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 June 30, 2021 December 31, 2020 Assets: Loans and accrued interest receivable (net of allowance for loan losses of $ 145,719 and $ 175,698 , respectively) $ 20,187,670 20,185,656 Cash and cash equivalents: Cash and cash equivalents - not held at a related party 37,243 33,292 Cash and cash equivalents - held at a related party 175,746 87,957 Total cash and cash equivalents 212,989 121,249 Investments 1,267,957 992,940 Restricted cash 616,711 553,175 Restricted cash - due to customers 247,673 283,971 Accounts receivable (net of allowance for doubtful accounts of $ 1,405 and $ 1,824 , respectively) 85,884 76,460 Goodwill 142,092 142,092 Intangible assets, net 58,464 75,070 Property and equipment, net 128,527 123,527 Other assets 80,896 92,020 Total assets $ 23,028,863 22,646,160 Liabilities: Bonds and notes payable $ 19,381,835 19,320,726 Accrued interest payable 4,922 28,701 Bank deposits 202,841 54,633 Other liabilities 307,474 312,280 Due to customers 303,173 301,471 Total liabilities 20,200,245 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 27,494,942 shares and 27,193,154 shares, respectively 275 272 Class B, convertible, $ 0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,054,171 shares and 11,155,571 shares, respectively 111 112 Additional paid-in capital 10,158 3,794 Retained earnings 2,812,315 2,621,762 Accumulated other comprehensive earnings, net 10,941 6,102 Total Nelnet, Inc. shareholders' equity 2,833,800 2,632,042 Noncontrolling interests ( 5,182 ) ( 3,693 ) Total equity 2,828,618 2,628,349 Total liabilities and equity $ 23,028,863 22,646,160 Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities: Loans and accrued interest receivable $ 19,935,821 20,132,996 Restricted cash 554,638 499,223 Bonds and notes payable ( 19,166,839 ) ( 19,355,375 ) Accrued interest payable and other liabilities ( 82,485 ) ( 83,127 ) Net assets of consolidated education and other lending variable interest entities $ 1,241,135 1,193,717 See accompanying notes to consolidated financial statements. 2 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share data) (unaudited) Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020 Interest income: Loan interest $ 122,005 146,140 246,123 327,933 Investment interest 11,578 5,743 16,563 13,141 Total interest income 133,583 151,883 262,686 341,074 Interest expense: Interest on bonds and notes payable and bank deposits 49,991 85,248 77,764 219,366 Net interest income 83,592 66,635 184,922 121,708 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 Other income/expense: Loan servicing and systems revenue 112,094 111,042 223,611 223,778 Education technology, services, and payment processing revenue 76,702 59,304 171,960 142,979 Communications revenue — 18,998 — 37,179 Other 22,921 60,127 18,317 68,408 Gain on sale of loans 15,271 — 15,271 18,206 Impairment expense and provision for beneficial interests, net ( 500 ) ( 332 ) 1,936 ( 34,419 ) Derivative market value adjustments and derivative settlements, net ( 6,989 ) 1,910 27,516 ( 14,455 ) Total other income/expense 219,499 251,049 458,611 441,676 Cost of services: Cost to provide education technology, services, and payment processing services 21,676 15,376 48,728 38,181 Cost to provide communications services — 5,743 — 11,325 Total cost of services 21,676 21,119 48,728 49,506 Operating expenses: Salaries and benefits 118,968 119,247 234,759 239,125 Depreciation and amortization 20,236 29,393 40,419 57,041 Other expenses 32,587 37,052 69,286 80,439 Total operating expenses 171,791 185,692 344,464 376,605 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 attributable to Nelnet, Inc. $ 83,867 86,482 207,465 45,950 Earnings per common share: Net income attributable to Nelnet, Inc. shareholders - basic and diluted $ 2.16 2.21 5.36 1.16 Weighted average common shares outstanding - basic and diluted 38,741,486 39,203,404 38,672,902 39,579,459 See accompanying notes to consolidated financial statements. 3 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (unaudited) 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 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 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 attributable to Nelnet, Inc. $ 85,786 88,856 212,304 46,211 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 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. 5 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 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 income — — — — — — — 45,950 — 895 46,845 Other comprehensive income — — — — — — — — 261 — 261 Distribution to noncontrolling interests — — — — — — — — — ( 589 ) ( 589 ) Cash dividends on Class A and Class B common stock - $ 0.40 per share — — — — — — — ( 15,679 ) — — ( 15,679 ) Issuance of common stock, net of forfeitures — 172,275 — — 1 — 4,600 — — — 4,601 Compensation expense for stock based awards — — — — — — 3,595 — — — 3,595 Repurchase of common stock — ( 1,497,934 ) — — ( 15 ) — ( 12,043 ) ( 56,469 ) — — ( 68,527 ) Impact of adoption of new accounting standard — — — — — — — ( 18,867 ) — — ( 18,867 ) Conversion of common stock — 100,000 ( 100,000 ) — 1 ( 1 ) — — — — — Acquisition of noncontrolling interest — — — — — — — ( 1,250 ) — ( 750 ) ( 2,000 ) Balance as of June 30, 2020 — 27,232,836 11,171,609 $ — 272 112 1,867 2,331,312 3,233 3,990 2,340,786 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 — — — — — — — — — 6,888 6,888 Net income (loss) — — — — — — — 207,465 — ( 1,548 ) 205,917 Other comprehensive income — — — — — — — — 4,839 — 4,839 Distribution to noncontrolling interests — — — — — — — — — ( 6,829 ) ( 6,829 ) Cash dividends on Class A and Class B common stock - $ 0.44 per share — — — — — — — ( 16,912 ) — — ( 16,912 ) Issuance of common stock, net of forfeitures — 231,955 — — 2 — 3,913 — — — 3,915 Compensation expense for stock based awards — — — — — — 4,859 — — — 4,859 Repurchase of common stock — ( 31,567 ) — — — — ( 2,408 ) — — — ( 2,408 ) Conversion of common stock — 101,400 ( 101,400 ) — 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. 6 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited) Six months ended June 30, 2021 2020 Net income attributable to Nelnet, Inc. $ 207,465 45,950 Net (loss) income attributable to noncontrolling interests ( 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 Loan discount accretion ( 14,606 ) ( 19,196 ) (Negative provision) provision for loan losses ( 16,674 ) 79,297 Derivative market value adjustments ( 37,194 ) 24,513 Proceeds from (payments to) clearinghouse - initial and variation margin, net 38,440 ( 24,453 ) Gain from sale of loans ( 15,271 ) ( 18,206 ) 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, net ( 1,936 ) 34,419 Increase in loan and investment accrued interest receivable ( 40,488 ) ( 123,276 ) (Increase) decrease in accounts receivable ( 9,446 ) 41,608 Decrease in other assets, net 32,241 22,992 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, net ( 13,663 ) ( 26,817 ) Decrease in the carrying amount of lease liability ( 3,288 ) ( 4,829 ) 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: Purchases and originations of loans ( 1,040,573 ) ( 872,987 ) Purchases of loans from a related party ( 20,847 ) ( 75,118 ) Net proceeds from loan repayments, claims, and capitalized interest 1,047,645 1,800,286 Proceeds from sale of loans 65,224 90,465 Purchases of available-for-sale securities ( 363,485 ) ( 112,675 ) Proceeds from sales of available-for-sale securities 38,511 23,372 Proceeds from and sale of beneficial interest in loan securitizations 19,077 21,765 Purchases of other investments ( 128,011 ) ( 117,598 ) Proceeds from other investments 167,821 6,770 Purchases of property and equipment ( 28,784 ) ( 46,994 ) Net cash (used in) provided by investing activities $ ( 243,422 ) 717,286 7 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Six months ended June 30, 2021 2020 Cash flows from financing activities: Payments on bonds and notes payable $ ( 1,073,523 ) ( 2,073,710 ) Proceeds from issuance of bonds and notes payable 1,114,821 1,252,360 Payments of debt issuance costs ( 3,035 ) ( 5,863 ) Increase in bank deposits, net 148,208 — Dividends paid ( 16,912 ) ( 15,679 ) Repurchases of common stock ( 2,408 ) ( 68,527 ) 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 provided by (used in) financing activities 174,897 ( 912,971 ) Effect of exchange rate changes on cash ( 108 ) — 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 Cash, cash equivalents, and restricted cash, end of period $ 1,077,373 921,315 Supplemental disclosures of cash flow information: Cash disbursements made for interest $ 78,904 209,170 Cash disbursements made for income taxes, net of refunds and credits received (a) $ 14,229 7,949 Cash disbursements made for operating leases $ 4,096 5,442 Non-cash operating, investing, and financing activity: ROU assets obtained in exchange for lease obligations $ 823 3,265 Receipt of beneficial interest in consumer loan securitizations $ 19,280 38,490 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 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 Restricted cash 616,711 553,175 585,236 650,939 Restricted cash - due to customers 247,673 283,971 268,539 437,756 Cash, cash equivalents, and restricted cash $ 1,077,373 958,395 921,315 1,222,601 See accompanying notes to consolidated financial statements. 8 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 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 ("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 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"). 2. Loans and Accrued Interest Receivable and Allowance for Loan Losses Loans and accrued interest receivable consisted of the following: As of As of June 30, 2021 December 31, 2020 Non-Nelnet Bank: Federally insured student loans: Stafford and other $ 4,420,716 4,383,000 Consolidation 14,518,148 14,746,173 Total 18,938,864 19,129,173 Private education loans 350,094 320,589 Consumer loans 42,767 109,346 Non-Nelnet Bank loans 19,331,725 19,559,108 Nelnet Bank: 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 ) Allowance for loan losses: Non-Nelnet Bank: Federally insured loans ( 120,802 ) ( 128,590 ) Private education loans ( 19,403 ) ( 19,529 ) Consumer loans ( 4,702 ) ( 27,256 ) Non-Nelnet Bank allowance for loan losses ( 144,907 ) ( 175,375 ) Nelnet Bank: 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. 9 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 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 Consumer loans 14,134 — 1,706 ( 1,464 ) 235 — ( 9,909 ) 4,702 Nelnet Bank 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 June 30, 2020 Non-Nelnet Bank Federally insured loans $ 146,759 — ( 1,950 ) ( 6,080 ) — 6,100 — 144,829 Private education loans 23,056 — 2,322 ( 26 ) 183 — — 25,535 Consumer loans 39,053 — 2,627 ( 2,820 ) 221 — — 39,081 $ 208,868 — 2,999 ( 8,926 ) 404 6,100 — 209,445 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 Nelnet Bank 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. 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 10 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 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 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 % Loans in forbearance 2,079,368 11.0 1,973,175 10.3 5,370,466 27.7 Loans in repayment status: Loans current 13,995,297 88.0 % 13,683,054 84.9 % 12,984,175 99.3 % Loans delinquent 31-60 days 580,602 3.7 633,411 3.9 2,057 — Loans delinquent 61-90 days 262,353 1.6 307,936 1.9 165 — Loans delinquent 91-120 days 104,124 0.7 800,257 5.0 23 — Loans delinquent 121-270 days 398,965 2.5 674,975 4.2 101 — Loans delinquent 271 days or greater 562,928 3.5 20,337 0.1 94,138 0.7 Total loans in repayment 15,904,269 84.0 100.0 % 16,119,970 84.3 100.0 % 13,080,659 67.5 100.0 % Total federally insured loans 18,938,864 100.0 % 19,129,173 100.0 % 19,387,871 100.0 % Accrued interest receivable 830,973 791,453 853,473 Loan discount, net of unamortized premiums and deferred origination costs ( 24,129 ) ( 14,505 ) ( 19,116 ) Allowance for loan losses ( 120,802 ) ( 128,590 ) ( 144,829 ) 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 - Non-Nelnet Bank: Loans in-school/grace/deferment $ 10,195 2.9 % $ 5,049 1.6 % $ 3,971 1.3 % Loans in forbearance 3,884 1.1 2,359 0.7 21,890 7.5 Loans in repayment status: Loans current 330,097 98.3 % 310,036 99.0 % 265,720 99.4 % Loans delinquent 31-60 days 3,962 1.2 1,099 0.4 680 0.2 Loans delinquent 61-90 days 818 0.2 675 0.2 244 0.1 Loans delinquent 91 days or greater 1,138 0.3 1,371 0.4 713 0.3 Total loans in repayment 336,015 96.0 100.0 % 313,181 97.7 100.0 % 267,357 91.2 100.0 % Total private education loans 350,094 100.0 % 320,589 100.0 % 293,218 100.0 % Accrued interest receivable 2,360 2,131 1,961 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 11 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: Loans current 41,039 96.1 % 105,650 97.4 % 142,540 97.6 % Loans delinquent 31-60 days 387 0.9 954 0.9 938 0.7 Loans delinquent 61-90 days 484 1.1 804 0.7 1,078 0.7 Loans delinquent 91 days or greater 819 1.9 1,109 1.0 1,478 1.0 Total loans in repayment 42,729 99.9 100.0 % 108,517 99.2 100.0 % 146,034 97.8 % 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 377 1,640 1,344 Allowance for loan losses ( 4,702 ) ( 27,256 ) ( 39,081 ) 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: Loans current 95,402 99.3 % Loans delinquent 31-60 days 593 0.6 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 federally insured loans 97,167 100.0 % Accrued interest receivable 1,179 Loan premium 29 Allowance for loan losses ( 245 ) 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 % $ — — % Loans in forbearance 133 0.1 29 0.2 Loans in repayment status: Loans current 93,189 100.0 % 17,514 100.0 % Loans delinquent 31-60 days — — — — Loans delinquent 61-90 days — — — — Loans delinquent 91 days or greater — — — — Total loans in repayment 93,189 99.8 100.0 % 17,514 99.8 100.0 % Total private education loans 93,404 100.0 % 17,543 100.0 % Accrued interest receivable 149 26 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 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. 12 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 Loans in forbearance — 299 755 173 — 2,657 3,884 Loans in repayment status: Loans current 1,885 90,009 60,694 481 — 177,028 330,097 Loans delinquent 31-60 days — 161 373 — — 3,428 3,962 Loans delinquent 61-90 days — — — — — 818 818 Loans delinquent 91 days or greater — — — — — 1,138 1,138 Total loans in repayment 1,885 90,170 61,067 481 — 182,412 336,015 Total private education loans $ 2,695 92,775 66,566 654 — 187,404 350,094 Accrued interest receivable 2,360 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 - Non-Nelnet Bank: Loans in deferment $ — — 30 8 — — 38 Loans in repayment status: Loans current 19,733 1,582 8,880 10,630 214 — 41,039 Loans delinquent 31-60 days 29 83 189 77 9 — 387 Loans delinquent 61-90 days 50 233 113 83 5 — 484 Loans delinquent 91 days or greater 25 107 302 385 — — 819 Total loans in repayment 19,837 2,005 9,484 11,175 228 — 42,729 Total consumer loans $ 19,837 2,005 9,514 11,183 228 — 42,767 Accrued interest receivable 328 Loan premium 377 Allowance for loan losses ( 4,702 ) 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 13 3. Bonds and Notes Payable The following tables summarize the Company’s outstanding debt obligations by type of instrument: As of June 30, 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 $ 16,974,086 0.22 % - 2.09 % 5/27/25 - 7/25/69 Bonds and notes based on auction 742,350 0.91 % - 2.06 % 3/22/32 - 11/26/46 Total FFELP variable-rate bonds and notes 17,716,436 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 893,093 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP warehouse facilities 301,144 0.16 % / 0.23 % 11/22/22 / 2/26/24 Private education loan warehouse facility 140,763 0.21 % 2/13/23 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 40,030 1.65 % / 1.84 % 12/26/40 / 6/25/49 Fixed-rate bonds and notes issued in private education loan asset-backed securitization 32,742 3.60 % / 5.35 % 12/26/40 / 12/28/43 Unsecured line of credit 85,000 1.58 % 12/16/24 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 19,601,609 Discount on bonds and notes payable and debt issuance costs ( 219,774 ) Total $ 19,381,835 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 Participation agreement 118,558 0.84 % 5/4/21 Secured line of credit 5,000 1.90 % 5/30/22 19,558,849 Discount on bonds and notes payable and debt issuance costs ( 238,123 ) Total $ 19,320,726 14 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 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 Amount outstanding 290,539 10,605 301,144 Amount available $ 19,461 39,395 58,856 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 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. NSLT 2021-1 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 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 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 The Company had a $ 100.0 million consumer loan warehouse facility. On March 31, 2021, the Company terminated this facility. 15 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 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. Participation Agreement 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 FFELP loan asset-backed securities. 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 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 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 income. 16 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 June 30, 2021 and December 31, 2020 is presented below. Basis Swaps 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 As of As of June 30, 2021 December 31, 2020 2021 $ — 250,000 2022 2,000,000 2,000,000 2023 750,000 750,000 2024 1,750,000 1,750,000 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 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 500,000 0.94 500,000 0.94 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. 17 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 Settlements: 1:3 basis swaps $ ( 221 ) 7,129 ( 240 ) 9,242 Interest rate swaps - floor income hedges ( 5,153 ) ( 1,308 ) ( 9,438 ) 816 Total settlements - (expense) income ( 5,374 ) 5,821 ( 9,678 ) 10,058 Change in fair value: 1:3 basis swaps ( 1,106 ) ( 2,872 ) 1,693 ( 1,314 ) Interest rate swaps - floor income hedges ( 509 ) ( 1,039 ) 35,501 ( 23,199 ) 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 ) 5. Investments 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. 18 A summary of the Company's investments follows: 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): 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 Total investments (at fair value) $ 724,082 29,733 ( 3,865 ) 749,950 376,805 16,810 ( 2,967 ) 390,648 Other Investments (not measured at fair value): Venture capital and funds: Measurement alternative (c) 150,857 144,795 Equity method 26,307 14,018 Other 883 894 Total venture capital and funds 178,047 159,707 Real estate Equity method 46,748 50,291 Notes receivable 3,500 847 Total real estate 50,248 51,138 Investment in ALLO: Voting interest/equity method (d) 108,271 129,396 Preferred membership interest and accrued and unpaid preferred return (e) 133,257 228,916 Total investment in ALLO 241,528 358,312 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 Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $ 4,449 as of December 31, 2020 (g) 40,983 27,954 Tax liens and affordable housing 4,029 5,177 Total investments (not measured at fair value) 518,007 602,292 Total investments $ 1,267,957 $ 992,940 (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. (c) The Company has an investment in Agile Sports Technologies, Inc. (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. David S. Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl. 19 (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. 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 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 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. 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 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 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 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 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. 20 (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. 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 income. 6. Intangible Assets Intangible assets consisted of the following: Weighted average remaining useful life as of June 30, 2021 (months) As of As of June 30, 2021 December 31, 2020 Amortizable intangible assets, net: Customer relationships (net of accumulated amortization of $ 91,996 and $ 83,419 , respectively) 107 $ 53,296 66,974 Computer software (net of accumulated amortization of $ 2,685 and $ 4,127 , respectively) 30 5,168 6,430 Trade names (net of accumulated amortization of $ 5,121 and $ 3,455 , respectively) — — 1,666 Total - amortizable intangible assets, net 100 $ 58,464 75,070 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 June 30, 2021, the Company estimates it will record amortization expense as follows: 2021 (July 1 - December 31) $ 6,435 2022 9,939 2023 9,830 2024 7,457 2025 4,644 2026 and thereafter 20,159 $ 58,464 7. Goodwill 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 Goodwill balance $ 23,639 76,570 41,883 — — 142,092 21 8. Property and Equipment Property and equipment consisted of the following: As of As of Useful life June 30, 2021 December 31, 2020 Computer equipment and software 1 - 5 years $ 207,206 172,664 Building and building improvements 5 - 48 years 54,545 52,444 Office furniture and equipment 1 - 10 years 23,243 21,899 Leasehold improvements 1 - 15 years 9,387 9,168 Transportation equipment 5 - 10 years 4,857 4,857 Land — 3,642 3,642 Construction in progress — 8,169 18,478 311,049 283,152 Accumulated depreciation ( 182,522 ) ( 159,625 ) Total property and equipment, net $ 128,527 123,527 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 . 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 June 30, 2021 2020 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 82,479 1,388 83,867 85,243 1,239 86,482 Denominator: Weighted-average common shares outstanding - basic and diluted 38,100,092 641,394 38,741,486 38,641,794 561,610 39,203,404 Earnings per share - basic and diluted $ 2.16 2.16 2.16 2.21 2.21 2.21 Six months ended June 30, 2021 2020 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 204,209 3,256 207,465 45,305 645 45,950 Denominator: 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 22 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 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 $ 30 210 — 129,965 2,041 1,524 ( 187 ) 133,583 Interest expense 23 — — 48,670 392 1,093 ( 187 ) 49,991 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 Other income/expense: Loan servicing and systems revenue 112,094 — — — — — — 112,094 Intersegment revenue 8,480 3 — — — — ( 8,483 ) — Education technology, services, and payment processing revenue — 76,702 — — — — — 76,702 Communications revenue — — — — — — — — Other 701 — — 2,316 4 19,900 — 22,921 Gain on sale of loans — — — 15,271 — — — 15,271 Impairment expense and provision for beneficial interests, net — — — — — ( 500 ) — ( 500 ) Derivative settlements, net — — — ( 5,374 ) — — — ( 5,374 ) Derivative market value adjustments, net — — — ( 1,615 ) — — — ( 1,615 ) Total other income/expense 121,275 76,705 — 10,598 4 19,400 ( 8,483 ) 219,499 Cost of services: Cost to provide education technology, services, and payment processing services — 21,676 — — — — — 21,676 Cost to provide communications services — — — — — — — — Total cost of services — 21,676 — — — — — 21,676 Operating expenses: Salaries and benefits 68,388 27,094 — 556 1,578 21,351 — 118,968 Depreciation and amortization 7,974 2,956 — — — 9,305 — 20,236 Other expenses 13,273 4,437 — 3,567 237 11,074 — 32,587 Intersegment expenses, net 16,134 3,520 — 8,549 37 ( 19,757 ) ( 8,483 ) — Total operating expenses 105,769 38,007 — 12,672 1,852 21,973 ( 8,483 ) 171,791 Income (loss) before income taxes 15,513 17,232 — 78,916 ( 268 ) ( 2,142 ) — 109,250 Income tax (expense) benefit (b) ( 3,723 ) ( 4,136 ) — ( 18,940 ) 64 497 — ( 26,237 ) Net income (loss) 11,790 13,096 — 59,976 ( 204 ) ( 1,645 ) — 83,013 Net loss (income) attributable to noncontrolling interests — — — — — 854 — 854 Net income (loss) attributable to Nelnet, Inc. $ 11,790 13,096 — 59,976 ( 204 ) ( 791 ) — 83,867 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. 23 Three 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 $ 52 420 — 150,583 — 1,196 ( 368 ) 151,883 Interest expense 28 21 — 84,489 — 1,078 ( 368 ) 85,248 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 Other income/expense: Loan servicing and systems revenue 111,042 — — — — — — 111,042 Intersegment revenue 8,537 3 — — — — ( 8,540 ) — Education technology, services, and payment processing revenue — 59,304 — — — — — 59,304 Communications revenue — — 18,998 — — — — 18,998 Other 1,914 — 392 732 — 57,089 — 60,127 Gain on sale of loans — — — — — — — — Impairment expense and provision for beneficial interests, net — — — — — ( 332 ) — ( 332 ) Derivative settlements, net — — — 5,821 — — — 5,821 Derivative market value adjustments, net — — — ( 3,911 ) — — — ( 3,911 ) Total other income/expense 121,493 59,307 19,390 2,642 — 56,757 ( 8,540 ) 251,049 Cost of services: Cost to provide education technology, services, and payment processing services — 15,376 — — — — — 15,376 Cost to provide communications services — — 5,743 — — — — 5,743 Total cost of services — 15,376 5,743 — — — — 21,119 Operating expenses: Salaries and benefits 68,401 24,522 5,570 421 — 20,334 — 119,247 Depreciation and amortization 9,142 2,362 10,824 — — 7,065 — 29,393 Other expenses 13,380 2,326 3,774 4,863 — 12,710 — 37,052 Intersegment expenses, net 15,996 3,429 536 9,055 — ( 20,476 ) ( 8,540 ) — Total operating expenses 106,919 32,639 20,704 14,339 — 19,633 ( 8,540 ) 185,692 Income (loss) before income taxes 14,598 11,691 ( 7,057 ) 51,398 — 37,242 — 107,874 Income tax (expense) benefit ( 3,504 ) ( 2,806 ) 1,694 ( 12,336 ) — ( 4,312 ) — ( 21,264 ) Net income (loss) 11,094 8,885 ( 5,363 ) 39,062 — 32,930 — 86,610 Net loss (income) attributable to noncontrolling interests — — — — — ( 128 ) — ( 128 ) Net income (loss) attributable to Nelnet, Inc. $ 11,094 8,885 ( 5,363 ) 39,062 — 32,802 — 86,482 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 June 30, 2020. 24 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. 25 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. 26 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 June 30, Six months ended June 30, 2021 2020 2021 2020 Government servicing - Nelnet $ 35,376 37,360 70,248 76,010 Government servicing - Great Lakes 43,863 45,213 87,165 91,660 Private education and consumer loan servicing 12,816 8,196 21,364 16,805 FFELP servicing 4,703 4,917 9,373 10,531 Software services 7,374 10,651 15,827 21,969 Outsourced services 7,962 4,705 19,634 6,803 Loan servicing and systems revenue $ 112,094 111,042 223,611 223,778 Education Technology, Services, and Payment Processing 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 Education technology and services 24,733 14,927 57,055 34,980 Other 423 262 771 555 Education technology, services, and payment processing revenue $ 76,702 59,304 171,960 142,979 Other Income/Expense 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 ALLO preferred return 2,020 — 4,342 — 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 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 $ 22,921 60,127 18,317 68,408 27 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 $ 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. 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, and on June 25, 2021, the Department cancelled the ISS solicitation. 28 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 June 30, 2021 As of December 31, 2020 Level 1 Level 2 Total Level 1 Level 2 Total Assets: Investments: 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 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 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. (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 June 30, 2021 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 20,712,564 19,352,681 — — 20,712,564 Accrued loan interest receivable 834,989 834,989 — 834,989 — Cash and cash equivalents 212,989 212,989 212,989 — — Investments (at fair value) 749,950 749,950 34,650 680,727 — Beneficial interest in loan securitizations 123,329 105,017 — — 123,329 Restricted cash 616,711 616,711 616,711 — — Restricted cash – due to customers 247,673 247,673 247,673 — — Financial liabilities: Bonds and notes payable 19,639,727 19,381,835 — 19,639,727 — Accrued interest payable 4,922 4,922 — 4,922 — Bank deposits 201,957 202,841 44,632 157,325 — Due to customers 303,173 303,173 303,173 — — 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. 29