolling interests ( 423 ) ( 333 )

Net cash used in financing activities ( 528,147 ) ( 83,480 )

Net cash provided by (used in) financing activities 174,897 ( 912,971 )

Effect of exchange rate changes on cash ( 108 ) —

Net decrease in cash, cash equivalents, and restricted cash ( 11,204 ) ( 122,263 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 118,978 ( 301,286 )

Cash, cash equivalents, and restricted cash, beginning of period 958,395 1,222,601

7 unchanged sentences

Receipt of beneficial interest in consumer loan securitizations $ 19,280 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.

Distribution to noncontrolling interests $ 6,406 33

Issuance of noncontrolling interests $ 592 —

(a) The Company utilized $ 22.0 million and $ 18.3 million of federal and state tax credits related primarily to renewable energy during the six months ended June 30, 2021 and 2020, respectively.

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

June 30, 2021 December 31, 2020 June 30, 2020 December 31, 2019

Total cash and cash equivalents $ 212,989 121,249 67,540 133,906

9 unchanged sentences

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.

and subsidiaries (the “Company”) as of June 30, 2021 and for the three and six months ended June 30, 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.

generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results for the year ending December 31, 2021.

Operating results for the three and six months ended June 30, 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").

1 unchanged sentence

Loans and accrued interest receivable consisted of the following:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Non-Nelnet Bank:

Federally insured student loans:

3 unchanged sentences

Private education loans 350,094 320,589

Private education loans - Nelnet Bank 79,231 17,543

Consumer loans 42,767 109,346

19,109,454 19,576,651

Non-Nelnet Bank loans 19,331,725 19,559,108

Federally insured student loans 97,167 —

Private education loans 93,404 17,543

Nelnet Bank loans 190,571 17,543

Accrued interest receivable 834,989 794,611

Loan discount, net of unamortized loan premiums and deferred origination costs ( 23,896 ) ( 9,908 )

( 9,091 ) ( 9,908 )

Allowance for loan losses:

Non-Nelnet Bank:

Federally insured loans ( 120,802 ) ( 128,590 )

Private education loans ( 19,403 ) ( 19,529 )

Private education loans - Nelnet Bank ( 744 ) ( 323 )

Consumer loans ( 4,702 ) ( 27,256 )

Non-Nelnet Bank allowance for loan losses ( 144,907 ) ( 175,375 )

Federally insured loans ( 245 ) —

Private education loans ( 567 ) ( 323 )

Nelnet Bank allowance for loan losses ( 812 ) ( 323 )

$ 20,187,670 20,185,656

On May 14, 2021, the Company sold $ 77.4 million (par value) of consumer loans to an unrelated third party who securitized such loans.

The Company recognized a gain of $ 15.3 million (pre-tax) as part of this transaction.

As partial consideration received for the consumer loans sold, the Company received a 24.5 percent residual interest in the consumer loan securitization that is included in "investments" on the Company's consolidated balance sheet.

Activity in the Allowance for Loan Losses

1 unchanged sentence

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

Three months ended June 30, 2021

Non-Nelnet Bank

Federally insured loans $ 121,846 — ( 397 ) ( 1,172 ) — 525 — 120,802

Private education loans 20,670 — ( 1,004 ) ( 403 ) 139 — 1 19,403

Private education loans - Nelnet Bank 323 — 422 — — — ( 1 ) 744

Consumer loans 14,134 — 1,706 ( 1,464 ) 235 — ( 9,909 ) 4,702

Federally insured loans — — 245 — — — — 245

Private education loans 744 — ( 176 ) — — — ( 1 ) 567

$ 157,394 — 374 ( 3,039 ) 374 525 ( 9,909 ) 145,719

Three months ended March 31, 2020

Three months ended June 30, 2020

Non-Nelnet Bank

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

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.

Six months ended June 30, 2021

Non-Nelnet Bank

Federally insured loans $ 128,590 — ( 7,880 ) ( 1,233 ) — 1,325 — 120,802

Private education loans 19,529 — 427 ( 896 ) 341 — 2 19,403

Consumer loans 27,256 — ( 9,712 ) ( 3,414 ) 481 — ( 9,909 ) 4,702

Federally insured loans — — 245 — — — — 245

Private education loans 323 — 246 — — — ( 2 ) 567

$ 175,698 — ( 16,674 ) ( 5,543 ) 822 1,325 ( 9,909 ) 145,719

Six months ended June 30, 2020

Non-Nelnet Bank

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

a) During the three months ended June 30, 2021 and 2020, and six months ended June 30, 2021 and 2020, the Company acquired $ 34.7 million (par value), $ 292.7 million (par value), $ 88.7 million (par value), and $ 583.9 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.

2 unchanged sentences

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.

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.

During the second quarter of 2021, the Company recorded a negative provision for loan losses for its federally insured and private education loan portfolios due to management's estimate of certain continued improved economic conditions as of June 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2021.

These amounts were partially offset due to the Company establishing an initial allowance for federally insured and private education loans acquired during the period.

The Company recorded a provision for loan losses on its consumer loan portfolio during the second quarter of 2021 as a result of establishing an initial allowance for consumer loans acquired during the period, which was partially offset by management's estimate of certain continued improved economic conditions as of June 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2021.

Loan Status and Delinquencies

3 unchanged sentences

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:

As of June 30, 2021 As of December 31, 2020 As of June 30, 2020

Federally insured loans - Non-Nelnet Bank:

Loans in-school/grace/deferment $ 955,227 5.0 % $ 1,036,028 5.4 % $ 936,746 4.8 %

13 unchanged sentences

Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 19,624,906 $ 19,777,531 $ 20,077,399

Private education loans:

Private education loans - Non-Nelnet Bank:

Loans in-school/grace/deferment $ 10,195 2.9 % $ 5,049 1.6 % $ 3,971 1.3 %

8 unchanged sentences

Accrued interest receivable 2,360 2,131 1,961

Loan premium, net of unaccreted discount 2,673 2,691 ( 138 )

Loan discount, net of unamortized premiums ( 1,547 ) 2,691 813

Allowance for loan losses ( 19,403 ) ( 19,529 ) ( 25,535 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 331,504 $ 305,882 $ 270,457

Private education loans - Nelnet Bank:

Loans in-school/grace/deferment $ 82 0.1 % $ — — %

Loans in forbearance 29 — 29 0.2

As of June 30, 2021 As of December 31, 2020 As of June 30, 2020

Consumer loans - Non-Nelnet Bank:

Loans in deferment $ 38 0.1 % $ 829 0.8 % $ 3,274 2.2 %

Loans in repayment status:

4 unchanged sentences

Total loans in repayment 42,729 99.9 100.0 % 108,517 99.2 100.0 % 146,034 97.8 % 100.0 %

Total private education loans 79,231 100.0 % 17,543 100.0 %

Total consumer loans 42,767 100.0 % 109,346 100.0 % 149,308 100.0 %

Accrued interest receivable 328 1,001 1,446

Loan premium, net of unaccreted discount 999 266

Loan premium 377 1,640 1,344

Allowance for loan losses ( 4,702 ) ( 27,256 ) ( 39,081 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 79,611 $ 17,512

Consumer loans:

Loans in deferment $ 306 0.3 % $ 829 0.8 % $ —

Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 38,770 $ 84,731 $ 113,017

Federally insured loans - Nelnet Bank:

Loans in-school/grace/deferment $ 103 0.1 %

Loans in forbearance 1,026 1.1

Loans in repayment status:

2 unchanged sentences

Loans delinquent 61-90 days 43 0.1

Loans delinquent 91-120 days — —

Loans delinquent 121-270 days — —

Loans delinquent 271 days or greater — —

Total loans in repayment 96,038 98.8 100.0 %

Total consumer loans 110,792 100.0 % 109,346 100.0 % 145,803

Total federally insured loans 97,167 100.0 %

Accrued interest receivable 1,179

1 unchanged sentence

Allowance for loan losses ( 245 )

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.

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:

Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 98,130

Private education loans - Nelnet Bank:

Loans in-school/grace/deferment $ 82 0.1 % $ — — %

8 unchanged sentences

Accrued interest receivable 149 26

Loan premium, net of unaccreted discount 2,673

Deferred origination costs 1,374 266

Allowance for loan losses ( 567 ) ( 323 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 94,360 $ 17,512

Private education loans - Nelnet Bank:

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 June 30, 2021, 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 June 30, 2021 based on year of origination.

Effective July 1, 2010, no new loan originations can be made under the Federal Family Education Loan Program (the "FFEL Program" or "FFELP") and all new federal loan originations must be made under the Federal Direct Loan Program.

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

Six months ended June 30, 2021 2020 2019 2018 2017 Prior years Total

Private education loans - Non-Nelnet Bank:

Loans in school/grace/deferment $ 810 2,306 4,744 — — 2,335 10,195

8 unchanged sentences

Accrued interest receivable 2,360

Loan premium, net of unaccreted discount 999

Loan discount, net of unamortized premiums ( 1,547 )

Allowance for loan losses ( 19,403 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 331,504

Consumer loans:

Consumer loans - Non-Nelnet Bank:

Loans in deferment $ — — 30 8 — — 38

10 unchanged sentences

Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 38,770

Private education loans - Nelnet Bank:

Loans in school/grace/deferment $ 82 — — — — — 82

Loans in forbearance 133 — — — — — 133

Loans in repayment status:

Loans current 78,817 14,372 — — — — 93,189

Loans delinquent 31-60 days — — — — — — —

Loans delinquent 61-90 days — — — — — — —

Loans delinquent 91 days or greater — — — — — — —

Total loans in repayment 78,817 14,372 — — — — 93,189

Total private education loans $ 79,032 14,372 — — — — 93,404

Accrued interest receivable 149

Deferred origination costs 1,374

Allowance for loan losses ( 567 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 94,360

Bonds and Notes Payable

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

As of March 31, 2021

As of June 30, 2021

Interest rate

19 unchanged sentences

Unsecured line of credit 85,000 1.58 % 12/16/24

Other borrowings 118,537 0.81 % / 1.86 %

Participation agreement 132,078 0.80 % 5/4/22

Repurchase agreements 255,323 0.80 % - 1.05 %

9/24/21 - 12/20/23

Secured line of credit 5,000 2.09 % 5/30/22

Discount on bonds and notes payable and debt issuance costs ( 219,774 )

20 unchanged sentences

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

Participation agreement 118,558 0.84 % 5/4/21

Secured line of credit 5,000 1.90 % 5/30/22

Discount on bonds and notes payable and debt issuance costs ( 238,123 )

1 unchanged sentence

FFELP Warehouse Facilities

The Company funds the majority of its FFELP loan acquisitions using its FFELP warehouse facilities.

The Company funds a portion 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

As of June 30, 2021, the Company had two FFELP warehouse facilities as summarized below.

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

Maximum financing amount $ 310,000 50,000 360,000

$ 260,000 50,000 310,000

Amount outstanding 290,539 10,605 301,144

Amount available $ 19,461 39,395 58,856

Expiration of liquidity provisions

May 20, 2021 February 26, 2022

Final maturity date May 20, 2022 February 26, 2024

Expiration of liquidity provisions November 22, 2021 February 26, 2022

Final maturity date November 22, 2022 February 26, 2024

Advanced as equity support $ 24,136 666 24,802

(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.

(a) On May 20, 2021, the Company extended the expiration of liquidity provisions and the maturity date for this warehouse facility an additional six months to November 22, 2021 and November 22, 2022, respectively.

On June 28, 2021, the maximum financing amount for this warehouse facility increased to $ 770.0 million, and on June 30, 2021 the maximum financing amount decreased to $ 310.0 million.

(b) 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.

Asset-Backed Securitizations

The following table summarizes the asset-backed securitization transaction completed by the Company during the first six months of 2021.

Date securities issued 6/30/21

Total original principal amount $ 797,000

Class A senior notes:

Total principal amount $ 781,000

Cost of funds 1-month LIBOR plus 0.50 %

Final maturity date 7/25/69

Class B subordinated notes:

Total principal amount $ 16,000

Cost of funds 1-month LIBOR plus 1.25 %

Final maturity date 7/25/69

Private Education Loan Warehouse Facility

1 unchanged sentence

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.

As of June 30, 2021, $ 140.8 million was outstanding under this warehouse facility and $ 34.2 million was available for future funding.

The facility has an advance rate of 80 to 90 percent and, as of June 30, 2021, the Company had $ 15.0 million advanced as equity support under this facility.

Consumer Loan Warehouse Facility

3 unchanged sentences

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.

As of June 30, 2021, $ 85.0 million was outstanding on the line of credit and $ 370.0 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.

Participation Agreement

As of June 30, 2021, $ 132.1 million of FFELP 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.

The Company can participate FFELP 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.

The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its discretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities.

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

Repurchase Agreements

On May 3, 2021, the Company entered into a repurchase agreement with a non-affiliated third party, the proceeds of which are collateralized by private education loan asset-backed securities.

The repurchase agreement has maturity dates of November 20, 2023 and December 20, 2023, or earlier if either party provides 180 days’ prior written notice.

The Company incurs interest on amounts outstanding based on three-month LIBOR plus an applicable spread, and is subject to margin deficit payment requirements if the fair value of the securities subject to the repurchase agreement is less than the original purchase price of such securities on any scheduled reset date.

Included in “bonds and notes payable” as of June 30, 2021 was $ 228.4 million subject to this repurchase agreement.

On June 23, 2021, the Company entered into an additional repurchase agreement with another non-affiliated third party, the proceeds of which are collateralized by private education loan asset-backed securities.

The repurchase agreement has a maturity date of September 24, 2021.

The Company incurs interest on amounts outstanding based on three-month LIBOR plus an applicable spread, and could be subject to margin deficit payment requirements if the fair value of the securities subject to the repurchase agreement is less than the original purchase price of such securities and the counter-party provides notice requiring such payment.

Included in "bonds and notes payable" as of June 30, 2021 was $ 26.9 million subject to this repurchase agreement.

See note 5 for additional information about the private education loan asset-backed securities investments serving as collateral for these repurchase agreements.

Accrued Interest Liability

1 unchanged sentence

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.

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 income.

Derivative Financial Instruments

1 unchanged sentence

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.

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").

A tabular presentation of such derivatives outstanding as of June 30, 2021 and December 31, 2020 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of June 30, 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

June 30, 2021 December 31, 2020

2021 $ — 250,000

2 unchanged sentences

2024 1,750,000 1,750,000

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.

2026 1,150,000 1,150,000

2027 250,000 250,000

$ 5,900,000 6,150,000

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 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

As of June 30, 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 $ 100,000 2.95 % $ 600,000 2.15 %

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

2022 500,000 0.94 500,000 0.94

2024 (c) 2,500,000 0.35 2,000,000 0.32

2023 900,000 0.62 900,000 0.62

2024 2,500,000 0.35 2,000,000 0.32

2025 500,000 0.35 500,000 0.35

2026 150,000 0.85 — —

2031 100,000 1.53 — —

$ 4,750,000 0.56 % $ 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.

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,

2021 2020 2021 2020

1:3 basis swaps $ ( 221 ) 7,129 ( 240 ) 9,242

4 unchanged sentences

Interest rate swaps - floor income hedges ( 509 ) ( 1,039 ) 35,501 ( 23,199 )

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 )

Total change in fair value - (expense) income ( 1,615 ) ( 3,911 ) 37,194 ( 24,513 )

Derivative market value adjustments and derivative settlements, net - (expense) income $ ( 6,989 ) 1,910 27,516 ( 14,455 )

Private Education Loan Investment

In December of 2020, Wells Fargo announced the sale of its approximately $ 10.0 billion portfolio of private education loans representing approximately 445,000 borrowers.

The Company has entered into a joint venture with other investors to acquire the loans, and under the joint venture the Company has an approximately 8 percent interest in the loans.

In conjunction with the sale, the Company was selected as servicer of the portfolio.

During March and throughout the second quarter of 2021, the borrowers were converted to the Company's servicing platform.

The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility.

The Company is accounting for its membership interests in this partnership under the equity method of accounting and as of June 30, 2021, such investment was $ 8.3 million.

This investment is included in “venture capital and funds – equity method” in the table below.

On May 20, 2021 and June 30, 2021, the joint venture completed asset-backed securitization transactions to permanently finance a total of $ 5.8 billion of the private education loans purchased by the joint venture.

The Company is accounting for its approximately 8 percent residual interest in these securitizations as held-to-maturity beneficial interest investments.

These investments are shown as “beneficial interest in private education loan securitizations” in the table below.

On behalf of the joint venture, the Company is the sponsor and administrator for these loan securitizations.

As sponsor, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement.

The bonds purchased to satisfy the risk retention requirement are included in “private education loan asset-backed securities – available for sale” in the table below and as of June 30, 2021, the fair value of these bonds was $ 307.3 million.

The Company must retain these investment securities until the latest of (i) two years from the closing date of the securitization, (ii) the date the aggregate outstanding principal balance of the loans in the securitization is 33 % or less of the initial loan balance, and (iii) the date the aggregate outstanding principal balance of the bonds is 33 % or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party.

The Company entered into repurchase agreements with third-parties, the proceeds of which were used to purchase a portion of the asset-backed investments, and such investments serve as collateral on the repurchase obligations.

See note 3 for additional information about these repurchase agreements.

A summary of the Company's investments follows:

As of March 31, 2021 As of December 31, 2020

As of June 30, 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

FFELP loan asset-backed securities- available-for-sale (a) $ 357,935 13,498 — 371,433 338,475 8,040 ( 13 ) 346,502

Private education loan asset-backed securities - available-for-sale (b) 306,395 898 — 307,293 — — — —

Other debt securities - available-for-sale 2,100 1 — 2,101 2,103 2 — 2,105

Equity securities 57,652 15,336 ( 3,865 ) 69,123 36,227 8,768 ( 2,954 ) 42,041

2 unchanged sentences

Venture capital and funds:

Measurement alternative 145,440 144,795

Equity method (b) 59,583 14,018

Measurement alternative (c) 150,857 144,795

Equity method 26,307 14,018

Other 883 894

1 unchanged sentence

Equity method 46,748 50,291

Notes receivable (c) 17,344 847

Notes receivable 3,500 847

Total real estate 50,248 51,138

4 unchanged sentences

Solar (f) ( 60,862 ) ( 30,373 )

Beneficial interest in private education loan securitizations (g) 36,079 —

Beneficial interest in federally insured loan securitizations (g) 27,955 30,377

4 unchanged sentences

Total investments $ 1,267,957 $ 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.

(a) As of June 30, 2021, $ 132.1 million (par value) of FFELP loan asset-backed securities were subject to participation interests held by Union Bank.

See note 3 for additional information.

(b) As of June 30, 2021, a total of $ 293.9 million (par value) of private education loan asset-backed securities were subject to repurchase agreements with third-parties.

See note 3 for additional information.

(doing business as “Hudl”) that is included in “venture capital and funds” in the above table.

On May 27, 2021, the Company made an additional equity investment of approximately $ 5 million in Hudl, as one of the participants in an equity raise completed by Hudl.

Prior to the additional 2021 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.

For accounting purposes, the May 2021 equity raise transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities and the price was contractually agreed to during Hudl's prior May 2020 equity raise.

Accordingly, the Company did not adjust its carrying value of its Hudl investment to the May 2021 transaction value.

As of June 30, 2021, the carrying amount of the Company's investment in Hudl is $ 133.9 million.

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

(d) The Company accounts for its voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "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

the HLBV method using a balance sheet approach.

The Company applies 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.

2 unchanged sentences

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.

During the three and six months ended June 30, 2021, the Company recognized income of $ 1.1 million and losses of $ 21.1 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment.

In the second quarter of 2021, the Company revised its accounting policy to correct for an error in its method of applying the HLBV method of accounting for its investment in ALLO.

Previously, the Company calculated Nelnet’s liquidation basis in ALLO under the HLBV method by using Nelnet’s proportionate share of tax losses and amortizing any basis difference using tax methods.

The Company has determined that Nelnet’s liquidation basis in ALLO under the HLBV method should equal ALLO’s GAAP losses and amortizing any basis difference using book lives.

During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of this error that resulted in a $ 14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to other income (a $ 10.6 million after tax, or $ 0.27 per share, increase to net income).

The Company concluded this error had an immaterial impact on 2021 results as well as the results for prior periods.

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.

The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP.

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.

The Company currently anticipates such losses in the second half of 2021 to approximate the amount of total losses incurred during the first half of 2021.

Income and losses from the Company's investment in ALLO are included in "other" in "other income/expense" on the consolidated statements of income.

(e) As of June 30, 2021, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 129.7 million and $ 3.6 million, respectively.

The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 percent.

During the three and six months ended June 30, 2021, the Company recognized income on its ALLO preferred membership interests of $ 2.0 million and $ 4.3 million, respectively, that is included in "other" in "other income/expense" on the consolidated statements of income.

On January 19, 2021, ALLO obtained 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.

Under 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.

As of June 30, 2021, the Company has funded a total of $ 162.0 million in solar investments, which includes $ 19.5 million funded by syndication partners.

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 solar investment balance at June 30, 2021 represents total tax credits earned on solar projects placed in service through June 30, 2021 being larger than total payments made by the Company on such projects.

The Company is committed to fund an additional $ 68.7 million on these projects, of which $ 34.9 million will be funded by syndication partners.

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 three months ended June 30, 2021 and 2020, the Company recognized pre-tax losses and income of $ 2.3 million and $ 2.0 million, respectively, and for the six months ended June 30, 2021 and 2020, the Company recognized pre-tax losses of $ 4.0 million and $ 0.8 million, respectively, on its solar investments.

These losses and income are included in "other" in "other income/expense" on the consolidated statements of income.

(g) The Company has purchased partial ownership in certain private education, federally insured, and consumer loan securitizations.

As of the latest remittance reports filed by the various trusts prior to June 30, 2021, the Company's ownership correlates to approximately $ 460 million, $ 495 million, and $ 280 million of private education, 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.

1 unchanged sentence

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.

Intangible Assets

1 unchanged sentence

Weighted average remaining useful life as of

March 31, 2021 (months)

March 31, 2021 December 31, 2020

June 30, 2021 (months)

June 30, 2021 December 31, 2020

Amortizable intangible assets, net:

5 unchanged sentences

Total - amortizable intangible assets, net 100 $ 58,464 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 recorded amortization expense on its intangible assets of $ 8.3 million and $ 7.4 million during the three months ended June 30, 2021 and 2020, respectively, and $ 16.6 million and $ 14.8 million during the six months ended June 30, 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

As of June 30, 2021, the Company estimates it will record amortization expense as follows:

2021 (July 1 - December 31) $ 6,435

2026 and thereafter 20,159

The carrying amount of goodwill as of December 31, 2020 and March 31, 2021 by reportable operating segment was as follows:

The carrying amount of goodwill as of June 30, 2021 and December 31, 2020 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

2 unchanged sentences

Property and equipment consisted of the following:

Useful life March 31, 2021 December 31, 2020

Useful life June 30, 2021 December 31, 2020

Computer equipment and software 1 - 5 years

11 unchanged sentences

Total property and equipment, net $ 128,527 123,527

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 .

The Company recorded depreciation expense on its property and equipment of $ 12.0 million and $ 22.0 million during the three months ended June 30, 2021 and 2020, respectively, and $ 23.8 million and $ 42.3 million during the six months ended June 30, 2021 and 2020, 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 income (loss) attributable to Nelnet, Inc.

Net income attributable to Nelnet, Inc.

$ 82,479 1,388 83,867 85,243 1,239 86,482

1 unchanged sentence

Earnings per share - basic and diluted $ 2.16 2.16 2.16 2.21 2.21 2.21

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.

$ 204,209 3,256 207,465 45,305 645 45,950

Weighted-average common shares outstanding - basic and diluted 38,065,869 607,033 38,672,902 39,023,624 555,835 39,579,459

Earnings per share - basic and diluted $ 5.36 5.36 5.36 1.16 1.16 1.16

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, 2021

Three months ended June 30, 2021

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

3 unchanged sentences

Interest expense 23 — — 48,670 392 1,093 ( 187 ) 49,991

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 7 210 — 81,295 1,649 431 — 83,592

Less provision (negative provision) for loan losses — — — 305 69 — — 374

Net interest income after provision for loan losses 7 210 — 80,990 1,580 431 — 83,218

26 unchanged sentences

$ 11,790 13,096 — 59,976 ( 204 ) ( 791 ) — 83,867

Total assets as of March 31, 2021 $ 191,910 372,315 — 20,367,532 296,908 1,148,560 ( 210,017 ) 22,167,208

Total assets as of June 30, 2021 $ 205,214 424,079 — 20,783,755 407,611 1,489,212 ( 281,008 ) 23,028,863

(a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements.

4 unchanged sentences

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.

Three months ended March 31, 2020

Three months ended June 30, 2020

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

Generation and

Nelnet Bank (a) Corporate and Other

Activities Eliminations Total

Management Nelnet Bank (a) Corporate and Other Activities Eliminations Total

Total interest income $ 52 420 — 150,583 — 1,196 ( 368 ) 151,883

Interest expense 28 21 — 84,489 — 1,078 ( 368 ) 85,248

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 24 399 — 66,094 — 118 — 66,635

Less provision (negative provision) for loan losses — — — 2,999 — — — 2,999

Net interest income after provision for loan losses 24 399 — 63,095 — 118 — 63,636

26 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

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

(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.

Accordingly, there are no operating results for the Nelnet Bank operating segment in the three months ended June 30, 2020.

Six months ended June 30, 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 $ 63 473 — 256,367 3,418 2,770 ( 405 ) 262,686

Interest expense 47 — — 75,620 586 1,916 ( 405 ) 77,764

Net interest income 16 473 — 180,747 2,832 854 — 184,922

Less provision (negative provision) for loan losses — — — ( 17,165 ) 491 — — ( 16,674 )

Net interest income after provision for loan losses 16 473 — 197,912 2,341 854 — 201,596

Other income/expense:

Loan servicing and systems revenue 223,611 — — — — — — 223,611

Intersegment revenue 16,748 6 — — — — ( 16,754 ) —

Education technology, services, and payment processing revenue — 171,960 — — — — — 171,960

Communications revenue — — — — — — — —

Other 1,814 — — 2,760 26 13,716 — 18,317

Gain on sale of loans — — — 15,271 — — — 15,271

Impairment expense and provision for beneficial interests, net — — — 2,436 — ( 500 ) — 1,936

Derivative settlements, net — — — ( 9,678 ) — — — ( 9,678 )

Derivative market value adjustments, net — — — 37,194 — — — 37,194

Total other income/expense 242,173 171,966 — 47,983 26 13,216 ( 16,754 ) 458,611

Cost of services:

Cost to provide education technology, services, and payment processing services — 48,728 — — — — — 48,728

Cost to provide communications services — — — — — — — —

Total cost of services — 48,728 — — — — — 48,728

Operating expenses:

Salaries and benefits 134,846 53,035 — 1,051 3,065 42,761 — 234,759

Depreciation and amortization 16,166 6,027 — — — 18,225 — 40,419

Other expenses 26,557 9,259 — 7,344 781 25,346 — 69,286

Intersegment expenses, net 33,024 7,184 — 16,976 40 ( 40,470 ) ( 16,754 ) —

Total operating expenses 210,593 75,505 — 25,371 3,886 45,862 ( 16,754 ) 344,464

Income (loss) before income taxes 31,596 48,206 — 220,524 ( 1,519 ) ( 31,792 ) — 267,015

Income tax (expense) benefit (b) ( 7,583 ) ( 11,570 ) — ( 52,926 ) 351 10,630 — ( 61,098 )

Net income (loss) 24,013 36,636 — 167,598 ( 1,168 ) ( 21,162 ) — 205,917

Net loss (income) attributable to noncontrolling interests — — — — — 1,548 — 1,548

Net income (loss) attributable to Nelnet, Inc.

$ 24,013 36,636 — 167,598 ( 1,168 ) ( 19,614 ) — 207,465

Total assets as of June 30, 2021 $ 205,214 424,079 — 20,783,755 407,611 1,489,212 ( 281,008 ) 23,028,863

(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.

Six months ended June 30, 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 $ 369 2,411 — 336,509 — 2,751 ( 967 ) 341,074

Interest expense 73 38 — 217,737 — 2,485 ( 967 ) 219,366

Net interest income 296 2,373 — 118,772 — 266 — 121,708

Less provision (negative 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

Other 4,544 — 745 3,947 — 59,172 — 68,408

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

Impairment expense and provision for beneficial interests, net — — — ( 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 loss (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

(a) Nelnet Bank launched operations on November 2, 2020.

Accordingly, there are no operating results for the Nelnet Bank operating segment in the six months ended June 30, 2020.

Disaggregated Revenue

1 unchanged sentence

Loan Servicing and Systems

Three months ended March 31,

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

2021 2020 2021 2020

Government servicing - Nelnet $ 35,376 37,360 70,248 76,010

6 unchanged sentences

Education Technology, Services, and Payment Processing

Three months ended March 31,

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

2021 2020 2021 2020

Tuition payment plan services $ 26,538 22,947 56,088 54,534

Payment processing 25,008 21,168 58,046 52,910

33,038 31,742

Education technology and services 24,733 14,927 57,055 34,980

32,322 20,054

Other 423 262 771 555

Education technology, services, and payment processing revenue $ 76,702 59,304 171,960 142,979

$ 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,

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

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

2021 2020 2021 2020

Income/gains from investments, net $ 15,591 51,111 24,089 50,085

Investment advisory services 2,697 2,802

ALLO preferred return 2,020 — 4,342 —

Management fee revenue 1,113 2,630

Investment advisory services 1,145 922 3,842 3,724

Income (loss) from ALLO voting membership interest investment 1,094 — ( 21,125 ) —

Borrower late fee income 744 319 1,184 3,506

Loss from ALLO voting membership interests investment ( 22,219 ) —

Loss from solar investments ( 1,679 ) ( 2,839 )

Management fee revenue 701 1,914 1,814 4,544

(Loss) income from solar investments ( 2,302 ) 2,040 ( 3,982 ) ( 799 )

Other 3,928 3,821 8,153 7,348

3 unchanged sentences

("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.

Revenue earned by Nelnet Servicing related to this contract was $ 35.4 million and $ 37.4 million for the three months ended June 30, 2021 and 2020, and $ 70.2 million and $ 76.0 million for the six months ended June 30, 2021 and 2020, respectively.

Revenue earned by Great Lakes related to this contract was $ 43.9 million and $ 45.2 million for the three months ended June 30, 2021 and 2020, and $ 87.2 million and $ 91.7 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, Nelnet Servicing and Great Lakes service 5.6 million and 7.6 million borrowers, respectively, under their contracts with the Department.

On June 9, 2021, Nelnet Servicing and Great Lakes each received Modifications of Contract with an effective date of June 15, 2021 from the Department pursuant to which the Department exercised its option to extend the student loan servicing contracts between the Department and each of Nelnet Servicing and Great Lakes from June 14, 2021 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, as amended by the modifications, 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.

12 unchanged sentences

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.

On January 9, 2021, the Department suspended the ISS solicitation, and on June 25, 2021, the Department cancelled the ISS solicitation.

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

As of June 30, 2021 As of December 31, 2020

Level 1 Level 2 Total Level 1 Level 2 Total

Student loan asset-backed debt securities - available-for-sale $ — 379,110 379,110 — 348,504 348,504

FFELP loan asset-backed debt securities - available-for-sale $ — 371,433 371,433 — 346,502 346,502

Private education loan asset-backed debt securities - available-for-sale — 307,293 307,293 — — —

Other debt securities - available-for-sale 100 2,001 2,101 103 2,002 2,105

Equity securities (a) 34,550 — 34,550 10,114 — 10,114

Equity securities measured at net asset value (b) 34,573 31,927

Debt securities - available-for-sale 103 — 103 103 — 103

Total investments 34,650 680,727 749,950 10,217 348,504 390,648

Total assets $ 34,650 680,727 749,950 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.

(a) As of June 30, 2021, $ 14.8 million and $ 19.8 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.

1 unchanged sentence

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

As of June 30, 2021

Fair value Carrying value Level 1 Level 2 Level 3

29 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