What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 208 added, 464 removed, 609 unchanged (52% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Loans and accrued interest receivable (net of allowance for loan losses of $ 117,825 and

37 unchanged sentences

Retained earnings 3,092,226 2,940,523

Accumulated other comprehensive earnings, net 13,479 6,102

Accumulated other comprehensive (loss) earnings, net ( 5,500 ) 9,304

Total Nelnet, Inc.

14 unchanged sentences

(Dollars in thousands, except share data)

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

Three months ended

Interest income:

2 unchanged sentences

Total interest income 125,196 129,103

Interest expense:

Interest on bonds and notes payable and bank deposits 50,176 58,423 127,939 277,788

Interest expense on bonds and notes payable and bank deposits 48,079 27,773

Net interest income 77,117 101,330

Less provision (negative provision) for loan losses 5,827 ( 5,821 ) ( 10,847 ) 73,476

Less negative provision for loan losses ( 435 ) ( 17,048 )

Net interest income after provision for loan losses 77,552 118,378

2 unchanged sentences

Education technology, services, and payment processing revenue 112,286 95,258

Communications revenue — 20,211 — 57,390

Other 9,877 ( 2,168 )

Gain on sale of loans 2,989 —

Impairment expense and provision for beneficial interests, net ( 14,159 ) — ( 12,223 ) ( 34,419 )

Derivative market value adjustments and derivative settlements, net 142,925 34,505

Total other income/expense 404,445 239,112

Cost of services:

Cost to provide education technology, services, and payment processing services 35,545 27,052

Cost to provide communications services — 5,914 — 17,240

Total cost of services 31,335 31,157 80,063 80,664

Operating expenses:

6 unchanged sentences

Net income 184,886 122,904

Net loss (income) attributable to noncontrolling interests 1,919 327 3,467 ( 568 )

Net loss attributable to noncontrolling interests 1,761 694

Net income attributable to Nelnet, Inc.

3 unchanged sentences

shareholders - basic and diluted

$ 1.38 1.86 6.74 2.99

Weighted average common shares outstanding - basic and diluted

4 unchanged sentences

(Dollars in thousands)

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

2021 2020 2021 2020

Three months ended March 31,

Net income $ 184,886 122,904

Other comprehensive income:

Other comprehensive (loss) income:

Net changes related to foreign currency translation adjustments $ 9 1

Net changes related to available-for-sale debt securities:

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

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

Unrealized holding (losses) gains arising during period, net ( 16,698 ) 4,349

Reclassification of gains recognized in net income, net of losses ( 2,793 ) ( 508 )

Income tax effect 4,678 ( 14,813 ) ( 922 ) 2,919

Other comprehensive income 2,538 1,051 7,377 1,312

Other comprehensive (loss) income ( 14,804 ) 2,920

Comprehensive income 170,082 125,824

Comprehensive loss (income) attributable to noncontrolling interests 1,919 327 3,467 ( 568 )

Comprehensive loss attributable to noncontrolling interests 1,761 694

Comprehensive income attributable to Nelnet, Inc.

4 unchanged sentences

(Dollars in thousands, except share data)

Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive earnings, net Noncontrolling interests Total equity

Class A Class B

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

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

Distribution to noncontrolling interests — — — — — — — — — ( 331 ) ( 331 )

Cash dividends on Class A and Class B common stock - $ 0.20 per share

— — — — — — — ( 7,664 ) — — ( 7,664 )

Issuance of common stock, net of forfeitures — 24,132 — — — — 553 — — — 553

Compensation expense for stock based awards — — — — — — 1,864 — — — 1,864

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

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

Issuance of noncontrolling interests — — — — — — — — — 4,935 4,935

Net income (loss) — — — — — — — 53,138 — ( 1,919 ) 51,219

Other comprehensive income — — — — — — — — 2,538 — 2,538

Distribution to noncontrolling interests — — — — — — — — — ( 125 ) ( 125 )

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

— — — — — — — ( 8,407 ) — — ( 8,407 )

Issuance of common stock, net of forfeitures — 29,805 — — — — 493 — — — 493

Compensation expense for stock based awards — — — — — — 2,770 — — — 2,770

Repurchase of common stock — ( 341,094 ) — — ( 3 ) — ( 11,828 ) ( 13,247 ) — — ( 25,078 )

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

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.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in thousands, except share data)

Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) earnings Noncontrolling interests Total equity

Class A Class B

1 unchanged sentence

Issuance of noncontrolling interests — — — — — — — — — 1,400 1,400

Net income — — — — — — — 117,452 — 568 118,020

Net income (loss) — — — — — — — 123,598 — ( 694 ) 122,904

Other comprehensive income — — — — — — — — 2,920 — 2,920

5 unchanged sentences

Repurchase of common stock — ( 26,199 ) — — — — ( 2,009 ) — — — ( 2,009 )

Impact of adoption of new accounting standard — — — — — — — ( 18,867 ) — — ( 18,867 )

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

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 March 31, 2021 — 27,367,797 11,154,171 $ — 274 112 5,859 2,736,923 9,022 ( 3,089 ) 2,749,101

Balance as of December 31, 2021 — 27,239,654 10,676,642 $ — 272 107 1,000 2,940,523 9,304 1,632 2,952,838

1 unchanged sentence

Net income (loss) — — — — — — — 186,647 — ( 1,761 ) 184,886

Other comprehensive income — — — — — — — — 7,377 — 7,377

Other comprehensive loss — — — — — — — — ( 14,804 ) — ( 14,804 )

Distribution to noncontrolling interests — — — — — — — — — ( 5,125 ) ( 5,125 )

5 unchanged sentences

Conversion of common stock — 1,750 ( 1,750 ) — — — — — — — —

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

Balance as of March 31, 2022 — 27,151,270 10,674,892 $ — 272 107 1,208 3,092,226 ( 5,500 ) ( 3,250 ) 3,085,063

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Nine months ended

September 30,

Three months ended

Net income attributable to Nelnet, Inc.

$ 186,647 123,598

Net (loss) income attributable to noncontrolling interests

( 3,467 ) 568

Net loss attributable to noncontrolling interests ( 1,761 ) ( 694 )

Net income 184,886 122,904

2 unchanged sentences

Loan discount accretion ( 9,927 ) ( 7,218 )

(Negative provision) provision for loan losses ( 10,847 ) 73,476

Negative provision for loan losses ( 435 ) ( 17,048 )

Derivative market value adjustments ( 145,734 ) ( 38,809 )

Proceeds from (payments to) clearinghouse - initial and variation margin, net 41,033 ( 20,405 )

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

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

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

Purchases of equity securities - trading, net ( 41,591 ) —

Deferred income tax expense (benefit) 33,078 ( 10,975 )

Proceeds from clearinghouse - initial and variation margin, net of payments 149,649 38,081

Gain on sale of loans ( 2,989 ) —

Loss on investments, net 2,801 13,849

Proceeds from sale (purchases) of equity securities, net 572 ( 13,512 )

Deferred income tax expense 39,443 15,405

Non-cash compensation expense 2,920 2,052

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

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

(Increase) decrease in accounts receivable ( 2,137 ) 45,475

Decrease in other assets, net 35,381 19,491

Decrease in the carrying amount of ROU asset 5,652 9,150

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

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

Negative provision for beneficial interests — ( 2,436 )

Decrease (increase) in loan and investment accrued interest receivable 10,694 ( 114 )

Decrease (increase) in accounts receivable 18,442 ( 3,831 )

(Increase) decrease in other assets, net ( 1,963 ) 5,147

Decrease in the carrying amount of ROU asset, net 1,439 1,418

Increase (decrease) in accrued interest payable 2,650 ( 23,174 )

Decrease in other liabilities, net ( 11,824 ) ( 10,375 )

Decrease in the carrying amount of lease liability ( 1,500 ) ( 1,247 )

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

Decrease in due to customers ( 89,884 ) ( 70,849 )

Other ( 110 ) —

Net cash provided by operating activities 185,465 48,658

6 unchanged sentences

Proceeds from sales of available-for-sale securities 113,980 18,077

Proceeds from and sale of beneficial interest in loan securitizations 30,811 34,371

Proceeds from beneficial interest in loan securitizations 7,271 8,603

Purchases of other investments ( 73,944 ) ( 71,590 )

( 166,664 ) ( 122,584 )

Proceeds from other investments 9,776 110,290

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine months ended

September 30,

Three months ended

Cash flows from financing activities:

6 unchanged sentences

Proceeds from issuance of common stock 435 381

Acquisition of noncontrolling interest — ( 2,000 )

Issuance of noncontrolling interests 2,004 1,940

2 unchanged sentences

Effect of exchange rate changes on cash 169 ( 77 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 292,683 ( 321,060 )

Net decrease in cash, cash equivalents, and restricted cash ( 16,523 ) ( 11,204 )

Cash, cash equivalents, and restricted cash, beginning of period 1,194,189 958,395

6 unchanged sentences

ROU assets obtained in exchange for lease obligations $ 746 740

Receipt of beneficial interest in consumer loan securitizations $ 23,506 52,501

Receipt of beneficial interest in consumer loan securitization $ 3,660 —

Distribution to noncontrolling interests $ 4,760 —

Issuance of noncontrolling interests $ — 540

(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.

(a) The Company utilized $ 1.1 million and $ 2.0 million of federal and state tax credits related primarily to renewable energy during the three months ended March 31, 2022 and 2021, 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

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

March 31, 2022 December 31, 2021 March 31, 2021 December 31, 2020

Total cash and cash equivalents $ 162,785 125,563 144,229 121,249

9 unchanged sentences

The accompanying unaudited consolidated financial statements of Nelnet, Inc.

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.

and subsidiaries (the “Company”) as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2021 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 nine months ended September 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results for the year ending December 31, 2022.

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, 2021 (the "2021 Annual Report").

1 unchanged sentence

Loans and accrued interest receivable consisted of the following:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Non-Nelnet Bank:

21 unchanged sentences

$ 17,621,576 18,335,197

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

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 September 30, 2021

The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.

March 31, 2022 December 31, 2021

Non-Nelnet Bank:

Federally insured loans $ 120,802 — 4,452 ( 10,330 ) — 935 — 115,859

Federally insured student loans (a) 0.59 % 0.60 %

Private education loans 5.25 % 5.39 %

Consumer loans 12.77 % 12.63 %

Federally insured loans 245 — 44 — — — — 289

Private education loans 567 — ( 157 ) — 4 — — 414

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

Three months ended September 30, 2020

Non-Nelnet Bank

Federally insured loans $ 144,829 — ( 5,299 ) ( 2,487 ) — 2,900 — 139,943

Federally insured student loans (a) 0.30 % 0.30 %

Private education loans 0.44 % 0.49 %

Consumer loans 39,081 — 5,128 ( 2,723 ) 381 — ( 15,924 ) 25,943

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

Nine months ended September 30, 2021

(a) As of March 31, 2022 and December 31, 2021, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 21.6 % and 22.2 %, respectively, and for Nelnet Bank was 11.8 % and 12.1 %, respectively.

Gain on Sale of Loans

On January 26, 2022, the Company sold $ 18.1 million (par value) of consumer loans to an unrelated third party who securitized such loans.

The Company recognized a gain of $ 3.0 million (pre-tax) as part of this transaction.

As partial consideration received for the consumer loans sold, the Company received a 6.6 percent residual interest in the consumer loan securitization, which is included in "investments" on the Company's consolidated balance sheet.

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 Provision (negative provision) for loan losses Charge-offs Recoveries Initial allowance on loans purchased with credit deterioration (a) Loan sales Balance at end of period

Three months ended March 31, 2022

Non-Nelnet Bank:

5 unchanged sentences

$ 127,113 ( 459 ) ( 7,010 ) 342 123 ( 2,284 ) 117,825

Nine months ended September 30, 2020

Three months ended March 31, 2021

Non-Nelnet Bank:

2 unchanged sentences

Consumer loans 27,256 ( 11,418 ) ( 1,950 ) 246 — — 14,134

Private education loans 323 422 — — — ( 1 ) 744

$ 175,698 ( 17,048 ) ( 2,504 ) 448 800 — 157,394

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.

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.

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.

(a) During the three months ended March 31, 2022 and 2021, the Company acquired $ 9.2 million (par value) and $ 54.0 million (par value), respectively, of federally insured rehabilitation loans that met the definition of purchased loans with credit deterioration ("PCD loans") when they were purchased by the Company.

The Company recorded a negative provision for loan losses for its federally insured loan portfolio for the three months ended March 31, 2022 due to the amortization of the portfolio and an increase in expected prepayments as a result of an initiative offered by the Department of Education (the “Department”) for Federal Family Education Loan Program ("FFELP" or "FFEL Program") borrowers to consolidate their loans into Federal Direct Loan Program loans with the Department by October 31, 2022 to qualify for loan forgiveness under the Public Service Loan Forgiveness program.

The Company recorded a provision for loan losses on its consumer loan portfolio during the three months ended March 31, 2022 as a result of loans acquired during the period.

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 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 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.

Unfunded Private Education Loan Commitments

As of March 31, 2022, Nelnet Bank has a liability of approximately $ 36,000 related to $ 37.9 million of unfunded private education loan commitments.

The liability for unfunded loan commitments is included in "other liabilities" on the consolidated balance sheet.

During the three months ended March 31, 2022, Nelnet Bank recognized provision for loan losses of approximately $ 24,000 related to unfunded loan commitments.

Key Credit Quality Indicators

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.

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.

1 unchanged sentence

The table below shows the Company’s loan status and delinquency amounts.

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

As of March 31, 2022 As of December 31, 2021 As of March 31, 2021

Federally insured loans - Non-Nelnet Bank:

28 unchanged sentences

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 265,215 $ 284,136 $ 298,354

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

As of March 31, 2022 As of December 31, 2021 As of March 31, 2021

Consumer loans - Non-Nelnet Bank:

11 unchanged sentences

Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 40,417 $ 46,129 $ 99,437

Federally insured loans - Nelnet Bank:

Federally insured loans - Nelnet Bank (a):

Loans in-school/grace/deferment $ 286 0.3 % $ 330 0.4 %

13 unchanged sentences

Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 83,798 $ 88,985

Private education loans - Nelnet Bank:

Private education loans - Nelnet Bank (a):

Loans in-school/grace/deferment $ 497 0.2 % $ 150 0.1 % $ 82 0.1 %

11 unchanged sentences

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 289,228 $ 171,874 $ 79,611

(a) For the periods presented for Nelnet Bank, the delinquency bucket periods conform with the delinquency bucket periods reflected in Nelnet Bank's Call Reports filed with the Federal Deposit Insurance Corporation.

FICO Scores - Nelnet Bank Private Education Loans

An additional key credit quality indicator for Nelnet Bank private education loans is FICO scores at the time of origination.

The following tables highlight the gross principal balance of Nelnet Bank's private education loan portfolio, by year of origination, stratified by FICO score at the time of origination.

Loan balance as of March 31, 2022

Three months ended March 31, 2022 2021 2020 Total

FICO at origination:

Less than 705 $ 2,097 5,841 99 8,037

705 - 734 10,935 11,391 272 22,598

735 - 764 17,278 17,906 1,049 36,233

765 - 794 34,510 34,100 1,389 69,999

Greater than 794 62,116 79,633 6,852 148,601

$ 126,936 148,871 9,661 285,468

Loan balance as of December 31, 2021

2021 2020 Total

FICO at origination:

Less than 705 $ 6,481 100 6,581

705 - 734 11,697 276 11,973

735 - 764 18,611 1,072 19,683

765 - 794 36,274 1,467 37,741

Greater than 794 86,141 7,771 93,912

$ 159,204 10,686 169,890

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 September 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, 2021 and March 31, 2022, 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 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.

The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of March 31, 2022 based on year of origination.

Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program.

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

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

Three months ended March 31, 2022 2021 2020 2019 2018 Prior years Total

Private education loans - Non-Nelnet Bank:

25 unchanged sentences

Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 40,417

Private education loans - Nelnet Bank:

Private education loans - Nelnet Bank (a):

Loans in school/grace/deferment $ 133 364 — — — — 497

11 unchanged sentences

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 289,228

Bonds and Notes Payable

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

As of September 30, 2021

As of March 31, 2022

Interest rate

9 unchanged sentences

10/25/67 - 8/27/68

FFELP warehouse facilities 5,446 0.17 %

11/22/22 / 2/26/24

FFELP loan warehouse facility 5,017 0.61 %

Private education loan warehouse facility 96,714 0.55 % 6/30/23

23 unchanged sentences

10/25/67 - 8/27/68

FFELP warehouse facilities 252,165 0.27 % / 0.31 %

5/20/22 / 2/26/23

FFELP loan warehouse facility 5,048 0.21 % 5/22/23

Private education loan warehouse facility 107,011 0.24 % 2/13/23

Consumer loan warehouse facility 25,809 0.28 % 4/23/22

Variable-rate bonds and notes issued in private education loan asset-backed securitizations 31,818 1.65 % / 1.85 %

4 unchanged sentences

Participation agreement 253,969 0.78 % 5/4/22

Repurchase agreements 483,848 0.66 % - 1.46 %

5/27/22 - 12/20/23

Secured line of credit 5,000 1.91 % 5/30/22

1 unchanged sentence

Total $ 17,631,089

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

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

Maximum financing amount $ 60,000 50,000 110,000

Amount outstanding 5,446 — 5,446

Amount available $ 54,554 50,000 104,554

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

Final maturity date November 22, 2022 February 26, 2024

Advanced as equity support $ 328 115 443

(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 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 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

Total original principal amount $ 797,000 531,300 1,328,300

Class A senior notes:

Total principal amount $ 781,000 520,600 1,301,600

Cost of funds 1-month LIBOR plus 0.50 %

1-month LIBOR plus 0.50 %

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

Class B subordinated notes:

Total principal amount $ 16,000 10,700 26,700

Cost of funds 1-month LIBOR plus 1.25 %

1-month LIBOR plus 1.20 %

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

Warehouse Facilities

The Company funds a portion of its loan acquisitions using warehouse facilities.

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

FFELP loan warehouse facility

As of March 31, 2022, the Company’s FFELP warehouse facility had an aggregate maximum financing amount available of $ 60.0 million, liquidity provisions through May 23, 2022, and a final maturity of May 22, 2023.

As of March 31, 2022, $ 5.0 million was outstanding under this facility, $ 55.0 million was available for future funding, and the Company had $ 0.3 million advanced as equity support.

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 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

The Company had a $ 100.0 million consumer loan warehouse facility.

On March 31, 2021, the Company terminated this facility.

As of March 31, 2022, the Company's private education warehouse facility had an aggregate maximum financing amount available of $ 175.0 million and an advance rate of 80 to 90 percent.

On January 28, 2022, the Company amended the facility to extend the liquidity provisions through June 30, 2022 and final maturity date to June 30, 2023.

As of March 31, 2022, $ 96.7 million was outstanding under this warehouse facility, $ 78.3 million was available for future funding, and the Company had $ 10.6 million advanced as equity support.

Unsecured Line of Credit

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.

The Company has a $ 495.0 million unsecured line of credit that has a maturity date of September 22, 2026.

As of March 31, 2022, no amount was outstanding on the line of credit and $ 495.0 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 $ 737.5 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 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.

As of March 31, 2022, $ 267.5 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.

On May 4, 2022, the agreement automatically renewed for another year through May 4, 2023.

The Company can participate FFELP loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $ 400.0 million or an amount in excess of $ 400.0 million if mutually agreed to by both parties.

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

See note 5 for additional information about the FFELP loan asset-backed securities investments serving as collateral under this participation agreement.

Repurchase Agreements

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.

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 certain private education and FFELP loan asset-backed securities.

Included in “bonds and notes payable” as of March 31, 2022 was $ 192.9 million subject to the first agreement and $ 191.4 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.

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.

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 was 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.

The reduction of this liability is reflected in (a reduction of) "interest expense 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

During the three months ended March 31, 2022, the Company repurchased $ 18.5 million of its own debt.

The gain recognized from these debt repurchases was not significant.

No debt was repurchased during the three months ended March 31, 2021.

The Company has retained certain of its own asset-backed securities upon their initial issuance or repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.

For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements.

However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate.

Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale.

As of March 31, 2022, the Company holds $ 398.1 million (par value) of its own asset-backed securities.

As of March 31, 2022, $ 45.7 million of the Company's repurchased asset-backed securities were financed with proceeds from the Company's repurchase agreements (as discussed above).

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 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").

Derivative instruments used as part of the Company's interest rate risk management strategy are further described in note 6 of the notes to consolidated financial statements included in the 2021 Annual Report.

A tabular presentation of such derivatives outstanding as of March 31, 2022 and December 31, 2021 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of March 31, 2022 and December 31, 2021, 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

September 30, 2021 December 31, 2020

2022 $ 2,000,000

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2026 1,150,000

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 September 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 March 31, 2022 and December 31, 2021 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 September 30, 2021 As of December 31, 2020

As of March 31, 2022 As of December 31, 2021

Maturity Notional amount Weighted average fixed rate paid by the Company (a) Notional amount Weighted average fixed rate paid by the Company (a)

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$ 4,350,000 0.44 % $ 5,000,000 0.55 %

$ 4,900,000 0.56 % $ 4,500,000 0.70 %

(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.

On April 28, 2022, the Company terminated $ 1.25 billion in notional amount of derivatives ($ 500 million, $ 250 million, and $ 500 million that had maturity dates in 2023, 2024, and 2025, respectively) that are included in the table above.

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 September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

1:3 basis swaps $ 396 ( 19 )

Interest rate swaps - floor income hedges ( 3,205 ) ( 4,285 )

Total settlements - (expense) income ( 5,909 ) ( 2,391 ) ( 15,587 ) 7,666

Total settlements - income (expense) ( 2,809 ) ( 4,304 )

Change in fair value:

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Derivative market value adjustments and derivative settlements, net - income (expense) $ 142,925 34,505

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.

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’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 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.

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

See note 3 for additional information about these repurchase agreements.

A summary of the Company's investments follows:

As of 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

As of March 31, 2022 As of December 31, 2021

Amortized cost Gross unrealized gains Gross unrealized losses (a) 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) $ 387,777 15,932 ( 49 ) 403,660 338,475 8,040 ( 13 ) 346,502

Private education loan asset-backed securities - available-for-sale (b) 369,859 1,865 — 371,724 — — — —

FFELP loan asset-backed securities- available-for-sale (b) $ 507,378 12,079 ( 2,388 ) 517,069 480,691 14,710 ( 719 ) 494,682

Private education loan asset-backed securities - available-for-sale (c) 388,736 — ( 16,851 ) 371,885 414,286 507 ( 2,241 ) 412,552

Other debt securities - available-for-sale 49,306 4 ( 78 ) 49,232 22,435 — — 22,435

Total available-for-sale debt securities $ 945,420 12,083 ( 19,317 ) 938,186 917,412 15,217 ( 2,960 ) 929,669

Equity securities 71,698 71,986

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Other Investments (not measured at fair value):

Other debt securities - held-to-maturity 8,200 8,200

Venture capital and funds:

Measurement alternative (c) 151,100 144,795

Measurement alternative 164,368 157,609

Equity method 74,339 67,840

Other 804 894

Total venture capital and funds 238,707 225,449

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Total investment in ALLO 248,232 224,589

Solar (f) ( 46,539 ) ( 30,373 )

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

Beneficial interest in loan securitizations (f):

Private education loans 73,915 66,008

Consumer loans 31,222 28,366

Federally insured student loans 25,217 25,768

Total beneficial interest in loan securitizations 130,354 120,142

Solar (g) ( 44,354 ) ( 42,457 )

Tax liens, affordable housing, and other 4,129 4,115

Total investments (not measured at fair value) 639,694 587,264

Total investments $ 1,649,578 $ 1,588,919

(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 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.

(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 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.

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 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.

(a) As of March 31, 2022, the aggregate fair value of asset-backed securities classified as available-for-sale with unrealized losses was $ 640.6 million.

The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.

(b) As of March 31, 2022, $ 267.5 million (par value) of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 3 under "Participation Agreement."

(c) As of March 31, 2022, a total of $ 374.4 million (par value) of private education loan asset-backed securities were subject to repurchase agreements with third parties, as discussed in note 3 under “Repurchase Agreements.”

(d) On February 25, 2022, the Company contributed $ 34.7 million of additional equity to ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO").

As a result of this equity contribution, the Company's voting membership interests percentage in ALLO did not materially change.

The Company accounts for its voting membership interests in ALLO under the Hypothetical Liquidation at Book Value ("HLBV") method of accounting.

During the three months ended March 31, 2022 and 2021, the Company recognized pre-tax losses of $ 13.1 million and $ 22.2 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.

2 unchanged sentences

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 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.

(e) As of March 31, 2022, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 137.3 million and $ 2.1 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 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.

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).

During the three months ended March 31, 2022 and 2021, the Company recognized pre-tax income on its ALLO preferred membership interests of $ 2.1 million and $ 2.3 million, respectively, that is included in "other" in "other income/expense" on the consolidated statements of income.

(f) 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 or as of March 31, 2022, the Company's ownership correlates to approximately $ 680 million, $ 190 million, and $ 450 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.

(g) 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 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.

As of March 31, 2022, the Company has funded a total of $ 231.4 million in solar investments, which includes $ 62.6 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 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 solar investment balance at March 31, 2022 represents the sum of total tax credits earned on solar projects placed in service through March 31, 2022 and the calculated HLBV net losses being larger than total payments made by the Company on such projects.

As of March 31, 2022, the Company is committed to fund an additional $ 19.0 million on these projects, of which $ 14.8 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 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.

During the three months ended March 31, 2022 and 2021, the Company recognized pre-tax losses of $ 1.0 million and $ 1.7 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.

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.

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)).

Losses from solar investments during the three months ended March 31, 2022 and 2021 include losses of $ 1.8 million and $ 0.6 million, respectively, attributable to third-party minority interest investors (syndication partners) that are included in “net loss attributable to noncontrolling interests” in the consolidated statements of income.

Intangible Assets

1 unchanged sentence

Weighted average remaining useful life as of

September 30, 2021 (months)

September 30, 2021 December 31, 2020

March 31, 2022 (months)

March 31, 2022 December 31, 2021

Amortizable intangible assets, net:

3 unchanged sentences

21 3,618 4,135

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

Total - amortizable intangible assets, net 94 $ 49,544 52,029

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 recorded amortization expense on its intangible assets of $ 2.5 million and $ 8.4 million during the three months ended March 31, 2022 and 2021, respectively.

The Company will continue to amortize intangible assets over their remaining useful lives.

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

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

As of March 31, 2022, the Company estimates it will record amortization expense as follows:

2022 (April 1 - December 31) $ 7,454

2027 and thereafter 15,642

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

The carrying amount of goodwill as of March 31, 2022 and December 31, 2021 by reportable operating segment was as follows:

Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management Nelnet Bank Corporate and Other Activities Total

Goodwill balance $ 23,639 76,570 41,883 — — 142,092

Property and Equipment

Property and equipment consisted of the following:

Useful life September 30, 2021 December 31, 2020

Computer equipment and software 1 - 5 years

$ 220,509 172,664

Building and building improvements 5 - 48 years

46,018 52,444

Office furniture and equipment 1 - 10 years

23,819 21,899

Leasehold improvements 1 - 15 years

Transportation equipment 5 - 10 years

Land — 3,642 3,642

Construction in progress — 3,783 18,478

311,958 283,152

Accumulated depreciation ( 194,662 ) ( 159,625 )

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

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

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Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.

Three months ended September 30,

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

Net income attributable to Nelnet, Inc.

$ 52,245 893 53,138 70,483 1,020 71,503

Weighted-average common shares outstanding - basic and diluted 37,947,257 648,464 38,595,721 37,988,584 549,892 38,538,476

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

Nine months ended September 30,

Three months ended March 31,

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

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The following tables include the results of each of the Company's operating segments reconciled to the consolidated financial statements.

Three months ended September 30, 2021

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

Three months ended March 31, 2022

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

Generation and

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Net interest income 43 339 72,595 2,174 1,966 — 77,117

Less provision (negative provision) for loan losses — — — 5,940 ( 113 ) — — 5,827

Net interest income after provision for loan losses 7 344 — 77,179 1,753 1,367 — 80,651

Other income/expense:

Loan servicing and systems revenue 112,351 — — — — — — 112,351

Intersegment revenue 8,621 3 — — — — ( 8,624 ) —

Education technology, services, and payment processing revenue — 85,324 — — — — — 85,324

Communications revenue — — — — — — — —

Other 727 13 — ( 7,275 ) 450 17,952 — 11,867

Gain on sale of loans — — — 3,444 — — — 3,444

Impairment expense and provision for beneficial interests, net ( 13,243 ) — — — — ( 916 ) — ( 14,159 )

Derivative settlements, net — — — ( 5,909 ) — — — ( 5,909 )

Derivative market value adjustments, net — — — 7,260 — — — 7,260

Total other income/expense 108,456 85,340 — ( 2,480 ) 450 17,036 ( 8,624 ) 200,178

Cost of services:

Cost to provide education technology, services, and payment processing services — 31,335 — — — — — 31,335

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

Total cost of services — 31,335 — — — — — 31,335

Operating expenses:

Salaries and benefits 75,305 29,119 — 542 890 22,735 — 128,592

Depreciation and amortization 4,245 2,762 — — — 8,702 — 15,710

Other expenses 12,738 4,804 — 5,420 445 14,918 — 38,324

Intersegment expenses, net 19,217 3,672 — 8,652 32 ( 22,949 ) ( 8,624 ) —

Total operating expenses 111,505 40,357 — 14,614 1,367 23,406 ( 8,624 ) 182,626

Income (loss) before income taxes ( 3,042 ) 13,992 — 60,085 836 ( 5,003 ) — 66,868

Income tax (expense) benefit (b) 730 ( 3,358 ) — ( 14,421 ) ( 200 ) 1,600 — ( 15,649 )

Net income (loss) ( 2,312 ) 10,634 — 45,664 636 ( 3,403 ) — 51,219

Net loss (income) attributable to noncontrolling interests — — — — — 1,919 — 1,919

Net income (loss) attributable to Nelnet, Inc.

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

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.

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.

Three months ended September 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 $ 34 367 — 137,959 — 1,646 ( 261 ) 139,745

Interest expense 24 16 — 57,755 — 888 ( 261 ) 58,423

Net interest income 10 351 — 80,204 — 758 — 81,322

Less provision (negative provision) for loan losses — — — ( 5,821 ) — — — ( 5,821 )

Less (negative provision) provision for loan losses — — ( 864 ) 429 — — ( 435 )

Net interest income after provision for loan losses 43 339 73,459 1,745 1,966 — 77,552

3 unchanged sentences

Education technology, services, and payment processing revenue — 112,286 — — — — 112,286

Communications revenue — — 20,211 — — — — 20,211

Other 740 — 6,511 1,500 1,125 — 9,877

Gain on sale of loans — — 2,989 — — — 2,989

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

Derivative settlements, net — — ( 2,809 ) — — — ( 2,809 )

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Cost of services — 35,545 — — — — 35,545

Cost to provide education technology, services, and payment processing services — 25,243 — — — — — 25,243

Cost to provide communications services — — 5,914 — — — — 5,914

Total cost of services — 25,243 5,914 — — — — 31,157

Operating expenses:

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Net income (loss) 9,191 25,166 162,206 738 ( 12,415 ) — 184,886

Net loss (income) attributable to noncontrolling interests — — — — — 327 — 327

Net loss attributable to noncontrolling interests — — — — 1,761 — 1,761

Net income (loss) attributable to Nelnet, Inc.

$ 9,191 25,166 162,206 738 ( 10,654 ) — 186,647

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 September 30, 2020.

Nine months ended September 30, 2021

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

Total assets as of March 31, 2022 $ 259,712 376,794 18,158,972 656,242 2,066,417 ( 528,396 ) 20,989,741

Three months ended March 31, 2021

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

Generation and

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Net interest income 11 263 99,452 1,182 422 — 101,330

Less provision (negative provision) for loan losses — — — ( 11,225 ) 378 — — ( 10,847 )

Net interest income after provision for loan losses 25 818 — 275,092 4,094 2,221 — 282,249

Other income/expense:

Loan servicing and systems revenue 335,961 — — — — — — 335,961

Intersegment revenue 25,369 9 — — — — ( 25,378 ) —

Education technology, services, and payment processing revenue — 257,284 — — — — — 257,284

Communications revenue — — — — — — — —

Other 2,541 13 — ( 4,514 ) 475 31,668 — 30,183

Gain on sale of loans — — — 18,715 — — — 18,715

Impairment expense and provision for beneficial interests, net ( 13,243 ) — — 2,436 — ( 1,416 ) — ( 12,223 )

Derivative settlements, net — — — ( 15,587 ) — — — ( 15,587 )

Derivative market value adjustments, net — — — 44,455 — — — 44,455

Total other income/expense 350,628 257,306 — 45,505 475 30,252 ( 25,378 ) 658,788

Cost of services:

Cost to provide education technology, services, and payment processing services — 80,063 — — — — — 80,063

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

Total cost of services — 80,063 — — — — — 80,063

Operating expenses:

Salaries and benefits 210,151 82,154 — 1,594 3,956 65,496 — 363,351

Depreciation and amortization 20,411 8,789 — — — 26,927 — 56,129

Other expenses 39,296 14,063 — 12,763 1,227 40,265 — 107,611

Intersegment expenses, net 52,241 10,856 — 25,627 72 ( 63,419 ) ( 25,378 ) —

Total operating expenses 322,099 115,862 — 39,984 5,255 69,269 ( 25,378 ) 527,091

Income (loss) before income taxes 28,554 62,199 — 280,613 ( 686 ) ( 36,796 ) — 333,883

Income tax (expense) benefit (b) ( 6,853 ) ( 14,928 ) — ( 67,347 ) 151 12,230 — ( 76,747 )

Net income (loss) 21,701 47,271 — 213,266 ( 535 ) ( 24,566 ) — 257,136

Net loss (income) attributable to noncontrolling interests — — — — — 3,467 — 3,467

Net income (loss) attributable to Nelnet, Inc.

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

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.

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.

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.

Nine months ended September 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 $ 403 2,777 — 474,468 — 4,397 ( 1,228 ) 480,818

Interest expense 97 54 — 275,492 — 3,373 ( 1,228 ) 277,788

Net interest income 306 2,723 — 198,976 — 1,024 — 203,030

Less provision (negative provision) for loan losses — — — 73,476 — — — 73,476

Less (negative provision) provision for loan losses — — ( 17,470 ) 422 — — ( 17,048 )

Net interest income after provision for loan losses 11 263 116,922 760 422 — 118,378

3 unchanged sentences

Education technology, services, and payment processing revenue — 95,258 — — — — 95,258

Communications revenue — — 57,390 — — — — 57,390

Other 1,113 — 2,881 22 ( 6,184 ) — ( 2,168 )

Gain on sale of loans — — — — — — —

Impairment expense and provision for beneficial interests, net — — — ( 26,303 ) — ( 8,116 ) — ( 34,419 )

Derivative settlements, net — — ( 4,304 ) — — — ( 4,304 )

2 unchanged sentences

Cost of services — 27,052 — — — — 27,052

Cost to provide education technology, services, and payment processing services — 63,424 — — — — — 63,424

Cost to provide communications services — — 17,240 — — — — 17,240

Total cost of services — 63,424 17,240 — — — — 80,664

Operating expenses:

7 unchanged sentences

Net income (loss) 12,224 23,540 107,622 ( 968 ) ( 19,517 ) — 122,904

Net loss (income) attributable to noncontrolling interests — — — — — ( 568 ) — ( 568 )

Net loss attributable to noncontrolling interests — — — — 694 — 694

Net income (loss) attributable to Nelnet, Inc.

$ 12,224 23,540 107,622 ( 968 ) ( 18,823 ) — 123,598

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 nine months ended September 30, 2020.

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

Disaggregated Revenue

The following tables provides 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.

Loan Servicing and Systems

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

2021 2020 2021 2020

Three months ended March 31,

Government servicing - Nelnet $ 61,049 34,872

3 unchanged sentences

Software services 7,400 8,454

Outsourced services 3,560 8,883 23,192 15,685

Outsourced services and other 2,722 11,671

Loan servicing and systems revenue $ 136,368 111,517

Education Technology, Services, and Payment Processing

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

2021 2020 2021 2020

Three months ended March 31,

Tuition payment plan services $ 30,716 29,550

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

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

2021 2020 2021 2020

Three months ended March 31,

Income/gains from investments, net $ 11,856 8,498

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

ALLO preferred return 2,043 — 6,384 —

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

Borrower late fee income 2,431 442

ALLO preferred return 2,117 2,321

Investment advisory services 1,282 2,697

Negative provision for beneficial interests investment — 2,436

Loss from ALLO voting membership interest investment ( 13,130 ) ( 22,219 )

Loss from solar investments ( 1,030 ) ( 1,679 )

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

Other 6,351 5,336

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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").

("Great Lakes"), subsidiaries of the Company, each earn loan servicing revenue from a servicing contract with the Department.

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 10.

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.

Nelnet Servicing's and Great Lakes' student loan servicing contracts with the Department are scheduled to expire on 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 Company cannot predict the timing, nature, or ultimate outcome of 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 September 30, 2021 As of December 31, 2020

As of March 31, 2022 As of December 31, 2021

Level 1 Level 2 Total Level 1 Level 2 Total

2 unchanged sentences

Other debt securities - available-for-sale 100 49,132 49,232 100 22,335 22,435

Equity securities (a) 61,573 — 61,573 10,114 — 10,114

Equity securities measured at net asset value (b) 8,471 31,927

Equity securities 59,943 — 59,943 63,154 — 63,154

Equity securities measured at net asset value (a) 11,755 8,832

Total investments 60,043 938,086 1,009,884 63,254 929,569 1,001,655

Total assets $ 60,043 938,086 1,009,884 63,254 929,569 1,001,655

(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.

(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.

(a) 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 September 30, 2021

As of March 31, 2022

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