4 unchanged sentences
The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:
−Removed: As of June 30, 2021 As of December 31, 2020
+Added: As of September 30, 2021 As of December 31, 2020
Dollars Percent Dollars Percent
8 unchanged sentences
The Company generally finances its FFELP student loan portfolio with variable rate debt.
−Removed: In low and/or declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, the Company’s FFELP student loans earn at a fixed
−Removed: rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates.
+Added: In low and/or declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, the Company’s FFELP student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates.
In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.
5 unchanged sentences
A summary of fixed rate floor income earned by the AGM operating segment follows.
−Removed: Three months ended June 30, Six months ended June 30,
+Added: Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
2 unchanged sentences
Fixed rate floor income, net $ 30,641 33,045 93,381 84,486
−Removed: (a) Derivative settlements consist of settlements (paid) received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
−Removed: Gross fixed rate floor income increased for the three and six months ended June 30, 2021 as compared to the same periods in 2020 due to lower interest rates in 2021 as compared to 2020.
+Added: (a) Derivative settlements consist of settlements paid related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
+Added: Gross fixed rate floor income increased for the nine months ended September 30, 2021 as compared to the same period in 2020 due to lower interest rates in 2021 as compared to 2020.
Absent the use of derivative instruments, a rise in interest rates will reduce the amount of floor income received and has an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas.
In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.
−Removed: The increase in net settlements paid in 2021 as compared to the same periods in 2020 was due to a decrease in interest rates.
+Added: The Company enters into derivative instruments to hedge student loans earning fixed rate floor income.
+Added: The increase in net settlements paid on these derivatives in 2021 as compared to the same periods in 2020 was due to a decrease in interest rates and an increase in the notional amount of derivatives outstanding.
The following graph depicts fixed rate floor income for a borrower with a fixed rate of 6.75% and a SAP rate of 2.64%:
−Removed: The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of June 30, 2021.
+Added: The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of September 30, 2021.
Fixed interest rate range Borrower/lender weighted average yield Estimated variable conversion rate (a) Loan balance
13 unchanged sentences
(a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate.
−Removed: As of June 30, 2021, the weighted average estimated variable conversion rate was 1.94% and the short-term interest rate was 10 basis points.
−Removed: The following table summarizes the outstanding derivative instruments as of June 30, 2021 used by AGM to economically hedge loans earning fixed rate floor income.
+Added: As of September 30, 2021, the weighted average estimated variable conversion rate was 1.93% and the short-term interest rate was 9 basis points.
+Added: The following table summarizes the outstanding derivative instruments as of September 30, 2021 used by AGM to economically hedge loans earning fixed rate floor income.
Maturity Notional amount Weighted average fixed rate paid by the Company (a)
9 unchanged sentences
AGM is also exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of AGM’s assets do not match the interest rate characteristics of the funding for those assets.
−Removed: The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of June 30, 2021.
+Added: The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of September 30, 2021.
Index Frequency of variable resets Assets Funding of student loan assets
11 unchanged sentences
The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets.
−Removed: The following table summarizes the 1:3 Basis Swaps outstanding as of June 30, 2021.
+Added: The following table summarizes the 1:3 Basis Swaps outstanding as of September 30, 2021.
Maturity Notional amount (i)
2 unchanged sentences
2026 1,150,000
−Removed: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2021 was one-month LIBOR plus 9.1 basis points.
−Removed: (b) As of June 30, 2021, the Company was sponsor for $742.4 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (“Auction Rate Securities”).
+Added: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2021 was one-month LIBOR plus 9.1 basis points.
+Added: (b) As of September 30, 2021, the Company was sponsor for $450.3 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (“Auction Rate Securities”).
Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture.
17 unchanged sentences
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
−Removed: Three months ended June 30, 2021
+Added: Three months ended September 30, 2021
Effect on earnings:
3 unchanged sentences
Increase (decrease) in basic and diluted earnings per share $ (0.04) $ 0.19 $ 0.00 $ 0.00
−Removed: Three months ended June 30, 2020
+Added: Three months ended September 30, 2020
Effect on earnings:
6 unchanged sentences
diluted earnings per share $ (0.27) $ (0.47) (0.00 ) $ (0.01)
−Removed: Six months ended June 30, 2021
+Added: Nine months ended September 30, 2021
Effect on earnings:
6 unchanged sentences
diluted earnings per share $ (0.23) $ 0.27 (0.00 ) $ (0.01)
−Removed: Six months ended June 30, 2020
+Added: Nine months ended September 30, 2020
Effect on earnings:
7 unchanged sentences
Interest Rate Risk - Nelnet Bank
−Removed: To manage Nelnet Bank's risk from market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow.
−Removed: To achieve this objective, the Company manages and mitigates its exposure to fluctuations in market interest rates through several techniques, include managing the maturity, repricing, and mix of fixed and variable rate assets and liabilities.
+Added: To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow.
+Added: To achieve this objective, the Company manages and mitigates its exposure to fluctuations in market interest rates through several techniques, including managing the maturity, repricing, and mix of fixed and variable rate assets and liabilities.
The following table presents Nelnet Bank's loan assets and deposits by rate characteristics:
−Removed: As of June 30, 2021 As of December 31, 2020
+Added: As of September 30, 2021 As of December 31, 2020
Dollars Percent Dollars Percent
6 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.