NELNET INC 10-Q

ITEM 1. FINANCIAL STATEMENTS NELNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (unaudited) As of As of March 31, 2022 December 31, 2021 Assets: Loans and accrued interest receivable (net of allowance for loan losses of $ 117,825 and $ 127,113 , respectively) $ 17,621,576 18,335,197 Cash and cash equivalents: Cash and cash equivalents - not held at a related party 36,111 30,128 Cash and cash equivalents - held at a related party 126,674 95,435 Total cash and cash equivalents 162,785 125,563 Investments 1,649,578 1,588,919 Restricted cash 757,954 741,981 Restricted cash - due to customers 256,927 326,645 Accounts receivable (net of allowance for doubtful accounts of $ 1,098 and $ 1,160 , respectively) 144,902 163,315 Goodwill 142,092 142,092 Intangible assets, net 49,544 52,029 Property and equipment, net 120,779 119,413 Other assets 83,604 82,887 Total assets $ 20,989,741 21,678,041 Liabilities: Bonds and notes payable $ 16,736,701 17,631,089 Accrued interest payable 7,216 4,566 Bank deposits 484,047 344,315 Other liabilities 400,523 379,231 Due to customers 276,191 366,002 Total liabilities 17,904,678 18,725,203 Commitments and contingencies Equity: Nelnet, Inc. shareholders' equity: Preferred stock, $ 0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding — — Common stock: Class A, $ 0.01 par value. Authorized 600,000,000 shares; issued and outstanding 27,151,270 shares and 27,239,654 shares, respectively 272 272 Class B, convertible, $ 0.01 par value. Authorized 60,000,000 shares; issued and outstanding 10,674,892 shares and 10,676,642 shares, respectively 107 107 Additional paid-in capital 1,208 1,000 Retained earnings 3,092,226 2,940,523 Accumulated other comprehensive (loss) earnings, net ( 5,500 ) 9,304 Total Nelnet, Inc. shareholders' equity 3,088,313 2,951,206 Noncontrolling interests ( 3,250 ) 1,632 Total equity 3,085,063 2,952,838 Total liabilities and equity $ 20,989,741 21,678,041 Supplemental information - assets and liabilities of consolidated education and other lending variable interest entities: Loans and accrued interest receivable $ 17,162,119 17,981,414 Restricted cash 666,369 674,073 Bonds and notes payable ( 16,660,541 ) ( 17,462,456 ) Accrued interest payable and other liabilities ( 48,267 ) ( 36,276 ) Net assets of consolidated education and other lending variable interest entities $ 1,119,680 1,156,755 See accompanying notes to consolidated financial statements. 2 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except share data) (unaudited) Three months ended March 31, 2022 2021 Interest income: Loan interest $ 111,377 124,117 Investment interest 13,819 4,986 Total interest income 125,196 129,103 Interest expense on bonds and notes payable and bank deposits 48,079 27,773 Net interest income 77,117 101,330 Less negative provision for loan losses ( 435 ) ( 17,048 ) Net interest income after provision for loan losses 77,552 118,378 Other income/expense: Loan servicing and systems revenue 136,368 111,517 Education technology, services, and payment processing revenue 112,286 95,258 Other 9,877 ( 2,168 ) Gain on sale of loans 2,989 — Derivative market value adjustments and derivative settlements, net 142,925 34,505 Total other income/expense 404,445 239,112 Cost to provide education technology, services, and payment processing services 35,545 27,052 Operating expenses: Salaries and benefits 149,414 115,791 Depreciation and amortization 16,956 20,184 Other expenses 39,499 36,698 Total operating expenses 205,869 172,673 Income before income taxes 240,583 157,765 Income tax expense 55,697 34,861 Net income 184,886 122,904 Net loss attributable to noncontrolling interests 1,761 694 Net income attributable to Nelnet, Inc. $ 186,647 123,598 Earnings per common share: Net income attributable to Nelnet, Inc. shareholders - basic and diluted $ 4.91 3.20 Weighted average common shares outstanding - basic and diluted 38,041,834 38,603,555 See accompanying notes to consolidated financial statements. 3 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (unaudited) Three months ended March 31, 2022 2021 Net income $ 184,886 122,904 Other comprehensive (loss) income: Net changes related to foreign currency translation adjustments $ 9 1 Net changes related to available-for-sale debt securities: 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 (loss) income ( 14,804 ) 2,920 Comprehensive income 170,082 125,824 Comprehensive loss attributable to noncontrolling interests 1,761 694 Comprehensive income attributable to Nelnet, Inc. $ 171,843 126,518 See accompanying notes to consolidated financial statements. 4 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands, except share data) (unaudited) Nelnet, Inc. Shareholders Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) earnings Noncontrolling interests Total equity Class A Class B Balance as of December 31, 2020 — 27,193,154 11,155,571 $ — 272 112 3,794 2,621,762 6,102 ( 3,693 ) 2,628,349 Issuance of noncontrolling interests — — — — — — — — — 1,400 1,400 Net income (loss) — — — — — — — 123,598 — ( 694 ) 122,904 Other comprehensive income — — — — — — — — 2,920 — 2,920 Distribution to noncontrolling interests — — — — — — — — — ( 102 ) ( 102 ) Cash dividends on Class A and Class B common stock - $ 0.22 per share — — — — — — — ( 8,437 ) — — ( 8,437 ) Issuance of common stock, net of forfeitures — 199,442 — — 2 — 2,089 — — — 2,091 Compensation expense for stock based awards — — — — — — 1,985 — — — 1,985 Repurchase of common stock — ( 26,199 ) — — — — ( 2,009 ) — — — ( 2,009 ) Conversion of common stock — 1,400 ( 1,400 ) — — — — — — — — 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 Issuance of noncontrolling interests — — — — — — — — — 2,004 2,004 Net income (loss) — — — — — — — 186,647 — ( 1,761 ) 184,886 Other comprehensive loss — — — — — — — — ( 14,804 ) — ( 14,804 ) Distribution to noncontrolling interests — — — — — — — — — ( 5,125 ) ( 5,125 ) Cash dividends on Class A and Class B common stock - $ 0.24 per share — — — — — — — ( 9,063 ) — — ( 9,063 ) Issuance of common stock, net of forfeitures — 289,919 — — 3 — 4,382 — — — 4,385 Compensation expense for stock based awards — — — — — — 2,841 — — — 2,841 Repurchase of common stock — ( 380,053 ) — — ( 3 ) — ( 7,015 ) ( 25,881 ) — — ( 32,899 ) Conversion of common stock — 1,750 ( 1,750 ) — — — — — — — — 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. 5 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited) Three months ended March 31, 2022 2021 Net income attributable to Nelnet, Inc. $ 186,647 123,598 Net loss attributable to noncontrolling interests ( 1,761 ) ( 694 ) Net income 184,886 122,904 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 36,335 38,415 Loan discount accretion ( 9,927 ) ( 7,218 ) Negative provision for loan losses ( 435 ) ( 17,048 ) Derivative market value adjustments ( 145,734 ) ( 38,809 ) 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 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 ) Decrease in due to customers ( 89,884 ) ( 70,849 ) Other ( 110 ) — Net cash provided by operating activities 185,465 48,658 Cash flows from investing activities: Purchases and originations of loans ( 161,334 ) ( 152,329 ) Purchases of loans from a related party ( 1,049 ) ( 19,731 ) Net proceeds from loan repayments, claims, and capitalized interest 848,188 637,275 Proceeds from sale of loans 15,170 — Purchases of available-for-sale securities ( 139,195 ) ( 44,335 ) Proceeds from sales of available-for-sale securities 113,980 18,077 Proceeds from beneficial interest in loan securitizations 7,271 8,603 Purchases of other investments ( 73,944 ) ( 71,590 ) Proceeds from other investments 9,776 110,290 Purchases of property and equipment ( 15,794 ) ( 17,898 ) Net cash provided by investing activities 603,069 468,362 6 NELNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Three months ended March 31, 2022 2021 Cash flows from financing activities: Payments on bonds and notes payable $ ( 918,270 ) ( 584,303 ) Proceeds from issuance of bonds and notes payable 13,512 7,800 Payments of debt issuance costs ( 312 ) ( 614 ) Increase in bank deposits, net 139,732 57,197 Dividends paid ( 9,063 ) ( 8,437 ) Repurchases of common stock ( 32,899 ) ( 2,009 ) Proceeds from issuance of common stock 435 381 Issuance of noncontrolling interests 2,004 1,940 Distribution to noncontrolling interests ( 365 ) ( 102 ) Net cash used in financing activities ( 805,226 ) ( 528,147 ) Effect of exchange rate changes on cash 169 ( 77 ) 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 Cash, cash equivalents, and restricted cash, end of period $ 1,177,666 947,191 Supplemental disclosures of cash flow information: Cash disbursements made for interest $ 33,895 39,686 Cash disbursements made for income taxes, net of refunds and credits received (a) $ 466 199 Cash disbursements made for operating leases $ 1,887 2,098 Non-cash operating, investing, and financing activity: ROU assets obtained in exchange for lease obligations $ 746 740 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 $ 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 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 Restricted cash 757,954 741,981 609,881 553,175 Restricted cash - due to customers 256,927 326,645 193,081 283,971 Cash, cash equivalents, and restricted cash $ 1,177,666 1,194,189 947,191 958,395 See accompanying notes to consolidated financial statements. 7 NELNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts, unless otherwise noted) (unaudited) 1. Basis of Financial Reporting The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of 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. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three 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"). 2. Loans and Accrued Interest Receivable and Allowance for Loan Losses Loans and accrued interest receivable consisted of the following: As of As of March 31, 2022 December 31, 2021 Non-Nelnet Bank: Federally insured student loans: Stafford and other $ 3,741,495 3,904,000 Consolidation 12,553,882 13,187,047 Total 16,295,377 17,091,047 Private education loans 278,537 299,442 Consumer loans 44,713 51,301 Non-Nelnet Bank loans 16,618,627 17,441,790 Nelnet Bank: Federally insured student loans 82,789 88,011 Private education loans 285,468 169,890 Nelnet Bank loans 368,257 257,901 Accrued interest receivable 774,774 788,552 Loan discount, net of unamortized loan premiums and deferred origination costs ( 22,257 ) ( 25,933 ) Allowance for loan losses: Non-Nelnet Bank: Federally insured loans ( 95,995 ) ( 103,381 ) Private education loans ( 14,622 ) ( 16,143 ) Consumer loans ( 5,710 ) ( 6,481 ) Non-Nelnet Bank allowance for loan losses ( 116,327 ) ( 126,005 ) Nelnet Bank: Federally insured loans ( 247 ) ( 268 ) Private education loans ( 1,251 ) ( 840 ) Nelnet Bank allowance for loan losses ( 1,498 ) ( 1,108 ) $ 17,621,576 18,335,197 8 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. As of As of March 31, 2022 December 31, 2021 Non-Nelnet Bank: Federally insured student loans (a) 0.59 % 0.60 % Private education loans 5.25 % 5.39 % Consumer loans 12.77 % 12.63 % Nelnet Bank: Federally insured student loans (a) 0.30 % 0.30 % Private education loans 0.44 % 0.49 % (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: Federally insured loans $ 103,381 ( 2,748 ) ( 4,761 ) — 123 — 95,995 Private education loans 16,143 ( 400 ) ( 1,299 ) 176 — 2 14,622 Consumer loans 6,481 2,284 ( 937 ) 166 — ( 2,284 ) 5,710 Nelnet Bank: Federally insured loans 268 ( 21 ) — — — — 247 Private education loans 840 426 ( 13 ) — — ( 2 ) 1,251 $ 127,113 ( 459 ) ( 7,010 ) 342 123 ( 2,284 ) 117,825 Three months ended March 31, 2021 Non-Nelnet Bank: Federally insured loans $ 128,590 ( 7,483 ) ( 61 ) — 800 — 121,846 Private education loans 19,529 1,431 ( 493 ) 202 — 1 20,670 Consumer loans 27,256 ( 11,418 ) ( 1,950 ) 246 — — 14,134 Nelnet Bank: Private education loans 323 422 — — — ( 1 ) 744 $ 175,698 ( 17,048 ) ( 2,504 ) 448 800 — 157,394 (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. 9 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 Key credit quality indicators for the Company's federally insured, private education, and consumer loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The table below shows the Company’s loan status and delinquency amounts. As of March 31, 2022 As of December 31, 2021 As of March 31, 2021 Federally insured loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ 839,566 5.2 % $ 829,624 4.9 % $ 1,006,605 5.4 % Loans in forbearance 1,160,048 7.1 1,118,667 6.5 1,936,553 10.4 Loans in repayment status: Loans current 12,352,543 86.4 % 12,847,685 84.9 % 13,787,038 88.0 % Loans delinquent 31-60 days 462,750 3.2 895,656 5.9 425,599 2.7 Loans delinquent 61-90 days 282,810 2.0 352,449 2.3 234,871 1.5 Loans delinquent 91-120 days 202,371 1.4 251,075 1.7 125,471 0.8 Loans delinquent 121-270 days 712,753 5.0 592,449 3.9 1,026,050 6.6 Loans delinquent 271 days or greater 282,536 2.0 203,442 1.3 63,196 0.4 Total loans in repayment 14,295,763 87.7 100.0 % 15,142,756 88.6 100.0 % 15,662,225 84.2 100.0 % Total federally insured loans 16,295,377 100.0 % 17,091,047 100.0 % 18,605,383 100.0 % Accrued interest receivable 770,853 784,716 791,199 Loan discount, net of unamortized premiums and deferred origination costs ( 27,317 ) ( 28,309 ) ( 14,608 ) Allowance for loan losses ( 95,995 ) ( 103,381 ) ( 121,846 ) Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 16,942,918 $ 17,744,073 $ 19,260,128 Private education loans - Non-Nelnet Bank: Loans in-school/grace/deferment $ 10,226 3.7 % $ 9,661 3.2 % $ 10,405 3.3 % Loans in forbearance 2,838 1.0 3,601 1.2 7,567 2.4 Loans in repayment status: Loans current 260,911 98.3 % 280,457 98.0 % 292,840 98.9 % Loans delinquent 31-60 days 1,699 0.6 2,403 0.8 1,343 0.5 Loans delinquent 61-90 days 1,040 0.4 976 0.3 843 0.3 Loans delinquent 91 days or greater 1,823 0.7 2,344 0.9 1,050 0.3 Total loans in repayment 265,473 95.3 100.0 % 286,180 95.6 100.0 % 296,076 94.3 100.0 % Total private education loans 278,537 100.0 % 299,442 100.0 % 314,048 100.0 % Accrued interest receivable 1,898 1,960 2,303 Loan discount, net of unamortized premiums ( 598 ) ( 1,123 ) 2,673 Allowance for loan losses ( 14,622 ) ( 16,143 ) ( 20,670 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 265,215 $ 284,136 $ 298,354 10 As of March 31, 2022 As of December 31, 2021 As of March 31, 2021 Consumer loans - Non-Nelnet Bank: Loans in deferment $ 72 0.2 % $ 43 0.1 % $ 306 0.3 % Loans in repayment status: Loans current 43,424 97.3 % 49,697 97.0 % 108,126 97.9 % Loans delinquent 31-60 days 255 0.5 414 0.8 760 0.7 Loans delinquent 61-90 days 304 0.7 322 0.6 577 0.5 Loans delinquent 91 days or greater 658 1.5 825 1.6 1,023 0.9 Total loans in repayment 44,641 99.8 100.0 % 51,258 99.9 100.0 % 110,486 99.7 % 100.0 % Total consumer loans 44,713 100.0 % 51,301 100.0 % 110,792 100.0 % Accrued interest receivable 374 396 934 Loan premium 1,040 913 1,845 Allowance for loan losses ( 5,710 ) ( 6,481 ) ( 14,134 ) Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 40,417 $ 46,129 $ 99,437 Federally insured loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 286 0.3 % $ 330 0.4 % Loans in forbearance 948 1.2 1,057 1.2 Loans in repayment status: Loans current 80,421 98.6 % 85,599 98.8 % Loans delinquent 30-59 days 402 0.5 816 1.0 Loans delinquent 60-89 days 427 0.5 — — Loans delinquent 90-119 days 90 0.1 — — Loans delinquent 120-270 days 157 0.2 209 0.2 Loans delinquent 271 days or greater 58 0.1 — — Total loans in repayment 81,555 98.5 100.0 % 86,624 98.4 100.0 % Total federally insured loans 82,789 100.0 % 88,011 100.0 % Accrued interest receivable 1,231 1,216 Loan premium 25 26 Allowance for loan losses ( 247 ) ( 268 ) Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 83,798 $ 88,985 Private education loans - Nelnet Bank (a): Loans in-school/grace/deferment $ 497 0.2 % $ 150 0.1 % $ 82 0.1 % Loans in forbearance 317 0.1 460 0.3 29 — Loans in repayment status: Loans current 284,081 99.8 % 169,157 99.9 % 79,120 100.0 % Loans delinquent 30-59 days 422 0.2 51 — — — Loans delinquent 60-89 days 78 — — — — — Loans delinquent 90 days or greater 73 — 72 0.1 — — Total loans in repayment 284,654 99.7 100.0 % 169,280 99.6 100.0 % 79,120 99.9 100.0 % Total private education loans 285,468 100.0 % 169,890 100.0 % 79,231 100.0 % Accrued interest receivable 418 264 125 Deferred origination costs 4,593 2,560 999 Allowance for loan losses ( 1,251 ) ( 840 ) ( 744 ) 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. 11 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, 2021 and March 31, 2022, was not material. 12 Amortized Cost Basis by Origination Year The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of 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. Three months ended March 31, 2022 2021 2020 2019 2018 Prior years Total Private education loans - Non-Nelnet Bank: Loans in school/grace/deferment $ 121 3,030 1,899 3,318 — 1,858 10,226 Loans in forbearance — 10 372 858 181 1,417 2,838 Loans in repayment status: Loans current 1,452 2,796 60,651 46,107 284 149,621 260,911 Loans delinquent 31-60 days — 2 10 239 — 1,448 1,699 Loans delinquent 61-90 days — 13 102 — — 925 1,040 Loans delinquent 91 days or greater — — 87 — — 1,736 1,823 Total loans in repayment 1,452 2,811 60,850 46,346 284 153,730 265,473 Total private education loans $ 1,573 5,851 63,121 50,522 465 157,005 278,537 Accrued interest receivable 1,898 Loan discount, net of unamortized premiums ( 598 ) Allowance for loan losses ( 14,622 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 265,215 Consumer loans - Non-Nelnet Bank: Loans in deferment $ — 34 — 32 6 — 72 Loans in repayment status: Loans current 17,335 17,475 574 3,738 4,243 59 43,424 Loans delinquent 31-60 days 32 74 15 99 31 4 255 Loans delinquent 61-90 days — 181 50 12 57 4 304 Loans delinquent 91 days or greater — 54 39 208 357 — 658 Total loans in repayment 17,367 17,784 678 4,057 4,688 67 44,641 Total consumer loans $ 17,367 17,818 678 4,089 4,694 67 44,713 Accrued interest receivable 374 Loan premium 1,040 Allowance for loan losses ( 5,710 ) Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 40,417 Private education loans - Nelnet Bank (a): Loans in school/grace/deferment $ 133 364 — — — — 497 Loans in forbearance 139 178 — — — — 317 Loans in repayment status: Loans current 126,380 148,040 9,661 — — — 284,081 Loans delinquent 30-59 days 284 138 — — — — 422 Loans delinquent 60-89 days — 78 — — — — 78 Loans delinquent 90 days or greater — 73 — — — — 73 Total loans in repayment 126,664 148,329 9,661 — — — 284,654 Total private education loans $ 126,936 148,871 9,661 — — — 285,468 Accrued interest receivable 418 Deferred origination costs 4,593 Allowance for loan losses ( 1,251 ) Total private education loans and accrued interest receivable, net of allowance for loan losses $ 289,228 (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. 13 3. Bonds and Notes Payable The following tables summarize the Company’s outstanding debt obligations by type of instrument: As of March 31, 2022 Carrying amount Interest rate range Final maturity Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations: Bonds and notes based on indices $ 15,144,282 0.37 % - 2.46 % 5/27/25 - 9/25/69 Bonds and notes based on auction 225,535 0.00 % - 1.43 % 3/22/32 - 8/27/46 Total FFELP variable-rate bonds and notes 15,369,817 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 736,079 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP loan warehouse facility 5,017 0.61 % 5/22/23 Private education loan warehouse facility 96,714 0.55 % 6/30/23 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 28,039 1.90 % / 2.21 % 12/26/40 / 6/25/49 Fixed-rate bonds and notes issued in private education loan asset-backed securitization 26,764 3.60 % / 5.35 % 12/26/40 / 12/28/43 Unsecured line of credit — — 9/22/26 Participation agreement 267,481 1.08 % 5/4/22 Repurchase agreements 384,343 0.95 % - 1.46 % 4/14/22 - 12/20/23 Secured line of credit 5,000 2.05 % 5/30/22 16,919,254 Discount on bonds and notes payable and debt issuance costs ( 182,553 ) Total $ 16,736,701 As of December 31, 2021 Carrying amount Interest rate range Final maturity Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations: Bonds and notes based on indices $ 15,887,295 0.23 % - 2.10 % 5/27/25 - 9/25/69 Bonds and notes based on auction 248,550 0.00 % - 1.09 % 3/22/32 - 8/27/46 Total FFELP variable-rate bonds and notes 16,135,845 Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations 772,935 1.42 % - 3.45 % 10/25/67 - 8/27/68 FFELP loan warehouse facility 5,048 0.21 % 5/22/23 Private education loan warehouse facility 107,011 0.24 % 2/13/23 Variable-rate bonds and notes issued in private education loan asset-backed securitizations 31,818 1.65 % / 1.85 % 12/26/40 / 6/25/49 Fixed-rate bonds and notes issued in private education loan asset-backed securitization 28,613 3.60 % / 5.35 % 12/26/40 / 12/28/43 Unsecured line of credit — — 9/22/26 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 17,824,087 Discount on bonds and notes payable and debt issuance costs ( 192,998 ) Total $ 17,631,089 14 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 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 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 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. The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its discretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities. As such, the FFELP loan asset-backed securities under this agreement have been accounted for by the Company as a secured borrowing. 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 certain private education and FFELP 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 maturity dates (as of March 31, 2022) of April 14, 2022, May 27, 2022, and January 13, 2023. 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 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 expense on bonds and notes payable and bank deposits" in the consolidated statements of income. 15 Debt Repurchases 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). 4. Derivative Financial Instruments The Company uses derivative financial instruments to manage interest rate risk. 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. Basis Swaps 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 2022 $ 2,000,000 2023 750,000 2024 1,750,000 2026 1,150,000 2027 250,000 $ 5,900,000 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 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) 2022 $ — — % $ 500,000 0.94 % 2023 750,000 0.30 900,000 0.62 2024 2,500,000 0.35 2,500,000 0.35 2025 500,000 0.35 500,000 0.35 2026 500,000 1.02 500,000 1.02 2031 100,000 1.53 100,000 1.53 $ 4,350,000 0.44 % $ 5,000,000 0.55 % (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. 16 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 March 31, 2022 2021 Settlements: 1:3 basis swaps $ 396 ( 19 ) Interest rate swaps - floor income hedges ( 3,205 ) ( 4,285 ) Total settlements - income (expense) ( 2,809 ) ( 4,304 ) Change in fair value: 1:3 basis swaps 889 2,799 Interest rate swaps - floor income hedges 144,845 36,010 Total change in fair value - income (expense) 145,734 38,809 Derivative market value adjustments and derivative settlements, net - income (expense) $ 142,925 34,505 17 5. Investments A summary of the Company's investments follows: 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 (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 Total investments (at fair value) 1,009,884 1,001,655 Other Investments (not measured at fair value): Other debt securities - held-to-maturity 8,200 8,200 Venture capital and funds: Measurement alternative 164,368 157,609 Equity method 74,339 67,840 Total venture capital and funds 238,707 225,449 Real estate: Equity method 50,257 47,226 Notes receivable 4,169 — Total real estate 54,426 47,226 Investment in ALLO: Voting interest/equity method (d) 108,773 87,247 Preferred membership interest and accrued and unpaid preferred return (e) 139,459 137,342 Total investment in ALLO 248,232 224,589 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 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. 18 Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers. The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP. Applying the HLBV method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years. 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 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 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 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 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 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. 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. 19 6. Intangible Assets Intangible assets consisted of the following: Weighted average remaining useful life as of March 31, 2022 (months) As of As of March 31, 2022 December 31, 2021 Amortizable intangible assets, net: Customer relationships (net of accumulated amortization of $ 99,366 and $ 97,398 , respectively) 100 $ 45,926 47,894 Computer software (net of accumulated amortization of $ 4,236 and $ 3,669 , respectively) 21 3,618 4,135 Total - amortizable intangible assets, net 94 $ 49,544 52,029 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 March 31, 2022, the Company estimates it will record amortization expense as follows: 2022 (April 1 - December 31) $ 7,454 2023 9,830 2024 7,457 2025 4,644 2026 4,517 2027 and thereafter 15,642 $ 49,544 7. Goodwill 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 8. Earnings per Common Share Presented below is a summary of the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock. Three months ended March 31, 2022 2021 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total Numerator: Net income attributable to Nelnet, Inc. $ 183,328 3,319 186,647 121,766 1,832 123,598 Denominator: Weighted-average common shares outstanding - basic and diluted 37,365,339 676,495 38,041,834 38,031,267 572,288 38,603,555 Earnings per share - basic and diluted $ 4.91 4.91 4.91 3.20 3.20 3.20 20 9. Segment Reporting See note 15 of the notes to consolidated financial statements included in the 2021 Annual Report for a description of the Company's operating segments. The following tables include the results of each of the Company's operating segments reconciled to the consolidated financial statements. Three months ended March 31, 2022 Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management Nelnet Bank Corporate and Other Activities Eliminations Total Total interest income $ 67 339 118,598 3,030 3,992 ( 828 ) 125,196 Interest expense 24 — 46,003 856 2,026 ( 828 ) 48,079 Net interest income 43 339 72,595 2,174 1,966 — 77,117 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 Other income/expense: Loan servicing and systems revenue 136,368 — — — — — 136,368 Intersegment revenue 8,480 3 — — — ( 8,483 ) — Education technology, services, and payment processing revenue — 112,286 — — — — 112,286 Other 740 — 6,511 1,500 1,125 — 9,877 Gain on sale of loans — — 2,989 — — — 2,989 Derivative settlements, net — — ( 2,809 ) — — — ( 2,809 ) Derivative market value adjustments, net — — 145,734 — — — 145,734 Total other income/expense 145,588 112,289 152,425 1,500 1,125 ( 8,483 ) 404,445 Cost of services — 35,545 — — — — 35,545 Operating expenses: Salaries and benefits 91,972 31,286 591 1,554 24,012 — 149,414 Depreciation and amortization 4,954 2,315 — 3 9,684 — 16,956 Other expenses 16,213 5,764 3,033 682 13,804 — 39,499 Intersegment expenses, net 20,398 4,605 8,831 45 ( 25,396 ) ( 8,483 ) — Total operating expenses 133,537 43,970 12,455 2,284 22,104 ( 8,483 ) 205,869 Income (loss) before income taxes 12,094 33,113 213,429 961 ( 19,013 ) — 240,583 Income tax (expense) benefit ( 2,903 ) ( 7,947 ) ( 51,223 ) ( 223 ) 6,598 — ( 55,697 ) Net income (loss) 9,191 25,166 162,206 738 ( 12,415 ) — 184,886 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 March 31, 2022 $ 259,712 376,794 18,158,972 656,242 2,066,417 ( 528,396 ) 20,989,741 21 Three months ended March 31, 2021 Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management Nelnet Bank Corporate and Other Activities Eliminations Total Total interest income $ 34 263 126,402 1,376 1,246 ( 218 ) 129,103 Interest expense 23 — 26,950 194 824 ( 218 ) 27,773 Net interest income 11 263 99,452 1,182 422 — 101,330 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 Other income/expense: Loan servicing and systems revenue 111,517 — — — — — 111,517 Intersegment revenue 8,268 3 — — — ( 8,271 ) — Education technology, services, and payment processing revenue — 95,258 — — — — 95,258 Other 1,113 — 2,881 22 ( 6,184 ) — ( 2,168 ) Gain on sale of loans — — — — — — — Derivative settlements, net — — ( 4,304 ) — — — ( 4,304 ) Derivative market value adjustments, net — — 38,809 — — — 38,809 Total other income/expense 120,898 95,261 37,386 22 ( 6,184 ) ( 8,271 ) 239,112 Cost of services — 27,052 — — — — 27,052 Operating expenses: Salaries and benefits 66,458 25,941 495 1,488 21,409 — 115,791 Depreciation and amortization 8,192 3,071 — — 8,920 — 20,184 Other expenses 13,285 4,822 3,777 545 14,272 — 36,698 Intersegment expenses, net 16,890 3,664 8,427 3 ( 20,713 ) ( 8,271 ) — Total operating expenses 104,825 37,498 12,699 2,036 23,888 ( 8,271 ) 172,673 Income (loss) before income taxes 16,084 30,974 141,609 ( 1,254 ) ( 29,650 ) — 157,765 Income tax (expense) benefit ( 3,860 ) ( 7,434 ) ( 33,987 ) 286 10,133 — ( 34,861 ) Net income (loss) 12,224 23,540 107,622 ( 968 ) ( 19,517 ) — 122,904 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 March 31, 2021 $ 191,910 372,315 20,367,532 296,908 1,148,560 ( 210,017 ) 22,167,208 22 10. Disaggregated Revenue 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 March 31, 2022 2021 Government servicing - Nelnet $ 61,049 34,872 Government servicing - Great Lakes 48,076 43,302 Private education and consumer loan servicing 12,873 8,548 FFELP servicing 4,248 4,670 Software services 7,400 8,454 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 March 31, 2022 2021 Tuition payment plan services $ 30,716 29,550 Payment processing 38,071 33,038 Education technology and services 43,251 32,527 Other 248 143 Education technology, services, and payment processing revenue $ 112,286 95,258 Other Income/Expense The following table provides the components of "other" in "other income/expense" on the consolidated statements of income: Three months ended March 31, 2022 2021 Income/gains from investments, net $ 11,856 8,498 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 ) Other 6,351 5,336 $ 9,877 ( 2,168 ) 11. Major Customer Nelnet Servicing, LLC ("Nelnet Servicing") and Great Lakes Educational Loan Services, Inc. ("Great Lakes"), subsidiaries of the Company, each earn loan servicing revenue from a servicing contract with the Department. 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. 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. The Company cannot predict the timing, nature, or ultimate outcome of NextGen or any other contract procurement process by the Department. 23 12. Fair Value The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. As of March 31, 2022 As of December 31, 2021 Level 1 Level 2 Total Level 1 Level 2 Total Assets: Investments: FFELP loan asset-backed debt securities - available-for-sale $ — 517,069 517,069 — 494,682 494,682 Private education loan asset-backed debt securities - available-for-sale — 371,885 371,885 — 412,552 412,552 Other debt securities - available-for-sale 100 49,132 49,232 100 22,335 22,435 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) 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 March 31, 2022 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 17,656,032 16,846,802 — — 17,656,032 Accrued loan interest receivable 774,774 774,774 — 774,774 — Cash and cash equivalents 162,785 162,785 162,785 — — Investments (at fair value) 1,009,884 1,009,884 60,043 938,086 — Beneficial interest in loan securitizations 145,623 130,354 — — 145,623 Restricted cash 757,954 757,954 757,954 — — Restricted cash – due to customers 256,927 256,927 256,927 — — Financial liabilities: Bonds and notes payable 16,705,877 16,736,701 — 16,705,877 — Accrued interest payable 7,216 7,216 — 7,216 — Bank deposits 469,559 484,047 189,319 280,240 — Due to customers 276,191 276,191 276,191 — — As of December 31, 2021 Fair value Carrying value Level 1 Level 2 Level 3 Financial assets: Loans receivable $ 18,576,272 17,546,645 — — 18,576,272 Accrued loan interest receivable 788,552 788,552 — 788,552 — Cash and cash equivalents 125,563 125,563 125,563 — — Investments (at fair value) 1,001,655 1,001,655 63,254 929,569 — Beneficial interest in loan securitizations 142,391 120,142 — — 142,391 Restricted cash 741,981 741,981 741,981 — — Restricted cash – due to customers 326,645 326,645 326,645 — — Financial liabilities: Bonds and notes payable 17,819,902 17,631,089 — 17,819,902 — Accrued interest payable 4,566 4,566 — 4,566 — Bank deposits 342,463 344,315 184,897 157,566 — Due to customers 366,002 366,002 366,002 — — The methodologies for estimating the fair value of financial assets and liabilities are described in note 22 of the notes to consolidated financial statements included in the 2021 Annual Report. 24