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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022 
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to . 
Commission File Number: 001-31924
nni-20220630_g1.jpg
NELNET, INC.
(Exact name of registrant as specified in its charter)
Nebraska
84-0748903
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
121 South 13th Street, Suite 100
Lincoln,Nebraska68508
(Address of principal executive offices)
(Zip Code)
(402) 458-2370
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, Par Value $0.01 per ShareNNINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                       Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                             Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer                                                      Accelerated filer
Non-accelerated filer                     Smaller reporting company
        Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
As of July 31, 2022, there were 26,540,797 and 10,674,892 shares of Class A Common Stock and Class B Common Stock, par value $0.01 per share, outstanding, respectively (excluding a total of 11,305,731 shares of Class A Common Stock held by wholly owned subsidiaries).




NELNET, INC.
FORM 10-Q
INDEX
June 30, 2022







PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(unaudited)
 
As of
As of
 June 30, 2022December 31, 2021
Assets:  
Loans and accrued interest receivable (net of allowance for loan losses of $120,424 and
   $127,113, respectively)
$16,916,344 18,335,197 
Cash and cash equivalents:  
Cash and cash equivalents - not held at a related party32,849 30,128 
Cash and cash equivalents - held at a related party95,650 95,435 
Total cash and cash equivalents128,499 125,563 
Investments and notes receivable1,988,450 1,588,919 
Restricted cash754,693 741,981 
Restricted cash - due to customers290,850 326,645 
Accounts receivable (net of allowance for doubtful accounts of $1,342 and $1,160, respectively)
119,774 163,315 
Goodwill149,117 142,092 
Intangible assets, net70,086 52,029 
Property and equipment, net123,738 119,413 
Other assets82,462 82,887 
Total assets$20,624,013 21,678,041 
Liabilities:  
Bonds and notes payable$16,115,269 17,631,089 
Accrued interest payable12,963 4,566 
Bank deposits588,474 344,315 
Other liabilities406,686 379,231 
Due to customers409,476 366,002 
Total liabilities17,532,868 18,725,203 
Commitments and contingencies
Equity:
Nelnet, Inc. shareholders' equity:  
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding
— — 
Common stock:
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 26,613,733
     shares and 27,239,654 shares, respectively
266 272 
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding
     10,674,892 shares and 10,676,642 shares, respectively
107 107 
Additional paid-in capital1,180 1,000 
Retained earnings3,127,687 2,940,523 
Accumulated other comprehensive (loss) earnings, net(31,858)9,304 
Total Nelnet, Inc. shareholders' equity3,097,382 2,951,206 
Noncontrolling interests(6,237)1,632 
Total equity3,091,145 2,952,838 
Total liabilities and equity$20,624,013 21,678,041 
Supplemental information - assets and liabilities of consolidated education lending
     variable interest entities:
Loans and accrued interest receivable$16,294,069 17,981,414 
Restricted cash678,871 674,073 
Bonds and notes payable(15,823,651)(17,462,456)
Accrued interest payable and other liabilities(60,461)(36,276)
Net assets of consolidated education lending variable interest entities$1,088,828 1,156,755 
See accompanying notes to consolidated financial statements.
2


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited)
 Three months endedSix months ended
 June 30,June 30,
 2022202120222021
Interest income:  
Loan interest$134,706 122,005 246,083 246,123 
Investment interest16,881 11,578 30,700 16,563 
Total interest income151,587 133,583 276,783 262,686 
Interest expense on bonds and notes payable and bank deposits73,642 49,991 121,721 77,764 
Net interest income77,945 83,592 155,062 184,922 
Less provision (negative provision) for loan losses9,409 374 8,974 (16,674)
Net interest income after provision for loan losses68,536 83,218 146,088 201,596 
Other income/expense: 
Loan servicing and systems revenue124,873 112,094 261,241 223,611 
Education technology, services, and payment processing revenue91,031 76,702 203,317 171,960 
Other12,647 22,921 22,524 18,317 
Gain on sale of loans— 15,271 2,989 15,271 
Impairment expense and provision for beneficial interests, net(6,284)(500)(6,284)1,936 
Derivative market value adjustments and derivative settlements, net45,024 (6,989)187,949 27,516 
Total other income/expense267,291 219,499 671,736 458,611 
Cost to provide education technology, services, and payment processing services30,852 21,676 66,397 48,728 
Operating expenses:  
Salaries and benefits141,398 118,968 290,813 234,759 
Depreciation and amortization18,250 20,236 35,206 40,419 
Other expenses36,940 32,587 76,439 69,286 
Total operating expenses196,588 171,791 402,458 344,464 
Income before income taxes108,387 109,250 348,969 267,015 
Income tax expense25,483 26,237 81,180 61,098 
Net income82,904 83,013 267,789 205,917 
Net loss attributable to noncontrolling interests2,225 854 3,987 1,548 
Net income attributable to Nelnet, Inc.$85,129 83,867 271,776 207,465 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted
$2.26 2.16 7.18 5.36 
Weighted average common shares outstanding - basic and diluted
37,710,214 38,741,486 37,875,108 38,672,902 
    
See accompanying notes to consolidated financial statements.
3


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)
Three months ended June 30,Six months ended June 30,
2022202120222021
Net income$82,904 83,013 267,789 205,917 
Other comprehensive (loss) income:
Net changes related to foreign currency translation adjustments$(8)(1)— 
Net changes related to available-for-sale debt securities:
Unrealized holding (losses) gains arising during period, net(33,822)2,897 (50,520)7,246 
Reclassification of gains recognized in net income, net of losses(849)(371)(3,642)(879)
Income tax effect8,321 (26,350)(606)1,920 12,999 (41,163)(1,528)4,839 
Other comprehensive (loss) income (26,358)1,919 (41,162)4,839 
Comprehensive income56,546 84,932 226,627 210,756 
Comprehensive loss attributable to noncontrolling interests2,225 854 3,987 1,548 
Comprehensive income attributable to Nelnet, Inc.$58,771 85,786 230,614 212,304 

See accompanying notes to consolidated financial statements.
4


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share data)
(unaudited)
 
Nelnet, Inc. Shareholders
 Preferred stock sharesCommon stock sharesPreferred stockClass A common stockClass B common stockAdditional paid-in capital Retained earningsAccumulated other comprehensive (loss) earningsNoncontrolling interestsTotal equity
 Class AClass B
Balance as of March 31, 2021— 27,367,797 11,154,171 $— 274 112 5,859 2,736,923 9,022 (3,089)2,749,101 
Issuance of noncontrolling interests— — — — — — — — — 5,488 5,488 
Net income (loss)— — — — — — — 83,867 — (854)83,013 
Other comprehensive income— — — — — — — — 1,919 — 1,919 
Distribution to noncontrolling interests— — — — — — — — — (6,727)(6,727)
Cash dividends on Class A and Class B common stock - $0.22 per share
— — — — — — — (8,475)— — (8,475)
Issuance of common stock, net of forfeitures— 32,513 — — — — 1,824 — — — 1,824 
Compensation expense for stock based awards— — — — — — 2,874 — — — 2,874 
Repurchase of common stock— (5,368)— — — — (399)— — — (399)
Conversion of common stock— 100,000 (100,000)— (1)— — — — — 
Balance as of June 30, 2021— 27,494,942 11,054,171 $— 275 111 10,158 2,812,315 10,941 (5,182)2,828,618 
Balance as of March 31, 2022— 27,151,270 10,674,892 $— 272 107 1,208 3,092,226 (5,500)(3,250)3,085,063 
Issuance of noncontrolling interests— — — — — — — — — 9,275 9,275 
Net income (loss)— — — — — — — 85,129 — (2,225)82,904 
Other comprehensive loss— — — — — — — — (26,358)— (26,358)
Distribution to noncontrolling interests— — — — — — — — — (10,037)(10,037)
Cash dividends on Class A and Class B common stock - $0.24 per share
— — — — — — — (8,973)— — (8,973)
Issuance of common stock, net of forfeitures— 20,720 — — — — 2,116 — — — 2,116 
Compensation expense for stock based awards— — — — — — 3,187 — — — 3,187 
Repurchase of common stock— (558,257)— — (6)— (5,331)(40,695)— — (46,032)
Balance as of June 30, 2022— 26,613,733 10,674,892 $— 266 107 1,180 3,127,687 (31,858)(6,237)3,091,145 

See accompanying notes to consolidated financial statements.

5


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share data)
(unaudited)
Nelnet, Inc. Shareholders
Preferred stock sharesCommon stock sharesPreferred stockClass A common stockClass B common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive (loss) earningsNoncontrolling interestsTotal equity
Class AClass B
Balance as of December 31, 2020— 27,193,154 11,155,571 $— 272 112 3,794 2,621,762 6,102 (3,693)2,628,349 
Issuance of noncontrolling interests— — — — — — — — — 6,888 6,888 
Net income (loss)— — — — — — — 207,465 — (1,548)205,917 
Other comprehensive income— — — — — — — — 4,839 — 4,839 
Distribution to noncontrolling interests— — — — — — — — — (6,829)(6,829)
Cash dividends on Class A and Class B common stock - $0.44 per share
— — — — — — — (16,912)— — (16,912)
Issuance of common stock, net of forfeitures— 231,955 — — — 3,913 — — — 3,915 
Compensation expense for stock based awards— — — — — — 4,859 — — — 4,859 
Repurchase of common stock— (31,567)— — — — (2,408)— — — (2,408)
Conversion of common stock— 101,400 (101,400)— (1)— — — — — 
Balance as of June 30, 2021— 27,494,942 11,054,171 $— 275 111 10,158 2,812,315 10,941 (5,182)2,828,618 
Balance as of December 31, 2021— 27,239,654 10,676,642 $— 272 107 1,000 2,940,523 9,304 1,632 2,952,838 
Issuance of noncontrolling interests— — — — — — — — — 11,279 11,279 
Net income (loss)— — — — — — — 271,776 — (3,987)267,789 
Other comprehensive loss— — — — — — — — (41,162)— (41,162)
Distribution to noncontrolling interests— — — — — — — — — (15,161)(15,161)
Cash dividends on Class A and Class B common stock - $0.48 per share
— — — — — — — (18,035)— — (18,035)
Issuance of common stock, net of forfeitures— 310,639 — — — 6,498 — — — 6,501 
Compensation expense for stock based awards— — — — 6,027 — — — 6,027 
Repurchase of common stock— (938,310)— — (9)— (12,345)(66,577)— — (78,931)
Conversion of common stock— 1,750 (1,750)— — — — — — — — 
Balance as of June 30, 2022— 26,613,733 10,674,892 $— 266 107 1,180 3,127,687 (31,858)(6,237)3,091,145 

See accompanying notes to consolidated financial statements.



6


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 Six months ended
June 30,
 20222021
Net income attributable to Nelnet, Inc.$271,776 207,465 
Net loss attributable to noncontrolling interests(3,987)(1,548)
Net income267,789 205,917 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs74,080 76,754 
Loan discount accretion(19,554)(14,606)
Provision (negative provision) for loan losses8,974 (16,674)
Derivative market value adjustments(186,135)(37,194)
Proceeds from termination of derivative instruments, net68,021 — 
Proceeds from clearinghouse - initial and variation margin, net of payments133,622 38,440 
Gain on sale of loans(2,989)(15,271)
Loss on investments, net3,207 812 
(Gain) loss from repurchases of debt, net(1,071)695 
Proceeds from sale (purchases) of equity securities, net42,398 (19,764)
Deferred income tax expense49,890 18,173 
Non-cash compensation expense6,171 4,980 
Provision (negative provision) for beneficial interests and impairment expense, net6,284 (1,936)
Decrease (increase) in loan and investment accrued interest receivable184 (40,488)
Decrease (increase) in accounts receivable44,786 (9,446)
(Increase) decrease in other assets, net(8,015)32,241 
Decrease in the carrying amount of ROU asset, net2,735 3,962 
Increase (decrease) in accrued interest payable8,397 (23,779)
Decrease in other liabilities, net(12,200)(13,663)
Decrease in the carrying amount of lease liability(2,860)(3,288)
Net cash provided by operating activities483,714 185,865 
Cash flows from investing activities:
 
 
Purchases and originations of loans(396,486)(1,040,573)
Purchases of loans from a related party(7,675)(20,847)
Net proceeds from loan repayments, claims, and capitalized interest1,792,930 1,047,645 
Proceeds from sale of loans15,278 65,224 
Purchases of available-for-sale securities(735,140)(363,485)
Proceeds from sales of available-for-sale securities319,752 38,511 
Proceeds from beneficial interest in loan securitizations13,212 19,077 
Purchases of other investments and issuance of notes receivable(147,400)(128,011)
Proceeds from other investments23,955 167,821 
Purchases of property and equipment(34,152)(28,784)
Business acquisition, net of cash acquired(7,320)— 
Net cash provided by (used in) investing activities836,954 (243,422)
7


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six months ended
June 30,
20222021
Cash flows from financing activities:  
Payments on bonds and notes payable$(1,695,697)(1,073,523)
Proceeds from issuance of bonds and notes payable159,931 1,114,821 
Payments of debt issuance costs(851)(3,035)
Increase in bank deposits, net244,159 148,208 
Increase in due to customers43,544 1,746 
Dividends paid(18,035)(16,912)
Repurchases of common stock(78,931)(2,408)
Proceeds from issuance of common stock801 689 
Issuance of noncontrolling interests5,142 7,480 
Distribution to noncontrolling interests(699)(423)
Net cash (used in) provided by financing activities(1,340,636)176,643 
Effect of exchange rate changes on cash(179)(108)
Net (decrease) increase in cash, cash equivalents, and restricted cash(20,147)118,978 
Cash, cash equivalents, and restricted cash, beginning of period1,194,189 958,395 
Cash, cash equivalents, and restricted cash, end of period$1,174,042 1,077,373 
Supplemental disclosures of cash flow information:
Cash disbursements made for interest$89,281 78,904 
Cash disbursements made for income taxes, net of refunds and credits received (a)$21,137 14,229 
Cash disbursements made for operating leases$3,538 4,096 
Non-cash operating, investing, and financing activity:
ROU assets obtained in exchange for lease obligations$746 823 
Receipt of beneficial interest in consumer loan securitization$3,660 19,280 
Distribution to noncontrolling interests$14,462 6,406 
Issuance of noncontrolling interests$6,137 592 
(a) The Company utilized $4.1 million and $22.0 million of federal and state tax credits related primarily to renewable energy during the six months ended June 30, 2022 and 2021, respectively.
Supplemental disclosures of noncash activities regarding the Company's business acquisition are contained in note 6.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total of the amounts reported in the consolidated statements of cash flows.
As ofAs ofAs ofAs of
June 30, 2022December 31, 2021June 30, 2021December 31, 2020
Total cash and cash equivalents$128,499 125,563 212,989 121,249 
Restricted cash754,693 741,981 616,711 553,175 
Restricted cash - due to customers290,850 326,645 247,673 283,971 
Cash, cash equivalents, and restricted cash
$1,174,042 1,194,189 1,077,373 958,395 
See accompanying notes to consolidated financial statements.
8


NELNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise noted)
(unaudited)

1.  Basis of Financial Reporting
The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2021 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022. The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report").
Reclassification of Prior Period Cash Flows Presentation
The line item in the Company's consolidated statements of cash flows for changes during a period in amounts "due to customers" was previously presented in cash flows from operating activities, and has been corrected for the periods presented in this report (including the prior year period) to be presented in cash flows from financing activities. This correction has no impact on the Company's previously reported consolidated net income, total assets (including cash and cash equivalents), liabilities, and equity, and while the correction has a corresponding impact on the amounts of cash flows from operating and financing activities, it has no impact on the net increase or decrease in cash for previously reported periods. The Company has concluded that the correction was not material from a combined quantitative and qualitative perspective to its previously issued interim financial statements for 2022, or its previously issued financial statements for 2021, 2020, and 2019.
9


2.  Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable consisted of the following:
As ofAs of
 June 30, 2022December 31, 2021
Non-Nelnet Bank:
Federally insured student loans:
Stafford and other$3,548,901 3,904,000 
Consolidation11,880,710 13,187,047 
Total15,429,611 17,091,047 
Private education loans272,943 299,442 
Consumer and other loans152,583 51,301 
Non-Nelnet Bank loans15,855,137 17,441,790 
Nelnet Bank:
Federally insured student loans77,428 88,011 
Private education loans346,125 169,890 
Nelnet Bank loans423,553 257,901 
Accrued interest receivable780,691 788,552 
Loan discount, net of unamortized loan premiums and deferred origination costs(22,613)(25,933)
Allowance for loan losses:
Non-Nelnet Bank:
Federally insured loans(92,593)(103,381)
Private education loans(15,253)(16,143)
Consumer and other loans(10,576)(6,481)
Non-Nelnet Bank allowance for loan losses(118,422)(126,005)
Nelnet Bank:
Federally insured loans(258)(268)
Private education loans(1,744)(840)
Nelnet Bank allowance for loan losses(2,002)(1,108)
 $16,916,344 18,335,197 
The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.
As ofAs of
June 30, 2022December 31, 2021
Non-Nelnet Bank:
Federally insured student loans (a)0.60 %0.60 %
Private education loans5.59 %5.39 %
Consumer and other loans (b)6.93 %12.63 %
Nelnet Bank:
Federally insured student loans (a)0.33 %0.30 %
Private education loans0.50 %0.49 %
(a)    As of June 30, 2022 and December 31, 2021, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 21.8% and 22.2%, respectively, and for Nelnet Bank was 13.2% and 12.1%, respectively.
(b)    During the second quarter of 2022, the Company purchased home equity loans that generally have lower default rates than unsecured consumer loans. As such, the allowance for loan losses as a percentage of the ending loan balance has decreased as of June 30, 2022 as compared to December 31, 2021.
Gain on Sale of Loans
On January 26, 2022, the Company sold $18.1 million (par value) of consumer loans to an unrelated third party who securitized such loans. The Company recognized a gain of $3.0 million (pre-tax) as part of this transaction. As partial consideration received for the consumer loans sold, the Company received a 6.6 percent residual interest in the consumer loan securitization, which is included in "investments and notes receivable" on the Company's consolidated balance sheet.
10


Activity in the Allowance for Loan Losses
The following table presents the activity in the allowance for loan losses by portfolio segment.
Balance at beginning of periodProvision (negative provision) for loan lossesCharge-offsRecoveriesInitial allowance on loans purchased with credit deterioration (a)Loan salesBalance at end of period
Three months ended June 30, 2022
Non-Nelnet Bank:
Federally insured loans$95,995 2,365 (5,788)— 21 — 92,593 
Private education loans14,622 1,217 (707)118 — 15,253 
Consumer and other loans5,710 5,245 (531)152 — — 10,576 
Nelnet Bank:
Federally insured loans247 13 (2)— — — 258 
Private education loans1,251 569 (73)— — (3)1,744 
$117,825 9,409 (7,101)270 21 — 120,424 
Three months ended June 30, 2021
Non-Nelnet Bank:
Federally insured loans$121,846 (397)(1,172)— 525 — 120,802 
Private education loans20,670 (1,004)(403)139 — 19,403 
Consumer and other loans14,134 1,706 (1,464)235 — (9,909)4,702 
Nelnet Bank:
Federally insured loans— 245 — — — — 245 
Private education loans744 (176)— — — (1)567 
$157,394 374 (3,039)374 525 (9,909)145,719 
Six months ended June 30, 2022
Non-Nelnet Bank
Federally insured loans$103,381 (383)(10,549)— 144 — 92,593 
Private education loans16,143 817 (2,006)295 — 15,253 
Consumer and other loans6,481 7,529 (1,469)319 — (2,284)10,576 
Nelnet Bank
Federally insured loans268 (8)(2)— — — 258 
Private education loans840 995 (87)— — (4)1,744 
$127,113 8,950 (14,113)614 144 (2,284)120,424 
Six months ended June 30, 2021
Non-Nelnet Bank
Federally insured loans$128,590 (7,880)(1,233)— 1,325 — 120,802 
Private education loans19,529 427 (896)341 — 19,403 
Consumer and other loans27,256 (9,712)(3,414)481 — (9,909)4,702 
Nelnet Bank
Federally insured loans— 245 — — — — 245 
Private education loans323 246 — — — (2)567 
$175,698 (16,674)(5,543)822 1,325 (9,909)145,719 
(a)    During the three months ended June 30, 2022 and 2021, and six months ended June 30, 2022 and 2021, the Company acquired $1.6 million (par value), $34.7 million (par value), $10.8 million (par value), and $88.7 million (par value), respectively, of federally insured rehabilitation loans that met the definition of purchased loans with credit deterioration ("PCD loans") when they were purchased by the Company.
The Company recorded a negative provision for loan losses for its federally insured loan portfolio for the three months ended March 31, 2022 due to the amortization of the portfolio and an increase in expected prepayments as a result of an initiative offered by the Department of Education (the “Department”) for Federal Family Education Loan Program ("FFELP" or "FFEL Program") borrowers to consolidate their loans into Federal Direct Loan Program loans with the Department by October 31, 2022 to qualify for loan forgiveness under the Public Service Loan Forgiveness program. The Company recorded a provision for loan losses on its consumer loan portfolio during the three months ended March 31, 2022 as a result of loans acquired during the period.
11


The Company recorded a provision for loan losses for its federally insured, private education, consumer, and other loan portfolios for the three months ended June 30, 2022 due to management's estimate of worsening economic conditions as of June 30, 2022 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2022. In addition, the Company recorded provision for loan losses on its consumer and other loan portfolio during the three months ended June 30, 2022 as a result of loans acquired during the period. The provision for loan losses recognized by the Company for its federally insured loan portfolio during the three months ended June 30, 2022 was partially offset due to the continued amortization of the portfolio and an increase in the estimate of prepayments as of June 30, 2022 in comparison to management's estimate used to determine the allowance for loan losses as of March 31, 2022.
Unfunded Private Education Loan Commitments
As of June 30, 2022, Nelnet Bank has a liability of approximately $36,000 related to $3.0 million of unfunded private education loan commitments. The liability for unfunded loan commitments is included in "other liabilities" on the consolidated balance sheet. During the six months ended June 30, 2022, Nelnet Bank recognized provision for loan losses of approximately $24,000 related to unfunded loan commitments.
Key Credit Quality Indicators
Loan Status and Delinquencies
Key credit quality indicators for the Company's federally insured, private education, 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. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The table below shows the Company’s loan status and delinquency amounts.
As of June 30, 2022As of December 31, 2021As of June 30, 2021
Federally insured loans - Non-Nelnet Bank:    
Loans in-school/grace/deferment $763,957 4.9 % $829,624 4.9 % $955,227 5.0 %
Loans in forbearance 1,246,882 8.1  1,118,667 6.5  2,079,368 11.0 
Loans in repayment status:  
Loans current11,551,817 86.1 %12,847,685 84.9 %13,995,297 88.0 %
Loans delinquent 31-60 days464,234 3.5 895,656 5.9 580,602 3.7 
Loans delinquent 61-90 days309,252 2.3 352,449 2.3 262,353 1.6 
Loans delinquent 91-120 days187,452 1.4 251,075 1.7 104,124 0.7 
Loans delinquent 121-270 days638,189 4.7 592,449 3.9 398,965 2.5 
Loans delinquent 271 days or greater267,828 2.0 203,442 1.3 562,928 3.5 
Total loans in repayment13,418,772 87.0 100.0 %15,142,756 88.6 100.0 %15,904,269 84.0 100.0 %
Total federally insured loans15,429,611 100.0 % 17,091,047 100.0 % 18,938,864 100.0 %
Accrued interest receivable775,337 784,716 830,973 
Loan discount, net of unamortized premiums and deferred origination costs(26,674)(28,309)(24,129)
Allowance for loan losses(92,593)(103,381)(120,802)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses$16,085,681 $17,744,073 $19,624,906 
Private education loans - Non-Nelnet Bank:
Loans in-school/grace/deferment $15,403 5.6 %$9,661 3.2 %$10,195 2.9 %
Loans in forbearance 2,447 0.9 3,601 1.2 3,884 1.1 
Loans in repayment status:
Loans current250,268 98.1 %280,457 98.0 %330,097 98.3 %
Loans delinquent 31-60 days1,980 0.8 2,403 0.8 3,962 1.2 
Loans delinquent 61-90 days782 0.3 976 0.3 818 0.2 
Loans delinquent 91 days or greater2,063 0.8 2,344 0.9 1,138 0.3 
Total loans in repayment255,093 93.5 100.0 %286,180 95.6 100.0 %336,015 96.0 100.0 %
Total private education loans272,943 100.0 % 299,442 100.0 % 350,094 100.0 %
Accrued interest receivable2,058 1,960 2,360 
Loan premium, net of unamortized discount94 (1,123)(1,547)
Allowance for loan losses(15,253)(16,143)(19,403)
Total private education loans and accrued interest receivable, net of allowance for loan losses$259,842 $284,136 $331,504 
12


As of June 30, 2022As of December 31, 2021As of June 30, 2021
Consumer and other loans - Non-Nelnet Bank:
Loans in deferment$64 0.0 %$43 0.1 %$38 0.1 %
Loans in repayment status:
Loans current150,812 98.9 %49,697 97.0 %41,039 96.1 %
Loans delinquent 31-60 days515 0.3 414 0.8 387 0.9 
Loans delinquent 61-90 days435 0.3 322 0.6 484 1.1 
Loans delinquent 91 days or greater757 0.5 825 1.6 819 1.9 
Total loans in repayment152,519 100.0 100.0 %51,258 99.9 100.0 %42,729 99.9 %100.0 %
Total consumer and other loans152,583 100.0 %51,301 100.0 %42,767 100.0 %
Accrued interest receivable1,376 396 328 
Loan discount, net of unamortized premiums(1,965)913 377 
Allowance for loan losses(10,576)(6,481)(4,702)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses$141,418 $46,129 $38,770 
Federally insured loans - Nelnet Bank (a):
Loans in-school/grace/deferment$283 0.4 %$330 0.4 %$103 0.1 %
Loans in forbearance1,029 1.3 1,057 1.2 1,026 1.1 
Loans in repayment status:
Loans current74,883 98.4 %85,599 98.8 %95,402 99.3 %
Loans delinquent 30-59 days587 0.8 816 1.0 593 0.6 
Loans delinquent 60-89 days165 0.2 — — 43 0.1 
Loans delinquent 90-119 days245 0.3 — — — — 
Loans delinquent 120-270 days236 0.3 209 0.2 — — 
Loans delinquent 271 days or greater— — — — — — 
Total loans in repayment76,116 98.3 100.0 %86,624 98.4 100.0 %96,038 98.8 100.0 %
Total federally insured loans77,428 100.0 %88,011 100.0 %97,167 100.0 %
Accrued interest receivable1,381 1,216 1,179 
Loan premium23 26 29 
Allowance for loan losses(258)(268)(245)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses$78,574 $88,985 $98,130 
Private education loans - Nelnet Bank (a):
Loans in-school/grace/deferment$1,160 0.3 %$150 0.1 %$82 0.1 %
Loans in forbearance1,236 0.4 460 0.3 133 0.1 
Loans in repayment status:
Loans current343,148 99.8 %169,157 99.9 %93,189 100.0 %
Loans delinquent 30-59 days169 0.1 51 — — — 
Loans delinquent 60-89 days412 0.1 — — — — 
Loans delinquent 90 days or greater— — 72 0.1 — — 
Total loans in repayment343,729 99.3 100.0 %169,280 99.6 100.0 %93,189 99.8 100.0 %
Total private education loans346,125 100.0 %169,890 100.0 %93,404 100.0 %
Accrued interest receivable539 264 149 
Deferred origination costs5,909 2,560 1,374 
Allowance for loan losses(1,744)(840)(567)
Total private education loans and accrued interest receivable, net of allowance for loan losses$350,829 $171,874 $94,360 
(a) For the periods presented for Nelnet Bank, the delinquency bucket periods conform with the delinquency bucket periods reflected in Nelnet Bank's Call Reports filed with the Federal Deposit Insurance Corporation.

13


FICO Scores - Nelnet Bank Private Education Loans
An additional key credit quality indicator for Nelnet Bank private education loans is FICO scores at the time of origination. The following tables highlight the gross principal balance of Nelnet Bank's private education loan portfolio, by year of origination, stratified by FICO score at the time of origination.
Loan balance as of June 30, 2022
Six months ended June 30, 202220212020Total
FICO at origination:
Less than 705$4,042 5,627 95 9,764 
705 - 73418,060 10,959 264 29,283 
735 - 76431,516 17,165 1,007 49,688 
765 - 79454,493 33,080 1,353 88,926 
Greater than 79485,571 76,274 6,619 168,464 
$193,682 143,105 9,338 346,125 

Loan balance as of December 31, 2021
20212020Total
FICO at origination:
Less than 705$6,481 100 6,581 
705 - 73411,697 276 11,973 
735 - 76418,611 1,072 19,683 
765 - 79436,274 1,467 37,741 
Greater than 79486,141 7,771 93,912 
$159,204 10,686 169,890 
Nonaccrual Status
The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private education, consumer, and other loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2021 and June 30, 2022, was not material.

14


Amortized Cost Basis by Origination Year
The following table presents the amortized cost of the Company's private education, consumer, and other loans by loan status and delinquency amount as of June 30, 2022 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all the Company’s federally insured loans were originated prior to July 1, 2010.
Six months ended June 30, 20222021202020192018Prior yearsTotal
Private education loans - Non-Nelnet Bank:
Loans in school/grace/deferment$1,601 7,311 1,784 3,093 — 1,614 15,403 
Loans in forbearance— — 368 632 47 1,400 2,447 
Loans in repayment status:
Loans current3,947 3,071 57,126 44,044 410 141,670 250,268 
Loans delinquent 31-60 days— — 104 421 — 1,455 1,980 
Loans delinquent 61-90 days— 20 52 — — 710 782 
Loans delinquent 91 days or greater— 111 79 — 1,866 2,063 
Total loans in repayment3,947 3,098 57,393 44,544 410 145,701 255,093 
Total private education loans$5,548 10,409 59,545 48,269 457 148,715 272,943 
Accrued interest receivable2,058 
Loan premium, net of unamortized discount94 
Allowance for loan losses(15,253)
Total private education loans and accrued interest receivable, net of allowance for loan losses$259,842 
Consumer and other loans - Non-Nelnet Bank:
Loans in deferment$16 38 — — 10 — 64 
Loans in repayment status:
Loans current101,890 40,772 1,865 3,118 3,130 37 150,812 
Loans delinquent 31-60 days163 219 26 60 44 515 
Loans delinquent 61-90 days151 194 14 46 30 — 435 
Loans delinquent 91 days or greater68 119 16 196 358 — 757 
Total loans in repayment102,272 41,304 1,921 3,420 3,562 40 152,519 
Total consumer and other loans$102,288 41,342 1,921 3,420 3,572 40 152,583 
Accrued interest receivable1,376 
Loan discount, net of unamortized premiums(1,965)
Allowance for loan losses(10,576)
Total consumer and other loans and accrued interest receivable, net of allowance for loan losses$141,418 
Private education loans - Nelnet Bank (a):
Loans in school/grace/deferment$863 297 — — — — 1,160 
Loans in forbearance665 440 131 — — — 1,236 
Loans in repayment status:
Loans current192,101 141,840 9,207 — — — 343,148 
Loans delinquent 30-59 days— 169 — — — — 169 
Loans delinquent 60-89 days53 359 — — — — 412 
Loans delinquent 90 days or greater— — — — — — — 
Total loans in repayment192,154 142,368 9,207 — — — 343,729 
Total private education loans$193,682 143,105 9,338 — — — 346,125 
Accrued interest receivable539 
Deferred origination costs5,909 
Allowance for loan losses(1,744)
Total private education loans and accrued interest receivable, net of allowance for loan losses$350,829 
(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.
15


3.  Bonds and Notes Payable
The following tables summarize the Company’s outstanding debt obligations by type of instrument:
 As of June 30, 2022
Carrying
amount
Interest rate
range
Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
   
Bonds and notes based on indices$14,323,434 
1.22% - 3.62%
2/27/28 - 9/25/69
Bonds and notes based on auction221,385 
0.00% - 2.30%
3/32/32 - 8/27/46
Total FFELP variable-rate bonds and notes14,544,819 
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations
703,600 
1.42% - 3.45%
10/25/67 - 8/27/68
FFELP loan warehouse facility4,618 
1.64%
11/22/23
Private education loan warehouse facility89,466 1.71%10/31/23
Variable-rate bonds and notes issued in private education loan asset-backed securitizations
24,737 
3.10% / 3.37%
12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization
25,200 
3.60% / 5.35%
12/26/40 / 12/28/43
Unsecured line of credit— 9/22/26
Participation agreement393,480 2.41%5/4/23
Repurchase agreements500,690 
0.97% - 2.81%
8/8/22 - 11/27/24
 16,286,610   
Discount on bonds and notes payable and debt issuance costs(171,341)
Total$16,115,269 

 As of December 31, 2021
Carrying
amount
Interest rate
range
Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:   
Bonds and notes based on indices$15,887,295 
0.23% - 2.10%
5/27/25 - 9/25/69
Bonds and notes based on auction248,550 
0.00% - 1.09%
3/22/32 - 8/27/46
Total FFELP variable-rate bonds and notes16,135,845 
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations772,935 
1.42% - 3.45%
10/25/67 - 8/27/68
FFELP loan warehouse facility5,048 0.21%5/22/23
Private education loan warehouse facility107,011 0.24%2/13/23
Variable-rate bonds and notes issued in private education loan asset-backed securitizations31,818 
1.65% / 1.85%
12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization28,613 
3.60% / 5.35%
12/26/40 / 12/28/43
Unsecured line of credit— 9/22/26
Participation agreement253,969 0.78%5/4/22
Repurchase agreements483,848 
0.66% - 1.46%
5/27/22 - 12/20/23
Secured line of credit5,000 1.91%5/30/22
 17,824,087   
Discount on bonds and notes payable and debt issuance costs(192,998)
Total$17,631,089 


16


Warehouse Facilities
The Company funds a portion of its loan acquisitions using warehouse facilities. Loan warehousing allows the Company to buy and manage loans prior to transferring them into more permanent financing arrangements.
FFELP loan warehouse facility
As of June 30, 2022, the Company’s FFELP warehouse facility had an aggregate maximum financing amount available of $25.0 million that was reduced from $60.0 million per a May 23, 2022 amendment to the facility. The May 2022 amendment also extended the liquidity provisions and final maturity to November 22, 2022 and November 22, 2023, respectively. As of June 30, 2022, $4.6 million was outstanding under this facility, $20.4 million was available for future funding, and the Company had $0.3 million advanced as equity support.
Private education loan warehouse facility
As of June 30, 2022, the Company's private education warehouse facility had an aggregate maximum financing amount available of $175.0 million and an advance rate of 80 to 90 percent. On June 30, 2022, the Company amended the facility to extend the liquidity provisions through October 31, 2022 and final maturity date to October 31, 2023. As of June 30, 2022, $89.5 million was outstanding under this warehouse facility, $85.5 million was available for future funding, and the Company had $10.1 million advanced as equity support.
Unsecured Line of Credit
The Company has a $495.0 million unsecured line of credit that has a maturity date of September 22, 2026. As of June 30, 2022, no amount was outstanding on the line of credit and $495.0 million was available for future use. The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $737.5 million, subject to certain conditions.
Participation Agreement
The Company has an agreement with Union Bank and Trust Company ("Union Bank"), a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in FFELP loan asset-backed securities. As of June 30, 2022, $393.4 million of FFELP loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. On May 4, 2022, the agreement automatically renewed for another year through May 4, 2023. The Company can participate FFELP loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $400.0 million or an amount in excess of $400.0 million if mutually agreed to by both parties. The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its discretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities. As such, the FFELP loan asset-backed securities subject to this agreement are included on the Company's consolidated balance sheet as "investments and notes receivable" and the participation interests outstanding have been accounted for by the Company as a secured borrowing.
See note 5 for additional information about the FFELP loan asset-backed securities investments serving as collateral under this participation agreement.
Repurchase Agreements
On May 3, 2021 and June 23, 2021, the Company entered into repurchase agreements with non-affiliated third parties, the proceeds of which are collateralized by certain private education and FFELP loan asset-backed securities. The first agreement has various maturity dates through November 27, 2024 or earlier if either party provides 180 days’ prior written notice, and the second agreement has various maturity dates through January 13, 2023. Included in “bonds and notes payable” as of June 30, 2022 was $228.5 million subject to the first agreement and $272.2 million subject to the second agreement.
See note 5 and below under "Debt Repurchases" for additional information about the private education and FFELP loan asset-backed securities investments, respectively, serving as collateral for these repurchase agreements.
Accrued Interest Liability
During the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined was no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income.
17


Debt Repurchases
During the three and six months ended June 30, 2022, the Company repurchased $36.7 million and $55.2 million, respectively, of its own debt and recognized gains of $1.0 million and $1.1 million, respectively. During the second quarter of 2021, the Company repurchased $19.8 million of its own debt and recognized a loss of $0.7 million.
The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. As of June 30, 2022, the Company holds $431.2 million (par value) of its own FFELP asset-backed securities. As of June 30, 2022, $206.9 million (par value) of the Company's repurchased FFELP loan asset-backed securities were serving as collateral on amounts outstanding under the Company's repurchase agreements (as discussed above).
4.  Derivative Financial Instruments
The Company uses derivative financial instruments to manage interest rate risk. Derivative instruments used as part of the Company's interest rate risk management strategy are further described in note 6 of the notes to consolidated financial statements included in the 2021 Annual Report. A tabular presentation of such derivatives outstanding as of June 30, 2022 and December 31, 2021 is presented below.
Basis Swaps
The following table summarizes the Company’s outstanding basis swaps as of June 30, 2022 and December 31, 2021, in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").
MaturityNotional amount
As ofAs of
June 30, 2022December 31, 2021
2022$1,000,000 2,000,000 
2023750,000 750,000 
20241,750,000 1,750,000 
20261,150,000 1,150,000 
2027250,000 250,000 
$4,900,000 5,900,000 
The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2022 and December 31, 2021 was one-month LIBOR plus 9.4 basis points and 9.1 basis points, respectively.
Interest Rate Swaps – Floor Income Hedges
The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.
As of June 30, 2022As of December 31, 2021
MaturityNotional amountWeighted average fixed rate paid by the Company (a)Notional amountWeighted average fixed rate paid by the Company (a)
2022$— — %$500,000 0.94 %
2023250,000 0.32 900,000 0.62 
20242,250,000 0.35 2,500,000 0.35 
2025— — 500,000 0.35 
2026500,000 1.02 500,000 1.02 
2031100,000 1.53 100,000 1.53 
 $3,100,000 0.49 %$5,000,000 0.55 %
(a)    For all interest rate derivatives, the Company receives discrete three-month LIBOR.
18


In March 2022, the Company terminated $650 million in notional amount of derivatives ($500 million and $150 million that had maturity dates in 2022 and 2023, respectively) for net payments of $0.1 million. On April 29, 2022, the Company terminated $1.25 billion in notional amount of derivatives ($500 million, $250 million, and $500 million that had maturity dates in 2023, 2024, and 2025, respectively) for total proceeds of $68.1 million.
Consolidated Financial Statement Impact Related to Derivatives - Statements of Income
The following table summarizes the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income.
Three months ended June 30,Six months ended June 30,
 2022202120222021
Settlements:  
1:3 basis swaps$931 (221)1,327 (240)
Interest rate swaps - floor income hedges3,692 (5,153)487 (9,438)
Total settlements - income (expense)4,623 (5,374)1,814 (9,678)
Change in fair value:  
1:3 basis swaps(148)(1,106)741 1,693 
Interest rate swaps - floor income hedges40,549 (509)185,394 35,501 
Total change in fair value - income (expense)40,401 (1,615)186,135 37,194 
Derivative market value adjustments and derivative settlements, net - income (expense)$45,024 (6,989)187,949 27,516 
19


5.  Investments and Notes Receivable
A summary of the Company's investments and notes receivable follows:
As of June 30, 2022As of December 31, 2021
Amortized costGross unrealized gains Gross unrealized losses (a)Fair valueAmortized costGross unrealized gainsGross unrealized lossesFair value
Investments (at fair value):
FFELP loan asset-backed securities- available-for-sale (b)$821,154 4,509 (16,028)809,635 480,691 14,710 (719)494,682 
Private education loan asset-backed securities - available-for-sale (c)366,602 — (28,161)338,441 414,286 507 (2,241)412,552 
Other debt securities - available-for-sale148,686 24 (2,249)146,461 22,435 — — 22,435 
Total available-for-sale debt securities$1,336,442 4,533 (46,438)1,294,537 917,412 15,217 (2,960)929,669 
Equity securities36,945 71,986 
Total investments (at fair value)1,331,482 1,001,655 
Other Investments (not measured at fair value):
Other debt securities - held-to-maturity8,200 8,200 
Venture capital and funds:
Measurement alternative159,332 157,609 
Equity method82,147 67,840 
Total venture capital and funds241,479 225,449 
Real estate:
Equity method57,532 47,226 
Notes receivable5,069 — 
Total real estate62,601 47,226 
Investment in ALLO:
Voting interest/equity method (d)91,832 87,247 
Preferred membership interest and accrued and unpaid preferred return (e)141,599 137,342 
Total investment in ALLO233,431 224,589 
Beneficial interest in loan securitizations (f):
Private education loans, including accrued interest77,308 66,008 
Consumer loans26,197 28,366 
Federally insured student loans24,300 25,768 
Total beneficial interest in loan securitizations127,805 120,142 
Solar (g)(54,499)(42,457)
Notes receivable33,012 — 
Tax liens, affordable housing, and other4,939 4,115 
Total investments (not measured at fair value)656,968 587,264 
Total investments and notes receivable$1,988,450 $1,588,919 

(a)    As of June 30, 2022, the aggregate fair value of available-for-sale debt securities with unrealized losses was $1.1 billion. The Company currently has the intent and ability to retain these investments, and none of the unrealized losses were due to credit losses.
(b)    As of June 30, 2022, $393.4 million (par value) of FFELP loan asset-backed securities were subject to participation interests held by Union Bank, as discussed in note 3 under "Participation Agreement."
(c)    The Company's private education loan asset-backed securities portfolio is subject to repurchase agreements with third parties, as discussed in note 3 under “Repurchase Agreements.”
(d)    On February 25, 2022, the Company contributed $34.7 million of additional equity to ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO"). As a result of this equity contribution, the Company's voting membership interests percentage in ALLO did not materially change.
The Company accounts for its voting membership interests in ALLO under the Hypothetical Liquidation at Book Value ("HLBV") method of accounting. During the three months ended June 30, 2022 and 2021, the Company recognized a pre-tax loss of $16.9 million and income of $1.1 million, respectively, under the HLBV method of accounting on its ALLO
20


voting membership interests investment, and during the six months ended June 30, 2022 and 2021, the Company recognized pre-tax losses of $30.1 million and $21.1 million, respectively. Income and losses from the Company's investment in ALLO are included in "other" in "other income/expense" on the consolidated statements of income. In the second quarter of 2021, the Company revised its accounting policy to correct for an error in its method of applying the HLBV method of accounting for its investment in ALLO. Prior to the second quarter of 2021, the Company calculated Nelnet’s liquidation basis in ALLO under the HLBV method by using Nelnet’s proportionate share of tax losses and amortizing any basis difference using tax methods. The Company determined that Nelnet’s liquidation basis in ALLO under the HLBV method should equal ALLO’s GAAP losses and amortization of any basis difference should use book lives. During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of this error that resulted in a $14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to other income. The Company concluded this error had an immaterial impact on 2021 results as well as the results for prior periods.
(e)    As of June 30, 2022, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $137.3 million and $4.3 million, respectively. The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 percent. The Company recognized pre-tax income on its ALLO preferred membership interests of $2.1 million and $2.0 million during the three months ended June 30, 2022 and 2021, respectively, and $4.3 million during both the six months ended June 30, 2022 and 2021. This income is included in "other" in "other income/expense" on the consolidated statements of income.
(f)    The Company has partial ownership in certain private education, consumer, and federally insured student loan securitizations. As of the latest remittance reports filed by the various trusts prior to or as of June 30, 2022, the Company's ownership correlates to approximately $650 million, $160 million, and $430 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations.
(g)    As of June 30, 2022, the Company has funded a total of $241.3 million in solar investments, which includes $71.4 million funded by syndication partners. The carrying value of the Company’s solar investments are reduced by tax credits earned when the solar project is placed in service. The solar investment balance at June 30, 2022 represents the sum of total tax credits earned on solar projects placed in service through June 30, 2022 and the calculated HLBV net losses being larger than total payments made by the Company on such projects. As of June 30, 2022, the Company is committed to fund an additional $51.9 million on these projects, of which $43.1 million will be provided by syndication partners.
The Company accounts for its solar investments using the HLBV method of accounting. For the majority of the Company’s solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. The Company recognized pre-tax losses on its solar investments of $1.9 million and $2.3 million during the three months ended June 30, 2022 and 2021, respectively, and $2.9 million and $4.0 million during the six months ended June 30, 2022 and 2021, respectively. These losses are included in “other” in "other income/expense" on the consolidated statements of income. Losses from solar investments include losses attributable to third-party minority interest investors (syndication partners) that are included in “net loss attributable to noncontrolling interests” in the consolidated statements of income. Solar losses attributed to minority investors was $2.0 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $3.8 million and $1.9 million for the six months ended June 30, 2022 and 2021, respectively.
Impairment Expense
During the second quarter of 2022, the Company recorded an impairment charge of $5.4 million related primarily to one of its venture capital investments accounted for under the measurement alternative method. The impairment expense is included in "impairment expense and provision for beneficial interests, net" on the consolidated statements of income.
21


6. Business Combination
NGWeb Solutions, LLC
On April 30, 2022, the Company acquired 30 percent of the ownership interests of NGWeb Solutions, LLC ("NextGen") for total cash consideration of $9.2 million. NextGen provides software solutions primarily to higher education institutions to enable administrators to efficiently manage online forms, scholarships, employment, online timesheets, and other specialized processes that require signed authorizations and interactions with student information.
Prior to the acquisition, the Company owned 50 percent of the ownership interests of NextGen and accounted for this investment under the equity method. As a result of the acquisition, the previously held 50 percent ownership interests was remeasured to its fair value as of the April 30, 2022 date of acquisition of the additional 30 percent of the ownership interests, resulting in a $15.2 million revaluation gain, which is included in "other" in "other income/expense" on the consolidated statements of income. For segment reporting, this gain is included in "Corporate and Other Activities." Subsequent to the acquisition, the Company will consolidate the operating results of NextGen and such results will be included in the Education Technology, Services, and Payment Processing reportable segment.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The fair values of the assets and liabilities related to NextGen are subject to refinement as the Company completes its analysis relative to the fair values at the date of acquisition.
Cash and cash equivalents$1,885 
Accounts receivable1,315 
Property and equipment800 
Other assets201 
Intangible assets23,395 
Excess cost over fair value of net assets acquired (goodwill)7,025 
Other liabilities(3,937)
Net assets acquired30,684 
Minority interest(6,137)
Remeasurement of previously held investment(15,342)
Total consideration paid by the Company$9,205 
The $23.4 million of acquired intangible assets is made up of computer software of $18.8 million (5-year useful life) and customer relationships of $4.6 million (7-year useful life).

22


7. Intangible Assets
Intangible assets consisted of the following:
Weighted average remaining useful life as of
June 30, 2022 (months)
As ofAs of
June 30, 2022December 31, 2021
Amortizable intangible assets, net:  
Customer relationships (net of accumulated amortization of $47,328 and $97,398, respectively)
96$48,552 47,894 
Computer software (net of accumulated amortization of $3,411 and $3,669, respectively)
5221,534 4,135 
Total - amortizable intangible assets, net82$70,086 52,029 
The Company recorded amortization expense on its intangible assets of $2.9 million and $8.3 million during the three months ended June 30, 2022 and 2021, respectively, and $5.3 million and $16.6 million during the six months ended June 30, 2022 and 2021, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of June 30, 2022, the Company estimates it will record amortization expense as follows:
2022 (July 1 - December 31)$7,176 
202314,243 
202411,870 
20259,057 
20268,930 
2027 and thereafter18,810 
 $70,086 

8. Goodwill
The carrying amount of goodwill by reportable operating segment was as follows:
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset Generation and ManagementNelnet BankCorporate and Other ActivitiesTotal
Balance as of December 31, 2021 and March 31, 2022$23,639 76,570 41,883 — — 142,092 
Goodwill acquired— 7,025 — — — 7,025 
Balance as of June 30, 2022$23,639 83,595 41,883 — — 149,117 
23


9.  Earnings per Common Share
Presented below is a summary of the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.
 Three months ended June 30,
20222021
Common shareholdersUnvested restricted stock shareholdersTotalCommon shareholdersUnvested restricted stock shareholdersTotal
Numerator:
Net income attributable to Nelnet, Inc.$83,485 1,644 85,129 82,479 1,388 83,867 
Denominator:
Weighted-average common shares outstanding - basic and diluted36,981,990 728,224 37,710,214 38,100,092 641,394 38,741,486 
Earnings per share - basic and diluted$2.26 2.26 2.26 2.16 2.16 2.16 
Six months ended June 30,
20222021
Common shareholdersUnvested restricted stock shareholdersTotalCommon shareholdersUnvested restricted stock shareholdersTotal
Numerator:
Net income attributable to Nelnet, Inc.$266,735 5,041 271,776 204,209 3,256 207,465 
Denominator:
Weighted-average common shares outstanding - basic and diluted37,172,606 702,502 37,875,108 38,065,869 607,033 38,672,902 
Earnings per share - basic and diluted$7.18 7.18 7.18 5.36 5.36 5.36 

24


10.  Segment Reporting
See note 15 of the notes to consolidated financial statements included in the 2021 Annual Report for a description of the Company's operating segments. The following tables include the results of each of the Company's operating segments reconciled to the consolidated financial statements.
 Three months ended June 30, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$246 874 140,396 5,212 6,235 (1,376)151,587 
Interest expense20 — 69,708 1,639 3,652 (1,376)73,642 
Net interest income226 874 70,688 3,573 2,583 — 77,945 
Less provision (negative provision) for loan losses— — 8,827 582 — — 9,409 
Net interest income after provision for loan losses226 874 61,861 2,991 2,583 — 68,536 
Other income/expense:
Loan servicing and systems revenue124,873 — — — — — 124,873 
Intersegment revenue8,381 — — — (8,388)— 
Education technology, services, and payment processing revenue— 91,031 — — — — 91,031 
Other611 — 5,133 157 6,747 — 12,647 
Gain on sale of loans— — — — — — — 
Impairment expense and provision for beneficial interests, net— — — — (6,284)— (6,284)
Derivative settlements, net— — 4,623 — — — 4,623 
Derivative market value adjustments, net— — 40,401 — — — 40,401 
Total other income/expense133,865 91,038 50,157 157 463 (8,388)267,291 
Cost of services— 30,852 — — — — 30,852 
Operating expenses:
Salaries and benefits83,220 32,120 614 1,714 23,729 — 141,398 
Depreciation and amortization5,318 2,698 — 10,230 — 18,250 
Other expenses13,507 6,750 3,543 899 12,241 — 36,940 
Intersegment expenses, net18,558 4,805 8,513 57 (23,545)(8,388)— 
Total operating expenses120,603 46,373 12,670 2,674 22,655 (8,388)196,588 
Income (loss) before income taxes13,488 14,687 99,348 474 (19,609)— 108,387 
Income tax (expense) benefit(3,237)(3,525)(23,844)(106)5,228 — (25,483)
Net income (loss)10,251 11,162 75,504 368 (14,381)— 82,904 
Net loss attributable to noncontrolling interests— 53 — — 2,172 — 2,225 
Net income (loss) attributable to Nelnet, Inc.$10,251 11,215 75,504 368 (12,209)— 85,129 
Total assets as of June 30, 2022$240,437 546,235 17,388,228 864,659 2,273,216 (688,762)20,624,013 


25


 Three months ended June 30, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$30 210 129,965 2,041 1,524 (187)133,583 
Interest expense23 — 48,670 392 1,093 (187)49,991 
Net interest income210 81,295 1,649 431 — 83,592 
Less provision (negative provision) for loan losses— — 305 69 — — 374 
Net interest income after provision for loan losses210 80,990 1,580 431 — 83,218 
Other income/expense:
Loan servicing and systems revenue112,094 — — — — — 112,094 
Intersegment revenue8,480 — — — (8,483)— 
Education technology, services, and payment processing revenue— 76,702 — — — — 76,702 
Other701 — 2,316 19,900 — 22,921 
Gain on sale of loans— — 15,271 — — — 15,271 
Impairment expense and provision for beneficial interests, net— — — — (500)— (500)
Derivative settlements, net— — (5,374)— — — (5,374)
Derivative market value adjustments, net— — (1,615)— — — (1,615)
Total other income/expense121,275 76,705 10,598 19,400 (8,483)219,499 
Cost of services— 21,676 — — — — 21,676 
Operating expenses:
Salaries and benefits68,388 27,094 556 1,578 21,351 — 118,968 
Depreciation and amortization7,974 2,956 — — 9,305 — 20,236 
Other expenses13,273 4,437 3,567 237 11,074 — 32,587 
Intersegment expenses, net16,134 3,520 8,549 37 (19,757)(8,483)— 
Total operating expenses105,769 38,007 12,672 1,852 21,973 (8,483)171,791 
Income (loss) before income taxes15,513 17,232 78,916 (268)(2,142)— 109,250 
Income tax (expense) benefit(3,723)(4,136)(18,940)64 497 — (26,237)
Net income (loss)11,790 13,096 59,976 (204)(1,645)— 83,013 
Net loss attributable to noncontrolling interests— — — — 854 — 854 
Net income (loss) attributable to Nelnet, Inc.$11,790 13,096 59,976 (204)(791)— 83,867 
Total assets as of June 30, 2021$205,214 424,079 20,783,755 407,611 1,489,212 (281,008)23,028,863 



26


Six months ended June 30, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$313 1,213 258,994 8,241 10,227 (2,205)276,783 
Interest expense44 — 115,711 2,494 5,678 (2,205)121,721 
Net interest income269 1,213 143,283 5,747 4,549 — 155,062 
Less provision (negative provision) for loan losses— — 7,963 1,011 — — 8,974 
Net interest income after provision for loan losses269 1,213 135,320 4,736 4,549 — 146,088 
Other income/expense:
Loan servicing and systems revenue261,241 — — — — — 261,241 
Intersegment revenue16,860 10 — — — (16,870)— 
Education technology, services, and payment processing revenue— 203,317 — — — — 203,317 
Other1,350 — 11,644 1,659 7,872 — 22,524 
Gain on sale of loans— — 2,989 — — — 2,989 
Impairment expense and provision for beneficial interests, net— — — — (6,284)— (6,284)
Derivative settlements, net— — 1,814 — — — 1,814 
Derivative market value adjustments, net— — 186,135 — — — 186,135 
Total other income/expense279,451 203,327 202,582 1,659 1,588 (16,870)671,736 
Cost of services— 66,397 — — — — 66,397 
Operating expenses:
Salaries and benefits175,192 63,406 1,205 3,268 47,742 — 290,813 
Depreciation and amortization10,272 5,013 — 19,914 — 35,206 
Other expenses29,721 12,514 6,576 1,584 26,045 — 76,439 
Intersegment expenses, net38,955 9,410 17,344 102 (48,941)(16,870)— 
Total operating expenses254,140 90,343 25,125 4,961 44,760 (16,870)402,458 
Income (loss) before income taxes25,580 47,800 312,777 1,434 (38,623)— 348,969 
Income tax (expense) benefit(6,139)(11,472)(75,066)(328)11,826 — (81,180)
Net income (loss)19,441 36,328 237,711 1,106 (26,797)— 267,789 
Net loss attributable to noncontrolling interests— 53 — — 3,934 — 3,987 
Net income (loss) attributable to Nelnet, Inc.$19,441 36,381 237,711 1,106 (22,863)— 271,776 
Total assets as of June 30, 2022$240,437 546,235 17,388,228 864,659 2,273,216 (688,762)20,624,013 


27


Six months ended June 30, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$63 473 256,367 3,418 2,770 (405)262,686 
Interest expense47 — 75,620 586 1,916 (405)77,764 
Net interest income16 473 180,747 2,832 854 — 184,922 
Less provision (negative provision) for loan losses— — (17,165)491 — — (16,674)
Net interest income after provision for loan losses16 473 197,912 2,341 854 — 201,596 
Other income/expense:
Loan servicing and systems revenue223,611 — — — — — 223,611 
Intersegment revenue16,748 — — — (16,754)— 
Education technology, services, and payment processing revenue— 171,960 — — — — 171,960 
Other1,814 — 2,760 26 13,716 — 18,317 
Gain on sale of loans— — 15,271 — — — 15,271 
Impairment expense and provision for beneficial interests, net— — 2,436 — (500)— 1,936 
Derivative settlements, net— — (9,678)— — — (9,678)
Derivative market value adjustments, net— — 37,194 — — — 37,194 
Total other income/expense242,173 171,966 47,983 26 13,216 (16,754)458,611 
Cost of services— 48,728 — — — — 48,728 
Operating expenses:
Salaries and benefits134,846 53,035 1,051 3,065 42,761 — 234,759 
Depreciation and amortization16,166 6,027 — — 18,225 — 40,419 
Other expenses26,557 9,259 7,344 781 25,346 — 69,286 
Intersegment expenses, net33,024 7,184 16,976 40 (40,470)(16,754)— 
Total operating expenses210,593 75,505 25,371 3,886 45,862 (16,754)344,464 
Income (loss) before income taxes31,596 48,206 220,524 (1,519)(31,792)— 267,015 
Income tax (expense) benefit(7,583)(11,570)(52,926)351 10,630 — (61,098)
Net income (loss)24,013 36,636 167,598 (1,168)(21,162)— 205,917 
Net loss attributable to noncontrolling interests— — — — 1,548 — 1,548 
Net income (loss) attributable to Nelnet, Inc.$24,013 36,636 167,598 (1,168)(19,614)— 207,465 
Total assets as of June 30, 2021$205,214 424,079 20,783,755 407,611 1,489,212 (281,008)23,028,863 

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11. Disaggregated Revenue
The following tables provide disaggregated revenue by service offering and/or customer type for the Company's fee-based reportable operating segments.
Loan Servicing and Systems
 Three months ended June 30,Six months ended June 30,
 2022202120222021
Government servicing$98,815 79,239 207,940 157,413 
Private education and consumer loan servicing12,122 12,816 24,995 21,364 
FFELP servicing4,011 4,703 8,259 9,373 
Software services 7,907 7,374 15,308 15,827 
Outsourced services and other2,018 7,962 4,739 19,634 
Loan servicing and systems revenue$124,873 112,094 261,241 223,611 
Education Technology, Services, and Payment Processing
 Three months ended June 30,Six months ended June 30,
 2022202120222021
Tuition payment plan services$27,637 26,538 58,352 56,088 
Payment processing27,968 25,008 66,039 58,046 
Education technology and services34,956 24,930 78,207 57,457 
Other470 226 719 369 
Education technology, services, and payment processing revenue$91,031 76,702 203,317 171,960 
Other Income/Expense
The following table provides the components of "other" in "other income/expense" on the consolidated statements of income:
Three months ended June 30,Six months ended June 30,
2022202120222021
Income/gains from investments, net$18,127 15,591 29,983 24,089 
Borrower late fee income2,436 744 4,867 1,184 
ALLO preferred return2,140 2,020 4,257 4,342 
Administration/sponsor fee income2,012 — 4,134 — 
Investment advisory services1,482 1,145 2,764 3,842 
Loss from ALLO voting membership interest investment(16,941)1,094 (30,071)(21,125)
Loss from solar investments(1,854)(2,302)(2,884)(3,982)
Other5,245 4,629 9,474 9,967 
$12,647 22,921 22,524 18,317 
12.  Major Customer
The Company earns loan servicing revenue from servicing contracts with the Department. Revenues earned by the Company related to these contracts are set forth in the "Government servicing" line item of the "Loan Servicing and Systems" table in note 11.
The Company's student loan servicing contracts with the Department are scheduled to expire on December 14, 2023. In 2017, the Department initiated a contract procurement process referred to as the Next Generation Financial Services Environment for a new framework for the servicing of all student loans owned by the Department. The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the process, including that any new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance. In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution ("USDS") for the new servicing framework. The Company responded to the USDS solicitation. The Company cannot predict the timing, nature, or ultimate outcome of this or any other contract procurement process by the Department.
29


13.  Fair Value
The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.

 As of June 30, 2022As of December 31, 2021
 Level 1Level 2TotalLevel 1Level 2Total
Assets:   
Investments:
FFELP loan asset-backed debt securities - available-for-sale$— 809,635 809,635 — 494,682 494,682 
Private education loan asset-backed debt securities - available-for-sale— 338,441 338,441 — 412,552 412,552 
Other debt securities - available-for-sale100 146,361 146,461 100 22,335 22,435 
Equity securities7,298 — 7,298 63,154 — 63,154 
Equity securities measured at net asset value (a)29,647 8,832 
Total investments 7,398 1,294,437 1,331,482 63,254 929,569 1,001,655 
Total assets$7,398 1,294,437 1,331,482 63,254 929,569 1,001,655 
(a) In accordance with the Fair Value Measurements Topic of the FASB Accounting Standards Codification, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.
The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets:
 As of June 30, 2022
 Fair valueCarrying valueLevel 1Level 2Level 3
Financial assets:    
Loans receivable$16,533,011 16,135,653 — — 16,533,011 
Accrued loan interest receivable780,691 780,691 — 780,691 — 
Cash and cash equivalents128,499 128,499 128,499 — — 
Investments (at fair value)1,331,482 1,331,482 7,398 1,294,437 — 
Beneficial interest in loan securitizations137,726 127,805 — — 137,726 
Restricted cash754,693 754,693 754,693 — — 
Restricted cash – due to customers290,850 290,850 290,850 — — 
Financial liabilities:  
Bonds and notes payable15,765,820 16,115,269 — 15,765,820 — 
Accrued interest payable12,963 12,963 — 12,963 — 
Bank deposits566,293 588,474 208,003 358,290 — 
Due to customers409,476 409,476 409,476 — — 
 As of December 31, 2021
 Fair valueCarrying valueLevel 1Level 2Level 3
Financial assets:    
Loans receivable$18,576,272 17,546,645 — — 18,576,272 
Accrued loan interest receivable788,552 788,552 — 788,552 — 
Cash and cash equivalents125,563 125,563 125,563 — — 
Investments (at fair value)1,001,655 1,001,655 63,254 929,569 — 
Beneficial interest in loan securitizations142,391 120,142 — — 142,391 
Restricted cash741,981 741,981 741,981 — — 
Restricted cash – due to customers326,645 326,645 326,645 — — 
Financial liabilities:  
Bonds and notes payable17,819,902 17,631,089 — 17,819,902 — 
Accrued interest payable4,566 4,566 — 4,566 — 
Bank deposits342,463 344,315 184,897 157,566 — 
Due to customers366,002 366,002 366,002 — — 
The methodologies for estimating the fair value of financial assets and liabilities are described in note 22 of the notes to consolidated financial statements included in the 2021 Annual Report.
30


14. Subsequent Event
On July 1, 2022, the Company acquired 80 percent of the outstanding ownership interests of GRNE-Nelnet, LLC ("GRNE") and its affiliate ENRG-Nelnet, LLC ("ENRG") for $29.7 million in cash. GRNE designs and installs residential, commercial, and utility-scale solar systems in the Midwest. ENRG owns certain assets that generate and sell solar energy. The operating results of GRNE and ENRG will be included in the Company's consolidated results of operations beginning July 1, 2022.
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Management’s Discussion and Analysis of Financial Condition and Results of Operations is for the three and six months ended June 30, 2022 and 2021. All dollars are in thousands, except per share amounts, unless otherwise noted.)
The following discussion and analysis provides information that the Company’s management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company. The discussion should be read in conjunction with the Company’s consolidated financial statements included in the 2021 Annual Report.
Forward-looking and cautionary statements
This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “scheduled,” “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.
The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the 2021 Annual Report, the "Risk Factors" section of this report, and elsewhere in this report, and include such risks and uncertainties as:
risks and uncertainties related to the severity, magnitude, and duration of the coronavirus disease 2019 (“COVID-19”) pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on various activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;
risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and any future servicing contracts with the U.S. Department of Education (the "Department"), which current contracts accounted for 29 percent of the Company's revenue in 2021, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the Company may not be successful in obtaining any of such potential new contracts, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), private education, and consumer loans;
loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans, and risks from changes in levels of loan prepayment or default rates;
financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from recent market volatility resulting from rising interest rates and other economic pressures and from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay
31


repayment of the associated bonds, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;
risks from changes in the terms of education loans and in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets, such as changes resulting from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and the expected decline over time in FFELP loan interest income due to the discontinuation of new FFELP loan originations in 2010 and government initiatives or proposals to consolidate existing FFELP loans to Federal Direct Loan Program loans, otherwise encourage or allow FFELP loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs;
risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to a disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;
uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration;
risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;
risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom), acquisitions, and other activities, including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;
risks and uncertainties associated with climate change, including extreme weather events and related natural disasters, which could result in increased loan portfolio credit risks and other asset and operational risks, as well as risks and uncertainties associated with efforts to address climate change; and
risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, reputational and other risks, including the risk of increased regulatory costs resulting from the politicization of student loan servicing, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.
All forward-looking statements contained in this report are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by law.
32


OVERVIEW
The Company is a diverse, innovative company with a purpose to serve others and a vision to make dreams possible. The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. 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). The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
The Company prepares its financial statements and presents its financial results in accordance with GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. A reconciliation of the Company's GAAP net income to net income, excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, is provided below.
Three months ended June 30,Six months ended June 30,
2022202120222021
GAAP net income attributable to Nelnet, Inc.
$85,129 83,867 271,776 207,465 
Realized and unrealized derivative market value adjustments
(40,401)1,615 (186,135)(37,194)
Tax effect (a)
9,696 (388)44,672 8,927 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)
$54,424 85,094 130,313 179,198 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.
$2.26 2.16 7.18 5.36 
Realized and unrealized derivative market value adjustments
(1.07)0.04 (4.91)(0.96)
Tax effect (a)
0.25 — 1.17 0.23 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)
$1.44 2.20 3.44 4.63 
(a) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.
(b) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. "Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria is met. Management has structured all of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the Company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.
The Company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations. Accordingly, the Company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the Company’s performance and in presentations with credit rating agencies, lenders, and investors. Consequently, the Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.

33


Operating Segments
The Company's reportable operating segments are described in note 1 of the notes to consolidated financial statements included in the 2021 Annual Report. They include:
Loan Servicing and Systems ("LSS") - referred to as Nelnet Diversified Services ("NDS")
Education Technology, Services, and Payment Processing ("ETS&PP") - referred to as Nelnet Business Services ("NBS")
Asset Generation and Management ("AGM")
Nelnet Bank
The Company earns fee-based revenue through its NDS and NBS operating segments. The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM operating segment. This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes. The Company actively works to maximize the amount and timing of cash flows generated by its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.
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. Nelnet Bank operates as an internet industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.
Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate"). Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured and other corporate related debt transactions.
The information below provides the operating results (income (loss) before income taxes) for each reportable operating segment and Corporate and Other Activities for the three and six months ended June 30, 2022 and 2021. See "Results of Operations" for each reportable operating segment under this Item 2 for additional detail.
Three months ended June 30,
20222021Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS$13,488 15,513 
NBS14,687 17,232 
AGM99,348 78,916 
A net gain of $40.4 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the second quarter of 2022 as compared to a net loss of $1.6 million for the same period in 2021
An increase of $8.2 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
A decrease of $10.1 million in net interest income due to the decrease in the average balance of FFELP loans in the second quarter of 2022 as compared to 2021
The recognition of an $8.8 million provision for loan losses in the second quarter of 2022, as compared to $0.3 million for the same period in 2021
The recognition of a gain of $15.3 million on the sale of loans during the second quarter of 2021
Nelnet Bank474 (268)
Corporate(19,609)(2,142)
The recognition of a net loss of $16.9 million for the second quarter of 2022 related to the Company’s investment in ALLO, as compared to net income of $1.1 million for the same period in 2021. During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of an error that resulted in a $14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to income.
The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)
The recognition of a $15.2 million gain in the second quarter of 2022 as a result of the revaluation of the Company's previously held 50 percent ownership interests in NGWeb Solutions, LLC ("NextGen") (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests
Investment income of $3.1 million in the second quarter of 2022 as compared to $14.3 million for the same period in 2021. During the second quarter of 2021, the Company recognized realized and unrealized gains from certain real estate and venture capital investments, including realized gains of $6.0 million from the sale of certain real estate investments.
Income before income taxes108,387 109,250 
Income tax expense(25,483)(26,237)
Net loss attributable to noncontrolling interests2,225 854 
Net income$85,129 83,867 
34


Six months ended June 30,
20222021Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS$25,580 31,596 
NBS47,800 48,206 
AGM312,777 220,524 
A net gain of $186.1 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first half of 2022 as compared to a net gain of $37.2 million for the same period in 2021
A decrease of $23.8 million in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid
The recognition of provision for loan losses of $8.0 million in the first half of 2022 as compared to negative provision of $17.2 million for the same period in 2021
The recognition of a gain of $15.3 million on the sale of loans during the second quarter of 2021
An increase of $8.4 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
A decrease of $18.4 million in net interest income due to the decrease in the average balance of FFELP loans in the first half of 2022 as compared to 2021
An increase of $6.3 million in investment interest income in 2022 as compared to 2021 primarily related to AGM's investments in private education loan beneficial interests obtained throughout 2021 as securitizations were being completed by the joint venture to purchase and securitize loans sold by Wells Fargo, and an increase of $4.1 million in revenue recognized during the first half of 2022 from serving as administrator and sponsor for such securitizations
Nelnet Bank1,434 (1,519)
Corporate(38,623)(31,792)
The recognition of a net loss of $30.1 million for the first half of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $21.1 million for the same period in 2021
The recognition of a $15.2 million gain in the second quarter of 2022 as a result of the revaluation of the Company's previously held 50 percent ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests
Investment income of $11.9 million for the first half of 2022 as compared to $22.8 million for the same period in 2021. During the first half of 2021, the Company recognized realized and unrealized gains from certain real estate and venture capital investments, including realized gains of $11.1 million from the sale of certain real estate investments.
The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)
Income before income taxes348,969 267,015 
Income tax expense(81,180)(61,098)
Net loss attributable to noncontrolling interests3,987 1,548 
Net income$271,776 207,465 
Recent Developments
On April 19, 2022, the Department issued a press release, and the Department’s Office of Federal Student Aid (“FSA”) posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment (“IDR”) plans for federal student loans. In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan before the Department completes implementation of these changes, which the Department estimates to be no sooner than January 1, 2023. In addition, on July 6, 2022, the Department announced the issuance of proposed regulations that would expand major student loan discharge programs under the Higher Education Act through changes related to borrower defense to repayment where there is a dispute with the higher education institution, the Public Service Loan Forgiveness program under the Federal Direct Loan Program, the interest capitalization rules, and closed school discharges, as well as other matters, which changes may also result in an increase in consolidations of FFELP loans into Federal Direct Loan Program loans. The announced changes have increased, and the Company currently believes these announced changes may continue to increase, FFEL Program loan prepayments. In addition, if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could also increase prepayments.
35


A significant increase in FFEL Program loan prepayments could have a materially adverse impact in future periods on the Company’s net interest income in its AGM operating segment, FFELP servicing revenue in the Company’s LSS operating segment, investment advisory services revenue earned by the Company’s SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on the Company’s FFELP loan asset-backed securities investments. In addition, student loan forgiveness or discharge under the Federal Direct Loan Program as a result of the changes described in the announcements and proposals could have a materially adverse impact on future revenue earned by the LSS operating segment under the Company’s government servicing contracts, including software services revenue earned by the Company in providing remote hosted services to other government servicers.
See Part II, Item 1A, “Risk Factors” in this report for additional information.
Impact of COVID-19
The COVID-19 pandemic is unprecedented and has had a significant impact on the economic environment globally and in the U.S. There is uncertainty as to the length and breadth of the impact to the U.S. economy and, consequently, on the Company. As a related matter, on April 6, 2022, the Department announced that the suspension under the CARES Act on federal student loan payments and interest accruals on all loans owned by the Department was extended through August 31, 2022.
For a further overview discussion of the impact of the COVID-19 pandemic on the Company, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview - Recent Transactions/Developments - COVID-19" in the 2021 Annual Report. In addition, for an additional discussion regarding the risks associated with COVID-19, see Part I, Item 1A. "Risk Factors - Operations - The COVID-19 pandemic has adversely impacted our results of operations, and either directly or indirectly through impacts on economic conditions or government policy could adversely impact our results of operations, businesses, financial condition, and/or cash flows going forward." in the 2021 Annual Report.
CONSOLIDATED RESULTS OF OPERATIONS
An analysis of the Company's consolidated operating results for the three and six months ended June 30, 2022 compared to the same periods in 2021 is provided below.
The Company’s operating results are primarily driven by the performance of its existing loan portfolio and the revenues generated by its fee-based businesses and the costs to provide such services. The performance of the Company’s portfolio is driven by net interest income (which includes financing costs) and losses related to credit quality of the assets, along with the cost to administer and service the assets and related debt.
The Company operates as distinct reportable operating segments as described above. For a reconciliation of the reportable segment operating results to the consolidated results of operations, see note 10 of the notes to consolidated financial statements included under Part I, Item 1 of this report. Since the Company monitors and assesses its operations and results based on these segments, the discussion following the consolidated results of operations is presented on a reportable segment basis.
 Three months endedSix months ended
 June 30,June 30,
 2022202120222021Additional information
Loan interest$134,706 122,005 246,083 246,123 Increase for the three months ended June 30, 2022 compared to the same period in 2021 was due primarily to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans and in gross fixed rate floor income. For the six months ended June 30, 2022 compared to the same period in 2021, the decrease in the average balance of loans and in gross fixed rate floor income offset the increase in the gross yield earned on loans.
Investment interest16,881 11,578 30,700 16,563 Includes income from interest-earning deposits and investments and funds in asset-backed securitizations. Increase was due to an increase in interest earning investments and an increase in interest rates in 2022 as compared to 2021.
Total interest income151,587 133,583 276,783 262,686 
Interest expense73,642 49,991 121,721 77,764 
Interest expense increased in 2022 as compared to 2021 due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding. In addition, during the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds, which liability the Company determined is 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.
Net interest income77,945 83,592 155,062 184,922 
Less provision (negative provision) for loan losses9,409 374 8,974 (16,674)
Represents the current period provision (negative provision) to reflect the lifetime expected credit losses related to the Company's loan portfolio. See note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report for the activity in the Company's allowance for loan losses.
36


Net interest income after provision for loan losses68,536 83,218 146,088 201,596 
Other income/expense:    
LSS revenue124,873 112,094 261,241 223,611 See LSS operating segment - results of operations.
ETS&PP revenue91,031 76,702 203,317 171,960 See ETS&PP operating segment - results of operations.
Other12,647 22,921 22,524 18,317 See table below for the components of "other."
Gain on sale of loans— 15,271 2,989 15,271 
The Company sold $18.1 million (par value) and $77.4 million (par value) of consumer loans in January 2022 and May 2021, respectively, and recognized gains of $3.0 million and $15.3 million, respectively.
Impairment expense and provision for beneficial interests, net(6,284)(500)(6,284)1,936 During the second quarter of 2022, the Company recorded impairment expense related primarily to a venture capital investment and certain real estate leases.
Derivative settlements, net4,623 (5,374)1,814 (9,678)The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income. See AGM operating segment - results of operations.
Derivative market value adjustments, net40,401 (1,615)186,135 37,194 Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. The majority of the derivative market value adjustments related to the changes in fair value of the Company's floor income interest rate swaps. Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.
Total other income/expense267,291 219,499 671,736 458,611 
Cost to provide education technology, services, and payment processing services30,852 21,676 66,397 48,728 
Represents primarily direct costs to provide payment processing and instructional services in the ETS&PP operating segment. Increase in 2022 compared to 2021 was primarily due to additional instructional services costs. See ETS&PP operating segment - results of operations.
Operating expenses:    
Salaries and benefits141,398 118,968 290,813 234,759 Increase was due to an increase in headcount in the (i) LSS operating segment as the Company prepares for the resumption of federal student loan payments and other activities after the CARES Act suspension expires on August 31, 2022; and (ii) ETS&PP operating segment to support the growth of its customer base and the investment in the development of new technologies.
Depreciation and amortization18,250 20,236 35,206 40,419 Includes depreciation of property and equipment and the amortization of intangibles from prior business acquisitions. Amortization of intangible assets for the three months ended June 30, 2022 and 2021 was $2.9 million and $8.3 million, respectively, and for the six months ended June 30 2022 and 2021 was $5.3 million and $16.6 million, respectively. The decrease in the amortization of intangibles during 2022 as compared to 2021 was due to the majority of intangible assets recorded from the acquisition of Great Lakes Educational Loan Services, Inc. ("Great Lakes") in February 2018 becoming fully amortized as of June 30, 2021.
Other expenses36,940 32,587 76,439 69,286 Other expenses includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs. Increase was due to (i) an increase in expenses in the LSS operating segment due to growth of borrowers under the government servicing contracts; and (ii) an increase in expenses in the ETS&PP operating segment due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies, and an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID pandemic.
Total operating expenses196,588 171,791 402,458 344,464 
Income before income taxes108,387 109,250 348,969 267,015 
Income tax expense25,483 26,237 81,180 61,098 
The effective tax rate was 23.0% and 23.8% for the three months ended June 30, 2022 and 2021, respectively, and 23.0% and 22.8% for the six months ended June 30, 2022 and 2021, respectively. The Company currently expects its effective tax rate for 2022 will range between 22 and 24 percent.
Net income82,904 83,013 267,789 205,917 
Net loss attributable to noncontrolling interests2,225 854 3,987 1,548 Amounts for noncontrolling interests primarily reflect the net income/loss attributable to the holders of minority membership interests in WRCM and multiple solar entities.
Net income attributable to Nelnet, Inc.$85,129 83,867 271,776 207,465 
37


The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income.
 Three months ended June 30,Six months ended June 30,
 2022202120222021
Income/gains from investments, net (a)$18,127 15,591 29,983 24,089 
Borrower late fee income (b)2,436 744 4,867 1,184 
ALLO preferred return (c)2,140 2,020 4,257 4,342 
Administration/sponsor fee income (d)2,012 — 4,134 — 
Investment advisory services (e)1,482 1,145 2,764 3,842 
Loss from ALLO voting membership interest investment (f)(16,941)1,094 (30,071)(21,125)
Loss from solar investments (g)(1,854)(2,302)(2,884)(3,982)
Other 5,245 4,629 9,474 9,967 
  Other income$12,647 22,921 22,524 18,317 

(a)    During the three months ended June 30, 2022, the Company recognized a $15.2 million (pre-tax) gain as a result of the revaluation of its previously held 50 percent ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests in NextGen on April 30, 2022.
In addition, the Company recognized net income/gains from its real estate and venture capital investment portfolios of $5.4 million and $14.2 million during the three months ended June 30, 2022 and 2021, respectively, and $17.0 million and $22.6 million during the six months ended June 30, 2022 and 2021, respectively. The majority of these gains were from the sale of investments, and thus are not recurring.
The remaining amount of income/gains from investments recognized by the Company and included in the table above relate to gains/losses from sales of debt and equity securities and the remeasurement of certain equity securities measured at fair value.
(b)    Represents borrower late fees earned by the AGM operating segment. The increase in borrower late fees for the three and six months ended June 30, 2022 as compared to the same periods in 2021 was due to the Company suspending substantially all borrower late fees effective March 13, 2020 to provide borrowers relief as a result of the COVID-19 pandemic. The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans).
(c)    Represents the Company's income on its preferred membership interests in ALLO, which was deconsolidated from the Company's financial statements in December 2020. As of June 30, 2022 and 2021, the amount of preferred membership interests held by the Company was $137.3 million and $129.7 million, respectively, which earns a preferred annual return of 6.25 percent.
(d)    Represents fee income earned by the AGM operating segment as administrator and sponsor for the securitizations completed by the joint venture to purchase and securitize private education loans sold by Wells Fargo.
(e)    The Company provides investment advisory services through Whitetail Rock Capital Management, LLC ("WRCM"), the Company's SEC-registered investment advisor subsidiary, under various arrangements. WRCM earns annual fees of 10 basis points to 25 basis points on the majority of the outstanding balance of asset-backed securities under management and a share of the gains from the sale of asset-backed securities or asset-backed securities being called prior to the full contractual maturity for which it provides advisory services. As of June 30, 2022, the outstanding balance of asset-backed securities under management subject to these arrangements was $2.8 billion, of which all of such securities were FFELP student loan asset-backed securities. In addition, WRCM earns annual management fees of five basis points for Nelnet stock under management (with the Nelnet stock primarily shares of Class B common stock held in various trust estates).
(f)    Represents the Company's share of loss on its voting membership interests in ALLO. During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of an error that resulted in a $14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to other income. See note 5 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information regarding the accounting for and income statement impact of this investment.
Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers. The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP. Applying the Hypothetical Liquidation at Book Value ("HLBV") method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years.
(g)    Represents the Company's share of income or loss from solar investments under 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. Losses from solar investments include losses attributable to third-party minority interest investors of $2.0 million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $3.8 million and $1.9 million for the six months ended June 30, 2022 and 2021, respectively, that are included in "net loss attributable to noncontrolling interests" in the consolidated statements of income.
38


LOAN SERVICING AND SYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS
Loan Servicing Volumes
As of
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
March 31,
2022
June 30,
2022
Servicing volume (dollars in millions):
Government$443,248 453,681 452,450 461,054 478,402 507,653 542,398 
FFELP30,763 30,084 29,361 28,244 26,916 25,646 24,224 
Private and consumer16,226 21,397 24,758 24,229 23,702 23,433 22,838 
Total$490,237 505,162 506,569 513,527 529,020 556,732 589,460 
Number of servicing borrowers:
Government13,251,930 13,301,364 13,253,051 13,570,056 14,196,520 14,727,860 15,426,607 
FFELP1,300,677 1,233,461 1,198,863 1,150,214 1,092,066 1,034,913 977,785 
Private and consumer636,136 882,477 1,039,537 1,097,252 1,065,439 1,030,863 998,454 
Total15,188,743 15,417,302 15,491,451 15,817,522 16,354,025 16,793,636 17,402,846 
Number of remote hosted borrowers:6,555,841 4,307,342 4,338,570 4,548,541 4,799,368 5,487,943 5,738,381 
Government Loan Servicing
The Company's student loan servicing contracts with the Department are scheduled to expire on December 14, 2023. In 2017, the Department initiated a contract procurement process referred to as the Next Generation Financial Services Environment for a new framework for the servicing of all student loans owned by the Department. The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the process, including that any new federal student loan servicing environment is required to provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance. In the second quarter of 2022, the Department released a solicitation entitled Unified Servicing and Data Solution ("USDS") for the new servicing framework. The Company responded to the USDS solicitation. The Company cannot predict the timing, nature, or ultimate outcome of this or any other contract procurement process by the Department.
In July 2021, the Pennsylvania Higher Education Assistance Agency ("PHEAA"), a servicer for the Department, announced that it will exit the federal student loan servicing business. All applicable student loans serviced for the Department by PHEAA will be transferred to successor servicers by December 2022. At the time of this announcement, PHEAA serviced approximately 8.5 million borrowers under its contract. As of December 31, 2021, March 31, 2022, and June 30, 2022, approximately 603,000, 1,175,000, and 1,905,000 PHEAA borrowers, respectively, have been transitioned to the Company's platform.
The Department currently allocates new loan volume among its servicers based on certain performance metrics that measure the satisfaction among separate customer groups, including borrowers and Department personnel who work with the servicers. The metrics also measure the success of keeping borrowers in an on-time repayment status and helping borrowers avoid default. Under the most recent publicly announced performance metrics used by the Department for the quarterly periods July 1, 2021 through December 31, 2021, the overall rankings of Great Lakes and Nelnet Servicing, LLC ("Nelnet Servicing") among the remaining six go-forward servicers for the Department (which excludes PHEAA) were tied for second (with two other servicers) and fourth, respectively. Based on these results, Great Lakes’ and Nelnet Servicing’s allocation of new student loan servicing volumes beginning March 1, 2022 are 18 percent and 12 percent, respectively.
Servicing contract amendments entered into with the Department in September 2021 to extend the contracts through December 14, 2023 also amended the methodology for performance measurements and new loan volume allocations, in part by reflecting additional service level performance metrics under which, along with portfolio performance metrics, the Department will evaluate each servicer and make new loan volume allocations on a quarterly basis.
Under the CARES Act, beginning in March 2020, federal student loan payments and interest accruals were suspended for all borrowers that had loans owned by the Department. As a result of the CARES Act, the Company receives less servicing revenue per borrower from the Department based on the borrower forbearance status than what was earned on such accounts prior to these provisions. On April 6, 2022, the Department extended the student loan payment pause under the CARES Act from May 1, 2022 to August 31, 2022. Prior to the April 2022 extension (during the fourth quarter of 2021 and first quarter of
39


2022), the Company earned additional revenue from the Department based on incremental work, including outbound engagement, being performed by the Company to support the anticipated Department borrowers coming out of forbearance. Effective May 1, 2022, the Department increased the monthly per borrower CARES Act forbearance rate paid to its servicers to compensate them for supplemental outreach to certain borrowers and to support the transition of borrowers back to repayment on August 31, 2022. Once borrowers transition back to repayment, the Company anticipates revenue per borrower from the Department will increase to pre-CARES Act levels.
Private Education Loan Servicing
In December 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education student loans representing approximately 445,000 borrowers. In conjunction with the sale, the Company was selected as servicer of the portfolio. During March 2021, approximately 261,000 borrowers were converted to the Company's servicing platform, with the vast majority of the remaining borrowers converted in the second quarter of 2021.
Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Net interest income$226726916Increase was due to higher interest rates in 2022 as compared to 2021.
Loan servicing and systems revenue124,873112,094261,241223,611See table below for additional information.
Intersegment servicing revenue8,3818,48016,86016,748
Represents revenue earned by the LSS operating segment from servicing loans for the AGM and Nelnet Bank operating segments. Increase in the six months ended June 30, 2022 compared to the same period in 2021 was due to ending COVID-19 pandemic borrower relief policies, which increased servicing activities performed for AGM. Increase was partially offset by the expected amortization of AGM's FFELP portfolio. FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Other income6117011,3501,814
Represents revenue earned from providing administrative support and marketing services, which primarily were to Great Lakes’ former parent company under a contract that expired on January 31, 2021.
Total other income133,865121,275279,451242,173
Salaries and benefits83,22068,388175,192134,846
Increase in 2022 compared to 2021 was due to the Company hiring contact center operations and support associates to prepare for the resumption of federal student loan payments and other activities after the CARES Act suspension expires. The CARES Act suspension was originally expected to expire on January 31, 2022 and has been extended two additional times to May 1, 2022 and again to August 31, 2022. The Company currently expects salaries and benefits to continue to be higher throughout 2022 as compared to the same periods in 2021 as it continues to stand ready for the suspension provisions of the CARES Act to expire on August 31, 2022.
Depreciation and amortization5,3187,97410,27216,166Includes amortization of intangibles from the Great Lakes acquisition in February 2018 and depreciation on property and equipment. Amortization of intangible assets for the three months ended June 30, 2022 and 2021 was $0.4 million and $5.5 million, respectively, and for the six months ended June 30, 2022 and 2021 was $0.7 million and $11.0 million, respectively. The majority of the Great Lakes intangible assets became fully amortized as of June 30, 2021. Excluding amortization of intangible assets, the increase in 2022 compared to 2021 was due to scaling of the Company's servicing platform for the PHEAA loan volume transferred to its platform.
Other expenses13,50713,27329,72126,557
Increase in 2022 compared to 2021 was due to additional costs associated with the growth of borrowers under the government servicing contracts.
Intersegment expenses18,55816,13438,95533,024
Intersegment expenses represent costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services. Increase in 2022 as compared to 2021 was due to the Company hiring contact center operations and support associates throughout 2021 and 2022 in preparation for the federal student loan payment pause under the CARES Act to expire. The Company currently expects intersegment expenses to be higher throughout 2022 as compared to the same periods in 2021 as it continues to stand ready for the payment pause to expire on August 31, 2022.
Total operating expenses120,603105,769254,140210,593
Income before income taxes13,48815,51325,58031,596
Income tax expense(3,237)(3,723)(6,139)(7,583)Represents income tax expense at an effective tax rate of 24%.
Net income$10,25111,79019,44124,013

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Before tax operating margin10.1 %12.8 %9.2 %13.0 %
Before tax operating margin is a measure of before tax operating profitability as a percentage of revenue, and for the LSS segment is calculated as income before income taxes divided by the total of loan servicing and systems revenue, intersegment servicing revenue, and other income revenue. The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it provides additional information to facilitate an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods.

Before tax operating margin decreased in 2022 as compared to 2021 due to increased operating expenses as the Company prepared for a January 31, 2022 expiration of the federal student loan payment pause under the CARES Act, which was extended to May 1, 2022 (and then again to August 31, 2022).
Loan servicing and systems revenue
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Government servicing$98,815 79,239 207,940 157,413 
Represents revenue from the Company's Department servicing contracts. Increase in the three and six months ended June 30, 2022 compared to the same periods in 2021 was due to (i) an increase in the number of borrowers serviced, including PHEAA borrowers transferred to the Company's servicing platform; (ii) a per borrower rate increase beginning September 1, 2021 to reflect the increase in the cost of labor (Economic Cost Index) per the provisions of the contract; and (iii) a CARES Act forbearance rate increase effective May 1, 2022. Increase in the six months ended June 30, 2022 compared to the same period in 2021 was also due to (i) the recognition of $9.1 million of revenue in the first quarter of 2022 for incremental work related primarily to CARES Act forbearance exit outreach activities to borrowers; and (ii) the recognition of $10.5 million of revenue in the first quarter of 2022 related to the discharge of borrowers under the Total and Permanent Disability ("TPD") discharge program. The Company earns revenue per each borrower that satisfies the requirements for their loan to be discharged under the TPD discharge program. The revenue earned by the Company for the discharge of TPD borrowers and CARES Act forbearance exit outreach is expected to be minimal for the remainder of 2022.
Private education and consumer loan servicing12,122 12,816 24,995 21,364 
Increase for the six months ended June 30, 2022 compared to the same period in 2021 was due to the addition of the former Wells Fargo private education loan borrowers converted to the Company's servicing platform during March and the second quarter of 2021. Excluding revenue earned on the former Wells Fargo portfolio, revenue for 2022 decreased compared to 2021. The decrease in revenue was due to a decrease in client requested enhanced delinquency services.
FFELP servicing4,011 4,703 8,259 9,373 
Decrease in 2022 compared to 2021 was due to a decrease in the number of borrowers serviced. Over time, FFELP servicing revenue will continue to decrease as third-party customers' FFELP portfolios pay off. Since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of borrower relief under the CARES Act and an initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness program.
Software services7,907 7,374 15,308 15,827 Decrease for the six months ended 2022 compared to the same period in 2021 was due to many of the services provided under the Company's remote hosted servicing and system support contract with Great Lakes' former parent, representing 2.3 million borrowers, expiring on January 31, 2021. This decrease in revenue was partially offset by an increase in 2022 as compared to 2021 in the number of remote hosted servicing borrowers from the Company's remaining customers.
Outsourced services and other2,018 7,962 4,739 19,634 
The majority of this revenue relates to providing contact center and back office operational outsourcing services, including services to state agencies to assist with COVID-19 specific activities that have been performed under shorter-term contracts. Revenue from providing COVID-19 related services to state agencies was $5.4 million and $15.1 million during the three and six months ended June 30, 2021. There was no revenue for these services during the three and six months ended June 30, 2022.
Loan servicing and systems revenue$124,873 112,094 261,241 223,611 

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EDUCATION TECHNOLOGY, SERVICES, AND PAYMENT PROCESSING OPERATING SEGMENT – RESULTS OF OPERATIONS
As discussed further in the Company's 2021 Annual Report, this segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year. Based on the timing of revenue recognition and when expenses are incurred, revenue and pre-tax operating margin are higher in the first quarter as compared to the remainder of the year.
Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Net interest income$874 210 1,213 473 
Represents interest income on tuition funds held in custody for schools. Increase was due to higher interest rates in 2022 as compared to 2021.
Education technology, services, and payment processing revenue91,031 76,702 203,317 171,960 See table below for additional information.
Intersegment revenue10 
Total other income91,038 76,705 203,327 171,966 
Cost of services30,852 21,676 66,397 48,728 See table below for additional information.
Salaries and benefits32,120 27,094 63,406 53,035 
Increase in 2022 compared to 2021 was due to an increase in headcount to support the growth of the customer base, and the investment in the development of new technologies.
Depreciation and amortization2,698 2,956 5,013 6,027 
Represents primarily amortization of intangible assets from prior business acquisitions. Amortization of intangible assets related to business acquisitions was $2.5 million and $2.8 million for the three months ended June 30, 2022 and 2021, respectively, and $4.6 million and $5.7 million for the six months ended June 30, 2022 and 2021, respectively. Amortization of intangible assets is expected to increase in future periods as a result of the business combination with NextGen. See note 6 of the notes to the consolidated financial statements included under Part I, Item 1 of this report.
Other expenses6,750 4,437 12,514 9,259 
Increase was due to higher costs for consulting, professional fees, and technology services resulting from investments in new technologies. Increase was also due to an increase in costs for travel and in-person hosted conferences that subsided in 2021 due to the COVID pandemic.
Intersegment expenses, net4,805 3,520 9,410 7,184 Intersegment expenses represent costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
Total operating expenses46,373 38,007 90,343 75,505 
Income before income taxes14,687 17,232 47,800 48,206 
Income tax expense(3,525)(4,136)(11,472)(11,570)Represents income tax expense at an effective tax rate of 24%.
Net income11,162 13,096 36,328 36,636 
Net loss attributable to noncontrolling interests53 — 53 — Amounts for noncontrolling interests reflect the net loss attributable to the holders of minority membership interests in NextGen, of which the Company became the majority owner on April 30, 2022. See note 6 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.
Net income attributable to Nelnet, Inc.$11,215 13,096 36,381 36,636 


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Education technology, services, and payment processing revenue
The following table provides disaggregated revenue by service offering and before tax operating margin for each reporting period.
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Tuition payment plan services$27,63726,53858,35256,088
Revenue increased in 2022 as compared to 2021 as a result of a higher number of payment plans in the K-12 market, partially offset by lower revenues for institutions of higher education as a result of lower enrollment trends.
Payment processing27,96825,00866,03958,046
Payment volumes in 2022 increased as compared to 2021 for both the K-12 and higher education markets due to new customers and an increase in volume from existing customers.
Education technology and services34,95624,93078,20757,457
Increase in 2022 compared to 2021 was due to an increase in revenues from the Company’s school information system software, enrollment and communication products, and FACTS Education Solutions instructional and professional development services. FACTS Education Solutions instructional services revenue was the largest component of this increase driven by the Emergency Assistance to Non-Public Schools (“EANS”) program which provides funds to non-public schools to address the impact the COVID-19 pandemic has had or continues to have on school students and teachers.
Other470226719369
Education technology, services, and payment processing revenue91,03176,702203,317171,960
Cost of services30,85221,67666,39748,728
Costs primarily relate to payment processing revenue and such costs decrease/increase in relationship to payment volumes. Costs to provide instructional services are also included as a component of this expense and were the primary driver in the increase in 2022 compared to 2021 due to the increase in instructional services resulting from the EANS program as noted for Education technology and services revenue above.
Net revenue$60,17955,026136,920123,232
Before tax operating margin24.4 %31.3 %34.9%39.1%
Before tax operating margin is a measure of before tax operating profitability as a percentage of revenue, and for the ETS&PP segment is calculated as income before income taxes divided by net revenue. The Company uses this metric to monitor and assess the segment’s performance, manage operating costs, identify and evaluate business trends affecting the segment, and make strategic decisions, and believes that it facilitates an understanding of the operating performance of the segment and provides a meaningful comparison of the results of operations between periods.

The decrease in margin for 2022 as compared to 2021 was due to investments in (i) the development of new services and technologies; and (ii) superior customer experiences to align with the Company’s strategies to grow, retain, and diversify revenues. The Company currently anticipates before tax operating margin will be lower throughout 2022 as compared to the same periods in 2021 as the Company continues to invest in these areas.


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ASSET GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS
Loan Portfolio
As of June 30, 2022, the AGM operating segment had a $15.9 billion loan portfolio, consisting primarily of federally insured loans. For a summary of the Company’s loan portfolio as of June 30, 2022 and December 31, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
Loan Activity
The following table sets forth the activity of loans in the AGM operating segment:
 Three months ended June 30,Six months ended June 30,
 2022202120222021
Beginning balance$16,618,627 19,030,223 17,441,790 19,559,108 
Loan acquisitions:
Federally insured student loans43,747 697,738 53,949 762,469 
Private education loans6,484 63,413 7,510 86,451 
Consumer and other loans118,012 20,924 136,534 40,380 
Total loan acquisitions168,243 782,075 197,993 889,300 
Repayments, claims, capitalized interest, participations, and other, net(478,461)(190,130)(925,601)(596,695)
Loans lost to external parties(453,158)(213,026)(840,806)(442,571)
Loans sold(114)(77,417)(18,239)(77,417)
Ending balance$15,855,137 19,331,725 15,855,137 19,331,725 

The Company has also purchased partial ownership in certain private education, consumer, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of June 30, 2022, the Company’s ownership correlates to approximately $650 million, $160 million, and $430 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.
Allowance for Loan Losses and Loan Delinquencies
AGM's total allowance for loan losses of $118.4 million at June 30, 2022 represents reserves equal to 0.60% of AGM's federally insured loans (or 21.8% of the risk sharing component of the loans that is not covered by the federal guaranty), 5.59% of AGM's private education loans, and 6.93% of AGM's consumer loans.
For a summary of the allowance as a percentage of the ending balance for each of AGM's loan portfolios as of June 30, 2022 and December 31, 2021, the activity in AGM's allowance for loan losses for the three and six months ended June 30, 2022 and 2021, and a summary of AGM's loan status and delinquency amounts as of June 30, 2022, December 31, 2021, and June 30, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

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Loan Spread Analysis
The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets. The spread amounts included in the following table are calculated by using the notional dollar values found in the table under the caption "Net interest income after provision for loan losses, net of settlements on derivatives" below, divided by the average balance of loans or debt outstanding.
 Three months ended June 30,Six months ended June 30,
2022202120222021
Variable loan yield, gross3.59 %2.63 %3.16 %2.67 %
Consolidation rebate fees(0.85)(0.84)(0.85)(0.85)
Discount accretion, net of premium and deferred origination costs amortization0.03 0.01 0.03 0.01 
Variable loan yield, net2.77 1.80 2.34 1.83 
Loan cost of funds - interest expense (a)(1.73)(1.04)(1.41)(1.06)
Loan cost of funds - derivative settlements (b) (c)0.02 (0.01)0.02 (0.00 )
Variable loan spread1.06 0.75 0.95 0.77 
Fixed rate floor income, gross0.46 0.78 0.57 0.76 
Fixed rate floor income - derivative settlements (b) (d)0.09 (0.12)0.01 (0.10)
Fixed rate floor income, net of settlements on derivatives0.55 0.66 0.58 0.66 
Core loan spread1.61 %1.41 %1.53 %1.43 %
Average balance of AGM's loans$16,437,861 18,958,042 16,823,385 19,226,022 
Average balance of AGM's debt outstanding15,923,648 18,656,465 16,335,310 18,905,249 
(a)     In 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 is no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income and the impact of this reduction to interest expense was excluded from the table above.
(b)    Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms. Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income. The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the Company’s net interest income (loan spread) as presented in this table. The Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance. See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the 2022 and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 4 and in this table.
A reconciliation of core loan spread, which includes the impact of derivative settlements on loan spread, to loan spread without
derivative settlements follows.
Three months ended June 30,Six months ended June 30,
2022202120222021
Core loan spread1.61 %1.41 %1.53 %1.43 %
Derivative settlements (1:3 basis swaps)(0.02)0.01 (0.02)0.00 
Derivative settlements (fixed rate floor income)(0.09)0.12 (0.01)0.10 
Loan spread1.50 %1.54 %1.50 %1.53 %
(c)    Derivative settlements consist of net settlements received (paid) related to the Company’s 1:3 basis swaps.
(d)    Derivative settlements consist of net settlements received (paid) related to the Company’s floor income interest rate swaps.
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A trend analysis of AGM's core and variable loan spreads is summarized below.
nni-20220630_g2.jpg
(a)    The interest earned on a large portion of AGM's FFELP student loan assets is indexed to the one-month LIBOR rate. AGM funds a portion of its assets with three-month LIBOR indexed floating rate securities. The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread. This table (the right axis) shows the difference between AGM's liability base rate and the one-month LIBOR rate by quarter. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s FFELP student loan assets and related funding for those assets.
Variable loan spread increased during the three and six months ended June 30, 2022 compared to the same periods in 2021 due to a significant increase in short-term interest rates during the first half of 2022. In an increasing interest rate environment, student loan spread increases due to the timing of interest rate resets on the Company's assets occurring daily in contrast to the timing of the interest resets on the Company's debt that occurs either monthly or quarterly. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on AGM’s FFELP student loan assets and related funding for those assets.
The difference between variable loan spread and core loan spread is fixed rate floor income earned on a portion of AGM's federally insured student loan portfolio. A summary of fixed rate floor income and its contribution to core loan spread follows:
 Three months ended June 30,Six months ended June 30,
2022202120222021
Fixed rate floor income, gross$18,292 36,639 47,285 72,178 
Derivative settlements (a)3,692 (5,153)487 (9,438)
Fixed rate floor income, net$21,984 31,486 47,772 62,740 
Fixed rate floor income contribution to spread, net0.55 %0.66 %0.58 %0.66 %

(a)    Derivative settlements consist of net settlements received (paid) related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
The decrease in gross fixed rate floor income for the three and six months ended June 30, 2022 compared to the same periods in 2021 was due to higher interest rates in 2022 as compared to 2021. Subsequent to June 30, 2022 (on July 27, 2022), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise in 2022 as a result of
46


inflationary pressures in the U.S. economy; increases in interest rates will reduce the amount of gross fixed rate floor income the Company is currently receiving.
The Company has a portfolio of derivative instruments in which the Company pays a fixed rate and receives a floating rate to economically hedge loans earning fixed rate floor income. The increase in net derivative settlements received by the Company during the three and six months ended June 30, 2022, as compared to net derivative settlements paid during the same periods in 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.
See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment,” which provides additional detail on the Company’s portfolio earning fixed rate floor income and the derivatives used by the Company to hedge these loans.
Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate
As of June 30, 2022, the interest earned on a principal amount of $14.4 billion of AGM's FFELP student loan asset portfolio was indexed to one-month LIBOR, and the interest paid on a principal amount of $14.3 billion of AGM’s FFELP student loan asset-backed debt securities was indexed to one-month or three-month LIBOR. In addition, the Company’s derivative financial instrument transactions used to manage LIBOR interest rate risks are indexed to LIBOR. The market transition away from the LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets, as well as the Company’s LIBOR-indexed derivative instruments. See Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.
On March 15, 2022, the President signed into law, as part of the Consolidated Appropriations Act, 2022, the Adjustable Interest Rate (LIBOR) Act (the "LIBOR Act"), which provides a framework for addressing the discontinuation of LIBOR under federal law. The LIBOR Act provides a statutory mechanism to automatically replace LIBOR with a benchmark rate based on the Secured Overnight Financing Rate ("SOFR"), including any applicable tenor adjustment, for certain contracts that reference LIBOR and do not contain sufficient fallback provisions. The LIBOR Act preempts and supersedes any state law or regulation relating to the selection or use of a benchmark rate replacement for LIBOR, such as similar legislation enacted by the State of New York in April 2021. Parties remain free to agree on a different benchmark replacement rate, and the Company has worked and will continue to work with its asset-backed securitization investors to amend transaction documents to address the discontinuation of LIBOR. On July 19, 2022, the Federal Reserve issued a notice of proposed rulemaking for proposed regulations to implement the LIBOR Act, as required by its terms.
The LIBOR Act also amends the Higher Education Act to substitute the current special allowance payment rate-setting mechanism for FFELP loans from the one-month LIBOR to the 30-day average SOFR in effect for each of the days in an applicable quarter, adjusted daily by adding a tenor spread adjustment. Transition of the rate-setting mechanism for special allowance payments from LIBOR to SOFR is expected to occur prior to June 30, 2023.

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Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Net interest income after provision for loan losses$61,861 80,990 135,320 197,912 See table below for additional analysis.
Other income5,133 2,316 11,644 2,760 
Other income includes primarily borrower late fees, income from providing administration activities for third-parties, and income from AGM's investment in a joint venture. Borrower late fees for the three months ended June 30, 2022 and 2021 were $2.4 million and $0.7 million, respectively, and for the six months ended June 30, 2022 and 2021 were $4.9 million and $1.2 million, respectively. The Company suspended borrower late fees in March 2020 to provide borrowers relief as a result of the COVID-19 pandemic. The Company began to recognize borrower late fees again in May 2021 (for private education loans) and October 2021 (for federally insured student loans). The Company recognized revenue of $2.0 million and $4.1 million for the three and six months ended June 30, 2022, respectively, as administrator and sponsor for the securitizations completed during 2021 by the joint venture to purchase and securitize private education loans sold by Wells Fargo. No administrator and sponsor revenue was earned during the first half of 2021. The Company also recognized a loss of $0.4 million and income of $1.2 million for the three months ended June 30, 2022 and 2021, respectively, and income of $1.6 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively, related to its investment in the joint venture.
Gain on sale of loans— 15,271 2,989 15,271 
The Company sold $18.1 million (par value) and $77.4 million (par value) of consumer loans in January 2022 and May 2021, respectively, and recognized gains of $3.0 million and $15.3 million, respectively.
Impairment expense and provision for beneficial interests, net— — — 2,436 
In the first quarter of 2021, due to improved economic conditions, the Company recorded a negative provision of $2.4 million related to its remaining allowance on a consumer loan securitization beneficial interest investment. Such allowance was initially recorded in March 2020 as a result of the COVID-19 pandemic.
Derivative settlements, net4,623 (5,374)1,814 (9,678)The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income as reflected in the table below.
Derivative market value adjustments, net40,401 (1,615)186,135 37,194 Includes the realized and unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. The majority of the derivative market value adjustments during 2022 and 2021 related to the changes in fair value of the Company's floor income interest rate swaps. Such changes reflect that a decrease in the forward yield curve during a reporting period results in a decrease in the fair value of the Company's floor income interest rate swaps, and an increase in the forward yield curve during a reporting period results in an increase in the fair value of such swaps.
Total other income/expense50,157 10,598 202,582 47,983 
Salaries and benefits614 556 1,205 1,051 
Other expenses3,543 3,567 6,576 7,344 The primary component of other expenses is servicing fees paid to third parties. The decrease in 2022 as compared to 2021 was due to a decrease in AGM's loan portfolio. These decreases were partially offset by increased costs due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first half of 2022 as compared to the same period in 2021.
Intersegment expenses8,513 8,549 17,344 16,976 
Amounts include fees paid to the LSS operating segment for the servicing of AGM’s loan portfolio. These amounts exceed the actual cost of servicing the loans. The increase in servicing fees for the six months ended June 30, 2022 as compared to the same period in 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first half of 2022 as compared to the same period in 2021. These increases were partially offset by the expected amortization of AGM's FFELP portfolio. Intersegment expenses also include costs for certain corporate activities and services that are allocated to each operating segment based on estimated use of such activities and services.
Total operating expenses12,670 12,672 25,125 25,371 
Total operating expenses were 31 basis points and 27 basis points of the average balance of loans for the three months ended June 30, 2022 and 2021, respectively, and 30 basis points and 26 basis points for the six months ended June 30, 2022 and 2021, respectively. The increase in operating expenses as a percent of the average balance of loans in 2022 as compared to 2021 was due to ending COVID-19 pandemic borrower relief policies which increased servicing activities in the first half of 2022 as compared to the same period in 2021.
Income before income taxes99,348 78,916 312,777 220,524 
Income tax expense(23,844)(18,940)(75,066)(52,926)Represents income tax expense at an effective tax rate of 24%.
Net income$75,504 59,976 237,711 167,598 
Additional information:
Net income$75,504 59,976 237,711 167,598 See "Overview - GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above for additional information about non-GAAP net income, excluding derivative market value adjustments.
Derivative market value adjustments, net(40,401)1,615 (186,135)(37,194)
Tax effect9,696 (388)44,672 8,927 
Net income, excluding derivative market value adjustments$44,799 61,203 96,248 139,331 
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Net interest income after provision for loan losses, net of settlements on derivatives The following table summarizes the components of "net interest income after provision for loan losses" and "derivative settlements, net."
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Variable interest income, gross$146,911 124,267 262,663 253,436 Increase in 2022 compared to 2021 was due to an increase in the gross yield earned on loans, partially offset by a decrease in the average balance of loans.
Consolidation rebate fees(34,952)(40,250)(71,723)(81,323)Decrease in 2022 compared to 2021 was due to a decrease in the average consolidation loan balance.
Discount accretion, net of
     premium and deferred
     origination costs amortization
1,474 427 2,934 546 Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years.
Variable interest income, net113,433 84,444 193,874 172,659 
Interest on bonds and notes
     payable
(68,616)(48,542)(113,825)(75,312)
Increase in 2022 compared to 2021 was due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding. In addition, during the first quarter of 2021, the Company reduced interest expense by $23.8 million as a result of reversing a historical accrued interest liability on certain bonds.
Derivative settlements, net (a)931 (221)1,327 (240)Derivative settlements include the net settlements received (paid) related to the Company’s 1:3 basis swaps.
Variable loan interest margin,
     net of settlements on
     derivatives (a)
45,748 35,681 81,376 97,107 
Fixed rate floor income, gross18,292 36,639 47,285 72,178 
Decrease in 2022 compared to 2021 was due to higher interest rates in 2022 as compared to 2021. Subsequent to June 30, 2022 (on July 27, 2022), the Federal Reserve again increased interest rates, and it is currently anticipated that interest rates may continue to rise in 2022 as a result of inflationary pressures in the U.S. economy; increases in interest rates will reduce the amount of fixed rate floor income the Company is currently receiving.
Derivative settlements, net (a)3,692 (5,153)487 (9,438)
Derivative settlements include the settlements received (paid) related to the Company's floor income interest rate swaps. The increase in net derivative settlements received by the Company during the three and six months ended June 30, 2022, as compared to net derivative settlements paid during the same periods in 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.
Fixed rate floor income, net of settlements on derivatives21,984 31,486 47,772 62,740 
Core loan interest income (a)67,732 67,167 129,148 159,847 
Investment interest8,671 8,882 17,835 11,530 Increase for the six months ended June 30, 2022 compared to 2021 was due primarily to an increase in the Company's loan beneficial interest investments during the first half of 2021.
Intercompany interest(1,092)(128)(1,886)(308)
(Provision) negative provision for loan losses - federally insured loans(2,365)397 383 7,880 See "Allowance for Loan Losses and Loan Delinquencies" included above under "Asset Generation and Management Operating Segment - Results of Operations."
(Provision) negative provision for loan losses - private education loans(1,217)1,004 (817)(427)
(Provision) negative provision for loan losses - consumer and other loans(5,245)(1,706)(7,529)9,712 
Net interest income after provision for loan losses (net of settlements on derivatives) (a)$66,484 75,616 137,134 188,234 Decrease for the three months ended June 30, 2022 as compared to the same period in 2021 was due to (i) a decrease in the average balance of loans; and (ii) an increase in provision for loan losses. These items were partially offset by an increase in core loan spread. Decrease for the six months ended June 30, 2022 as compared to the same period in 2021 was due to (i) a decrease in the average balance of loans; (ii) an increase in provision for loan losses; and (iii) the reversal of a historical accrued interest liability on certain bonds in the first quarter of 2021. These items were partially offset by an increase in core loan spread and an increase in interest income as a result of an increase in the Company's loan beneficial interest investments during the first half of 2021.
(a)    Core loan interest income and net interest income after provision for loan losses (net of settlements on derivatives) are non-GAAP financial measures. For an explanation of GAAP accounting for derivative settlements and the reasons why the Company reports these non-GAAP measures (and the limitations thereof), see footnote (b) to the table immediately under the caption “Loan Spread Analysis” above. See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative referred to in the "Additional information" column of this table, for the 2022 and 2021 periods presented in the table under the caption "Consolidated Financial Statement Impact Related to Derivatives - Statements of Income" in note 4 and in this table.
Future levels of net interest income can be affected by the levels of prepayments with respect to the Company's loan portfolios. See Part II, Item 1A, "Risk Factors" in this report for information regarding the potential impact on prepayments of recent government announcements related to student loan income-driven and other repayment forgiveness or discharge.

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NELNET BANK OPERATING SEGMENT – RESULTS OF OPERATIONS
Loan Portfolio
As of June 30, 2022, Nelnet Bank had a $423.6 million loan portfolio, consisting of $346.1 million of private education loans and $77.4 million of FFELP loans.
As of June 30, 2022, Nelnet Bank's allowance for loan losses on its portfolio was $2.0 million, which represents reserves equal to 0.33% of Nelnet Bank's federally insured loans (or 13.2% of the risk sharing component of the loans that is not covered by the federal guaranty), and 0.50% of Nelnet Bank's private education loans.
For a summary of the allowance as a percentage of the ending balance of each of Nelnet Bank's loan portfolios as of June 30, 2022 and December 31, 2021, the activity in Nelnet Bank's allowance for loan losses for the three and six months ended June 30, 2022 and 2021, and a summary of Nelnet Bank's loan status, delinquency amounts, and other key credit quality indicators as of June 30, 2022, December 31, 2021, and June 30, 2021, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
The following table sets forth the activity in Nelnet Bank's loan portfolio:
 Three months ended June 30,Six months ended June 30,
2022202120222021
Beginning balance$368,257 79,231 257,901 17,543 
Federally insured student loan acquisitions— 99,973 — 99,973 
Private education loan originations75,204 21,246 205,546 86,155 
Repayments(17,373)(9,004)(35,767)(10,998)
Sales to AGM segment(2,535)(875)(4,127)(2,102)
Ending balance$423,553 190,571 423,553 190,571 
Deposits
As of June 30, 2022, Nelnet Bank had $751.3 million of deposits, of which $162.9 million were deposits from Nelnet, Inc. (the parent company) and its subsidiaries (intercompany), and thus eliminated for consolidated financial reporting purposes. All of Nelnet Bank’s deposits are interest-bearing deposits and consist of brokered certificates of deposit (CDs) and retail and other savings deposits and CDs. Retail and other deposits include savings deposits from Educational 529 College Savings and Health Savings plans and commercial and institutional CDs. Union Bank, a related party, is the program manager for the College Savings plans. The intercompany deposits include a pledged deposit of $40.0 million from Nelnet, Inc. as required under the Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating and savings deposits, and Nelnet Business Services custodial deposits consisting of collected tuition payments which are subsequently remitted to the appropriate school.

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Average Balance Sheet
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities.
Three months ended June 30,Six months ended June 30,
2022202120222021
BalanceRateBalanceRateBalanceRateBalanceRate
Average assets
Federally insured student loans$80,424 2.18 %$71,440 1.35 %$82,832 1.79 %$35,917 1.35 %
Private education loans331,584 3.08 86,497 3.16 280,542 3.01 65,240 3.23 
Cash and investments354,336 2.53 223,322 2.01 309,965 2.16 219,489 1.96 
Total interest-earning assets766,344 2.73 %381,259 2.15 %673,339 2.47 %320,646 2.15 %
Non-interest-earning assets17,144 9,237 16,214 7,896 
Total assets$783,488 $390,496 $689,553 $328,542 
Average liabilities and equity
Brokered deposits$249,830 1.31 %$72,324 0.84 %$197,783 1.27 %$37,846 0.83 %
Intercompany deposits 137,812 0.83 93,434 0.25 104,380 0.62 75,161 0.26 
Retail and other deposits287,656 0.75 117,770 0.62 278,393 0.68 109,661 0.61 
Total interest-bearing liabilities675,298 0.97 %283,528 0.55 %580,556 0.87 %222,668 0.53 %
Non-interest-bearing liabilities5,226 4,297 5,509 3,587 
Equity102,964 102,671 103,488 102,287 
Total liabilities and equity$783,488 $390,496 $689,553 $328,542 
Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2022202120222021Additional information
Total interest income$5,212 2,041 8,241 3,418 Represents interest earned on Nelnet Bank's FFELP and private education student loans, cash, and investments. Increase was due to an increase of these balances and interest rates in 2022 as compared to 2021.
Interest expense1,639 392 2,494 586 Represents interest expense on deposits. Increase was due to an increase of deposits and interest rates in 2022 as compared to 2021.
Net interest income 3,573 1,649 5,747 2,832 
Provision for loan losses582 69 1,011 491 Represents the current period provision expense to reflect the current lifetime expected credit losses related to Nelnet Bank's loan portfolio. Increase was due to an increase in loans originated in 2022 as compared to 2021.
Net interest income after provision for loan losses2,991 1,580 4,736 2,341 
Other income157 1,659 26 
Represents primarily income and gains from investments. During the first quarter of 2022, Nelnet Bank recognized gains of approximately $1.1 million on certain asset-backed securities that were sold or called during the quarter.
Salaries and benefits1,714 1,578 3,268 3,065 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.
Other expenses903 237 1,591 781 Represents various expenses such as consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses. Increase was due to the overall growth of Nelnet Bank activities.
Intersegment expenses57 37 102 40 
Represents primarily servicing costs paid to the LSS operating segment. Certain shared service and support costs incurred by the Company to support Nelnet Bank are not and will not be reflected as part of the Nelnet Bank operating segment through 2023 (when the bank's de novo period will end). The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank's operating segment were $1.5 million and $1.0 million for the three months ended June 30, 2022 and 2021, respectively, and $2.8 million and $1.7 million for the six months ended June 30, 2022 and 2021, respectively.
Total operating expenses2,674 1,852 4,961 3,886 
Income (loss) before income taxes474 (268)1,434 (1,519)
Income tax (expense) benefit(106)64 (328)351 
Represents income tax (expense) benefit at an effective tax rate of 22.3% and 24.1% for the three months ended June 30, 2022 and 2021, respectively, and 22.9% and 23.1% for the six months ended June 30, 2022 and 2021, respectively.
Net income (loss)$368 (204)1,106 (1,168)
51


LIQUIDITY AND CAPITAL RESOURCES
The Company’s Loan Servicing and Systems, and Education Technology, Services, and Payment Processing operating segments are non-capital intensive and both produce positive operating cash flows. As such, a minimal amount of debt and equity capital is allocated to these segments and any liquidity or capital needs are satisfied using cash flow from operations. Therefore, the Liquidity and Capital Resources discussion is concentrated on the Company’s liquidity and capital needs to meet existing debt obligations in the Asset Generation and Management operating segment and the Company's other initiatives to pursue additional strategic investments.
Sources of Liquidity
As of June 30, 2022, the Company's sources of liquidity included:
Cash and cash equivalents$128,499 
Less: Cash and cash equivalents held at Nelnet Bank (1)(33,218)
Net cash and cash equivalents95,281 
Available-for-sale (AFS) debt securities (investments) - at fair value1,294,537 
Less: AFS debt securities held at Nelnet Bank - at fair value (1)(393,457)
AFS debt securities serving as collateral on participation agreement - at fair value (2)(370,522)
AFS debt securities serving as collateral on repurchase agreements - at fair value (3)(338,441)
Net AFS debt securities (investments) - at fair value192,117 
Unencumbered private, consumer, and other loans (Non-Nelnet Bank)244,234 
Repurchased Nelnet issued asset-backed debt securities - at par (not included on consolidated financial statements) (4)431,211 
Less: Repurchased Nelnet issued asset-backed debt securities serving as collateral on repurchase agreements - at par(206,925)
224,286 
Unused capacity on unsecured line of credit (5)495,000 
Sources of liquidity as of June 30, 2022$1,250,918 
(1) Cash and investments held at Nelnet Bank are generally not available for Company activities outside of Nelnet Bank.
(2) See the caption "Other Debt Facilities" below.
(3) See the caption "Repurchase Agreements" below.
(4) The Company has repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. Certain of these securities serve as collateral on amounts outstanding under the Company's repurchase agreements as reflected in the table above.
(5) The Company has a $495.0 million unsecured line of credit that matures on September 22, 2026. As of June 30, 2022, there was no amount outstanding on the unsecured line of credit and $495.0 million was available for future use. The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $737.5 million, subject to certain conditions.
The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP, private education, consumer, and other loan acquisitions (or investment interests therein); strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. The timing and size of these opportunities will vary and will have a direct impact on the Company's cash and investment balances.
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Cash Flows
The Company has historically generated positive cash flow from operations. During the six months ended June 30, 2022 and 2021, the Company generated $483.7 million and $185.9 million, respectively, in cash from operating activities. See the caption "Reclassification of Prior Period Cash Flows Presentation" in note 1 of the notes to the consolidated financial statements under Part I, Item 1 of this report for additional information. The increase in 2022 as compared to 2021 was due to:
An increase in net income;
An increase in proceeds from the Company's clearinghouse for margin payments on derivatives for the six months ended June 30, 2022 compared to the same period in 2021;
Proceeds from termination of derivative instruments for the six months ended June 30, 2022 compared to no proceeds from terminations in the same period in 2021;
Net proceeds from the sale of equity securities for the six months ended June 30, 2022 compared to net purchases in the same period in 2021;
Adjustments to net income for the impact of provision for loan losses, gain on sale of loans, and the non-cash change in deferred income taxes; and
The impact of changes to accounts receivable, accrued interest receivable, and accrued interest payable during the six months ended June 30, 2022 as compared to the same period in 2021.
These factors were partially offset by:
The adjustments to net income for derivative market value adjustments; and
The impact of changes to other assets during the six months ended June 30, 2022 as compared to the same period in 2021.
The primary items included in the statement of cash flows for investing activities are the purchase, origination, and repayment of loans and the purchase and sale of available-for-sale securities. The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable and Nelnet Bank deposits used to fund loans. Cash provided by investing activities and used in financing activities for the six months ended June 30, 2022 was $837.0 million and $1.3 billion, respectively. Cash used in investing activities and provided by financing activities for the six months ended June 30, 2021 was $243.4 million and $176.6 million, respectively. Investing and financing activities are further addressed in the discussion that follows.
Liquidity Needs and Sources of Liquidity Available to Satisfy Debt Obligations Secured by Loan Assets and Related Collateral
The following table shows AGM's debt obligations outstanding that are secured by loan assets and related collateral.
 As of June 30, 2022
Carrying amount
Final maturity
Bonds and notes issued in asset-backed securitizations$15,298,356 2/27/28 - 9/25/69
FFELP and private education loan warehouse facilities94,084 10/31/23 - 11/22/23
 $15,392,440  

Bonds and Notes Issued in Asset-backed Securitizations
The majority of AGM’s portfolio of student loans is funded in asset-backed securitizations that are structured to substantially match the maturity of the funded assets, thereby minimizing liquidity risk. Cash generated from student loans funded in asset-backed securitizations provide the sources of liquidity to satisfy all obligations related to the outstanding bonds and notes issued in such securitizations. In addition, due to (i) the difference between the yield AGM receives on the loans and cost of financing within these transactions, and (ii) the servicing and administration fees AGM earns from these transactions, AGM has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.
As of June 30, 2022, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, AGM currently expects future undiscounted cash flows from its portfolio to be approximately $1.72 billion as detailed below.
The forecasted cash flow presented below includes all loans funded in asset-backed securitizations as of June 30, 2022. As of June 30, 2022, AGM had $15.5 billion of loans included in asset-backed securitizations, which represented 97.6 percent of its
53


total loan portfolio. The forecasted cash flow does not include cash flows that the Company expects to receive related to loans funded in its warehouse facilities, unencumbered private education and consumer loans funded with operating cash, loans acquired subsequent to June 30, 2022, loans owned by Nelnet Bank, and cash flows relating to the Company's ownership of beneficial interest in loan securitizations (such beneficial interest investments are classified as "investments" on the Company's consolidated balance sheets).
Asset-backed Securitization Cash Flow Forecast
$1.72 billion
(dollars in millions)
nni-20220630_g3.jpg
The forecasted future undiscounted cash flows of approximately $1.72 billion include approximately $1.07 billion (as of June 30, 2022) of overcollateralization included in the asset-backed securitizations. These excess net asset positions are included in the consolidated balance sheets and included in the balances of "loans and accrued interest receivable" and "restricted cash." The difference between the total estimated future undiscounted cash flows and the overcollateralization of approximately $0.65 billion, or approximately $0.49 billion after income taxes based on the estimated effective tax rate, represents estimated future net interest income (earnings) from the portfolio and is expected to be accretive to the Company's June 30, 2022 balance of consolidated shareholders' equity.
The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast. These assumptions are further discussed below.
Prepayments: The primary variable in establishing a life of loan estimate is the level and timing of prepayments. Prepayment rates equal the amount of loans that prepay annually as a percentage of the beginning of period balance, net of scheduled principal payments. A number of factors can affect estimated prepayment rates, including the level of consolidation activity, borrower default rates, and utilization of debt management options such as income-based repayment, deferments, and forbearance. Should any of these factors change, management may revise its assumptions, which in turn would impact the projected future cash flow. The Company’s cash flow forecast above assumes prepayment rates of 4 percent for consolidation loans and 5 percent for all other loan types. These prepayment rates are generally consistent with those utilized in the Company’s most recent asset-backed securitization transactions.
On April 19, 2022, the Department issued a press release, and the Department's Office of Federal Student Aid ("FSA") posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment ("IDR") plans for federal student loans. In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit
54


from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan. These announced changes have increased, and the Company currently believes these announced changes may continue to increase, FFEL Program loan prepayments. In addition, if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could also significantly increase prepayments. For example, since late 2021, the Company has experienced accelerated run-off of its FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act and an initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness program. See Part II, Item 1A, "Risk Factors" in this report for additional information related to these announcements and other risks associated with loan prepayments.
The following table summarizes the estimated impact to the above forecasted cash flows if prepayments were greater than the prepayment rate assumptions used to calculate the forecasted cash flows.
Increase in prepayment rate
Reduction in forecasted cash flow from table above
Forecasted cash flow using increased prepayment rate
2x$0.13 billion$1.59 billion
4x$0.33 billion$1.39 billion
10x$0.58 billion$1.14 billion
If the entire AGM student loan portfolio prepaid, the Company would receive the full amount of overcollateralization included in the asset-backed securitizations of approximately $1.07 billion (as of June 30, 2022); however, the Company would not receive the $0.65 billion ($0.49 billion after tax) of estimated future earnings from the portfolio.
The forecasted cash flow presented below includes the $1.72 billion estimated cash flow as presented in the above cash flow forecast table, and the estimated cash flow assuming a 10 times increase in prepayments on the Company's FFELP asset-backed securities transactions.
Asset-backed Securitization Cash Flow Forecast
(dollars in millions)
nni-20220630_g4.jpg
Interest rates: The Company funds a large portion of its student loans with three-month LIBOR indexed floating rate securities. Meanwhile, the interest earned on the Company’s student loan assets is indexed primarily to a one-month LIBOR rate. The different interest rate characteristics of the Company’s loan assets and liabilities funding these assets result in basis risk. The Company’s cash flow forecast assumes three-month LIBOR will exceed one-month LIBOR by 12 basis points for the life of the portfolio, which approximates the historical relationship between these indices. If the forecast is computed assuming a spread of 24 basis points between three-month and one-month LIBOR for the life of the portfolio, the cash flow forecast would be reduced by approximately $60 million to $85 million. As the percentage of the Company's outstanding debt financed
55


by three-month LIBOR declines, the Company's basis risk will be reduced. In addition, the Company attempts to mitigate the impact of this basis risk by entering into certain derivative instruments.
The Company uses the current forward interest rate yield curve to forecast cash flows. A change in the forward interest rate curve would impact the future cash flows generated from the portfolio. An increase in future interest rates will reduce the amount of fixed rate floor income the Company is currently receiving. The Company attempts to mitigate the impact of a rise in short-term rates by entering into certain derivative instruments.
The forecasted cash flow does not include cash flows the Company expects to pay/receive related to derivative instruments used by the Company to manage interest rate risk.
See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk - AGM Operating Segment" for additional information about various interest rate risks which may impact future cash flows from AGM's loan assets.
In addition, LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the forecasted cash flows from the Company's asset-backed securitizations. See "Interest Rate Risk - Replacement of LIBOR as a Benchmark Rate" above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.
Warehouse Facilities
The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facility. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements. As of June 30, 2022, the Company's warehouse facility had a maximum financing amount available of $25.0 million, of which $4.6 million was outstanding and $20.4 million was available for additional funding. The warehouse facility has a static advance rate until the expiration date of the liquidity provisions (November 22, 2022). In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor. The loans would then be funded at this new advance rate until the final maturity date of the facility (November 22, 2023). As of June 30, 2022, the Company had $0.3 million advanced as equity support on this facility.
The Company has a private education loan warehouse facility that, as of June 30, 2022, had an aggregate maximum financing amount available of $175.0 million, an advance rate of 80 to 90 percent, liquidity provisions through October 31, 2022, and a final maturity date of October 31, 2023. As of June 30, 2022, $89.5 million was outstanding under this warehouse facility, $85.5 million was available for future funding, and $10.1 million was advanced as equity support.
Upon termination or expiration of the warehouse facilities, the Company would expect to access the securitization market, obtain replacement warehouse facilities, use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.
Other Uses of Liquidity
The Company no longer originates FFELP loans, but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist, including opportunities to purchase private education, consumer, and other loans (or investment interests therein).
The Company plans to fund additional loan acquisitions and related investments using current cash; using proceeds from the sale of certain investments; using its unsecured line of credit, Union Bank student loan participation agreement, Union Bank student loan asset-backed securities participation agreement, and third-party repurchase agreements (each as described below), and/or establishing similar secured and unsecured borrowing facilities; using its existing warehouse facilities (as described above); increasing the capacity under existing and/or establishing new warehouse facilities; and continuing to access the asset-backed securities market.
Repurchase Agreements
In December 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education loans representing approximately 445,000 borrowers. The Company entered into a joint venture with other investors to acquire the loans, and under the joint venture, the Company had an approximately 8 percent interest in the loans and has a corresponding 8 percent interest in residual interests in the 2021 securitizations of the loans discussed below. The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility.
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During 2021, the Company sponsored four asset-backed securitization transactions to permanently finance a total of $8.7 billion of private education loans sold by Wells Fargo (which represented the total remaining loans originally purchased from Wells Fargo, factoring in borrower payments from the date of purchase). As sponsor, the Company is required to provide a certain level of risk retention, and has purchased bonds issued in such securitizations to satisfy this requirement. The bonds purchased to satisfy the risk retention requirement are reflected on the Company's consolidated balance sheet as "investments and notes receivable" and as of June 30, 2022, the fair value of these bonds was $338.4 million. 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. The Company entered into repurchase agreements with third parties, of which a portion of the proceeds from such agreements were used to purchase the asset-backed investments, and such investments serve as collateral on the repurchase obligations.
In addition, as discussed above, the Company has repurchased certain of its own asset-backed securities in the secondary market that serve as collateral on amounts outstanding under the Company's repurchase agreements.
As of June 30, 2022, $500.7 million was outstanding on the Company's repurchase agreements, of which $319.2 million was borrowed to fund private education loan securitization bonds subject to the Company’s risk retention requirement and $181.5 million was borrowed to fund repurchased FFELP loan asset-backed securities. The repurchase agreements have various maturity dates (as of June 30, 2022) between August 8, 2022 and November 27, 2024, but are subject to early termination upon required notice provided by the Company or the applicable counterparty prior to the maturity dates. The Company is required to pay additional cash in the event the fair value of the securities subject to a repurchase agreement becomes less than the original purchase price of such securities.
Upon termination or expiration of the repurchase agreements, the Company would use cash and/or cash proceeds from its unsecured line of credit, consider the sale of assets (subject to any restrictions described above), or transfer collateral to satisfy any outstanding obligations subject to the repurchase agreements.
Union Bank Participation Agreement
The Company maintains 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 student loans. As of June 30, 2022, $915.2 million of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. 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. The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $900.0 million or an amount in excess of $900.0 million if mutually agreed to by both parties. Loans participated under this agreement have been accounted for by the Company as loan sales. Accordingly, the participation interests sold are not included on the Company’s consolidated balance sheets.
Asset-backed Securities Transactions
The Company, through its subsidiaries, has historically funded student loans by completing asset-backed securitizations. Depending on market conditions, the Company currently anticipates continuing to access the asset-backed securitization market. Such asset-backed securitization transactions would be used to refinance student loans included in its warehouse facilities, loans purchased from third parties, and/or student loans in its existing asset-backed securitizations.
There were no asset-backed securitization transactions completed during the six months ended June 30, 2022.
Liquidity Impact Related to Nelnet Bank
Nelnet Bank launched operations in November 2020. Nelnet Bank was funded by the Company with an initial capital contribution of $100.0 million, consisting of $55.9 million of cash and $44.1 million of student loan asset-backed securities. In addition, the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC discussed below.
Prior to Nelnet Bank’s launch of operations, Nelnet Bank, Nelnet, Inc. (the parent), and Michael S. Dunlap (Nelnet, Inc.’s controlling shareholder) entered into a Capital and Liquidity Maintenance Agreement and a Parent Company Agreement with the FDIC in connection with Nelnet, Inc.’s role as a source of financial strength for Nelnet Bank. As part of the Capital and Liquidity Maintenance Agreement, Nelnet, Inc. is obligated to (i) contribute capital to Nelnet Bank for it to maintain capital levels that meet FDIC requirements for a “well capitalized” bank, including a leverage ratio of capital to total assets of at least
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12 percent; (ii) provide and maintain an irrevocable asset liquidity takeout commitment for the benefit of Nelnet Bank in an amount equal to the greater of either 10 percent of Nelnet Bank’s total assets or such additional amount as agreed to by Nelnet Bank and Nelnet, Inc.; (iii) provide additional liquidity to Nelnet Bank in such amount and duration as may be necessary for Nelnet Bank to meet its ongoing liquidity obligations; and (iv) establish and maintain a pledged deposit of $40.0 million with Nelnet Bank.
Under the regulatory framework for prompt corrective action, Nelnet Bank is subject to various regulatory capital requirements administered by the FDIC and the UDFI and must meet specific capital standards. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on Nelnet Bank's business, results of operations, and financial condition. On January 1, 2020, the Community Bank Leverage Ratio ("CBLR") framework, as issued jointly by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the FDIC, became effective. Any banking organization with total consolidated assets of less than $10 billion, limited amounts of certain types of assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9% may opt into the CBLR framework quarterly. The CBLR framework allows banks to satisfy capital standards and be considered "well capitalized" under the prompt corrective action framework if their leverage ratio is greater than 9%, unless the banking organization's federal banking agency determines that the banking organization's risk profile warrants a more stringent leverage ratio. The FDIC has ordered Nelnet Bank to maintain at least a 12% leverage ratio. Nelnet Bank has opted into the CBLR framework for the quarter ended June 30, 2022 with a leverage ratio of 13.8%. Nelnet Bank intends to maintain at all times regulatory capital levels that meet both the minimum level necessary to be considered “well capitalized” under the FDIC’s prompt corrective action framework and the minimum level required by the FDIC.
In the second quarter of 2022, Nelnet, Inc. made an additional capital contribution to Nelnet Bank of $15.0 million. Based on Nelnet Bank's business plan for growth and current financial condition, the Company currently believes no additional capital contributions to Nelnet Bank will be required for the remainder of 2022.
Liquidity Impact Related to ALLO
Upon the deconsolidation of ALLO on December 21, 2020, the Company recorded its 45 percent voting membership interests in ALLO at fair value, and accounts for such investment under the HLBV method of accounting. In addition, the Company recorded its remaining non-voting preferred membership units of ALLO at fair value, and accounts for such investment as a separate equity investment. As of June 30, 2022, the outstanding preferred membership interests of ALLO held by the Company was $137.3 million that earns a preferred annual return of 6.25 percent.
Agreements among the Company, SDC (a third party global digital infrastructure investor), and ALLO provide that they will use commercially reasonable efforts (which excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause the redemption, on or before April 2024, of the remaining non-voting preferred membership interests in ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests.
If ALLO needs additional capital to support its growth in existing or new markets, the Company has the option to contribute additional capital to maintain its voting equity interest. Although ALLO has obtained third-party debt financing to fund a large portion of its current growth plans, the Company contributed $34.7 million of additional equity to ALLO on February 25, 2022. As a result of this equity contribution, the Company’s voting membership interests percentage did not materially change. Based on ALLO's business plan for growth and current financial condition, the Company currently believes additional capital contributions to ALLO may be required during the fourth quarter of 2022 and during 2023 and 2024.
Liquidity Impact Related to Hedging Activities
The Company utilizes derivative instruments to manage interest rate sensitivity. By using derivative instruments, the Company is exposed to market risk which could impact its liquidity. Based on the derivative portfolio outstanding as of June 30, 2022, the Company does not currently anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor does the Company expect that any movement in interest rates would have a material impact on its ability to make variation margin payments to its third-party clearinghouse. However, if interest rates move materially and negatively impact the fair value of the Company's derivative portfolio, the replacement of LIBOR as a benchmark rate has significant adverse impacts on the Company's derivatives, or if the Company enters into additional derivatives for which the fair value becomes negative, the Company could be required to make variation margin payments to its third-party clearinghouse. The variation margin, if significant, could negatively impact the Company's liquidity and capital resources. In addition, clearing rules require the Company to post amounts of liquid collateral when executing new derivative instruments, which could prevent or limit the Company from utilizing additional derivative instruments to manage interest rate sensitivity and risks. See note 4 of the notes to consolidated financial statements included in this report for additional information on the Company's derivative portfolio.
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Other Debt Facilities
As discussed above, the Company has a $495.0 million unsecured line of credit with a maturity date of September 22, 2026. As of June 30, 2022, the unsecured line of credit had no amount outstanding and $495.0 million was available for future use. Upon the maturity date of this facility, there can be no assurance that the Company will be able to maintain this line of credit, increase or maintain the amount outstanding under the line, or find alternative funding if necessary.
During 2020, the Company entered into an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in federally insured student loan asset-backed securities. As of June 30, 2022, $393.4 million (par value) of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. This participation agreement has been accounted for by the Company as a secured borrowing. Upon termination or expiration of this agreement, the Company would expect to use operating cash, consider the sale of assets, or transfer collateral to satisfy any remaining obligations.
Stock Repurchases
In 2019, the Board of Directors authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ended May 7, 2022. On May 9, 2022, the Board of Directors authorized a new stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ended May 8, 2025. The five million shares authorized under the new program include the remaining unpurchased shares from the prior program, which the new program replaced. As of June 30, 2022, 4,683,837 shares remained authorized for repurchase under the Company's stock repurchase program. Shares may be repurchased from time to time on the open market, in private transactions (including with related parties), or otherwise, depending on various factors, including share prices and other potential uses of liquidity.
Shares repurchased by the Company during the three months ended March 31, 2022 and June 30, 2022 are shown below. For additional information on stock repurchases during the second quarter of 2022, see "Stock Repurchases" under Part II, Item 2 of this report.
Total shares repurchasedPurchase price
(in thousands)
Average price of shares repurchased (per share)
Quarter ended March 31, 2022380,053 $32,899 86.56 
Quarter ended June 30, 2022558,257 46,032 82.46 
  Total938,310 $78,931 84.12 
Dividends
On June 15, 2022, the Company paid a second quarter 2022 cash dividend on the Company's Class A and Class B common stock of $0.24 per share. In addition, the Company's Board of Directors has declared a third quarter 2022 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.24 per share. The third quarter cash dividend will be paid on September 15, 2022 to shareholders of record at the close of business on September 1, 2022.
The Company currently plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. The Company bases its estimates and judgments on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under varying assumptions or conditions. Note 3 of the notes to consolidated financial statements included in the Company’s 2021 Annual Report includes a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements.
On an on-going basis, management evaluates its estimates and judgments, particularly as they relate to accounting policies that management believes are most “critical” — that is, they are most important to the portrayal of the Company’s financial condition and results of operations and they require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has identified the allowance for loan losses as a critical accounting policy and estimate, as discussed further under Part II, Item 7, “Management’s
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Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Loan Losses” in the Company’s 2021 Annual Report. For additional information regarding changes in the Company’s allowance for loan losses for the three and six months ended June 30, 2022 and 2021, see the caption “Activity in the Allowance for Loan Losses” in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report. There have been no material changes to the Company’s critical accounting policy and estimate since December 31, 2021.
RECENT ACCOUNTING PRONOUNCEMENTS
Financial Instruments - Credit Losses
In March 2022, the FASB issued accounting guidance which eliminates the troubled debt restructurings recognition and measurement guidance and instead requires an entity to evaluate whether the modification represents a new loan or a continuation of an existing loan. The guidance also enhances the disclosure requirements for certain modifications of receivables made to borrowers experiencing financial difficulty. This guidance will be effective for the Company beginning January 1, 2023 with early adoption permitted. The Company is evaluating the impact this pronouncement will have on its ongoing financial reporting.
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(All dollars are in thousands, except share amounts, unless otherwise noted)
Interest Rate Risk - AGM Operating Segment
AGM’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact AGM due to shifts in market interest rates.
The following table sets forth AGM’s loan assets and debt instruments by rate characteristics:
 As of June 30, 2022As of December 31, 2021
 DollarsPercentDollarsPercent
Fixed-rate loan assets$3,972,191 25.1 %$7,434,068 42.6 %
Variable-rate loan assets11,882,946 74.9 10,007,722 57.4 
Total$15,855,137 100.0 %$17,441,790 100.0 %
Fixed-rate debt instruments$728,800 4.7 %$801,548 4.7 %
Variable-rate debt instruments14,663,640 95.3 16,279,722 95.3 
Total$15,392,440 100.0 %$17,081,270 100.0 %
FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment ("SAP") formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its FFELP student loan portfolio with variable rate debt. In low and/or declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, the Company’s FFELP 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. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.
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. 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. 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.
No variable-rate floor income was earned by the Company in 2022 or 2021.
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A summary of fixed rate floor income earned by the AGM operating segment follows.
Three months ended June 30,Six months ended June 30,
2022202120222021
Fixed rate floor income, gross$18,292 36,639 47,285 72,178 
Derivative settlements (a)3,692 (5,153)487 (9,438)
Fixed rate floor income, net$21,984 31,486 47,772 62,740 
(a)    Derivative settlements consist of settlements received (paid) related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
Gross fixed rate floor income decreased for the three and six months ended June 30, 2022 as compared to the same periods in 2021 due to higher interest rates in 2022 as compared to 2021.
Absent the use of derivative instruments, a rise in interest rates will reduce the amount of floor income received and has an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas. In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.
The Company enters into derivative instruments to hedge student loans earning fixed rate floor income. The increase in net derivative settlements received by the Company during the three and six months ended June 30, 2022, as compared to net derivative settlements paid during the same periods in 2021, was due to an increase in interest rates, partially offset by a decrease in the notional amount of derivatives outstanding.
The following graph depicts fixed rate floor income for a borrower with a fixed rate of 6.75% and a SAP rate of 2.64%:
nni-20220630_g5.jpg
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The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of June 30, 2022.
Fixed interest rate rangeBorrower/lender weighted average yieldEstimated variable conversion rate (a)Loan balance
3.5 - 3.99%3.81%1.17%$390,523 
4.0 - 4.49%4.20%1.56%812,050 
4.5 - 4.99%4.71%2.07%516,568 
5.0 - 5.49%5.22%2.58%355,095 
5.5 - 5.99%5.67%3.03%224,241 
6.0 - 6.49%6.19%3.55%263,638 
6.5 - 6.99%6.70%4.06%258,430 
7.0 - 7.49%7.17%4.53%96,676 
7.5 - 7.99%7.71%5.07%182,195 
8.0 - 8.99%8.18%5.54%424,181 
> 9.0%
9.05%6.41%164,979 
$3,688,576 
(a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of June 30, 2022, the weighted average estimated variable conversion rate was 3.02% and the short-term interest rate was 100 basis points.
The following table summarizes the outstanding derivative instruments as of June 30, 2022 used by AGM to economically hedge loans earning fixed rate floor income.
MaturityNotional amountWeighted average fixed rate paid by the Company (a)
2023$250,000 0.32 %
20242,250,000 0.35 
2026500,000 1.02 
2031100,000 1.53 
$3,100,000 0.49 %
(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.

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AGM is also exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of AGM’s assets do not match the interest rate characteristics of the funding for those assets. The following table presents AGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of June 30, 2022.
IndexFrequency of variable resetsAssetsFunding of student loan assets
1 month LIBOR (a)Daily$14,389,927 — 
3 month H15 financial commercial paperDaily552,971 — 
3 month Treasury billDaily486,713 — 
1 month LIBORMonthly— 9,585,812 
3 month LIBOR (a)Quarterly— 4,737,622 
Fixed rate— 703,600 
Auction-rate (b)Varies— 221,385 
Asset-backed commercial paper (c)Varies— 4,618 
Other (d)1,450,609 1,627,183 
  $16,880,220 16,880,220 
(a)    The Company has certain basis swaps outstanding in which the Company receives three-month LIBOR and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps"). 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. The following table summarizes the 1:3 Basis Swaps outstanding as of June 30, 2022.
MaturityNotional amount (i)
2022$1,000,000 
2023750,000 
20241,750,000 
20261,150,000 
2027250,000 
$4,900,000 
(i)    The weighted average rate paid by the Company on the 1:3 Basis Swaps as of June 30, 2022 was one-month LIBOR plus 9.4 basis points.
(b)    As of June 30, 2022, the Company was sponsor for $221.4 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (“Auction Rate Securities”). Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents.
(c)    The interest rate on the Company's FFELP warehouse facility is indexed to asset-backed commercial paper rates.
(d)    Assets include accrued interest receivable and restricted cash. Funding represents overcollateralization (equity) and other liabilities included in FFELP asset-backed securitizations and warehouse facilities.
LIBOR is in the process of being discontinued as a benchmark rate, and the market transition away from the current LIBOR framework could result in significant changes to the interest rate characteristics of the Company's LIBOR-indexed assets and funding for those assets. See "Interest Rate Risk - Repayment of LIBOR as a Benchmark Rate" under Item 2 above and Item 1A, "Risk Factors - Loan Portfolio - Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2021 Annual Report for additional information.

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Sensitivity Analysis
The following tables summarize the effect on the Company’s consolidated earnings, based upon a sensitivity analysis performed on AGM's assets and liabilities assuming hypothetical increases in interest rates of 100 basis points and 300 basis points while funding spreads remain constant. In addition, a sensitivity analysis was performed assuming the funding index increases 10 basis points and 30 basis points while holding the asset index constant, if the funding index is different than the asset index. The sensitivity analysis was performed on AGM’s variable rate assets (including loans earning fixed rate floor income) and liabilities. The analysis includes the effects of AGM’s derivative instruments in existence during these periods.
 Interest ratesAsset and funding index mismatches
Change from increase of
100 basis points
Change from increase of
300 basis points
Increase of
10 basis points
Increase of
30 basis points
 
 DollarsPercentDollarsPercentDollarsPercentDollarsPercent
 Three months ended June 30, 2022
Effect on earnings:   
Decrease in pre-tax net income before impact of derivative settlements$(5,927)(5.4)%$(10,505)(9.7)%$(1,199)(1.1)%$(3,597)(3.3)%
Impact of derivative settlements7,729 7.1 23,187 21.4 1,222 1.1 3,664 3.4 
Increase (decrease) in net income before taxes$1,802 1.7 %$12,682 11.7 %$23 0.0 %$67 0.1 %
Increase (decrease) in basic and diluted earnings per share$0.04 $0.26 $0.00 $0.00 
 Three months ended June 30, 2021
Effect on earnings:   
Decrease in pre-tax net income before
   impact of derivative settlements
$(14,023)(12.8)%$(25,636)(23.5)%$(1,571)(1.4)%$(4,713)(4.3)%
Impact of derivative settlements9,562 8.7 28,685 26.3 1,471 1.3 4,413 4.0 
Increase (decrease) in net income
   before taxes
$(4,461)(4.1)%$3,049 2.8 %$(100)(0.1)%$(300)(0.3)%
Increase (decrease) in basic and
   diluted earnings per share
$(0.09)$0.06 $(0.00)$(0.01)
 Six months ended June 30, 2022
Effect on earnings:   
Decrease in pre-tax net income before
   impact of derivative settlements
$(16,068)(4.6)%$(28,152)(8.1)%$(2,461)(0.7)%$(7,383)(2.1)%
Impact of derivative settlements18,455 5.3 55,365 15.9 2,677 0.8 8,028 2.3 
Increase (decrease) in net income
   before taxes
$2,387 0.7 %$27,213 7.8 %$216 0.1 %$645 0.2 %
Increase (decrease) in basic and
   diluted earnings per share
$0.05 $0.55 $0.00 $0.01 
 Six months ended June 30, 2021
Effect on earnings:        
Decrease in pre-tax net income before
   impact of derivative settlements
$(28,355)(10.6)%$(52,005)(19.5)%$(3,175)(1.2)%$(9,527)(3.6)%
Impact of derivative settlements18,692 7.0 56,075 21.0 2,987 1.1 8,962 3.4 
Increase (decrease) in net income
   before taxes
$(9,663)(3.6)%$4,070 1.5 %$(188)(0.1)%$(565)(0.2)%
Increase (decrease) in basic and
   diluted earnings per share
$(0.19)$0.08 $(0.00)$(0.01)
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Interest Rate Risk - Nelnet Bank
To manage Nelnet Bank's risk from fluctuations in market interest rates, the Company actively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of assets, net income, and cash flow. To achieve this objective, the Company manages and mitigates Nelnet Bank's exposure to fluctuations in market interest rates through several techniques, including managing the maturity, repricing, and mix of fixed and variable rate assets and liabilities.
The following table presents Nelnet Bank's loan assets and deposits by rate characteristics:
 As of June 30, 2022As of December 31, 2021
 DollarsPercentDollarsPercent
Fixed-rate loan assets$334,984 79.1 %$191,410 74.2 %
Variable-rate loan assets88,569 20.9 66,491 25.8 
Total$423,553 100.0 %$257,901 100.0 %
Fixed-rate deposits$380,471 50.6 %$344,315 80.9 %
Variable-rate deposits370,874 49.4 81,085 19.1 
Total$751,345 100.0 %$425,400 100.0 %
ITEM 4.  CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company's principal executive and principal financial officers, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, 2022. Based on this evaluation, the Company’s principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes from the information referred to in the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 under Item 3 of Part I of such Form 10-K.
ITEM 1A.  RISK FACTORS
The following risk factors provide supplements and updates to the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 in response to Item 1A of Part I of such Form 10-K and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 in response to Item 1A of Part II of such Form 10-Q, in order to provide information regarding (i) loan portfolio prepayment risks associated with recent announcements and proposals by the Department and the Department's Office of Federal Student Aid ("FSA") related to student loan income-driven and other repayment forgiveness or discharge; and (ii) a recent cybersecurity incident.
Our loan portfolio is subject to prepayment risk, which could reduce the expected cash flows and earnings on our portfolio.
Higher rates of prepayments of student loans, including consolidations by the Department through the Federal Direct Loan Program or private refinancing programs, would reduce our interest income.
Pursuant to the Higher Education Act, borrowers may prepay loans made under the FFEL Program at any time without penalty. Prepayments may result from consolidations of student loans by the Department through the Federal Direct Loan Program or by a lending institution through a private education or unsecured consumer loan, which historically tend to occur more frequently in low interest rate environments; from borrower defaults on federally insured loans, which will result in the receipt of a guaranty payment; and from voluntary full or partial prepayments; among other things.
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Legislative and executive action risk exists as Congress and the President evaluate economic stimulus packages and proposals to reauthorize the Higher Education Act. If the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could further increase prepayments and reduce interest income and could also reduce servicing fees. Future laws, regulations, executive actions, or other policy statements may encourage or force consolidation, create additional income-based repayment or debt forgiveness programs, create broad debt cancellation programs, or establish other policies and programs that impact prepayments on education loans. Even if a broad debt cancellation program only applied to student loans held by the Department, such program could result in a significant increase in consolidations of FFELP loans to Federal Direct Loan Program loans and a corresponding increase in prepayments with respect to our FFELP loan portfolio. For example, in October 2021, the Department announced a set of policy changes and released proposed negotiated rulemaking materials relating to the Public Service Loan Forgiveness program under its Federal Direct Loan Program, which may result in an increase in consolidations of FFELP loans into Federal Direct Loan Program loans held by the Department (which results in the loans no longer being on our balance sheet). Such policy changes have increased prepayments and may continue to cause higher than anticipated prepayment rates on our portfolio of loans. In addition, on April 19, 2022, the Department issued a press release, and FSA posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment (“IDR”) plans for federal student loans. In the April 2022 announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan before the Department completes implementation of these changes, which the Department estimates to be no sooner than January 1, 2023. Further, on July 6, 2022, the Department announced the issuance of proposed regulations that would expand major student loan discharge programs under the Higher Education Act through changes related to borrower defense to repayment where there is a dispute with the higher education institution, the Public Service Loan Forgiveness program, the interest capitalization rules, and closed school discharges, as well as other matters. We currently believe these announced changes and proposals could significantly increase FFEL Program loan prepayments. For example, since late 2021, we have experienced accelerated run-off of our FFELP servicing portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act and the initiative offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness program.

A significant increase in FFEL Program loan prepayments could have a materially adverse impact in future periods on net interest income in our AGM operating segment, FFELP servicing revenue in our LSS operating segment, investment advisory services revenue earned by our SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on our FFELP loan asset-backed securities investments. In addition, student loan forgiveness or discharge under the Federal Direct Loan Program as a result of the changes described in the announcements and proposals could have a materially adverse impact on future revenue earned by the LSS operating segment under our government servicing contracts, including software services revenue earned by us in providing remote hosted services to other government servicers. As of June 30, 2022, we were servicing 15.4 million borrowers under our government servicing contracts. If there is a broad $10,000 or $50,000 per borrower forgiveness on all government owned loans, we estimate it would decrease the number of borrowers serviced by us (based on the borrower loan information as of June 30, 2022) by approximately 4.3 million borrowers and 12.1 million borrowers, respectively.
Some variability in prepayment levels is expected, although extraordinary or extended increases in prepayment rates could have a materially adverse effect on our revenues, cash flows, profitability, and business outlook, and, as a result, could materially, adversely affect our business, financial condition, and results of operations.
We cannot otherwise predict how or what programs or policies will be impacted by any actions that the Administration, Congress, or the federal government may take, the timing of when such programs or policies may be implemented, and/or the ultimate outcome thereof. In addition, any changes to government programs or policies may be legally challenged, which may impact the extent and timing these changes may have to the Company's business, financial condition, and results of operations.
A cybersecurity incident we recently experienced could result in negative impacts to our business.
In late July 2022, we determined the primary loan servicing platform used by our remote hosted servicing clients had experienced a cybersecurity incident which may have resulted in unauthorized access to confidential consumer information. We executed extensive steps and blocked the unauthorized activity, we notified our affected clients and our insurance carrier, and we have launched a forensic investigation to determine if confidential customer information left our technical environment. The investigation is ongoing, and this incident could result in liability or expense, decreased revenue, as well as risk and damage to our reputation. Any of these could have a material adverse effect on our business.
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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Stock Repurchases
The following table summarizes the repurchases of Class A common stock during the second quarter of 2022 by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934. Certain share repurchases included in the table below were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.
PeriodTotal number of shares purchased (a)Average price paid per shareTotal number of shares purchased as part of publicly announced plans or programs (b)Maximum number of shares that may yet be purchased under the plans or programs (b)
April 1 - April 30, 2022155,510 $84.38 155,510 2,067,349 
May 1 - May 31, 2022275,161 82.18 275,161 4,806,205 
June 1 - June 30, 2022127,586 80.71 122,368 4,683,837 
Total558,257 $82.46 553,039 
(a) The total number of shares includes: (i) shares repurchased pursuant to the stock repurchase programs discussed in footnote (b) below; and (ii) shares owned and tendered by employees to satisfy tax withholding obligations upon the vesting of restricted shares. Shares of Class A common stock tendered by employees to satisfy tax withholding obligations included 5,218 shares in June 2022. Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were purchased at the closing price of the Company's shares on the date of vesting.
(b) On May 8, 2019, the Company announced that its Board of Directors authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ended May 7, 2022. That program expired on May 7, 2022. On May 9, 2022, the Company announced that its Board of Directors authorized a stock repurchase program to repurchase up to a total of five million shares of the Company's Class A common stock during the three-year period ending May 8, 2025. The five million shares authorized under the new program include the remaining unpurchased shares from the prior program, which the new program replaces. As of June 30, 2022, 4,683,837 shares remained authorized for repurchase under the Company's new program.
Working capital and dividend restrictions/limitations
The Company's $495.0 million unsecured line of credit, which is available through September 22, 2026, imposes restrictions on the payment of dividends through covenants requiring a minimum consolidated net worth and a minimum level of unencumbered cash, cash equivalent investments, and available borrowing capacity under the line of credit. In addition, trust indentures and other financing agreements governing debt issued by the Company's lending subsidiaries generally have limitations on the amounts of funds that can be transferred to the Company by its subsidiaries through cash dividends at certain times. Further, Nelnet Bank is subject to laws and regulations that restrict the ability of Nelnet Bank to pay dividends to the Company, and authorize regulatory authorities to prohibit or limit the payment of dividends by Nelnet Bank to the Company. These provisions do not currently materially limit the Company's ability to pay dividends, and, based on the Company's current financial condition and recent results of operations, the Company does not currently anticipate that these provisions will materially limit the future payment of dividends.
ITEM 6.  EXHIBITS
3.1
3.2*
10.1*+
31.1*
31.2*
32**
101.INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
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101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*Filed herewith
**Furnished herewith
+Filed herewith for purposes of providing a complete set of all documents to the Third Amended and Restated Guaranty related to the Third Amended and Restated Credit Agreement, both dated September 22, 2021.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 NELNET, INC. 
    
Date:August 8, 2022By:/s/ JEFFREY R. NOORDHOEK 
 Name:Jeffrey R. Noordhoek 
 Title:
Chief Executive Officer
Principal Executive Officer
 
    
Date:August 8, 2022By:/s/ JAMES D. KRUGER 
Name:James D. Kruger 
 Title: 
Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer
 


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