4 unchanged sentences
Changes in Internal Control over Financial Reporting
−Removed: The Company implemented a new enterprise resource planning system in 2021 which replaced multiple systems, including the general ledger and payroll processing systems, and resulted in changes to business processes.
−Removed: We believe the change has enhanced the Company’s internal control over financial reporting due to increased automation and further integration of related processes.
−Removed: The Company replaced multiple internal controls that were previously considered effective with new or modified controls that are also considered effective.
−Removed: There were no other changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
+Added: There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
41 unchanged sentences
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
−Removed: The information as to the directors, executive officers, and corporate governance of the Company set forth under the captions “PROPOSAL 1 - ELECTION OF DIRECTORS,” “EXECUTIVE OFFICERS,” and “CORPORATE GOVERNANCE,” and the information as to any delinquent report under Section 16(a) of the Securities Exchange Act of 1934 set forth under the caption “SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL SHAREHOLDERS - Delinquent Section 16(a) Reports," to the extent any such disclosure is required, in the definitive Proxy Statement to be filed on Schedule 14A with the SEC, no later than 120 days after the end of the Company's fiscal year, relating to the Company's 2022 Annual Meeting of Shareholders scheduled to be held on May 19, 2022 (the “Proxy Statement”), is incorporated herein by reference.
+Added: The information required by this Item will be included in the Company’s definitive Proxy Statement to be filed on Schedule 14A with the SEC, no later than 120 days after the end of the Company's fiscal year, relating to the Company's 2023 Annual Meeting of Shareholders scheduled to be held on May 18, 2023 (the “Proxy Statement”), and is incorporated herein by reference.
EXECUTIVE COMPENSATION
−Removed: The information set forth under the captions “CORPORATE GOVERNANCE” and “EXECUTIVE COMPENSATION” in the Proxy Statement is incorporated herein by reference.
+Added: The information required by this Item will be included in the Proxy Statement, and is incorporated herein by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
−Removed: The information set forth under the caption “SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL SHAREHOLDERS - Stock Ownership” in the Proxy Statement is incorporated herein by reference.
−Removed: There are no arrangements known to the Company, the operation of which may at a subsequent date result in a change in the control of the Company.
The following table summarizes information about compensation plans under which equity securities are authorized for issuance.
10 unchanged sentences
Employee Share Purchase Plan, respectively.
+Added: The remaining information required by this Item will be included in the Proxy Statement, and is incorporated herein by reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
−Removed: The information set forth under the captions “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,” “CORPORATE GOVERNANCE - Board Composition and Director Independence,” and “CORPORATE GOVERNANCE - Board Committees” in the Proxy Statement is incorporated herein by reference.
+Added: The information required by this Item will be included in the Proxy Statement, and is incorporated herein by reference.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
−Removed: The information set forth under the caption “PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Independent Accountant Fees and Services” in the Proxy Statement is incorporated herein by reference.
+Added: The information required by this Item will be included in the Proxy Statement, and is incorporated herein by reference.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
13 unchanged sentences
Exhibit Index
−Removed: 3.1 Composite Third Amended and Restated Articles of Incorporation of Nelnet, Inc., as amended on May 23, 2019, filed as Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 and incorporated herein by reference.
+Added: 3.1 Composite Third Amended and Restated Articles of Incorporation of Nelnet, Inc., as amended through August 8, 2022, filed as Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and incorporated herein by reference.
3.2 Ninth Amended and Restated Bylaws of Nelnet, Inc., as amended as of May 24, 2018, filed as Exhibit 3.2 to the registrant's Current Report on Form 8-K filed on May 24, 2018 and incorporated herein by reference.
−Removed: 4.1 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, filed as Exhibit 4.1 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference.
+Added: 4.1 * Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 .
4.2 Form of Class A Common Stock Certificate of Nelnet, Inc., filed on November 24, 2003 as Exhibit 4.1 to the registrant’s Registration Statement on Form S-1 (Registration No.
333-108070) and incorporated herein by reference.
−Removed: 4.3 Certain instruments, including indentures of trust, defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries, none of which instruments authorizes a total amount of indebtedness thereunder in excess of 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis, are omitted from this Exhibit Index pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
+Added: 4.3 Certain instruments, including indentures of trust, defining the rights of holders of long-term debt of the registrant and its consolidated subsidiaries, none of which instruments authorizes a total amount of indebtedness thereunder in excess of 10% of the total assets of the registrant and its subsidiaries on a consolidated basis, are omitted from this Exhibit Index pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
Certain of such instruments have been previously filed with the Securities and Exchange Commission, and the registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request.
26 unchanged sentences
10.12 Amendment to Office Building Lease dated June 11, 1997 between Miller & Paine and Union Bank and Trust Company, filed as Exhibit 10.4 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated herein by reference.
−Removed: 10.13*# Of fice Building Lease dated J anu ary 5, 2021 betwee n Union Bank and Trust Company and National Educa tion Loan Ne twork.
10.13 Lease Amendment Number Two dated February 8, 2001 between Miller & Paine and Union Bank and Trust Company, filed as Exhibit 10.5 to the registrant's Current Report on Form 8-K filed on October 16, 2006 and incorporated herein by reference.
4 unchanged sentences
and Union Bank and Trust Company, filed as Exhibit 10.16 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2017 and incorporated herein by reference.
+Added: 10.18# Office Building Lease dated January 5, 2021 between Union Bank and Trust Company and National Education Loan Network, filed as Exhibit 10.13 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 and incorporated herein by reference.
10.19+ Nelnet, Inc.
15 unchanged sentences
10.31 Form of Modification of Contract entered into on September 24, 2021 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on September 27, 2021 and incorporated herein by reference.
−Removed: 10.32* Form of Modification of Contract entered into December 29, 2021 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC.
+Added: 10.32 Form of Modification of Contract entered into December 29, 2021 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC , filed as Exhibit 10.3 2 to the registrant ’ s Annual Report on Form 10-K for the year ended Dec ember 31, 2021 and incorporated herein by reference .
10.33 Student Loan Servicing Contract between the United States Department of Education and Great Lakes Educational Loan Services, Inc., filed as Exhibit 10.6 to the registrant's Current Report on Form 8-K filed on May 17, 2019 and incorporated herein by reference.
6 unchanged sentences
10.40 Form of Modification of Contract entered into on September 24, 2021 for Student Loan Servicing Contract between the United States Department of Education and Great Lakes Educational Loan Services, Inc., filed as Exhibit 10.2 to the registrant's Current Report on Form 8-K filed on September 27, 2021 and incorporated herein by reference.
−Removed: 10.41* Form of Modification of Contract entered into on January 7, 2022 for Student Loan Servicing Contract between the United States Department of Education and Great Lakes Educational Loan Services, Inc.
+Added: 10.41 Form of Modification of Contract entered into on January 7, 2022 for Student Loan Servicing Contract between the United States Department of Education and Great Lakes Educational Loan Services, Inc ., filed as Exhibit 10.41 to the registrant ’ s Annual Report on Form 10-K for the year ended December 3 1, 2021 and incorporated herein by reference .
10.42 Management Agreement, dated effective as of May 1, 2011, by Whitetail Rock Capital Management, LLC and Union Bank and Trust Company, filed as Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 and incorporated herein by reference.
11 unchanged sentences
10.54 Form of Administrative Services Agreement for Whitetail Rock SLAB Funds by and among the Fund, Whitetail Rock Fund Management, LLC, Adminisystems, Inc., and Union Bank and Trust Company, filed as Exhibit 10.28 to the registrant's Annual Report on Form 10-K for the year ended December 31, 2014 and incorporated herein by reference.
−Removed: 10.55 Management Agreement dated as of August 8, 2019 between 1867 – Riley Road, LLC (of which Farmers & Merchants Investment Inc., North Central Bancorp, Inc., and Nelnet Solar, LLC are members) and 1867 Capital-1, LLC (a wholly owned subsidiary of Nelnet, Inc.), filed as Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and incorporated herein by reference.
10.55 Subordination Agreement effective as of July 26, 2019, by and between Union Bank and Trust Company, Nelnet, Inc., and Agile Sports Technologies, Inc., filed as Exhibit 10.7 to the registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 and incorporated herein by reference.
7 unchanged sentences
Bank National Association, as Administrative Agent, filed as Exhibit 10.2 to the registrant's Current Report on Form 8-K filed on September 22, 2021 and incorporated herein by reference.
+Added: 10.58 Guaranty Supplement to the Third Amended and Restated Guaranty, dated as of July 27, 2022, in favor of U.S.
+Added: Bank National Association, as Administrative Agent, filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and incorporated herein by reference.
10.59 Aircraft Joint Ownership Agreement dated as of January 1, 2019, by and between National Education Loan Network, Inc.
26 unchanged sentences
10.76 SLABS Participation Agreement, dated effective as of May 5, 2020, by and between National Education Loan Network, Inc., and Union Bank and Trust Company, as Trustee, filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference.
−Removed: 10.77* First Amendment of SLABS Participation Agreement, dated effective as of October 1, 2021, by and between National Education Loan Network, Inc., and Union Bank and Trust Company, as Trustee.
+Added: 10.77 First Amendment of SLABS Participation Agreement, dated effective as of October 1, 2021, by and between National Education Loan Network, Inc., and Union Bank and Trust Company, as Trustee , filed as Exhibit 10.77 to the registra nt ’ s Annual Report on Form 10-K for the year ended Dec ember 31, 2021 and inc orporated herein by reference .
10.78 Parent Company Agreement, dated as of June 26, 2020, by and among the Federal Deposit Insurance Corporation, Nelnet, Inc., Michael Dunlap, and Nelnet Bank, filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and incorporated herein by reference.
5 unchanged sentences
and in which certain parties referred to therein with other relationships with Nelnet, Inc.
−Removed: have participated.
+Added: have participated , filed as Exhibit 10.83 to the registrant ’ s Annual Report on Form 10-K for the year ended December 31, 2021 and incorporated here in by reference .
10.84±± Form of Management Agreement for solar energy investments managed by a subsidiary of Nelnet, Inc.
and in which certain parties referred to therein with other relationships with Nelnet, Inc.
−Removed: have participated.
+Added: have participated , filed as Exhibit 10.84 to the registrant ’ s Annual Report on Form 10-K for the year ended December 31, 2021 and inc orporated herein by reference .
21.1* Subsidiaries of Nelnet, Inc.
37 unchanged sentences
DUNLAP Executive Chairman February 28, 2023
−Removed: ABEL Director February 28, 2022
/s/ PREETA D.
BANSAL Director February 28, 2023
−Removed: /s/ WILLIAM R.
−Removed: CINTANI Director February 28, 2022
+Added: /s/ MATTHEW W.
+Added: DUNLAP Director February 28, 2023
/s/ KATHLEEN A.
3 unchanged sentences
HENNING Director February 28, 2023
+Added: PETERSON Director February 28, 2023
/s/ KIMBERLY K.
RATH Director February 28, 2023
+Added: VAN DEUN Director February 28, 2023
AND SUBSIDIARIES
15 unchanged sentences
generally accepted accounting principles.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in I nternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of ASU No.
−Removed: 2016-13, “Financial Instruments - Credit Losses (Topic 326):
−Removed: Measurement of Credit Losses on Financial Instruments.”
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
14 unchanged sentences
Assessment of the Allowance for loan losses
−Removed: As discussed in Note 4 to the consolidated financial statements, the Company’s allowance for loan losses as of December 31, 2021 was $127.1 million, of which $103.4 related to the Company’s allowance for loan losses on Non-Nelnet Bank federally insured loans and $16.1 related to the Company’s allowance for loan losses on Non-Nelnet Bank private education loans, collectively, the allowance for loan losses (the ALL).
−Removed: The ALL is the measure of expected credit losses on a pooled basis for those loans that share similar risk characteristics.
+Added: As discussed in Note 4 to the consolidated financial statements, the Company’s allowance for loan losses as of December 31, 2022, was $131.8 million, of which $83.6 million related to the Company’s allowance for loan losses on Non-Nelnet Bank federally insured loans and $15.4 million related to the Company’s allowance for loan losses on Non-Nelnet Bank private education loans, collectively, the allowance for loan losses (the ALL).
+Added: The ALL is the measure of expected credit losses on a pooled basis for those loans that share similar risk characteristics based on a collective assessment using a combination of measurement models and management judgment.
The Company estimated the ALL using an undiscounted cash flow model.
The Company’s methodology is based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
−Removed: For the undiscounted cash flow models, the expected credit losses are the product of multiplying
−Removed: the Company’s estimates of probability of default (PD), loss given default (LGD), and the exposure at default over the expected life of the loans.
−Removed: The undiscounted cash flow model incorporates a single economic forecast scenario and macroeconomic assumptions over the reasonable and supportable forecast periods.
+Added: For the undiscounted cash flow models, the expected credit losses are the product of multiplying the Company’s estimates of probability of default (PD), loss given default (LGD), and the exposure at default over the expected life of the loans.
+Added: The undiscounted cash flow model incorporates probability weighted economic forecast scenarios and macroeconomic assumptions over the reasonable and supportable forecast periods.
After the reasonable and supportable forecast periods, the Company reverts on a straight-line basis over the reversion period to its historical loss rates, evaluated over the historical observation period, for the remaining life of the loans.
21 unchanged sentences
• evaluating the selection of the economic forecast scenarios and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices
−Removed: • evaluating the length of the historical observation period and reasonable and supportable forecast periods by comparing to specific portfolio risk characteristics and trends
+Added: • evaluating the historical observation period and reasonable and supportable forecast periods by comparing to specific portfolio risk characteristics and trends
• determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices.
17 unchanged sentences
Total cash and cash equivalents 118,146 125,563
−Removed: Investments 1,588,919 992,940
+Added: Investments and notes receivable 2,111,917 1,588,919
Restricted cash 945,159 741,981
29 unchanged sentences
Retained earnings 3,234,844 2,940,523
−Removed: Accumulated other comprehensive earnings, net 9,304 6,102
+Added: Accumulated other comprehensive (loss) earnings, net ( 37,366 ) 9,304
Total Nelnet, Inc.
19 unchanged sentences
Total interest income 742,806 523,835 619,656
−Removed: Interest expense:
−Removed: Interest on bonds and notes payable and bank deposits 176,233 330,071 699,327
+Added: Interest expense on bonds and notes payable and bank deposits 430,137 176,233 330,071
Net interest income 312,669 347,602 289,585
−Removed: Less (negative provision) provision for loan losses ( 12,426 ) 63,360 39,000
+Added: Less provision (negative provision) for loan losses 46,441 ( 12,426 ) 63,360
Net interest income after provision for loan losses 266,228 360,028 226,225
3 unchanged sentences
Communications revenue — — 76,643
−Removed: Other 78,681 57,561 47,918
−Removed: Gain on sale of loans 18,715 33,023 17,261
+Added: Solar construction revenue 24,543 — —
+Added: Other, net 25,486 78,681 57,561
+Added: Gain on sale of loans, net 2,903 18,715 33,023
Gain from deconsolidation of ALLO — — 258,588
5 unchanged sentences
Cost to provide communications services — — 22,812
+Added: Cost to provide solar construction services 19,971 — —
Total cost of services 168,374 108,660 105,018
21 unchanged sentences
Net income $ 396,241 386,283 349,626
−Removed: Other comprehensive income (loss):
+Added: Other comprehensive (loss) income:
Net changes related to foreign currency translation adjustments $ ( 9 ) ( 10 ) —
Net changes related to available-for-sale debt securities:
−Removed: Unrealized holding gains (losses) arising during period, net 6,921 6,637 ( 1,199 )
+Added: Unrealized holding (losses) gains arising during period, net ( 58,946 ) 6,921 6,637
Reclassification of gains recognized in net income, net of losses ( 5,902 ) ( 2,695 ) ( 2,521 )
Income tax effect 15,564 ( 49,284 ) ( 1,014 ) 3,212 ( 986 ) 3,130
−Removed: Other comprehensive income (loss) 3,202 3,130 ( 911 )
+Added: Net changes related to equity method investee's other comprehensive income:
+Added: Gain on cash flow hedges 3,452 — —
+Added: Income tax effect ( 829 ) 2,623 — — — —
+Added: Other comprehensive (loss) income ( 46,670 ) 3,202 3,130
Comprehensive income 349,571 389,485 352,756
6 unchanged sentences
Years ended December 31, 2022, 2021, and 2020
−Removed: Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital Retained earnings Accumulated other comprehensive earnings Noncontrolling interests Total equity
+Added: 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
3 unchanged sentences
Net income (loss) — — — — — — — 352,443 — ( 2,817 ) 349,626
−Removed: Other comprehensive loss
+Added: Other comprehensive income
— — — — — — — — 3,130 — 3,130
7 unchanged sentences
Conversion of common stock — 116,038 ( 116,038 ) — 1 ( 1 ) — — — — —
+Added: Acquisition of noncontrolling interest — — — — — — — ( 375 ) — ( 225 ) ( 600 )
+Added: Deconsolidation of noncontrolling interest - ALLO — — — — — — — — — ( 208,175 ) ( 208,175 )
+Added: Other equity transactions, net of costs incurred to sell shares of subsidiary — — — — — — — 1,218 — — 1,218
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
9 unchanged sentences
Repurchase of common stock — ( 713,274 ) — — ( 7 ) — ( 18,036 ) ( 40,068 ) — — ( 58,111 )
−Removed: Impact of adoption of new accounting standard — — — — — — — ( 18,868 ) — — ( 18,868 )
Conversion of common stock — 478,929 ( 478,929 ) — 5 ( 5 ) — — — — —
−Removed: Acquisition of noncontrolling interest — — — — — — — ( 375 ) — ( 225 ) ( 600 )
−Removed: Deconsolidation of noncontrolling interest - ALLO — — — — — — — — — ( 208,175 ) ( 208,175 )
−Removed: Other equity transactions, net of costs incurred to sell shares of subsidiary — — — — — — — 1,218 — — 1,218
Balance as of December 31, 2021 — 27,239,654 10,676,642 — 272 107 1,000 2,940,523 9,304 1,632 2,952,838
1 unchanged sentence
Net income (loss) — — — — — — — 407,347 — ( 11,106 ) 396,241
−Removed: Other comprehensive income
+Added: Other comprehensive loss
— — — — — — — — ( 46,670 ) — ( 46,670 )
17 unchanged sentences
Net income 396,241 386,283 349,626
−Removed: Adjustments to reconcile net income to net cash provided by operating activities:
+Added: Adjustments to reconcile net income to net cash provided by operating activities, net of business acquisitions:
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 176,248 132,325 198,473
Loan discount accretion ( 67,480 ) ( 7,990 ) ( 35,285 )
−Removed: (Negative provision) provision for loan losses ( 12,426 ) 63,360 39,000
+Added: Provision (negative provision) for loan losses 46,441 ( 12,426 ) 63,360
Derivative market value adjustments ( 231,691 ) ( 92,813 ) 28,144
−Removed: Payments to terminate derivative instruments, net — — ( 12,530 )
+Added: Proceeds from termination of derivative instruments, net 91,786 — —
Proceeds from (payments to) clearinghouse - initial and variation margin, net 148,691 91,294 ( 26,747 )
Gain from deconsolidation of ALLO, including cash impact — — ( 287,579 )
−Removed: Gain from sale of loans ( 18,715 ) ( 33,023 ) ( 17,261 )
−Removed: Gain from investments, net ( 3,811 ) ( 14,055 ) ( 3,095 )
−Removed: Loss on (gain from) repurchases and extinguishments of debt, net 6,775 ( 1,924 ) 16,553
−Removed: Purchases of equity securities, net ( 42,916 ) — —
−Removed: Deferred income tax expense (benefit) 55,622 7,974 ( 7,265 )
+Added: Gain on sale of loans ( 2,903 ) ( 18,715 ) ( 33,023 )
+Added: Loss (gain) on investments, net 24,643 ( 3,811 ) ( 14,055 )
+Added: (Gain) loss from repurchases of debt, net ( 1,231 ) 6,775 ( 1,924 )
+Added: Proceeds from sale (purchases) of equity securities, net 42,841 ( 42,916 ) —
+Added: Deferred income tax expense 34,640 55,622 7,974
Non-cash compensation expense 14,176 10,673 16,739
−Removed: Provision for beneficial interests and impairment expense, net 16,360 24,723 —
−Removed: Other — 186 584
−Removed: Decrease (increase) in loan and investment accrued interest receivable 1,378 ( 61,090 ) ( 54,586 )
+Added: Impairment expense and provision for beneficial interests, net 15,523 16,360 24,723
+Added: Other, net 723 — 186
+Added: (Increase) decrease in loan and investment accrued interest receivable ( 38,500 ) 1,378 ( 61,090 )
(Increase) decrease in accounts receivable ( 26,358 ) ( 86,982 ) 40,880
−Removed: Decrease (increase) in other assets, net 39,439 59,182 ( 19,858 )
+Added: (Increase) decrease in other assets, net ( 11,275 ) 39,439 59,182
Decrease in the carrying amount of ROU asset, net 5,702 7,170 11,594
−Removed: Decrease in accrued interest payable ( 24,135 ) ( 18,584 ) ( 14,394 )
−Removed: Increase in other liabilities, net 29,775 35,907 49,100
+Added: Increase (decrease) in accrued interest payable 31,483 ( 24,135 ) ( 18,584 )
+Added: Increase in other liabilities 40,001 29,775 35,907
Decrease in the carrying amount of lease liability ( 5,642 ) ( 6,978 ) ( 9,401 )
−Removed: Increase (decrease) in due to customers 64,539 ( 136,285 ) 68,078
Net cash provided by operating activities 684,059 480,328 349,100
−Removed: Cash flows from investing activities:
+Added: Cash flows from investing activities, net of business acquisitions:
Purchases and originations of loans ( 1,452,018 ) ( 1,318,605 ) ( 1,459,696 )
4 unchanged sentences
Proceeds from sales of available-for-sale securities 511,124 160,976 173,784
−Removed: Proceeds from and sale of beneficial interest in loan securitizations, net 40,602 44,213 6,593
−Removed: Purchases of other investments ( 253,894 ) ( 168,216 ) ( 103,250 )
+Added: Proceeds from and sale of beneficial interest in loan securitizations 21,531 40,602 44,213
+Added: Purchases of other investments and issuance of notes receivable ( 263,346 ) ( 253,894 ) ( 168,216 )
Proceeds from other investments 65,369 191,821 13,011
Purchases of held-to-maturity debt securities ( 240 ) ( 8,200 ) —
+Added: Redemption of held-to-maturity debt securities 3,500 — —
Purchases of property and equipment ( 59,421 ) ( 58,952 ) ( 113,312 )
5 unchanged sentences
(Dollars in thousands)
−Removed: Cash flows from financing activities:
+Added: Cash flows from financing activities, net of business acquisitions:
Payments on bonds and notes payable $ ( 4,339,164 ) ( 3,683,770 ) ( 3,129,485 )
1 unchanged sentence
Payments of debt issuance costs ( 3,795 ) ( 7,093 ) ( 8,674 )
−Removed: Payments to extinguish debt — — ( 14,030 )
Increase in bank deposits, net 347,007 289,682 54,633
+Added: (Decrease) increase in due to customers ( 17,670 ) 64,539 ( 136,285 )
Dividends paid ( 36,608 ) ( 34,457 ) ( 31,778 )
14 unchanged sentences
Noncash operating, investing, and financing activity:
+Added: Business acquisition deferred purchase price $ 5,000 — —
ROU assets obtained in exchange for lease obligations $ 7,728 4,228 4,282
−Removed: Receipt of beneficial interest in consumer loan securitizations $ 23,506 52,501 39,780
+Added: Receipt of beneficial interest in consumer loan securitizations as consideration from sale of loans $ 19,069 23,506 52,501
+Added: Receipt of held-to-maturity debt securities as consideration from sale of loans $ 13,806 — —
Distribution to noncontrolling interests $ 53,038 47,881 15,035
2 unchanged sentences
Supplemental disclosures of noncash activities regarding the adoption of the new accounting standard for measurement of credit losses on January 1, 2020 are contained in note 3.
−Removed: Supplemental disclosures of noncash activities regarding the Company's recapitalization of ALLO in 2020 and business acquisitions during 2020 are contained in note 2 and note 8, respectively.
+Added: Supplemental disclosures of noncash activities regarding the Company's recapitalization of ALLO in 2020 and business acquisitions during 2020 and 2022 are contained in note 2 and note 8, 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.
14 unchanged sentences
A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans.
−Removed: The Company also makes investments to further diversify the Company both within and outside of its historical core education-related businesses, including, but not limited to, investments in early-stage and emerging growth companies, real estate, and renewable energy (solar).
+Added: The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in early-stage and emerging growth companies, real estate, and renewable energy (solar).
Substantially all revenue from external customers is earned, and all long-lived assets are located, in the United States.
2 unchanged sentences
Department of Education (the “Department”).
−Removed: The Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act of 2010”) discontinued loan originations under the FFEL Program, effective July 1, 2010, and requires that all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program.
+Added: The Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act of 2010”) discontinued new loan originations under the FFEL Program, effective July 1, 2010, and requires all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program.
This law does not alter or affect the terms and conditions of existing FFELP loans.
−Removed: As a result of this law, the Company no longer originates FFELP loans.
+Added: As a result of the Reconciliation Act of 2010, the Company no longer originates FFELP loans.
However, a significant portion of the Company's income continues to be derived from its existing FFELP student loan portfolio.
Interest income on the Company's existing FFELP loan portfolio will decline over time as the portfolio is paid down.
−Removed: Since all FFELP loans will eventually run off, a key objective of the Company is to reposition itself for the post-FFELP environment.
−Removed: To reduce its reliance on interest income on student loans, the Company has expanded its services and products.
+Added: Since all FFELP loans will eventually run off, a key objective of the Company is to maximize the amount and timing of cash flows generated from its FFELP portfolio and reposition itself for the post-FFELP environment.
+Added: To reduce its reliance on interest income from FFELP loans, the Company has expanded its services and products.
This expansion has been accomplished through internal growth and innovation as well as business and certain investment acquisitions.
−Removed: The Company is also actively expanding its private education and consumer loan portfolios, and in November 2020 launched Nelnet Bank (as further discussed below).
+Added: The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank (as further explained below).
In addition, the Company has been servicing federally owned student loans for the Department since 2009.
2 unchanged sentences
• Education Technology, Services, and Payment Processing (ETS&PP)
−Removed: • Communications
• Asset Generation and Management (AGM)
• Nelnet Bank
+Added: • Communications
A description of each reportable operating segment is included below.
1 unchanged sentence
Loan Servicing and Systems
−Removed: The primary service offerings of the Loan Servicing and Systems operating segment (known as Nelnet Diversified Services (“NDS”)) include:
−Removed: • Servicing federally-owned student loans for the Department of Education
+Added: The primary service offerings of the Loan Servicing and Systems reportable operating segment (known as Nelnet Diversified Services (NDS)) include:
+Added: • Servicing federally owned student loans for the Department
• Servicing FFELP loans
2 unchanged sentences
• Providing student loan servicing software and other information technology products and services
−Removed: • Customer acquisition, management services, and backup servicing for community solar developers
• Providing outsourced services including call center, processing, and technology services
7 unchanged sentences
Nelnet Servicing, LLC (“Nelnet Servicing”) and Great Lakes Educational Loan Services, Inc.
−Removed: (“Great Lakes”), subsidiaries of the Company, are two of the current seven private sector entities that have student loan servicing contracts with the Department to provide servicing capacity for loans owned by the Department.
+Added: (“Great Lakes”), subsidiaries of the Company, are two of the current six private sector entities that have student loan servicing contracts with the Department to provide servicing capacity for loans owned by the Department.
This segment also provides student loan servicing software, which is used internally and licensed to third-party student loan holders and servicers.
3 unchanged sentences
Education Technology, Services, and Payment Processing
−Removed: The Education Technology, Services, and Payment Processing segment (known as Nelnet Business Services (“NBS”)) provides education services, payment technology, and community management solutions for K-12 schools, higher education institutions, churches, and businesses in the United States and internationally.
+Added: The Education Technology, Services, and Payment Processing reportable operating segment (known as Nelnet Business Services (NBS)) provides education services, payment technology, and community management solutions for K-12 schools, higher education institutions, churches, and businesses in the United States and internationally.
NBS provides service and technology under five divisions as follows:
−Removed: FACTS provides solutions that elevate the education experience in the K-12 market for school administrators, teachers, and families.
+Added: FACTS provides solutions that elevate the education experience in the K-12 private and faith-based markets for school administrators, teachers, and families.
FACTS offers (i) financial management, including tuition payment plans and financial needs assessment (grant and aid);
6 unchanged sentences
and (ii) integrated commerce including solutions for in-person, online, and mobile payment experiences on campus.
−Removed: PaymentSpring provides secure payment processing technology.
−Removed: PaymentSpring supports and provides payment processing services, including credit card and electronic transfer, to the other divisions of NBS in addition to other industries and software platforms across the United States.
+Added: Nelnet Payment Services provides secure payment processing technology.
+Added: Nelnet Payment Services supports and provides payment processing services, including credit card and electronic transfer, to the other divisions of NBS and Nelnet in addition to other industries and software platforms across the United States.
Nelnet Community Engagement provides faith community engagement, giving management, and learning management services and technologies.
Nelnet Community Engagement serves customers in the technology, nonprofit, religious, health care, and professional services industries.
−Removed: Nelnet International provides its services and technology in more than 50 countries with the largest concentrations in Australia, New Zealand, and the Asia-Pacific region.
+Added: Nelnet International provides its services and technology in Australia, New Zealand, and the Asia-Pacific region.
Nelnet International serves customers in the education, local government, and healthcare industries.
Nelnet International’s suite of services include an integrated commerce payment platform, financial management and tuition payment plan services, and a school management platform that provides administrative, information management, financial management, and communication functions for K-12 schools.
−Removed: Communications
−Removed: ALLO Communications LLC (“ALLO”) provides pure fiber optic service to homes and businesses for internet, television, and telephone services.
−Removed: ALLO derives its revenue primarily from the sale of communication services to residential, governmental, and business customers in Nebraska and Colorado.
−Removed: Internet and television services include revenue from residential and business customers for subscriptions to ALLO's data and video products.
−Removed: ALLO data services provide high-speed internet access over ALLO's all-fiber network at various symmetrical speeds of up to 1 gigabit per second for residential customers and is capable of providing symmetrical speeds of over 1 gigabit per second for business customers.
−Removed: Telephone services include local and long distance telephone service, hosted PBX services, and other services.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: On December 21, 2020 the Company deconsolidated ALLO from the Company’s consolidated financial statements due to ALLO’s recapitalization.
−Removed: The recapitalization of ALLO was not considered a strategic shift in the Company’s involvement with ALLO and ALLO’s results of operations, prior to deconsolidation, are presented by the Company as a reportable operating segment.
−Removed: See note 2, “ALLO Recapitalization,” for a description of this transaction and the Company’s continued involvement.
Asset Generation and Management
−Removed: The Company's Asset Generation and Management operating segment includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank).
+Added: The Company's Asset Generation and Management reportable operating segment includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank).
Substantially all loan assets included in this segment are student loans originated under the FFEL Program, including the Stafford Loan Program, the PLUS Loan program, and loans that reflect the consolidation into a single loan of certain previously separate borrower obligations (“consolidation” loans).
−Removed: AGM also acquires private education and consumer loans.
+Added: AGM also acquires private education, consumer, and other loans.
AGM generates a substantial portion of its earnings from the spread, referred to as loan spread, between the yield it receives on its loan portfolio and the associated costs to finance such portfolio.
1 unchanged sentence
In addition to the loan spread earned on its portfolio, all costs and activity associated with managing the portfolio, such as servicing of the assets and debt maintenance, are included in this segment.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and for a bank charter from the Utah Department of Financial Institutions (UDFI) in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations.
−Removed: Nelnet Bank operates as an internet Utah-chartered industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.
+Added: Nelnet Bank operates as an internet Utah-chartered industrial bank franchise focused on the private education and consumer loan marketplace, with a home office in Salt Lake City, Utah.
Nelnet Bank serves and plans to serve a niche market, with a concentration in the private education and unsecured consumer loan markets.
+Added: Communications
+Added: ALLO Communications LLC (“ALLO”) provides pure fiber optic service to homes and businesses for internet, television, and telephone services.
+Added: ALLO derives its revenue primarily from the sale of communication services to residential, governmental, and business customers in Nebraska, Colorado, and Arizona.
+Added: Internet and television services include revenue from residential and business customers for subscriptions to ALLO's data and video products.
+Added: ALLO data services provide high-speed internet access over ALLO's all-fiber network at various symmetrical speeds of up to 1 gigabit per second for residential customers and is capable of providing symmetrical speeds of over 1 gigabit per second for business customers.
+Added: Telephone services include local and long distance telephone service, hosted PBX services, and other services.
+Added: On December 21, 2020 the Company deconsolidated ALLO from the Company’s consolidated financial statements due to ALLO’s recapitalization.
+Added: The recapitalization of ALLO was not considered a strategic shift in the Company’s involvement with ALLO and ALLO’s results of operations, prior to deconsolidation, are presented by the Company as a reportable operating segment.
+Added: See note 2 for a description of this transaction and the Company’s continued involvement.
Corporate and Other Activities
1 unchanged sentence
Corporate and Other Activities include the following items:
−Removed: • The operating results of Whitetail Rock Capital Management, LLC (“WRCM”), the Company's SEC-registered investment advisor subsidiary
−Removed: • The majority of the Company’s investment activities
+Added: • The operating results of Whitetail Rock Capital Management, LLC (WRCM), the Company's U.S.
+Added: Securities and Exchange Commission (SEC)-registered investment advisor subsidiary
+Added: • The operating results of Nelnet Renewable Energy, which include solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar development
+Added: • The results of the majority of the Company’s investment activities, including early-stage and emerging growth companies and real estate
+Added: • Interest income earned on cash and investment debt securities (primarily student loan and other asset-backed securities)
• Interest expense incurred on unsecured and certain other corporate related debt transactions
• Other product and service offerings that are not considered reportable operating segments
−Removed: Corporate and Other Activities also includes certain corporate activities and overhead functions related to executive management, internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
+Added: Corporate and Other Activities also include certain activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
These costs are allocated to each operating segment based on estimated use of such activities and services.
+Added: Corporate and Other Activities also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.
ALLO Recapitalization
1 unchanged sentence
The agreements provided for a series of interrelated transactions, whereby on October 15, 2020, ALLO received proceeds of $ 197.0 million from SDC as the purchase price for the issuance of non-voting preferred membership units of ALLO, and redeemed $ 160.0 million of non-voting preferred membership units of ALLO held by the Company.
−Removed: On December 21, 2020, the non-voting preferred membership units of ALLO held by SDC automatically converted into voting membership units of ALLO pursuant to the terms of the agreements upon the receipt on December 21, 2020 of the required approvals from applicable regulatory authorities.
−Removed: As a result of such conversion, SDC, the Company, and members of ALLO’s management own approximately 48 percent, 45 percent, and 7 percent, respectively, of the outstanding voting membership interests of ALLO, and the Company deconsolidated ALLO from the Company’s consolidated financial statements.
+Added: On December 21, 2020, the non-voting preferred membership units of ALLO held by SDC automatically converted into voting membership units of ALLO pursuant to the terms of the agreements upon the receipt on December 21, 2020 of the required approvals from
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: Upon the deconsolidation of ALLO, the Company recorded its 45 percent voting membership interests in ALLO at fair value, and accounts for such investment under the Hypothetical Liquidation at Book Value (“HLBV”) method of accounting.
+Added: applicable regulatory authorities.
+Added: As a result of such conversion, SDC, the Company, and members of ALLO’s management own approximately 48 %, 45 %, and 7 %, respectively, of the outstanding voting membership interests of ALLO, and the Company deconsolidated ALLO from the Company’s consolidated financial statements.
+Added: Upon the deconsolidation of ALLO, the Company recorded its 45 % voting membership interests in ALLO at fair value, and accounts for such investment under the Hypothetical Liquidation at Book Value (HLBV) method of accounting.
In addition, the Company recorded its remaining non-voting preferred membership interests in ALLO at fair value, and accounts for such investment as a separate equity investment.
The agreements between the Company, SDC, and ALLO provide that they will use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause ALLO to redeem, on or before April 2024, the remaining preferred membership units of ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such units.
−Removed: The preferred membership units earn a preferred annual return of 6.25 percent.
−Removed: The voting membership interests and non-voting preferred membership interests of ALLO are included on the consolidated balance sheet in “investments.” See note 7 for additional information.
+Added: The preferred membership units earn a preferred annual return of 6.25 %.
+Added: However, if the non-voting preferred membership interests are not redeemed on or before April 2024, the preferred annual return is increased from 6.25 % to 10.00 %.
+Added: The voting membership interests and non-voting preferred membership interests of ALLO are included on the consolidated balance sheet in “investments and notes receivable.” See note 7 for additional information.
As a result of the deconsolidation of ALLO on December 21, 2020, the Company recognized a gain of $ 258.6 million as summarized below.
19 unchanged sentences
As part of the ALLO recapitalization transaction, the Company and SDC entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of $ 25.0 million to $ 35.0 million in the event the Company disposes of its voting membership interests of ALLO that it holds and realizes from such disposition certain targeted return levels.
−Removed: The Company recognized the estimated fair value of the contingent payment as of December 31, 2020 to be $ 2.3 million, which is included in “other liabilities” on the consolidated balance sheet.
+Added: The Company recognized the estimated fair value of the contingent payment as of December 31, 2020 to be $ 2.3 million.
+Added: During 2022, the Company recognized an additional expense of $ 5.3 million associated with this obligation, and as of December 31, 2022 the estimated fair value of the contingent payment is $ 7.6 million, which is included in “other liabilities” on the consolidated balance sheet.
AND SUBSIDIARIES
26 unchanged sentences
The Company is not required to consolidate VIEs in which it has determined it is not the primary beneficiary.
−Removed: In December of 2020, Wells Fargo announced the sale of its approximately $ 10.0 billion portfolio of private education loans representing approximately 445,000 borrowers.
−Removed: The Company entered into a joint venture with other investors to acquire the loans.
−Removed: During 2021, the joint venture completed asset-backed securitization transactions to permanently finance a total of $ 8.7 billion of the private education loans purchased by the joint venture (which represented the total remaining loans originally purchased from Wells Fargo, factoring in borrower payments from the date of purchase).
−Removed: Under the terms of the joint venture agreements, the Company is the servicer of the portfolio, owns an approximate 8 percent interest in residual interests in securitizations of the loans, and serves as the sponsor and administrator for the loan securitizations completed by the joint venture.
−Removed: See note 7, “Investments” for a description of, and the Company’s accounting for, these transactions, and disclosure of the Company’s maximum exposure.
−Removed: The Company makes investments in entities that promote renewable energy sources (solar).
+Added: As of December 31, 2022, the Company owned 45 % of the economic rights of ALLO Communications LLC and has a disproportional 43 % of the voting rights related to all operating decisions for ALLO's business.
+Added: See note 1 for a description of ALLO, including the primary services offered.
+Added: See note 2 for disclosure of ALLO’s recapitalization and the Company’s initial recognition of its voting interest/equity method and non-voting preferred membership investments.
+Added: See note 7 for the Company’s carrying value of its voting interest/equity method and non-voting preferred membership investments, which is the Company’s maximum exposure to loss.
+Added: The Company makes tax equity 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.
−Removed: These investments are included in "investments" on the consolidated balance sheets and accounted for under the HLBV method of accounting.
+Added: These investments are included in "investments and notes receivable" on the consolidated balance sheets and accounted for under the HLBV method of accounting.
The carrying value of these investments are reduced by tax credits earned when the solar project is placed-in-service.
−Removed: The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are included in “other liabilities” on the consolidated balance sheet.
+Added: The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are included in “other liabilities” on the consolidated balance sheets.
The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment, unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level.
12 unchanged sentences
Maximum exposure to loss $ 214,296 144,693
−Removed: As of December 31, 2021, the Company owned 45 percent of the economic rights of ALLO Communications LLC and has a disproportional 43 percent of the voting rights related to all operating decisions for ALLO's business.
−Removed: See note 1, “Description of Business,” for a description of ALLO, including the primary services offered.
−Removed: See note 2, “ALLO Recapitalization,” for disclosure of ALLO’s recapitalization and the Company’s initial recognition of its voting interest/equity method and non-voting preferred membership investments.
−Removed: See note 7, “Investments,” for the Company’s carrying value of its voting interest/equity method and non-voting preferred membership investments, which is the Company’s maximum exposure to loss.
+Added: Reclassification of Prior Period Cash Flow Presentation
+Added: In prior years, the line item in the Company's consolidated statements of cash flows for changes in amounts "due to customers" was presented in cash flows from operating activities.
+Added: Beginning in 2022, the Company corrected this presentation for all periods presented in its statements of cash flows to show this activity as a financing activity.
+Added: This correction had 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 had a corresponding impact on the amounts of cash flows from operating and financing activities, it had no impact on the net increase or decrease in cash for previously reported periods.
+Added: The Company has concluded that the correction was not material from a combined quantitative and qualitative perspective to its previously issued financial statements for 2021 and 2020.
Noncontrolling Interests
−Removed: Amounts for noncontrolling interests reflect the proportionate share of membership interest (equity) and net income attributable to the holders of minority membership interests in the following entities:
+Added: Amounts for noncontrolling interests reflect the share of membership interest (equity) and net income attributable to the holders of minority membership interests in the following entities:
• Whitetail Rock Capital Management, LLC - WRCM is the Company’s SEC-registered investment advisor subsidiary.
−Removed: WRCM issued 10 percent minority membership interests on January 1, 2012.
+Added: WRCM issued 10 % minority membership interests on January 1, 2012.
+Added: • NGWeb Solutions, LLC - The Company acquired a controlling interest of NGWeb Solutions, LLC on April 30, 2022.
+Added: Minority membership interests of 20 % was maintained by prior interest holders.
+Added: See note 8 for a description of NGWeb Solutions, LLC, including the primary services offered.
+Added: • GRNE-Nelnet, LLC and ENRG-Nelnet, LLC - The Company acquired a controlling interest in two subsidiaries of GRNE Solutions, LLC on July 1, 2022.
+Added: Minority membership interests of 20 % was maintained by prior interest holders.
+Added: See note 8 for additional description of the acquisition, including the primary services offered.
In addition, the Company has established multiple entities for the purpose of investing in renewable energy (solar) and federal opportunity zone programs in which it has noncontrolling members.
4 unchanged sentences
Loans Receivable
−Removed: Loans consist of federally insured student loans, private education loans, and consumer loans.
+Added: Loans consist of federally insured student, private education, consumer, and other loans.
If the Company has the ability and intent to hold loans for the foreseeable future, such loans are held for investment and carried at amortized cost.
4 unchanged sentences
There were no loans classified as held for sale as of December 31, 2022 and 2021.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Federally insured loans were originated under the FFEL Program by certain eligible lenders as defined by the Higher Education Act of 1965, as amended (the “Higher Education Act”).
8 unchanged sentences
These plans determine the borrower's payment amount based on their discretionary income and may extend their repayment period.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: rates on federally insured student loans may be fixed or variable, dependent upon the type of loan, terms of the loan agreements, and date of origination.
+Added: Interest rates on federally insured student loans may be fixed or variable, dependent upon the type of loan, terms of the loan agreements, and date of origination.
Substantially all FFELP loan principal and related accrued interest is guaranteed as provided by the Higher Education Act.
2 unchanged sentences
Such student loans are subject to “cure” procedures and reinstatement of the guarantee under certain circumstances.
−Removed: Loans also include private education and consumer loans.
+Added: Loans also include private education, consumer, and other loans.
Private education loans are loans to students or their families that are non-federal loans and loans not insured or guaranteed under the FFEL Program.
4 unchanged sentences
The terms of the consumer loans, which vary on an individual basis, generally provide for repayment in weekly or monthly installments of principal and interest over a period of up to six years .
+Added: Other loans consist of home equity lines of credit.
+Added: These loans are made to an individual primarily for debt consolidation purposes using equity in the borrower’s home as security in the form of primarily second liens.
+Added: These loans typically have a revolving draw period of five years and a repayment period at the end of the draw period of five to ten years .
+Added: Principal and interest payments are generally required to be made during the draw period and repayment period.
Allowance for Loan Losses
5 unchanged sentences
The Company adopted Topic 326 using the modified retrospective method.
−Removed: As such, the results for reporting periods beginning after January 1, 2020 are presented under Topic 326 (recognizing estimated credit losses expected to occur over the asset's remaining life) while prior period amounts continue to be reported in accordance with previously applicable GAAP (recognizing estimated credit losses using an incurred loss model);
−Removed: therefore, the comparative information for 2019 is not comparable to the information presented for 2020 and 2021.
−Removed: Adoption of the new guidance primarily impacted the allowance for loan losses related to the Company's loan portfolio.
Upon adoption, the Company recorded an increase to the allowance for loan losses of $ 91.0 million and decreased retained earnings, net of tax, by $ 18.9 million.
−Removed: Allowance for Loan Losses - Accounting Policies Under Topic 326
+Added: Allowance for Loan Losses - Accounting Policies
The allowance for loan losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans as of the balance sheet date.
3 unchanged sentences
Expected recoveries of amounts previously charged off, not to exceed the aggregate of the amount previously charged off, are included in the estimate of the allowance for loan losses at the balance sheet date.
−Removed: The Company aggregates loans with similar risk characteristics into pools to estimate its expected credit losses.
−Removed: The Company evaluates such pooling decisions each quarter and makes adjustments as risk characteristics change.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
The Company determines its estimated credit losses for the following financial assets as follows:
Loans receivable
−Removed: Management has determined that the federally insured, private education, and consumer loan portfolios each meet the definition of a portfolio segment, which is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses.
+Added: The Company aggregates loans with similar risk characteristics into pools to estimate its expected credit losses.
+Added: The Company evaluates such pooling decisions each quarter and makes adjustments as risk characteristics change.
+Added: Management has determined that the federally insured, private education, consumer, and other loan portfolios each meet the definition of a portfolio segment, which is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses.
Accordingly, the portfolio segment disclosures are presented on this basis in note 4 for each of these portfolios.
The Company does not disaggregate its portfolio segment loan portfolios into classes of financing receivables.
−Removed: The Company utilizes an undiscounted cash flow methodology in determining its lifetime expected credit losses on its federally insured and private education loan portfolios and a remaining life methodology for its consumer loan portfolio.
−Removed: For the undiscounted cash flow models, the expected credit losses are the product of multiplying the Company’s estimates of
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: probability of default and loss given default and the exposure of default over the expected life of the loans.
+Added: The Company utilizes an undiscounted cash flow methodology in determining its lifetime expected credit losses on its federally insured and private education loan portfolios and a remaining life methodology for its consumer and other loan portfolios.
+Added: For the undiscounted cash flow models, the expected credit losses are the product of multiplying the Company’s estimates of probability of default and loss given default and the exposure of default over the expected life of the loans.
For the remaining life method, the expected credit losses are the product of multiplying the Company’s estimated net loss rate by the exposure at default over the expected life of the loans.
9 unchanged sentences
delinquency status;
−Removed: type of private education or consumer loan program;
+Added: type of private education, consumer, or other loan program;
trends in defaults in the portfolio based on Company and industry data;
3 unchanged sentences
and other relevant qualitative factors.
−Removed: The federal government guarantees 97 percent of the principal of and the interest on federally insured student loans disbursed on and after July 1, 2006 (and 98 percent for those loans disbursed on and after October 1, 1993 and prior to July 1, 2006), which limits the Company’s loss exposure on the outstanding balance of the Company’s federally insured portfolio.
+Added: The federal government guarantees 97% of the principal of and the interest on federally insured student loans disbursed on and after July 1, 2006 (and 98% for those loans disbursed on and after October 1, 1993 and prior to July 1, 2006), which limits the Company’s loss exposure on the outstanding balance of the Company’s federally insured portfolio.
Federally insured student loans disbursed prior to October 1, 1993 are fully insured.
1 unchanged sentence
Accordingly, the Company bears the full risk of loss on these loans if the borrower and co-borrower, if applicable, default.
−Removed: The Company places private education and consumer loans on nonaccrual status when the collection of principal and interest is 90 days past due and charges off the loan when the collection of principal and interest is 120 days or 180 days past due, depending on type of loan program.
+Added: The Company places private education, consumer, and other loans on nonaccrual status when the collection of principal and interest is 90 days past due and charges off the loan when the collection of principal and interest is 120 days or 180 days past due, depending on type of loan program.
Collections, if any, are reflected as a recovery through the allowance for loan losses.
9 unchanged sentences
Loan Accrued Interest Receivable
−Removed: Accrued interest receivable on loans is combined and presented with the loans receivable amortized cost balance on the Company’s consolidated balance sheet.
+Added: Accrued interest receivable on loans is combined and presented with the loans receivable amortized cost balance on the Company’s consolidated balance sheets.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
For the Company’s federally insured loan portfolio, the Company records an allowance for credit losses for accrued interest receivables.
1 unchanged sentence
Charge-offs of accrued interest receivable are recognized as a reduction to the allowance for loan losses.
−Removed: For the Company’s private education and consumer loan portfolios, the Company does not measure an allowance for credit losses for accrued interest receivables.
−Removed: For private education and consumer loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due.
+Added: For the Company’s private education, consumer, and other loan portfolios, the Company does not measure an allowance for credit losses for accrued interest receivables.
+Added: For private education, consumer, and other loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due.
Charge-offs of accrued interest receivable are recognized by reversing interest income.
−Removed: Allowance for Loan Losses - Accounting Policies Prior to Adoption of Topic 326
−Removed: Prior to the adoption of Topic 326 effective January 1, 2020, the allowance for loan losses represented management's estimate of probable losses on loans.
−Removed: The provision for loan losses for periods ended prior to January 1, 2020 reflected the activity for
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: the applicable period and provided an allowance at a level that the Company's management believed was appropriate to cover probable losses inherent in the loan portfolio.
−Removed: The Company evaluated the adequacy of the allowance for loan losses using a historical loss rate methodology adjusted for qualitative factors separately on each of its federally insured, private education, and consumer loan portfolios.
−Removed: These evaluation processes were subject to numerous judgments and uncertainties including the selection of loss rates over time and determination of the loss emergence period.
Cash and Cash Equivalents and Statements of Cash Flows
−Removed: For purposes of the consolidated statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents.
+Added: The Company considers all investments with original maturities of three months or less to be cash equivalents.
+Added: Cash and cash equivalents include amounts due to Nelnet Bank from the Federal Reserve Bank of $ 5.2 million and $ 18.7 million as of December 31, 2022 and 2021, respectively.
Accrued interest on loans purchased and sold is included in cash flows from operating activities in the respective period.
5 unchanged sentences
For available-for-sale debt securities where fair value is less than amortized cost, credit-related impairment, if any, is recognized through an allowance for credit losses and adjusted each period for changes in credit risk.
−Removed: The Company classifies its residual interest in federally insured, private education, and consumer loan securitizations as held-to-maturity beneficial interest investments.
+Added: The Company classifies its residual interest in federally insured, private education, consumer, and other loan securitizations as held-to-maturity beneficial interest investments.
The Company measures accretable yield initially as the excess of all cash flows expected to be collected attributable to the beneficial interest estimated at the acquisition/transaction date over the initial investment and recognizes interest income over the life of the beneficial interest using the effective interest method.
The Company continues to update, over the life of the beneficial interest, the expectation of cash flows to be collected.
−Removed: Beneficial interest investments are evaluated for impairment by comparing the present value of the remaining cash flows as estimated at the initial transaction date (or the last date previously revised) to the present value of the cash flows expected to be collected at the current financial reporting date, both discounted using the same effective rate equal to the current yield used to accrete the beneficial interest.
−Removed: If the present value of remaining cash flows is less than the present value of cash flows expected to be collected, the Company records an allowance for credit losses for the difference.
+Added: Beneficial interest investments are evaluated for impairment by comparing the present value of the remaining cash flows as expected to be collected at the initial transaction date (or the last date previously revised) to the present value of the cash flows expected to be collected at the current financial reporting date, both discounted using the same effective rate equal to the current yield used to accrete the beneficial interest.
+Added: If the present value of remaining cash flows is less than the present value of cash flows expected to be collected and the Company determines a credit loss has occurred, the Company records an allowance for credit losses for the difference.
Subsequent favorable changes, if any, decreases the allowance for credit losses.
The Company reflects the changes in the allowance for credit losses in provision for beneficial interests on the consolidated statements of income.
−Removed: Equity investments with readily determinable fair values are measured at fair value, with changes in the fair value recognized through net income (other than those equity investments accounted for under the equity method of accounting or those that result in consolidation of the investee).
+Added: Equity investments with readily determinable fair values are measured at fair value, with changes in the fair value recognized through net income.
For equity investments without readily determinable fair value, the Company uses the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
5 unchanged sentences
The Company accounts for its solar investments, voting equity investment in ALLO, and certain real estate investments under the HLBV method of accounting.
−Removed: The HLBV method of accounting is used by the Company for equity method investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership or voting interests.
−Removed: The Company applies the HLBV method using a balance sheet approach.
−Removed: A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined
+Added: The HLBV method of accounting is used by the Company for equity method investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: liquidation priorities.
+Added: underlying percentage ownership or voting interests.
+Added: The Company applies the HLBV method using a balance sheet approach.
+Added: A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined liquidation priorities.
The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the amount the Company recognizes for its share of the earnings or losses from the equity investment for the period.
+Added: Notes Receivable
+Added: The Company accounts for its investments in notes receivable as financing receivables under ASC Topic 310, Receivables.
+Added: Notes exchanged for cash are recorded at amortized cost.
+Added: Discounts, if any, upon issuance are accreted to income over the contractual life of the issued note, and interest income is accounted for on an accrual basis.
+Added: The Company applies the principles in ASC Topic 326 to evaluate and record expected losses, if any, on its notes receivable.
Restricted Cash
7 unchanged sentences
Cash collected for customers and the related liability are included in the accompanying consolidated balance sheets.
+Added: A portion of cash collected for customers in the Company's Education Technology, Services, and Payment Processing operating segment are held at Nelnet Bank, in which Nelnet Bank can use these cash deposits for general operating purposes and is no longer considered restricted.
+Added: As of December 31, 2022 and 2021, $ 55.0 million and $ 40.0 million, respectively, of cash collected for customers are held at Nelnet Bank.
Accounts Receivable
Accounts receivable are presented at their net realizable values, which include allowances for doubtful accounts.
−Removed: Allowance estimates are based upon individual customer experience, as well as the age of receivables and likelihood of collection.
+Added: Allowance estimates are based upon expected loss considering individual customer experience, as well as the age of receivables and likelihood of collection.
Business Combinations
1 unchanged sentence
Under the acquisition method, the financial statements reflect the operations of an acquired business starting from the completion of the acquisition.
−Removed: The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of acquisition.
+Added: The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of acquisition, with the exception of contract assets or liabilities generated from contracts with customers, which are measured as if the Company had originated the acquired contract.
Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
5 unchanged sentences
However, components are aggregated as a single reporting unit if they have similar economic characteristics.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
The Company tests goodwill for impairment in accordance with applicable accounting guidance.
8 unchanged sentences
The estimates of future cash flows associated with intangible assets are generally prepared using a cost savings method, a lost income method, or an excess return method, as appropriate.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: utilizing such methods, management must make certain assumptions about the amount and timing of estimated future cash flows and other economic benefits from the assets, the remaining economic useful life of the assets, and general economic factors concerning the selection of an appropriate discount rate.
+Added: In utilizing such methods, management must make certain assumptions about the amount and timing of estimated future cash flows and other economic benefits from the assets, the remaining economic useful life of the assets, and general economic factors concerning the selection of an appropriate discount rate.
The Company may also use replacement cost or market comparison approaches to estimate fair value if such methods are determined to be more appropriate.
7 unchanged sentences
Gains and losses from the sale of property and equipment are included in determining net income.
−Removed: The Company uses the straight-line method for recording depreciation and amortization.
+Added: The Company uses the straight-line method for recording depreciation over the estimated useful life of the asset.
Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful life of the asset.
+Added: The Company evaluates the estimated remaining useful lives of property and equipment and whether events or changes in circumstances warrant a revision to the remaining periods of depreciation.
+Added: When the Company leases assets from others, it records right-of-use (ROU) assets and lease liabilities.
The Company determines if the arrangement is, or contains, a lease at the inception of an arrangement and records the lease in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available by the lessor.
2 unchanged sentences
The lease expense for these leases is recognized on a straight-line basis over the lease term.
−Removed: All other lease assets (ROU assets) and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date.
+Added: All other ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date.
The Company classifies each lease as operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases.
5 unchanged sentences
Therefore, the combined component is considered a single performance obligation under ASC Topic 606, Revenue from Contracts with Customers .
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Most leases include one or more options to renew, with renewal terms that can be extended.
10 unchanged sentences
Although the Company believes the historical assumptions and estimates used are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Fair Value Measurements
23 unchanged sentences
Revenue Recognition
−Removed: The Company applies the provisions of ASC Topic 606 , Revenue from Contracts with Customers ("ASC Topic 606") , to its fee-based operating segments.
−Removed: The majority of the Company’s revenue earned in its Asset Generation and Management and Nelnet Bank operating segments, including loan interest and derivative activity, is explicitly excluded from the scope of ASC Topic 606.
−Removed: The Company recognizes revenue under the core principle of ASC Topic 606 to depict the transfer of control of products and services to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled.
+Added: The Company applies the provisions of ASC Topic 606 , Revenue from Contracts with Customers ("Topic 606") , to its fee-based operating segments.
+Added: The majority of the Company’s revenue earned in its Asset Generation and Management and Nelnet Bank operating segments, including loan interest and derivative activity, is explicitly excluded from the scope of Topic 606.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: The Company recognizes revenue under the core principle of Topic 606 to depict the transfer of control of products and services to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled.
In order to achieve that core principle, the Company applies the following five-step approach:
9 unchanged sentences
Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in “other assets” on the consolidated balance sheets.
−Removed: Additional information related to revenue earned in its Asset Generation and Management operating segment is provided below.
−Removed: See note 16, "Disaggregated Revenue and Deferred Revenue" for additional information related to the Company's fee-based operating segments.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: Loan interest income - Loan interest on federally insured student loans is paid by the Department or the borrower, depending on the status of the loan at the time of the accrual.
+Added: Additional information related to revenue earned in its Asset Generation and Management and Nelnet Bank operating segments is provided below.
+Added: See note 18 for additional information related to the Company's fee-based operating segments.
+Added: Loan interest income - The Company recognizes loan interest income as earned, net of amortization of loan premiums and deferred origination costs and the accretion of loan discounts.
+Added: Loan interest income is recognized based upon the expected yield of the loan after giving effect to interest rate reductions resulting from borrower utilization of incentives such as timely payments ("borrower benefits") and other yield adjustments.
+Added: Loan premiums or discounts, deferred origination costs, and borrower benefits are amortized/accreted over the estimated life of the loans, which includes an estimate of forecasted payments in excess of contractually required payments (the constant prepayment rate).
+Added: Loan interest on federally insured student loans is paid by the Department or the borrower, depending on the status of the loan at the time of the accrual.
The Department makes quarterly interest subsidy payments on certain qualified FFELP loans until the student is required under the provisions of the Higher Education Act to begin repayment.
2 unchanged sentences
Borrower repayment of private education loans typically begins six months following the borrower's graduation from a qualified institution, and the interest is either paid by the borrower or capitalized annually or at repayment.
−Removed: Repayment of consumer loans typically starts upon origination of the loan.
+Added: Repayment of consumer and other loans typically starts upon origination of the loan.
The Department provides a special allowance to lenders participating in the FFEL Program.
−Removed: The special allowance is accrued based upon the fiscal quarter average rate of 13-week Treasury Bill auctions (for loans originated prior to January 1, 2000), the fiscal quarter average rate of the daily three-month financial commercial paper rates (for loans originated on and after January 1, 2000), or the fiscal quarter average rate of daily one-month LIBOR rates (for loans originated on and after January 1, 2000, and for lenders which elected to change the special allowance index to one-month LIBOR effective April 1, 2012) relative to the yield of the student loan.
−Removed: The Company recognizes loan interest income as earned, net of amortization of loan premiums and deferred origination costs and the accretion of loan discounts.
−Removed: Loan interest income is recognized based upon the expected yield of the loan after giving effect to interest rate reductions resulting from borrower utilization of incentives such as timely payments ("borrower benefits") and other yield adjustments.
−Removed: Loan premiums or discounts, deferred origination costs, and borrower benefits are amortized/accreted over the estimated life of the loans, which includes an estimate of forecasted payments in excess of contractually required payments (the constant prepayment rate).
−Removed: The constant prepayment rate currently used by the Company to amortize/accrete federally insured loan premiums/discounts is 5 percent for Stafford loans and 4 percent for Consolidation loans.
+Added: The special allowance is accrued based upon the daily fiscal quarter average of the 13-week Treasury Bill auction rate (for loans originated prior to January 1, 2000), the daily fiscal quarter average of the three-month financial commercial paper rate (for loans originated on and after January 1, 2000), or the daily fiscal quarter average of the one-month LIBOR rate (for loans originated on and after January 1, 2000, and for lenders which elected to change the special allowance index to one-month LIBOR effective April 1, 2012) relative to the yield of the student loan.
+Added: The constant prepayment rate currently used by the Company to amortize/accrete federally insured loan premiums/discounts is 6 % for Stafford loans and 5 % for consolidation loans.
The Company periodically evaluates the assumptions used to estimate the life of the loans and prepayment rates.
In instances where there are changes to the assumptions, amortization/accretion is adjusted on a cumulative basis to reflect the change since the acquisition of the loan.
−Removed: During the fourth quarter of 2021, the Company changed its estimate of the constant prepayment rate on its consolidation loans from 3 percent to 4 percent, which resulted in a $ 6.2 million increase to the Company’s net loan discount balance and a corresponding pre-tax decrease to interest income.
+Added: During the fourth quarter of 2022, the Company changed its estimate of the constant prepayment rate on its Stafford loans from 5 % to 6 % and on its consolidation loans from 4 % to 5 %, which resulted in a $ 8.4 million decrease to the Company’s net loan discount balance and a corresponding increase to interest income.
+Added: During the fourth quarter of 2021, the Company changed its estimate of the constant prepayment rate on its consolidation loans from 3 % to 4 %, which resulted in a $ 6.2 million increase to the Company’s net loan discount balance and a corresponding decrease to interest income.
The Company also pays the Department an annual 105 basis point rebate fee on Consolidation loans.
These rebate fees are netted against loan interest income.
−Removed: Interest Expense
−Removed: Interest expense is based upon contractual interest rates, adjusted for the amortization of debt issuance costs and the accretion of discounts.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: Deposits and Interest Expense
+Added: Deposits are interest-bearing deposits and consist of brokered certificates of deposit (CDs) and retail and other savings deposits and CDs.
+Added: Retail and other deposits include savings deposits from Educational 529 College Savings and Health Savings plans and commercial and institutional CDs.
+Added: Union Bank and Trust Company (“Union Bank”), a related party, is the program manager for the College Savings plans.
+Added: CDs are accounts that have a stipulated maturity and interest rate.
+Added: For savings accounts, the depositor may be required to give written notice of any intended withdrawal no less than seven days before the withdrawal is made.
+Added: Generally, early withdrawal of brokered CDs is prohibited (except in the case of death or legal incapacity).
+Added: Nelnet Bank has intercompany deposits from Nelnet, Inc.
+Added: and its subsidiaries, including a $ 40.0 million pledged deposit from Nelnet, Inc.
+Added: as required under a Capital and Liquidity Maintenance Agreement with the FDIC.
+Added: All intercompany deposits held at Nelnet Bank are eliminated for consolidated financial reporting purposes.
+Added: For bonds and notes payable, interest expense is based upon contractual interest rates, adjusted for the amortization of debt issuance costs and the accretion of discounts.
The amortization of debt issuance costs and accretion of discounts are recognized using the effective interest method.
10 unchanged sentences
As such, variation margin payments are considered in determining the fair value of the centrally cleared derivative portfolio.
−Removed: The Company records
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: derivative contracts on its balance sheet with a fair value of zero due to the payment or receipt of variation margin between the Company and the CME settling the outstanding mark-to-market exposure on such derivatives to a balance of zero on a daily basis.
+Added: The Company records derivative contracts on its balance sheet with a fair value of zero due to the payment or receipt of variation margin between the Company and the CME settling the outstanding mark-to-market exposure on such derivatives to a balance of zero on a daily basis.
Management has structured all of the Company's derivative transactions with the intent that each is economically effective;
9 unchanged sentences
The investment tax credits are recognized as a reduction to the related asset.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Income tax expense includes deferred tax expense, which represents a portion of the net change in the deferred tax asset or liability balance during the year, plus any change made in the valuation allowance, and current tax expense, which represents the amount of tax currently payable to or receivable from a tax authority plus amounts for expected tax deficiencies .
22 unchanged sentences
Non-Nelnet Bank:
−Removed: Federally insured student loans:
+Added: Federally insured loans:
Stafford and other $ 3,389,178 3,904,000
2 unchanged sentences
Private education loans 252,383 299,442
−Removed: Consumer loans 51,301 109,346
+Added: Consumer and other loans 350,915 51,301
Non-Nelnet Bank loans 14,169,771 17,441,790
−Removed: Federally insured student loans 88,011 —
+Added: Federally insured loans 65,913 88,011
Private education loans 353,882 169,890
6 unchanged sentences
Private education loans ( 15,411 ) ( 16,143 )
−Removed: Consumer loans ( 6,481 ) ( 27,256 )
+Added: Consumer and other loans ( 30,263 ) ( 6,481 )
Non-Nelnet Bank allowance for loan losses ( 129,267 ) ( 126,005 )
3 unchanged sentences
$ 15,243,889 18,335,197
−Removed: The Company has sold portfolios of consumer loans to an unrelated third party who securitized such loans.
−Removed: As partial consideration received for the consumer loans sold, the Company received residual interest in the consumer loan securitizations that are included in "investments" on the Company's consolidated balance sheet.
−Removed: The following table provides a summary of the consumer loans sold and gains recognized by the Company during 2021, 2020, and 2019.
−Removed: (par value) Gain Residual interest received in securitization
−Removed: May 14, 2021 $ 77,417 15,271 24.5 %
−Removed: September 29, 2021 18,390 3,249 6.9
+Added: 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.
+Added: December 31, 2022 December 31, 2021
+Added: Non-Nelnet Bank:
+Added: Federally insured loans (a) 0.62 % 0.60 %
+Added: Private education loans 6.11 % 5.39 %
+Added: Consumer and other loans (b) 8.62 % 12.63 %
+Added: Federally insured loans (a) 0.26 % 0.30 %
+Added: Private education loans 0.68 % 0.49 %
+Added: (a) As of December 31, 2022 and 2021, the allowance for loan losses as a percent of the risk sharing component of federally insured loans not covered by the federal guaranty for non-Nelnet Bank was 22.4 % and 22.2 %, respectively, and for Nelnet Bank was 10.3 % and 12.1 %, respectively.
+Added: (b) During 2022, the Company purchased home equity loans that generally have lower default rates than unsecured consumer loans.
+Added: As such, the allowance for loan losses as a percentage of the ending loan balance has decreased as of December 31, 2022 compared with December 31, 2021.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: The Company has sold portfolios of loans to unrelated third parties who securitized such loans.
+Added: As partial consideration received for the loans sold, the Company received residual interest in the loan securitizations that are included in "investments and notes receivable" on the Company's consolidated balance sheets.
+Added: The following table provides a summary of the loans sold and gains/losses recognized by the Company during 2022, 2021, and 2020.
+Added: (par value) Gain (loss) Loan type Residual interest received in securitization
+Added: January 26 $ 18,125 2,989 Consumer 6.6 %
+Added: June 30 114 — Home equity —
+Added: July 7 28,915 2,627 Consumer 7.6
+Added: October 27 28,498 2,901 Consumer 7.9
+Added: November 29 91,298 ( 5,614 ) Home equity 54.8 (a)
$ 166,950 2,903
−Removed: January 30, 2020 $ 124,249 18,206 31.4 %
−Removed: July 29, 2020 60,779 14,817 25.4
+Added: May 14 $ 77,417 15,271 Consumer 24.5 %
+Added: August 10 5,280 195 Private —
+Added: September 29 18,390 3,249 Consumer 6.9
+Added: December 28 20 — Federally insured —
$ 101,107 18,715
−Removed: May 1, 2019 $ 47,680 1,712 11.0 %
−Removed: October 17, 2019 179,301 15,549 28.7
+Added: January 30 $ 124,249 18,206 Consumer 31.4 %
+Added: July 29 60,779 14,817 Consumer 25.4
$ 185,028 33,023
+Added: (a) In addition to receiving a residual interest in the securitization, the Company also received $ 13.8 million of asset-backed securities issued as part of the transaction.
+Added: These debt securities are classified as held-to-maturity and included in “investments and notes receivable” on the Company’s consolidated balance sheet.
AND SUBSIDIARIES
8 unchanged sentences
Private education loans 16,143 — 2,487 ( 3,879 ) 656 — 4 15,411
−Removed: Consumer loans 27,256 — ( 4,544 ) ( 5,123 ) 824 — ( 11,932 ) 6,481
+Added: Consumer and other loans 6,481 — 38,383 ( 3,725 ) 592 — ( 11,468 ) 30,263
Federally insured loans 268 — ( 93 ) ( 5 ) — — — 170
5 unchanged sentences
Private education loans 19,529 — ( 1,333 ) ( 2,476 ) 721 — ( 298 ) 16,143
−Removed: Consumer loans 15,554 13,926 38,183 ( 12,115 ) 1,132 — ( 29,424 ) 27,256
+Added: Consumer and other loans 27,256 — ( 4,544 ) ( 5,123 ) 824 — ( 11,932 ) 6,481
+Added: Federally insured loans — — 268 — — — — 268
Private education loans 323 — 526 ( 4 ) — — ( 5 ) 840
4 unchanged sentences
Private education loans 9,597 4,797 6,156 ( 1,652 ) 631 — — 19,529
−Removed: Consumer loans 7,240 — 31,000 ( 12,498 ) 812 — ( 11,000 ) 15,554
+Added: Consumer and other loans 15,554 13,926 38,183 ( 12,115 ) 1,132 — ( 29,424 ) 27,256
+Added: Private education loans — — 330 ( 7 ) — — — 323
$ 61,914 91,014 63,360 ( 28,729 ) 1,763 15,800 ( 29,424 ) 175,698
−Removed: (a) During the years ended December 31, 2021 and 2020, the Company acquired $ 224.1 million (par value) and $ 835.0 million (par value), respectively, of federally insured rehabilitation loans that met the definition of PCD loans when they were purchased by the Company.
+Added: (a) During the years ended December 31, 2022, 2021, and 2020 the Company acquired $ 12.0 million (par value), $ 224.1 million (par value), and $ 835.0 million (par value), respectively, of federally insured rehabilitation loans that met the definition of PCD loans when they were purchased by the Company.
+Added: The following table summarizes net charge-offs as a percentage of average loans for each of the Company's loan portfolios.
+Added: Year ended December 31,
+Added: 2022 2021 2020
+Added: Non-Nelnet Bank:
+Added: Federally insured loans 0.15 % 0.11 % 0.08 %
+Added: Private education loans 1.18 % 0.55 % 0.36 %
+Added: Consumer and other loans 2.05 % 6.21 % 8.66 %
+Added: Federally insured loans 0.01 % 0.00 % —
+Added: Private education loans 0.10 % 0.00 % 0.14 %
+Added: (a) The charge-offs as a percentage of average loans for Nelnet Bank in 2020 is for the period from November 2, 2020 (Nelnet Bank’s inception) through December 31, 2020.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Beginning in March 2020, the coronavirus disease 2019 (“COVID-19”) pandemic caused significant disruptions in the U.S.
1 unchanged sentence
Apart from the impact of the adoption of Topic 326 effective January 1, 2020, the Company’s allowance for loan losses increased in 2020 primarily as a result of the COVID-19 pandemic and its effects on economic conditions.
−Removed: During the year ended December 31, 2021, the Company recorded a negative provision for loan losses due to (i) management's estimate of certain continued improved economic conditions as of December 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020;
+Added: During the year ended December 31, 2021, the Company recorded a negative provision for loan losses due to (i) management's estimate of certain improved economic conditions as of December 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020;
(ii) an increase in the constant prepayment rate on FFELP consolidation loans;
1 unchanged sentence
These amounts were partially offset by the establishment of an initial allowance for loans originated and acquired during the period.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: During the year ended December 31, 2022, the Company recorded a provision for loan losses due to (i) management's estimate of declining economic conditions as of December 31, 2022 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2021;
+Added: and (ii) the establishment of an initial allowance for loans originated and acquired during the period.
+Added: These amounts were partially offset by the amortization of the federally insured loan portfolio and an increase in expected prepayments as a result of continued initiatives offered and proposed by the Department for FFELP borrowers to consolidate their loans into Federal Direct Loan Program loans with the Department.
+Added: Unfunded Private Education Loan Commitments
+Added: As of December 31, 2022, Nelnet Bank has a liability of approximately $ 84,000 related to $ 5.0 million of unfunded private education loan commitments.
+Added: The liability for unfunded loan commitments is included in "other liabilities" on the consolidated balance sheets.
+Added: During the year ended December 31, 2022, Nelnet Bank recognized provision for loan losses of approximately $ 73,000 related to unfunded loan commitments.
+Added: Key Credit Quality Indicators
Loan Status and Delinquencies
−Removed: The key credit quality indicators for the Company’s federally insured, private education, and consumer loan portfolios are loan status, including delinquencies.
+Added: 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.
17 unchanged sentences
Loan discount, net of unamortized premiums and deferred origination costs ( 35,468 ) ( 28,309 ) ( 14,505 )
−Removed: Non-accretable discount (e) — — ( 28,036 )
Allowance for loan losses ( 83,593 ) ( 103,381 ) ( 128,590 )
Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 14,255,562 $ 17,744,073 $ 19,777,531
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: As of December 31,
+Added: 2022 2021 2020
Private education loans - Non-Nelnet Bank:
10 unchanged sentences
Loan discount, net of unamortized premiums ( 38 ) ( 1,123 ) 2,691
−Removed: Non-accretable discount (e) — — ( 4,362 )
Allowance for loan losses ( 15,411 ) ( 16,143 ) ( 19,529 )
Total private education loans and accrued interest receivable, net of allowance for loan losses $ 239,080 $ 284,136 $ 305,882
−Removed: Consumer loans - Non-Nelnet Bank:
+Added: Consumer and other loans - Non-Nelnet Bank:
Loans in deferment (a) $ 109 0.0 % $ 43 0.1 % $ 829 0.8 %
5 unchanged sentences
Total loans in repayment 350,806 100.0 100.0 % 51,258 99.9 100.0 % 108,517 99.2 100.0 %
−Removed: Total consumer loans 51,301 100.0 % 109,346 100.0 % 225,918
+Added: Total consumer and other loans 350,915 100.0 % 51,301 100.0 % 109,346 100.0 %
Accrued interest receivable 3,658 396 1,001
−Removed: Loan premium 913 1,640 740
+Added: Loan discount, net of unamortized premiums ( 588 ) 913 1,640
Allowance for loan losses ( 30,263 ) ( 6,481 ) ( 27,256 )
−Removed: Total consumer loans and accrued interest receivable, net of allowance for loan losses $ 46,129 $ 84,731 $ 212,984
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: As of December 31,
−Removed: 2021 2020 2019
−Removed: Federally insured loans - Nelnet Bank:
+Added: Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 323,722 $ 46,129 $ 84,731
+Added: Federally insured loans - Nelnet Bank (e):
Loans in-school/grace/deferment (a) $ 241 0.4 % $ 330 0.4 %
13 unchanged sentences
Total federally insured loans and accrued interest receivable, net of allowance for loan losses $ 67,521 $ 88,985
−Removed: Private education loans - Nelnet Bank:
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: As of December 31,
+Added: 2022 2021 2020
+Added: Private education loans - Nelnet Bank (e):
Loans in-school/grace/deferment (a) $ 11,580 3.3 % $ 150 0.1 % $ — — %
8 unchanged sentences
Accrued interest receivable 1,152 264 26
−Removed: Deferred origination costs 2,560 266
+Added: Deferred origination costs, net of unaccreted discount 5,360 2,560 266
Allowance for loan losses ( 2,390 ) ( 840 ) ( 323 )
5 unchanged sentences
(d) A portion of loans included in loans delinquent 271 days or greater includes loans in claim status, which are loans that have gone into default and have been submitted to the guaranty agency.
−Removed: (e) Upon adoption of ASC 326 on January 1, 2020, the Company reclassified the non-accretable discount balance related to loans purchased with evidence of credit deterioration to allowance for loan losses.
−Removed: As a result of COVID-19, effective March 13, 2020 through June 30, 2020, the Company proactively applied a 90 day natural disaster forbearance to any loan that was 31-269 days past due (for federally insured loans) and 80 days past due (for private education loans), and to any current loan upon request.
−Removed: Beginning July 1, 2020, the Company discontinued proactively applying 90 day natural disaster forbearances on past due loans.
−Removed: However, the Company continued to apply a natural disaster forbearance in 90 day increments to any private education and federally insured loan upon request through July 31, 2021 and September 30, 2021, respectively.
−Removed: As a result of the ongoing impacts of the COVID-19 pandemic, the Company continues to review whether additional and/or extended borrower relief policies and activities are needed.
−Removed: All relief provided to borrowers by the Company through December 31, 2021 have been delays in payment that the Company considers to be insignificant and have not been accounted for as troubled debt restructuring.
+Added: (e) 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.
+Added: FICO Scores - Nelnet Bank Private Education Loans
+Added: An additional key credit quality indicator for Nelnet Bank private education loans is FICO scores at the time of origination.
+Added: 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.
+Added: Loan balance as of December 31, 2022
+Added: 2022 2021 2020 Total
+Added: FICO at origination:
+Added: Less than 705 $ 5,898 5,389 348 11,635
+Added: 705 - 734 23,392 10,543 542 34,477
+Added: 735 - 764 35,456 16,686 1,473 53,615
+Added: 765 - 794 57,141 31,035 1,622 89,798
+Added: Greater than 794 87,959 70,135 6,263 164,357
+Added: $ 209,846 133,788 10,248 353,882
+Added: Loan balance as of December 31, 2021
+Added: 2021 2020 Total
+Added: FICO at origination:
+Added: Less than 705 $ 6,481 100 6,581
+Added: 705 - 734 11,697 276 11,973
+Added: 735 - 764 18,611 1,072 19,683
+Added: 765 - 794 36,274 1,467 37,741
+Added: Greater than 794 86,141 7,771 93,912
+Added: $ 159,204 10,686 169,890
+Added: Nonaccrual Status
+Added: The Company does not place federally insured loans on nonaccrual status due to the government guaranty.
+Added: 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, 2022, 2021, and 2020 was not material.
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: Nonaccrual Status
−Removed: The Company does not place federally insured loans on nonaccrual status due to the government guaranty.
−Removed: 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, 2020, and 2019 was not material.
Amortized Cost Basis by Origination Year
−Removed: The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of December 31, 2021 based on year of origination.
+Added: 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 December 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.
15 unchanged sentences
Total private education loans and accrued interest receivable, net of allowance for loan losses $ 239,080
−Removed: Consumer loans - Non-Nelnet Bank:
+Added: Consumer and other loans - Non-Nelnet Bank:
Loans in deferment $ 46 52 — 11 — — 109
5 unchanged sentences
Total loans in repayment 334,296 11,752 779 2,061 1,915 3 350,806
−Removed: Total consumer loans $ 38,298 1,094 5,577 6,245 87 — 51,301
+Added: Total consumer and other loans $ 334,342 11,804 779 2,072 1,915 3 350,915
Accrued interest receivable 3,658
−Removed: Loan premium 913
+Added: Loan discount, net of unamortized premiums ( 588 )
Allowance for loan losses ( 30,263 )
−Removed: Total consumer loans and accrued interest
−Removed: receivable, net of allowance for loan losses $ 46,129
−Removed: Private education loans - Nelnet Bank:
+Added: Total consumer and other loans and accrued interest receivable, net of allowance for loan losses $ 323,722
+Added: Private education loans - Nelnet Bank (a):
Loans in-school/grace/deferment $ 9,315 1,210 1,055 — — — 11,580
8 unchanged sentences
Accrued interest receivable 1,152
−Removed: Deferred origination costs 2,560
+Added: Deferred origination costs, net of unaccreted discount 5,360
Allowance for loan losses ( 2,390 )
Total private education loans and accrued interest receivable, net of allowance for loan losses $ 358,004
+Added: (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.
AND SUBSIDIARIES
17 unchanged sentences
Private education loan warehouse facility 64,356 4.72 % 12/31/23
+Added: Consumer loan warehouse facility 89,000 4.73 % 11/14/25
Variable-rate bonds and notes issued in private education loan asset-backed securitizations 19,865 5.90 % / 6.14 %
12/26/40 / 6/25/49
−Removed: 12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization 23,032 3.60 % / 5.35 %
12/26/40 / 12/28/43
−Removed: 12/26/40 / 12/28/43
Unsecured line of credit — — 9/22/26
2 unchanged sentences
1/04/23 - 11/27/24
−Removed: Secured line of credit 5,000 1.91 % 5/30/22
+Added: Other - due to related party 6,187 3.55 % - 6.05 %
+Added: 3/01/24 - 11/15/30
Discount on bonds and notes payable and debt issuance costs ( 148,088 )
11 unchanged sentences
772,935 1.42 % - 3.45 %
−Removed: FFELP loan warehouse facilities 252,165 0.27 % / 0.31 %
10/25/67 - 8/27/68
+Added: FFELP loan warehouse facility 5,048 0.21 %
Private education loan warehouse facility 107,011 0.24 % 2/13/23
−Removed: Consumer loan warehouse facility 25,809 0.28 % 4/23/22
Variable-rate bonds and notes issued in private education loan asset-backed securitizations 31,818 1.65 % / 1.85 %
4 unchanged sentences
Participation agreement 253,969 0.78 % 5/4/22
+Added: Repurchase agreements 483,848 0.66 % - 1.46 %
+Added: 5/27/22 - 12/20/23
Secured line of credit 5,000 1.91 % 5/30/22
8 unchanged sentences
FFELP loan warehouse facility
−Removed: As of December 31, 2021, 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.
+Added: As of December 31, 2022, the Company’s FFELP warehouse facility had an aggregate maximum financing amount available of $ 1.2 billion, liquidity provisions through May 22, 2023, and a final maturity of May 22, 2024.
As of December 31, 2022, $ 979.0 million was outstanding under this facility, $ 221.0 million was available for future funding, and the Company had $ 67.0 million advanced as equity support.
1 unchanged sentence
Private education loan warehouse facility
−Removed: During 2020, the Company obtained a private education loan warehouse facility.
−Removed: As of December 31, 2021, the facility has an aggregate maximum financing amount available of $ 175.0 million, an advance rate of 80 to 90 percent, liquidity provisions through February 13, 2022, and a final maturity date of February 13, 2023.
−Removed: As of December 31, 2021, $ 107.0 million was outstanding under this warehouse facility, $ 68.0 million was available for future funding, and the Company had $ 11.8 million advanced as equity support.
+Added: As of December 31, 2022, the Company’s private education warehouse facility had an aggregate maximum financing amount available of $ 64.4 million, an advance rate of 75 %, liquidity provisions through June 30, 2023, and a final maturity of December 31, 2023.
+Added: As of December 31, 2022, $ 64.4 million was outstanding under this facility with no amount available for future funding, and the Company had $ 22.4 million advanced as equity support.
Consumer loan warehouse facility
−Removed: The Company had a $ 100.0 million consumer loan warehouse facility.
−Removed: On March 31, 2021, the Company terminated this facility.
+Added: On November 14, 2022, the Company closed on a consumer loan warehouse facility that had an aggregate maximum financing amount available of $ 250.0 million, an advance rate of 70 %, liquidity provisions through November 14, 2024, and a final maturity date of November 14, 2025.
+Added: As of December 31, 2022, $ 89.0 million was outstanding under this facility, $ 161.0 million was available for future funding, and the Company had $ 36.6 million advanced as equity support.
Asset-backed securitizations
3 unchanged sentences
The bonds and notes payable are primarily secured by the loans receivable, related accrued interest, and by the amounts on deposit in the accounts established under the respective financing agreements.
−Removed: The following tables summarize the asset-backed securitization transactions completed in 2021 and 2020.
−Removed: Securitizations completed during the year ended December 31, 2021
+Added: The following table summarizes the asset-backed securitization transactions completed in 2021.
+Added: There were no asset-backed securitization transactions completed during the year ended December 31, 2022.
2021-1 2021-2 Total
14 unchanged sentences
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: Securitizations completed during the year ended December 31, 2020
−Removed: 2020-1 2020-2 2020-3 2020-4 (a) 2020-5 (a) Total
−Removed: Date securities issued 2/20/20 3/11/20 3/19/20 8/27/20 10/1/20
−Removed: Total original principal amount $ 435,600 272,100 352,600 191,300 295,000 1,546,600
−Removed: Class A senior notes:
−Removed: Total principal amount $ 424,600 264,300 343,600 191,300 295,000 1,518,800
−Removed: Bond discount — ( 44 ) ( 1,503 ) ( 19 ) — ( 1,566 )
−Removed: Issue price $ 424,600 264,256 342,097 191,281 295,000 1,517,234
−Removed: Cost of funds 1-month LIBOR plus 0.74 %
−Removed: 1.83 % 1-month LIBOR plus 0.92 %
−Removed: 1.42 % 1-month LIBOR plus 0.88 %
−Removed: Final maturity date 3/26/68 4/25/68 3/26/68 8/27/68 10/25/68
−Removed: Class B subordinated notes:
−Removed: Total principal amount $ 11,000 7,800 9,000 27,800
−Removed: Bond discount — ( 574 ) ( 284 ) ( 858 )
−Removed: Issue price $ 11,000 7,226 8,716 26,942
−Removed: Cost of funds 1-month LIBOR plus 1.75 %
−Removed: 2.50 % 1-month LIBOR plus 1.90 %
−Removed: Final maturity date 3/26/68 4/25/68 3/26/68
−Removed: (a) Total original principal amount excludes the Class B subordinated tranche for the 2020-4 and 2020-5 transactions, totaling $ 5.0 million and $ 7.5 million, respectively, that was retained by the Company at issuance.
−Removed: As of December 31, 2021, the Company had a total of $ 381.2 million (par value) of its own asset-backed securities that were retained upon initial issuance or repurchased in the secondary market.
−Removed: For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements.
−Removed: 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 in the trust estate.
−Removed: 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.
−Removed: Upon sale, these notes would be shown as "bonds and notes payable" in the Company's consolidated balance sheet.
Unsecured Line of Credit
3 unchanged sentences
Interest on amounts borrowed under the line of credit is payable, at the Company's election, at an alternate base rate or a Eurodollar rate, plus a variable rate (LIBOR), in each case as defined in the credit agreement.
−Removed: The initial margin applicable to Eurodollar borrowings is 150 basis points and may vary from 100 to 200 basis points depending on the Company's credit rating.
+Added: The current margin applicable to Eurodollar borrowings is 150 basis points and may vary from 100 to 175 basis points depending on the Company's credit rating.
The line of credit agreement contains certain financial covenants that, if not met, lead to an event of default under the agreement.
1 unchanged sentence
• A minimum consolidated net worth
−Removed: • A minimum recourse indebtedness to adjusted EBITDA (over the last four rolling quarters)
−Removed: • A limitation on recourse indebtedness
−Removed: • A limitation on the amount of unsecuritized private education and consumer loans in the Company’s portfolio
+Added: • A limitation on recourse indebtedness to adjusted EBITDA (over the last four rolling quarters)
+Added: • A limitation on recourse and non-recourse indebtedness
+Added: • A limitation on the amount of private education, consumer, and other (non-FFELP) loans in the Company’s portfolio
• A limitation on permitted investments, including business acquisitions that are not in one of the Company's existing lines of business
3 unchanged sentences
However, changes in the Company's ratings have modest implications on the pricing level at which the Company obtains funds.
−Removed: A default on the Company's other debt facilities would result in an event of default on the Company's unsecured line of credit that would result in the outstanding balance on the line of credit becoming immediately due and payable.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: A default on the Company's other debt facilities would result in an event of default on the Company's unsecured line of credit that would result in the outstanding balance on the line of credit, if any, becoming immediately due and payable.
Participation Agreement
−Removed: 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.
+Added: The Company has an agreement with 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 (bond investments).
As of December 31, 2022, $ 395.4 million of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement.
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.
−Removed: As such, the FFELP loan asset-backed securities under this agreement have been accounted for by the Company as a secured borrowing.
+Added: As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance sheets as "investments and notes receivable" and the participation interests outstanding have been accounted for by the Company as a secured borrowing.
See note 7 for additional information about the FFELP loan asset-backed securities investments serving as collateral under this participation agreement.
Repurchase Agreements
−Removed: 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.
−Removed: The first agreement has maturity dates of November 20, 2023 and December 20, 2023, or earlier if either party provides 180 days’ prior written notice, and the second agreement has a maturity date of May 27, 2022.
+Added: 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 (bond investments).
+Added: 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 (as of December 31, 2022) from January 4, 2023 through January 25, 2023.
+Added: Subsequent to December 31, 2022, the maturities on this agreement were extended, and as of February 28, 2023, the maturity dates vary from March 8, 2023 through November 27, 2024.
The Company incurs interest on amounts outstanding under these agreements based on three-month LIBOR plus an applicable spread.
−Removed: Under the first agreement, the Company is subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities on any scheduled reset date, and under the second agreement, the Company could be subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities and the counter-party provides notice requiring such payment.
−Removed: Included in “bonds and notes payable” as of December 31, 2021 was $ 208.1 million subject to the first agreement and $ 275.8 million subject to the second agreement.
−Removed: See note 7 for additional information about the private education loan asset-backed securities investments serving as collateral for these repurchase agreements.
+Added: Under the first agreement, the Company is subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities on any scheduled reset date, and under the second agreement, the Company
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: could be subject to margin deficit payment requirements if the fair value of the securities subject to the agreement is less than the original purchase price of such securities and the counter-party provides notice requiring such payment.
+Added: Included in “bonds and notes payable” in the consolidated balance sheets as of December 31, 2022 was $ 299.8 million subject to the first agreement and $ 267.5 million subject to the second agreement.
+Added: See note 7 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.
+Added: Nelnet Bank has Federal Funds lines of credit with correspondent banks totaling $ 30.0 million at a stated interest rate at the time of borrowing.
+Added: As of December 31, 2022, no amounts were drawn on these lines of credit.
Debt Covenants
Certain bond resolutions and related credit agreements contain, among other requirements, covenants relating to restrictions on additional indebtedness, limits as to direct and indirect administrative expenses, and maintaining certain financial ratios.
−Removed: Management believes the Company is in compliance with all covenants of the bond indentures and related credit agreements as of December 31, 2021.
+Added: The Company is in compliance with all covenants of the bond indentures and related credit agreements as of December 31, 2022.
Maturity Schedule
1 unchanged sentence
2023 $ 885,772
+Added: 2024 1,120,517
2028 and thereafter 12,689,709
1 unchanged sentence
Subject to certain provisions, all bonds and notes are subject to redemption prior to maturity at the option of certain lending subsidiaries.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Accrued Interest Liability
−Removed: 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.
+Added: During 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.
−Removed: The reduction of this liability is reflected in (a reduction of) "interest on bonds and notes payable and bank deposits" in the consolidated statements of income.
+Added: The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income.
Debt Repurchases
The following table summarizes the Company's repurchases of its own debt.
−Removed: Gains/losses recorded by the Company from the repurchase of debt are included in “other” in "other income/expense" on the Company’s consolidated statements of income.
+Added: Gains/losses recorded by the Company from the repurchase of debt are included in “other, net” in "other income (expense)" on the Company’s consolidated statements of income.
Year ended December 31,
2 unchanged sentences
Par value 69,133 406,875 27,605
−Removed: Remaining debt discount and unamortized cost of issuance ( 6,163 ) ( 38 ) —
−Removed: (Loss) gain $ ( 6,775 ) 1,924 136
−Removed: During 2019, the Company extinguished $ 1.05 billion of notes payable included in certain FFELP asset-backed securitizations prior to the notes’ contractual maturities.
−Removed: To extinguish the notes, the Company paid premiums of $ 14.0 million and wrote off $ 2.7 million of debt issuance costs.
−Removed: In total, the Company recognized $ 16.7 million (pre-tax) in expenses to extinguish these notes, which is included in “other expenses” on the consolidated statements of income.
+Added: Remaining unamortized cost of issuance ( 821 ) ( 6,163 ) ( 38 )
+Added: Gain (loss) $ 1,231 ( 6,775 ) 1,924
+Added: The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market.
+Added: For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements.
+Added: However, these securities remain legally outstanding at the trust level and the Company could sell these
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: notes to third parties or redeem the notes at par as cash is generated by the trust estate.
+Added: 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.
+Added: As of December 31, 2022, the Company holds $ 417.2 million (par value) of its own FFELP asset-backed securities.
+Added: As of December 31, 2022, $ 331.6 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
11 unchanged sentences
The Company has entered into basis swaps 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”).
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
The following table summarizes the Company’s 1:3 Basis Swaps outstanding:
7 unchanged sentences
$ 3,900,000 5,900,000
−Removed: $ 5,900,000 6,150,000
−Removed: The weighted average rate paid by the Company on the 1:3 Basis Swaps as of December 31, 2021 and 2020, was one-month LIBOR plus 9.1 basis points.
+Added: The weighted average rate paid by the Company on the 1:3 Basis Swaps as of December 31, 2022 and 2021, was one-month LIBOR plus 9.7 basis points and 9.1 basis points, respectively.
Interest Rate Swaps – Floor Income Hedges
2 unchanged sentences
The Company generally finances its student loan portfolio with variable rate debt.
−Removed: In low and/or certain declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, these student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates.
+Added: In low and/or certain declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, these student loans earn at a fixed rate while the
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: interest on the variable rate debt typically continues to reflect the low and/or declining interest rates.
In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.
5 unchanged sentences
As of December 31, 2022 and 2021, the Company had $ 0.9 billion and $ 7.2 billion, respectively, of FFELP student loan assets that were earning fixed rate floor income.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.
7 unchanged sentences
2031 100,000 1.53 100,000 1.53
−Removed: 2031 100,000 1.53 — —
+Added: 2032 (b) 200,000 2.92 — —
$ 2,800,000 0.70 % $ 5,000,000 0.55 %
−Removed: (a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.
+Added: (a) For the interest rate derivatives maturing in 2032, the Company receives payments based on Secured Overnight Financing Rate (SOFR) that resets quarterly.
+Added: For all other interest rate derivatives, the Company receives payments based on three-month LIBOR that resets quarterly.
+Added: (b) These derivatives have forward effective start dates in November 2024.
+Added: 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.
+Added: 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.
+Added: On August 26, 2022, the Company terminated $ 500 million in notional amount of derivatives ($ 250 million that had maturity dates in each of 2023 and 2024) for total proceeds of $ 23.8 million.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Consolidated Financial Statement Impact Related to Derivatives - Statements of Income
4 unchanged sentences
Interest rate swaps - floor income hedges 33,149 ( 19,729 ) ( 6,699 )
−Removed: Total settlements - (expense) income ( 21,367 ) 3,679 45,406
+Added: Total settlements - income (expense) 32,943 ( 21,367 ) 3,679
Change in fair value:
1 unchanged sentence
Interest rate swaps - floor income hedges 229,429 87,786 ( 20,682 )
−Removed: Other — — ( 683 )
Total change in fair value - income (expense) 231,691 92,813 ( 28,144 )
6 unchanged sentences
With the Company's current derivative portfolio, the Company does not currently anticipate any movement in interest rates having a material impact on its liquidity or capital resources, nor expects future movements in interest rates to have a material impact on its ability to meet variation margin payments to its third-party clearinghouse.
−Removed: Due to the existing low interest rate environment, the Company's exposure to downward movements in interest rates on its interest rate swaps is limited.
−Removed: In addition, the historical high correlation between one-month and three-month LIBOR limits the Company's exposure to interest rate movements on the 1:3 Basis Swaps.
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: Private Education Loan Investment
−Removed: In December 2020, Wells Fargo announced the sale of its approximately $ 10.0 billion portfolio of private education loans representing approximately 445,000 borrowers.
−Removed: The Company entered into a joint venture with other investors to acquire the loans.
−Removed: Under the terms of the joint venture agreements, the Company is the servicer of the portfolio, owns an approximate 8 percent interest in residual interests in securitizations of the loans, and serves as the sponsor and administrator for the loan securitizations completed by the joint venture.
−Removed: The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility.
−Removed: The Company’s initial contribution to the limited partnership was $ 71.1 million.
−Removed: In conjunction with the establishment of the limited partnership, the parties provided additional funding commitments to the partnership, in the event additional funding became necessary after the initial purchase of loans.
−Removed: In accordance with GAAP, the Company’s carrying value of its investment in the limited partnership is accounted for under the equity method of accounting, is reduced by cash distributions and the fair value of its portion of loans transferred into securitizations, and can be less than zero or negative because of the potential future contributions pursuant to the funding commitment.
−Removed: The carrying value of the investment in the limited partnership is also impacted by the amount of the Company’s proportionate share of the net earnings or losses of the partnership.
−Removed: During 2021, the joint venture completed asset-backed securitization transactions to permanently finance a total of $ 8.7 billion of the private education loans purchased by the joint venture.
−Removed: Cash distributions, the fair value of the Company’s portion of loans securitized as a result of these securitizations, and the Company’s proportionate share of losses of this partnership were $ 52.1 million, $ 51.9 million, and $ 5.0 million, respectively, and reduced the Company’s carrying value of its limited partnership investment to a credit (negative) balance of $ 37.9 million.
−Removed: During the fourth quarter of 2021, the Company’s financial commitment to the limited partnership was terminated by the partners of the joint venture, and the Company recognized income of $ 37.9 million (pre-tax) associated with the termination, which is included in “other” in “other income/expense” on the consolidated statements of income.
−Removed: The Company’s ownership in the residual interest of securitization transactions used to permanently finance the loans are reflected in the table below as “beneficial interest in private education loan securitizations.”
−Removed: As sponsor of the loan securitizations, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement.
−Removed: The bonds purchased to satisfy the risk retention requirement are included in “private education loan asset-backed securities – available for sale” in the table below and as of December 31, 2021, the fair value of these bonds was $ 412.6 million.
−Removed: The Company must retain these investment securities until the latest of (i) two years from the closing date of the securitization, (ii) the date the aggregate outstanding principal balance of the loans in the securitization is 33 % or less of the initial loan balance, and (iii) the date the aggregate outstanding principal balance of the bonds is 33 % or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party.
−Removed: The Company entered into repurchase agreements with third-parties, the proceeds of which were used to purchase a portion of the asset-backed investments, and such investments serve as collateral on the repurchase obligations.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: A summary of the Company's investments follows:
+Added: Investments and Notes Receivable
+Added: A summary of the Company's investments and notes receivable follows:
As of December 31, 2022 As of December 31, 2021
−Removed: Amortized cost Gross unrealized gains Gross unrealized losses Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value
+Added: 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):
−Removed: FFELP loan asset-backed securities- available-for-sale (a) $ 480,691 14,710 ( 719 ) 494,682 338,475 8,040 ( 13 ) 346,502
−Removed: Private education loan asset-backed securities - available-for-sale (b) 414,286 507 ( 2,241 ) 412,552 — — — —
−Removed: Other debt securities - available-for-sale 22,435 — — 22,435 2,103 2 — 2,105
+Added: FFELP loan asset-backed securities- available-for-sale (b) $ 813,716 4,453 ( 19,958 ) 798,211 480,691 14,710 ( 719 ) 494,682
+Added: Private education loan asset-backed securities - available-for-sale (c) 337,844 — ( 29,560 ) 308,284 414,286 507 ( 2,241 ) 412,552
+Added: Other debt securities - available-for-sale (d) 290,070 169 ( 7,697 ) 282,542 22,435 — — 22,435
+Added: Total available-for-sale debt securities $ 1,441,630 4,622 ( 57,215 ) 1,389,037 917,412 15,217 ( 2,960 ) 929,669
Equity securities 39,082 71,986
Total investments (at fair value) 1,428,119 1,001,655
−Removed: Other Investments (not measured at fair value):
−Removed: Other debt securities - held-to-maturity (c) 8,200 —
+Added: Other Investments and Notes Receivable (not measured at fair value):
+Added: Other debt securities - held-to-maturity (e) 18,774 8,200
Venture capital and funds:
−Removed: Measurement alternative (d)(e) 157,609 144,795
+Added: Measurement alternative (f)(g) 160,052 157,609
Equity method 89,332 67,840
1 unchanged sentence
Equity method 80,364 47,226
−Removed: Notes receivable — 847
−Removed: Total real estate 47,226 51,138
Investment in ALLO:
−Removed: Voting interest/equity method (f) 87,247 129,396
−Removed: Preferred membership interest and accrued and unpaid preferred return (g) 137,342 228,916
+Added: Voting interest/equity method (h) 67,538 87,247
+Added: Preferred membership interest and accrued and unpaid preferred return (i) 145,926 137,342
Total investment in ALLO 213,464 224,589
−Removed: Solar (h) ( 42,457 ) ( 30,373 )
−Removed: Beneficial interest in private education loan securitizations (i)
−Removed: Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $ 4,449 as of December 31, 2020 (i)
−Removed: 28,366 27,954
−Removed: Beneficial interest in federally insured student loan securitizations (i) 25,768 30,377
+Added: Beneficial interest in loan securitizations (j):
+Added: Private education loans 75,261 66,008
+Added: Consumer loans and other 39,249 28,366
+Added: Federally insured student loans 24,228 25,768
+Added: Total beneficial interest in loan securitizations 138,738 120,142
+Added: Solar (k) ( 55,448 ) ( 42,457 )
+Added: Notes receivable 31,106 —
Tax liens, affordable housing, and other 7,416 4,115
Total investments (not measured at fair value) 683,798 587,264
−Removed: Total investments $ 1,588,919 $ 992,940
−Removed: (a) As of December 31, 2021, $ 254.0 million (par value) of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 5 under "Participation Agreement."
−Removed: As of December 31, 2021, the stated maturities of a majority of the Company’s FFELP student loan asset-backed securities classified as available-for-sale were greater than 10 years;
−Removed: however, such securities with a fair value of $ 77.9 million as of December 31, 2021 are scheduled to mature within the next 10 years, including $ 25.2 million, $ 32.1 million, and $ 20.6 million due within the next one year, 1-5 years, and 6-10 years, respectively.
−Removed: (b) As of December 31, 2021, a total of $ 400.0 million (par value) of private education loan asset-backed securities were subject to repurchase agreements with third-parties, as discussed in note 5 under “Repurchase Agreements.”
−Removed: As of December 31, 2021, the stated maturities for all the Company’s private education loan asset-backed securities classified as available for sale were greater than 10 years.
−Removed: (c) As of December 31, 2021, securities classified as held-to-maturity of $ 3.5 million and $ 4.7 million were scheduled to mature within one year and 1-5 years, respectively.
−Removed: As of December 31, 2021, the fair value of these securities approximated their carrying value.
+Added: Total investments and notes receivable $ 2,111,917 $ 1,588,919
+Added: (a) As of December 31, 2022, the aggregate fair value of available-for-sale debt securities with unrealized losses was $ 1.2 billion.
+Added: The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.
+Added: (b) A portion of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 5 under "Participation Agreement." As of December 31, 2022, the par value and fair value of these securities was $ 395.4 million and $ 370.7 million, respectively.
+Added: The Company’s FFELP loan asset-backed securities classified as available-for-sale with a fair value of $ 105.5 million, $ 9.3 million, $ 77.0 million, and $ 606.4 million as of December 31, 2022 were scheduled to mature within the next one year, 1-5 years, 6-10 years, and greater than 10 years, respectively.
+Added: (c) In December 2020, Wells Fargo announced the sale of its approximately $ 10.0 billion portfolio of private education loans.
+Added: The Company entered into a joint venture with other investors to acquire the loans.
+Added: Under the terms of the joint venture agreements, the Company serves as the sponsor and administrator for the loan securitizations completed by the joint venture to permanently finance the loans acquired.
+Added: As sponsor of the loan securitizations, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement.
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: (d) The Company has an investment in Agile Sports Technologies, Inc.
+Added: The bonds purchased to satisfy the risk retention requirement are included in “private education loan asset-backed securities – available for sale” in the above table and as of December 31, 2022, the par value and fair value of these bonds was $ 336.5 million and $ 306.5 million, respectively.
+Added: These securities were subject to repurchase agreements with third parties, as discussed in note 5 under “Repurchase Agreements.” The Company must retain these investment securities until the latest of (i) two years from the closing date of the securitization, (ii) the date the aggregate outstanding principal balance of the loans in the securitization is 33 % or less of the initial loan balance, and (iii) the date the aggregate outstanding principal balance of the bonds is 33 % or less of the aggregate initial outstanding principal balance of the bonds, at which time the Company can sell its investment securities (bonds) to a third party.
+Added: As of December 31, 2022, the stated maturities for all the Company’s private education loan asset-backed securities classified as available-for-sale were greater than 10 years.
+Added: (d) Other debt securities include mortgage-backed and consumer-backed securities and collateralized loan obligations.
+Added: These debt securities classified as available-for-sale with a fair value of $ 23.4 million, $ 186.0 million, and $ 73.1 million as of December 31, 2022 were scheduled to mature in 1-5 years, 6-10 years, and greater than 10 years, respectively.
+Added: (e) As of December 31, 2022, securities classified as held-to-maturity of $ 1.5 million, $ 3.5 million and $ 13.8 million were scheduled to mature within one year, 1-5 years, and greater than 10 years, respectively.
+Added: As of December 31, 2022, the fair value of these securities approximated their carrying value.
+Added: (f) The Company has an investment in Agile Sports Technologies, Inc.
(doing business as “Hudl”) that is included in “venture capital and funds” in the above table.
2 unchanged sentences
The Company accounts for its investment in Hudl using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions.
−Removed: As a result of Hudl’s equity raise, the Company recognized a $ 51.0 million (pre-tax) gain during the second quarter of 2020 to adjust its carrying value to reflect the May 2020 transaction value.
−Removed: This gain is included in “other” in “other income/expense” on the consolidated statements of income.
+Added: As a result of Hudl’s equity raise, the Company recognized a $ 51.0 million gain during the second quarter of 2020 to adjust its carrying value to reflect the May 2020 transaction value.
+Added: This gain is included in “other, net” in “other income (expense)” on the consolidated statements of income.
In May 2021, the Company made an additional $ 5 million investment in Hudl.
3 unchanged sentences
Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl.
−Removed: (e) In October 2021, CompanyCam Inc., an entity in which the Company has an equity investment, completed an additional equity raise.
+Added: (g) In October 2021, CompanyCam Inc., an entity in which the Company has an equity investment, completed an additional equity raise.
The Company accounts for its investment in this entity using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions.
−Removed: As a result of this entity’s equity raise, the Company recognized a $ 10.3 million (pre-tax) gain during the fourth quarter of 2021 to adjust its carrying value to reflect the October 2021 transaction value.
+Added: As a result of this entity’s equity raise, the Company recognized a $ 10.3 million gain during the fourth quarter of 2021 to adjust its carrying value to reflect the October 2021 transaction value.
As of December 31, 2022, the carrying amount of this investment is $ 11.5 million.
−Removed: (f) The Company accounts for its voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO") under the HLBV method of accounting.
−Removed: During the years ended December 31, 2021 and 2020 , the Company recognized pre-tax losses of $ 42.1 million and $ 3.6 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment.
+Added: (h) The Company accounts for its voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO") under the HLBV method of accounting.
+Added: During the years ended December 31, 2022, 2021, and 2020, the Company recognized losses of $ 68.0 million, $ 42.1 million, and $ 3.6 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment.
+Added: Losses from the Company's investment in ALLO are included in "other, net" in "other income (expense)" on the consolidated statements of income.
+Added: During 2022, the Company contributed $ 48.3 million of additional equity to ALLO.
+Added: As a result of this equity contribution, the Company's voting membership interests percentage in ALLO did not materially change.
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.
1 unchanged sentence
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.
−Removed: Income and losses from the Company's investment in ALLO are included in "other" in "other income/expense" on the consolidated statements of income.
−Removed: (g) On January 19, 2021, ALLO obtained certain private debt financing facilities from unrelated third-party lenders.
−Removed: With proceeds from this transaction, ALLO redeemed a portion of its non-voting preferred membership interests held by the Company in exchange for an aggregate redemption price payment to the Company of $ 100.0 million.
+Added: (i) The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 %.
+Added: During the years ended December 31, 2022, 2021, and 2020, the Company recognized income on its ALLO preferred membership interests of $ 8.6 million, $ 8.4 million, and $ 0.4 million, respectively, which are included in "other, net" in "other income (expense)" on the consolidated statements of income.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Under October 2020 recapitalization agreements for ALLO, the parties have agreed to use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause ALLO to redeem, on or before April 2024, the remaining preferred membership interests of ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests.
−Removed: As of December 31, 2021, the outstanding preferred membership interests of ALLO held by the Company was $ 137.3 million, which includes accrued and unpaid preferred return of $ 7.7 million that was capitalized at December 31, 2021.
−Removed: The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 percent.
−Removed: During the years ended December 31, 2021 and 2020 , the Company recognized pre-tax income on its ALLO preferred membership interests of $ 8.4 million and $ 0.4 million, respectively, that is included in "other" in "other income/expense" on the consolidated statements of income.
−Removed: (h) The Company makes investments in entities that promote renewable energy sources (solar).
+Added: (j) The Company has partial ownership in certain federally insured student, private education, and consumer and other loan securitizations.
+Added: As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2022, the Company's ownership correlates to approximately $ 390 million, $ 620 million, and $ 310 million of federally insured student, private education, and consumer and other loans, respectively, included in these securitizations.
+Added: (k) 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 December 31, 2022, the Company has funded a total of $ 278.4 million in solar investments, which includes $ 102.8 million funded by syndication partners.
−Removed: The carrying value of the Company’s solar investments are reduced by tax credits earned when the solar project is placed in service.
−Removed: The solar investment balance at December 31, 2021 represents the sum of total tax credits earned on solar projects placed in service through December 31, 2021 and the calculated HLBV net losses being larger than total payments made by the Company on such projects.
−Removed: The Company is committed to fund an additional $ 22.3 million on these projects, of which $ 17.9 million will be provided by syndication partners.
+Added: The carrying value of the Company’s investment in a solar project is reduced by tax credits earned when the solar project is placed-in-service.
+Added: The solar investment balance at December 31, 2022 represents the sum of total tax credits earned on solar projects placed-in-service through December 31, 2022 and the calculated HLBV net losses being larger than the total investment contributions made by the Company on such projects.
+Added: As of December 31, 2022, the Company is committed to fund an additional $ 30.3 million on these projects, of which $ 22.5 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.
−Removed: During the years ended December 31, 2021 and 2020, the Company recognized pre-tax losses of $ 10.1
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: million and $ 37.4 million, respectively, on its solar investments.
−Removed: These losses are included in “other” in "other income/expense" on the consolidated statements of income.
−Removed: Losses from solar investments in 2021 and 2020 include losses of $ 7.1 million and $ 3.8 million, respectively, attributable to third-party minority interest investors that are included in “net loss attributable to noncontrolling interests” in the consolidated statements of income.
−Removed: (i) The Company has partial ownership in certain private education, consumer, and federally insured student loan securitizations.
−Removed: As of the latest remittance reports filed by the various trusts prior to or as of December 31, 2021, the Company's ownership correlates to approximately $ 688 million, $ 195 million, and $ 445 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.
−Removed: Impairment Expense and Provision for Beneficial Interests
−Removed: During the first quarter of 2020, the Company recorded a $ 26.3 million provision charge related to the Company's beneficial interest in consumer loan securitizations.
−Removed: As of March 31, 2020, the Company's estimate of future cash flows from the beneficial interest in consumer loan securitizations was lower than previously anticipated due to the expectation of increased consumer loan defaults within such securitizations due to the distressed economic conditions resulting from the COVID-19 pandemic and recorded an allowance for credit losses of $ 26.3 million.
−Removed: Additionally, during the first quarter of 2020, the Company recorded a $ 7.8 million impairment charge related to several of its venture capital investments.
−Removed: The Company identified several venture capital investments, a majority of which were accounted for under the measurement alternative, that were also negatively impacted by the distressed economic conditions resulting from the COVID-19 pandemic, and estimated that the fair value of such investments was significantly reduced from their previous carrying value.
−Removed: During the fourth quarter of 2020 and first quarter of 2021, due to improved economic conditions, the Company reduced the allowance for credit losses related to the consumer loan beneficial interests by $ 9.7 million and $ 2.4 million, respectively.
−Removed: During 2021, the Company recorded a total impairment charge of $ 4.6 million related to several of its venture capital investments accounted for under the measurement alternative method.
−Removed: The impairment expense and recovery activity described above is included in “impairment expense and provision for beneficial interests, net” on the consolidated statements of income.
−Removed: Business Combination
+Added: During the years ended December 31, 2022, 2021, and 2020, the Company recognized losses on its solar investments of $ 9.5 million, $ 10.1 million, and $ 37.4 million, respectively.
+Added: These losses, which include losses attributable to third-party noncontrolling interest investors (syndication partners), are included in “other, net” in "other income (expense)" on the consolidated statements of income.
+Added: Solar losses attributed to noncontrolling interest investors was $ 10.9 million, $ 7.4 million, and $ 3.8 million, for the years ended December 31, 2022, 2021, and 2020, respectively, and is reflected in “net loss attributable to noncontrolling interests” in the consolidated statements of income.
+Added: Business Combinations
HigherSchool Publishing Company ("HigherSchool")
−Removed: On December 31, 2020, the Company acquired 100 percent of the outstanding stock of HigherSchool for total cash consideration of $ 24.7 million.
+Added: On December 31, 2020, the Company acquired 100 % of the outstanding stock of HigherSchool for total cash consideration of $ 24.7 million.
HigherSchool provides supplemental instructional services and educational professional development for K-12 schools.
The acquisition of HigherSchool has expanded the Company's professional development and educational instruction services.
−Removed: The operating results of HigherSchool are included in the Education Technology, Services, and Payment Processing operating segment from the date of acquisition.
+Added: The operating results of HigherSchool are included in the Education Technology, Services, and Payment Processing reportable operating segment from the date of acquisition.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
12 unchanged sentences
(Dollars in thousands, except share amounts, unless otherwise noted)
+Added: NGWeb Solutions, LLC
+Added: On April 30, 2022, the Company acquired 30 % of the ownership interests of NGWeb Solutions, LLC ("NextGen") for total cash consideration of $ 9.2 million.
+Added: 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.
+Added: Prior to the acquisition, the Company owned 50 % of the ownership interests of NextGen and accounted for this investment under the equity method.
+Added: As a result of the acquisition, the previously held 50 % ownership interests was remeasured to its fair value as of the April 30, 2022 date of acquisition of the additional 30 % of the ownership interests, resulting in a $ 15.2 million revaluation gain, which is included in "other, net" in "other income (expense)" on the consolidated statements of income.
+Added: For segment reporting, this gain is included in Corporate and Other Activities.
+Added: Subsequent to the acquisition, the Company has consolidated the operating results of NextGen and such results are included in the Education Technology, Services, and Payment Processing reportable operating segment.
+Added: The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
+Added: Cash and cash equivalents $ 1,885
+Added: Accounts receivable 1,315
+Added: Property and equipment 800
+Added: Other assets 201
Intangible assets 15,250
+Added: Excess cost over fair value of net assets acquired (goodwill) 15,937
+Added: Other liabilities ( 4,550 )
+Added: Net assets acquired 30,838
+Added: Minority interest ( 6,291 )
+Added: Remeasurement of previously held investment ( 15,342 )
+Added: Total consideration paid by the Company $ 9,205
+Added: The $ 15.3 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 14 years.
+Added: The intangible assets that made up this amount include customer relationships of $ 12.8 million ( 15 -year useful life), computer software of $ 1.7 million ( 5 -year useful life), and a trade name of $ 0.8 million ( 10 -year useful life).
+Added: The $ 15.9 million of goodwill was assigned to the NextGen reporting unit and is not expected to be deductible for tax purposes.
+Added: The amount allocated to goodwill was primarily attributed to the synergies and economies of scale expected from combining the operations of the Company and NextGen.
+Added: The pro forma impacts of the NextGen acquisition on the Company's historical results prior to the acquisition were not material.
+Added: On July 1, 2022, the Company acquired 80 % of the ownership interests of two subsidiaries of GRNE Solutions, LLC named GRNE-Nelnet, LLC (GRNE) and ENRG-Nelnet, LLC (ENRG) (collectively referred to as "GRNE Solar") for total cash consideration of $ 28.9 million.
+Added: GRNE designs and installs residential, commercial, and utility-scale solar systems in the Midwest.
+Added: ENRG owns certain assets that generate and sell solar energy.
+Added: The acquisition diversifies the Company's position in the renewable energy space to include solar construction.
+Added: For segment reporting, the operating results of GRNE Solar are included in Corporate and Other Activities.
+Added: As part of the acquisition, the Company agreed to pay $ 5.0 million in future capital contributions on behalf of the minority interest members.
+Added: Any amount of the $ 5.0 million not paid as capital contributions to GRNE Solar by June 30, 2025 will be paid by the Company directly to the minority interest members.
+Added: The $ 5.0 million liability is included in “other liabilities” and the Company recognized an additional $ 5.0 million in “goodwill” on the consolidated balance sheet as a result of the future capital contribution commitment.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
+Added: Cash and cash equivalents $ 1,742
+Added: Restricted cash 2,200
+Added: Accounts receivable 3,983
+Added: Property and equipment 8,720
+Added: Other assets 2,296
+Added: Intangible assets 11,683
+Added: Excess cost over fair value of net assets acquired (goodwill) 13,873
+Added: Bonds and notes payable ( 750 )
+Added: Other liabilities ( 7,624 )
+Added: Net assets acquired 36,123
+Added: Minority interest ( 7,225 )
+Added: Total consideration paid by the Company $ 28,898
+Added: The $ 11.7 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 8 years.
+Added: The intangible assets that made up this amount include a trade name of $ 8.1 million ( 10 -year useful life), customer relationships of $ 1.1 million ( 3 -year useful life), and other separably identified intangibles of $ 2.4 million ( 5 -year useful life).
+Added: The $ 18.9 million of goodwill was assigned to the GRNE operating segment and is expected to be deductible for tax purposes.
+Added: The amount allocated to goodwill was attributed to synergies from combining the operations of the Company and GRNE Solar and intangible assets that do not qualify for separate recognition.
+Added: The pro forma impacts of the GRNE Solar acquisition on the Company's historical results prior to the acquisition were not material.
+Added: Intangible Assets
Intangible assets consist of the following:
5 unchanged sentences
112 $ 51,738 47,894
+Added: Trade names (net of accumulated amortization of $ 617 )
Computer software (net of accumulated amortization of $ 6,400 and $ 3,669 , respectively)
52 1,520 4,135
−Removed: Trade names (net of accumulated amortization of $ 3,455 )
+Added: Other (net of accumulated amortization of $ 490 )
Total - amortizable intangible assets, net 109 $ 63,501 52,029
2 unchanged sentences
As of December 31, 2022, the Company estimates it will record amortization expense as follows:
+Added: 2023 $ 10,344
2028 and thereafter 21,323
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
The change in the carrying amount of goodwill by reportable operating segment was as follows:
−Removed: Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset Generation and Management (a) Nelnet Bank Corporate and Other Activities Total
−Removed: Balance as of December 31, 2019 $ 23,639 70,278 21,112 41,883 — — 156,912
−Removed: Goodwill acquired — 6,292 — — — — 6,292
−Removed: Deconsolidation of ALLO — — ( 21,112 ) — — — ( 21,112 )
+Added: Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset Generation and Management (a) Nelnet Bank Corporate and Other Activities Total
Balance as of December 31, 2020 and 2021 $ 23,639 76,570 41,883 — — 142,092
+Added: Goodwill acquired (NextGen) — 15,937 — — — 15,937
+Added: Goodwill acquired (GRNE Solar) — — — — 18,873 18,873
+Added: Balance as of December 31, 2022 $ 23,639 92,507 41,883 — 18,873 176,902
(a) As a result of the Reconciliation Act of 2010, the Company no longer originates new FFELP loans, and net interest income from the Company's existing FFELP loan portfolio will decline over time as the Company's portfolio pays down.
1 unchanged sentence
Management believes the elimination of new FFELP loan originations will not have an adverse impact on the fair value of the Company's other reporting units.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Property and Equipment
9 unchanged sentences
Leasehold improvements 1 - 15 years
+Added: 10,410 10,537
Transportation equipment 5 - 10 years
+Added: Solar facilities 5 - 35 years
Land — 3,181 3,266
4 unchanged sentences
The Company recorded depreciation expense on its property and equipment of $ 59.1 million, $ 50.7 million, and $ 87.9 million during the years ended December 31, 2022, 2021, and 2020, respectively.
−Removed: Impairment charges
−Removed: During the third quarter of 2021, the Company evaluated the use of office space as a large number of employees continue to work from home due to COVID-19.
−Removed: As a result of this evaluation, the Company recorded a non-cash impairment charge of $ 14.2 million during the three months ended September 30, 2021.
−Removed: The impairment charge of $ 13.2 million within its Loan Servicing and Systems operating segment related primarily to building and building improvements.
−Removed: The impairment charge of $ 1.0 million within its Corporate and Other Activities operating segment related to operating lease assets associated with leased office space which the Company had fully ceased to use prior to the lease term end date.
−Removed: These impairment charges are included in "impairment expense and provision for beneficial interest, net" in the consolidated statements of income.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: Impairment Expense and Provision for Beneficial Interests
+Added: The following table presents the non-cash impairment charges by asset and reportable operating segment recognized by the Company during 2022, 2021, and 2020.
+Added: The Company’s non-cash impairment charges are included in “impairment expense and provision for beneficial interest, net” in the consolidated statements of income.
+Added: Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset
+Added: Generation and
+Added: Management Nelnet Bank Corporate and Other Activities Total
+Added: Year ended December 31, 2022
+Added: Investments - venture capital and funds (a) $ — — — — 6,561 6,561
+Added: Property and equipment - internally developed software 3,737 — — 214 — 3,951
+Added: Leases, buildings, and associated improvements (b) 1,774 — — — 998 2,772
+Added: Intangible asset - computer software — 2,239 — — — 2,239
+Added: $ 5,511 2,239 — 214 7,559 15,523
+Added: Year ended December 31, 2021
+Added: Investments - venture capital and funds (a) $ — — — — 4,637 4,637
+Added: Leases, buildings, and associated improvements (b) 13,243 — — — 916 14,159
+Added: Beneficial interest in loan securitizations (c) — — ( 2,436 ) — — ( 2,436 )
+Added: $ 13,243 — ( 2,436 ) — 5,553 16,360
+Added: Year ended December 31, 2020
+Added: Investments - venture capital and funds (a) $ — — — — 8,116 8,116
+Added: Beneficial interest in loan securitizations (c) — — 16,607 — — 16,607
+Added: $ — — 16,607 — 8,116 24,723
+Added: (a) The Company recorded non-cash impairment charges related to several of its venture capital investments accounted for under the measurement alternative method.
+Added: (b) The Company continues to evaluate the use of office space as a large number of employees continue to work from home due to COVID-19.
+Added: As a result, the Company recorded non-cash impairment charges related to operating lease assets and associated leasehold improvements and to building and building improvements.
+Added: (c) During the first quarter of 2020, the Company recorded an allowance for credit losses (and related provision expense) related to the Company’s beneficial interest in consumer loan securitizations as a result of the expectation of increased consumer loan defaults within such securitizations due to the distressed economic conditions resulting from the COVID-19 pandemic.
+Added: During the fourth quarter of 2020 and the first quarter of 2021, due to improved economic conditions, the Company reduced the allowance for credit losses related to the consumer loan beneficial interests.
+Added: As of December 31, 2022 and 2021, there is no allowance for credit losses on the Company’s beneficial interest investments.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: Bank Deposits
+Added: The following table summarizes Nelnet Bank’s interest-bearing deposits, excluding intercompany deposits:
+Added: As of December 31,
+Added: Brokered CDs, net of brokered deposit fees $ 254,817 84,209
+Added: Retail and other savings (529 and HSA) 410,556 243,759
+Added: Retail and other CDs (commercial and institutional) 25,949 16,347
+Added: Total interest-bearing deposits $ 691,322 344,315
+Added: Brokered deposit fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method.
+Added: The Bank recognized brokered deposit fee expense of $ 0.3 million and $ 0.1 million during the years ended December 31, 2022 and 2021, respectively.
+Added: Brokered deposit fee expense was not significant in 2020.
+Added: Fees paid to third-party brokers related to these CDs were $ 0.6 million and $ 0.4 million during the years ended December 31, 2022 and 2021, respectively.
+Added: These fees were not significant in 2020.
+Added: Certificates of deposit remaining maturities as of December 31, 2022 are summarized as follows:
+Added: One year or less $ 51,501
+Added: After one year to two years —
+Added: After two years to three years 3,237
+Added: After three years to four years 150,318
+Added: After four years to five years 75,710
+Added: After five years —
+Added: Total $ 280,766
+Added: The Educational 529 College Savings and Health Savings plan deposits are large interest-bearing omnibus accounts structured to allow FDIC insurance to flow through to underlying individual depositors.
+Added: Except for the pledged deposit from Nelnet, Inc.
+Added: and an earmarked deposit required for intercompany transactions, there were no deposits exceeding the FDIC insurance limits as of December 31, 2022 and 2021.
+Added: Accrued interest on deposits was $ 0.7 million and $ 0.1 million on December 31, 2022 and 2021, respectively, which is included in “accrued interest payable” on the consolidated balance sheets.
Shareholders’ Equity
31 unchanged sentences
These shares are included in the Company's weighted average shares outstanding calculation.
−Removed: The Company is subject to income taxes in the United States, Canada, and Australia.
+Added: The Company is subject to income taxes in the United States, Canada, Australia, Puerto Rico, and Philippines.
Significant judgment is required in evaluating the Company's tax positions and determining the provision for income taxes.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
−Removed: As required by the Income Taxes Topic of the FASB Accounting Standards Codification ("ASC Topic 740"), the Company recognizes in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions.
+Added: As required by the ASC Topic 740, Income Taxes , the Company recognizes in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions.
It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such change.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
As of December 31, 2022, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $ 16.8 million, which is included in “other liabilities” on the consolidated balance sheet.
1 unchanged sentence
The Company currently anticipates uncertain tax positions will decrease by $ 2.3 million prior to December 31, 2023 as a result of a lapse of applicable statutes of limitations, settlements, correspondence with examining authorities, and recognition or measurement considerations with federal and state jurisdictions;
−Removed: however, actual developments in this area could differ from those currently expected.
+Added: however, actual developments in this area could differ from those expected.
Of the anticipated $ 2.3 million decrease, $ 1.8 million, if recognized, would favorably affect the Company's effective tax rate.
4 unchanged sentences
Additions based on tax positions related to the current year 2,521 2,388
+Added: Settlements with taxing authorities ( 2,818 ) —
Reductions for tax positions of prior years ( 2,580 ) ( 1,002 )
1 unchanged sentence
Gross balance - end of year $ 16,835 19,678
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
All the reductions shown in the table above that are due to prior year tax positions and the lapse of statutes of limitations impacted the effective tax rate.
1 unchanged sentence
As of December 31, 2022 and 2021, $ 4.0 million and $ 5.1 million in accrued interest and penalties, respectively, were included in “other liabilities” on the consolidated balance sheets.
−Removed: The impact to the consolidated statements of income related to interest expense and penalties for uncertain tax positions was not significant for the years 2021, 2020, and 2019.
+Added: The Company recognized interest benefit of $ 1.1 million and $ 0.3 million, and expense of $ 0.4 million related to uncertain tax positions for the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: The impact to the consolidated statements of income related to penalties for uncertain tax positions was not significant for the years 2022, 2021, and 2020.
The impact of timing differences and tax attributes are considered when calculating interest and penalty accruals associated with the unrecognized tax benefits.
5 unchanged sentences
state and local income tax examinations by tax authorities prior to 2014.
−Removed: As of December 31, 2021, the Company has tax uncertainties that remain unsettled in the jurisdiction of California (2010 through 2017).
The provision for income taxes consists of the following components:
10 unchanged sentences
Provision for income tax expense $ 113,224 115,822 100,860
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
The differences between the income tax provision computed at the statutory federal corporate tax rate and the financial statement provision for income taxes are shown below:
6 unchanged sentences
Provision for uncertain federal and state tax matters — ( 0.1 ) ( 0.2 )
+Added: Basis difference ( 0.6 ) — —
+Added: Change in valuation allowance ( 0.5 ) — —
Other ( 0.3 ) ( 0.3 ) ( 0.2 )
Effective tax rate 21.8 % 22.8 % 22.3 %
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
The tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following:
8 unchanged sentences
Net operating losses 2,613 2,410
−Removed: Basis in certain derivative contracts — 5,061
−Removed: Securitizations — 694
+Added: Debt and equity investments 1,430 —
Total gross deferred tax assets 81,054 70,749
5 unchanged sentences
Depreciation 11,306 15,264
−Removed: Debt and equity investments 12,859 20,538
Loan origination services 3,264 4,930
−Removed: Intangible assets 4,772 7,703
Lease right of use asset 3,073 3,317
+Added: Intangible assets 1,474 4,772
Securitization 363 128
+Added: Debt and equity investments — 12,859
Other 2,679 1,665
5 unchanged sentences
Management considers the scheduled reversals of deferred tax liabilities, projected taxable income, carry back opportunities, and tax planning strategies in making the assessment of the amount of the valuation allowance.
−Removed: With the exception of a portion of the Company's state net operating losses, it is management's opinion that it is more likely than not that the deferred tax assets will be realized and should not be reduced by a valuation allowance.
−Removed: The amount of deferred tax assets considered realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
−Removed: As of December 31, 2021 and 2020, the Company had a current income tax receivable of $ 8.1 million and $ 21.5 million, respectively, that is included in "other assets" on the consolidated balance sheets.
−Removed: Net deferred tax assets of $ 27.3 million and net deferred tax liabilities of $ 117.9 million are included in “other assets” and “other liabilities,” respectively, on the consolidated balance sheets.
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
+Added: exception of a portion of the Company's state net operating losses, it is management's opinion that it is more likely than not that the deferred tax assets will be realized and should not be reduced by a valuation allowance.
+Added: The amount of deferred tax assets considered realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
+Added: As of December 31, 2022 and 2021, net deferred tax liabilities of $ 140.1 million and $ 117.9 million, respectively, and net deferred tax assets of $ 34.4 million and $ 27.3 million, respectively, were included in “other liabilities” and “other assets,” respectively, on the consolidated balance sheets.
+Added: As of December 31, 2022 and 2021, the Company had a current income tax payable of $ 5.2 million and receivable of $ 8.1 million, respectively, that is included in “other liabilities” and "other assets," respectively, on the consolidated balance sheets.
Segment Reporting
2 unchanged sentences
• Education Technology, Services, and Payment Processing
−Removed: • Communications
• Asset Generation and Management
• Nelnet Bank
−Removed: The Company earns fee-based revenue through its Loan Servicing and Systems and Education Technology, Services, and Payment Processing operating segments and earned revenue from its Communications operating segment prior to its deconsolidation on December 21, 2020.
−Removed: In addition, the Company earns interest income on its loan portfolio in its Asset Generation and Management operating segment.
−Removed: On November 2, 2020, the Company launched operations of Nelnet Bank.
−Removed: Nelnet bank operates as an internet bank franchise focused primarily on the private education loan marketplace.
+Added: • Communications
+Added: The Company earns fee-based revenue through its Loan Servicing and Systems and Education Technology, Services, and Payment Processing operating segments;
+Added: and earns interest income on its loan portfolio in its Asset Generation and Management and Nelnet Bank operating segments.
+Added: In addition, the Company earned revenue from its Communications operating segment prior to its deconsolidation on December 21, 2020.
+Added: See note 2 for a description of the transaction and a summary of the deconsolidation impact.
+Added: As a result of ALLO’s deconsolidation, there are no operating results for the (former) Communications operating segment in 2021 and 2022.
The Company’s operating segments are defined by the products and services they offer and the types of customers they serve, and they reflect the manner in which financial information is currently evaluated by management.
−Removed: See note 1, "Description of Business," for a description of each operating segment, including the primary products and services offered.
+Added: See note 1 for a description of each operating segment, including the primary products and services offered.
The management reporting process measures the performance of the Company’s operating segments based on the management structure of the Company, as well as the methodology used by management to evaluate performance and allocate resources.
7 unchanged sentences
Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities.
−Removed: Corporate and Other Activities includes the following items:
−Removed: • The majority of the Company’s investment activities, including investments accounted for under the equity method.
−Removed: See note 7 for the amounts of investments in equity method investees.
+Added: Corporate and Other Activities include the following items:
+Added: • The results of the majority of the Company’s investment activities, including early-stage and emerging growth companies and real estate
+Added: • Interest income earned on cash and investment debt securities (primarily student loan and other asset-backed securities)
• Interest expense incurred on unsecured and certain other corporate related debt transactions
−Removed: • Other product and service offerings that are not considered reportable operating segments including, but not limited to, WRCM, the SEC-registered investment advisor subsidiary
−Removed: Corporate and Other Activities also includes certain corporate activities and overhead functions related to executive management, internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: • Other product and service offerings that are not considered reportable operating segments including, but not limited to, WRCM, the SEC-registered investment advisor subsidiary, and Nelnet Renewable Energy, which includes solar tax equity investments made by the Company, administrative and management services provided by the Company on tax equity investments made by third parties, and solar development
+Added: Corporate and Other Activities also includes certain activities related to internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.
These costs are allocated to each operating segment based on estimated use of such activities and services.
Certain shared service costs incurred to support Nelnet Bank will not be allocated to Nelnet Bank until the end of the Bank’s de novo period (November 2023).
+Added: Corporate and Other Activities also includes corporate costs and overhead functions not allocated to operating segments, including executive management, investments in innovation, and other holding company organizational costs.
Segment Results
4 unchanged sentences
Year ended December 31, 2022
−Removed: Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications (a) Asset
+Added: Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset
Generation and
2 unchanged sentences
Interest expense 44 — 411,900 11,055 21,538 ( 14,399 ) 430,137
−Removed: Net interest income (expense) 43 1,075 — 333,983 6,214 6,286 — 347,602
−Removed: Less (negative provision) provision for loan losses — — — ( 13,220 ) 794 — — ( 12,426 )
+Added: Net interest income 2,678 9,377 264,657 14,918 21,038 — 312,669
+Added: Less provision (negative provision) for loan losses — — 44,601 1,840 — — 46,441
Net interest income after provision for loan losses 2,678 9,377 220,056 13,078 21,038 — 266,228
3 unchanged sentences
Education technology, services, and payment processing revenue — 408,543 — — — — 408,543
−Removed: Communications revenue — — — — — — — —
−Removed: Other 3,307 — — 34,306 713 40,356 — 78,681
−Removed: Gain on sale of loans — — — 18,715 — — — 18,715
+Added: Solar construction revenue — — — — 24,543 — 24,543
+Added: Other, net 2,543 — 21,170 2,625 ( 853 ) — 25,486
+Added: Gain on sale of loans, net — — 2,903 — — — 2,903
Gain from deconsolidation of ALLO — — — — — — —
5 unchanged sentences
Cost to provide education technology, services, and payment processing services — 148,403 — — — — 148,403
−Removed: Cost to provide communications services — — — — — — — —
+Added: Cost to provide solar construction services — — — — 19,971 — 19,971
Total cost of services — 148,403 — — 19,971 — 168,374
8 unchanged sentences
Net income (loss) 48,986 56,320 345,591 3,344 ( 58,002 ) — 396,241
−Removed: Net loss attributable to noncontrolling interests — — — — — 7,003 — 7,003
+Added: Net (income) loss attributable to noncontrolling interests — ( 3 ) — — 11,109 — 11,106
Net income (loss) attributable to Nelnet, Inc.
1 unchanged sentence
Total assets as of December 31, 2022 $ 273,072 484,976 15,945,762 918,716 2,406,965 ( 655,447 ) 19,374,044
−Removed: (a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements.
−Removed: See note 2, “ALLO Recapitalization,” for a description of the transaction and a summary of the deconsolidation impact.
−Removed: Accordingly, there are no operating results for the (former) Communications operating segment in 2021.
AND SUBSIDIARIES
2 unchanged sentences
Year ended December 31, 2021
−Removed: Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications (a) Asset
+Added: Loan Servicing and Systems Education Technology, Services, and Payment Processing Asset
Generation and
−Removed: Management Nelnet Bank (b) Corporate and Other Activities Eliminations Total
+Added: Management Nelnet Bank Corporate and Other Activities Eliminations Total
Total interest income $ 137 1,075 506,901 7,721 9,801 ( 1,800 ) 523,835
Interest expense 94 — 172,918 1,507 3,515 ( 1,800 ) 176,233
−Removed: Net interest income (expense) 315 2,982 2 283,317 373 2,597 — 289,585
−Removed: Less (negative provision) provision for loan losses — — — 63,029 330 — — 63,360
+Added: Net interest income 43 1,075 333,983 6,214 6,286 — 347,602
+Added: Less provision (negative provision) for loan losses — — ( 13,220 ) 794 — — ( 12,426 )
Net interest income after provision for loan losses 43 1,075 347,203 5,420 6,286 — 360,028
3 unchanged sentences
Education technology, services, and payment processing revenue — 338,234 — — — — 338,234
−Removed: Communications revenue — — 76,643 — — — — 76,643
−Removed: Other 9,421 373 1,561 7,189 48 38,969 — 57,561
−Removed: Gain on sale of loans — — — 33,023 — — — 33,023
+Added: Solar construction revenue — — — — — — —
+Added: Other, net 3,307 — 34,306 713 40,356 — 78,681
+Added: Gain on sale of loans, net — — 18,715 — — — 18,715
Gain from deconsolidation of ALLO — — — — — — —
5 unchanged sentences
Cost to provide education technology, services, and payment processing services — 108,660 — — — — 108,660
−Removed: Cost to provide communications services — — 22,812 — — — — 22,812
+Added: Cost to provide solar construction services — — — — — — —
Total cost of services — 108,660 — — — — 108,660
8 unchanged sentences
Net income (loss) 47,458 55,262 321,948 ( 617 ) ( 37,766 ) — 386,283
−Removed: Net loss attributable to noncontrolling interests — — — — — 2,817 — 2,817
+Added: Net (income) loss attributable to noncontrolling interests — — — — 7,003 — 7,003
Net income (loss) attributable to Nelnet, Inc.
1 unchanged sentence
Total assets as of December 31, 2021 $ 296,618 443,788 18,965,371 535,948 1,963,032 ( 526,716 ) 21,678,041
−Removed: (a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements.
−Removed: See note 2, “ALLO Recapitalization,” for a description of the transaction and a summary of the deconsolidation impact.
−Removed: Accordingly, the operating results for the Communications operating segment in the table above are for the period from January 1, 2020 through December 21, 2020.
−Removed: (b) Nelnet Bank launched operations on November 2, 2020.
−Removed: Accordingly, the operating results for the Nelnet Bank operating segment in the table above are for the period from November 2, 2020 through December 31, 2020.
AND SUBSIDIARIES
2 unchanged sentences
Year ended December 31, 2020
−Removed: Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications Asset
+Added: Loan Servicing and Systems Education Technology, Services, and Payment Processing Communications (a) Asset
Generation and
−Removed: Management Nelnet Bank (a) Corporate and Other Activities Eliminations Total
+Added: Management Nelnet Bank (b) Corporate and Other Activities Eliminations Total
Total interest income $ 436 3,036 2 611,474 414 5,775 ( 1,480 ) 619,656
Interest expense 121 54 — 328,157 41 3,178 ( 1,480 ) 330,071
−Removed: Net interest income (expense) 1,916 9,198 3 238,588 — ( 355 ) — 249,350
−Removed: Less (negative provision) provision for loan losses — — — 39,000 — — — 39,000
+Added: Net interest income 315 2,982 2 283,317 373 2,597 — 289,585
+Added: Less provision (negative provision) for loan losses — — — 63,029 330 — — 63,360
Net interest income after provision for loan losses 315 2,982 2 220,288 43 2,597 — 226,225
4 unchanged sentences
Communications revenue — — 76,643 — — — — 76,643
−Removed: Other 9,736 259 1,509 13,088 — 23,327 — 47,918
−Removed: Gain on sale of loans — — — 17,261 — — — 17,261
+Added: Solar construction revenue — — — — — — — —
+Added: Other, net 9,421 373 1,561 7,189 48 38,969 — 57,561
+Added: Gain on sale of loans, net — — — 33,023 — — — 33,023
Gain from deconsolidation of ALLO — — — — — 258,588 — 258,588
6 unchanged sentences
Cost to provide communications services — — 22,812 — — — — 22,812
+Added: Cost to provide solar construction services — — — — — — — —
Total cost of services — 82,206 22,812 — — — — 105,018
8 unchanged sentences
Net income (loss) 40,565 50,312 ( 25,223 ) 123,654 ( 60 ) 160,379 — 349,626
−Removed: Net loss attributable to noncontrolling interests — — — — — 509 — 509
+Added: Net (income) loss attributable to noncontrolling interests — — — — — 2,817 — 2,817
Net income (loss) attributable to Nelnet, Inc.
1 unchanged sentence
Total assets as of December 31, 2020 $ 190,297 436,702 — 20,773,968 216,937 1,225,790 ( 197,534 ) 22,646,160
−Removed: (a) Nelnet Bank launched operations on November 2, 2020.
−Removed: Accordingly, there are no operating results for the Nelnet Bank operating segment in the year ended December 31, 2019 .
+Added: (a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements.
+Added: Accordingly, the operating results for the Communications operating segment in the table above are for the period from January 1, 2020 through December 21, 2020.
+Added: (b) Nelnet Bank launched operations on November 2, 2020.
+Added: Accordingly, the operating results for the Nelnet Bank operating segment in the table above are for the period from November 2, 2020 through December 31, 2020.
AND SUBSIDIARIES
2 unchanged sentences
Disaggregated Revenue and Deferred Revenue
−Removed: The following provides additional revenue recognition information for the Company’s fee-based reportable operating segments.
+Added: The following provides additional revenue recognition information for the Company’s fee-based operating segments.
Loan Servicing and Systems Revenue
15 unchanged sentences
2022 2021 2020
−Removed: Government servicing - Nelnet $ 167,579 146,798 157,991
−Removed: Government servicing - Great Lakes 193,214 179,872 185,656
+Added: Government loan servicing $ 423,066 360,793 326,670
Private education and consumer loan servicing 49,210 47,302 32,492
−Removed: FFELP servicing 18,281 20,183 25,043
+Added: FFELP loan servicing 16,016 18,281 20,183
Software services 33,409 34,600 41,999
−Removed: Outsourced services and other 25,387 30,217 8,700
+Added: Outsourced services 13,758 25,387 30,217
Loan servicing and systems revenue $ 535,459 486,363 451,561
4 unchanged sentences
Revenue for each performance obligation is allocated to the distinct service period, the academic school term, and recognized ratably over the service period as customers simultaneously receive and consume benefits.
+Added: • Payment processing - Payment processing consideration is determined from individual contracts with customers and includes electronic transfer and credit card processing, reporting, virtual terminal solutions, and specialized integrations to business software for education and non-education markets.
+Added: Volume-based revenue from payment
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: • Payment processing - Payment processing consideration is determined from individual contracts with customers and includes electronic transfer and credit card processing, reporting, virtual terminal solutions, and specialized integrations to business software for education and non-education markets.
−Removed: Volume-based revenue from payment processing is allocated and recognized to the distinct service period, based on when each transaction is completed, and recognized as control transfers as customers simultaneously receive and consume benefits.
+Added: processing is allocated and recognized to the distinct service period, based on when each transaction is completed, and recognized as control transfers as customers simultaneously receive and consume benefits.
The electronic transfer and credit card processing consideration is recognized as revenue on a gross basis as the Company is the principal in the delivery of the payment processing.
1 unchanged sentence
In addition, the Company has the unilateral ability to accept or reject a transaction based on criteria established by the Company.
−Removed: The Company is liable for the costs of processing the transactions and records such costs within "cost to provide education technology, services, and payment processing services."
+Added: The Company is liable for the costs of processing the transactions and records such costs within "cost to provide education technology, services, and payment processing services" in the consolidated statements of income.
• Education technology and services - Education technology and services consideration is determined from individual contracts with customers and is based on the services selected by the customer.
12 unchanged sentences
Education technology, services, and payment processing revenue $ 408,543 338,234 282,196
−Removed: Cost to provide education technology, services, and payment processing services is primarily associated with providing payment processing services.
−Removed: Interchange and payment network fees are charged by the card associations or payment networks.
+Added: Cost to provide education technology, services, and payment processing services is primarily associated with providing professional development and educational instruction and payment processing services.
+Added: Items included in the cost to provide professional development and educational instruction services include salaries and benefits and third-party professional services directly related to providing these services to teachers, school leaders, and students.
+Added: For payment processing services, interchange and payment network fees are charged by the card associations or payment networks.
Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods.
−Removed: Other items included in cost to provide education technology, services, and payment processing services include salaries and benefits and third-party professional service costs directly related to providing professional development and educational instruction services to teachers, school leaders, and students.
−Removed: Communications Revenue
−Removed: Communications revenue is derived principally from internet, television, and telephone services and is billed as a flat fee in advance of providing the service.
−Removed: Revenues for usage-based services, such as access charges billed to other telephone carriers for originating and terminating long-distance calls on the Company's network, are billed in arrears.
−Removed: These are each considered distinct performance obligations.
−Removed: Revenue is recognized monthly for the consideration the Company has a right to invoice, the amount of which corresponds directly with the value provided to the customer based on the performance completed.
−Removed: The Company recognizes revenue from these services in the period the services are rendered rather than billed.
−Removed: Revenue received or receivable in advance of the delivery of services is included in deferred revenue.
−Removed: Earned but unbilled usage-based services are recorded in accounts receivable.
+Added: Solar Construction Revenue
+Added: Solar construction revenue is derived principally from individual contracts with customers for engineering, procurement, and construction (EPC) of solar facilities for both commercial and residential customers.
+Added: Solar construction is a single performance obligation which requires a significant level of integration.
+Added: The individual materials and installation (the inputs) are not considered distinct and are integrated into the solar facilities (the combined output).
+Added: Revenue for this service is recognized based on the project progress to date.
+Added: Progress towards completion of the contract is measured by the percentage of total costs incurred to date compared to the estimated total costs to complete the contract.
+Added: GRNE Solar will recognize a contract asset or liability depending on the progression of the project to date compared to the amount billed to date.
AND SUBSIDIARIES
2 unchanged sentences
The following table provides disaggregated revenue by service offering and customer type.
+Added: The amounts listed for 2022 reflect activity subsequent to GRNE Solar acquisition on July 1, 2022.
+Added: Period from July 1, 2022 - December 31, 2022
+Added: Solar construction $ 24,386
+Added: Operations and maintenance 157
+Added: Solar construction revenue $ 24,543
+Added: Commercial revenue $ 16,891
+Added: Residential revenue 7,495
+Added: Solar construction revenue $ 24,543
+Added: Cost to provide solar construction services include direct costs associated with completing a solar facility, including labor, third-party contractor fees, permitting, engineering fees, and construction material.
+Added: Communications Revenue
+Added: Communications revenue was derived principally from internet, television, and telephone services and is billed as a flat fee in advance of providing the service.
+Added: Revenues for usage-based services, such as access charges billed to other telephone carriers for originating and terminating long-distance calls on ALLO’s network, were billed in arrears.
+Added: These are each considered distinct performance obligations.
+Added: Revenue was recognized monthly for the consideration the Company had a right to invoice, the amount of which corresponds directly with the value provided to the customer based on the performance completed.
+Added: The Company recognized revenue from these services in the period the services were rendered rather than billed.
+Added: Revenue received or receivable in advance of the delivery of services was included in deferred revenue.
+Added: Earned but unbilled usage-based services were recorded in accounts receivable.
+Added: The following table provides disaggregated revenue by service offering and customer type.
The amounts listed for 2020 reflect activity prior to ALLO’s deconsolidation on December 21, 2020.
−Removed: Period from January 1 2020 - December 21, 2020 Year ended December 31, 2019
+Added: Period from January 1 2020 - December 21, 2020
Internet $ 48,362
1 unchanged sentence
Telephone 11,037
−Removed: Other 153 129
Communications revenue $ 76,643
1 unchanged sentence
Business revenue 18,038
−Removed: Other 576 236
Communications revenue $ 76,643
−Removed: Cost to provide communications services is primarily associated with television programming costs.
−Removed: ALLO has various contracts to obtain television programming from programming vendors whose compensation is typically based on a flat fee per customer.
−Removed: The cost of the right to exhibit network programming under such arrangements is recorded in the month the programming is available for exhibition.
−Removed: Programming costs are paid each month based on calculations performed by ALLO and are subject to periodic audits performed by the programmers.
+Added: Cost to provide communications services was primarily associated with television programming costs.
+Added: ALLO had various contracts to obtain television programming from programming vendors whose compensation is typically based on a flat fee per customer.
+Added: The cost of the right to exhibit network programming under such arrangements was recorded in the month the programming was available for exhibition.
+Added: Programming costs were paid each month based on calculations performed by ALLO and are subject to periodic audits performed by the programmers.
Other items in cost to provide communications services include connectivity, franchise, and other regulatory costs directly related to providing internet and telephone services.
−Removed: The following table provides the components of "other" in “other income/expense” on the consolidated statements of income:
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: Other Income/Expense
+Added: The following table provides the components of "other, net" in “other income (expense)” on the consolidated statements of income:
Year ended December 31,
1 unchanged sentence
Income/gains from investments, net $ 51,552 91,593 56,402
+Added: Borrower late fee income 10,809 3,444 5,194
ALLO preferred return 8,584 8,427 386
+Added: Administration/sponsor fee income 7,898 3,656 10
Investment advisory services 6,026 7,773 10,875
−Removed: Borrower late fee income 3,444 5,194 12,884
Management fee revenue 2,543 3,307 9,421
1 unchanged sentence
Loss from solar investments ( 9,479 ) ( 10,132 ) ( 37,423 )
−Removed: (Loss) gain on debt repurchased ( 6,775 ) 1,924 136
Other 15,519 12,761 16,261
−Removed: Other income $ 78,681 57,561 47,918
−Removed: • Investment advisory fees - Investment advisory services are provided by WRCM, the Company's SEC-registered investment advisor subsidiary, under various arrangements.
−Removed: The Company earns monthly fees based on the monthly outstanding balance of investments and certain performance measures, which are recognized monthly as the uncertainty of the transaction price is resolved.
−Removed: • Borrower late fee income - Late fee income is earned by the education lending subsidiaries.
+Added: Other, net $ 25,486 78,681 57,561
+Added: • Borrower late fee income - Late fee income is earned primarily by the education lending subsidiaries in the AGM operating segment.
Revenue is allocated to the distinct service period, based on when each transaction is completed.
+Added: • Administration/sponsor fee income - Administration and sponsor fee income is earned by the AGM operating segment as administrator and sponsor for certain securitizations.
+Added: Revenue is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits.
+Added: • Investment advisory services - Investment advisory services are provided by WRCM, the Company's SEC-registered investment advisor subsidiary, under various arrangements.
+Added: The Company earns monthly fees based on the monthly outstanding balance of investments and certain performance measures, which are recognized monthly as the uncertainty of the transaction price is resolved.
• Management fee revenue - Management fee revenue is earned for providing administrative support and marketing services, which primarily was to Great Lakes' former parent company under a contract that expired in January 2021.
Revenue is allocated to the distinct service period, based on when each transaction is completed.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Deferred Revenue
4 unchanged sentences
Recognition of revenue ( 3,824 ) ( 90,409 ) ( 42,903 ) ( 3,286 ) ( 140,422 )
+Added: Deconsolidation of ALLO — — ( 3,925 ) — ( 3,925 )
+Added: Business acquisition — 1,419 — — 1,419
Balance as of December 31, 2020 1,378 33,267 — 1,551 36,196
1 unchanged sentence
Recognition of revenue ( 4,844 ) ( 105,801 ) — ( 5,316 ) ( 115,961 )
−Removed: Deconsolidation of ALLO — — ( 3,925 ) — ( 3,925 )
−Removed: Business acquisition — 1,419 — — 1,419
Balance as of December 31, 2021 2,416 36,744 — 2,010 41,170
1 unchanged sentence
Recognition of revenue ( 2,713 ) ( 129,433 ) — ( 12,940 ) ( 145,086 )
+Added: Business acquisition — 3,917 — 1,997 5,914
Balance as of December 31, 2022 $ 2,310 49,314 — 5,030 56,654
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Major Customer
−Removed: Nelnet Servicing and Great Lakes, subsidiaries of the Company, each earn loan servicing revenue from a servicing contract with the Department.
−Removed: Revenue earned by Nelnet Servicing related to this contract was $ 167.6 million, $ 146.8 million, and $ 158.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.
−Removed: Revenue earned by Great Lakes related to this contract was $ 193.2 million, $ 179.9 million, and $ 185.7 million for the years ended December 31, 2021, 2020, and 2019, respectively.
−Removed: Nelnet Servicing's and Great Lakes' student loan servicing contracts with the Department are scheduled to expire on December 14, 2023.
−Removed: 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.
−Removed: 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.
−Removed: The Company cannot predict the timing, nature, or ultimate outcome of NextGen or any other contract procurement process by the Department.
+Added: The Company earns loan servicing revenue from servicing contracts with the Department.
+Added: Revenues earned by the Company related to these contracts in 2022, 2021, and 2020 was $ 423.1 million, $ 360.8 million, and $ 326.7 million, respectively.
+Added: The Company’s student loan servicing contracts with the Department are scheduled to expire on December 14, 2023.
+Added: 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.
+Added: 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.
+Added: In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution (USDS) for the new servicing framework.
+Added: The Company responded to the USDS solicitation.
+Added: The Company cannot predict the timing, nature, or ultimate outcome of this or any other contract procurement process by the Department.
+Added: If the Company’s servicing contracts are not extended beyond the current expiration date or the Company is not chosen as a subsequent servicer, the Company’s servicing revenue would decrease significantly.
+Added: If the terms and requirements under a potential new contract with the Department are less favorable than under the Company’s current contracts, loan servicing revenue and/or operating margins could be adversely impacted.
+Added: On August 24, 2022, the Department issued a bulletin which indicated the Department will provide targeted student debt cancellation to borrowers with loans held by the Department, and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.
+Added: Decisions by the U.S.
+Added: Courts of Appeals for the Eighth Circuit and Fifth Circuit in October 2022 and November 2022, respectively, in response to legal challenges that were initiated by certain parties (not the Company) have blocked implementation of the Department's broad based student debt relief plan.
+Added: These cases have been appealed to the U.S.
+Added: Supreme Court.
+Added: As of the filing of this report, the Supreme Court has not ruled on, and the Company cannot predict the timing, nature, or ultimate outcome of, this case.
+Added: As of December 31, 2022, the Company was servicing 15.8 million borrowers under its government servicing contracts.
+Added: The Company cannot currently estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the Department’s August 24, 2022 bulletin and subsequent publicly available guidance provided by the Department.
+Added: However, revenue earned by the Company under its contracts will be negatively impacted if the Department’s student debt relief plan or other broad based loan forgiveness is implemented.
The following table provides supplemental balance sheet information related to leases:
1 unchanged sentence
Operating lease ROU assets, which is included in " other assets " on the
−Removed: consolidated balance sheet
+Added: consolidated balance sheets
$ 14,852 14,314
Operating lease liabilities, which is included in " other liabilities " on the
−Removed: consolidated balance sheet
+Added: consolidated balance sheets
$ 16,414 15,899
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
The following table provides components of lease expense:
1 unchanged sentence
2022 2021 2020
−Removed: Rental expense, which is included in "other expenses" on the
−Removed: consolidated statements of income (a) $ 9,386 11,885 11,171
+Added: Rental expense, which is included in "other, net" in "other income (expense)" on the consolidated statements of income (a) $ 6,841 9,386 11,885
Rental expense, which is included in "cost to provide communications
2 unchanged sentences
(a) Includes short-term and variable lease costs, which are immaterial.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Weighted average remaining lease term and discount rate are shown below:
9 unchanged sentences
The Company has a 401(k) savings plan that covers substantially all of its employees.
−Removed: Employees may contribute up to 100 percent of their pre-tax salary, subject to IRS limitations.
−Removed: The Company matches up to 100 percent on the first 3 percent of contributions and 50 percent on the next 2 percent.
+Added: Employees may contribute up to 100 % of their pre-tax salary, subject to IRS limitations.
+Added: The Company matches up to 100 % on the first 3 % of contributions and 50 % on the next 2 %.
The Company made contributions to the plan of $ 12.9 million, $ 11.2 million, and $ 11.7 million during the years ended December 31, 2022, 2021, and 2020, respectively.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Stock Based Compensation Plans
8 unchanged sentences
Non-vested shares at end of year 752,622 660,166 552,456
−Removed: As of December 31, 2021, there was $ 23.5 million of unrecognized compensation cost included in equity on the consolidated balance sheet related to restricted stock, which is expected to be recognized as compensation expense in future periods as shown in the table below.
+Added: As of December 31, 2022, there was $ 29.5 million of unrecognized compensation cost included in equity on the consolidated balance sheets related to restricted stock, which is expected to be recognized as compensation expense in future periods as shown in the table below.
+Added: 2023 $ 11,268
2028 and thereafter 2,400
For the years ended December 31, 2022, 2021, and 2020, the Company recognized compensation expense of $ 13.9 million, $ 10.4 million, and $ 7.3 million, respectively, related to shares issued under the restricted stock plan, which is included in "salaries and benefits" on the consolidated statements of income.
−Removed: Employee Share Purchase Plan
−Removed: The Company has an employee share purchase plan pursuant to which employees are entitled to purchase Class A common stock from payroll deductions at a 15 percent discount from market value.
−Removed: During the years ended December 31, 2021, 2020, and 2019, the Company recognized compensation expense of $ 0.2 million, $ 0.4 million, and $ 0.3 million, respectively, in connection with issuing 24,205 shares, 36,687 shares, and 33,250 shares, respectively, under this plan, which is included in "salaries and benefits" on the consolidated statements of income.
−Removed: Non-employee Directors Compensation Plan
−Removed: The Company has a compensation plan for non-employee directors pursuant to which non-employee directors can elect to receive their annual retainer fees in the form of cash or Class A common stock.
−Removed: If a non-employee director elects to receive Class A common stock, the number of shares of Class A common stock that are awarded is equal to the amount of the annual retainer fee otherwise payable in cash divided by 85 percent of the fair market value of a share of Class A common stock on the date the fee is payable.
−Removed: Non-employee directors who choose to receive Class A common stock may also elect to defer receipt of the Class A common stock until termination of their service on the board of directors.
AND SUBSIDIARIES
1 unchanged sentence
(Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: For the years ended December 31, 2021, 2020, and 2019, the Company recognized $ 1.4 million, $ 1.2 million, and $ 1.2 million, respectively, of expense related to this plan, which is included in "other expenses" on the consolidated statements of income.
+Added: Employee Share Purchase Plan
+Added: The Company has an employee share purchase plan pursuant to which employees are entitled to purchase Class A common stock from payroll deductions at a 15 % discount from market value.
+Added: During the years ended December 31, 2022, 2021, and 2020, the Company recognized compensation expense of $ 0.1 million, $ 0.2 million, and $ 0.4 million, respectively, in connection with issuing 26,011 shares, 24,205 shares, and 36,687 shares, respectively, under this plan, which is included in "salaries and benefits" on the consolidated statements of income.
+Added: Directors Compensation Plan
+Added: The Company has a compensation plan for directors pursuant to which directors can elect to receive their annual retainer fees in the form of cash or Class A common stock.
+Added: If a director elects to receive Class A common stock, the number of shares of Class A common stock that are awarded is equal to the amount of the annual retainer fee otherwise payable in cash divided by 85 % of the fair market value of a share of Class A common stock on the date the fee is payable.
+Added: Directors who choose to receive Class A common stock may also elect to defer receipt of the Class A common stock until termination of their service on the board of directors.
+Added: For the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 1.7 million, $ 1.4 million, and $ 1.2 million, respectively, of expense related to this plan, which is included in "other, net" in "other income (expense)" on the consolidated statements of income.
The following table provides the number of shares awarded under this plan for the years ended December 31, 2022, 2021, and 2020.
9 unchanged sentences
Transactions with Union Bank and Trust Company
−Removed: Union Bank and Trust Company ("Union Bank") is controlled by Farmers & Merchants Investment Inc.
+Added: Union Bank is controlled by Farmers & Merchants Investment Inc.
(“F&M”), which owns a majority of Union Bank's common stock and a minority share of Union Bank's non-voting non-convertible preferred stock.
11 unchanged sentences
The Company purchased $ 8.1 million (par value), $ 22.3 million (par value), and $ 144.9 million (par value) of private education loans from Union Bank in 2022, 2021, and 2020, respectively.
−Removed: In addition, the Company purchased $ 32.6 million (par value) of consumer loans from Union Bank in 2019.
−Removed: There were no consumer loan purchases in 2021 or 2020.
The net premiums paid by the Company on these loan acquisitions was $ 0.2 million, $ 0.4 million, and $ 2.6 million in 2022, 2021, and 2020, respectively.
1 unchanged sentence
Union Bank paid $ 0.1 million, $ 0.1 million, and $ 2.0 million in marketing fees to the Company in 2022, 2021, and 2020, respectively, under this agreement.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Loan Servicing
6 unchanged sentences
The agreement automatically renews annually and is terminable by either party upon five business days' notice.
−Removed: This agreement provides beneficiaries of Union Bank's grantor trusts with access to investments in interests in student loans,
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
−Removed: while providing liquidity to the Company on a short-term basis.
+Added: This agreement provides beneficiaries of Union Bank's grantor trusts with access to investments in interests in student loans, while providing liquidity to the Company on a short-term basis.
The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $ 900 million or an amount in excess of $ 900 million if mutually agreed to by both parties.
18 unchanged sentences
The promissory note carries an interest rate of 3.85 % and has a maturity date of October 30, 2024.
+Added: TDP Phase III (“TDP”) is an entity that was established in 2015 for the sole purpose of acquiring, developing, and owning a commercial real estate property in Lincoln, Nebraska.
+Added: The Company owns 25 % of TDP.
+Added: On December 30, 2022, Union Bank, as lender, received a $ 20.0 million promissory note from TDP.
+Added: The promissory note carries an interest rate of 5.85 % and has a maturity date of January 1, 2028.
Operating Cash Accounts
3 unchanged sentences
Interest income earned by the Company on the amounts invested in the STFIT and in cash operating accounts in 2022, 2021, and 2020, was $ 1.2 million, $ 0.2 million, and $ 0.5 million, respectively.
−Removed: The Company provides certain 529 Plan administration services to certain college savings plans (the “College Savings Plans”) through a contract with Union Bank, as the program manager.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: Educational 529 College Savings Plan
+Added: The Company provides certain Educational 529 College Savings Plan administration services to certain college savings plans (the “College Savings Plans”) through a contract with Union Bank, as the program manager.
Union Bank is entitled to a fee as program manager pursuant to its program management agreement with the College Savings Plans.
2 unchanged sentences
For services provided in 2021, the Company received $ 0.4 million from Union Bank;
−Removed: fees received for services provided in 2020 were no t significant.
+Added: fees received for services provided in 2020 were not significant.
+Added: The Company did not provide these services to Union Bank in 2022.
Additionally, Union Bank, as the program manager for the College Savings Plans, has agreed to allocate plan bank deposits to Nelnet Bank.
As of December 31, 2022 and 2021, Nelnet Bank had $ 355.3 million and $ 184.9 million, respectively, in deposits from the funds offered under the College Savings Plans.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Lease Arrangements
6 unchanged sentences
During the years ended December 31, 2022, 2021, and 2020, Union Bank paid the Company approximately $ 342,000 , $ 342,000 , and $ 317,000 , respectively, under certain employee sharing arrangements.
−Removed: During the years ended December 31, 2020 and 2019, Union Bank paid the Company approximately $ 273,000 , and $ 92,000 , respectively, for communications services.
+Added: During the year ended December 31, 2020, Union Bank paid the Company approximately $ 273,000 for communications services.
401(k) Plan Administration
14 unchanged sentences
As of December 31, 2022, WRCM was the investment advisor with respect to a total 578,607 shares and 4.6 million shares of the Company's Class A and Class B common stock, respectively, held directly by these trusts.
−Removed: For the years ended December 31, 2021, 2020, and 2019, the Company earned approximately $ 213,000 , $ 141,000 , and $ 144,000 , respectively, of fees under these agreements.
+Added: For the years ended December 31,
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: 2022, 2021, and 2020, the Company earned approximately $ 216,000 , $ 213,000 , and $ 141,000 , respectively, of fees under these agreements.
WRCM has established private investment funds for the primary purpose of purchasing, selling, investing, and trading, directly or indirectly, in student loan asset-backed securities, and to engage in financial transactions related thereto.
3 unchanged sentences
Based upon the current level of holdings by non-affiliated limited partners, the management agreements provide non-affiliated limited partners the ability to remove WRCM as manager without cause.
−Removed: WRCM earns 50 basis points (annually) on the outstanding balance of the investments in these funds, of which WRCM pays approximately 50 percent of such amount to Union Bank as custodian.
+Added: WRCM earns 50 basis points (annually) on the outstanding balance of the investments in these funds, of which WRCM pays approximately 50 % of such amount to Union Bank as custodian.
As of December 31, 2022, the outstanding balance of investments in these funds was $ 137.8 million.
The Company paid Union Bank $ 0.3 million in each of 2022, 2021, and 2020, as custodian of the funds.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Transactions with Agile Sports Technologies, Inc.
2 unchanged sentences
On each of May 20, 2020 and May 27, 2021, the Company made additional equity investments in Hudl, as one of the participants in equity raises completed by Hudl.
−Removed: See Note 7, “Investments” for additional information on these transactions.
−Removed: The Company and Mr.
−Removed: Dunlap, along with his children, currently hold combined direct and indirect equity ownership interests in Hudl of 19.3 % and 3.8 %, respectively, which did not materially change as a result of the May 2020 and May 2021 transactions.
+Added: See note 7 for additional information on these transactions.
+Added: As of December 31, 2022, the Company and Mr.
+Added: Dunlap, along with his children, hold a combined direct and indirect equity ownership interests in Hudl of 19.3 % and 3.8 %, respectively, which did not materially change as a result of the May 2020 and May 2021 transactions.
+Added: Subsequent to December 31, 2022, on February 6, 2023, the Company purchased stock from existing Hudl shareholders for total consideration of $ 31.5 million which increased Nelnet’s ownership percentage.
+Added: This was not considered an observable market transaction, thus the Company was not required to adjust its carrying value of Hudl to the February 2023 transaction value.
The Company's and Mr.
2 unchanged sentences
Dunlap's equity ownership interests are not considered in-substance common stock and the Company is accounting for its equity investment in Hudl using the measurement alternative method.
−Removed: On July 26, 2019, the Company, as lender, received a $ 16.0 million promissory note from Hudl.
−Removed: The promissory note carried a 14 percent interest rate and was due 180 days from the date of issuance.
−Removed: In connection with this promissory note, the Company entered into a Subordination Agreement with Union Bank, effective as of July 26, 2019, which required the Company to subordinate its promissory note from Hudl to existing notes Union Bank holds from Hudl.
−Removed: The $ 16.0 million promissory note from Hudl was paid in full to the Company in August 2019.
The Company makes investments to further diversify the Company both within and outside of its historical core education-related businesses, including investments in real estate.
Recent real estate investments have been focused on the development of commercial properties in the Midwest, and particularly in Lincoln, Nebraska, where the Company's headquarters are located.
−Removed: One investment includes the development of a building in Lincoln's Haymarket District that is the headquarters of Hudl, in which Hudl is the primary tenant in this building.
−Removed: Transaction with Assurity Life Insurance Company ("Assurity")
−Removed: Thomas Henning, who has served on the Company's Board of Directors since 2003, was President and Chief Executive Officer of Assurity during the years ended December 31, 2021, 2020, and 2019, when Nelnet Business Services, a subsidiary of the Company, paid $ 2.1 million, $ 1.8 million, and $ 1.7 million, respectively, to Assurity for insurance premiums for insurance on certain tuition payment plans.
+Added: The Company owns 25 % of TDP, which is the entity that developed and owns a building in Lincoln's Haymarket District that is the headquarters of Hudl, in which Hudl is the primary tenant and Nelnet is a tenant in this building.
+Added: During 2022, the Company paid Hudl approximately $ 158,000 to provide lunches for Nelnet’s associates in Hudl’s employee cafeteria.
+Added: Transactions with Assurity Life Insurance Company ("Assurity")
+Added: Thomas Henning, who has served on the Company's Board of Directors since 2003, was President and Chief Executive Officer of Assurity until December 31, 2021, at which point he retired and then served as the Non-Executive Chairman of Assurity’s board of directors until his retirement from the Assurity board on December 31, 2022.
+Added: During the years ended December 31, 2022, 2021, and 2020, Nelnet Business Services paid $ 2.0 million, $ 2.1 million, and $ 1.8 million, respectively, to Assurity for insurance premiums for insurance on certain tuition payment plans.
As part of providing the tuition payment plan insurance to Nelnet Business Services, Assurity entered into a reinsurance agreement with the Company's insurance subsidiary, under which Assurity paid the Company's insurance subsidiary reinsurance premiums of $ 1.7 million, $ 1.8 million and $ 1.4 million in 2022, 2021 and 2020, respectively, and the Company's insurance subsidiary paid claims on such reinsurance to Assurity of $ 1.3 million, $ 1.5 million, and $ 1.0 million in 2022, 2021, and 2020, respectively.
−Removed: In addition, Assurity pays Nelnet Business Services a partial refund annually based on claim experience, which was approximately $ 41,000 , $ 64,000 , and $ 56,000 for the years ended December 31, 2021, 2020, and 2019, respectively.
−Removed: Henning retired as President and Chief Executive Officer of Assurity effective January 1, 2022, and now serves as the Non-Executive Chairman of Assurity’s board of directors.
−Removed: Solar Transactions
+Added: In addition, Assurity paid Nelnet Business Services a partial refund annually based on claim experience, which was approximately $ 51,000 $ 41,000 and $ 64,000 for the years ended December 31, 2022, 2021, and 2020, respectively.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
+Added: Nelnet Renewable Energy
+Added: Solar Tax Equity Investments
The Company has co-invested in Company-managed limited liability companies with related parties that invest in renewable energy (solar) (as summarized below).
As part of these transactions, the Company receives management and performance fees under a management agreement.
−Removed: Entity/Relationship Investment amount Fees earned by the Company
+Added: Entity/Relationship Investment amount Revenue recognized by the Company from management and performance fees
2022 2021 2020 2022 2021 2020
1 unchanged sentence
Assurity (Board member Thomas Henning) 2,195,790 5,421,659 1,150,000 67,956 16,027 11,538
−Removed: Ameritas Life Insurance Corp.
−Removed: (Board member James Abel) 5,000,000 — — 9,615 — —
North Central Bancorp, Inc.
10 unchanged sentences
Muhleisen) — 116,667 383,333 3,846 962 3,846
+Added: Funding - Solar
+Added: Union Bank has provided funding for the following Nelnet Renewable Energy properties and solar fields.
+Added: Building/solar field Original loan amount Loan amount outstanding as of December 31, 2022 Fixed interest rate Maturity date
+Added: Office space - Palatine, Illinois $ 287,000 $ 284,661 6.05 % 12/30/2027
+Added: Warehouse - Elk Grove Village, Illinois 332,000 290,929 5.35 3/1/2024
+Added: Warehouse - Indianapolis, Illinois 168,000 161,075 3.55 10/14/2028
+Added: Solarfield - Round Lake, Illinois 900,000 899,909 5.00 11/5/2030
+Added: Solarfield - Round Lake, Illinois 1,700,000 1,746,000 5.00 11/15/2028
+Added: Solarfield - St.
+Added: Charles, Illinois 2,300,000 600,000 5.00 11/15/2028
+Added: Solarfield - St.
+Added: Charles, Illinois 600,000 2,204,809 5.00 11/15/2030
AND SUBSIDIARIES
2 unchanged sentences
The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.
−Removed: There were no transfers into or out of level 1, level 2, or level 3 for the year ended December 31, 2021.
+Added: There were no transfers into or out of level 1, level 2, or level 3 for the years ended December 31, 2022 and 2021.
As of December 31, 2022 As of December 31, 2021
1 unchanged sentence
Investments (a):
−Removed: FFELP loan asset-backed securities - available-for-sale $ — 494,682 494,682 — 346,502 346,502
−Removed: Private education loan asset-backed debt securities - available for sale — 412,552 412,552 — — —
+Added: FFELP loan asset-backed debt securities - available-for-sale $ — 798,211 798,211 — 494,682 494,682
+Added: Private education loan asset-backed securities - available for sale — 308,284 308,284 — 412,552 412,552
Other debt securities - available for sale 100 282,442 282,542 100 22,335 22,435
6 unchanged sentences
Treasury security.
−Removed: Level 2 investments include student loan asset-backed, mortgage-backed, and collateralized loan obligation securities.
+Added: Level 2 investments include student loan asset-backed, mortgage-backed, collateralized loan obligation, and other consumer loan-backed securities.
The fair value for the Level 2 securities is determined using indicative quotes from broker-dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms issued by companies with comparable credit risk.
11 unchanged sentences
Investments (at fair value) 1,428,119 1,428,119 6,819 1,388,937 —
+Added: Notes receivable 31,106 31,106 — 31,106 —
Beneficial interest in loan securitizations 162,360 138,738 — — 162,360
27 unchanged sentences
A number of significant inputs into the models are internally derived and not observable to market participants.
+Added: Notes Receivable
+Added: Fair values for notes receivable were determined by using model-derived valuations with observable inputs, including current market rates.
+Added: AND SUBSIDIARIES
+Added: Notes to Consolidated Financial Statements
+Added: (Dollars in thousands, except share amounts, unless otherwise noted)
Beneficial Interest in Loan Securitizations
2 unchanged sentences
A number of significant inputs into the models are internally derived and not observable to market participants.
−Removed: AND SUBSIDIARIES
−Removed: Notes to Consolidated Financial Statements
−Removed: (Dollars in thousands, except share amounts, unless otherwise noted)
Cash and Cash Equivalents, Restricted Cash, Restricted Cash – Due to Customers, Accrued Loan Interest Receivable, Accrued Interest Payable, and Due to Customers
15 unchanged sentences
The Company is subject to various claims, lawsuits, and proceedings that arise in the normal course of business.
−Removed: These matters frequently involve claims by student loan borrowers disputing the manner in which their student loans have been serviced or the accuracy of reports to credit bureaus, claims by student loan borrowers or other consumers alleging that state or Federal consumer protection laws have been violated in the process of collecting loans or conducting other business activities, and disputes with other business entities.
+Added: These matters frequently involve claims by student loan borrowers disputing the manner in which their student loans have been serviced or the accuracy of reports to credit bureaus, claims by student loan borrowers or other consumers alleging that state or Federal privacy, cybersecurity, and other consumer protection laws have been violated in the process of servicing loans or conducting other business activities, and disputes with other business entities.
In addition, from time to time, the Company receives information and document requests or demands from state or federal regulators concerning its business practices.
The Company cooperates with these inquiries and responds to the requests or demands.
−Removed: While the Company cannot predict the ultimate outcome of any regulatory examination, inquiry, or investigation, the Company believes its activities have materially complied with applicable law, including the Higher Education Act, the rules and regulations adopted by the Department thereunder, and the Department's guidance regarding those rules and regulations.
−Removed: On the basis of present information, anticipated insurance coverage, and advice received from counsel, it is the opinion of the Company's management that the disposition or ultimate determination of these claims, lawsuits, and proceedings will not have a material adverse effect on the Company's business, financial position, or results of operations.
+Added: While the Company cannot predict the ultimate outcome of any claim, regulatory examination, inquiry, or investigation, the Company believes its activities have materially complied with applicable law, including the Higher Education Act, the rules and regulations adopted by the Department thereunder, and the Department's guidance regarding those rules and regulations, and applicable consumer protection laws and regulations.
+Added: On the basis of present information, anticipated insurance coverage, and advice received from counsel, it is the opinion of the Company's management that the disposition or ultimate determination of claims, lawsuits, and proceedings such as those discussed above will not have a material adverse effect on the Company's business, financial position, or results of operations.
AND SUBSIDIARIES
23 unchanged sentences
Retained earnings 3,234,844 2,940,523
−Removed: Accumulated other comprehensive earnings 9,304 6,102
+Added: Accumulated other comprehensive (loss) earnings, net ( 37,366 ) 9,304
Total Nelnet, Inc.
12 unchanged sentences
Interest expense on bonds and notes payable 21,489 3,515 3,179
−Removed: Net interest income (expense) 8,940 931 ( 4,663 )
+Added: Net interest income 28,976 8,940 931
Other income (expense):
−Removed: Other income 45,291 48,688 8,384
−Removed: (Loss) gain from debt repurchases, net ( 6,530 ) 1,962 136
+Added: Other, net ( 43,949 ) 45,291 48,688
+Added: Gain (loss) from debt repurchases, net 1,324 ( 6,530 ) 1,962
Equity in subsidiaries income
7 unchanged sentences
Income before income taxes 458,041 420,329 396,015
−Removed: Income tax (expense) benefit ( 27,101 ) ( 43,577 ) 5,950
+Added: Income tax expense 50,732 27,101 43,577
Net income 407,309 393,228 352,438
7 unchanged sentences
Net income $ 407,309 393,228 352,438
−Removed: Other comprehensive income (loss):
+Added: Other comprehensive (loss) income:
Net changes related to equity in subsidiaries other comprehensive income $ ( 11,713 ) 6,692 —
3 unchanged sentences
Income tax effect 11,205 ( 35,482 ) 1,102 ( 3,490 ) ( 986 ) 3,130
−Removed: Other comprehensive income (loss) 3,202 3,130 ( 911 )
+Added: Net changes related to equity method investee's other comprehensive income:
+Added: Gain on cash flow hedges 691 — —
+Added: Income tax effect ( 166 ) 525 — — — —
+Added: Other comprehensive (loss) income ( 46,670 ) 3,202 3,130
Comprehensive income 360,639 396,430 355,568
20 unchanged sentences
Gain from deconsolidation of ALLO, including cash impact — — ( 287,579 )
−Removed: Loss on (gain from) debt repurchases 6,530 ( 1,962 ) ( 136 )
−Removed: Loss on (gain from) investments, net 721 ( 46,019 ) ( 3,969 )
−Removed: Purchases of equity securities, net ( 42,916 ) — —
−Removed: Deferred income tax expense (benefit) 47,423 23,747 ( 19,183 )
+Added: (Gain) loss from repurchases of debt, net ( 1,324 ) 6,530 ( 1,962 )
+Added: Loss (gain) on investments, net 51,175 721 ( 46,019 )
+Added: Proceeds from sale (purchases) of equity securities, net 42,841 ( 42,916 ) —
+Added: Deferred income tax expense 39,997 47,423 23,747
Non-cash compensation expense 14,176 10,673 16,739
1 unchanged sentence
Other — — ( 329 )
−Removed: Increase in other assets ( 9,108 ) ( 17,410 ) ( 10,672 )
+Added: Decrease (increase) in other assets 16,140 ( 9,108 ) ( 17,410 )
Increase in other liabilities 10,590 1,784 26,009
3 unchanged sentences
Proceeds from sales of available-for-sale securities 435,937 133,286 168,555
−Removed: Capital distributions/contributions from/to subsidiaries, net 294,578 99,830 449,602
−Removed: Decrease in notes receivable from subsidiaries 20,895 21,343 14,421
+Added: Proceeds from beneficial interest in consumer loan securitization 345 — —
+Added: Capital distributions from subsidiaries, net 7,340 294,578 99,830
+Added: (Increase) decrease in notes receivable from subsidiaries ( 66,698 ) 20,895 21,343
Purchases of subsidiary debt, net ( 36,104 ) ( 335,184 ) ( 25,085 )
1 unchanged sentence
Proceeds from other investments 20,358 129,899 8,564
−Removed: Net cash (used in) provided by investing activities ( 507,354 ) ( 123,993 ) 444,843
+Added: Net cash used in investing activities ( 474,739 ) ( 507,354 ) ( 123,993 )
Cash flows from financing activities:
7 unchanged sentences
Issuance of noncontrolling interest — — 194,985
−Removed: Net cash provided by (used in) financing activities 400,340 260,992 ( 369,867 )
+Added: Net cash provided by financing activities 93,522 400,340 260,992
Net (decrease) increase in cash, cash equivalents, and restricted cash ( 12,516 ) ( 8,421 ) 80,247
303 unchanged sentences
The rates for special allowance payments are based on formulas that differ according to the type of loan, the date the loan was originally made or insured, and the type of funds used to finance the loan (taxable or tax-exempt).
+Added: Replacement of LIBOR with SOFR
+Added: Lenders who did not elect the alternate calculation formula provided by the Military Construction and Veterans Affairs and Related Agencies Appropriations Act of 2012 and are still using the 1 Month London Inter Bank Offered Rate (LIBOR) rate for SAP calculations will need to switch to a new calculation formula by July 1, 2023 as the publication of the LIBOR index is being discontinued.
+Added: The Department of Education published Dear Colleague Letter GEN-22-12 to detail the process for lenders to transition from LIBOR to the Secured Overnight Financing Rate (SOFR).
+Added: Lenders can transition to the new formula prior to July 1, 2023 or will be automatically be changed beginning for the 3 rd quarter on 2023.
Stafford Loans.
27 unchanged sentences
For PLUS and SLS Loans made prior to July 1, 1994, and PLUS loans made on or after July 1, 1998, which bear interest at rates adjusted annually, special allowance payments are made only in quarters during which the interest rate ceiling on such loans operates to reduce the rate that would otherwise apply based upon the applicable formula.
−Removed: See “Interest Rates for PLUS
−Removed: Loans” and “Interest Rates for SLS Loans.” Special allowance payments are available on variable rate PLUS Loans and SLS Loans made on or after July 1, 1987, and before July 1, 1994, and on any PLUS Loans made on or after July 1, 1998, and before January 1, 2000, only if the variable rate, which is reset annually, based on the weekly average one-year constant maturity Treasury yield for loans made before July 1, 1998, and based on the 91-day or 52-week Treasury bill, as applicable for loans made on or after July 1, 1998, exceeds the applicable maximum borrower rate.
+Added: See “Interest Rates for PLUS Loans” and “Interest Rates for SLS Loans.” Special allowance payments are available on variable rate PLUS Loans and SLS Loans made on or after July 1, 1987, and before July 1, 1994, and on any PLUS Loans made on or after July 1, 1998, and before January 1, 2000, only if the variable rate, which is reset annually, based on the weekly average one-year constant maturity Treasury yield for loans made before July 1, 1998, and based on the 91-day or 52-week Treasury bill, as applicable for loans made on or after July 1, 1998, exceeds the applicable maximum borrower rate.
The maximum borrower rate is between 9% and 12% per annum.
25 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.