4 unchanged sentences
The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:
−Removed: As of June 30, 2024 As of December 31, 2023
+Added: As of September 30, 2024 As of December 31, 2023
Dollars Percent Dollars Percent
11 unchanged sentences
Depending on the type of loan and when it was originated, the borrower rate is either fixed to term or is reset to an annual rate each July 1.
−Removed: As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate floor income.
+Added: As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate
+Added: floor income.
All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department.
3 unchanged sentences
A summary of fixed rate floor income earned by the AGM operating segment follows.
−Removed: Three months ended June 30, Six months ended June 30,
+Added: Three months ended September 30, Nine months ended September 30,
2024 2023 2024 2023
3 unchanged sentences
(a) Derivative settlements consist of settlements received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
−Removed: Gross fixed rate floor income decreased for the three and six months ended June 30, 2024 compared with the same periods in 2023 due to higher interest rates in 2024 compared with 2023.
+Added: Gross fixed rate floor income decreased for the three and nine months ended September 30, 2024 compared with the same periods in 2023 due to higher interest rates in 2024 compared with 2023.
The Company had a significant portfolio of derivative instruments in which the Company paid a fixed rate and received a floating rate to economically hedge loans earning fixed rate floor income.
During the first quarter of 2023, to minimize the Company's exposure to market volatility and increase liquidity, the Company terminated its derivative portfolio hedging loans earning fixed rate floor income ($2.8 billion in notional amount of derivatives).
−Removed: Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to current period settlements.
+Added: Through March 15, 2023, the Company had received cash or had a receivable from its clearinghouse related to variation margin equal to the fair value of the $2.8 billion notional amount of fixed rate floor derivatives as of March 15, 2023 of $183.2 million, which included $19.1 million related to 2023 settlements.
Subsequent to terminating these derivatives, during the second and fourth quarters of 2023, the Company entered into a total of $400.0 million notional amount of derivatives to hedge loans earning fixed rate floor income and other loans and investments in which the Company receives a fixed rate.
−Removed: The increase in net derivative settlements received by the Company during the three months ended June 30, 2024, compared with the same period in 2023, was due to an increase in the notional amount of derivatives outstanding.
−Removed: The decrease in net derivative settlements received by the Company during the six months ended June 30, 2024, compared with the same period in 2023, was due to a decrease in the notional amount of derivatives outstanding and less favorable terms on the $400.0 million of notional derivatives entered into in 2023 compared with the $2.8 billion notional derivatives that were terminated due to an increase in interest rates from when the terminated derivatives were initially executed.
+Added: The increase in net derivative settlements received by the Company during the three months ended September 30, 2024, compared with the same period in 2023, was due to an increase in the notional amount of derivatives outstanding.
+Added: The decrease in net derivative settlements received by the Company during the nine months ended September 30, 2024, compared with the same period in 2023, was due to a decrease in the notional amount of derivatives outstanding and less favorable terms on the $400.0 million of notional derivatives entered into in 2023 compared with the $2.8 billion notional derivatives that were terminated due to an increase in interest rates from when the terminated derivatives were initially executed.
For further details of the Company’s derivatives used to hedge fixed rate loans, see note 5 of the notes to consolidated financial statements included in Part I, Item 1 of this report.
−Removed: The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of June 30, 2024.
+Added: The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of September 30, 2024.
Fixed interest rate range Borrower/lender weighted average yield Estimated variable conversion rate (a) Loan balance
2 unchanged sentences
(a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate.
−Removed: As of June 30, 2024, the weighted average estimated variable conversion rate was 5.93% and the short-term interest rate was 556 basis points.
+Added: As of September 30, 2024, the weighted average estimated variable conversion rate was 5.90% and the short-term interest rate was 556 basis points.
AGM is also exposed to interest rate risk in the form of repricing risk and basis risk because the interest rate characteristics of AGM’s assets do not match the interest rate characteristics of the funding for those assets.
−Removed: The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of June 30, 2024.
+Added: The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of September 30, 2024.
Index Frequency of variable resets Assets Funding of student loan assets
12 unchanged sentences
The Company entered into these derivative instruments to better match the interest rate characteristics on its student loan assets and the debt funding such assets.
−Removed: The following table summarizes the 1:3 Basis Swaps outstanding as of June 30, 2024.
+Added: The following table summarizes the 1:3 Basis Swaps outstanding as of September 30, 2024.
Maturity Notional amount (i)
2026 $ 1,150,000
−Removed: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2024 was the term adjusted SOFR (plus the tenor spread adjustment relating to LIBOR) plus 10.4 basis points.
+Added: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2024 was the term adjusted SOFR (plus the tenor spread adjustment relating to LIBOR) plus 10.4 basis points.
(b) The interest rate on the Company's FFELP warehouse facilities is indexed to asset-backed commercial paper rates and daily SOFR.
−Removed: (c) As of June 30, 2024, the Company was sponsor for $75.7 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (the “Auction Rate Securities”).
+Added: (c) As of September 30, 2024, the Company was sponsor for $70.2 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (the “Auction Rate Securities”).
Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture.
13 unchanged sentences
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
−Removed: Three months ended June 30, 2024
+Added: Three months ended September 30, 2024
Effect on earnings:
3 unchanged sentences
Increase in basic and diluted earnings per share $ 0.02 $ 0.09 $ 0.02 $ 0.09
−Removed: Three months ended June 30, 2023
+Added: Three months ended September 30, 2023
Effect on earnings:
Increase in pre-tax net income before impact of derivative settlements $ 522 1.0 % $ 2,093 4.0 % $ 2,166 4.1 % $ 9,199 17.4 %
−Removed: Impact of derivative settlements (a) 33 0.1 99 0.3 (33) (0.1) (99) (0.3)
+Added: Impact of derivative settlements 126 0.2 378 0.7 (126) (0.2) (378) (0.7)
Increase in net income before taxes $ 648 1.2 % $ 2,471 4.7 % $ 2,040 3.9 % $ 8,821 16.7 %
Increase in basic and diluted earnings per share $ 0.01 $ 0.05 $ 0.04 $ 0.18
−Removed: Six months ended June 30, 2024
+Added: Nine months ended September 30, 2024
Effect on earnings:
3 unchanged sentences
Increase in basic and diluted earnings per share $ 0.08 $ 0.29 $ 0.06 $ 0.32
−Removed: Six months ended June 30, 2023
+Added: Nine months ended September 30, 2023
Effect on earnings:
11 unchanged sentences
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
−Removed: Three months ended June 30, 2024 Three months ended June 30, 2023
+Added: Three months ended September 30, 2024 Three months ended September 30, 2023
Effect on earnings:
3 unchanged sentences
Decrease in basic and diluted earnings per share $ (0.01) $ (0.03) $ (0.01) $ (0.02)
−Removed: Six months ended June 30, 2024 Six months ended June 30, 2023
+Added: Nine months ended September 30, 2024 Nine months ended September 30, 2023
Effect on earnings:
6 unchanged sentences
To achieve this objective, the Company manages and mitigates Nelnet Bank’s exposure to fluctuations in market interest rates through several techniques, including managing the maturity, repricing, and mix of fixed and variable rate assets and liabilities and the use of derivative instruments.
−Removed: The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits by rate characteristics:
−Removed: As of June 30, 2024 As of December 31, 2023
+Added: The following table presents Nelnet Bank's loan assets, asset-backed security investments, and deposits (including intercompany deposits) by rate characteristics:
+Added: As of September 30, 2024 As of December 31, 2023
Dollars Percent Dollars Percent
11 unchanged sentences
The derivatives are not reflected in the above table.
−Removed: See note 5 of the notes to consolidated financial statements included under Part I, Item 1 of this report for a summary of Nelnet Bank's derivatives outstanding as of June 30, 2024.
+Added: See note 5 of the notes to consolidated financial statements included under Part I, Item 1 of this report for a summary of Nelnet Bank's derivatives outstanding as of September 30, 2024.
Interest Rate and Market Risk - Investments
2 unchanged sentences
Average balance Interest income/ expense Average yields/ rates Average balance Interest income/ expense Average yields/ rates
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Asset-backed securities available-for-sale (a) (b) $ 818,421 11,502 5.58 % $ 887,549 11,448 5.12 %
3 unchanged sentences
$ 109,033 1,782 6.48 $ 340,126 5,661 6.60
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Asset-backed securities available-for-sale (a) (b) $ 836,400 39,612 6.31 % $ 1,018,489 44,058 5.78 %
9 unchanged sentences
(b) The majority of the Company’s asset-backed securities earn floating rates with expected returns of approximately SOFR + 100 to 350 basis points to maturity.
−Removed: As of June 30, 2024, $206.5 million (par value) of the Company’s asset-backed securities earn a weighted average fixed rate of 3.22%.
+Added: As of September 30, 2024, $206.9 million (par value) of the Company’s asset-backed securities earn a weighted average fixed rate of 3.32%.
(c) Interest incurred by the Company on amounts borrowed under the participation agreement is at a variable rate of SOFR + 62.5 basis points.
1 unchanged sentence
The Company’s portfolio of asset-backed investment securities has limited liquidity, and the Company could incur a significant loss if the investments were sold prior to maturity at an amount less than the original purchase price.
−Removed: As of June 30, 2024, the gross unrealized loss on the Company’s available-for-sale debt securities was $26.7 million, and the aggregate fair value of available-for-sale debt securities with unrealized losses was $401.2 million.
+Added: As of September 30, 2024, the gross unrealized loss on the Company’s available-for-sale debt securities was $23.3 million, and the aggregate fair value of available-for-sale debt securities with unrealized losses was $367.0 million.
The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.
1 unchanged sentence
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.