4 unchanged sentences
The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:
−Removed: As of September 30, 2021 As of December 31, 2020
+Added: As of March 31, 2022 As of December 31, 2021
Dollars Percent Dollars Percent
13 unchanged sentences
All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department.
−Removed: As a result of the significant drop in interest rates in March 2020 and the first half of the second quarter of 2020, the Company earned $3.9 million and $4.8 million of variable-rate floor income on approximately $1.4 billion of FFELP loans during the three and six months ended June 30, 2020, respectively.
−Removed: Since the borrower rate reset on July 1, 2020, the Company no longer earns such variable-rate floor income on these loans, reflecting the lower interest rate environment.
+Added: No variable-rate floor income was earned by the Company in 2022 or 2021.
A summary of fixed rate floor income earned by the AGM operating segment follows.
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2021 2020 2021 2020
+Added: Three months ended March 31,
Fixed rate floor income, gross $ 28,993 35,539
2 unchanged sentences
(a) Derivative settlements consist of settlements paid 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 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.
+Added: Gross fixed rate floor income decreased for the three months ended March 31, 2022 as compared to the same period in 2021 due to higher interest rates in 2022 as compared to 2021.
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.
1 unchanged sentence
The Company enters into derivative instruments to hedge student loans earning fixed rate floor income.
−Removed: 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.
+Added: The decrease in net derivative settlements paid on these derivatives in 2022 as compared to 2021 was due to an increase in interest rates and a decrease in the notional amount of derivatives outstanding in 2022 as compared to 2021.
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 September 30, 2021.
+Added: The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of March 31, 2022.
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 September 30, 2021, the weighted average estimated variable conversion rate was 1.93% and the short-term interest rate was 9 basis points.
−Removed: 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.
+Added: As of March 31, 2022, the weighted average estimated variable conversion rate was 1.97% and the short-term interest rate was 23 basis points.
+Added: The following table summarizes the outstanding derivative instruments as of March 31, 2022 used by AGM to economically hedge loans earning fixed rate floor income.
Maturity Notional amount Weighted average fixed rate paid by the Company (a)
5 unchanged sentences
$ 4,350,000 0.44 %
−Removed: 2031 100,000 1.53
−Removed: $ 4,900,000 0.56 %
(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.
+Added: 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.
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 September 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 March 31, 2022.
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 September 30, 2021.
+Added: The following table summarizes the 1:3 Basis Swaps outstanding as of March 31, 2022.
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 September 30, 2021 was one-month LIBOR plus 9.1 basis points.
−Removed: (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”).
+Added: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of March 31, 2022 was one-month LIBOR plus 9.1 basis points.
+Added: (b) As of March 31, 2022, the Company was sponsor for $225.5 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.
4 unchanged sentences
LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets.
−Removed: See "Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate" under Item 2 above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2020 Annual Report for additional information.
+Added: See "Interest Rate Risk - Repayment of LIBOR as a Benchmark Rate" under Item 2 above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.
Sensitivity Analysis
10 unchanged sentences
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
−Removed: Three months ended September 30, 2021
+Added: Three months ended March 31, 2022
Effect on earnings:
3 unchanged sentences
Increase (decrease) in basic and diluted earnings per share $ 0.01 $ 0.29 $ 0.00 $ 0.01
−Removed: Three months ended September 30, 2020
−Removed: Effect on earnings:
−Removed: Decrease in pre-tax net income before
−Removed: impact of derivative settlements $ (16,328) (18.1) % $ (31,947) (35.4) % $ (1,737) (1.9) % $ (5,212) (5.7) %
−Removed: Impact of derivative settlements 2,643 2.9 7,930 8.8 1,546 1.7 4,638 5.1
−Removed: Increase (decrease) in net income
−Removed: before taxes $ (13,685) (15.2) % $ (24,017) (26.6) % $ (191) (0.2) % $ (574) (0.6) %
−Removed: Increase (decrease) in basic and
−Removed: diluted earnings per share $ (0.27) $ (0.47) (0.00 ) $ (0.01)
−Removed: Nine months ended September 30, 2021
−Removed: Effect on earnings:
−Removed: Decrease in pre-tax net income before
−Removed: impact of derivative settlements $ (42,749) (12.8) % $ (79,285) (23.7) % $ (4,659) (1.4) % $ (13,980) (4.2) %
−Removed: Impact of derivative settlements 30,944 9.3 92,831 27.8 4,474 1.3 13,423 4.0
−Removed: Increase (decrease) in net income
−Removed: before taxes $ (11,805) (3.5) % $ 13,546 4.1 % $ (185) (0.1) % $ (557) (0.2) %
−Removed: Increase (decrease) in basic and
−Removed: diluted earnings per share $ (0.23) $ 0.27 (0.00 ) $ (0.01)
−Removed: Nine months ended September 30, 2020
+Added: Three months ended March 31, 2021
Effect on earnings:
8 unchanged sentences
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.
−Removed: 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.
+Added: To achieve this objective, the Company manages and mitigates Nelnet Bank's 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 September 30, 2021 As of December 31, 2020
+Added: As of March 31, 2022 As of December 31, 2021
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.