What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 312 added, 133 removed, 684 unchanged (39% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Loans and accrued interest receivable (net of allowance for loan losses of $ 120,424 and

5 unchanged sentences

Total cash and cash equivalents 128,499 125,563

Investments 1,649,578 1,588,919

Investments and notes receivable 1,988,450 1,588,919

Restricted cash 754,693 741,981

35 unchanged sentences

Total liabilities and equity $ 20,624,013 21,678,041

Supplemental information - assets and liabilities of consolidated education and other lending

Supplemental information - assets and liabilities of consolidated education lending

variable interest entities:

3 unchanged sentences

Accrued interest payable and other liabilities ( 60,461 ) ( 36,276 )

Net assets of consolidated education and other lending variable interest entities $ 1,119,680 1,156,755

Net assets of consolidated education lending variable interest entities $ 1,088,828 1,156,755

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands, except share data)

Three months ended

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

Interest income:

4 unchanged sentences

Net interest income 77,945 83,592 155,062 184,922

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

Less provision (negative provision) for loan losses 9,409 374 8,974 ( 16,674 )

Net interest income after provision for loan losses 68,536 83,218 146,088 201,596

4 unchanged sentences

Gain on sale of loans — 15,271 2,989 15,271

Impairment expense and provision for beneficial interests, net ( 6,284 ) ( 500 ) ( 6,284 ) 1,936

Derivative market value adjustments and derivative settlements, net 45,024 ( 6,989 ) 187,949 27,516

15 unchanged sentences

shareholders - basic and diluted

$ 2.26 2.16 7.18 5.36

Weighted average common shares outstanding - basic and diluted

4 unchanged sentences

(Dollars in thousands)

Three months ended March 31,

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

2022 2021 2022 2021

Net income $ 82,904 83,013 267,789 205,917

16 unchanged sentences

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

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

Issuance of noncontrolling interests — — — — — — — — — 5,488 5,488

8 unchanged sentences

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

Balance as of June 30, 2021 — 27,494,942 11,054,171 $ — 275 111 10,158 2,812,315 10,941 ( 5,182 ) 2,828,618

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

Issuance of noncontrolling interests — — — — — — — — — 9,275 9,275

Net income (loss) — — — — — — — 85,129 — ( 2,225 ) 82,904

Other comprehensive loss — — — — — — — — ( 26,358 ) — ( 26,358 )

Distribution to noncontrolling interests — — — — — — — — — ( 10,037 ) ( 10,037 )

Cash dividends on Class A and Class B common stock - $ 0.24 per share

— — — — — — — ( 8,973 ) — — ( 8,973 )

Issuance of common stock, net of forfeitures — 20,720 — — — — 2,116 — — — 2,116

Compensation expense for stock based awards — — — — — — 3,187 — — — 3,187

Repurchase of common stock — ( 558,257 ) — — ( 6 ) — ( 5,331 ) ( 40,695 ) — — ( 46,032 )

Balance as of June 30, 2022 — 26,613,733 10,674,892 $ — 266 107 1,180 3,127,687 ( 31,858 ) ( 6,237 ) 3,091,145

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

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

1 unchanged sentence

Net income (loss) — — — — — — — 207,465 — ( 1,548 ) 205,917

Other comprehensive income — — — — — — — — 4,839 — 4,839

Distribution to noncontrolling interests — — — — — — — — — ( 6,829 ) ( 6,829 )

Cash dividends on Class A and Class B common stock - $ 0.44 per share

— — — — — — — ( 16,912 ) — — ( 16,912 )

Issuance of common stock, net of forfeitures — 231,955 — — 2 — 3,913 — — — 3,915

Compensation expense for stock based awards — — — — — — 4,859 — — — 4,859

Repurchase of common stock — ( 31,567 ) — — — — ( 2,408 ) — — — ( 2,408 )

Conversion of common stock — 101,400 ( 101,400 ) — 1 ( 1 ) — — — — —

Balance as of June 30, 2021 — 27,494,942 11,054,171 $ — 275 111 10,158 2,812,315 10,941 ( 5,182 ) 2,828,618

Balance as of 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 — — — — — — — — — 11,279 11,279

Net income (loss) — — — — — — — 271,776 — ( 3,987 ) 267,789

Other comprehensive loss — — — — — — — — ( 41,162 ) — ( 41,162 )

6 unchanged sentences

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

Balance as of June 30, 2022 — 26,613,733 10,674,892 $ — 266 107 1,180 3,127,687 ( 31,858 ) ( 6,237 ) 3,091,145

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Three months ended

Six months ended

Net income attributable to Nelnet, Inc.

5 unchanged sentences

Loan discount accretion ( 19,554 ) ( 14,606 )

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

Provision (negative provision) for loan losses 8,974 ( 16,674 )

Derivative market value adjustments ( 186,135 ) ( 37,194 )

Proceeds from termination of derivative instruments, net 68,021 —

Proceeds from clearinghouse - initial and variation margin, net of payments 133,622 38,440

1 unchanged sentence

Loss on investments, net 3,207 812

(Gain) loss from repurchases of debt, net ( 1,071 ) 695

Proceeds from sale (purchases) of equity securities, net 42,398 ( 19,764 )

1 unchanged sentence

Non-cash compensation expense 6,171 4,980

Negative provision for beneficial interests — ( 2,436 )

Provision (negative provision) for beneficial interests and impairment expense, net 6,284 ( 1,936 )

Decrease (increase) in loan and investment accrued interest receivable 184 ( 40,488 )

5 unchanged sentences

Decrease in the carrying amount of lease liability ( 2,860 ) ( 3,288 )

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

Other ( 110 ) —

Net cash provided by operating activities 483,714 185,865

7 unchanged sentences

Proceeds from beneficial interest in loan securitizations 13,212 19,077

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

Purchases of other investments and issuance of notes receivable ( 147,400 ) ( 128,011 )

Proceeds from other investments 23,955 167,821

Purchases of property and equipment ( 34,152 ) ( 28,784 )

Net cash provided by investing activities 603,069 468,362

Business acquisition, net of cash acquired ( 7,320 ) —

Net cash provided by (used in) investing activities 836,954 ( 243,422 )

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three months ended

Six months ended

Cash flows from financing activities:

3 unchanged sentences

Increase in bank deposits, net 244,159 148,208

Increase in due to customers 43,544 1,746

Dividends paid ( 18,035 ) ( 16,912 )

3 unchanged sentences

Distribution to noncontrolling interests ( 699 ) ( 423 )

Net cash used in financing activities ( 805,226 ) ( 528,147 )

Net cash (used in) provided by financing activities ( 1,340,636 ) 176,643

Effect of exchange rate changes on cash ( 179 ) ( 108 )

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

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 20,147 ) 118,978

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

9 unchanged sentences

Issuance of noncontrolling interests $ 6,137 592

(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.

(a) The Company utilized $ 4.1 million and $ 22.0 million of federal and state tax credits related primarily to renewable energy during the six months ended June 30, 2022 and 2021, respectively.

Supplemental disclosures of noncash activities regarding the Company's business acquisition are contained in note 6.

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

June 30, 2022 December 31, 2021 June 30, 2021 December 31, 2020

Total cash and cash equivalents $ 128,499 125,563 212,989 121,249

9 unchanged sentences

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.

and subsidiaries (the “Company”) as of June 30, 2022 and for the three and six months ended June 30, 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 months ended March 31, 2022 are not necessarily indicative of the results for the year ending December 31, 2022.

Operating results for the three and six months ended June 30, 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").

Reclassification of Prior Period Cash Flows Presentation

The line item in the Company's consolidated statements of cash flows for changes during a period in amounts "due to customers" was previously presented in cash flows from operating activities, and has been corrected for the periods presented in this report (including the prior year period) to be presented in cash flows from financing activities.

This correction has no impact on the Company's previously reported consolidated net income, total assets (including cash and cash equivalents), liabilities, and equity, and while the correction has a corresponding impact on the amounts of cash flows from operating and financing activities, it has no impact on the net increase or decrease in cash for previously reported periods.

The Company has concluded that the correction was not material from a combined quantitative and qualitative perspective to its previously issued interim financial statements for 2022, or its previously issued financial statements for 2021, 2020, and 2019.

Loans and Accrued Interest Receivable and Allowance for Loan Losses

Loans and accrued interest receivable consisted of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Non-Nelnet Bank:

4 unchanged sentences

Private education loans 272,943 299,442

Consumer loans 44,713 51,301

Consumer and other loans 152,583 51,301

Non-Nelnet Bank loans 15,855,137 17,441,790

8 unchanged sentences

Private education loans ( 15,253 ) ( 16,143 )

Consumer loans ( 5,710 ) ( 6,481 )

Consumer and other loans ( 10,576 ) ( 6,481 )

Non-Nelnet Bank allowance for loan losses ( 118,422 ) ( 126,005 )

4 unchanged sentences

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

June 30, 2022 December 31, 2021

Non-Nelnet Bank:

1 unchanged sentence

Private education loans 5.59 % 5.39 %

Consumer loans 12.77 % 12.63 %

Consumer and other loans (b) 6.93 % 12.63 %

Federally insured student loans (a) 0.33 % 0.30 %

Private education loans 0.50 % 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.

(a) As of June 30, 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 21.8 % and 22.2 %, respectively, and for Nelnet Bank was 13.2 % and 12.1 %, respectively.

(b) During the second quarter of 2022, the Company purchased home equity loans that generally have lower default rates than unsecured consumer loans.

As such, the allowance for loan losses as a percentage of the ending loan balance has decreased as of June 30, 2022 as compared to December 31, 2021.

Gain on Sale of Loans

1 unchanged sentence

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

1 unchanged sentence

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

Three months ended June 30, 2022

Non-Nelnet Bank:

1 unchanged sentence

Private education loans 14,622 1,217 ( 707 ) 118 — 3 15,253

Consumer loans 6,481 2,284 ( 937 ) 166 — ( 2,284 ) 5,710

Consumer and other loans 5,710 5,245 ( 531 ) 152 — — 10,576

Federally insured loans 247 13 ( 2 ) — — — 258

1 unchanged sentence

$ 117,825 9,409 ( 7,101 ) 270 21 — 120,424

Three months ended March 31, 2021

Three months ended June 30, 2021

Non-Nelnet Bank:

1 unchanged sentence

Private education loans 20,670 ( 1,004 ) ( 403 ) 139 — 1 19,403

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

Consumer and other loans 14,134 1,706 ( 1,464 ) 235 — ( 9,909 ) 4,702

Federally insured loans — 245 — — — — 245

Private education loans 744 ( 176 ) — — — ( 1 ) 567

$ 157,394 374 ( 3,039 ) 374 525 ( 9,909 ) 145,719

(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.

Six months ended June 30, 2022

Non-Nelnet Bank

Federally insured loans $ 103,381 ( 383 ) ( 10,549 ) — 144 — 92,593

Private education loans 16,143 817 ( 2,006 ) 295 — 4 15,253

Consumer and other loans 6,481 7,529 ( 1,469 ) 319 — ( 2,284 ) 10,576

Federally insured loans 268 ( 8 ) ( 2 ) — — — 258

Private education loans 840 995 ( 87 ) — — ( 4 ) 1,744

$ 127,113 8,950 ( 14,113 ) 614 144 ( 2,284 ) 120,424

Six months ended June 30, 2021

Non-Nelnet Bank

Federally insured loans $ 128,590 ( 7,880 ) ( 1,233 ) — 1,325 — 120,802

Private education loans 19,529 427 ( 896 ) 341 — 2 19,403

Consumer and other loans 27,256 ( 9,712 ) ( 3,414 ) 481 — ( 9,909 ) 4,702

Federally insured loans — 245 — — — — 245

Private education loans 323 246 — — — ( 2 ) 567

$ 175,698 ( 16,674 ) ( 5,543 ) 822 1,325 ( 9,909 ) 145,719

(a) During the three months ended June 30, 2022 and 2021, and six months ended June 30, 2022 and 2021, the Company acquired $ 1.6 million (par value), $ 34.7 million (par value), $ 10.8 million (par value), and $ 88.7 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.

The Company recorded a provision for loan losses for its federally insured, private education, consumer, and other loan portfolios for the three months ended June 30, 2022 due to management's estimate of worsening economic conditions as of June 30, 2022 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2022.

In addition, the Company recorded provision for loan losses on its consumer and other loan portfolio during the three months ended June 30, 2022 as a result of loans acquired during the period.

The provision for loan losses recognized by the Company for its federally insured loan portfolio during the three months ended June 30, 2022 was partially offset due to the continued amortization of the portfolio and an increase in the estimate of prepayments as of June 30, 2022 in comparison to management's estimate used to determine the allowance for loan losses as of March 31, 2022.

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.

As of June 30, 2022, Nelnet Bank has a liability of approximately $ 36,000 related to $ 3.0 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.

During the six months ended June 30, 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.

Key credit quality indicators for the Company's federally insured, private education, consumer, and other 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 March 31, 2022 As of December 31, 2021 As of March 31, 2021

As of June 30, 2022 As of December 31, 2021 As of June 30, 2021

Federally insured loans - Non-Nelnet Bank:

25 unchanged sentences

Accrued interest receivable 2,058 1,960 2,360

Loan discount, net of unamortized premiums ( 598 ) ( 1,123 ) 2,673

Loan premium, net of unamortized discount 94 ( 1,123 ) ( 1,547 )

Allowance for loan losses ( 15,253 ) ( 16,143 ) ( 19,403 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 259,842 $ 284,136 $ 331,504

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

Consumer loans - Non-Nelnet Bank:

As of June 30, 2022 As of December 31, 2021 As of June 30, 2021

Consumer and other loans - Non-Nelnet Bank:

Loans in deferment $ 64 0.0 % $ 43 0.1 % $ 38 0.1 %

5 unchanged sentences

Total loans in repayment 152,519 100.0 100.0 % 51,258 99.9 100.0 % 42,729 99.9 % 100.0 %

Total consumer loans 44,713 100.0 % 51,301 100.0 % 110,792 100.0 %

Total consumer and other loans 152,583 100.0 % 51,301 100.0 % 42,767 100.0 %

Accrued interest receivable 1,376 396 328

Loan premium 1,040 913 1,845

Loan discount, net of unamortized premiums ( 1,965 ) 913 377

Allowance for loan losses ( 10,576 ) ( 6,481 ) ( 4,702 )

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

Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 141,418 $ 46,129 $ 38,770

Federally insured loans - Nelnet Bank (a):

32 unchanged sentences

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

Loan balance as of June 30, 2022

Six months ended June 30, 2022 2021 2020 Total

FICO at origination:

16 unchanged sentences

The Company does not place federally insured loans on nonaccrual status due to the government guaranty.

The amortized cost of private and consumer loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2021 and March 31, 2022, was not material.

The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2021 and June 30, 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 March 31, 2022 based on year of origination.

The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of June 30, 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

Six months ended June 30, 2022 2021 2020 2019 2018 Prior years Total

Private education loans - Non-Nelnet Bank:

9 unchanged sentences

Accrued interest receivable 2,058

Loan discount, net of unamortized premiums ( 598 )

Loan premium, net of unamortized discount 94

Allowance for loan losses ( 15,253 )

Total private education loans and accrued interest receivable, net of allowance for loan losses $ 259,842

Consumer loans - Non-Nelnet Bank:

Consumer and other loans - Non-Nelnet Bank:

Loans in deferment $ 16 38 — — 10 — 64

5 unchanged sentences

Total loans in repayment 102,272 41,304 1,921 3,420 3,562 40 152,519

Total consumer loans $ 17,367 17,818 678 4,089 4,694 67 44,713

Total consumer and other loans $ 102,288 41,342 1,921 3,420 3,572 40 152,583

Accrued interest receivable 1,376

Loan premium 1,040

Loan discount, net of unamortized premiums ( 1,965 )

Allowance for loan losses ( 10,576 )

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

Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 141,418

Private education loans - Nelnet Bank (a):

15 unchanged sentences

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

As of March 31, 2022

As of June 30, 2022

Interest rate

21 unchanged sentences

8/8/22 - 11/27/24

Secured line of credit 5,000 2.05 % 5/30/22

Discount on bonds and notes payable and debt issuance costs ( 171,341 )

28 unchanged sentences

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.

As of June 30, 2022, the Company’s FFELP warehouse facility had an aggregate maximum financing amount available of $ 25.0 million that was reduced from $ 60.0 million per a May 23, 2022 amendment to the facility.

The May 2022 amendment also extended the liquidity provisions and final maturity to November 22, 2022 and November 22, 2023, respectively.

As of June 30, 2022, $ 4.6 million was outstanding under this facility, $ 20.4 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.

As of June 30, 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 June 30, 2022, the Company amended the facility to extend the liquidity provisions through October 31, 2022 and final maturity date to October 31, 2023.

As of June 30, 2022, $ 89.5 million was outstanding under this warehouse facility, $ 85.5 million was available for future funding, and the Company had $ 10.1 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.

As of June 30, 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.

1 unchanged sentence

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.

As of June 30, 2022, $ 393.4 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.

2 unchanged sentences

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.

As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance sheet as "investments and notes receivable" and the participation interests outstanding 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.

1 unchanged sentence

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.

The first agreement has various maturity dates through November 27, 2024 or earlier if either party provides 180 days’ prior written notice, and the second agreement has various maturity dates through January 13, 2023.

Included in “bonds and notes payable” as of June 30, 2022 was $ 228.5 million subject to the first agreement and $ 272.2 million subject to the second agreement.

See note 5 and below under "Debt Repurchases" for additional information about the private education and FFELP loan asset-backed securities investments, respectively, serving as collateral for these repurchase agreements.

Accrued Interest Liability

3 unchanged sentences

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.

During the three and six months ended June 30, 2022, the Company repurchased $ 36.7 million and $ 55.2 million, respectively, of its own debt and recognized gains of $ 1.0 million and $ 1.1 million, respectively.

During the second quarter of 2021, the Company repurchased $ 19.8 million of its own debt and recognized a loss of $ 0.7 million.

The Company has 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.

1 unchanged sentence

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).

As of June 30, 2022, the Company holds $ 431.2 million (par value) of its own FFELP asset-backed securities.

As of June 30, 2022, $ 206.9 million (par value) of the Company's repurchased FFELP loan asset-backed securities were serving as collateral on amounts outstanding under the Company's repurchase agreements (as discussed above).

Derivative Financial Instruments

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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").

A tabular presentation of such derivatives outstanding as of June 30, 2022 and December 31, 2021 is presented below.

The following table summarizes the Company’s outstanding basis swaps as of June 30, 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

June 30, 2022 December 31, 2021

2022 $ 1,000,000 2,000,000

1 unchanged sentence

2024 1,750,000 1,750,000

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.

2026 1,150,000 1,150,000

2027 250,000 250,000

$ 4,900,000 5,900,000

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2022 and December 31, 2021 was one-month LIBOR plus 9.4 basis points and 9.1 basis points, respectively.

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

As of June 30, 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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(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.

In March 2022, the Company terminated $ 650 million in notional amount of derivatives ($ 500 million and $ 150 million that had maturity dates in 2022 and 2023, respectively) for net payments of $ 0.1 million.

On April 29, 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) for total proceeds of $ 68.1 million.

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,

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

2022 2021 2022 2021

1:3 basis swaps $ 931 ( 221 ) 1,327 ( 240 )

6 unchanged sentences

Derivative market value adjustments and derivative settlements, net - income (expense) $ 45,024 ( 6,989 ) 187,949 27,516

A summary of the Company's investments follows:

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

Investments and Notes Receivable

A summary of the Company's investments and notes receivable follows:

As of June 30, 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

20 unchanged sentences

Beneficial interest in loan securitizations (f):

Private education loans 73,915 66,008

Private education loans, including accrued interest 77,308 66,008

Consumer loans 26,197 28,366

2 unchanged sentences

Solar (g) ( 54,499 ) ( 42,457 )

Notes receivable 33,012 —

Tax liens, affordable housing, and other 4,939 4,115

Total investments (not measured at fair value) 656,968 587,264

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.

Total investments and notes receivable $ 1,988,450 $ 1,588,919

(a) As of June 30, 2022, the aggregate fair value of available-for-sale debt securities with unrealized losses was $ 1.1 billion.

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.”

(b) As of June 30, 2022, $ 393.4 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) The Company's private education loan asset-backed securities portfolio is 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").

1 unchanged sentence

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.

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.

During the three months ended June 30, 2022 and 2021, the Company recognized a pre-tax loss of $ 16.9 million and income of $ 1.1 million, respectively, under the HLBV method of accounting on its ALLO

voting membership interests investment, and during the six months ended June 30, 2022 and 2021, the Company recognized pre-tax losses of $ 30.1 million and $ 21.1 million, respectively.

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.

In the second quarter of 2021, the Company revised its accounting policy to correct for an error in its method of applying the HLBV method of accounting for its investment in ALLO.

Prior to the second quarter of 2021, the Company calculated Nelnet’s liquidation basis in ALLO under the HLBV method by using Nelnet’s proportionate share of tax losses and amortizing any basis difference using tax methods.

The Company determined that Nelnet’s liquidation basis in ALLO under the HLBV method should equal ALLO’s GAAP losses and amortization of any basis difference should use book lives.

During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of this error that resulted in a $ 14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to other income.

The Company concluded this error had an immaterial impact on 2021 results as well as the results for prior periods.

(e) As of June 30, 2022, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $ 137.3 million and $ 4.3 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.

The Company recognized pre-tax income on its ALLO preferred membership interests of $ 2.1 million and $ 2.0 million during the three months ended June 30, 2022 and 2021, respectively, and $ 4.3 million during both the six months ended June 30, 2022 and 2021.

This income 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.

As of the latest remittance reports filed by the various trusts prior to or as of June 30, 2022, the Company's ownership correlates to approximately $ 650 million, $ 160 million, and $ 430 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.

(g) As of June 30, 2022, the Company has funded a total of $ 241.3 million in solar investments, which includes $ 71.4 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 solar investment balance at June 30, 2022 represents the sum of total tax credits earned on solar projects placed in service through June 30, 2022 and the calculated HLBV net losses being larger than total payments made by the Company on such projects.

As of June 30, 2022, the Company is committed to fund an additional $ 51.9 million on these projects, of which $ 43.1 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.

The Company recognized pre-tax losses on its solar investments of $ 1.9 million and $ 2.3 million during the three months ended June 30, 2022 and 2021, respectively, and $ 2.9 million and $ 4.0 million during the six months ended June 30, 2022 and 2021, respectively.

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.

Losses from solar investments include losses 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.

Solar losses attributed to minority investors was $ 2.0 million and $ 0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 3.8 million and $ 1.9 million for the six months ended June 30, 2022 and 2021, respectively.

Impairment Expense

During the second quarter of 2022, the Company recorded an impairment charge of $ 5.4 million related primarily to one of its venture capital investments accounted for under the measurement alternative method.

The impairment expense is included in "impairment expense and provision for beneficial interests, net" on the consolidated statements of income.

Business Combination

NGWeb Solutions, LLC

On April 30, 2022, the Company acquired 30 percent of the ownership interests of NGWeb Solutions, LLC ("NextGen") for total cash consideration of $ 9.2 million.

NextGen provides software solutions primarily to higher education institutions to enable administrators to efficiently manage online forms, scholarships, employment, online timesheets, and other specialized processes that require signed authorizations and interactions with student information.

Prior to the acquisition, the Company owned 50 percent of the ownership interests of NextGen and accounted for this investment under the equity method.

As a result of the acquisition, the previously held 50 percent ownership interests was remeasured to its fair value as of the April 30, 2022 date of acquisition of the additional 30 percent of the ownership interests, resulting in a $ 15.2 million revaluation gain, which is included in "other" in "other income/expense" on the consolidated statements of income.

For segment reporting, this gain is included in "Corporate and Other Activities." Subsequent to the acquisition, the Company will consolidate the operating results of NextGen and such results will be included in the Education Technology, Services, and Payment Processing reportable segment.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

The fair values of the assets and liabilities related to NextGen are subject to refinement as the Company completes its analysis relative to the fair values at the date of acquisition.

Cash and cash equivalents $ 1,885

Accounts receivable 1,315

Property and equipment 800

Other assets 201

Intangible assets 23,395

Excess cost over fair value of net assets acquired (goodwill) 7,025

Other liabilities ( 3,937 )

Net assets acquired 30,684

Minority interest ( 6,137 )

Remeasurement of previously held investment ( 15,342 )

Total consideration paid by the Company $ 9,205

The $ 23.4 million of acquired intangible assets is made up of computer software of $ 18.8 million ( 5 -year useful life) and customer relationships of $ 4.6 million ( 7 -year useful life).

Intangible Assets

Intangible assets consisted of the following:

Weighted average remaining useful life as of

March 31, 2022 (months)

March 31, 2022 December 31, 2021

June 30, 2022 (months)

June 30, 2022 December 31, 2021

Amortizable intangible assets, net:

4 unchanged sentences

Total - amortizable intangible assets, net 82 $ 70,086 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 recorded amortization expense on its intangible assets of $ 2.9 million and $ 8.3 million during the three months ended June 30, 2022 and 2021, respectively, and $ 5.3 million and $ 16.6 million during the six months ended June 30, 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

As of June 30, 2022, the Company estimates it will record amortization expense as follows:

2022 (July 1 - December 31) $ 7,176

2027 and thereafter 18,810

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

The carrying amount of goodwill 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

Balance as of December 31, 2021 and March 31, 2022 $ 23,639 76,570 41,883 — — 142,092

Goodwill acquired — 7,025 — — — 7,025

Balance as of June 30, 2022 $ 23,639 83,595 41,883 — — 149,117

Earnings per Common Share

2 unchanged sentences

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

Three months ended March 31,

Three months ended June 30,

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

3 unchanged sentences

Earnings per share - basic and diluted $ 2.26 2.26 2.26 2.16 2.16 2.16

Six months ended June 30,

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

Net income attributable to Nelnet, Inc.

$ 266,735 5,041 271,776 204,209 3,256 207,465

Weighted-average common shares outstanding - basic and diluted 37,172,606 702,502 37,875,108 38,065,869 607,033 38,672,902

Earnings per share - basic and diluted $ 7.18 7.18 7.18 5.36 5.36 5.36

Segment Reporting

1 unchanged sentence

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

Three months ended June 30, 2022

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

4 unchanged sentences

Net interest income 226 874 70,688 3,573 2,583 — 77,945

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

Less provision (negative provision) for loan losses — — 8,827 582 — — 9,409

Net interest income after provision for loan losses 226 874 61,861 2,991 2,583 — 68,536

5 unchanged sentences

Gain on sale of loans — — — — — — —

Impairment expense and provision for beneficial interests, net — — — — ( 6,284 ) — ( 6,284 )

Derivative settlements, net — — 4,623 — — — 4,623

14 unchanged sentences

$ 10,251 11,215 75,504 368 ( 12,209 ) — 85,129

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

Total assets as of June 30, 2022 $ 240,437 546,235 17,388,228 864,659 2,273,216 ( 688,762 ) 20,624,013

Three months ended June 30, 2021

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

4 unchanged sentences

Net interest income 7 210 81,295 1,649 431 — 83,592

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

Less provision (negative provision) for loan losses — — 305 69 — — 374

Net interest income after provision for loan losses 7 210 80,990 1,580 431 — 83,218

5 unchanged sentences

Gain on sale of loans — — 15,271 — — — 15,271

Impairment expense and provision for beneficial interests, net — — — — ( 500 ) — ( 500 )

Derivative settlements, net — — ( 5,374 ) — — — ( 5,374 )

14 unchanged sentences

$ 11,790 13,096 59,976 ( 204 ) ( 791 ) — 83,867

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

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

Six months ended June 30, 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 $ 313 1,213 258,994 8,241 10,227 ( 2,205 ) 276,783

Interest expense 44 — 115,711 2,494 5,678 ( 2,205 ) 121,721

Net interest income 269 1,213 143,283 5,747 4,549 — 155,062

Less provision (negative provision) for loan losses — — 7,963 1,011 — — 8,974

Net interest income after provision for loan losses 269 1,213 135,320 4,736 4,549 — 146,088

Other income/expense:

Loan servicing and systems revenue 261,241 — — — — — 261,241

Intersegment revenue 16,860 10 — — — ( 16,870 ) —

Education technology, services, and payment processing revenue — 203,317 — — — — 203,317

Other 1,350 — 11,644 1,659 7,872 — 22,524

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

Impairment expense and provision for beneficial interests, net — — — — ( 6,284 ) — ( 6,284 )

Derivative settlements, net — — 1,814 — — — 1,814

Derivative market value adjustments, net — — 186,135 — — — 186,135

Total other income/expense 279,451 203,327 202,582 1,659 1,588 ( 16,870 ) 671,736

Cost of services — 66,397 — — — — 66,397

Operating expenses:

Salaries and benefits 175,192 63,406 1,205 3,268 47,742 — 290,813

Depreciation and amortization 10,272 5,013 — 7 19,914 — 35,206

Other expenses 29,721 12,514 6,576 1,584 26,045 — 76,439

Intersegment expenses, net 38,955 9,410 17,344 102 ( 48,941 ) ( 16,870 ) —

Total operating expenses 254,140 90,343 25,125 4,961 44,760 ( 16,870 ) 402,458

Income (loss) before income taxes 25,580 47,800 312,777 1,434 ( 38,623 ) — 348,969

Income tax (expense) benefit ( 6,139 ) ( 11,472 ) ( 75,066 ) ( 328 ) 11,826 — ( 81,180 )

Net income (loss) 19,441 36,328 237,711 1,106 ( 26,797 ) — 267,789

Net loss attributable to noncontrolling interests — 53 — — 3,934 — 3,987

Net income (loss) attributable to Nelnet, Inc.

$ 19,441 36,381 237,711 1,106 ( 22,863 ) — 271,776

Total assets as of June 30, 2022 $ 240,437 546,235 17,388,228 864,659 2,273,216 ( 688,762 ) 20,624,013

Six months ended June 30, 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 $ 63 473 256,367 3,418 2,770 ( 405 ) 262,686

Interest expense 47 — 75,620 586 1,916 ( 405 ) 77,764

Net interest income 16 473 180,747 2,832 854 — 184,922

Less provision (negative provision) for loan losses — — ( 17,165 ) 491 — — ( 16,674 )

Net interest income after provision for loan losses 16 473 197,912 2,341 854 — 201,596

Other income/expense:

Loan servicing and systems revenue 223,611 — — — — — 223,611

Intersegment revenue 16,748 6 — — — ( 16,754 ) —

Education technology, services, and payment processing revenue — 171,960 — — — — 171,960

Other 1,814 — 2,760 26 13,716 — 18,317

Gain on sale of loans — — 15,271 — — — 15,271

Impairment expense and provision for beneficial interests, net — — 2,436 — ( 500 ) — 1,936

Derivative settlements, net — — ( 9,678 ) — — — ( 9,678 )

Derivative market value adjustments, net — — 37,194 — — — 37,194

Total other income/expense 242,173 171,966 47,983 26 13,216 ( 16,754 ) 458,611

Cost of services — 48,728 — — — — 48,728

Operating expenses:

Salaries and benefits 134,846 53,035 1,051 3,065 42,761 — 234,759

Depreciation and amortization 16,166 6,027 — — 18,225 — 40,419

Other expenses 26,557 9,259 7,344 781 25,346 — 69,286

Intersegment expenses, net 33,024 7,184 16,976 40 ( 40,470 ) ( 16,754 ) —

Total operating expenses 210,593 75,505 25,371 3,886 45,862 ( 16,754 ) 344,464

Income (loss) before income taxes 31,596 48,206 220,524 ( 1,519 ) ( 31,792 ) — 267,015

Income tax (expense) benefit ( 7,583 ) ( 11,570 ) ( 52,926 ) 351 10,630 — ( 61,098 )

Net income (loss) 24,013 36,636 167,598 ( 1,168 ) ( 21,162 ) — 205,917

Net loss attributable to noncontrolling interests — — — — 1,548 — 1,548

Net income (loss) attributable to Nelnet, Inc.

$ 24,013 36,636 167,598 ( 1,168 ) ( 19,614 ) — 207,465

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

Disaggregated Revenue

The following tables provides disaggregated revenue by service offering and/or customer type for the Company's fee-based reportable operating segments.

The following tables provide 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,

Government servicing - Nelnet $ 61,049 34,872

Government servicing - Great Lakes 48,076 43,302

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

2022 2021 2022 2021

Government servicing $ 98,815 79,239 207,940 157,413

Private education and consumer loan servicing 12,122 12,816 24,995 21,364

4 unchanged sentences

Education Technology, Services, and Payment Processing

Three months ended March 31,

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

2022 2021 2022 2021

Tuition payment plan services $ 27,637 26,538 58,352 56,088

5 unchanged sentences

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

Three months ended March 31,

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

2022 2021 2022 2021

Income/gains from investments, net $ 18,127 15,591 29,983 24,089

1 unchanged sentence

ALLO preferred return 2,140 2,020 4,257 4,342

Administration/sponsor fee income 2,012 — 4,134 —

Investment advisory services 1,482 1,145 2,764 3,842

Negative provision for beneficial interests investment — 2,436

Loss from ALLO voting membership interest investment ( 16,941 ) 1,094 ( 30,071 ) ( 21,125 )

3 unchanged sentences

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.

The Company earns loan servicing revenue from servicing contracts with the Department.

Revenues earned by the Company related to these contracts are set forth in the "Government servicing" line item of the "Loan Servicing and Systems" table in note 11.

The Company's 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 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 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.

In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution ("USDS") for the new servicing framework.

The Company responded to the USDS solicitation.

The Company cannot predict the timing, nature, or ultimate outcome of this 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 March 31, 2022 As of December 31, 2021

As of June 30, 2022 As of December 31, 2021

Level 1 Level 2 Total Level 1 Level 2 Total

8 unchanged sentences

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

As of June 30, 2022

Fair value Carrying value Level 1 Level 2 Level 3

28 unchanged sentences

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.

Subsequent Event

On July 1, 2022, the Company acquired 80 percent of the outstanding ownership interests of GRNE-Nelnet, LLC ("GRNE") and its affiliate ENRG-Nelnet, LLC ("ENRG") for $ 29.7 million in cash.

GRNE designs and installs residential, commercial, and utility-scale solar systems in the Midwest.

ENRG owns certain assets that generate and sell solar energy.

The operating results of GRNE and ENRG will be included in the Company's consolidated results of operations beginning July 1, 2022 .

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