What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-05 · 178 added, 156 removed, 895 unchanged (27% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Loans and accrued interest receivable (net of allowance for loan losses of $ 138,044 and

54 unchanged sentences

(Dollars in thousands, except share data)

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

42 unchanged sentences

(Dollars in thousands)

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

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

4 unchanged sentences

Unrealized gains during period, net 4,524 1,893 11,770 2,114

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

Reclassification of gains to net income, net ( 1,173 ) ( 513 ) ( 2,052 ) ( 390 )

Income tax effect ( 804 ) 2,547 ( 329 ) 1,051 ( 2,332 ) 7,386 ( 412 ) 1,312

10 unchanged sentences

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

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

Issuance of noncontrolling interests — — — — — — — — — 14 14

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

Net income (loss) — — — — — — — 71,503 — ( 327 ) 71,176

Other comprehensive income — — — — — — — — 1,051 — 1,051

5 unchanged sentences

Repurchase of common stock — ( 93,380 ) — — — — ( 2,580 ) ( 2,038 ) — — ( 4,618 )

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

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

Balance as of September 30, 2020 — 27,163,588 11,171,609 $ — 272 112 1,704 2,393,113 4,284 3,346 2,402,831

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

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 — — — — — — — — — 4,935 4,935

8 unchanged sentences

Conversion of common stock — 372,717 ( 372,717 ) — 4 ( 4 ) — — — — —

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

Balance as of September 30, 2021 — 27,556,370 10,681,454 $ — 276 107 1,593 2,843,799 13,479 ( 2,291 ) 2,856,963

See accompanying notes to consolidated financial statements.

17 unchanged sentences

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 September 30, 2020 — 27,163,588 11,171,609 $ — 272 112 1,704 2,393,113 4,284 3,346 2,402,831

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 — 474,117 ( 474,117 ) — 5 ( 5 ) — — — — —

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

Balance as of September 30, 2021 — 27,556,370 10,681,454 $ — 276 107 1,593 2,843,799 13,479 ( 2,291 ) 2,856,963

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Six months ended

Nine months ended

September 30,

Net income attributable to Nelnet, Inc.

3 unchanged sentences

Net income 257,136 118,020

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

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 113,651 149,175

4 unchanged sentences

Gain from sale of loans ( 18,715 ) ( 33,023 )

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

Gain from investments, net ( 293 ) ( 37,766 )

Loss (gain) from repurchases of debt, net 3,964 ( 508 )

2 unchanged sentences

Non-cash compensation expense 7,824 5,538

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

Provision for beneficial interests and impairment expense, net 12,223 34,419

Increase in loan and investment accrued interest receivable ( 41,931 ) ( 27,192 )

3 unchanged sentences

Decrease in accrued interest payable ( 24,260 ) ( 17,673 )

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

Increase in other liabilities, net 41,040 32,733

Decrease in the carrying amount of lease liability ( 5,158 ) ( 8,484 )

Increase (decrease) in due to customers 53,146 ( 151,674 )

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

Net cash provided by operating activities 389,693 173,035

Cash flows from investing activities:

10 unchanged sentences

Purchases of property and equipment ( 42,594 ) ( 80,698 )

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

Net cash provided by investing activities $ 543,442 953,637

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Six months ended

Nine months ended

September 30,

Cash flows from financing activities:

9 unchanged sentences

Distribution to noncontrolling interests ( 548 ) ( 660 )

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

Net cash used in financing activities ( 640,277 ) ( 1,447,732 )

Effect of exchange rate changes on cash ( 175 ) —

11 unchanged sentences

Issuance of noncontrolling interests $ 2,082 —

(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.

(a) The Company utilized $ 22.2 million and $ 17.0 million of federal and state tax credits related primarily to renewable energy during the nine months ended September 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

September 30, 2021 December 31, 2020 September 30, 2020 December 31, 2019

Total cash and cash equivalents $ 191,936 121,249 96,316 133,906

9 unchanged sentences

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.

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

1 unchanged sentence

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.

Operating results for the three and nine months ended September 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:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Non-Nelnet Bank:

21 unchanged sentences

$ 19,304,203 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.

On May 14, 2021 and September 29, 2021, the Company sold $ 77.4 million (par value) and $ 18.4 million (par value) of consumer loans, respectively, to an unrelated third party who securitized such loans.

The Company recognized a gain of $ 15.3 million (pre-tax) and $ 3.2 million (pre-tax), respectively, as part of these transactions.

As partial consideration received for the consumer loans sold, the Company received a 24.5 percent and 6.9 percent residual interest, respectively, in the consumer loan securitizations that are 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 June 30, 2021

Three months ended September 30, 2021

Non-Nelnet Bank

5 unchanged sentences

$ 145,719 — 5,827 ( 12,417 ) 304 935 ( 2,324 ) 138,044

Three months ended June 30, 2020

Three months ended September 30, 2020

Non-Nelnet Bank

3 unchanged sentences

$ 209,445 — ( 5,821 ) ( 5,215 ) 514 2,900 ( 15,924 ) 185,899

Six months ended June 30, 2021

Nine months ended September 30, 2021

Non-Nelnet Bank

5 unchanged sentences

$ 175,698 — ( 10,847 ) ( 17,960 ) 1,126 2,260 ( 12,233 ) 138,044

Six months ended June 30, 2020

Nine months ended September 30, 2020

Non-Nelnet Bank

3 unchanged sentences

$ 61,914 91,014 73,476 ( 26,138 ) 1,357 13,700 ( 29,424 ) 185,899

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.

a) During the three months ended September 30, 2021 and 2020, and nine months ended September 30, 2021 and 2020, the Company acquired $ 64.6 million (par value), $ 137.5 million (par value), $ 153.3 million (par value), and $ 721.4 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.

1 unchanged sentence

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

The Company recorded a negative provision for loan losses for its federally insured and consumer loan portfolios for the three months ended March 31, 2021 due to management's estimate of certain continued improved economic conditions (including the improvement in certain macroeconomic variables (unemployment rates, gross domestic product, and consumer price index) used in the Company's loan loss models) as of March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020.

The Company recorded a provision expense on its private education loan portfolio during the three months ended March 31, 2021 as a result of an increase of loans in forbearance, which was partially offset by management's estimate of certain continued improved economic conditions as of

March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020.

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.

During the third quarter of 2020, the Company recognized a negative provision for loan losses 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) in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of June 30, 2020.

For the three months ended September 30, 2021, charge-offs for the Company’s federally insured loan portfolio were $ 10.3 million.

The increased level of charge-offs in the third quarter of 2021 as compared to historical periods was due to the Company proactively applying a 90 day natural disaster forbearance due to COVID-19 to any loan that was 31-269 days past due effective March 13, 2020 through June 30, 2020.

Beginning July 1, 2020, the Company discontinued proactively applying

90 day natural disaster forbearances on past due loans.

Many loans that exited the natural disaster forbearance on July 1, 2020 have gone into default, been submitted to the guaranty agency, and been charged off by the Company during the third quarter of 2021.

During the nine months ended September 30, 2021, the Company recorded a negative provision for loan losses due to management's estimate of certain continued improved economic conditions as of September 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020.

These amounts were partially offset by the establishment of an initial allowance for loans originated and acquired during the period.

Loan Status and Delinquencies

3 unchanged sentences

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

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

Federally insured loans - Non-Nelnet Bank:

28 unchanged sentences

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 302,739 $ 305,882 $ 256,891

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

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

Consumer loans - Non-Nelnet Bank:

43 unchanged sentences

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.

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 September 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.

The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of September 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

Nine months ended September 30, 2021 2020 2019 2018 2017 Prior years Total

Private education loans - Non-Nelnet Bank:

41 unchanged sentences

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

As of June 30, 2021

As of September 30, 2021

Interest rate

52 unchanged sentences

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

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

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

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

6 unchanged sentences

(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.

On June 28, 2021, the maximum financing amount for this warehouse facility increased to $ 770.0 million, and on June 30, 2021 and July 27, 2021, the maximum financing amount decreased to $ 310.0 million and to $ 60 million, respectively.

(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.

On October 14, 2021, this facility was terminated.

Asset-Backed Securitizations

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

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

NSLT 2021-1 NSLT 2021-2 Total

Date securities issued 6/30/21 8/31/21

3 unchanged sentences

Cost of funds 1-month LIBOR plus 0.50 %

1-month LIBOR plus 0.50 %

Final maturity date 7/25/69 9/25/69

2 unchanged sentences

Cost of funds 1-month LIBOR plus 1.25 %

1-month LIBOR plus 1.20 %

Final maturity date 7/25/69 9/25/69

2 unchanged sentences

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.

As of September 30, 2021, $ 118.3 million was outstanding under this warehouse facility and $ 56.7 million was available for future funding.

The facility has an advance rate of 80 to 90 percent and, as of September 30, 2021, the Company had $ 12.9 million advanced as equity support under this facility.

Consumer Loan Warehouse Facility

2 unchanged sentences

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.

On September 22, 2021, the Company amended its existing unsecured line of credit.

Under the amended terms, the following provisions of the facility were modified:

• The maturity date was extended from December 16, 2024 to September 22, 2026.

• The facility size increased from $ 455.0 million to $ 495.0 million.

The amended terms also increased the accordion feature of the facility to provide that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $ 737.5 million.

• The cost of funds decreased 25.0 basis points and 2.5 basis points for drawn and undrawn amounts, respectively, based on the Company's current credit ratings.

The amended terms also include customary provisions to provide for replacement of LIBOR with an alternative benchmark rate when LIBOR ceases to be available.

• The provisions for secured recourse indebtedness were expanded to increase the limit on the aggregate amount of secured recourse indebtedness from 5 percent of the Company's consolidated net worth to 10 percent.

• The provisions for permitted investments were expanded to increase the aggregate amount of permitted investments from 40 percent of the Company's consolidated net worth to 50 percent.

• The provisions for loans owned by the Company other than federally insured FFELP student loans were revised to replace the limit of $ 850.0 million on non-FFELP loans owned by the Company with a limit of 50 percent of the Company's consolidated net worth on non-FFELP loans owned by the Company with FICO scores of less than 700 .

As of September 30, 2021, no amount was outstanding on the line of credit and $ 495.0 million was available for future use.

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.

As of September 30, 2021, $ 194.2 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.

3 unchanged sentences

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.

On May 3, 2021 and June 23, 2021, the Company entered into repurchase agreements with non-affiliated third parties, the proceeds of which are collateralized by private education loan asset-backed securities.

The first agreement has maturity dates of November 20, 2023 and December 20, 2023, or earlier if either party provides 180 days’ prior written notice, and the second agreement has a maturity date of November 15, 2021.

The Company incurs interest on amounts outstanding under these agreements based on three-month LIBOR plus an applicable spread.

Under the first agreement, the Company is subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities on any scheduled reset date, and under the second agreement, the Company could be subject to margin deficit payment requirements if the fair value of the securities subject to the 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 September 30, 2021 was $ 223.8 million subject to the first agreement and $ 110.6 million subject to the second agreement.

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

3 unchanged sentences

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.

Debt Repurchases

The following table summarizes the Company's repurchases of its own debt.

Gains/losses recorded by the Company from the repurchase of debt are included in "other" in "other income/expense" on the Company's consolidated statements of income.

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Purchase price $ ( 184,827 ) ( 6,054 ) ( 205,269 ) ( 7,572 )

Par value 184,781 6,163 204,597 8,090

Remaining unamortized cost of issuance ( 3,222 ) ( 4 ) ( 3,292 ) ( 10 )

(Loss) gain $ ( 3,268 ) 105 ( 3,964 ) 508

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 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").

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

The following table summarizes the Company’s outstanding basis swaps as of September 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

September 30, 2021 December 31, 2020

2021 $ — 250,000

5 unchanged sentences

$ 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.

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

As of September 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)

10 unchanged sentences

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,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

5 unchanged sentences

Interest rate swaps - floor income hedges 6,199 3,601 41,700 ( 19,597 )

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 )

Total change in fair value - income (expense) 7,260 3,440 44,455 ( 21,072 )

Derivative market value adjustments and derivative settlements, net - income (expense) $ 1,351 1,049 28,868 ( 13,406 )

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 Company has entered into a joint venture with other investors to acquire the loans.

Under the terms of the joint venture agreements, the Company is the servicer of the portfolio, owns an approximate 8 percent interest in the loans and in residual interests in subsequent securitizations of the loans, and serves as the sponsor and administrator for the loan securitizations completed by the joint venture.

During March and throughout the second quarter of 2021, the vast majority of 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.

The Company’s initial contribution to the limited partnership was $ 71.1 million.

In conjunction with the establishment of the limited partnership, the parties provided additional funding commitments to the partnership, in the event additional funding became necessary after the initial purchase of loans.

In accordance with GAAP, the Company’s carrying value of its investment in the limited partnership is accounted for under the equity method of accounting, is reduced by cash distributions and the fair value of its portion of loans transferred into securitizations, and can be less than zero or negative because of the potential future contributions pursuant to the funding commitment.

The Company’s carrying value of its investment in the limited partnership, which is included in "Venture capital and funds - equity method" in the table below, is

also impacted by the amount of the Company’s proportionate share of the net earnings or losses of the partnership.

For the nine months ended September 30, 2021, the Company’ proportionate share of losses of this partnership was $ 5.0 million, which reduced the carrying value of this investment (and is included as an expense in "other" in "other income/expense" on the consolidated statements of income).

On May 20, 2021, June 30, 2021, and August 18, 2021, the joint venture completed asset-backed securitization transactions to permanently finance a total of $ 7.4 billion of the private education loans purchased by the joint venture.

Cash distributions and the fair value of the Company’s portion of loans securitized as a result of these securitizations was $ 40.6 million and $ 43.3 million, respectively, which reduced the Company’s carrying value of its limited partnership investment.

The Company records its ownership in the residual interest of securitization transactions used to permanently finance the loans at fair value as held-to-maturity beneficial interest investments, and such investments are reflected in the table below as “beneficial interest in private education loan securitizations, including accrued interest.”

See the caption "Subsequent Events" below for information regarding an event on October 27, 2021 impacting the Company's investment in the joint venture limited partnership.

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

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 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 September 30, 2021, the fair value of these bonds was $ 371.7 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.

2 unchanged sentences

A summary of the Company's investments follows:

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

As of September 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

19 unchanged sentences

Solar (f) ( 46,539 ) ( 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 private education loan securitizations, including accrued interest (g) 44,902 —

Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $ 4,449 as of December 31, 2020 (g)

37,021 27,954

Beneficial interest in federally insured student loan securitizations (g) 26,904 30,377

Tax liens and affordable housing 3,755 5,177

1 unchanged sentence

Total investments $ 1,374,913 $ 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.

(a) As of September 30, 2021, $ 194.2 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.

(b) As of September 30, 2021, a total of $ 370.4 million (par value) of private education loan asset-backed securities were subject to repurchase agreements with third-parties.

See note 3 for additional information.

6 unchanged sentences

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.

As of September 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.

See the caption "Subsequent Events" below for information regarding an event on October 15, 2021 impacting another investment accounted for using the measurement alternative method.

(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.

5 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 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.

During the three and nine months ended September 30, 2021, the Company recognized losses of $ 10.5 million and $ 31.6 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment.

Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers.

1 unchanged sentence

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.

(e) As of September 30, 2021, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 129.7 million and $ 5.6 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.

During the three and nine months ended September 30, 2021, the Company recognized income on its ALLO preferred membership interests of $ 2.0 million and $ 6.4 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.

3 unchanged sentences

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.

As of September 30, 2021, the Company has funded a total of $ 181.4 million in solar investments, which includes $ 24.5 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 solar investment balance at September 30, 2021 represents the result of total tax credits earned on solar projects placed in service through September 30, 2021 being larger than total payments made by the Company on such projects.

The Company is committed to fund an additional $ 74.0 million on these projects, of which $ 55.9 million will be provided 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.

(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 three months ended September 30, 2021 and 2020, the Company recognized pre-tax losses of $ 3.4 million and $ 11.8 million, respectively, and for the nine months ended September 30, 2021 and 2020, the Company recognized pre-tax losses of $ 7.4 million and $ 12.6 million, respectively, on its solar investments.

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

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

As of the latest remittance reports filed by the various trusts prior to September 30, 2021, the Company's ownership correlates to approximately $ 545 million, $ 250 million, and $ 485 million of private education, consumer, and federally insured student 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.

2 unchanged sentences

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.

Subsequent Events

On October 15, 2021, an entity in which the Company has an equity investment completed an additional equity raise.

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

As a result of this entity’s equity raise, the Company currently anticipates recognizing income in the fourth quarter of 2021 of $ 10 million to $ 15 million (pre-tax) to adjust its carrying value to reflect the October 15, 2021 transaction value, subject to final valuations of the equity classes.

On October 27, 2021, the Company's joint venture with other investors for the acquisition of private education loans from Wells Fargo completed a final asset-backed securitization of $ 1.2 billion of private education loans that permanently financed all remaining eligible loans temporarily funded in the joint venture limited partnership’s warehouse facility.

The cash distribution and the fair value of the Company’s portion of loans securitized as a result of this securitization was $ 9.8 million and $ 8.5 million, respectively, which reduced the Company’s carrying value of its limited partnership investment to a credit (negative) balance of approximately $ 36 million.

Due to the completion of this transaction, the Company expects the joint venture limited partnership established to purchase the loans will be dissolved without further financial requirements (and the Company's funding commitment will therefore be terminated) and/or the financial commitment will be reduced or terminated by the partners of the joint venture.

Upon the reduction and/or termination of the Company's financial commitment to the limited partnership, currently expected by the Company to occur during the fourth quarter of 2021, the Company will record a derecognition of all or a portion of the negative investment balance (and record positive income up to $ 36 million (pre-tax)).

Intangible Assets

1 unchanged sentence

Weighted average remaining useful life as of

June 30, 2021 (months)

June 30, 2021 December 31, 2020

September 30, 2021 (months)

September 30, 2021 December 31, 2020

Amortizable intangible assets, net:

3 unchanged sentences

27 4,651 6,430

Trade names (net of accumulated amortization of $ 5,121 and $ 3,455 , respectively)

Trade names (net of accumulated amortization of $ 3,455 )

Total - amortizable intangible assets, net 98 $ 55,176 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 recorded amortization expense on its intangible assets of $ 3.3 million and $ 8.0 million during the three months ended September 30, 2021 and 2020, respectively, and $ 19.9 million and $ 22.8 million during the nine months ended September 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

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

2021 (October 1 - December 31) $ 3,147

2026 and thereafter 20,159

The carrying amount of goodwill as of June 30, 2021 and December 31, 2020 by reportable operating segment was as follows:

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

Useful life September 30, 2021 December 31, 2020

Computer equipment and software 1 - 5 years

11 unchanged sentences

Total property and equipment, net $ 117,296 123,527

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 .

The Company recorded depreciation expense on its property and equipment of $ 12.4 million and $ 22.3 million during the three months ended September 30, 2021 and 2020, respectively, and $ 36.2 million and $ 64.6 million during the nine months ended September 30, 2021 and 2020, respectively.

Impairment charges

During the third quarter of 2021, the Company evaluated the use of office space as a large number of employees continue to work from home due to COVID-19.

As a result of this evaluation, the Company recorded a non-cash impairment charge of $ 14.2 million during the three months ended September 30, 2021.

The impairment charge of $ 13.2 million within its Loan Servicing and Systems operating segment related primarily to building and building improvements.

The impairment charge of $ 1.0 million within its Corporate and Other Activities operating segment related to operating lease assets associated with leased office space which the Company had fully ceased to use prior to the lease term end date.

These impairment charges are included in "impairment expense and provision for beneficial interest, net" in the consolidated statements of income.

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 June 30,

Three months ended September 30,

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

3 unchanged sentences

Earnings per share - basic and diluted $ 1.38 1.38 1.38 1.86 1.86 1.86

Six months ended June 30,

Nine months ended September 30,

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

6 unchanged sentences

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

Three months ended September 30, 2021

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

33 unchanged sentences

$ ( 2,312 ) 10,634 — 45,664 636 ( 1,484 ) — 53,138

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

Total assets as of September 30, 2021 $ 238,602 415,178 — 20,001,997 413,155 1,740,060 ( 406,253 ) 22,402,739

(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 June 30, 2020

Three months ended September 30, 2020

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

33 unchanged sentences

$ 10,139 11,433 ( 3,450 ) 68,337 — ( 14,953 ) — 71,503

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

Total assets as of September 30, 2020 $ 211,726 382,608 305,276 20,686,478 — 770,621 ( 134,183 ) 22,222,526

(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.

Six months ended June 30, 2021

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

Nine months ended September 30, 2021

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

33 unchanged sentences

$ 21,701 47,271 — 213,266 ( 535 ) ( 21,099 ) — 260,603

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

Total assets as of September 30, 2021 $ 238,602 415,178 — 20,001,997 413,155 1,740,060 ( 406,253 ) 22,402,739

(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.

Six months ended June 30, 2020

Nine months ended September 30, 2020

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

33 unchanged sentences

$ 31,585 41,105 ( 14,347 ) 61,083 — ( 1,972 ) — 117,452

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

Total assets as of September 30, 2020 $ 211,726 382,608 305,276 20,686,478 — 770,621 ( 134,183 ) 22,222,526

(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.

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

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).

The following tables provides 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,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

7 unchanged sentences

Education Technology, Services, and Payment Processing

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

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

6 unchanged sentences

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,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Income/gains from investments, net $ 16,050 1,687 40,141 51,772

ALLO preferred return 2,020 — 4,342 —

Investment advisory services 2,400 4,463 6,242 8,187

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

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

ALLO preferred return 2,043 — 6,384 —

Management fee revenue 727 2,353 2,541 6,897

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

Borrower late fee income 514 871 1,698 4,377

Loss from ALLO voting membership interest investment ( 10,495 ) — ( 31,620 ) —

Loss from solar investments ( 3,393 ) ( 11,839 ) ( 7,375 ) ( 12,638 )

(Loss) gain on debt repurchased ( 3,268 ) 105 ( 3,964 ) 508

Other 7,289 3,862 16,136 10,807

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 $ 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.

Revenues earned by Nelnet Servicing and Great Lakes related to these contracts are set forth in the "Government servicing - Nelnet" and "Government servicing - Great Lakes" line items of the "Loan Servicing and Systems" table in note 11.

As of September 30, 2021, Nelnet Servicing and Great Lakes serviced 5.8 million and 7.8 million borrowers, respectively, under their contracts with the Department.

In June 2021, Nelnet Servicing and Great Lakes each received a contract modification 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.

In September 2021, Nelnet Servicing and Great Lakes each entered into contract amendments with the Department, pursuant to which the student loan servicing contracts were extended from December 14, 2021 through December 14, 2023.

In 2017, the Department initiated a contract procurement process referred to as the Next Generation Financial Services Environment ("NextGen") for a new framework for the servicing of all student loans owned by the Department.

The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the NextGen process, including that any new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance.

Nelnet cannot predict the timing, nature, or ultimate outcome of the NextGen or any other contract procurement process by the Department.

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

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

Level 1 Level 2 Total Level 1 Level 2 Total

6 unchanged sentences

Total assets $ 61,673 777,621 847,765 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.

(a) As of September 30, 2021, $ 41.6 million and $ 20.0 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 June 30, 2021

As of September 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