UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172021
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

NELNET, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA
Nebraska
84-0748903
(State or other jurisdiction of incorporation or organization)
84-0748903
(I.R.S. Employer Identification No.)
121 SOUTH 13TH STREET
SUITESouth 13th Street, Suite 100
LINCOLN, NEBRASKA
Lincoln,Nebraska68508
(Address of principal executive offices)
68508
(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 [X]☒ No [   ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).                             Yes [X]☒ 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 [X]☒                                                     Accelerated filer [ ]☐
Non-accelerated filer [ ] (Do not check if a smaller reporting company)☐                    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[X]Yes ☐ No ☒

As of OctoberJuly 31, 2017,2021, there were 29,370,34327,600,443 and 11,476,93210,954,171 shares of Class A Common Stock and Class B Common Stock, par value $0.01 per share, outstanding, respectively (excluding 11,317,364a total of 11,305,731 shares of Class A Common Stock held by wholly owned subsidiaries).





NELNET, INC.
FORM 10-Q
INDEX
SeptemberJune 30, 20172021



Item 1.
2
Item 2.
2730
Item 3.
5859
Item 4.
6364
Item 1.
6364
Item 1A.
6364
Item 2.
6465
Item 6.
6566
6667










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
  September 30, 2017
December 31, 2016
Assets:    
Student loans receivable (net of allowance for loan losses of $51,964 and $51,842, respectively) $22,528,845
 24,903,724
Cash and cash equivalents:  
  
Cash and cash equivalents - not held at a related party 11,313
 7,841
Cash and cash equivalents - held at a related party 243,078
 61,813
Total cash and cash equivalents 254,391
 69,654
Investments and other receivables 276,536
 254,144
Restricted cash 725,463
 980,961
Restricted cash - due to customers 105,299
 119,702
Accrued interest receivable 396,827
 391,264
Accounts receivable (net of allowance for doubtful accounts of $1,905 and $1,549, respectively) 70,628
 43,972
Goodwill 147,312
 147,312
Intangible assets, net 40,742
 47,813
Property and equipment, net 208,441
 123,786
Other assets 13,230
 10,245
Fair value of derivative instruments 996
 87,531
Total assets $24,768,710
 27,180,108
Liabilities:  
  
Bonds and notes payable $22,240,279
 24,668,490
Accrued interest payable 47,824
 45,677
Other liabilities 214,763
 197,488
Due to customers 105,299
 119,702
Fair value of derivative instruments 30,105
 77,826
Total liabilities 22,638,270
 25,109,183
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 29,436,022 shares and 30,628,112 shares, respectively 294
 306
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,476,932 shares 115
 115
Additional paid-in capital 360
 420
Retained earnings 2,106,895
 2,056,084
Accumulated other comprehensive earnings 4,187
 4,730
Total Nelnet, Inc. shareholders' equity 2,111,851
 2,061,655
Noncontrolling interests 18,589
 9,270
Total equity 2,130,440
 2,070,925
Total liabilities and equity $24,768,710
 27,180,108
     
Supplemental information - assets and liabilities of consolidated education lending variable interest entities:    
Student loans receivable $22,704,085
 25,090,530
Restricted cash 687,666
 970,306
Accrued interest receivable and other assets 397,093
 390,504
Bonds and notes payable (22,459,091) (25,105,704)
Other liabilities (282,441) (290,996)
Fair value of derivative instruments, net (22,773) (66,453)
Net assets of consolidated education lending variable interest entities $1,024,539
 988,187
See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited)
 Three months Nine months
 ended September 30, ended September 30,
 2017 2016 2017 2016
Interest income:       
Loan interest$191,755
 193,721
 562,451
 567,775
Investment interest5,129
 2,460
 11,335
 6,674
Total interest income196,884
 196,181
 573,786
 574,449
Interest expense:   
    
Interest on bonds and notes payable121,650
 96,386
 341,787
 280,847
Net interest income75,234
 99,795
 231,999
 293,602
Less provision for loan losses6,000
 6,000
 9,000
 10,500
Net interest income after provision for loan losses69,234
 93,795
 222,999
 283,102
Other income:   
    
Loan systems and servicing revenue55,950
 54,350
 167,079
 161,082
Tuition payment processing, school information, and campus commerce revenue35,450
 33,071
 113,293
 102,211
Communications revenue6,751
 4,343
 17,577
 13,167
Enrollment services revenue—
 —
 —
 4,326
Other income19,756
 15,150
 44,874
 38,711
Gain from debt repurchases116
 2,160
 5,537
 2,260
Derivative market value and foreign currency transaction adjustments and derivative settlements, net7,173
 36,001
 (25,568) (33,391)
Total other income125,196
 145,075
 322,792
 288,366
Operating expenses: 
  
    
Salaries and benefits74,193
 63,743
 220,684
 187,907
Depreciation and amortization10,051
 8,994
 27,687
 24,817
Loan servicing fees7,939
 5,880
 19,584
 20,024
Cost to provide communications services2,632
 1,784
 6,789
 5,169
Cost to provide enrollment services—
 —
 —
 3,623
Other expenses30,518
 26,391
 84,593
 84,174
Total operating expenses125,333
 106,792
 359,337
 325,714
Income before income taxes69,097
 132,078
 186,454
 245,754
Income tax expense25,562
 47,715
 70,349
 87,184
Net income43,535
 84,363
 116,105
 158,570
Net loss (income) attributable to noncontrolling interests2,768
 (69) 8,960
 (165)
Net income attributable to Nelnet, Inc.$46,303
 84,294
 125,065
 158,405
Earnings per common share:       
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$1.11
 1.98
 2.97
 3.70
Weighted average common shares outstanding - basic and diluted41,553,316
 42,642,213
 42,054,532
 42,788,133

 See accompanying notes to consolidated financial statements.


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)
 Three months Nine months
 ended September 30, ended September 30,
 2017 2016 2017 2016
Net income$43,535
 84,363
 116,105
 158,570
Other comprehensive (loss) income:       
Available-for-sale securities:       
Unrealized holding gains (losses) arising during period, net405
 3,431
 383
 (4,217)
Reclassification adjustment for gains recognized in net income, net of losses(504) (491) (1,244) (82)
Income tax effect35
 (1,087) 318
 1,591
Total other comprehensive (loss) income(64) 1,853
 (543) (2,708)
Comprehensive income43,471
 86,216
 115,562
 155,862
Comprehensive loss (income) attributable to noncontrolling interests2,768
 (69) 8,960
 (165)
Comprehensive income attributable to Nelnet, Inc.$46,239
 86,147
 124,522
 155,697

NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(unaudited)
 As ofAs of
 June 30, 2021December 31, 2020
Assets:  
Loans and accrued interest receivable (net of allowance for loan losses of $145,719 and
   $175,698, respectively)
$20,187,670 20,185,656 
Cash and cash equivalents:  
Cash and cash equivalents - not held at a related party37,243 33,292 
Cash and cash equivalents - held at a related party175,746 87,957 
Total cash and cash equivalents212,989 121,249 
Investments1,267,957 992,940 
Restricted cash616,711 553,175 
Restricted cash - due to customers247,673 283,971 
Accounts receivable (net of allowance for doubtful accounts of $1,405 and $1,824, respectively)85,884 76,460 
Goodwill142,092 142,092 
Intangible assets, net58,464 75,070 
Property and equipment, net128,527 123,527 
Other assets80,896 92,020 
Total assets$23,028,863 22,646,160 
Liabilities:  
Bonds and notes payable$19,381,835 19,320,726 
Accrued interest payable4,922 28,701 
Bank deposits202,841 54,633 
Other liabilities307,474 312,280 
Due to customers303,173 301,471 
Total liabilities20,200,245 20,017,811 
Commitments and contingencies00
Equity:
Nelnet, Inc. shareholders' equity:  
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; 0 shares issued or outstanding0 0 
Common stock:
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 27,494,942
     shares and 27,193,154 shares, respectively
275 272 
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding
     11,054,171 shares and 11,155,571 shares, respectively
111 112 
Additional paid-in capital10,158 3,794 
Retained earnings2,812,315 2,621,762 
Accumulated other comprehensive earnings, net10,941 6,102 
Total Nelnet, Inc. shareholders' equity2,833,800 2,632,042 
Noncontrolling interests(5,182)(3,693)
Total equity2,828,618 2,628,349 
Total liabilities and equity$23,028,863 22,646,160 
Supplemental information - assets and liabilities of consolidated education and other lending
     variable interest entities:
Loans and accrued interest receivable$19,935,821 20,132,996 
Restricted cash554,638 499,223 
Bonds and notes payable(19,166,839)(19,355,375)
Accrued interest payable and other liabilities(82,485)(83,127)
Net assets of consolidated education and other lending variable interest entities$1,241,135 1,193,717 
See accompanying notes to consolidated financial statements.


2
NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share data)
(unaudited)
 Nelnet, Inc. Shareholders   
 Preferred stock shares Common stock shares Preferred stock Class A common stock Class B common stock Additional paid-in capital  Retained earnings Accumulated other comprehensive (loss) earnings Noncontrolling interests Total equity
  Class A Class B        
Balance as of June 30, 2016—
 31,024,230
 11,476,932
 $—
 310
 115
 4,601
 1,894,551
 (2,277) 8,916
 1,906,216
Issuance of noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 26
 26
Net income—
 —
 —
 —
 —
 —
 —
 84,294
 —
 69
 84,363
Other comprehensive income—
 —
 —
 —
 —
 —
 —
 —
 1,853
 —
 1,853
Cash dividend on Class A and Class B common stock - $0.12 per share—
 —
 —
 —
 —
 —
 —
 (5,101) —
 —
 (5,101)
Issuance of common stock, net of forfeitures—
 16,662
 —
 —
 —
 —
 282
 —
 —
 —
 282
Compensation expense for stock based awards—
 —
 —
 —
 —
 —
 1,132
 —
 —
 —
 1,132
Repurchase of common stock—
 (201,551) —
 —
 (2) —
 (5,791) (1,882) —
 —
 (7,675)
Balance as of September 30, 2016—

30,839,341

11,476,932
 $—

308

115

224

1,971,862

(424)
9,011
 1,981,096
Balance as of June 30, 2017—
 30,373,691
 11,476,932
 $—
 304
 115
 366
 2,110,158
 4,251
 15,215
 2,130,409
Issuance of noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 6,901
 6,901
Net income (loss)—
 —
 —
 —
 —
 —
 —
 46,303
 —
 (2,768) 43,535
Other comprehensive loss—
 —
 —
 —
 —
 —
 —
 —
 (64) —
 (64)
Distribution to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 (759) (759)
Cash dividend on Class A and Class B common stock - $0.14 per share—
 —
 —
 —
 —
 —
 —
 (5,766) —
 —
 (5,766)
Issuance of common stock, net of forfeitures—
 10,125
 —
 —
 —
 —
 278
 —
 —
 —
 278
Compensation expense for stock based awards—
 —
 —
 —
 —
 —
 1,042
 —
 —
 —
 1,042
Repurchase of common stock—
 (947,794) —
 —
 (10) —
 (1,326) (43,800) —
 —
 (45,136)
Balance as of September 30, 2017—
 29,436,022
 11,476,932
 $—
 294
 115
 360
 2,106,895
 4,187
 18,589
 2,130,440
Balance as of December 31, 2015—
 32,476,528
 11,476,932
 $—
 325
 115
 —
 1,881,708
 2,284
 7,726
 1,892,158
Issuance of noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 1,339
 1,339
Net income—
 —
 —
 —
 —
 —
 —
 158,405
 —
 165
 158,570
Other comprehensive loss—
 —
 —
 —
 —
 —
 —
 —
 (2,708) —
 (2,708)
Distribution to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 (219) (219)
Cash dividend on Class A and Class B common stock - $0.36 per share—
 —
 —
 —
 —
 —
 —
 (15,293) —
 —
 (15,293)
Issuance of common stock, net of forfeitures—
 175,405
 —
 —
 1
 —
 3,943
 —
 —
 —
 3,944
Compensation expense for stock based awards—
 —
 —
 —
 —
 —
 3,448
 —
 —
 —
 3,448
Repurchase of common stock—
 (1,812,592) —
 —
 (18) —
 (7,167) (52,958) —
 —
 (60,143)
Balance as of September 30, 2016—
 30,839,341
 11,476,932
 $—
 308
 115
 224
 1,971,862
 (424) 9,011
 1,981,096
Balance as of December 31, 2016—
 30,628,112
 11,476,932
 $—
 306
 115
 420
 2,056,084
 4,730
 9,270
 2,070,925
Issuance of noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 19,553
 19,553
Net income (loss)—
 —
 —
 —
 —
 —
 —
 125,065
 —
 (8,960) 116,105
Other comprehensive loss—
 —
 —
 —
 —
 —
 —
 —
 (543) —
 (543)
Distribution to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
 (1,274) (1,274)
Cash dividend on Class A and Class B common stock - $0.42 per share—
 —
 —
 —
 —
 —
 —
 (17,569) —
 —
 (17,569)
Issuance of common stock, net of forfeitures—
 171,481
 —
 —
 2
 —
 3,359
 —
 —
 —
 3,361
Compensation expense for stock based awards—
 —
 —
 —
 —
 —
 3,213
 —
 —
 —
 3,213
Repurchase of common stock—
 (1,363,571) —
 —
 (14) —
 (6,632) (56,685) —
 —
 (63,331)
Balance as of September 30, 2017—
 29,436,022
 11,476,932
 $—
 294
 115
 360
 2,106,895
 4,187
 18,589
 2,130,440

NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(unaudited)
 Three months endedSix months ended
 June 30,June 30,
 2021202020212020
Interest income:  
Loan interest$122,005 146,140 246,123 327,933 
Investment interest11,578 5,743 16,563 13,141 
Total interest income133,583 151,883 262,686 341,074 
Interest expense: 
Interest on bonds and notes payable and bank deposits49,991 85,248 77,764 219,366 
Net interest income83,592 66,635 184,922 121,708 
Less provision (negative provision) for loan losses374 2,999 (16,674)79,297 
Net interest income after provision for loan losses83,218 63,636 201,596 42,411 
Other income/expense: 
Loan servicing and systems revenue112,094 111,042 223,611 223,778 
Education technology, services, and payment processing revenue76,702 59,304 171,960 142,979 
Communications revenue0 18,998 0 37,179 
Other22,921 60,127 18,317 68,408 
Gain on sale of loans15,271 0 15,271 18,206 
Impairment expense and provision for beneficial interests, net(500)(332)1,936 (34,419)
Derivative market value adjustments and derivative settlements, net(6,989)1,910 27,516 (14,455)
Total other income/expense219,499 251,049 458,611 441,676 
Cost of services:
Cost to provide education technology, services, and payment processing services21,676 15,376 48,728 38,181 
Cost to provide communications services0 5,743 0 11,325 
Total cost of services21,676 21,119 48,728 49,506 
Operating expenses:  
Salaries and benefits118,968 119,247 234,759 239,125 
Depreciation and amortization20,236 29,393 40,419 57,041 
Other expenses32,587 37,052 69,286 80,439 
Total operating expenses171,791 185,692 344,464 376,605 
Income before income taxes109,250 107,874 267,015 57,976 
Income tax expense26,237 21,264 61,098 11,131 
Net income83,013 86,610 205,917 46,845 
Net loss (income) attributable to noncontrolling interests854 (128)1,548 (895)
Net income attributable to Nelnet, Inc.$83,867 86,482 207,465 45,950 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$2.16 2.21 5.36 1.16 
Weighted average common shares outstanding - basic and diluted38,741,486 39,203,404 38,672,902 39,579,459 

See accompanying notes to consolidated financial statements.


3
NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 Nine months
 ended September 30,
 2017 2016
Net income attributable to Nelnet, Inc.$125,065
 158,405
Net (loss) income attributable to noncontrolling interests(8,960) 165
Net income116,105
 158,570
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization, including debt discounts and student loan premiums and deferred origination costs99,826
 83,988
Student loan discount accretion(32,820) (30,439)
Provision for loan losses9,000
 10,500
Derivative market value adjustment(22,381) 1,556
Unrealized foreign currency transaction adjustment45,635
 13,543
Proceeds from termination of derivative instruments3,013
 2,830
Payments to enter into derivative instruments(929) —
Proceeds from clearinghouse to settle variation margin, net37,744
 —
Gain from debt repurchases(5,537) (2,260)
Gain from sales of available-for-sale securities, net of losses(1,244) (82)
Proceeds related to trading securities, net23
 1,192
Deferred income tax benefit(15,012) (7,633)
Non-cash compensation expense3,370
 3,563
Other4,288
 1,681
(Increase) decrease in accrued interest receivable(5,572) 2,021
Increase in accounts receivable(26,656) (1,982)
Increase in other assets(1,213) (1,141)
Increase in accrued interest payable2,147
 11,333
Increase in other liabilities20,548
 11,587
Net cash provided by operating activities230,335
 258,827
Cash flows from investing activities: 
  
Purchases of student loans(137,158) (234,270)
Net proceeds from student loan repayments, claims, capitalized interest, and other2,515,850
 2,908,738
Proceeds from sale of student loans—
 44,760
Purchases of available-for-sale securities(109,666) (66,733)
Proceeds from sales of available-for-sale securities141,206
 100,423
Purchases of investments and loans receivable and issuance of notes receivable(68,131) (14,912)
Proceeds from investments and other receivables10,521
 12,169
Purchases of property and equipment(106,656) (46,821)
Decrease (increase) in restricted cash, net276,654
 (39,400)
Net cash provided by investing activities2,522,620
 2,663,954
Cash flows from financing activities: 
  
Payments on bonds and notes payable(3,679,592) (2,998,017)
Proceeds from issuance of bonds and notes payable1,178,027
 154,619
Payments of debt issuance costs(4,411) (2,098)
Dividends paid(17,569) (15,293)
Repurchases of common stock(63,331) (60,143)
Proceeds from issuance of common stock457
 656
Issuance of noncontrolling interests19,475
 1,339
Distribution to noncontrolling interests(1,274) (219)
Net cash used in financing activities(2,568,218) (2,919,156)
Net increase in cash and cash equivalents184,737
 3,625
Cash and cash equivalents, beginning of period69,654
 63,529
Cash and cash equivalents, end of period$254,391
 67,154
    
Cash disbursements made for: 
  
Interest$287,265
 219,672
Income taxes, net of refunds$71,431
 87,633


NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)
Three months ended June 30,Six months ended June 30,
2021202020212020
Net income$83,013 86,610 205,917 46,845 
Other comprehensive income:
Net changes related to foreign currency translation adjustments$(1)0 0 0 
Net changes related to available-for-sale debt securities:
Unrealized gains during period, net2,897 3,236 7,246 221 
Reclassification of (gains) losses to net income, net(371)(112)(879)123 
Income tax effect(606)1,920 (750)2,374 (1,528)4,839 (83)261 
Other comprehensive income1,919 2,374 4,839 261 
Comprehensive income84,932 88,984 210,756 47,106 
Comprehensive loss (income) attributable to noncontrolling interests854 (128)1,548 (895)
Comprehensive income attributable to Nelnet, Inc.$85,786 88,856 212,304 46,211 

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 earnings, netNoncontrolling interestsTotal equity
 Class AClass B
Balance as of March 31, 20200 28,582,032 11,271,609 $0 286 113 9,140 2,310,282 859 5,120 2,325,800 
Issuance of noncontrolling interests— — — — — — — — — 26 26 
Net income— — — — — — — 86,482 — 128 86,610 
Other comprehensive income— — — — — — — — 2,374 — 2,374 
Distribution to noncontrolling interests— — — — — — — — — (534)(534)
Cash dividends on Class A and Class B common stock - $0.20 per share— — — — — — — (7,733)— — (7,733)
Issuance of common stock, net of forfeitures— 23,853 — — — — 1,660 — — — 1,660 
Compensation expense for stock based awards— — — — — — 1,857 — — — 1,857 
Repurchase of common stock— (1,473,049)— — (15)— (10,790)(56,469)— — (67,274)
Conversion of common stock— 100,000 (100,000)— 1 (1)— — — — 0 
Acquisition of noncontrolling interest— — — — — — — (1,250)— (750)(2,000)
Balance as of June 30, 20200 27,232,836 11,171,609 $0 272 112 1,867 2,331,312 3,233 3,990 2,340,786 
Balance as of March 31, 20210 27,367,797 11,154,171 $0 274 112 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 (1)— — — — 0 
Balance as of June 30, 20210 27,494,942 11,054,171 $0 275 111 10,158 2,812,315 10,941 (5,182)2,828,618 

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 earnings, netNoncontrolling interestsTotal equity
Class AClass B
Balance as of December 31, 20190 28,458,495 11,271,609 $0 285 113 5,715 2,377,627 2,972 4,382 2,391,094 
Issuance of noncontrolling interests— — — — — — — — — 52 52 
Net income— — — — — — — 45,950 — 895 46,845 
Other comprehensive income— — — — — — — — 261 — 261 
Distribution to noncontrolling interests— — — — — — — — — (589)(589)
Cash dividends on Class A and Class B common stock - $0.40 per share— — — — — — — (15,679)— — (15,679)
Issuance of common stock, net of forfeitures— 172,275 — — 1 — 4,600 — — — 4,601 
Compensation expense for stock based awards— — — — — — 3,595 — — — 3,595 
Repurchase of common stock— (1,497,934)— — (15)— (12,043)(56,469)— — (68,527)
Impact of adoption of new accounting standard— — — — — — — (18,867)— — (18,867)
Conversion of common stock— 100,000 (100,000)— 1 (1)— — — — 0 
Acquisition of noncontrolling interest— — — — — — — (1,250)— (750)(2,000)
Balance as of June 30, 20200 27,232,836 11,171,609 $0 272 112 1,867 2,331,312 3,233 3,990 2,340,786 
Balance as of December 31, 20200 27,193,154 11,155,571 $0 272 112 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 — — 2 — 3,913 — — — 3,915 
Compensation expense for stock based awards— — — — — — 4,859 — — — 4,859 
Repurchase of common stock— (31,567)— — — — (2,408)0 — — (2,408)
Conversion of common stock— 101,400 (101,400)— 1 (1)— — — — 0 
Balance as of June 30, 20210 27,494,942 11,054,171 $0 275 111 10,158 2,812,315 10,941 (5,182)2,828,618 

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,
 20212020
Net income attributable to Nelnet, Inc.$207,465 45,950 
Net (loss) income attributable to noncontrolling interests(1,548)895 
Net income205,917 46,845 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs76,754 99,282 
Loan discount accretion(14,606)(19,196)
(Negative provision) provision for loan losses(16,674)79,297 
Derivative market value adjustments(37,194)24,513 
Proceeds from (payments to) clearinghouse - initial and variation margin, net38,440 (24,453)
Gain from sale of loans(15,271)(18,206)
Loss (gain) from investments, net812 (48,402)
Loss (gain) from repurchases of debt, net695 (403)
Purchases of equity securities - trading, net(19,764)0 
Deferred income tax expense (benefit)18,173 (14,762)
Non-cash compensation expense4,980 3,581 
(Negative provision) provision for beneficial interests and impairment expense, net(1,936)34,419 
Increase in loan and investment accrued interest receivable(40,488)(123,276)
(Increase) decrease in accounts receivable(9,446)41,608 
Decrease in other assets, net32,241 22,992 
Decrease in the carrying amount of ROU asset3,962 5,948 
Decrease in accrued interest payable(23,779)(14,525)
Decrease in other liabilities, net(13,663)(26,817)
Decrease in the carrying amount of lease liability(3,288)(4,829)
Increase (decrease) in due to customers1,746 (169,217)
Net cash provided by (used in) operating activities187,611 (105,601)
Cash flows from investing activities:  
Purchases and originations of loans(1,040,573)(872,987)
Purchases of loans from a related party(20,847)(75,118)
Net proceeds from loan repayments, claims, and capitalized interest1,047,645 1,800,286 
Proceeds from sale of loans65,224 90,465 
Purchases of available-for-sale securities(363,485)(112,675)
Proceeds from sales of available-for-sale securities38,511 23,372 
Proceeds from and sale of beneficial interest in loan securitizations19,077 21,765 
Purchases of other investments(128,011)(117,598)
Proceeds from other investments167,821 6,770 
Purchases of property and equipment(28,784)(46,994)
Net cash (used in) provided by investing activities$(243,422)717,286 
7

NELNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six months ended
June 30,
20212020
Cash flows from financing activities:  
Payments on bonds and notes payable$(1,073,523)(2,073,710)
Proceeds from issuance of bonds and notes payable1,114,821 1,252,360 
Payments of debt issuance costs(3,035)(5,863)
Increase in bank deposits, net148,208 0 
Dividends paid(16,912)(15,679)
Repurchases of common stock(2,408)(68,527)
Proceeds from issuance of common stock689 781 
Acquisition of noncontrolling interest0 (2,000)
Issuance of noncontrolling interests7,480 0 
Distribution to noncontrolling interests(423)(333)
Net cash provided by (used in) financing activities174,897 (912,971)
Effect of exchange rate changes on cash(108)0 
Net increase (decrease) in cash, cash equivalents, and restricted cash118,978 (301,286)
Cash, cash equivalents, and restricted cash, beginning of period958,395 1,222,601 
Cash, cash equivalents, and restricted cash, end of period$1,077,373 921,315 
Supplemental disclosures of cash flow information:
Cash disbursements made for interest$78,904 209,170 
Cash disbursements made for income taxes, net of refunds and credits received (a)$14,229 7,949 
Cash disbursements made for operating leases$4,096 5,442 
Non-cash operating, investing, and financing activity:
ROU assets obtained in exchange for lease obligations$823 3,265 
Receipt of beneficial interest in consumer loan securitizations$19,280 38,490 
Distribution to noncontrolling interests$6,406 33 
Issuance of noncontrolling interests$592 0 
(a) The Company utilized $22.0 million and $18.3 million of federal and state tax credits related primarily to renewable energy during the six months ended June 30, 2021 and 2020, respectively.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets to the total of the amounts reported in the consolidated statements of cash flows.
As ofAs ofAs ofAs of
June 30, 2021December 31, 2020June 30, 2020December 31, 2019
Total cash and cash equivalents$212,989 121,249 67,540 133,906 
Restricted cash616,711 553,175 585,236 650,939 
Restricted cash - due to customers247,673 283,971 268,539 437,756 
Cash, cash equivalents, and restricted cash$1,077,373 958,395 921,315 1,222,601 
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 SeptemberJune 30, 20172021 and for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 20162020 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 ninesix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results for the year ending December 31, 2017.2021. 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, 20162020 (the "2016"2020 Annual Report").

Consolidation

The consolidated financial statements include the accounts of Nelnet, Inc. and its consolidated subsidiaries. In addition, the accounts of all variable interest entities (“VIEs”) of which the Company has determined that it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

Variable Interest Entities
The following entities are VIEs of which the Company has determined that it is the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.
The Company's education lending subsidiaries are engaged in the securitization of education finance assets. These education lending subsidiaries hold beneficial interests in eligible loans, subject to creditors with specific interests. The liabilities of the Company's education lending subsidiaries are not the direct obligations of Nelnet, Inc. or any of its other subsidiaries. Each education lending subsidiary is structured to be bankruptcy remote, meaning that it should not be consolidated in the event of bankruptcy of the parent company or any other subsidiary. The Company is generally the administrator and master servicer of the securitized assets held in its education lending subsidiaries and owns the residual interest of the securitization trusts. As a result, for accounting purposes, the transfers of student loans to the securitization trusts do not qualify as sales. Accordingly, all the financial activities and related assets and liabilities, including debt, of the securitizations are reflected in the Company's consolidated financial statements and are summarized as supplemental information on the balance sheet.
The Company owns 91.5 percent of the economic rights of Allo Communications LLC ("Allo") and has a disproportional 80 percent of the voting rights related to all operating decisions for Allo's business. Allo management, as current minority members, has the opportunity to earn an additional 11.5 percent of the total ownership interests based on the financial performance of Allo. In addition to the Company’s equity investment, Nelnet, Inc. (the parent) issued a $200.0 million line of credit to Allo on December 30, 2015. On September 30, 2017, the line of credit was increased by $70.0 million to a total of $270.0 million. As of September 30, 2017, the outstanding balance and accrued interest on the line of credit was $144.5 million and $4.6 million, respectively. Nelnet, Inc.’s maximum exposure to loss as a result of its involvement with Allo is equal to its equity investment and the outstanding balance and accrued interest on the line of credit. The amounts owed by Allo to Nelnet, Inc., including the interest costs incurred by Allo and interest earnings recognized by Nelnet, Inc., are not reflected in the Company’s consolidated balance sheet as they were eliminated in consolidation. All of Allo’s financial activities and related assets and liabilities, excluding the line of credit, are reflected in the Company’s consolidated financial statements. See note 10, "Segment Reporting," for disclosure of Allo's total assets and results of operations (included in the "Communications" operating segment), note 7, "Goodwill," for disclosure of Allo's goodwill, and note 8, “Property and Equipment,” for disclosure of Allo’s fixed assets. Allo's goodwill and property and equipment comprise the majority of its assets. The assets recognized as a result of consolidating Allo are the property of Allo and are not available for any other purpose, other than to Nelnet, Inc. as a secured lender under Allo's line of credit.


Noncontrolling Interest

Nelnet Servicing, LLC ("Nelnet Servicing"), a subsidiary of the Company, and Great Lakes Educational Loan Services, Inc. ("Great Lakes") created a joint venture to respond to the initiative announced by the U.S. Department of Education (the "Department") in April 2016 for the procurement of a contract for federal student loan servicing to acquire a single servicing platform to manage all loans owned by the Department.  The joint venture operates as a new legal entity called GreatNet Solutions, LLC (“GreatNet”).  Nelnet Servicing and Great Lakes each own 50 percent of the ownership interests in GreatNet.  See note 11 for additional information on the contract procurement process. 

During the first and third quarters of 2017, Nelnet Servicing and Great Lakes each contributed $12.6 million and $6.5 million, respectively, to GreatNet and during the first quarter of 2017 GreatNet began to incur certain operating costs. For financial reporting purposes, the balance sheet and operating results of GreatNet are included in the Company’s consolidated financial statements and presented in the Company’s Loan Systems and Servicing operating segment.  The proportionate share of membership interest (equity) and net loss of GreatNet that is attributable to Great Lakes is reflected as noncontrolling interests in the consolidated financial statements.

On October 18, 2017, the Company entered into an agreement to purchase 100 percent of the outstanding stock of Great Lakes. See note 14, "Subsequent Events" for additional information on this business acquisition agreement.

For a description of other entities in which the Company reflects noncontrolling interests in its consolidated financial statements, see note 2 of the notes to consolidated financial statements included in the 2016 Annual Report.

2.  Student Loans and Accrued Interest Receivable and Allowance for Loan Losses

Student loansLoans and accrued interest receivable consisted of the following:
As ofAs of
 June 30, 2021December 31, 2020
Non-Nelnet Bank:
Federally insured student loans:
Stafford and other$4,420,716 4,383,000 
Consolidation14,518,148 14,746,173 
Total18,938,864 19,129,173 
Private education loans350,094 320,589 
Consumer loans42,767 109,346 
Non-Nelnet Bank loans19,331,725 19,559,108 
Nelnet Bank:
Federally insured student loans97,167 0 
Private education loans93,404 17,543 
Nelnet Bank loans190,571 17,543 
 
Accrued interest receivable834,989 794,611 
Loan discount, net of unamortized loan premiums and deferred origination costs(23,896)(9,908)
Allowance for loan losses:
Non-Nelnet Bank:
Federally insured loans(120,802)(128,590)
Private education loans(19,403)(19,529)
Consumer loans(4,702)(27,256)
Non-Nelnet Bank allowance for loan losses(144,907)(175,375)
Nelnet Bank:
Federally insured loans(245)0 
Private education loans(567)(323)
Nelnet Bank allowance for loan losses(812)(323)
 $20,187,670 20,185,656 
 As of As of
 September 30, 2017 December 31, 2016
Federally insured loans:    
Stafford and other$4,534,588
  5,186,047
Consolidation17,952,696
  19,643,937
Total22,487,284
  24,829,984
Private education loans226,629
  273,659
 22,713,913

 25,103,643
Loan discount, net of unamortized loan premiums and deferred origination costs(119,572)  (129,507)
Non-accretable discount (a)(13,532)  (18,570)
Allowance for loan losses – federally insured loans(39,398)  (37,268)
Allowance for loan losses – private education loans(12,566)  (14,574)
 $22,528,845
  24,903,724

(a)For loans purchased where there is evidence of credit deterioration since the origination of the loan, the Company records a credit discount, separate from the allowance for loan losses, which is non-accretable to interest income.

On May 14, 2021, the Company sold $77.4 million (par value) of consumer loans to an unrelated third party who securitized such loans. The Company recognizes student loan interest incomerecognized a gain of $15.3 million (pre-tax) as earned, netpart of amortization of loan premiums and deferred origination costs andthis transaction. As partial consideration received for the accretion of loan discounts. Loan interest income is recognized based upon the expected yield of the loan after giving effect to interest rate reductions resulting from borrower utilization of incentives such as timely payments ("borrower benefits") and other yield adjustments. Loan premiums or discounts, deferred origination costs, and borrower benefits are amortized/accreted over the estimated life of theconsumer loans which includes an estimate of forecasted payments in excess of contractually required payments. The Company periodically evaluates the assumptions used to estimate the life of the loans and prepayment rates. In instances where there are changes to the assumptions, amortization/accretion is adjusted on a cumulative basis to reflect the change since the acquisition of the loan.
In the third quarter of 2016,sold, the Company revised its policy to correct for an errorreceived a 24.5 percent residual interest in its method of applying the interest method used to amortize premiums and deferred origination costs and accrete discounts on its studentconsumer loan portfolio. Previously, the Company amortized premiums and deferred origination costs and accreted discounts by including in its prepayment assumption


forecasted payments in excess of contractually required payments as well as forecasted defaults. The Company has determinedsecuritization that only payments in excess of contractually required payments (excluding forecasted defaults) should beis included in the prepayment assumption. Under"investments" on the Company's revised policy, as of September 30, 2016, the constant prepayment rate used by the Company to amortize/accrete student loan premiums/discounts was decreased. The constant prepayment rates under the Company's revised policy are 5 percent for Stafford loans and 3 percent for Consolidation loans. The constant prepayment rates under the Company's prior policy in effect before this correction were 6 percent and 4 percent, respectively. During the third quarter of 2016, the Company recorded an adjustment to reflect the cumulative net impact on prior periods for the correction of this error that resulted in an $8.2 million reduction to the Company's net loan discountconsolidated balance and a corresponding pre-tax increase to interest income. The Company concluded this error had an immaterial impact on 2016 results as well as the results for prior periods.sheet.

9

Activity in the Allowance for Loan Losses

The provision for loan losses representsfollowing table presents the periodic expense of maintaining an allowance sufficient to absorb losses, net of recoveries, inherent in the portfolio of student loans. Activityactivity in the allowance for loan losses is shown below.by portfolio segment.
Balance at beginning of periodImpact of ASC 326 adoptionProvision (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, 2021
Non-Nelnet Bank
Federally insured loans$121,846 — (397)(1,172)0 525 0 120,802 
Private education loans20,670 — (1,004)(403)139 0 1 19,403 
Consumer loans14,134 — 1,706 (1,464)235 0 (9,909)4,702 
Nelnet Bank
Federally insured loans0 — 245 0 0 0 0 245 
Private education loans744 — (176)0 0 0 (1)567 
$157,394 — 374 (3,039)374 525 (9,909)145,719 
Three months ended June 30, 2020
Non-Nelnet Bank
Federally insured loans$146,759 — (1,950)(6,080)0 6,100 0 144,829 
Private education loans23,056 — 2,322 (26)183 0 0 25,535 
Consumer loans39,053 — 2,627 (2,820)221 0 0 39,081 
$208,868 — 2,999 (8,926)404 6,100 0 209,445 
Six months ended June 30, 2021
Non-Nelnet Bank
Federally insured loans$128,590 — (7,880)(1,233)0 1,325 0 120,802 
Private education loans19,529 — 427 (896)341 0 2 19,403 
Consumer loans27,256 — (9,712)(3,414)481 0 (9,909)4,702 
Nelnet Bank
Federally insured loans0 — 245 0 0 0 0 245 
Private education loans323 — 246 0 0 0 (2)567 
$175,698 — (16,674)(5,543)822 1,325 (9,909)145,719 
Six months ended June 30, 2020
Non-Nelnet Bank
Federally insured loans$36,763 72,291 37,373 (12,398)0 10,800 0 144,829 
Private education loans9,597 4,797 12,121 (1,355)375 0 0 25,535 
Consumer loans15,554 13,926 29,803 (7,170)468 0 (13,500)39,081 
$61,914 91,014 79,297 (20,923)843 10,800 (13,500)209,445 
a) During the three months ended June 30, 2021 and 2020, and six months ended June 30, 2021 and 2020, the Company acquired $34.7 million (par value), $292.7 million (par value), $88.7 million (par value), and $583.9 million (par value), respectively, of federally insured rehabilitation loans that met the definition of PCD loans when they were purchased by the Company.
Beginning in March 2020, the coronavirus disease 2019 ("COVID-19") pandemic has caused significant disruptions in the U.S. and world economies. Apart from the impact of the adoption of ASC 326 effective January 1, 2020, the Company’s allowance for loan losses increased during the first quarter of 2020 primarily as a result of the COVID-19 pandemic and its effects on economic conditions.
The Company recorded a negative provision for loan losses for its federally insured and consumer loan portfolios for the three months ended March 31, 2021 due to management's estimate of certain continued improved economic conditions (including the improvement in certain macroeconomic variables (unemployment rates, gross domestic product, and consumer price index) used in the Company's loan loss models) as of March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020. The Company recorded a provision expense on its private education loan portfolio during the three months ended March 31, 2021 as a result of an increase of loans in forbearance, which was partially offset by management's estimate of certain continued improved economic conditions as of
10

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Balance at beginning of period$49,708
 48,753
 51,842
 50,498
Provision for loan losses:       
Federally insured loans7,000
 7,000
 11,000
 11,000
Private education loans(1,000) (1,000) (2,000) (500)
Total provision for loan losses6,000
 6,000
 9,000
 10,500
Charge-offs: 
  
    
Federally insured loans(3,464) (3,196) (8,870) (9,462)
Private education loans(491) (320) (861) (1,235)
Total charge-offs(3,955) (3,516) (9,731) (10,697)
Recoveries - private education loans161
 243
 603
 769
Purchase of private education loans—
 30
 —
 290
Transfer from repurchase obligation related to private education loans repurchased50
 60
 250
 210
Balance at end of period$51,964
 51,570
 51,964
 $51,570
        
Allocation of the allowance for loan losses:   
    
Federally insured loans$39,398
 37,028
 39,398
 37,028
Private education loans12,566
 14,542
 12,566
 14,542
Total allowance for loan losses$51,964
 51,570
 51,964
 51,570
March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020.

During the second quarter of 2021, the Company recorded a negative provision for loan losses for its federally insured and private education loan portfolios due to management's estimate of certain continued improved economic conditions as of June 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2021. These amounts were partially offset due to the Company establishing an initial allowance for federally insured and private education loans acquired during the period. The Company recorded a provision for loan losses on its consumer loan portfolio during the second quarter of 2021 as a result of establishing an initial allowance for consumer loans acquired during the period, which was partially offset by management's estimate of certain continued improved economic conditions as of June 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2021.





Student Loan Status and Delinquencies

The key credit quality indicators for the Company's federally insured, private education, and consumer loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The table below shows the Company’s loan status and delinquency amounts.

As of June 30, 2021As of December 31, 2020As of June 30, 2020
Federally insured loans - Non-Nelnet Bank:    
Loans in-school/grace/deferment$955,227 5.0 % $1,036,028 5.4 % $936,746 4.8 %
Loans in forbearance2,079,368 11.0  1,973,175 10.3  5,370,466 27.7 
Loans in repayment status:  
Loans current13,995,297 88.0 %13,683,054 84.9 %12,984,175 99.3 %
Loans delinquent 31-60 days580,602 3.7 633,411 3.9 2,057 0 
Loans delinquent 61-90 days262,353 1.6 307,936 1.9 165 0 
Loans delinquent 91-120 days104,124 0.7 800,257 5.0 23 0 
Loans delinquent 121-270 days398,965 2.5 674,975 4.2 101 0 
Loans delinquent 271 days or greater562,928 3.5 20,337 0.1 94,138 0.7 
Total loans in repayment15,904,269 84.0 100.0 %16,119,970 84.3 100.0 %13,080,659 67.5 100.0 %
Total federally insured loans18,938,864 100.0 % 19,129,173 100.0 % 19,387,871 100.0 %
Accrued interest receivable830,973 791,453 853,473 
Loan discount, net of unamortized premiums and deferred origination costs(24,129)(14,505)(19,116)
Allowance for loan losses(120,802)(128,590)(144,829)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses$19,624,906 $19,777,531 $20,077,399 
Private education loans - Non-Nelnet Bank:
Loans in-school/grace/deferment$10,195 2.9 %$5,049 1.6 %$3,971 1.3 %
Loans in forbearance3,884 1.1 2,359 0.7 21,890 7.5 
Loans in repayment status:
Loans current330,097 98.3 %310,036 99.0 %265,720 99.4 %
Loans delinquent 31-60 days3,962 1.2 1,099 0.4 680 0.2 
Loans delinquent 61-90 days818 0.2 675 0.2 244 0.1 
Loans delinquent 91 days or greater1,138 0.3 1,371 0.4 713 0.3 
Total loans in repayment336,015 96.0 100.0 %313,181 97.7 100.0 %267,357 91.2 100.0 %
Total private education loans350,094 100.0 % 320,589 100.0 % 293,218 100.0 %
Accrued interest receivable2,360 2,131 1,961 
Loan discount, net of unamortized premiums(1,547)2,691 813 
Allowance for loan losses(19,403)(19,529)(25,535)
Total private education loans and accrued interest receivable, net of allowance for loan losses$331,504 $305,882 $270,457 
11

As of June 30, 2021As of December 31, 2020As of June 30, 2020
Consumer loans - Non-Nelnet Bank:Consumer loans - Non-Nelnet Bank:
Loans in defermentLoans in deferment$38 0.1 %$829 0.8 %$3,274 2.2 %
Loans in repayment status:Loans in repayment status:
Loans currentLoans current41,039 96.1 %105,650 97.4 %142,540 97.6 %
Loans delinquent 31-60 daysLoans delinquent 31-60 days387 0.9 954 0.9 938 0.7 
Loans delinquent 61-90 daysLoans delinquent 61-90 days484 1.1 804 0.7 1,078 0.7 
Loans delinquent 91 days or greaterLoans delinquent 91 days or greater819 1.9 1,109 1.0 1,478 1.0 
Total loans in repaymentTotal loans in repayment42,729 99.9 100.0 %108,517 99.2 100.0 %146,034 97.8 %100.0 %
Total consumer loansTotal consumer loans42,767 100.0 %109,346 100.0 %149,308 100.0 %
Accrued interest receivableAccrued interest receivable328 1,001 1,446 
Loan premiumLoan premium377 1,640 1,344 
Allowance for loan lossesAllowance for loan losses(4,702)(27,256)(39,081)
Total consumer loans and accrued interest receivable, net of allowance for loan lossesTotal consumer loans and accrued interest receivable, net of allowance for loan losses$38,770 $84,731 $113,017 
As of September 30, 2017 As of December 31, 2016 As of September 30, 2016
Federally insured loans:           
Federally insured loans - Nelnet Bank:Federally insured loans - Nelnet Bank:
Loans in-school/grace/deferment$1,448,172
   $1,606,468
   $1,864,323
  Loans in-school/grace/deferment$103 0.1 %
Loans in forbearance2,406,346
   2,295,367
   2,403,504
  Loans in forbearance1,026 1.1 
Loans in repayment status:           Loans in repayment status:
Loans current16,534,795
 88.7% 18,125,768
 86.6% 18,445,728
 86.8%Loans current95,402 99.3 %
Loans delinquent 31-60 days579,665
 3.1
 818,976
 3.9
 825,905
 3.9
Loans delinquent 31-60 days593 0.6 
Loans delinquent 61-90 days334,085
 1.8
 487,647
 2.3
 491,395
 2.3
Loans delinquent 61-90 days43 0.1 
Loans delinquent 91-120 days255,567
 1.4
 335,291
 1.6
 326,020
 1.5
Loans delinquent 91-120 days0 0 
Loans delinquent 121-270 days700,319
 3.8
 854,432
 4.1
 835,250
 3.9
Loans delinquent 121-270 days0 0 
Loans delinquent 271 days or greater228,335
 1.2
 306,035
 1.5
 350,808
 1.6
Loans delinquent 271 days or greater0 0 
Total loans in repayment18,632,766
 100.0% 20,928,149
 100.0% 21,275,106
 100.0%Total loans in repayment96,038 98.8 100.0 %
Total federally insured loans$22,487,284
  
 $24,829,984
  
 $25,542,933
  Total federally insured loans97,167 100.0 %
Accrued interest receivableAccrued interest receivable1,179 
Loan premiumLoan premium29 
           
Private education loans:           
Allowance for loan lossesAllowance for loan losses(245)
Total federally insured loans and accrued interest receivable, net of allowance for loan lossesTotal federally insured loans and accrued interest receivable, net of allowance for loan losses$98,130 
Private education loans - Nelnet Bank:Private education loans - Nelnet Bank:
Loans in-school/grace/deferment$27,188
   $35,146
   $51,042
  Loans in-school/grace/deferment$82 0.1 %$0 0 %
Loans in forbearance2,904
   3,448
   1,770
  Loans in forbearance133 0.1 29 0.2 
Loans in repayment status:           Loans in repayment status:
Loans current190,153
 96.8% 228,612
 97.2% 217,108
 97.1%Loans current93,189 100.0 %17,514 100.0 %
Loans delinquent 31-60 days1,200
 0.6
 1,677
 0.7
 1,357
 0.6
Loans delinquent 31-60 days0 0 0 0 
Loans delinquent 61-90 days1,195
 0.6
 1,110
 0.5
 1,228
 0.5
Loans delinquent 61-90 days0 0 0 0 
Loans delinquent 91 days or greater3,989
 2.0
 3,666
 1.6
 3,927
 1.8
Loans delinquent 91 days or greater0 0 0 0 
Total loans in repayment196,537
 100.0% 235,065
 100.0% 223,620
 100.0%Total loans in repayment93,189 99.8 100.0 %17,514 99.8 100.0 %
Total private education loans$226,629
  
 $273,659
  
 $276,432
  Total private education loans93,404 100.0 %17,543 100.0 %
Accrued interest receivableAccrued interest receivable149 26 
Deferred origination costsDeferred origination costs1,374 266 
Allowance for loan lossesAllowance for loan losses(567)(323)
Total private education loans and accrued interest receivable, net of allowance for loan lossesTotal private education loans and accrued interest receivable, net of allowance for loan losses$94,360 $17,512 




Nonaccrual Status
The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private and consumer loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2020 and June 30, 2021, was not material.

12

Amortized Cost Basis by Origination Year
The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of June 30, 2021 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the Federal Family Education Loan Program (the "FFEL Program" or "FFELP") 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, 20212020201920182017Prior yearsTotal
Private education loans - Non-Nelnet Bank:
Loans in school/grace/deferment$810 2,306 4,744 0 0 2,335 10,195 
Loans in forbearance0 299 755 173 0 2,657 3,884 
Loans in repayment status:
Loans current1,885 90,009 60,694 481 0 177,028 330,097 
Loans delinquent 31-60 days0 161 373 0 0 3,428 3,962 
Loans delinquent 61-90 days0 0 0 0 0 818 818 
Loans delinquent 91 days or greater0 0 0 0 0 1,138 1,138 
Total loans in repayment1,885 90,170 61,067 481 0 182,412 336,015 
Total private education loans$2,695 92,775 66,566 654 0 187,404 350,094 
Accrued interest receivable2,360 
Loan discount, net of unamortized premiums(1,547)
Allowance for loan losses(19,403)
Total private education loans and accrued interest receivable, net of allowance for loan losses$331,504 
Consumer loans - Non-Nelnet Bank:
Loans in deferment$0 0 30 8 0 0 38 
Loans in repayment status:
Loans current19,733 1,582 8,880 10,630 214 0 41,039 
Loans delinquent 31-60 days29 83 189 77 9 0 387 
Loans delinquent 61-90 days50 233 113 83 5 0 484 
Loans delinquent 91 days or greater25 107 302 385 0 0 819 
Total loans in repayment19,837 2,005 9,484 11,175 228 0 42,729 
Total consumer loans$19,837 2,005 9,514 11,183 228 0 42,767 
Accrued interest receivable328 
Loan premium377 
Allowance for loan losses(4,702)
Total consumer loans and accrued interest receivable, net of allowance for loan losses$38,770 
Private education loans - Nelnet Bank:
Loans in school/grace/deferment$82 0 0 0 0 0 82 
Loans in forbearance133 0 0 0 0 0 133 
Loans in repayment status:
Loans current78,817 14,372 0 0 0 0 93,189 
Loans delinquent 31-60 days0 0 0 0 0 0 0 
Loans delinquent 61-90 days0 0 0 0 0 0 0 
Loans delinquent 91 days or greater0 0 0 0 0 0 0 
Total loans in repayment78,817 14,372 0 0 0 0 93,189 
Total private education loans$79,032 14,372 0 0 0 0 93,404 
Accrued interest receivable149 
Deferred origination costs1,374 
Allowance for loan losses(567)
Total private education loans and accrued interest receivable, net of allowance for loan losses$94,360 

13

3.  Bonds and Notes Payable

The following tables summarize the Company’s outstanding debt obligations by type of instrument:
As of September 30, 2017 As of June 30, 2021
Carrying
amount
 
Interest rate
range
 Final maturity
Carrying
amount
Interest rate
range
Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:     Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:   
Bonds and notes based on indices$20,675,881
 0.22% - 6.90% 8/25/21 - 9/25/65Bonds and notes based on indices$16,974,086 0.22% - 2.09%5/27/25 - 7/25/69
Bonds and notes based on auction781,276
 1.97% - 2.61% 3/22/32 - 11/26/46Bonds and notes based on auction742,350 0.91% - 2.06%3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes21,457,157
 Total FFELP variable-rate bonds and notes17,716,436 
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizationsFixed-rate bonds and notes issued in FFELP loan asset-backed securitizations893,093 1.42% - 3.45%10/25/67 - 8/27/68
FFELP warehouse facilities745,107
 1.23% - 1.37% 11/19/19 - 4/27/20FFELP warehouse facilities301,144 0.16% / 0.23%11/22/22 / 2/26/24
Variable-rate bonds and notes issued in private education loan asset-backed securitization84,881
 2.99% 12/26/40
Private education loan warehouse facilityPrivate education loan warehouse facility140,763 0.21%2/13/23
Variable-rate bonds and notes issued in private education loan asset-backed securitizationsVariable-rate bonds and notes issued in private education loan asset-backed securitizations40,030 1.65% / 1.84%12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization90,896
 3.60% / 5.35% 12/26/40 / 12/28/43Fixed-rate bonds and notes issued in private education loan asset-backed securitization32,742 3.60% / 5.35%12/26/40 / 12/28/43
Unsecured line of credit210,000
 2.74% 12/12/21Unsecured line of credit85,000 1.58%12/16/24
Unsecured debt - Junior Subordinated Hybrid Securities20,526
 4.71% 9/15/61
Other borrowings18,355
 3.38% 3/31/23 / 12/15/45
Participation agreementParticipation agreement132,078 0.80%5/4/22
Repurchase agreementsRepurchase agreements255,323 0.80% - 1.05%9/24/21 - 12/20/23
Secured line of creditSecured line of credit5,000 2.09%5/30/22
22,626,922
     19,601,609   
Discount on bonds and notes payable and debt issuance costs(386,643) Discount on bonds and notes payable and debt issuance costs(219,774)
Total$22,240,279
 Total$19,381,835 
 As of December 31, 2016
 
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$22,130,063
 0.24% - 6.90% 6/25/21 - 9/25/65
Bonds and notes based on auction998,415
 1.61% - 2.28% 3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes23,128,478
    
FFELP warehouse facilities1,677,443
 0.63% - 1.09% 9/7/18 - 12/13/19
Variable-rate bonds and notes issued in private education loan asset-backed securitization112,582
 2.60% 12/26/40
Fixed-rate bonds and notes issued in private education loan asset-backed securitization113,378
 3.60% / 5.35% 12/26/40 / 12/28/43
Unsecured line of credit—
 — 12/12/21
Unsecured debt - Junior Subordinated Hybrid Securities50,184
 4.37% 9/15/61
Other borrowings18,355
 3.38% 3/31/23 / 12/15/45
 25,100,420
    
Discount on bonds and notes payable and debt issuance costs(431,930)    
Total$24,668,490
    


 As of December 31, 2020
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$17,127,643 0.28% - 2.05%5/27/25 - 10/25/68
Bonds and notes based on auction749,925 1.12% - 2.14%3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes17,877,568 
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations923,076 1.42% - 3.45%10/25/67 - 8/27/68
FFELP warehouse facilities252,165 0.27% / 0.31%5/20/22 / 2/26/23
Private education loan warehouse facility150,397 0.28%2/13/22
Consumer loan warehouse facility25,809 0.28%4/23/22
Variable-rate bonds and notes issued in private education loan asset-backed securitizations49,025 1.65% / 1.90%12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization37,251 3.60% / 5.35%12/26/40 / 12/28/43
Unsecured line of credit120,000 1.65%12/16/24
Participation agreement118,558 0.84%5/4/21
Secured line of credit5,000 1.90%5/30/22
 19,558,849   
Discount on bonds and notes payable and debt issuance costs(238,123)
Total$19,320,726 




Asset-Backed Securitizations

The following table summarizes the asset-backed securitization transactions completed during the first nine months of 2017.
14
  NSLT 2017-1 NSLT 2017-2 Total
Date securities issued 5/24/17 7/26/17  
Total original principal amount $535,000
 399,390
 934,390
Bond discount —
 (2,002) (2,002)
Issue price $535,000
 397,388
 932,388
Cost of funds 1-month LIBOR plus 0.78% 1-month LIBOR plus 0.77%  
Final maturity date 6/25/65 9/25/65  


FFELP Warehouse Facilities

The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.

As of SeptemberJune 30, 2017,2021, the Company had threetwo FFELP warehouse facilities as summarized below.
NFSLW-I (a)NHELP-II (b)Total
Maximum financing amount$310,000 50,000 360,000 
Amount outstanding290,539 10,605 301,144 
Amount available$19,461 39,395 58,856 
Expiration of liquidity provisionsNovember 22, 2021February 26, 2022
Final maturity dateNovember 22, 2022February 26, 2024
Advanced as equity support$24,136 666 24,802 
  NFSLW-I (a) NHELP-II NHELP-III (b) Total
Maximum financing amount $500,000
 500,000
 200,000
 1,200,000
Amount outstanding 307,425
 288,969
 148,713
 745,107
Amount available $192,575
 211,031
 51,287
 454,893
Expiration of liquidity provisions September 20, 2019
 December 15, 2017
 April 27, 2018
  
Final maturity date November 19, 2019
 December 13, 2019
 April 27, 2020
  
Maximum advance rates 92.0 - 98.0%
 85.0 - 95.0%
 92.2 - 95.0%
  
Minimum advance rates 84.0 - 90.0%
 85.0 - 95.0%
 92.2 - 95.0%
  
Advanced as equity support $4,747
 20,531
 3,163
 28,441


(a)    On May 20, 2021, the Company extended the expiration of liquidity provisions and the maturity date for this warehouse facility an additional six months to November 22, 2021 and November 22, 2022, respectively. On June 28, 2021, the maximum financing amount for this warehouse facility increased to $770.0 million, and on June 30, 2021 the maximum financing amount decreased to $310.0 million.
(b)    On February 26, 2021, the Company extended the expiration of liquidity provisions and the maturity date for this warehouse facility an additional year to February 26, 2022 and February 26, 2024, respectively.
Asset-Backed Securitizations
The following table summarizes the asset-backed securitization transaction completed by the Company during the first six months of 2021.
(a)On May 25, 2017 and August 18, 2017, the Company decreased the maximum financing amount for this warehouse facility by $175.0 million and $200.0 million, respectively. As of September 30, 2017, the maximum financing amount for this warehouse facility was $500.0 million, as reflected in this table. On September 22, 2017, the Company amended the agreement for this warehouse facility, which changed the expiration date for the liquidity provisions to September 20, 2019 and changed the final maturity date to November 19, 2019.

NSLT 2021-1
(b)On April 3, 2017, the Company entered into a letter agreement for this warehouse facility to decrease the maximum financing
Date securities issued6/30/21
Total original principal amount from $750.0 million to $600.0 million. On April 28, 2017, the Company amended the agreement for this warehouse facility, which changed the expiration date for the liquidity provisions to April 27, 2018 and changed the final$797,000 
Class A senior notes:
Total principal amount$781,000 
Cost of funds1-month LIBOR plus 0.50%
Final maturity date to April 27, 2020. On May 5, 2017, May 25, 2017, and June 2, 2017, the Company decreased the maximum financing7/25/69
Class B subordinated notes:
Total principal amount for this warehouse facility by $200.0 million, $100.0 million, and $100.0 million, respectively. As$16,000 
Cost of September 30, 2017, the maximum financing amount for this warehouse facility was $200.0 million, as reflected in this table.funds1-month LIBOR plus 1.25%
Final maturity date7/25/69


Private Education Loan Warehouse Facility
During 2020, the Company obtained a private education loan warehouse facility that had an aggregate maximum financing amount available of $200.0 million. On February 12, 2021, the Company decreased the maximum financing amount available for this facility to $175.0 million and extended the liquidity provisions and final maturity date to February 13, 2022 and February 13, 2023, respectively. As of June 30, 2021, $140.8 million was outstanding under this warehouse facility and $34.2 million was available for future funding. The facility has an advance rate of 80 to 90 percent and, as of June 30, 2021, the Company had $15.0 million advanced as equity support under this facility.
Consumer Loan Warehouse Facility
The Company had a $100.0 million consumer loan warehouse facility. On March 31, 2021, the Company terminated this facility.
15

Unsecured Line of Credit

The Company has a $350.0$455.0 million unsecured line of credit that has a maturity date of December 12, 2021.16, 2024. As of SeptemberJune 30, 2017, $210.02021, $85.0 million was outstanding on the line of credit and $140.0$370.0 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 $550.0 million, subject to certain conditions.

Participation Agreement

Debt Repurchases

The following table summarizesCompany 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's repurchasesCompany participation interests in FFELP loan asset-backed securities. As of June 30, 2021, $132.1 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. The Company can participate FFELP loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $100.0 million or an amount in excess of $100.0 million if mutually agreed to by both parties. The Company maintains legal ownership of the FFELP loan asset-backed securities and, in its own debt. Gains recordeddiscretion, approves and accomplishes any sale, assignment, transfer, encumbrance, or other disposition of the securities. As such, the FFELP loan asset-backed securities under this agreement have been accounted for by the Company fromas a secured borrowing.
Repurchase Agreements
On May 3, 2021, the Company entered into a repurchase agreement with a non-affiliated third party, the proceeds of which are collateralized by private education loan asset-backed securities. The repurchase agreement has maturity dates of November 20, 2023 and December 20, 2023, or earlier if either party provides 180 days’ prior written notice. The Company incurs interest on amounts outstanding based on three-month LIBOR plus an applicable spread, and is subject to margin deficit payment requirements if the fair value of the securities subject to the repurchase agreement is less than the original purchase price of debtsuch securities on any scheduled reset date. Included in “bonds and notes payable” as of June 30, 2021 was $228.4 million subject to this repurchase agreement.
On June 23, 2021, the Company entered into an additional repurchase agreement with another non-affiliated third party, the proceeds of which are includedcollateralized by private education loan asset-backed securities. The repurchase agreement has a maturity date of September 24, 2021. The Company incurs interest on amounts outstanding based on three-month LIBOR plus an applicable spread, and could be subject to margin deficit payment requirements if the fair value of the securities subject to the repurchase agreement is less than the original purchase price of such securities and the counter-party provides notice requiring such payment. Included in "gain from debt repurchases""bonds and notes payable" as of June 30, 2021 was $26.9 million subject to this repurchase agreement.
See note 5 for additional information about the private education loan asset-backed securities investments serving as collateral for these repurchase agreements.
Accrued Interest Liability
During the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company'sCompany 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 on bonds and notes payable and bank deposits" in the consolidated statements of income.
16
 Par value Purchase price Gain Par value Purchase price Gain
 Three months ended
 September 30, 2017 September 30, 2016
   Asset-backed securities$14,702
 14,586
 116
 10,965
 8,805
 2,160
            
 Nine months ended
 September 30, 2017 September 30, 2016
Unsecured debt - Hybrid Securities (a)$29,658
 25,241
 4,417
 —
 —
 —
   Asset-backed securities18,790
 17,670
 1,120
 11,362
 9,102
 2,260
 $48,448
 42,911
 5,537
 11,362
 9,102
 2,260


(a)During the three months ended March 31, 2017, the Company initiated a cash tender offer to purchase any and all of its outstanding Hybrid Securities, including a related consent solicitation to effect certain amendments to the indenture governing the notes to eliminate a provision requiring a minimum principal amount of the notes to remain outstanding after a partial redemption. After the completion of this tender offer, the Company has $20.5 million of Hybrid Securities that remain outstanding. In addition, the amendments described above have been made to the indenture.

4.  Derivative Financial Instruments

The Company uses derivative financial instruments primarily to manage interest rate risk and foreign currency exchange risk. Derivative instruments used as part of the Company's risk management strategy are further described in note 56 of the notes to consolidated financial statements included in the 20162020 Annual Report. A tabular presentation of such derivatives outstanding as of SeptemberJune 30, 20172021 and December 31, 20162020 is presented below.

Basis Swaps

The following table summarizes the Company’s outstanding basis swaps as of June 30, 2021 and December 31, 2020, 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, 2021December 31, 2020
2021$0 250,000 
20222,000,000 2,000,000 
2023750,000 750,000 
20241,750,000 1,750,000 
20261,150,000 1,150,000 
2027250,000 250,000 
$5,900,000 6,150,000 
  As of September 30, As of December 31,
  2017 2016
Maturity Notional amount Notional amount
2018 $4,000,000
 $—
2019 3,000,000
 —
2024 250,000
 —
2026 1,150,000
 1,150,000
2027 375,000
 —
2028 325,000
 325,000
2029 100,000
 —
2031 300,000
 300,000
  $9,500,000
 $1,775,000

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of SeptemberJune 30, 20172021 and December 31, 20162020 was one-month LIBOR plus 13.49.1 basis points and 10.1 basis points, respectively.


points.
Interest Rate Swaps – Floor Income Hedges

The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.
As of June 30, 2021As of December 31, 2020
MaturityNotional amountWeighted average fixed rate paid by the Company (a)Notional amountWeighted average fixed rate paid by the Company (a)
2021$100,000 2.95 %$600,000 2.15 %
2022500,000 0.94 500,000 0.94 
2023900,000 0.62 900,000 0.62 
20242,500,000 0.35 2,000,000 0.32 
2025500,000 0.35 500,000 0.35 
2026150,000 0.85 0 0 
2031100,000 1.53 0 0 
 $4,750,000 0.56 %$4,500,000 0.70 %
  As of September 30, 2017 As of December 31, 2016
Maturity Notional amount Weighted average fixed rate paid by the Company (a) Notional amount Weighted average fixed rate paid by the Company (a)
    
2017 $—
 —% $750,000
 0.99%
2018 1,350,000
 1.07
 1,350,000
 1.07
2019 3,250,000
 0.97
 3,250,000
 0.97
2020 1,500,000
 1.01
 1,500,000
 1.01
2025 100,000
 2.32
 100,000
 2.32
  $6,200,000
 1.02% $6,950,000
 1.02%


(a)(a)    For all interest rate derivatives, the Company receives discrete three-month LIBOR.

On August 20, 2014, the Company paid $9.1 million for an interest rate swap option to economically hedge loans earning fixed rate floor income. The interest rate swap option gives the Company the right, but not the obligation, to enter into a $250.0 million notional interest rate swap in which the Company would pay a fixed amount of 3.30% and receivereceives discrete one-monththree-month LIBOR. If the interest rate swap option is exercised, the swap would become effective in 2019 and mature in 2024.

17
Interest Rate Caps

In June 2015, in conjunction with the entry into a $275.0 million private education loan warehouse facility, the Company paid $2.9 million for two interest rate cap contracts with a total notional amount of $275.0 million. The first interest rate cap had a notional amount of $125.0 million and a one-month LIBOR strike rate of 2.50%, and the second interest rate cap had a notional amount of $150.0 million and a one-month LIBOR strike rate of 4.99%. In the event that the one-month LIBOR rate rose above the applicable strike rate, the Company would receive monthly payments related to the spread difference. Both interest rate cap contracts had a maturity date of July 15, 2020. The private education loan warehouse facility was terminated by the Company on December 21, 2016. During the first quarter of 2017, the Company received $913,000 to terminate the interest rate cap contracts that were held in the private education loan warehouse legal entity and paid $929,000 to enter into new interest rate cap contracts with identical terms at Nelnet, Inc. (the parent company). The Company currently intends to keep these derivatives outstanding to partially mitigate a rise in interest rates and its impact on earnings related to its student loan portfolio earning a fixed rate.

Interest Rate Swaps – Unsecured Debt Hedges

As of September 30, 2017 and December 31, 2016, the Company had $20.5 million and $50.2 million, respectively, of unsecured Hybrid Securities outstanding. The interest rate on the Hybrid Securities through September 29, 2036 is equal to three-month LIBOR plus 3.375%, payable quarterly. The Company had the following derivatives outstanding as of September 30, 2017 and December 31, 2016 that are used to effectively convert the variable interest rate on a designated notional amount with respect to the Hybrid Securities to a fixed rate of 7.66%.

Maturity Notional amount Weighted average fixed rate paid by the Company (a)
2036 $25,000
 4.28%
(a)For all interest rate derivatives, the Company receives discrete three-month LIBOR.

Foreign Currency Exchange Risk

In 2006, the Company issued €352.7 million of student loan asset-backed Euro Notes (the "Euro Notes") with an interest rate based on a spread to the EURIBOR index. As a result of the Euro Notes, the Company was exposed to market risk related to fluctuations in foreign currency exchange rates between the U.S. dollar and Euro. The principal and accrued interest on these notes have been re-measured at each reporting period and recorded in the Company’s consolidated balance sheet in U.S. dollars based


on the foreign currency exchange rate on that date. Changes in the principal and accrued interest amounts as a result of foreign currency exchange rate fluctuations have been included in the Company’s consolidated statements of income.

The Company entered into a cross-currency interest rate swap in connection with the issuance of the Euro Notes. Under the terms of the cross-currency interest rate swap, the Company has received from the counterparty a spread to the EURIBOR index based on a notional amount of €352.7 million and has paid a spread to the LIBOR index based on a notional amount of $450.0 million.

The following table shows the unrealized income statement impact as a result of the re-measurement of the Euro Notes and the change in the fair value of the related derivative instrument.
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Re-measurement of Euro Notes$(13,683) (4,831) (45,635) (13,543)
Change in fair value of cross-currency interest rate swap16,257
 5,501
 44,831
 26,194
Total impact to consolidated statements of income - income (expense) (a)$2,574
 670
 (804) 12,651
(a)The financial statement impact of the above items is included in "Derivative market value and foreign currency transaction adjustments and derivative settlements, net" in the Company's consolidated statements of income.
Management structured the cross-currency interest rate swap to economically hedge the Euro Notes to effectively convert the notes to U.S. dollars and pay a spread on these notes based on the LIBOR index. However, the cross-currency interest rate swap did not qualify for hedge accounting. The re-measurement of the Euro-denominated bonds generally correlated with the change in the fair value of the corresponding cross-currency interest rate swap. However, the Company experienced unrealized gains and losses between these financial instruments due to the principal and accrued interest on the Euro Notes being re-measured to U.S. dollars at each reporting date based on the foreign currency exchange rate on that date, while the cross-currency interest rate swap was measured at fair value at each reporting date with the change in fair value recognized in the current period earnings.
On October 25, 2017, the Company completed a remarketing of the Euro Notes which reset the principal amount outstanding on the Euro Notes to $450.0 million U.S. dollars, with an interest rate based on the 3-month LIBOR index, and resulted in the termination of the cross-currency interest rate swap. See note 14, “Subsequent Events” for additional information on this remarketing.

Consolidated Financial Statement Impact Related to Derivatives

Effective June 10, 2013, all over-the-counter derivative contracts executed by the Company are cleared post-execution at the Chicago Mercantile Exchange (“CME”), a regulated clearinghouse.  Clearing is a process by which a third-party, the clearinghouse, steps in between the original counterparties and guarantees the performance - Statements of both, by requiring that each post liquid collateral on an initial (initial margin) and mark-to-market (variation margin) basis to cover the clearinghouse’s potential future exposure in the event of default. 

Prior to January 3, 2017, the Company accounted for variation margin payments to the CME as collateral against its derivative position.  As such, these payments were treated as a separate unit of account from the derivative instrument and reported as a liability for cash collateral received and an asset (restricted cash) for cash collateral paid.  Effective January 3, 2017, the CME amended its rulebooks to legally characterize variation margin payments for over-the-counter derivatives they clear as settlements of the derivatives’ exposure rather than collateral against the exposure.  Based on these rulebook changes, for accounting and presentation purposes, the Company considers variation margin and the corresponding derivative instrument as a single unit of account.  As such, effective January 3, 2017, the variation margin received or paid is no longer accounted for separately as a liability or asset ("collateralized-to-market").  Instead, these payments are considered in determining the fair value of the centrally cleared derivative portfolio ("settled-to-market").  The principal difference for accounting and presentation purposes is that prior to January 3, 2017, the Company recorded the fair value of collateralized-to-market derivative contracts on its balance sheet as "fair value of derivative instruments" with an equal amount of variation margin collateral accounted for separately as an asset or liability. Subsequent to January 3, 2017, the Company records settled-to-market derivative contracts on its balance sheet with a fair value of zero and no collateral posted due to the payment or receipt of variation margin between the Company and the CME settling the outstanding mark-to-market exposure on such derivatives to a balance of zero on a daily basis, and records the underlying daily changes in the market value of such derivative contracts that result in such receipts or payments on its income statement as realized derivative market value adjustments in "Derivative market value and foreign currency transaction adjustments and derivative settlements, net."



The new clearinghouse requirements did not alter or affect the accounting and presentation of the Company’s derivative instruments executed prior to June 10, 2013 and those derivatives that are not required to be cleared at a clearinghouse (non-centrally cleared derivatives). The Company records these derivative instruments in the consolidated balance sheets on a gross basis as either an asset or liability measured at its fair value. Certain non-centrally cleared derivatives are subject to right of offset provisions with counterparties.  For these derivatives, the Company does not offset fair value amounts executed with the same counterparty under a master netting arrangement. In addition, the Company does not offset fair value amounts recognized for derivative instruments with respect to the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable).

Balance Sheet

The following table summarizes the fair value of the Company’s derivatives as reflected in the consolidated balance sheets:
 Fair value of asset derivatives Fair value of liability derivatives
 As of As of As of As of
 September 30,
2017		 December 31,
2016		 September 30,
2017		 December 31,
2016
1:3 basis swaps$—
 —
 —
 2,624
Interest rate swaps - floor income hedges—
 81,159
 —
 256
Interest rate swap option - floor income hedge765
 2,977
 —
 —
Interest rate caps231
 1,152
 —
 —
Interest rate swaps - hybrid debt hedges—
 —
 7,332
 7,341
Cross-currency interest rate swap—

—
 22,773
 67,605
Other—
 2,243
 —
 —
Total$996
 87,531
 30,105
 77,826

During the second quarter of 2017, the Company received proceeds of $2.1 million from the termination of derivatives that were included in "other" in the preceding table.

Offsetting of Derivative Assets/Liabilities

The following tables include the gross amounts related to the Company's derivative portfolio recognized in the consolidated balance sheets, reconciled to the net amount when excluding derivatives subject to enforceable master netting arrangements and cash collateral received/pledged.
    Gross amounts not offset in the consolidated balance sheets  
Derivative assets Gross amounts of recognized assets presented in the consolidated balance sheets Derivatives subject to enforceable master netting arrangement Cash collateral pledged Net asset
Balance as of
September 30, 2017
 $996
 —
 —
 996
Balance as of
December 31, 2016
 87,531
 (2,880) 475
 85,126
    Gross amounts not offset in the consolidated balance sheets  
Derivative liabilities Gross amounts of recognized liabilities presented in the consolidated balance sheets Derivatives subject to enforceable master netting arrangement Cash collateral pledged Net liability
Balance as of
September 30, 2017		 $(30,105) —
 8,470
 (21,635)
Balance as of
December 31, 2016		 (77,826) 2,880
 7,292
 (67,654)



Income Statement Impact

The following table summarizes the components of "derivative market value and foreign currency transaction adjustments and derivative settlements, net" included in the consolidated statements of income.
Three months ended June 30,Six months ended June 30,
 2021202020212020
Settlements:  
1:3 basis swaps$(221)7,129 (240)9,242 
Interest rate swaps - floor income hedges(5,153)(1,308)(9,438)816 
Total settlements - (expense) income(5,374)5,821 (9,678)10,058 
Change in fair value:  
1:3 basis swaps(1,106)(2,872)1,693 (1,314)
Interest rate swaps - floor income hedges(509)(1,039)35,501 (23,199)
Total change in fair value - (expense) income(1,615)(3,911)37,194 (24,513)
Derivative market value adjustments and derivative settlements, net - (expense) income$(6,989)1,910 27,516 (14,455)
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Settlements: 
  
    
1:3 basis swaps$(2,172) 523
 (1,836) 938
Interest rate swaps - floor income hedges3,883
 (5,157) 5,877
 (15,241)
Interest rate swaps - hybrid debt hedges(191) (233) (593) (696)
Cross-currency interest rate swap(2,093) (1,394) (5,762) (3,293)
Total settlements - (expense) income(573) (6,261) (2,314) (18,292)
Change in fair value: 
  
    
1:3 basis swaps5,916
 140
 (5,499) 323
Interest rate swaps - floor income hedges(185) 42,073
 (13,670) (17,913)
Interest rate swap option - floor income hedge(500) (269) (2,212) (2,541)
Interest rate caps(103) (68) (936) (1,283)
Interest rate swaps - hybrid debt hedges44
 13
 10
 (4,000)
Cross-currency interest rate swap16,257
 5,501
 44,831
 26,194
Other—
 (297) (143) (2,336)
Total change in fair value - income (expense)21,429
 47,093
 22,381
 (1,556)
Re-measurement of Euro Notes (foreign currency transaction adjustment) - (expense) income(13,683) (4,831) (45,635) (13,543)
Derivative market value and foreign currency transaction adjustments and derivative settlements, net - income (expense)$7,173
 36,001
 (25,568) (33,391)


5.  Investments
Private Education Loan Investment
In December of 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education loans representing approximately 445,000 borrowers. The Company has entered into a joint venture with other investors to acquire the loans, and Other Receivablesunder the joint venture the Company has an approximately 8 percent interest in the loans. In conjunction with the sale, the Company was selected as servicer of the portfolio. During March and throughout the second quarter of 2021, the borrowers were converted to the Company's servicing platform. The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility. The Company is accounting for its membership interests in this partnership under the equity method of accounting and as of June 30, 2021, such investment was $8.3 million. This investment is included in “venture capital and funds – equity method” in the table below.

On May 20, 2021 and June 30, 2021, the joint venture completed asset-backed securitization transactions to permanently finance a total of $5.8 billion of the private education loans purchased by the joint venture. The Company is accounting for its approximately 8 percent residual interest in these securitizations as held-to-maturity beneficial interest investments. These investments are shown as “beneficial interest in private education loan securitizations” in the table below. On behalf of the joint venture, the Company is the sponsor and administrator for these loan securitizations. 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 included in “private education loan asset-backed securities – available for sale” in the table below and as of June 30, 2021, the fair value of these bonds was $307.3 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, the proceeds of which were used to purchase a portion of the asset-backed investments, and such investments serve as collateral on the repurchase obligations. See note 3 for additional information about these repurchase agreements.

18

A summary of the Company's investments follows:
As of June 30, 2021As of December 31, 2020
Amortized costGross unrealized gainsGross unrealized lossesFair valueAmortized costGross unrealized gainsGross unrealized lossesFair value
Investments (at fair value):
FFELP loan asset-backed securities- available-for-sale (a)$357,935 13,498 0 371,433 338,475 8,040 (13)346,502 
Private education loan asset-backed securities - available-for-sale (b)306,395 898 0 307,293 0 0 0 0 
Other debt securities - available-for-sale2,100 1 0 2,101 2,103 2 0 2,105 
Equity securities57,652 15,336 (3,865)69,123 36,227 8,768 (2,954)42,041 
Total investments (at fair value)$724,082 29,733 (3,865)749,950 376,805 16,810 (2,967)390,648 
Other Investments (not measured at fair value):
Venture capital and funds:
Measurement alternative (c)150,857 144,795 
Equity method26,307 14,018 
Other883 894 
Total venture capital and funds178,047 159,707 
Real estate
Equity method46,748 50,291 
Notes receivable3,500 847 
Total real estate50,248 51,138 
Investment in ALLO:
Voting interest/equity method (d)108,271 129,396 
Preferred membership interest and accrued and unpaid preferred return (e)133,257 228,916 
Total investment in ALLO241,528 358,312 
Solar (f)(60,862)(30,373)
Beneficial interest in private education loan securitizations (g)36,079 0 
Beneficial interest in federally insured loan securitizations (g)27,955 30,377 
Beneficial interest in consumer loan securitizations, net of allowance for credit losses of $4,449 as of December 31, 2020 (g)40,983 27,954 
Tax liens and affordable housing4,029 5,177 
Total investments (not measured at fair value)518,007 602,292 
Total investments$1,267,957 $992,940 

(a)    As of June 30, 2021, $132.1 million (par value) of FFELP loan asset-backed securities were subject to participation interests held by Union Bank. See note 3 for additional information.
(b)    As of June 30, 2021, a total of $293.9 million (par value) of private education loan asset-backed securities were subject to repurchase agreements with third-parties. See note 3 for additional information.
(c)    The Company has an investment in Agile Sports Technologies, Inc. (doing business as “Hudl”) that is included in “venture capital and funds” in the above table. On May 27, 2021, the Company made an additional equity investment of approximately $5 million in Hudl, as one of the participants in an equity raise completed by Hudl. Prior to the additional 2021 investment, the Company had direct and indirect equity ownership interests in Hudl of less than 20%, which did not materially change as a result of this transaction. The Company accounts for its investment in Hudl using the measurement alternative method, which requires it to adjust its carrying value of the investment for changes resulting from observable market transactions. For accounting purposes, the May 2021 equity raise transaction was not considered an observable market transaction (not orderly) because it was not subject to customary marketing activities and the price was contractually agreed to during Hudl's prior May 2020 equity raise. Accordingly, the Company did not adjust its carrying value of its Hudl investment to the May 2021 transaction value. As of June 30, 2021, the carrying amount of the Company's investment in Hudl is $133.9 million.
David S. Graff, who has served on the Company's Board of Directors since May 2014, is CEO, co-founder, and a director of Hudl.
19

(d)    The Company accounts for its voting membership interests in ALLO Holdings LLC, a holding company for ALLO Communications LLC (collectively referred to as "ALLO") under the Hypothetical Liquidation at Book Value ("HLBV") method of accounting. The HLBV method of accounting is used by the Company for equity method investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership or voting interests. The Company applies the HLBV method using a balance sheet approach. A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the Company’s share of the earnings or losses from the equity investment for the period. Because the Company will be able to utilize certain tax losses related to ALLO’s operations, the equity investment agreements for the Company have liquidation rights and priorities that are sufficiently different from the voting membership interests percentages such that the HLBV method of accounting was deemed appropriate. Accordingly, the recognition of earnings or losses during any reporting period related to the Company’s equity investment in ALLO may or may not reflect its voting membership interests percentage and could vary substantially from those calculated based on the Company’s voting membership interests in ALLO.
During the three and six months ended June 30, 2021, the Company recognized income of $1.1 million and losses of $21.1 million, respectively, under the HLBV method of accounting on its ALLO voting membership interests investment. 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. Previously, 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 has determined that Nelnet’s liquidation basis in ALLO under the HLBV method should equal ALLO’s GAAP losses and amortizing any basis difference using 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 (a $10.6 million after tax, or $0.27 per share, increase to net income). The Company concluded this error had an immaterial impact on 2021 results as well as the results for prior periods.
Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers. The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP. Applying the HLBV method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years. The Company currently anticipates such losses in the second half of 2021 to approximate the amount of total losses incurred during the first half of 2021. Income and losses from the Company's investment in ALLO are included in "other" in "other income/expense" on the consolidated statements of income.
(e)    As of June 30, 2021, the outstanding preferred membership interests and accrued and unpaid preferred return of ALLO held by the Company was $129.7 million and $3.6 million, respectively. The preferred membership interests of ALLO held by the Company earn a preferred annual return of 6.25 percent. During the three and six months ended June 30, 2021, the Company recognized income on its ALLO preferred membership interests of $2.0 million and $4.3 million, respectively, that is included in "other" in "other income/expense" on the consolidated statements of income.
On January 19, 2021, ALLO obtained certain private debt financing facilities from unrelated third-party lenders providing for aggregate financing of up to $230.0 million. With proceeds from this transaction, ALLO redeemed a portion of its non-voting preferred membership interests held by the Company in exchange for an aggregate redemption price payment to the Company of $100.0 million. Under October 2020 recapitalization agreements for ALLO, the parties have agreed to use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause ALLO to redeem, on or before April 2024, the remaining preferred membership interests of ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests.
(f)    The Company makes investments in entities that promote renewable energy sources (solar). The Company's investments in these entities generate a return primarily through the realization of federal income tax credits, operating cash flows, and other receivables follows:tax benefits, such as tax deductions from operating losses of the investments, over specified time periods which range from 5 to 6 years. As of June 30, 2021, the Company has funded a total of $162.0 million in solar investments, which includes $19.5 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, 2021 represents total tax credits earned on solar projects placed in service through June 30, 2021 being larger than total payments made by the Company on such projects. The Company is committed to fund an additional $68.7 million on these projects, of which $34.9 million will be funded by syndication partners.
The Company accounts for its solar investments using the HLBV method of accounting. For the majority of the Company's solar investments, the HLBV method of accounting results in accelerated losses in the initial years of investment. During the three months ended June 30, 2021 and 2020, the Company recognized pre-tax losses and income of $2.3 million and $2.0 million, respectively, and for the six months ended June 30, 2021 and 2020, the Company recognized pre-tax losses of $4.0 million and $0.8 million, respectively, on its solar investments. These losses and income are included in "other" in "other income/expense" on the consolidated statements of income.
20

 As of September 30, 2017 As of December 31, 2016
 Amortized cost Gross unrealized gains Gross unrealized losses (a) Fair value Amortized cost Gross unrealized gains Gross unrealized losses Fair value
        
Investments (at fair value):               
Available-for-sale investments:               
Student loan asset-backed and other debt securities (b)$68,010
 4,768
 (240) 72,538
 98,260
 6,280
 (641) 103,899
Equity securities756
 2,140
 (21) 2,875
 720
 1,930
 (61) 2,589
Total available-for-sale investments$68,766
 6,908
 (261) 75,413
 98,980
 8,210
 (702) 106,488
Trading investments - equity securities      —
       105
Total available-for-sale and trading investments      75,413
       106,593
Other Investments and Other Receivables (not measured at fair value):            
Venture capital and funds      84,903
       69,789
Notes and loans receivable      56,732
       17,031
Real estate      49,567
       48,379
Tax liens and affordable housing      9,921
       12,352
Total investments and other receivables      $276,536
       254,144
(g)    The Company has purchased partial ownership in certain private education, federally insured, and consumer loan securitizations. As of the latest remittance reports filed by the various trusts prior to June 30, 2021, the Company's ownership correlates to approximately $460 million, $495 million, and $280 million of private education, federally insured, and consumer loans, respectively, included in these securitizations.
(a)
As of September 30, 2017, the aggregate fair value of available-for-sale investments with unrealized losses was $2.7 million, of which $0.4 million had been in a continuous unrealized loss position for greater than 12 months. Because the Company currently has the intent and ability to retain these investments for an anticipated recovery in fair value, as of September 30, 2017, the Company considered the decline in market value of its available-for-sale investments to be temporary in nature and did not consider any of its investments other-than-temporarily impaired.

During the first quarter of 2020, the Company recorded a $26.3 million provision charge related to the Company's beneficial interest in consumer loan securitizations due to distressed economic conditions resulting from the COVID-19 pandemic. Due to improved economic conditions, the Company has reduced the allowance for credit losses related to the consumer loan beneficial interests, including reducing such allowance by $2.4 million during the first quarter of 2021. As of March 31, 2021, the Company no longer has an allowance for credit losses associated with the consumer loan beneficial interests. The activity related to the allowance for credit losses related to the consumer loan beneficial interests is included in “impairment expense and provision for beneficial interests, net” on the consolidated statements of income.


(b)
As of September 30, 2017, the stated maturities of substantially all of the Company's student loan asset-backed and other debt securities classified as available-for-sale were greater than 10 years.

6. Intangible Assets net

Intangible assets consistconsisted of the following:
Weighted average remaining useful life as of
June 30, 2021 (months)
As ofAs of
June 30, 2021December 31, 2020
Amortizable intangible assets, net:  
Customer relationships (net of accumulated amortization of $91,996 and $83,419, respectively)107$53,296 66,974 
Computer software (net of accumulated amortization of $2,685 and $4,127, respectively)305,168 6,430 
Trade names (net of accumulated amortization of $5,121 and $3,455, respectively)—0 1,666 
Total - amortizable intangible assets, net100$58,464 75,070 
  Weighted average remaining useful life as of September 30, 2017 (months) As of September 30, 2017 As of December 31, 2016
 
 Amortizable intangible assets, net:   
 Customer relationships (net of accumulated amortization of $11,704 and $8,548, respectively)162 $25,179
 28,335
 Trade names (net of accumulated amortization of $2,287 and $1,653, respectively)180 9,285
 9,919
 Computer software (net of accumulated amortization of $8,929 and $5,675, respectively)17 6,042
 9,296
 Covenants not to compete (net of accumulated amortization of $118 and $91, respectively)80 236
 263
 Total - amortizable intangible assets, net144 $40,742
 47,813


The Company recorded amortization expense on its intangible assets of $2.3$8.3 million and $3.2$7.4 million during the three months ended SeptemberJune 30, 20172021 and 2016,2020, respectively, and $7.1$16.6 million and $8.4$14.8 million during the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of SeptemberJune 30, 2017,2021, the Company estimates it will record amortization expense as follows:

2021 (July 1 - December 31)$6,435 
20229,939 
20239,830 
20247,457 
20254,644 
2026 and thereafter20,159 
 $58,464 

2017 (October 1 - December 31)$2,315
20188,605
20195,147
20204,231
20213,480
2022 and thereafter16,964
 $40,742

7. Goodwill

The carrying amount of goodwill as of June 30, 2021 and December 31, 2016 and September 30, 20172020 by reportable operating segment was as follows:
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset Generation and ManagementNelnet BankCorporate and Other ActivitiesTotal
Goodwill balance$23,639 76,570 41,883 0 0 142,092 

21
 Loan Systems and Servicing Tuition Payment Processing and Campus Commerce Communications Asset Generation and Management Corporate and Other Activities Total
Goodwill balance$8,596
 67,168
 21,112
 41,883
 8,553
 147,312




8. Property and Equipment

Property and equipment consisted of the following:
As ofAs of
 
As of
September 30, 2017
 
As of
December 31, 2016
Useful lifeJune 30, 2021December 31, 2020
Useful life 
Non-communications:    
Computer equipment and software1-5 years $108,430
 97,317
Computer equipment and software1-5 years$207,206 172,664 
Building and building improvements5-39 years 25,283
 13,363
Building and building improvements5-48 years54,545 52,444 
Office furniture and equipment3-7 years 14,357
 12,344
Office furniture and equipment1-10 years23,243 21,899 
Leasehold improvements5-20 years 6,496
 3,579
Leasehold improvements1-15 years9,387 9,168 
Transportation equipment4-10 years 3,813
 3,809
Transportation equipment5-10 years4,857 4,857 
Land— 2,605
 1,682
Land—3,642 3,642 
Construction in progress— 14,025
 16,346
Construction in progress—8,169 18,478 
 175,009
 148,440
311,049 283,152 
Accumulated depreciation - non-communications 104,430
 91,285
Non-communications, net property and equipment 70,579
 57,155
    
Communications:    
Network plant and fiber5-15 years 83,870
 40,844
Customer located property5-10 years 10,987
 5,138
Central office5-15 years 8,476
 6,448
Transportation equipment4-10 years 5,011
 2,966
Computer equipment and software1-5 years 3,318
 2,026
Other1-39 years 2,285
 1,268
Land— 70
 70
Construction in progress— 35,709
 12,537
 149,726
 71,297
Accumulated depreciation - communications 11,864
 4,666
Communications, net property and equipment 137,862
 66,631
Accumulated depreciationAccumulated depreciation(182,522)(159,625)
Total property and equipment, net $208,441
 123,786
Total property and equipment, net$128,527 123,527 
The Company recorded depreciation expense on its property and equipment of $7.7$12.0 million and $5.8$22.0 million during the three months ended SeptemberJune 30, 20172021 and 2016,2020, respectively, and $20.6$23.8 million and $16.4$42.3 million during the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, respectively.



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,
20212020
Common shareholdersUnvested restricted stock shareholdersTotalCommon shareholdersUnvested restricted stock shareholdersTotal
Numerator:
Net income attributable to Nelnet, Inc.$82,479 1,388 83,867 85,243 1,239 86,482 
Denominator:
Weighted-average common shares outstanding - basic and diluted38,100,092 641,394 38,741,486 38,641,794 561,610 39,203,404 
Earnings per share - basic and diluted$2.16 2.16 2.16 2.21 2.21 2.21 
Six months ended June 30,
20212020
Common shareholdersUnvested restricted stock shareholdersTotalCommon shareholdersUnvested restricted stock shareholdersTotal
Numerator:
Net income attributable to Nelnet, Inc.$204,209 3,256 207,465 45,305 645 45,950 
Denominator:
Weighted-average common shares outstanding - basic and diluted38,065,869 607,033 38,672,902 39,023,624 555,835 39,579,459 
Earnings per share - basic and diluted$5.36 5.36 5.36 1.16 1.16 1.16 

22
 Three months ended September 30,
 2017 2016
 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total
Numerator:           
Net income attributable to Nelnet, Inc.$45,850
 453
 46,303
 83,419
 875
 84,294
     

      
Denominator:

 

 

      
Weighted-average common shares outstanding - basic and diluted41,146,424
 406,892
 41,553,316
 42,199,580
 442,633
 42,642,213
Earnings per share - basic and diluted$1.11
 1.11
 1.11
 1.98
 1.98
 1.98


 Nine months ended September 30,
 2017 2016
 Common shareholders Unvested restricted stock shareholders Total Common shareholders Unvested restricted stock shareholders Total
Numerator:           
Net income attributable to Nelnet, Inc.$123,816
 1,249
 125,065
 156,749
 1,656
 158,405
            
Denominator:           
Weighted-average common shares outstanding - basic and diluted41,634,578
 419,954
 42,054,532
 42,340,867
 447,266
 42,788,133
Earnings per share - basic and diluted$2.97
 2.97
 2.97
 3.70
 3.70
 3.70





10.  Segment Reporting

See note 1415 of the notes to consolidated financial statements included in the 20162020 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, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingCommunications (a)Asset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$30 210 0 129,965 2,041 1,524 (187)133,583 
Interest expense23 0 0 48,670 392 1,093 (187)49,991 
Net interest income7 210 0 81,295 1,649 431 0 83,592 
Less provision (negative provision) for loan losses0 0 0 305 69 0 0 374 
Net interest income after provision for loan losses7 210 0 80,990 1,580 431 0 83,218 
Other income/expense:
Loan servicing and systems revenue112,094 0 0 0 0 0 0 112,094 
Intersegment revenue8,480 3 0 0 0 0 (8,483)0 
Education technology, services, and payment processing revenue0 76,702 0 0 0 0 0 76,702 
Communications revenue0 0 0 0 0 0 0 0 
Other701 0 0 2,316 4 19,900 0 22,921 
Gain on sale of loans0 0 0 15,271 0 0 0 15,271 
Impairment expense and provision for beneficial interests, net0 0 0 0 0 (500)0 (500)
Derivative settlements, net0 0 0 (5,374)0 0 0 (5,374)
Derivative market value adjustments, net0 0 0 (1,615)0 0 0 (1,615)
Total other income/expense121,275 76,705 0 10,598 4 19,400 (8,483)219,499 
Cost of services:
Cost to provide education technology, services, and payment processing services0 21,676 0 0 0 0 0 21,676 
Cost to provide communications services0 0 0 0 0 0 0 0 
Total cost of services0 21,676 0 0 0 0 0 21,676 
Operating expenses:
Salaries and benefits68,388 27,094 0 556 1,578 21,351 0 118,968 
Depreciation and amortization7,974 2,956 0 0 0 9,305 0 20,236 
Other expenses13,273 4,437 0 3,567 237 11,074 0 32,587 
Intersegment expenses, net16,134 3,520 0 8,549 37 (19,757)(8,483)0 
Total operating expenses105,769 38,007 0 12,672 1,852 21,973 (8,483)171,791 
Income (loss) before income taxes15,513 17,232 0 78,916 (268)(2,142)0 109,250 
Income tax (expense) benefit (b)(3,723)(4,136)0 (18,940)64 497 0 (26,237)
Net income (loss)11,790 13,096 0 59,976 (204)(1,645)0 83,013 
Net loss (income) attributable to noncontrolling interests0 0 0 0 0 854 0 854 
Net income (loss) attributable to Nelnet, Inc.$11,790 13,096 0 59,976 (204)(791)0 83,867 
Total assets as of June 30, 2021$205,214 424,079 0 20,783,755 407,611 1,489,212 (281,008)23,028,863 

(a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements. See note 2 of the notes to consolidated financial statements included in the 2020 Annual Report for a description of the transaction and a summary of the deconsolidation impact. Accordingly, there are no operating results for the (former) Communications operating segment in 2021.
(b) Income taxes for the Nelnet Bank operating segment reflect Nelnet Bank's actual tax expense/benefit as allocated and reflected in its Call Report filed with the Federal Deposit Insurance Corporation. Income taxes for all other operating segments are allocated based on 24% of that segment's income before taxes. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities.
23

Three months ended September 30, 2017 Three months ended June 30, 2020
Loan Systems and Servicing Tuition Payment Processing and Campus Commerce Communications Asset
Generation and
Management		 Corporate and Other Activities Eliminations TotalLoan Servicing and SystemsEducation Technology, Services, and Payment ProcessingCommunicationsAsset
Generation and
Management		Nelnet Bank (a)Corporate and Other ActivitiesEliminationsTotal
Total interest income$147
 5
 1
 194,968
 3,903
 (2,139) 196,884
Total interest income$52 420 0 150,583 0 1,196 (368)151,883 
Interest expense—
 —
 1,551
 121,074
 1,165
 (2,139) 121,650
Interest expense28 21 0 84,489 0 1,078 (368)85,248 
Net interest income147
 5
 (1,550) 73,894
 2,738
 —
 75,234
Net interest income24 399 0 66,094 0 118 0 66,635 
Less provision for loan losses—
 —
 —
 6,000
 —
 —
 6,000
Net interest income (loss) after provision for loan losses147

5
 (1,550) 67,894
 2,738
 —
 69,234
Other income: 
  
    
  
  
  
Loan systems and servicing revenue55,950
 —
 —
 —
 —
 —
 55,950
Intersegment servicing revenue10,563
 —
 —
 —
 —
 (10,563) —
Tuition payment processing, school information, and campus commerce revenue—
 35,450
 —
 —
 —
 —
 35,450
Less provision (negative provision) for loan lossesLess provision (negative provision) for loan losses0 0 0 2,999 0 0 0 2,999 
Net interest income after provision for loan lossesNet interest income after provision for loan losses24 399 0 63,095 0 118 0 63,636 
Other income/expense:Other income/expense:
Loan servicing and systems revenueLoan servicing and systems revenue111,042 0 0 0 0 0 0 111,042 
Intersegment revenueIntersegment revenue8,537 3 0 0 0 0 (8,540)0 
Education technology, services, and payment processing revenueEducation technology, services, and payment processing revenue0 59,304 0 0 0 0 0 59,304 
Communications revenue—
 —
 6,751
 —
 —
 —
 6,751
Communications revenue0 0 18,998 0 0 0 0 18,998 
Other income—
 —
 —
 2,753
 17,003
 —
 19,756
Gain from debt repurchases—
 —
 —
 116
 —
 —
 116
OtherOther1,914 0 392 732 0 57,089 0 60,127 
Gain on sale of loansGain on sale of loans0 0 0 0 0 0 0 0 
Impairment expense and provision for beneficial interests, netImpairment expense and provision for beneficial interests, net0 0 0 0 0 (332)0 (332)
Derivative settlements, net—
 —
 —
 (382) (191) —
 (573)Derivative settlements, net0 0 0 5,821 0 0 0 5,821 
Derivative market value and foreign currency transaction adjustments, net—
 —
 —
 7,702
 44
 —
 7,746
Total other income66,513
 35,450
 6,751
 10,189
 16,856
 (10,563) 125,196
Derivative market value adjustments, netDerivative market value adjustments, net0 0 0 (3,911)0 0 0 (3,911)
Total other income/expenseTotal other income/expense121,493 59,307 19,390 2,642 0 56,757 (8,540)251,049 
Cost of services:Cost of services:
Cost to provide education technology, services, and payment processing servicesCost to provide education technology, services, and payment processing services0 15,376 0 0 0 0 0 15,376 
Cost to provide communications servicesCost to provide communications services0 0 5,743 0 0 0 0 5,743 
Total cost of servicesTotal cost of services0 15,376 5,743 0 0 0 0 21,119 
Operating expenses: 
  
      
    
Operating expenses:
Salaries and benefits38,435
 17,432
 4,099
 392
 13,834
 —
 74,193
Salaries and benefits68,401 24,522 5,570 421 0 20,334 0 119,247 
Depreciation and amortization549
 2,316
 3,145
 —
 4,040
 —
 10,051
Depreciation and amortization9,142 2,362 10,824 0 0 7,065 0 29,393 
Loan servicing fees—
 —
 —
 7,939
 —
 —
 7,939
Cost to provide communications services—
 —
 2,632
 —
 —
 —
 2,632
Other expenses10,317
 4,224
 2,278
 1,451
 12,248
 —
 30,518
Other expenses13,380 2,326 3,774 4,863 0 12,710 0 37,052 
Intersegment expenses, net7,774
 2,219
 470
 10,659
 (10,559) (10,563) —
Intersegment expenses, net15,996 3,429 536 9,055 0 (20,476)(8,540)0 
Total operating expenses57,075
 26,191
 12,624
 20,441
 19,563
 (10,563) 125,333
Total operating expenses106,919 32,639 20,704 14,339 0 19,633 (8,540)185,692 
Income (loss) before income taxes9,585
 9,264
 (7,423) 57,642
 31
 —
 69,097
Income (loss) before income taxes14,598 11,691 (7,057)51,398 0 37,242 0 107,874 
Income tax (expense) benefit(4,937) (3,520) 2,821
 (21,904) 1,978
 —
 (25,562)Income tax (expense) benefit(3,504)(2,806)1,694 (12,336)0 (4,312)0 (21,264)
Net income (loss)4,648
 5,744
 (4,602) 35,738
 2,009
 —
 43,535
Net income (loss)11,094 8,885 (5,363)39,062 0 32,930 0 86,610 
Net loss (income) attributable to noncontrolling interests3,408
 —
 —
 —
 (640) —
 2,768
Net loss (income) attributable to noncontrolling interests0 0 0 0 0 (128)0 (128)
Net income (loss) attributable to Nelnet, Inc.$8,056
 5,744
 (4,602) 35,738
 1,369
 —
 46,303
Net income (loss) attributable to Nelnet, Inc.$11,094 8,885 (5,363)39,062 0 32,802 0 86,482 
             
Total assets as of September 30, 2017$98,555
 208,290
 179,206
 23,724,413
 863,700
 (305,454) 24,768,710
Total assets as of June 30, 2020Total assets as of June 30, 2020$221,313 351,392 301,741 21,136,268 0 732,994 (132,500)22,611,208 



(a) Nelnet Bank launched operations on November 2, 2020. Accordingly, there are no operating results for the Nelnet Bank operating segment in the three months ended June 30, 2020.

24

Three months ended September 30, 2016Six months ended June 30, 2021
Loan Systems and Servicing Tuition Payment Processing and Campus Commerce Communications 
Asset
Generation and
Management
 Corporate and Other
Activities		 Eliminations TotalLoan Servicing and SystemsEducation Technology, Services, and Payment ProcessingCommunications (a)Asset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$37
 2
 —
 194,701
 2,370
 (930) 196,181
Total interest income$63 473 0 256,367 3,418 2,770 (405)262,686 
Interest expense—
 —
 318
 95,383
 1,615
 (930) 96,386
Interest expense47 0 0 75,620 586 1,916 (405)77,764 
Net interest income37
 2
 (318) 99,318
 755
 —
 99,795
Net interest income16 473 0 180,747 2,832 854 0 184,922 
Less provision for loan losses—
 —
 —
 6,000
 —
 —
 6,000
Net interest income (loss) after provision for loan losses37
 2
 (318) 93,318
 755
 —
 93,795
Other income: 
  
    
  
  
  
Loan systems and servicing revenue54,350
 —
 —
 —
 —
 —
 54,350
Intersegment servicing revenue11,021
 —
 —
 —
 —
 (11,021) —
Tuition payment processing, school information, and campus commerce revenue—
 33,071
 —
 —
 —
 —
 33,071
Less provision (negative provision) for loan lossesLess provision (negative provision) for loan losses0 0 0 (17,165)491 0 0 (16,674)
Net interest income after provision for loan lossesNet interest income after provision for loan losses16 473 0 197,912 2,341 854 0 201,596 
Other income/expense:Other income/expense:
Loan servicing and systems revenueLoan servicing and systems revenue223,611 0 0 0 0 0 0 223,611 
Intersegment revenueIntersegment revenue16,748 6 0 0 0 0 (16,754)0 
Education technology, services, and payment processing revenueEducation technology, services, and payment processing revenue0 171,960 0 0 0 0 0 171,960 
Communications revenue—
 —
 4,343
 —
 —
 —
 4,343
Communications revenue0 0 0 0 0 0 0 0 
Enrollment services revenue—
 —
 —
 —
 —
 —
 —
Other income—
 —
 —
 4,265
 10,886
 —
 15,150
Gain from debt repurchases—
 —
 —
 2,160
 —
 —
 2,160
OtherOther1,814 0 0 2,760 26 13,716 0 18,317 
Gain on sale of loansGain on sale of loans0 0 0 15,271 0 0 0 15,271 
Impairment expense and provision for beneficial interests, netImpairment expense and provision for beneficial interests, net0 0 0 2,436 0 (500)0 1,936 
Derivative settlements, net—
 —
 —
 (6,028) (233) —
 (6,261)Derivative settlements, net0 0 0 (9,678)0 0 0 (9,678)
Derivative market value and foreign currency transaction adjustments, net—
 —
 —
 42,546
 (284) —
 42,262
Total other income65,371
 33,071
 4,343
 42,943
 10,369
 (11,021) 145,075
Derivative market value adjustments, netDerivative market value adjustments, net0 0 0 37,194 0 0 0 37,194 
Total other income/expenseTotal other income/expense242,173 171,966 0 47,983 26 13,216 (16,754)458,611 
Cost of services:Cost of services:
Cost to provide education technology, services, and payment processing servicesCost to provide education technology, services, and payment processing services0 48,728 0 0 0 0 0 48,728 
Cost to provide communications servicesCost to provide communications services0 0 0 0 0 0 0 0 
Total cost of servicesTotal cost of services0 48,728 0 0 0 0 0 48,728 
Operating expenses: 
  
    
  
 .
  
Operating expenses:
Salaries and benefits32,505
 15,979
 2,325
 486
 12,448
 —
 63,743
Salaries and benefits134,846 53,035 0 1,051 3,065 42,761 0 234,759 
Depreciation and amortization557
 2,929
 1,630
 —
 3,878
 —
 8,994
Depreciation and amortization16,166 6,027 0 0 0 18,225 0 40,419 
Loan servicing fees—
 —
 —
 5,880
 —
 —
 5,880
Cost to provide communications services—
 —
 1,784
 —
 —
 —
 1,784
Cost to provide enrollment services—
 —
 —
 —
 —
 —
 —
Other expenses8,784
 4,149
 1,545
 1,769
 10,143
 —
 26,391
Other expenses26,557 9,259 0 7,344 781 25,346 0 69,286 
Intersegment expenses, net5,825
 1,616
 279
 11,146
 (7,845) (11,021) —
Intersegment expenses, net33,024 7,184 0 16,976 40 (40,470)(16,754)0 
Total operating expenses47,671
 24,673
 7,563
 19,281
 18,624
 (11,021) 106,792
Total operating expenses210,593 75,505 0 25,371 3,886 45,862 (16,754)344,464 
Income (loss) before income taxes17,737
 8,400
 (3,538) 116,980
 (7,500) —
 132,078
Income (loss) before income taxes31,596 48,206 0 220,524 (1,519)(31,792)0 267,015 
Income tax (expense) benefit(6,740) (3,192) 1,344
 (44,571) 5,443
 —
 (47,715)
Income tax (expense) benefit (b)Income tax (expense) benefit (b)(7,583)(11,570)0 (52,926)351 10,630 0 (61,098)
Net income (loss)10,997
 5,208
 (2,194) 72,409
 (2,057) —
 84,363
Net income (loss)24,013 36,636 0 167,598 (1,168)(21,162)0 205,917 
Net loss (income) attributable to noncontrolling interests—
 —
 —
 —
 (69) —
 (69)Net loss (income) attributable to noncontrolling interests0 0 0 0 0 1,548 0 1,548 
Net income (loss) attributable to Nelnet, Inc.$10,997
 5,208
 (2,194) 72,409
 (2,126) —
 84,294
Net income (loss) attributable to Nelnet, Inc.$24,013 36,636 0 167,598 (1,168)(19,614)0 207,465 
             
Total assets as of September 30, 2016$79,418
 190,682
 90,361
 26,888,950
 687,347
 (267,147) 27,669,611
Total assets as of June 30, 2021Total assets as of June 30, 2021$205,214 424,079 0 20,783,755 407,611 1,489,212 (281,008)23,028,863 



(a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements. See note 2 of the notes to consolidated financial statements included in the 2020 Annual Report for a description of the transaction and a summary of the deconsolidation impact. Accordingly, there are no operating results for the (former) Communications operating segment in 2021.


(b) Income taxes for the Nelnet Bank operating segment reflect Nelnet Bank's actual tax expense/benefit as allocated and reflected in its Call Report filed with the Federal Deposit Insurance Corporation. Income taxes for all other operating segments are allocated based on 24% of that segment's income before taxes. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities.
25

Nine months ended September 30, 2017Six months ended June 30, 2020
Loan Systems and Servicing Tuition Payment Processing and Campus Commerce Communications Asset
Generation and
Management		 Corporate and Other Activities Eliminations TotalLoan Servicing and SystemsEducation Technology, Services, and Payment ProcessingCommunicationsAsset
Generation and
Management		Nelnet Bank (a)Corporate and Other ActivitiesEliminationsTotal
Total interest income$361
 10
 2
 568,661
 10,026
 (5,274) 573,786
Total interest income$369 2,411 0 336,509 0 2,751 (967)341,074 
Interest expense—
 —
 3,367
 340,898
 2,794
 (5,274) 341,787
Interest expense73 38 0 217,737 0 2,485 (967)219,366 
Net interest income361
 10
 (3,365) 227,763
 7,232
 —
 231,999
Net interest income296 2,373 0 118,772 0 266 0 121,708 
Less provision for loan losses—
 —
 —
 9,000
 —
 —
 9,000
Net interest income (loss) after provision for loan losses361

10
 (3,365) 218,763
 7,232
 —
 222,999
Other income: 
  
    
  
  
  
Loan systems and servicing revenue167,079
 —
 —
 —
 —
 —
 167,079
Intersegment servicing revenue30,839
 —
 —
 —
 —
 (30,839) —
Tuition payment processing, school information, and campus commerce revenue—
 113,293
 —
 —
 —
 —
 113,293
Less provision (negative provision) for loan lossesLess provision (negative provision) for loan losses0 0 0 79,297 0 0 0 79,297 
Net interest income after provision for loan lossesNet interest income after provision for loan losses296 2,373 0 39,475 0 266 0 42,411 
Other income/expense:Other income/expense:
Loan servicing and systems revenueLoan servicing and systems revenue223,778 0 0 0 0 0 0 223,778 
Intersegment revenueIntersegment revenue19,591 14 0 0 0 0 (19,605)0 
Education technology, services, and payment processing revenueEducation technology, services, and payment processing revenue0 142,979 0 0 0 0 0 142,979 
Communications revenue—
 —
 17,577
 —
 —
 —
 17,577
Communications revenue0 0 37,179 0 0 0 0 37,179 
Other income—
 —
 —
 9,152
 35,722
 —
 44,874
Gain from debt repurchases—
 —
 —
 1,097
 4,440
 —
 5,537
OtherOther4,544 0 745 3,947 0 59,172 0 68,408 
Gain on sale of loansGain on sale of loans0 0 0 18,206 0 0 0 18,206 
Impairment expense and provision for beneficial interests, netImpairment expense and provision for beneficial interests, net0 0 0 (26,303)0 (8,116)0 (34,419)
Derivative settlements, net—
 —
 —
 (1,721) (593) —
 (2,314)Derivative settlements, net0 0 0 10,058 0 0 0 10,058 
Derivative market value and foreign currency transaction adjustments, net—
 —
 —
 (23,121) (133) —
 (23,254)
Total other income197,918
 113,293
 17,577
 (14,593) 39,436
 (30,839) 322,792
Derivative market value adjustments, netDerivative market value adjustments, net0 0 0 (24,513)0 0 0 (24,513)
Total other income/expenseTotal other income/expense247,913 142,993 37,924 (18,605)0 51,056 (19,605)441,676 
Cost of services:Cost of services:
Cost to provide education technology, services, and payment processing servicesCost to provide education technology, services, and payment processing services0 38,181 0 0 0 0 0 38,181 
Cost to provide communications servicesCost to provide communications services0 0 11,325 0 0 0 0 11,325 
Total cost of servicesTotal cost of services0 38,181 11,325 0 0 0 0 49,506 
Operating expenses: 
  
      
    
Operating expenses:
Salaries and benefits116,932
 50,986
 10,489
 1,156
 41,121
 —
 220,684
Salaries and benefits138,894 48,218 10,986 863 0 40,163 0 239,125 
Depreciation and amortization1,644
 7,053
 7,880
 —
 11,109
 —
 27,687
Depreciation and amortization17,990 4,749 21,330 0 0 12,972 0 57,041 
Loan servicing fees—
 —
 —
 19,584
 —
 —
 19,584
Cost to provide communications services—
 —
 6,789
 —
 —
 —
 6,789
Other expenses28,333
 14,072
 5,422
 4,269
 32,497
 —
 84,593
Other expenses30,870 8,418 7,463 8,581 0 25,108 0 80,439 
Intersegment expenses, net23,496
 6,430
 1,472
 31,114
 (31,673) (30,839) —
Intersegment expenses, net32,235 6,756 1,160 20,971 0 (41,517)(19,605)0 
Total operating expenses170,405
 78,541
 32,052
 56,123
 53,054
 (30,839) 359,337
Total operating expenses219,989 68,141 40,939 30,415 0 36,726 (19,605)376,605 
Income (loss) before income taxes27,874
 34,762
 (17,840) 148,047
 (6,386) —
 186,454
Income (loss) before income taxes28,220 39,044 (14,340)(9,545)0 14,596 0 57,976 
Income tax (expense) benefit(14,410) (13,210) 6,779
 (56,258) 6,749
 —
 (70,349)Income tax (expense) benefit(6,773)(9,371)3,442 2,291 0 (720)0 (11,131)
Net income (loss)13,464
 21,552
 (11,061) 91,789
 363
 —
 116,105
Net income (loss)21,447 29,673 (10,898)(7,254)0 13,876 0 46,845 
Net loss (income) attributable to noncontrolling interests10,050
 —
 —
 —
 (1,090) —
 8,960
Net loss (income) attributable to noncontrolling interests0 0 0 0 0 (895)0 (895)
Net income (loss) attributable to Nelnet, Inc.$23,514
 21,552
 (11,061) 91,789
 (727) —
 125,065
Net income (loss) attributable to Nelnet, Inc.$21,447 29,673 (10,898)(7,254)0 12,981 0 45,950 
             
Total assets as of September 30, 2017$98,555
 208,290
 179,206
 23,724,413
 863,700
 (305,454) 24,768,710
Total assets as of June 30, 2020Total assets as of June 30, 2020$221,313 351,392 301,741 21,136,268 0 732,994 (132,500)22,611,208 



(a) Nelnet Bank launched operations on November 2, 2020. Accordingly, there are no operating results for the Nelnet Bank operating segment in the six months ended June 30, 2020.



26

 Nine months ended September 30, 2016
 Loan Systems and Servicing Tuition Payment Processing and Campus Commerce Communications Asset
Generation and
Management		 Corporate and Other Activities Eliminations Total
Total interest income$80
 7
 1
 570,390
 6,527
 (2,556) 574,449
Interest expense—
 —
 671
 278,029
 4,702
 (2,556) 280,847
Net interest income80
 7
 (670) 292,361
 1,825
 —
 293,602
Less provision for loan losses—
 —
 —
 10,500
 —
 —
 10,500
Net interest income (loss) after provision for loan losses80

7
 (670) 281,861
 1,825
 —
 283,102
Other income: 
  
    
  
  
  
Loan systems and servicing revenue161,082
 —
 —
 —
 —
 —
 161,082
Intersegment servicing revenue34,436
 —
 —
 —
 —
 (34,436) —
Tuition payment processing, school information, and campus commerce revenue—
 102,211
 —
 —
 —
 —
 102,211
Communications revenue—
 —
 13,167
 —
 —
 —
 13,167
Enrollment services revenue—
 —
 —
 —
 4,326
 —
 4,326
Other income—
 —
 —
 12,362
 26,349
 —
 38,711
Gain from debt repurchases—
 —
 —
 2,260
 —
 —
 2,260
Derivative settlements, net—
 —
 —
 (17,596) (696) —
 (18,292)
Derivative market value and foreign currency transaction adjustments, net—
 —
 —
 (8,763) (6,336) —
 (15,099)
Total other income195,518
 102,211
 13,167
 (11,737) 23,643
 (34,436) 288,366
Operating expenses: 
  
      
    
Salaries and benefits96,851
 45,859
 4,792
 1,504
 38,902
 —
 187,907
Depreciation and amortization1,440
 7,711
 4,137
 —
 11,528
 —
 24,817
Loan servicing fees—
 —
 —
 20,024
 —
 —
 20,024
Cost to provide communications services—
 —
 5,169
 —
 —
 —
 5,169
Cost to provide enrollment services—
 —
 —
 —
 3,623
 —
 3,623
Other expenses31,635
 13,122
 3,110
 4,766
 31,540
 —
 84,174
Intersegment expenses, net18,168
 4,690
 610
 34,791
 (23,823) (34,436) —
Total operating expenses148,094
 71,382
 17,818
 61,085
 61,770
 (34,436) 325,714
Income (loss) before income taxes47,504
 30,836
 (5,321) 209,039
 (36,302) —
 245,754
Income tax (expense) benefit(18,052) (11,718) 2,022
 (79,434) 19,998
 —
 (87,184)
Net income (loss)29,452
 19,118
 (3,299) 129,605
 (16,304) —
 158,570
  Net loss (income) attributable to noncontrolling interests—
 —
 —
 —
 (165) —
 (165)
Net income (loss) attributable to Nelnet, Inc.$29,452
 19,118
 (3,299) 129,605
 (16,469) —
 158,405
              
Total assets as of September 30, 2016$79,418
 190,682
 90,361
 26,888,950
 687,347
 (267,147) 27,669,611




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 (except ALLO).
Loan Servicing and Systems
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Government servicing - Nelnet$35,376 37,360 70,248 76,010 
Government servicing - Great Lakes43,863 45,213 87,165 91,660 
Private education and consumer loan servicing12,816 8,196 21,364 16,805 
FFELP servicing4,703 4,917 9,373 10,531 
Software services7,374 10,651 15,827 21,969 
Outsourced services7,962 4,705 19,634 6,803 
Loan servicing and systems revenue$112,094 111,042 223,611 223,778 

Education Technology, Services, and Payment Processing
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Tuition payment plan services$26,538 22,947 56,088 54,534 
Payment processing25,008 21,168 58,046 52,910 
Education technology and services24,733 14,927 57,055 34,980 
Other423 262 771 555 
Education technology, services, and payment processing revenue$76,702 59,304 171,960 142,979 

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,
2021202020212020
Income/gains from investments, net$15,591 51,111 24,089 50,085 
ALLO preferred return2,020 0 4,342 0 
Investment advisory services1,145 922 3,842 3,724 
Income (loss) from ALLO voting membership interest investment1,094 0 (21,125)0 
Borrower late fee income744 319 1,184 3,506 
Management fee revenue701 1,914 1,814 4,544 
(Loss) income from solar investments(2,302)2,040 (3,982)(799)
Other3,928 3,821 8,153 7,348 
$22,921 60,127 18,317 68,408 

27

12.  Major Customer
TheNelnet Servicing, LLC ("Nelnet Servicing") and Great Lakes Educational Loan Services, Inc. ("Great Lakes"), subsidiaries of the Company, earnseach earn loan servicing revenue from a servicing contract with the Department that currently is set to expire on June 16, 2019.of Education (the "Department"). Revenue earned by the Company's Loan Systems andNelnet Servicing operating segment related to this contract was $38.6$35.4 million and $40.2$37.4 million for the three months ended SeptemberJune 30, 20172021 and 2016, respectively,2020, and $117.4$70.2 million and $112.5$76.0 million for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, respectively. In April 2016,Revenue earned by Great Lakes related to this contract was $43.9 million and $45.2 million for the three months ended June 30, 2021 and 2020, and $87.2 million and $91.7 million for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, Nelnet Servicing and Great Lakes service 5.6 million and 7.6 million borrowers, respectively, under their contracts with the Department.
On June 9, 2021, Nelnet Servicing and Great Lakes each received Modifications of Contract with an effective date of June 15, 2021 from the Department announcedpursuant to which the Department exercised its option to extend the student loan servicing contracts between the Department and each of Nelnet Servicing and Great Lakes from June 14, 2021 through December 14, 2021. The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, provides that the Department may extend the period of performance for the servicing contracts, as amended by the modifications, for up to two additional years to December 14, 2023.
The Department is conducting a new contract procurement process entitled Next Generation Financial Services Environment (“NextGen”) for a new framework for the Department to acquire a single servicing platform to manageof all student loans owned by the Department. On January 15, 2019, the Department issued solicitations for certain NextGen components, including the NextGen Enhanced Processing Solution (“EPS”), which was for a technology servicing system and certain processing functions the Department planned to use under NextGen to service the Department's student loan customers, and the NextGen Business Processing Operations (“BPO”), which is for the back office and call center operational functions for servicing the Department's student loan customers.

On June 24, 2020, the Department awarded and signed contracts with five other companies in connection with the BPO solicitation. On July 10, 2020, the Department cancelled the solicitation for the EPS component. In May 2016, Nelnet Servicing, a subsidiarythe Department's description of its cancellation of the Company, and Great Lakes submitted a joint responseEPS solicitation component, the Department indicated that it continues to be committed to the procurement as partgoals and vision of NextGen, and that it would be introducing a newly created joint venturenew solicitation to respondcontinue the NextGen strategy in the future. On October 28, 2020, the Department issued a new federal loan servicing solicitation for an Interim Servicing Solution ("ISS"). ISS was a follow-on to the existing contracts, which would award a full system and servicing solution to two providers. Under ISS, the selected providers would have provided the technology platform to host the Department's student loan portfolio; customer service (including contact centers) and back-office processing; digital engagement layer including borrower-facing website and mobile-applications; intake, imaging, and fulfillment; and portfolio-level operations. As the companies awarded BPO contracts are onboarded, contact center and back-office operations would have shifted from the ISS contract solicitation process and to provide services under a new contract in the event that the Department selects it for a contract award.BPO providers. The joint venture operates as a new legal entity called GreatNet. Nelnet Servicing and Great Lakes each own 50 percentConsolidated Appropriations Act, 2021 contains provisions directing certain aspects of the ownership interests of GreatNet. In addition to Nelnet Servicing, Great Lakes is currently one of four large private sector companies (referred to as Title IV Additional Servicers, or "TIVAS")NextGen process, including that has aany new federal student loan servicing environment shall provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance, and directed the suspension of awarding any ISS contract withfor at least 90 days. On January 9, 2021, the Department to provide servicing for loans owned bysuspended the Department. On May 19, 2017,ISS solicitation, and on June 25, 2021, the Department announced it had amendedcancelled the contract procurement process, which required another response by the participants, and on July 7, 2017, GreatNet submitted its response to the Department.ISS solicitation.

On August 1, 2017, the Department announced it was canceling the current procurement process for a single servicing platform and that it intends to develop a new contract procurement proposal. The Department indicated that its new approach is expected to require separate contract acquisitions for database housing, system processing, and customer account servicing.

28
On October 18, 2017, the Company entered into an agreement to purchase 100 percent of the outstanding stock of Great Lakes. See note 14, "Subsequent Events" for additional information on this business acquisition agreement.


12. Related Parties

The Company has entered into certain contractual arrangements with related parties as described in note 19 of the notes to consolidated financial statements included in the 2016 Annual Report. The following provides an update for related party transactions that occurred during the first nine months of 2017.

Transactions with Union Bank and Trust Company

During the three and nine months ended September 30, 2017, the Company purchased $2.4 million (par value) and $7.3 million (par value), respectively, of consumer loans from Union Bank and Trust Company. The Company's investment in consumer loans is included in "investments and other receivables" in the Company's consolidated balance sheet.

Transactions with Agile Sports Technologies, Inc. (doing business as "Hudl")

David Graff, who currently serves as an independent director on the Company's Board of Directors, is CEO, co-founder, and a director of Hudl. On July 7, 2017, the Company made an additional $10.4 million preferred stock investment in Hudl as part of a significantly larger equity financing by Hudl. Prior to this investment, the Company and Michael Dunlap, the Company's Executive Chairman and a principal shareholder, made separate equity investments in Hudl. The additional preferred stock investment made by the Company in July 2017 slightly increased the Company's direct and indirect equity ownership in Hudl. The Company's and Mr. Dunlap's direct and indirect equity ownership interests in Hudl consist of preferred stock with certain liquidation preferences that are considered substantive. Accordingly, for accounting purposes, the Company's and Mr. Dunlap's equity ownership interests are not considered in-substance common stock and the Company is accounting for its equity investment in Hudl under the cost method. The Company's investment in Hudl is included in "investments and other receivables" in the Company's consolidated balance sheet.



13.  Fair Value

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

 As of June 30, 2021As of December 31, 2020
 Level 1Level 2TotalLevel 1Level 2Total
Assets:   
Investments:
FFELP loan asset-backed debt securities - available-for-sale$0 371,433 371,433 0 346,502 346,502 
Private education loan asset-backed debt securities - available-for-sale0 307,293 307,293 0 0 0 
Other debt securities - available-for-sale100 2,001 2,101 103 2,002 2,105 
Equity securities (a)34,550 0 34,550 10,114 0 10,114 
Equity securities measured at net asset value (b)34,573 31,927 
Total investments34,650 680,727 749,950 10,217 348,504 390,648 
Total assets$34,650 680,727 749,950 10,217 348,504 390,648 
(a) As of June 30, 2021, $14.8 million and $19.8 million of equity securities were no transfers into or outclassified as trading and available-for-sale, respectively. All equity securities as of level 1, level 2, or level 3 forDecember 31, 2020 were classified as available-for-sale.
(b) In accordance with the nine months ended September 30, 2017.
 As of September 30, 2017 As of December 31, 2016
 Level 1 Level 2 Total Level 1 Level 2 Total
Assets:           
Investments (available-for-sale and trading):    

      
Student loan and other asset-backed securities$—
 72,427
 72,427
 —
 103,780
 103,780
Equity securities2,875
 —
 2,875
 2,694
 —
 2,694
Debt securities111
 —
 111
 119
 —
 119
Total investments (available-for-sale and trading)2,986
 72,427
 75,413
 2,813
 103,780
 106,593
Derivative instruments—
 996
 996
 —
 87,531
 87,531
Total assets$2,986
 73,423
 76,409
 2,813
 191,311
 194,124
Liabilities: 
  
  
      
Derivative instruments$—
 30,105
 30,105
 —
 77,826
 77,826
Total liabilities$—
 30,105
 30,105
 —
 77,826
 77,826

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, 2021
 Fair valueCarrying valueLevel 1Level 2Level 3
Financial assets:    
Loans receivable$20,712,564 19,352,681 0 0 20,712,564 
Accrued loan interest receivable834,989 834,989 0 834,989 0 
Cash and cash equivalents212,989 212,989 212,989 0 0 
Investments (at fair value)749,950 749,950 34,650 680,727 0 
Beneficial interest in loan securitizations123,329 105,017 0 0 123,329 
Restricted cash616,711 616,711 616,711 0 0 
Restricted cash – due to customers247,673 247,673 247,673 0 0 
Financial liabilities:  
Bonds and notes payable19,639,727 19,381,835 0 19,639,727 0 
Accrued interest payable4,922 4,922 0 4,922 0 
Bank deposits201,957 202,841 44,632 157,325 0 
Due to customers303,173 303,173 303,173 0 0 
 As of September 30, 2017
 Fair value Carrying value Level 1 Level 2 Level 3
Financial assets:         
Student loans receivable$23,635,887
 22,528,845
 —
 —
 23,635,887
Cash and cash equivalents254,391
 254,391
 254,391
 —
 —
Investments (available-for-sale)75,413
 75,413
 2,986
 72,427
 —
Notes receivable16,393
 16,393
 —
 16,393
 —
Loans receivable42,006
 40,339
 —
 —
 42,006
Restricted cash725,463
 725,463
 725,463
 —
 —
Restricted cash – due to customers105,299
 105,299
 105,299
 —
 —
Accrued interest receivable396,827
 396,827
 —
 396,827
 —
Derivative instruments996
 996
 —
 996
 —
Financial liabilities: 
  
      
Bonds and notes payable22,319,439
 22,240,279
 —
 22,319,439
 —
Accrued interest payable47,824
 47,824
 —
 47,824
 —
Due to customers105,299
 105,299
 105,299
 —
 —
Derivative instruments30,105
 30,105
 —
 30,105
 —
As of December 31, 2016 As of December 31, 2020
Fair value Carrying value Level 1 Level 2 Level 3 Fair valueCarrying valueLevel 1Level 2Level 3
Financial assets:         Financial assets:    
Student loans receivable$25,653,581
 24,903,724
 —
 —
 25,653,581
Loans receivableLoans receivable$20,454,132 19,391,045 0 0 20,454,132 
Accrued loan interest receivableAccrued loan interest receivable794,611 794,611 0 794,611 0 
Cash and cash equivalents69,654
 69,654
 69,654
 —
 —
Cash and cash equivalents121,249 121,249 121,249 0 0 
Investments (available-for-sale and trading)106,593
 106,593
 2,813
 103,780
 —
Notes receivable17,031
 17,031
 —
 17,031
 —
Investments (at fair value)Investments (at fair value)390,648 390,648 10,217 348,504 0 
Beneficial interest in loan securitizationsBeneficial interest in loan securitizations58,709 58,331 0 0 58,709 
Restricted cash980,961
 980,961
 980,961
 —
 —
Restricted cash553,175 553,175 553,175 0 0 
Restricted cash – due to customers119,702
 119,702
 119,702
 —
 —
Restricted cash – due to customers283,971 283,971 283,971 0 0 
Accrued interest receivable391,264
 391,264
 —
 391,264
 —
Derivative instruments87,531
 87,531
 —
 87,531
 —
Financial liabilities: 
  
      Financial liabilities:  
Bonds and notes payable24,220,996
 24,668,490
 —
 24,220,996
 —
Bonds and notes payable19,270,810 19,320,726 0 19,270,810 0 
Accrued interest payable45,677
 45,677
 —
 45,677
 —
Accrued interest payable28,701 28,701 0 28,701 0 
Bank depositsBank deposits54,599 54,633 48,422 6,177 0 
Due to customers119,702
 119,702
 119,702
 —
 —
Due to customers301,471 301,471 301,471 0 0 
Derivative instruments77,826
 77,826
 —
 77,826
 —
The methodologies for estimating the fair value of financial assets and liabilities are described in note 2022 of the notes to consolidated financial statements included in the 20162020 Annual Report.

29


14. Subsequent Events


On October 18, 2017, the Company entered into an agreement to purchase 100 percent of the outstanding stock of Great Lakes for a purchase price of $150.0 million in cash. The transaction is scheduled to close on January 1, 2018, subject to customary closing conditions.

On October 25, 2017, the Company completed a remarketing of its Euro Notes which reset the principal amount outstanding on the Euro Notes from €352.7 million to $450.0 million U.S. dollars and reset the interest rate from an interest rate based on a spread to the EURIBOR index to an interest rate based on the 3-month LIBOR index. As a result of the remarketing, the Company terminated its cross-currency interest rate swap associated with the Euro Notes. The pre-tax GAAP income statement impact of this remarketing and swap termination was a non-cash expense of $10.6 million that will be included in “Derivative market value and foreign currency transaction adjustments and derivative settlements, net” on the consolidated statements of income.    

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 ninesix months ended SeptemberJune 30, 20172021 and 2016.2020. 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 20162020 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 “may,“anticipate,” “should,“assume,” “believe,” “continue,” “could,” “would,” “predict,” “potential,” “continue,“estimate,” “expect,” “anticipate,“forecast,” “future,” “intend,” “scheduled,“may,” “plan,” “believe,“potential,” “estimate,“predict,” “assume,“scheduled,” “forecast,“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 20162020 Annual 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 business, educational, individual, or travel activities intended to slow the spread of 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 27 percent of the Company's revenue in 2020, 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 (under which awards of new contracts have been made to other service providers), 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 Federal Family Education LoanFFEL Program, (the "FFEL Program" or "FFELP"), 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, and consumer loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, and consumer loans, and risks from changes in levels of student loan prepayment or default rates;
•financing and liquidity risks, including risks of changes in the general interest rate environment, including the availability of any relevant money market index rate such as LIBOR or the relationship between the relevant money market index rate and the rate at which the Company's assets and liabilities are priced, and changes in the securitization and other financing markets for student loans, including adverse changes resulting from slower than expected paymentsunanticipated repayment trends on student loans in FFELPthe Company's securitization trusts that could accelerate or delay 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
30

loan interest income and fee-based revenues due to the discontinuation of new FFELP loan originations in 2010 and potential government initiatives or legislative proposals to consolidate existing FFELP loans to the Federal Direct Loan Program, or otherwise allow FFELP loans to be refinanced with Federal Direct Loan Program loans;loans, or create additional loan forgiveness or broad debt cancellation programs;


risks that the reported agreement to acquire Great Lakes Educational Loan Services, Inc. ("Great Lakes") may not be completed within the currently scheduled time frame or at all, the uncertain nature of the expected benefits from the acquisition and the ability to successfully integrate loan servicing operations and successfully maintain and increase allocated volumes of student loans serviced under existing and any future servicing contracts with the U.S. Department of Education (the "Department"), risks to the Company related to the Department's initiative to procure new contracts for federal student loan servicing, including the risk that the Company's joint venture with Great Lakes, or the Company on a post-Great Lakes acquisition basis, may not be awarded a contract, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of FFELP, Federal Direct Loan Program, and private education and consumer loans;
•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 the potential disclosure of confidential student loan borrower and other customer information;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;
the uncertain nature•risks and uncertainties of the expected benefits from the acquisitionNovember 2020 launch of Allo Communications LLC on December 31, 2015 andNelnet Bank operations, including the ability to integrate its communicationssuccessfully conduct banking operations and successfully expand its fiber network in existing service areasachieve expected market penetration;
•risks related to the expected benefits to the Company and to ALLO Communications LLC (“ALLO”) from the recapitalization and additional communitiesfunding for ALLO and managethe Company’s continuing investment in ALLO, and risks related construction risks;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, acquisitions, and other activities, such as the completed and additional planned transactions associated with the sale by Wells Fargo of its private education loan portfolio for which the Company was selected as the new servicer (including risks associated with errors that occasionally occur in converting loan servicing portfolio acquisitions to a new servicing platform), including investments and acquisitionsactivities that are intended to diversify the Company both within and outside of its historical core education-related businesses; 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 recent 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 securities laws.law.


31

OVERVIEW

The Company is a diverse company with a focus onpurpose to serve others and a vision to make customers' dreams possible by delivering education-relatedcustomer focused products and services and student loan asset management.services. The largest operating businesses engage in student loan servicing tuitionand education technology, services, and payment processing, and school information systems, andthe 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 the Company both within and outside of its historical core education-related businesses, including, but not limited to, investments in real estate, early-stage and start-up ventures.



emerging growth companies, and renewable energy.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments

The Company prepares its financial statements and presents its financial results in accordance with U.S. 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 and foreign currency transaction 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,
2021202020212020
GAAP net income attributable to Nelnet, Inc.$83,867 86,482 207,465 45,950 
Realized and unrealized derivative market value adjustments1,615 3,911 (37,194)24,513 
Tax effect (a)(388)(939)8,927 (5,883)
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$85,094 89,454 179,198 64,580 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$2.16 2.21 5.36 1.16 
Realized and unrealized derivative market value adjustments0.04 0.10 (0.96)0.62 
Tax effect (a)— (0.03)0.23 (0.15)
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$2.20 2.28 4.63 1.63 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
GAAP net income attributable to Nelnet, Inc.$46,303
 84,294
 125,065
 158,405
Realized and unrealized derivative market value adjustments(21,429) (47,093) (22,381) 1,556
Unrealized foreign currency transaction adjustments13,683
 4,831
 45,635
 13,543
Net tax effect (a)2,943
 16,060
 (8,837) (5,737)
Net income, excluding derivative market value and foreign currency transaction adjustments (b)$41,500
 58,092
 139,482
 167,767
        
Earnings per share:       
GAAP net income attributable to Nelnet, Inc.$1.11
 1.98
 2.97
 3.70
Realized and unrealized derivative market value adjustments(0.51) (1.10) (0.53) 0.03
Unrealized foreign currency transaction adjustments0.33
 0.11
 1.09
 0.32
Net tax effect (a)0.07
 0.37
 (0.21) (0.13)
Net income, excluding derivative market value and foreign currency transaction adjustments (b)$1.00
 1.36
 3.32
 3.92
(a) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.

(a)The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments and unrealized foreign currency transaction adjustments by the applicable statutory income tax rate.

(b)"Derivative market value and foreign currency transaction adjustments" include (i) 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 under new rules effective January 3, 2017) 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; and (ii) the unrealized foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.(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 and foreign currency transaction 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. In addition, the Company has incurred unrealized foreign currency transaction adjustments for periodic fluctuations in currency exchange rates between the U.S. dollar and Euro in connection with its student loan asset-backed Euro-denominated bonds with an interest rate based on a spread to the EURIBOR index.
The principal and accrued interest on these bonds were remeasured at each reporting period and recorded in the Company's consolidated balance sheet in U.S. dollars based on the foreign currency exchange rate on that date.

The CompanyCompany believes these point-in-time estimates of asset and liability values related to its derivative instruments and Euro-denominated bonds that are or were subject to interest and currency rate fluctuations are or were 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.

On October 25, 2017, the Company completed a remarketing of the Company’s bonds that were prior to that date denominated in Euros, to denominate those bonds in U.S. dollars and reset the interest rate to be based on the 3-month LIBOR index. The Company also terminated a cross-currency interest rate swap associated with those bonds. As a result, foreign currency transaction adjustments will not be incurred with respect to those bonds after October 25, 2017.

The decrease in GAAP net income decreased for the three months ended SeptemberJune 30, 2017,2021 compared withto the same period in 2016, was2020 primarily due to the recognition of a reduction$51.0 million ($38.8 million after tax) gain in the second quarter of 2020 to adjust the carrying value of the Company's investment in Hudl to reflect Hudl's May 2020 equity raise transaction value.
32

This factor was partially offset by the following items:
•The recognition of net investment gains and income of $15.6 million ($11.8 million after tax) on certain venture capital and real estate investments during the three months ended June 30, 2021;
•The recognition of a gain of $15.3 million ($11.6 million after tax) from the sale of a portfolio of consumer loans during the second quarter of 2021;
•The recognition of a net loss by ALLO of $7.1 million ($5.4 million after tax) during the three months ended June 30, 2020, prior to the deconsolidation of ALLO in December 2020;
•An increase of $6.2 million ($4.7 million after tax) in interest income from the Company's consumer loan beneficial interest investments; and
•An increase in net gainsincome in the second quarter of 2021 as compared to 2020 of $5.5 million ($4.2 million after tax) from the Education Technology, Services, and Payment Processing operating segment.
GAAP net income increased for the six months ended June 30, 2021 compared to the same period in 2020 primarily due to the following factors:
•The recognition of $97.1 million ($73.8 million after tax) of certain expenses during the first quarter of 2020 as a result of the COVID-19 pandemic, consisting of the recognition of an incremental provision for loan losses of $63.0 million ($47.9 million after tax), provision expense of $26.3 million ($20.0 million after tax) related to the Company's investment in certain consumer loan beneficial interest securitizations, and $7.8 million ($5.9 million after tax) impairment expense on certain venture capital investments;
•Net income of $37.2 million ($28.3 million after tax) related to changes in the fair values of derivative instruments and anthat do not qualify for hedge accounting in the six months ended June 30, 2021 as compared to a net loss of $24.5 million ($18.6 million after tax) in 2020;
•An increase of $26.7 million ($20.3 million after tax) in losses relatednet interest income due to foreign currency transaction adjustments caused by the re-measurement ofimproved loan spread (including derivative settlements) on the Company's Euro-denominated bonds to U.S. dollars. 


The decreaseloan portfolio in GAAP net income for the ninesix months ended SeptemberJune 30, 2017,2021 as compared withto the same period in 2016, was primarily due to2020, including an increase in fixed rate floor income;
•A decrease of $23.8 million ($18.1 million after tax) in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds (initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013), which liability the Company determined is no longer probable of being required to be paid;
•The recognition of net investment gains of $24.1 million ($18.3 million after tax) on certain venture capital and real estate investments during the six months ended June 30, 2021;
•The recognition of $16.7 million ($12.7 million after tax) negative provision for loan losses on the Company's loan portfolio during the six months ended June 30, 2021 as a result of management's estimate of certain continued improved economic conditions as compared to a provision expense (excluding the incremental provision for loan losses related to foreign currency transaction adjustments causedCOVID-19) of $16.3 million ($12.4 million after tax) during 2020;
•The recognition of a $15.3 million ($11.6 million after tax) gain from the sale of consumer loans in the second quarter of 2020;
•The recognition of a net loss by ALLO of $14.3 million ($10.9 million after tax) during the six months ended June 30, 2020. ALLO was deconsolidated in December 2020;
•An increase in net income during the six months ended June 30, 2021 as compared to 2020 of $9.2 million ($7.0 million after tax) from the Education Technology, Services, and Payment Processing operating segment;
•An increase of $5.9 million ($4.5 million after tax) in interest income from the Company's consumer loan beneficial interest investments; and
•An increase in net income during the six months ended June 30, 2021 as compared to 2020 of $3.4 million ($2.6 million after tax) from the Loan Servicing and Systems operating segment.
These factors were partially offset by the re-measurementfollowing items:
•The recognition of a $51.0 million ($38.8 million after tax) gain in the second quarter of 2020 to adjust the carrying value of the Company's Euro-denominated bondsinvestment in Hudl to U.S. dollars, partially offset by an increasereflect Hudl's May 2020 equity raise transaction value;
•The recognition of a $18.2 million ($13.8 million after tax) gain from the sale of consumer loans in the first quarter of 2020;
•The recognition of a net gainsloss of $16.8 million ($12.8 million after tax) during the six months of 2021 related to changesthe Company's investment in the fair valuesALLO; and
33

•A decrease of derivative instruments. 

In addition,$9.9 million ($7.6 million after tax) in net interest income earned on the Company’s student loan portfolio decreased in 2017 compared to 2016 due to the expected runoffdecrease in the average balance of loans during the six months ended June 30, 2021 as compared to 2020 as a result of the portfolio and lower studentamortization of the FFELP loan spread.portfolio.

Operating Results

The Company earns net interest income on its FFELP student loan portfolio, consisting primarily of FFELP loans, in its Asset Generation and Management ("AGM") operating segment. This segment is expected to generate a stable net interest margin and significant amounts of cash as the FFELP portfolio amortizes. As of SeptemberJune 30, 2017, the Company2021, AGM had a $22.5$19.3 billion student loan portfolio that management anticipates will amortize over the next approximately 2520 years and has a weighted average remaining life of 9.5 years. The Company actively works to maximize the amount and timing of cash flows generated by its FFELP portfolio and seeks to acquire additional FFELP loan portfoliosassets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.

In addition, the Company earns fee-based revenue through the following reportable operating segments:
•Loan SystemsServicing and ServicingSystems ("LSS") - referred to as Nelnet Diversified SolutionsServices ("NDS")
Tuition•Education Technology, Services, and Payment Processing and Campus Commerce ("TPP&CC"ETS&PP") - referred to as Nelnet Business SolutionsServices ("NBS")
Communications - referredFurther, the Company earned communications revenue through ALLO, formerly a majority owned subsidiary of the Company prior to a recapitalization of ALLO resulting in the deconsolidation of ALLO from the Company’s financial statements on December 21, 2020. The recapitalization of ALLO was not considered a strategic shift in the Company’s involvement with ALLO, and ALLO’s results of operations, prior to the deconsolidation, are presented by the Company as Allo Communicationsa reportable operating segment.
On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation ("Allo"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 Utah-chartered industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah. Nelnet Bank’s operations are presented by the Company as a reportable operating segment.
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. In addition, the Corporate segment includes direct incremental costs associated with Nelnet Bank prior to the UDFI’s approval for its bank charter and certain shared service and support costs incurred by the Company that will not be reflected in Nelnet Bank’s operating results through 2023 (the bank’s de novo period). Such Nelnet Bank-related costs included in the Corporate segment totaled $1.0 million (pre-tax) and $1.3 million (pre-tax) for the three months ended June 30, 2021 and 2020, respectively, and $1.7 million (pre-tax) and $2.5 million (pre-tax) for the six months ended June 30, 2021 and 2020, respectively.


34

The information below provides the operating results for each reportable operating segment and Corporate and Other Activities for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 (dollars in millions).

segopresults2017q3a01.jpg


(a)    Revenue includes intersegment revenue earned by LSS as a result of servicing loans for AGM.

(b)Total revenue includes "net interest income after provision for loan losses" and "total other income" from the Company's segment statements of income, excluding the impact from changes in fair values of derivatives and foreign currency transaction adjustments. Net income excludes changes in fair values of derivatives and foreign currency transaction adjustments, net of tax. For information regarding the exclusion of the impact from changes in fair values of derivatives and foreign currency transaction adjustments, see "GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above.

A summary of the results and financial highlights for each reportable operating segment and a summary of the Company's liquidity and capital resources follows. See "Results of Operations" for each reportable operating segment and "Liquidity and Capital Resources"(except ALLO) under this Item 2 for additional detail.

LSS (a)ETS&PPALLO (b)AGM (c)Bank (c)
Loan Systems and Servicingnni-20210630_g1.jpg

nni-20210630_g2.jpg
As of September 30, 2017,(a)    Revenue includes intersegment revenue.
(b)    On December 21, 2020, the Company was servicing $207.8 billion in FFELP, government owned, and private education and consumer loans, as compared with $193.2 billiondeconsolidated ALLO from the Company’s consolidated financial statements. See note 2 of loans as of September 30, 2016.

Revenue increasedthe notes to consolidated financial statements included in the three2020 Annual Report for a description of the transaction and nine months ended September 30, 2017 compareda summary of the deconsolidation impact. Accordingly, there are no operating results for the (former) Communications operating segment in 2021.
(c)    Total revenue includes "net interest income" and "total other income/expense" from the Company's segment statements of income, excluding from AGM the impact from changes in fair values of derivatives. Net income (loss) excludes from AGM changes in fair values of derivatives, net of tax. For information regarding the exclusion of the impact from changes in fair values of derivatives, see "GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above.





35

COVID-19
Beginning in March 2020, the COVID-19 pandemic resulted in many businesses and schools closing or reducing hours throughout the U.S. to combat the spread of COVID-19, and states and local jurisdictions implementing various containment efforts, including lockdowns on non-essential business and other business restrictions, stay-at-home orders, and shelter-in-place orders. The COVID-19 pandemic caused significant disruption to the same periodsU.S. and world economies, including significantly higher unemployment and underemployment, significantly lower interest rates, and extreme volatility in 2016 duethe U.S. and world markets. While certain COVID-19 vaccines have been approved and have become widely available for use in the U.S., the Company is unable to growthpredict how widely utilized the vaccines will be or how effective they will be in private educationpreventing the spread of COVID-19 (including variant strains of the virus which have emerged or may emerge). As a result, although the economy has improved since the pandemic began, it is still uncertain when or if economic activity and consumer loan servicing volume from existing and new clients. In addition, revenue increased for the nine months ended September 30, 2017 compared to the same period in 2016 due to an increase in revenue on the government servicing contract. The increase in revenue for the nine months ended September 30, 2017 compared to the same period in 2016 was partially offset by the loss of guaranty servicing and collection revenue on June 30, 2016.

Revenue from the government servicing contract decreased to $38.6 million for the three months ended September 30, 2017 compared to $40.2 million for the same period in 2016, and increased to $117.4 million for the nine months ended September 30, 2017, compared to $112.5 million for the same period in 2016. The decrease for the three months ended September 30, 2017 compared to the same period in 2016 was due to a decrease in application volumebusiness operations at pre-pandemic levels for the Company's administrationcustomers will resume. In addition, a significant number of the TotalCompany's employees continue to work from home, either full-time or dividing their work days between working from home and Permanent Disability Discharge (TPD) program during the third quarter of 2017. The increase for the nine months ended September 30, 2017 compared to the same period in 2016 was due to an increase in TPD and Direct Loan Consolidation program application volume, the transfer of borrowers to the Company from a not-for-profit servicer who exited the loan servicing business in August 2016, and the shiftworking in the portfolio of loans serviced to a greater portion of loans in higher paying repayment statuses. As of September 30, 2017, the Company was servicing $171.6 billion of student loans for 5.9 million borrowers under this contract.

Revenue from private education and consumer loan servicing increased to $7.6 million for the three months ended September 30, 2017 compared to $4.1 million for the same period in 2016, and increased to $20.5 million for the nine months ended September 30, 2017, compared to $10.7 million for the same period in 2016. As of September 30, 2017, the Company was servicing $10.8 billion of private education and consumer loans for approximately 478,000 borrowers,office as compared to $6.4 billion of private education and consumer loans for approximately 293,000 borrowers as of September 30, 2016.

The Company's remaining guaranty servicing and collection client exited the FFELP guaranty business at the end of their contract term on June 30, 2016. After this customer's exit from the FFELP guaranty business effective June 30, 2016, the Company has no remaining guaranty servicing and collection revenue. Guaranty servicing and collection revenue earned from this customeroffered employees flexibility in the nine months ended September 30, 2016 was $9.6 million.

amount of time they work in recently re-opened offices. The Company's government servicing contract is currently set to expire on June 16, 2019. In April 2016, the Department announced a new contract procurement process for the Department to acquire a single servicing platform to manage all student loans owned by the Department.

In May 2016, Nelnet Servicing, a subsidiaryresults of the Company, and Great Lakes submitted a joint response to the procurement as part of a newly created joint venture to respond to the contract solicitation process and to provide services under a new contractoperations discussion below should be read in the event that the Department selects it for a contract award. The joint venture operates as a new legal entity called GreatNet. Nelnet Servicing and Great Lakes each own 50 percent of the ownership interests of GreatNet. In addition to Nelnet Servicing, Great Lakes is currently one of four private sector companies (referred to as Title IV Additional Servicers, or "TIVAS") that has a student loan servicing contractconjunction with the Department to provide servicing for loans owned byCompany’s 2020 Annual Report, including the Department. On May 19, 2017, the Department announced it had amended the contract procurement process, which required another response by the participants,information included in “Risk Factors – Operations – The COVID-19 pandemic has adversely impacted our results of operations, and on July 7, 2017, GreatNet submitted its response to the Department.



On August 1, 2017, the Department announced it was canceling the current procurement process for a single servicing platform and that it intends to develop a new contract procurement proposal. The Department indicated that its new approach is expected to require separate contract acquisitions for database housing, system processing, and customer account servicing.

For financial reporting purposes, the operatingcontinue to adversely impact our results of GreatNet are included in the Company's consolidatedoperations, as well as adversely impact our businesses, financial statements. The proportionate sharecondition, and/or cash flows” and “Management’s Discussion and Analysis of membership interest (equity)Financial Condition and net lossResults of GreatNet that is attributable to Great Lakes is reflected as noncontrolling interests. During the first and third quartersOperations – Overview – Impacts of 2017, Nelnet Servicing and Great Lakes each contributed capital to GreatNet and during the first quarter of 2017 GreatNet began to incur certain operating costs.

Before tax operating margin decreased in 2017 compared to 2016 due to operating expenses incurred related to GreatNet and an increase in personnel to support the increase in volume of loans serviced for the government entering repayment status.
On October 18, 2017, the Company entered into an agreement to purchase 100 percent of the outstanding stock of Great Lakes for a purchase price of $150.0 million in cash. The transaction is scheduled to close on January 1, 2018, subject to customary closing conditions.  After the transaction settles, Great Lakes and the Company will maintain their distinct brands, servicing operations, and operational teams, and each will continue to compete for new student loan volume under its respective existing contract with the Department. Over time, shared services teams will integrate and technology systems will be leveraged to support both the Great Lakes and the Company's servicing operations. The operating results of Great Lakes will be included in the Loan Systems and Servicing operating segment.

Tuition Payment Processing and Campus Commerce

Revenue increased in the three and nine months ended September 30, 2017 compared to the same periods in 2016 due to increases in the number of managed tuition payment plans, campus commerce customer transactions and payments volume, and new school customers.

Before tax operating margin for the three months ended September 30, 2017 and 2016 was 26.1 percent and 25.4 percent, respectively, and for the nine months ended September 30, 2017 and 2016 was 30.7 percent and 30.2 percent, respectively. This segment is subject to seasonal fluctuations. Based on the timing of when revenue is recognized and when expenses are incurred, revenue and operating margin are higher in the first quarter as compared to the remainder of the year.

Communications

For the three months ended September 30, 2017 and 2016, Allo recorded net losses of $4.6 million and $2.2 million, respectively, and for the nine months ended September 30, 2017 and 2016 recorded net losses of $11.1 million and $3.3 million, respectively. The Company anticipates this operating segment will be dilutive to consolidated earnings over the next several years as it continues to build its network in Lincoln, Nebraska, due to large upfront capital expenditures and associated depreciation and upfront customer acquisition costs.

Revenue from Allo for the three months ended September 30, 2017 and 2016 was $6.8 million and $4.3 million, respectively, and for the nine months ended September 30, 2017 and 2016 revenue was $17.6 million and $13.2 million, respectively. The increase in revenue was primarily due to additional residential households served, which increased to 16,394 as of September 30, 2017 from 8,745 as of September 30, 2016.

COVID-19 Pandemic.”
For the three and nine months ended September 30, 2017, Allo's capital expenditures were $29.4 million and $78.4 million, respectively. The Company anticipates total network capital expenditures of approximately $30.0 million in the fourth quarter of 2017 and approximately $100.0 million in 2018; however, such amounts could change based on customer demand for Allo's services. The number of residential households passed, which represents the estimated number of single residence homes, apartments, and condominiums that Allo already serves and those in which Allo has the capacity to connect to its network distribution system without further material extensions to the transmission lines (but have not been connected) increased to 54,815 as of September 30, 2017 as compared to 30,962 as of December 31, 2016. The total households in current markets that Allo plans to expand its network to make services available is 137,500.
36


Asset Generation and Management

During the three months ended September 30, 2017 compared to the same period in 2016, the average balance of student loans decreased $3.2 billion, to $23.2 billion, due primarily to the amortization of the student loan portfolio, partially offset by limited portfolio acquisitions from third parties. The Company acquired $37.5 million and $142.4 million of student loans during the three and nine months ended September 30, 2017, respectively.

Core student loan spread was 1.17% for the three months ended September 30, 2017, compared to 1.26% for the same period in 2016. The decrease in core student loan spread was primarily due to a decrease in fixed rate floor income and an increase in derivative settlements paid related to the Company's 1:3 basis swaps.

Due to historically low interest rates, the Company continues to earn significant fixed rate floor income. During the three months ended September 30, 2017 and 2016, and nine months ended September 30, 2017 and 2016, the Company earned $24.6 million, $41.5 million, $84.4 million, and $131.7 million, respectively, of fixed rate floor income.

Provision for loan losses for federally insured loans was $7.0 million for the three months ended September 30, 2017. During the three months ended September 30, 2017, the Company determined an additional allowance was necessary related to a $1.6 billion (principal balance as of September 30, 2017) portfolio of federally insured loans that were purchased in 2014 and 2015, and recognized $5.0 million (pre-tax) in provision expense related to these loans.

During the third quarter of 2017, the Company incurred $2.8 million (pre-tax) in expenses related to conversion fees to transfer loans from a third-party servicer to the Company's servicing platform, which will decrease servicing costs over the remaining life of this portfolio.

Corporate and Other Activities

Whitetail Rock Capital Management, LLC, the Company's SEC-registered investment advisor subsidiary, recognized investment advisory revenue of $5.9 million, $1.5 million, $11.7 million, and $3.4 million in the three months ended September 30, 2017 and 2016 and nine months ended September 30, 2017 and 2016, respectively. These amounts include performance fees earned from the sale of managed securities or managed securities being called prior to the full contractual maturity.

Liquidity and Capital Resources

As of September 30, 2017, the Company had cash and cash equivalents of $254.4 million. In addition, the Company had a portfolio of available-for-sale investments, consisting primarily of student loan asset-backed securities, with a fair value of $75.4 million as of September 30, 2017.

For the nine months ended September 30, 2017, the Company generated $230.3 million in net cash from operating activities.

Forecasted undiscounted future cash flows from the Company's student loan portfolio financed in asset-backed securitization transactions are estimated to be approximately $1.93 billion as of September 30, 2017.

As of September 30, 2017, there was $210.0 million outstanding on the Company's $350.0 million unsecured line of credit and $140.0 million was available for future use. The unsecured line of credit has a maturity date of December 12, 2021.

During the nine months ended September 30, 2017, the Company repurchased a total of 1,363,571 shares of Class A common stock for $63.3 million ($46.44 per share), including a total of 947,794 shares of Class A common stock repurchased for $45.1 million ($47.62 per share) during the three months ended September 30, 2017. Certain of these repurchases were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.

During the first quarter of 2017, the Company initiated a cash tender offer to purchase any and all of its outstanding unsecured Hybrid Securities. The aggregate principal amount of notes tendered to the Company was $29.7 million. The Company paid $25.3 million to redeem these notes, and recognized a $4.4 million (pre-tax) gain. In addition, during the three and nine months ended September 30, 2017, the Company repurchased $14.7 million and $18.8 million of its own asset-backed debt securities and recognized gains of $0.1 million and $1.1 million, respectively.



During the nine months ended September 30, 2017, the Company paid cash dividends of $17.6 million ($0.42 per share), including $5.8 million ($0.14 per share) during the three months ended September 30, 2017. In addition, the Company's Board of Directors has declared a fourth quarter 2017 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.16 per share. The fourth quarter cash dividend will be paid on December 15, 2017 to shareholders of record at the close of business on December 1, 2017.

The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP and private education and consumer loan acquisitions; strategic acquisitions and investments; expansion of Allo's telecommunications network; 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.

CONSOLIDATED RESULTS OF OPERATIONS

An analysis of the Company's operating results for the three and ninesix months ended SeptemberJune 30, 20172021 compared to the same periods in 20162020 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.basis (except for ALLO, which was deconsolidated from the Company's consolidated financial statements in December 2020).


 Three months endedSix months ended
 June 30,June 30,
 2021202020212020Additional information
Loan interest$122,005 146,140 246,123 327,933 Decrease was due primarily to decreases in the gross yield earned on loans and the average balance of loans, partially offset by an increase in gross fixed rate floor income due to lower interest rates in 2021 as compared to 2020.
Investment interest11,578 5,743 16,563 13,141 Includes income from unrestricted interest-earning deposits and investments and funds in asset-backed securitizations. Increase was due to interest income earned on consumer loan beneficial interest investments, partially offset by a decrease in interest rates in 2021 as compared to 2020.
Total interest income133,583 151,883 262,686 341,074 
Interest expense49,991 85,248 77,764 219,366 Decrease was due primarily to a decrease in cost of funds and 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 income83,592 66,635 184,922 121,708 
Less provision (negative provision) for loan losses374 2,999 (16,674)79,297 The Company recognized negative provision in the first quarter of 2021 due to management's estimate of improved economic conditions as of March 31, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of December 31, 2020. During the first quarter of 2020, the Company recognized an incremental provision of $63.0 million as a result of an increase in expected defaults due to the COVID-19 pandemic.
Net interest income after provision for loan losses83,218 63,636 201,596 42,411 
Other income/expense:    
LSS revenue112,094 111,042 223,611 223,778 See LSS operating segment - results of operations.
ETS&PP revenue76,702 59,304 171,960 142,979 See ETS&PP operating segment - results of operations.
Communications revenue— 18,998 — 37,179 As discussed above, on December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements.
Other22,921 60,127 18,317 68,408 See table below for the components of "other."
Gain on sale of loans15,271 — 15,271 18,206 The Company sold a portfolio of consumer loans in each of May 2021 and January 2020 and recognized gains of $15.3 million and $18.2 million, respectively.
Impairment expense and provision for beneficial interests, net(500)(332)1,936 (34,419)During the first quarter of 2020, the Company recognized impairments of $26.3 million and $7.8 million related to beneficial interest in consumer loan securitization investments and several venture capital investments, respectively. Such impairments were the result of impacts from the COVID-19 pandemic. During the first quarter of 2021, the Company reversed the remaining allowance of $2.4 million related to the beneficial interest in consumer loan securitizations due to continued improved economic conditions.
Derivative settlements, net(5,374)5,821 (9,678)10,058 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, net(1,615)(3,911)37,194 (24,513)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 the six months ended June 30, 2021 and 2020 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/expense219,499 251,049 458,611 441,676 
37

 Three months Nine months  
 ended September 30, ended September 30, Additional information
 2017 2016 2017 2016  
Loan interest$191,755
 193,721
 562,451
 567,775
 Decrease due to a decrease in the average balance of student loans, a decrease in gross fixed rate floor income, and an adjustment recorded during the third quarter of 2016 to reflect the net impact on prior periods for a correction of an error regarding the Company's method of applying the interest method to amortize premiums and accrete discounts on its student loan portfolio, partially offset by an increase in the gross yield earned on the student loan portfolio.
Investment interest5,129
 2,460
 11,335
 6,674
 Includes income from unrestricted interest-earning deposits and investments and funds in asset-backed securitizations. The increase in 2017 compared to 2016 is due to an increase in interest-earning investments and an increase in interest rates.
Total interest income196,884
 196,181
 573,786
 574,449
  
Interest expense121,650
 96,386
 341,787
 280,847
 Increase due primarily to an increase in the Company's cost of funds, partially offset by a decrease in the average balance of debt outstanding.
Net interest income75,234
 99,795
 231,999
 293,602
 See table below for additional analysis.
Less provision for loan losses6,000
 6,000
 9,000
 10,500
 Represents the periodic expense of maintaining an allowance appropriate to absorb losses inherent in the portfolio of student loans. See AGM operating segment - results of operations.
Net interest income after provision for loan losses69,234
 93,795
 222,999
 283,102
  
Other income: 
  
  
  
  
LSS revenue55,950
 54,350
 167,079
 161,082
 See LSS operating segment - results of operations.
TPP&CC revenue35,450
 33,071
 113,293
 102,211
 See TPP&CC operating segment - results of operations.
Communications revenue6,751
 4,343
 17,577
 13,167
 See Communications operating segment - results of operations.
Enrollment services revenue—
 —
 —
 4,326
 On February 1, 2016, the Company sold Sparkroom LLC. After this sale, the Company no longer earns enrollment services revenue.
Other income19,756
 15,150
 44,874
 38,711
 See table below for the components of "other income."
Gain from debt repurchases116
 2,160
 5,537
 2,260
 Gains are from the Company repurchasing its own debt. During the first quarter of 2017, the Company initiated a cash tender offer to purchase any and all of its outstanding Hybrid Securities. The Company paid $25.3 million to redeem $29.7 million of these notes and recognized a gain of $4.4 million. Other gains are from the repurchase of the Company's asset-backed debt securities.
Derivative settlements, net(573) (6,261) (2,314) (18,292) 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 table below for additional analysis.
Derivative market value and foreign currency transaction adjustments, net7,746
 42,262
 (23,254) (15,099) Includes (i) 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; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.
Total other income125,196
 145,075
 322,792
 288,366
  
Operating expenses: 
  
  
  
  
Salaries and benefits74,193
 63,743
 220,684
 187,907
 Increase was due to an (i) increase in contract programming related to the GreatNet joint venture and an increase in personnel to support the increase in volume of loans serviced for the government entering repayment status and the increase in private education and consumer loan servicing volume in the LSS operating segment; (ii) increase in personnel to support the growth in revenue in the TPP&CC operating segment; and (iii) increase in personnel at Allo to support the Lincoln, Nebraska network expansion. See each individual operating segment results of operations discussion for additional information.
Depreciation and amortization10,051
 8,994
 27,687
 24,817
 Increase was due to additional depreciation expense at Allo. Since the acquisition of Allo on December 31, 2015, there has been a significant amount of property and equipment purchases to support the Lincoln, Nebraska network expansion.
Loan servicing fees7,939
 5,880
 19,584
 20,024
 Increase for the three months ended September 30, 2017 compared to the same period in 2016 due to a payment of $2.8 million in conversion fees related to a transfer of loans in August 2017 from a third-party servicer to the LSS operating segment's servicing platform. Excluding the $2.8 million conversion fee paid in the third quarter of 2017, loan servicing fees paid to third-parties decreased $0.7 million and $3.2 million for the three and nine months ended September 30, 2017 compared to the same periods in 2016 due to runoff of the Company's student loan portfolio and transfers of loans in August 2017 and June 2016 from third-party servicers to the LSS's servicing platform.
Cost to provide communication services2,632
 1,784
 6,789
 5,169
 Represents costs of services and products primarily associated with television programming costs in the Communications operating segment.
Cost to provide enrollment services—
 —
 —
 3,623
 On February 1, 2016, the Company sold Sparkroom LLC. After this sale, the Company no longer provides enrollment services.
Other expenses30,518
 26,391
 84,593
 84,174
 Increase was a result of an increase in operating expenses due to GreatNet, additional costs to support the increase in payment plans and campus commerce activity, and an increase in operating expenses at Allo to support the Lincoln, Nebraska network expansion, partially offset by the elimination of FFELP guaranty collection costs. The Company's remaining guaranty collection client exited the FFELP guaranty business at the end of their contract term on June 30, 2016, and after this date the Company has no remaining guaranty collection revenue. Accordingly, there were no collection costs for the three and nine months ended September 30, 2017, compared to no collection costs and $3.5 million for the three months and nine months ended September 30, 2016, respectively.
Total operating expenses125,333
 106,792
 359,337
 325,714
  
Cost of services:
Cost to provide education technology, services, and payment processing services21,676 15,376 48,728 38,181 Represents primarily direct costs to provide payment processing and instructional services in the ETS&PP operating segment. Increase in 2021 compared to 2020 was primarily due to additional instructional services costs.
Cost to provide communications services— 5,743 — 11,325 As discussed above, on December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements.
Total cost of services21,676 21,119 48,728 49,506 
Operating expenses:    
Salaries and benefits118,968 119,247 234,759 239,125 Decrease was due to a decrease in contact center operations and support in the LSS operating segment as a result of federal student loan payments being suspended under the CARES Act, and the deconsolidation of ALLO from the Company's consolidated financial statements. These decreases were partially offset by an increase in expenses in the ETS&PP operating segment due to an increase in headcount to support the growth of its customer base, the investment in the development of new technologies, and businesses it acquired in December 2020.
Depreciation and amortization20,236 29,393 40,419 57,041 Decrease was primarily due to the deconsolidation of ALLO from the Company's consolidated financial statements on December 21, 2020, resulting in no depreciation expense being recorded in 2021 for ALLO.
Other expenses32,587 37,052 69,286 80,439 Other expenses includes expenses necessary for operations, such as postage and distribution, consulting and professional fees, occupancy, communications, and certain information technology-related costs. Decrease was due to cost savings in the LSS segment from an increase in the adoption of electronic borrower statements and correspondence and a decrease in printing and postage while loan payments are suspended as a result of COVID-19 borrower relief efforts, and the deconsolidation of ALLO in December 2020.
Total operating expenses171,791 185,692 344,464 376,605 
Income before income taxes109,250 107,874 267,015 57,976 
Income tax expense26,237 21,264 61,098 11,131 The effective tax rate was 23.83% and 19.74% for the three months ended June 30, 2021 and 2020, respectively, and 22.75% and 19.50% for the six months ended June 30, 2021 and 2020, respectively. The Company currently expects its effective tax rate for 2021 will range between 22 and 24 percent.
Net income83,013 86,610 205,917 46,845 
Net loss (income) attributable to noncontrolling interests854 (128)1,548 (895)
Net income attributable to Nelnet, Inc.$83,867 86,482 207,465 45,950 




38
Income before income taxes69,097
 132,078
 186,454
 245,754
  
Income tax expense25,562
 47,715
 70,349
 87,184
 The effective tax rate was 35.60% and 36.15% for the three months ended September 30, 2017 and 2016, respectively, and 36.00% and 35.50% for the nine months ended September 30, 2017 and 2016, respectively. The lower effective tax rate for the nine months ended September 30, 2016 was due to the resolution of certain tax positions during the first quarter of 2016.
Net income43,535
 84,363
 116,105
 158,570
  
Net loss (income) attributable to noncontrolling interest2,768
 (69) 8,960
 (165) In 2017, represents primarily the net loss of GreatNet attributable to Great Lakes. See "Noncontrolling Interest" in note 1 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
Net income attributable to Nelnet, Inc.$46,303
 84,294
 125,065
 158,405
  
          
Additional information:         
Net income attributable to Nelnet, Inc.$46,303
 84,294
 125,065
 158,405
 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 and foreign currency transaction adjustments.
Derivative market value and foreign currency transaction adjustments, net(7,746) (42,262) 23,254
 15,099
 
Net tax effect2,943
 16,060
 (8,837) (5,737) 
Net income attributable to Nelnet, Inc., excluding derivative market value and foreign currency transaction adjustments$41,500
 58,092
 139,482
 167,767
 



The following table summarizes the components of “net interest income”"other" in "other income/expense" on the consolidated statements of income.
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Income/gains from investments, net (a)$15,591 51,111 24,089 50,085 
ALLO preferred return (b)2,020 — 4,342 — 
Investment advisory services (c)1,145 922 3,842 3,724 
Income (loss) from ALLO voting membership interest investment (d)1,094 — (21,125)— 
Borrower late fee income (e)744 319 1,184 3,506 
Management fee revenue (f)701 1,914 1,814 4,544 
(Loss) income from solar investments (g)(2,302)2,040 (3,982)(799)
Other3,928 3,821 8,153 7,348 
Other income$22,921 60,127 18,317 68,408 

(a)     During the second quarter of 2020, the Company recognized a $51.0 million (pre-tax) gain to adjust the carrying value of its investment in Hudl to reflect Hudl’s May 2020 equity raise transaction value. During the three and “derivative settlements, net.”six months ended June 30, 2021, the Company recognized (pre-tax) realized and unrealized gains from certain real estate and venture capital investments, including realized gains from the sale of certain real estate investments of $6.0 million and $11.1 million, respectively.

(b)    Represents the Company's income on its preferred membership interests in a holding company for ALLO, which was deconsolidated from the Company's financial statements in December 2020. As of June 30, 2021, the amount of preferred membership interests held by the Company was $129.7 million that earns a preferred annual return of 6.25 percent.
Derivative settlements represent(c)    The Company provides investment advisory services through Whitetail Rock Capital Management, LLC ("WRCM"), the cash paid or received duringCompany's SEC-registered investment advisor subsidiary, under various arrangements. WRCM earns annual fees of 25 basis points on the current period to settle with derivative instrument counterparties the economic effectmajority of the outstanding balance of asset-backed securities under management and up to 50 percent 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, 2021, the outstanding balance of asset-backed securities under management subject to these arrangements was $1.6 billion. In addition, WRCM earns annual management fees of five basis points for certain other investments under management.
(d)    Represents the Company's derivative instruments basedshare of income or loss on their contractual terms. Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recordedits voting membership interests 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 settlementsholding company for each applicable period should be evaluated with the Company’s net interest income as presented in the table below.  Net interest income (net of settlements on derivatives) is a non-GAAP financial measure, and 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.ALLO. See note 45 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information onregarding the accounting for and income statement impact of this investment during 2021.
(e)    Represents borrower late fees earned by the AGM operating segment. The decrease in borrower late fees for the six months ended June 30, 2021 as compared to the same period in 2020 was due to the Company suspending borrower late fees effective March 13, 2020 to provide borrowers relief as a result of the COVID-19 pandemic.
(f)    Represents revenue earned from providing administrative support and marketing services primarily to Great Lakes’ former parent company under a contract that expired in January 2021.
(g)    Represents the Company's derivative instruments, includingshare of income or loss from solar investments accounted for using the net settlement activity recognized byHLBV method of accounting. For the Company for each typemajority of derivative for the periods presentedCompany's solar investments, the HLBV method of accounting results in accelerated losses in the table under the caption "Income Statement Impact" in note 4 and in the table below. initial years of investment.
39

 Three months ended September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Variable student loan interest margin$46,683
 57,442
 139,082
 159,932
 Represents the yield the Company receives on its student loan portfolio less the cost of funding these loans. Variable student loan spread is also impacted by the amortization/accretion of loan premiums and discounts and the 1.05% per year consolidation loan rebate fee paid to the Department. In the third quarter of 2016, the Company revised its policy to correct for an error in its method of applying the interest method used to amortize premiums and accrete discounts on its student loan portfolio. During the third quarter of 2016, the Company recorded an adjustment to reflect the net impact on prior periods for the correction of this error that resulted in an $8.2 million reduction to the Company's net loan discount balance and a corresponding increase in interest income. See AGM operating segment - results of operations.
Settlements on associated derivatives(4,265) (871) (7,598) (2,355) Includes the net settlements paid/received related to the Company’s 1:3 basis swaps and cross-currency interest rate swap.
Variable student loan interest margin, net of settlements on derivatives42,418
 56,571
 131,484
 157,577
  
Fixed rate floor income24,586
 41,509
 84,382
 131,720
 The Company has a portfolio of student loans that are earning interest at a fixed borrower rate which exceeds the statutorily defined variable lender rates, generating fixed rate floor income. See Item 3, "Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk" for additional information.
Settlements on associated derivatives3,883
 (5,157) 5,877
 (15,241) Includes the net settlements paid/received related to the Company’s floor income interest rate swaps.
Fixed rate floor income, net of settlements on derivatives28,469
 36,352
 90,259
 116,479
  
Investment interest5,129
 2,460
 11,335
 6,674
  
Corporate debt interest expense(1,164) (1,616) (2,800) (4,724) Includes interest expense on the Junior Subordinated Hybrid Securities and unsecured line of credit. During the first quarter of 2017, the Company repurchased $29.7 million of its Hybrid Securities. In addition, the weighted average balance outstanding under the Company's unsecured line of credit was lower during 2017 as compared to 2016. These factors resulted in less corporate debt interest expense in 2017 as compared to 2016.
Non-portfolio related derivative settlements(191) (233) (593) (696) 
Includes the net settlements paid/received related to the Company’s hybrid debt hedges.

Net interest income (net of settlements on derivatives)$74,661
 93,534
 229,685
 275,310
  






The following table summarizes the components of "other income."
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Investment advisory fees$5,852
 1,535
 11,661
 3,367
Peterson's revenue3,402
 4,128
 9,282
 10,655
Borrower late fee income2,731
 3,158
 9,098
 9,910
Realized and unrealized gains on investments classified as available-for-sale and trading, net2,468
 506
 3,185
 1,444
Other5,303
 5,823
 11,648
 13,335
Other income$19,756
 15,150
 44,874
 38,711




LOAN SYSTEMSSERVICING AND SERVICINGSYSTEMS OPERATING SEGMENT – RESULTS OF OPERATIONS

Loan Servicing Volumes (dollars
As of
December 31,
2019		March 31,
2020		June 30,
2020		September 30,
2020		December 31,
2020		March 31,
2021		June 30,
2021
Servicing volume (dollars in millions):
Nelnet Servicing:
Government$183,790 185,477 185,315 189,932 191,678 195,875 195,030 
FFELP33,185 32,326 31,392 31,122 30,763 30,084 29,361 
Private and consumer16,033 16,364 16,223 16,267 16,226 21,397 24,758 
Great Lakes:
Government239,980 243,205 243,609 249,723 251,570 257,806 257,420 
Total$472,988 477,372 476,539 487,044 490,237 505,162 506,569 
Number of servicing borrowers:
Nelnet Servicing:
Government5,574,001 5,498,872 5,496,662 5,604,685 5,645,946 5,664,094 5,636,781 
FFELP1,478,703 1,423,286 1,370,007 1,332,908 1,300,677 1,233,461 1,198,863 
Private and consumer682,836 670,702 653,281 649,258 636,136 882,477 1,039,537 
Great Lakes:
Government7,396,657 7,344,509 7,346,691 7,542,679 7,605,984 7,637,270 7,616,270 
Total15,132,197 14,937,369 14,866,641 15,129,530 15,188,743 15,417,302 15,491,451 
Number of remote hosted borrowers:6,433,324 6,354,158 6,264,559 6,251,598 6,555,841 4,307,342 4,338,570 

Government Loan Servicing
Nelnet Servicing's and Great Lakes' current student loan servicing contracts with the Department are currently scheduled to expire on December 14, 2021. The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, provides that the Department may extend the period of performance for the servicing contracts for up to two additional years to December 14, 2023. The Department is conducting a contract procurement process for a new framework for the servicing of all student loans owned by the Department. See note 12 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information.
Nelnet Servicing and Great Lakes are two of the four large private sector companies (referred to as Title IV Additional Servicers, or "TIVAS") that have student loan servicing contracts with the Department. In addition, the Department has contracts with four not-for-profit ("NFP") entities to service loans owned by the Department. 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, and that measure the success of keeping borrowers in millions)an on-time repayment status and helping borrowers avoid default. Under the most recent publicly announced performance metrics measurements used by the Department for the quarterly periods July 1, 2020 through December 31, 2020, Great Lakes’ and Nelnet Servicing’s overall rankings among the eight current servicers for the Department were second and tied for third, respectively. Based on these results, Great Lakes’ and Nelnet Servicing’s allocation of new student loan servicing volumes for the period March 1, 2021 through August 31, 2021 are 15% and 14%, respectively. On July 8, 2021 and July 19, 2021, the Pennsylvania Higher Education Assistance Agency ("PHEAA"), one of the TIVAS, and the New Hampshire Higher Education Association Foundation Network ("Granite State"), one of the NFP servicers that utilizes Nelnet Servicing's platform to service its loans for the Department, announced that they will exit the federal student loan servicing business after their current contracts with the Department expire in December 2021. PHEAA and Granite State service approximately 8.5 million and 1.3 million borrowers, respectively, under their contracts. As of the filing of this report, the Department has not yet indicated how or when the PHEAA and Granite State servicing volume will be transitioned to other servicers for the Department.
lnservvol2017q3a02.jpgPrivate Education Loan Servicing
In December of 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 remaining borrowers converted in the second quarter of 2021.
40
Company owned $19,742 $18,886 $18,433 $18,079 $17,429 $16,962 $16,352 $15,789 $18,403
% of total 12.2% 10.7% 10.1% 9.8% 9.0% 8.7% 8.2% 7.9% 8.9%
Number of servicing borrowers:              
Government servicing: 5,915,449
 5,842,163
 5,786,545
 5,726,828
 6,009,433
 5,972,619
 5,924,099
 5,849,283
 5,906,404
FFELP servicing: 1,397,295
 1,335,538
 1,298,407
 1,296,198
 1,357,412
 1,312,192
 1,263,785
 1,218,706
 1,317,552
Private education and consumer loan servicing: 202,529
 245,737
 250,666
 267,073
 292,989
 355,096
 389,010
 454,182
 478,150
Total: 7,515,273
 7,423,438
 7,335,618
 7,290,099
 7,659,834
 7,639,907
 7,576,894
 7,522,171
 7,702,106
                   
Number of remote hosted borrowers: 1,611,654
 1,755,341
 1,796,783
 1,842,961
 2,103,989
 2,230,019
 2,305,991
 2,317,151
 2,714,588









Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2021202020212020Additional information
Net interest income$72416296Decrease was due to lower interest rates in 2021 as compared to 2020.
Loan servicing and systems revenue112,094111,042223,611223,778See table below for additional information.
Intersegment servicing revenue8,4808,53716,74819,591Represents revenue earned by the LSS operating segment as a result of servicing loans for the AGM and Nelnet Bank operating segments. Decrease in the six months ended June 30, 2021 compared to the same period in 2020 was due to the impact of borrower relief policies implemented in March 2020 in response to the COVID-19 pandemic and the expected amortization of AGM's FFELP portfolio. FFELP intersegment servicing revenue will continue to decrease as AGM's FFELP portfolio pays off.
Other income7011,9141,8144,544Represents revenue earned from providing administrative support and marketing services primarily to Great Lakes’ former parent company under a contract that expired in January 2021.
Total other income121,275121,493242,173247,913
Salaries and benefits68,38868,401134,846138,894Decrease in the six months ended June 30, 2021 compared to the same period in 2020 was due to a decrease in contact center operations and support as a result of federal student loan payments being suspended in March 2020 under the CARES Act, which suspension has been extended through at least September 30, 2021. The Company currently expects salaries and benefits will increase as it prepares for the provisions of the CARES Act to expire.
Depreciation and amortization7,9749,14216,16617,990Includes depreciation on property and equipment and amortization of intangibles from the Great Lakes acquisition in February 2018. Amortization of intangible assets for the three months ended June 30, 2021 and 2020 was $5.5 million and $5.0 million, respectively, and for the six months ended June 30, 2021 and 2020 was $11.0 million and $9.8 million, respectively. The majority of the Great Lakes' intangible assets became fully amortized at June 30, 2021. The Company expects amortization expense for the second half of 2021 to be approximately $1.4 million. Excluding amortization of intangible assets, the decrease in 2021 compared to 2020 was due to certain purchases to integrate Great Lakes and expand servicing capacity becoming fully depreciated.
Other expenses13,27313,38026,55730,870Decrease in the six months ended June 30, 2021 compared to same period in 2020 was due to cost savings as a result of the impact of the COVID-19 pandemic and the resulting CARES Act (which became effective March 13, 2020), primarily associated with the fact that while student loan payments are suspended there is a significant reduction of borrower statement printing and postage costs. The Company currently expects these costs will increase when the provisions of the CARES Act expire, currently scheduled for September 30, 2021 but subject to possible further extension. Decrease was also due to cost savings from an increase in the adoption of electronic borrower statements and correspondence.
Intersegment expenses16,13415,99633,02432,235Intersegment 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 expenses105,769106,919210,593219,989
Income before income taxes15,51314,59831,59628,220
Income tax expense(3,723)(3,504)(7,583)(6,773)Represents income tax expense at an effective tax rate of 24%.
Net income$11,79011,09424,01321,447

Before tax operating margin12.8 %12.0 %13.0 %11.4 %
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 facilitates 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 increased in 2021 as compared to 2020 primarily due to operating expenses decreasing as a result of federal student loan payments being suspended under the CARES Act as discussed above. The Company currently expects these costs will increase and operating margin to decrease from recent historical levels as it prepares for the provisions of the CARES Act to expire.

41
 Three months ended September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Net interest income$147
 37
 361
 80
 
Loan systems and servicing revenue55,950
 54,350
 167,079
 161,082
 See table below for additional analysis.
Intersegment servicing revenue10,563
 11,021
 30,839
 34,436
 Represents revenue earned by the LSS operating segment as a result of servicing loans for the AGM operating segment. Decrease was due to a decrease in loans serviced for the AGM segment during the comparable periods due to portfolio run-off. In August 2017, the AGM operating segment converted $3.1 billion of loans from a third-party servicer to the LSS operating segment's servicing platform.
Total other income66,513
 65,371
 197,918
 195,518
 
Salaries and benefits38,435
 32,505
 116,932
 96,851
 Increase due to contract programming related to GreatNet and an increase in personnel to support the increase in volume of loans serviced for the government entering repayment status and the increase in private education and consumer loan servicing volume.
Depreciation and amortization549
 557
 1,644
 1,440
 
Other expenses10,317
 8,784
 28,333
 31,635
 Increase in the three months ended September 30, 2017 compared to the same period in 2016 due to increase in operating expenses related to GreatNet. Decrease in the nine months ended September 30, 2017 compared to the same period in 2016 due primarily to the elimination of FFELP guaranty collection costs directly related to the loss of FFELP guaranty collection revenue. There were no collection costs for the three and nine months ended September 30, 2017 and three months ended September 30, 2016, and $3.5 million for the nine months ended September 30, 2016. Excluding collection costs, other expenses were $28.1 million for the nine months ended September 30, 2016. See additional information below regarding the loss of FFELP guaranty collection revenue.
Intersegment expenses, net7,774
 5,825
 23,496
 18,168
 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 expenses57,075
 47,671
 170,405
 148,094
 
Income before income taxes9,585
 17,737
 27,874
 47,504
 
Income tax expense(4,937) (6,740) (14,410) (18,052) Reflects income tax expense based on 38% of income before taxes and the net loss attributable to noncontrolling interest.
Net income4,648
 10,997
 13,464
 29,452
 
  Net loss attributable to noncontrolling interest3,408
 —
 10,050
 —
 Represents the net loss of GreatNet attributable to Great Lakes. See "Noncontrolling Interest" in note 1 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
Net income attributable to
Nelnet, Inc.
$8,056
 10,997
 23,514
 29,452
  
Before tax operating margin14.4% 27.1% 14.1% 24.3% Decrease in margin due to increases in salaries and benefits and other operating expenses as described above (including costs incurred related to GreatNet) and the loss of the guaranty business which had higher margin than the remaining businesses. Before tax operating margin, excluding the net loss attributable to noncontrolling interest (Great Lakes) for the three and nine months ended September 30, 2017 was 18.5% and 18.2%, respectively.




Loan systemsservicing and servicingsystems revenue
 Three months ended June 30,Six months ended June 30,
 2021202020212020Additional information
Government servicing - Nelnet$35,376 37,360 70,248 76,010 Represents revenue from Nelnet Servicing's Department servicing contract. Decrease in the six months ended June 30, 2021 compared to the same period in 2020 was due to a decrease in revenue from the administration of the Total and Permanent Disability (TPD) Discharge program, decrease in fees earned from the Department for originating consolidation loans, and decrease in revenue earned per borrower as a result of certain provisions included in the CARES Act suspending federal student loan payments through at least September 30, 2021. Decrease in revenue for the three months ended June 30, 2021 compared to the same period in 2020 was due to a further decrease in revenue earned per borrower (from the monthly rate of $2.19 per borrower to $2.05 per borrower) as a result of the Department issuing a change request effective October 1, 2020. The decrease in revenue in 2021 as compared to 2020 was partially offset as a result of an increase in the number of borrowers serviced. The Company expects future revenue per borrower to continue to be lower while the loan payment suspension provisions of the CARES Act remain in effect.
Government servicing - Great Lakes43,863 45,213 87,165 91,660 Represents revenue from Great Lakes' Department servicing contract. Decrease in the six months ended June 30, 2021 compared to the same period in 2020 was due to a decrease in fees earned from the Department for originating consolidation loans and decrease in revenue earned per borrower as a result of certain provisions included in the CARES Act suspending federal student loan payments through at least September 30, 2021. Decrease in revenue for the three months ended June 30, 2021 compared to the same period in 2020 was due to a further decrease in revenue earned per borrower (from the monthly rate of $2.19 per borrower to $2.05 per borrower) as a result of the Department issuing a change request effective October 1, 2020. The decrease in revenue in 2021 as compared to 2020 was partially offset as a result of an increase in the number of borrowers serviced. The Company expects future revenue per borrower to continue to be lower while the loan payment suspension provisions of the CARES Act remain in effect.
Private education and consumer loan servicing12,816 8,196 21,364 16,805 Increase for the three and six months ended June 30, 2021 compared to the same periods in 2020 was due to the former Wells Fargo 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 the three and six months ended June 30, 2021 decreased from the comparable periods in 2020. The decrease in revenue was due to a decrease in the number of legacy borrowers serviced, a decrease in origination fee revenue, and the impact of borrower relief policies implemented by private lenders in response to the COVID-19 pandemic.
FFELP servicing4,703 4,917 9,373 10,531 Decrease in 2021 compared to 2020 was due to a decrease in the number of borrowers serviced. In addition, decrease during the six months ended June 30, 2021 as compared to the same period in 2020 was due to the impact of borrower relief policies implemented by lenders in response to the COVID-19 pandemic. Over time, FFELP servicing revenue will continue to decrease as third-party customers' FFELP portfolios pay off.
Software services7,374 10,651 15,827 21,969 Decrease in 2021 compared to 2020 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, decreasing and/or expiring in January 2021. This decrease in revenue was partially offset by an increase in the number of remote hosted servicing borrowers in 2021 as compared to 2020.
Outsourced services7,962 4,705 19,634 6,803 The majority of this revenue relates to providing contact center and back office operational outsourcing activities. Increase in 2021 compared to 2020 was due to contracts with state agencies to process unemployment claims and conduct certain health tracing support activities (including vaccination registration support). Revenue from providing these services to state agencies was $5.4 million and $15.1 million during the three and six months ended June 30, 2021, and $3.1 million during the three and six months ended June 30, 2020. Outsourcing activities provided to state agencies are performed under shorter-term contracts, and thus revenue in future periods could decrease from current levels depending on agencies' needs for such services.
Loan servicing and systems revenue$112,094 111,042 223,611 223,778 


42
 Three months ended September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Government servicing$38,594
 40,159
 117,409
 112,453
 Increase for the nine months ended September 30, 2017 compared to the same period in 2016 due to an increase in application volume for the Company's administration of the Total and Permanent Disability Discharge (TPD) and Direct Loan Consolidation programs, the transfer of borrowers from a not-for-profit servicer who exited the loan servicing business in August 2016, and the shift in the portfolio of loans serviced to a greater portion of loans in higher paying repayment statuses. Decrease for the three months ended September 30, 2017 compared to the same period in 2016 due to lower TPD application volume. On August 15, 2017, the Department provided an update on its Direct Loan servicing contract with performance metrics results for the period January 1, 2017 through June 30, 2017 and new volume allocations for its student loan servicers based on these results. The new performance results had the Company ranked fourth among all TIVAS and NFP servicers, which resulted in the Company being allocated 11 percent of new student loan servicing volume for the period September 1, 2017 through February 28, 2018. The Company ranked second among the four large TIVAS, with Great Lakes ranking first.
FFELP servicing3,979
 4,541
 11,693
 11,864
 Decrease due to conversion revenue recognized during the third quarter of 2016. Over time, FFELP servicing revenue will decrease as third-party customers' FFELP portfolios run off.
Private education and consumer loan servicing7,596
 4,142
 20,535
 10,715
 Increase due to growth in loan servicing volume from existing and new clients.
FFELP guaranty servicing—
 —
 —
 2,349
 The Company’s remaining guaranty servicing client exited the FFELP guaranty business at the end of their contract term on June 30, 2016, and after this date the Company has no remaining guaranty servicing revenue.
FFELP guaranty collection—
 —
 —
 7,211
 The Company’s remaining guaranty collection client exited the FFELP guaranty business at the end of their contract term on June 30, 2016, and after this date the Company has no remaining guaranty collection revenue. The Company incurred collection costs that were directly related to guaranty collection revenue.
Software services4,430
 4,491
 13,093
 13,753
 The majority of software services revenue relates to providing hosted student loan servicing. The decrease in 2017 as compared to 2016 was due to (i) a not-for-profit servicer exiting the loan servicing business in August 2016, resulting in a transfer of its servicing volume to the Company that is included in the Company's government servicing volume; (ii) a shift in the composition of loans serviced by remote hosted customers from borrowers in higher paying repayment status to in-school status; and (iii) a decrease in revenue from other software service products. These decreases were partially offset by an increase in the number of remote hosted borrowers.
 Other1,351
 1,017
 4,349
 2,737
 Increase due to growth in contact center outsourcing activities.
Loan systems and servicing revenue$55,950
 54,350
 167,079
 161,082
  



TUITIONEDUCATION TECHNOLOGY, SERVICES, AND PAYMENT PROCESSING AND CAMPUS COMMERCE OPERATING SEGMENT – RESULTS OF OPERATIONS

ThisAs discussed further in the Company's 2020 Annual Report, this segment of the Company’s business is subject to seasonal fluctuations which correspond, or are related to, the traditional school year. Tuition management revenue is recognized over the course of the academic term, but the peak operational activities take place in summer and early fall. Higher amounts of revenue are typically recognized during the first quarter due to fees related to grant and aid applications as well as online applications and enrollment services.  The Company’s operating expenses do not follow the seasonality of the revenues. This is primarily due to generally fixed year-round personnel costs and seasonal marketing costs. 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.

On December 31, 2020, the Company acquired HigherSchool Instructional Services ("HigherSchool"), a services company that provides supplemental instructional services and educational professional development for K-12 schools in New York City, and CD2 LLC ("CD2"), a platform technology solution that includes learning management, collaboration/workflow, gamification, customer management/document storage, and employee boarding. The results of HigherSchool and CD2 are reported in the Company’s consolidated financial statements from the date of acquisition. Revenue recognized by these acquisitions during the three and six months ended June 30, 2021 was $7.1 million and $15.1 million, respectively.
Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2021202020212020Additional information
Net interest income$210 399 473 2,373 Represents interest income on tuition funds held in custody for schools. Decrease was due to a significant decrease in interest rates in March 2020. If interest rates remain at current levels, the Company anticipates this segment will earn minimal interest income in future periods.
Education technology, services, and payment processing revenue76,702 59,304 171,960 142,979 See table below for additional information.
Intersegment revenue3 3 6 14 
Total other income76,705 59,307 171,966 142,993 
Cost to provide education technology, services, and payment processing services21,676 15,376 48,728 38,181 See table below for additional information.
Salaries and benefits27,094 24,522 53,035 48,218 Increase in 2021 compared to 2020 was due to an increase in headcount to support the growth of the customer base, the investment in the development of new technologies, and the acquisitions of HigherSchool and CD2.
Depreciation and amortization2,956 2,362 6,027 4,749 Represents primarily amortization of intangible assets from prior business acquisitions. Amortization of intangible assets related to business acquisitions was $2.8 million and $2.2 million for the three months ended June 30, 2021 and 2020, respectively, and $5.7 million and $4.4 million for the six months ended June 30, 2021 and 2020, respectively. The increase in 2021 compared to 2020 was due to the acquisitions of HigherSchool and CD2.
Other expenses4,437 2,326 9,259 8,418 Other expenses decreased during the first quarter of 2021 compared to the first quarter of 2020 due to a reduction of travel expenses due to COVID-19 which was partially offset due to the acquisitions of HigherSchool and CD2. Other expenses increased during the second quarter of 2021 as compared to the second quarter of 2020 due to higher costs for consulting and professional fees due to investments in new technologies and due to the acquisitions of HigherSchool and CD2, partially offset by a decrease in costs for travel related expenses.
Intersegment expenses, net3,520 3,429 7,184 6,756 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 expenses38,007 32,639 75,505 68,141 
Income before income taxes17,232 11,691 48,206 39,044 
Income tax expense(4,136)(2,806)(11,570)(9,371)Represents income tax expense at an effective tax rate of 24%.
Net income$13,096 8,885 36,636 29,673 


43

 Three months ended September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Net interest income$5
 2
 10
 7
  
Tuition payment processing, school information, and campus commerce revenue35,450
 33,071
 113,293
 102,211
 Increase was due to an increase in the number of managed tuition payment plans, campus commerce customer transactions and payments volume, and new school customers.
Salaries and benefits17,432
 15,979
 50,986
 45,859
 Increase due to additional personnel to support the increase in payment plans and campus commerce activity and continued investments in and enhancements of payment plan and campus commerce systems and products.
Depreciation and amortization2,316
 2,929
 7,053
 7,711
  
Other expenses4,224
 4,149
 14,072
 13,122
 Increase due to additional costs to support the increase in payment plans and campus commerce activity and continued investments in and enhancements of payment plan and campus commerce systems and products.
Intersegment expenses, net2,219
 1,616
 6,430
 4,690
 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 expenses26,191
 24,673
 78,541
 71,382
  
Income before income taxes9,264
 8,400
 34,762
 30,836
  
Income tax expense(3,520) (3,192) (13,210) (11,718)  
Net income$5,744
 5,208
 21,552
 19,118
  
Before tax operating margin26.1% 25.4% 30.7% 30.2%  
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,
 2021202020212020Additional information
Tuition payment plan services$26,53822,94756,08854,534Revenue increased for the three and six months ended June 30, 2021 as compared to the same periods in 2020 as a result of a higher number of payment plans in the K-12 market. Revenue recognized during the first three months of 2021 was negatively impacted due to enrollment for institutions of higher education decreasing as a result of COVID-19.
Payment processing25,00821,16858,04652,910Payment volumes in 2021 increased as compared to 2020 in both the K-12 and higher education markets. The increase in payments volume is driven by both new customers and an increase in volumes from existing customers.
Education technology and services24,73314,92757,05534,980Increase in 2021 compared to 2020 was primarily the result of the HigherSchool and CD2 acquisitions. Additionally, revenues from the Company’s application and enrollment products, grant and aid assessments, and FACTS Education Solutions instructional and professional development services increased compared to the prior year.
Other423262771555
Education technology, services, and payment processing revenue76,70259,304171,960142,979
Cost to provide education technology, services, and payment processing services21,67615,37648,72838,181Costs 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 a driver in the increase in 2021 compared to 2020 due to the acquisition of HigherSchool and growth in the FACTS Education Solutions division.
Net revenue$55,02643,928123,232104,798
Before tax operating margin31.3 %26.6 %39.1%37.3%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 increase in before tax operating margin in 2021 as compared to 2020 was due to operating leverage.
COMMUNICATIONS OPERATING SEGMENT – RESULTS OF OPERATIONS


Summary and ComparisonProposed Community College Legislation
On April 28, 2021, President Biden announced the American Families Plan, which includes a proposal for Congress to approve funding to allow students to enroll in community college at no tuition cost. If such proposal were to become effective, this segment's revenue earned from community colleges would be adversely impacted. Community colleges represented approximately 10% of Operating Resultstotal segment revenues (and net revenue) for the year ended December 31, 2020.
44
 Three months ended September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Net interest income (expense)$(1,550) (318) (3,365) (670) Allo has a line of credit with Nelnet, Inc. (parent company). The interest expense incurred by Allo and related interest income earned by Nelnet, Inc. is eliminated for the Company's consolidated financial statements. The average outstanding balance on this line of credit for the three months ended September 30, 2017 and 2016 was $131.4 million and $35.7 million, respectively, and $98.3 million and $24.6 million for the nine months ended September 30, 2017 and 2016, respectively. The proceeds from debt were used by Allo for network capital expenditures and related expenses.
Communications revenue6,751
 4,343
 17,577
 13,167
 Communications revenue is derived primarily from the sale of pure fiber optic services to residential and business customers in Nebraska, including internet, television, and telephone services. Increase was primarily due to additional residential households served. See additional financial and operating data for Allo in the tables below.
Salaries and benefits4,099
 2,325
 10,489
 4,792
 Since the acquisition of Allo on December 31, 2015, there has been a significant increase in personnel to support the Lincoln, Nebraska network expansion. As of December 31, 2015, September 30, 2016, December 31, 2016, and September 30, 2017, Allo had 97, 279, 318, and 464 employees, respectively, including part-time employees. Allo also uses temporary employees in the normal course of business. Certain costs qualify for capitalization as Allo builds its network.
Depreciation and amortization3,145
 1,630
 7,880
 4,137
 Depreciation reflects the allocation of the costs of Allo's property and equipment over the period in which such assets are used. Since the acquisition of Allo on December 31, 2015, there has been a significant amount of property and equipment purchases to support the Lincoln, Nebraska network expansion. Amortization reflects the allocation of costs related to intangible assets recorded at fair value as of the date the Company acquired Allo over their estimated useful lives.
Cost to provide communications services2,632
 1,784
 6,789
 5,169
 Cost of services and products primarily associated with television programming costs.
Other expenses2,278
 1,545
 5,422
 3,110
 Other operating expenses includes selling, general, and administrative expenses necessary for operations, such as advertising, occupancy, professional services, construction materials, personal property taxes, and provision for losses on accounts receivable. Increase was due to expansion of the Lincoln, Nebraska network and number of households served.
Intersegment expenses, net470
 279
 1,472
 610
 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 expenses12,624
 7,563
 32,052
 17,818
  
Loss before income taxes(7,423) (3,538) (17,840) (5,321)  
Income tax benefit2,821
 1,344
 6,779
 2,022
  
Net loss$(4,602) (2,194) (11,061) (3,299) 
The Company anticipates this operating segment will be dilutive to consolidated earnings over the next several years as it continues to build its network in Lincoln, Nebraska, due to large upfront capital expenditures and associated depreciation and upfront customer acquisition costs.

          
Additional Information:         
Net loss$(4,602) (2,194) (11,061) (3,299)  
Net interest expense1,550
 318
 3,365
 670
  
Income tax benefit(2,821) (1,344) (6,779) (2,022)  
Depreciation and amortization3,145
 1,630
 7,880
 4,137
  
Earnings (loss) before interest, income taxes, depreciation, and amortization (EBITDA)$(2,728) (1,590) (6,595) (514) For additional information regarding this non-GAAP measure, see the table below.



Certain financial and operating data for Allo is summarized in the tables below.

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Residential revenue$4,691
 2,643
 11,862
 7,695
Business revenue2,003
 1,565
 5,514
 4,777
Other revenue57
 135
 201
 695
Total revenue$6,751
 4,343
 17,577
 13,167
        
Net loss$(4,602) (2,194) (11,061) (3,299)
EBITDA (a)(2,728) (1,590) (6,595) (514)
        
Capital expenditures29,417
 12,610
 78,430
 24,647
        
Revenue contribution:       
Internet46.7% 40.5 % 44.6% 38.5%
Television30.8
 32.5
 30.7
 32.2
Telephone20.6
 27.2
 22.5
 27.1
Other1.9
 (0.2) 2.2
 2.2
 100.0% 100.0 % 100.0% 100.0%

 As of September 30, 2017 As of
June 30, 2017		 As of
March 31, 2017		 
As of
December 31, 2016
 As of September 30, 2016 
As of
June 30, 2016
 As of
March 31, 2016		 
As of
December 31, 2015
Residential customer information:               
Households served16,394
 12,460
 10,524
 9,814
 8,745
 8,314
 7,909
 7,600
Households passed (b)54,815
 45,880
 34,925
 30,962
 22,977
 22,977
 21,274
 21,274
Total households in current markets (c)137,500
 137,500
 137,500
 137,500
 137,500
 137,500
 137,500
 28,874

(a)
Earnings (loss) before interest, income taxes, depreciation, and amortization ("EBITDA") is a supplemental non-GAAP performance measure that is frequently used in capital-intensive industries such as telecommunications. Allo's management uses EBITDA to compare Allo's performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure performance from period to period. EBITDA excludes interest and income taxes because these items are associated with a company's particular capitalization and tax structures. EBITDA also excludes depreciation and amortization expense because these non-cash expenses primarily reflect the impact of historical capital investments, as opposed to the cash impacts of capital expenditures made in recent periods, which may be evaluated through cash flow measures. The Company reports EBITDA for Allo because the Company believes that it provides useful additional information for investors regarding a key metric used by management to assess Allo's performance. There are limitations to using EBITDA as a performance measure, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from Allo's calculations. In addition, EBITDA should not be considered a substitute for other measures of financial performance, such as net income or any other performance measures derived in accordance with GAAP. A reconciliation of EBITDA from net income (loss) under GAAP is presented under "Summary and Comparison of Operating Results" in the table above.
(b)Represents the number of single residence homes, apartments, and condominiums that Allo already serves and those in which Allo has the capacity to connect to its network distribution system without further material extensions to the transmission lines, but have not been connected.
(c)During the first quarter of 2016, Allo announced plans to expand its network to make services available to substantially all commercial and residential premises in Lincoln, Nebraska, and currently plans to expand to additional communities in Nebraska and surrounding states over the next several years.


ASSET GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS

Student Loan Portfolio

As of SeptemberJune 30, 2017,2021, the CompanyAGM operating segment had a $22.5$19.3 billion student loan portfolio, consisting primarily of federally insured loans, that management anticipates will amortize over the next approximately 2520 years and has a weighted average remaining life of 9.5 years. For a summary of the Company’s student loan portfolio as of SeptemberJune 30, 20172021 and December 31, 2016,2020, 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:loans in the AGM operating segment:
 Three months ended June 30,Six months ended June 30,
 2021202020212020
Beginning balance$19,030,223 20,605,065 19,559,108 20,798,719 
Loan acquisitions:
Federally insured student loans697,738 460,513 762,469 809,574 
Private education loans63,413 33,303 86,451 80,908 
Consumer loans20,924 22,980 40,380 85,811 
Total loan acquisitions782,075 516,796 889,300 976,293 
Repayments, claims, capitalized interest, participations, and other, net(190,130)(1,124,686)(596,695)(1,437,265)
Consolidation loans lost to external parties(213,026)(166,778)(442,571)(383,105)
Consumer loans sold(77,417)— (77,417)(124,245)
Ending balance$19,331,725 19,830,397 19,331,725 19,830,397 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Beginning balance$23,390,300
 26,754,560
 25,103,643
 28,555,749
Loan acquisitions37,532
 52,667
 142,386
 238,595
Repayments, claims, capitalized interest, and other(446,588) (660,074) (1,643,049) (1,989,806)
Consolidation loans lost to external parties(267,331) (327,766) (889,067) (940,413)
Loans sold—
 (22) —
 (44,760)
Ending balance$22,713,913
 25,819,365
 22,713,913
 25,819,365

The Company has also purchased partial ownership in certain private education, federally insured, and consumer loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to June 30, 2021, the Company’s ownership correlates to approximately $460 million, $495 million, and $280 million of private education, federally insured, and consumer loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.
The Company's federally insured student loan acquisitions include the purchase of rehabilitated loans purchased from guaranty agencies. After a guaranty agency rehabilitates a federally insured student loan, the agency sells the rehabilitated loan to a private lender, such as the Company. On March 30, 2021, the Department suspended collections on defaulted federally insured student loans held by guaranty agencies and reduced the interest rate on such loans to zero percent, effectively suspending interest payments. The collections pause and adjusted interest rate are both retroactive to March 13, 2020, when the President first declared a national emergency for the COVID-19 pandemic. The Company currently believes these relief efforts will negatively impact the amount of rehabilitated loans the Company will have the opportunity to purchase in future periods.
Allowance for Loan Losses and Loan Delinquencies

The Company maintains an allowance that management believes is appropriate to absorb losses, net of recoveries, inherent in the portfolio of student loans, which results in periodic expense provisions for loan losses. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs.  

For a summary of the Company's activity in the allowance for loan losses for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, and a summary of the Company's student loan status and delinquency amounts as of SeptemberJune 30, 2017, 2021, December 31, 2016,2020, and SeptemberJune 30, 2016,2020, see note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

ProvisionAGM recorded a negative provision for loan losses for its federally insured loans was $7.0and consumer loan portfolios of $7.5 million and $11.4 million, respectively, for the three months ended September 30, 2017. DuringMarch 31, 2021 due to management's estimate of certain continued improved economic conditions (including the three months ended September 30, 2017,improvement in certain macroeconomic variables (unemployment rates, gross domestic product, and consumer price index) used in the Company determined an additional allowance was necessary related to a $1.6 billion (principal balanceCompany's loan loss models) as of September 30, 2017) portfolioMarch 31, 2021 in comparison to management's estimate of federally insured loans that were purchased in 2014 and 2015, and recognized $5.0 million (pre-tax) in provision expense relatedeconomic conditions used to these loans.

Provision for loan losses for federally insured loans was also $7.0 million for the three months ended September 30, 2016. During the three months ended September 30, 2016, the Company determined an additional allowance was necessary related to a $1.2 billion (principal balance as of September 30, 2016) portfolio of federally insured rehabilitation loans that were purchased in 2012 and 2013, and recognized $5.0 million (pre-tax) in provision expense related to these loans.

For loans purchased where there is evidence of credit deterioration since the origination of the loan, the Company records a credit discount, separate fromdetermine the allowance for loan losses as of December 31, 2020. AGM recorded a $1.4 million provision expense on its private education loan portfolio during the three months ended March 31, 2021 as a result of an increase of loans in forbearance, which is non-accretablewas partially offset by management's estimate of certain continued improved economic conditions as of March 31, 2021 in comparison to interest income.  Remaining discounts and premiums for purchased loans are recognized in interest income over the remaining estimated livesmanagement's estimate of the loans.  The Company continues to evaluate credit losses associated with purchased loans based on current information and changes in expectationseconomic conditions used to determine the need for any additional allowance for loan losses. losses as of December 31, 2020.

45

The CompanyDuring the second quarter of 2021, AGM recorded a negative provision for loan losses of $0.4 million and $1.0 million for its federally insured and private education loan losses for the three and nine months ended September 30, 2017 and 2016portfolios, respectively, due to better than expected credit performance.management's estimate of certain continued improved economic conditions as of June 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2021. These amounts were partially offset due to the Company establishing an initial allowance for federally insured and private education loans acquired during the period. The Company recorded a provision for loan losses of $1.7 million on its consumer loan portfolio during the second quarter of 2021 as a result of establishing an initial allowance for consumer loans acquired during the period, which was partially offset by management's estimate of certain continued improved economic conditions as of June 30, 2021 in comparison to management's estimate of economic conditions used to determine the allowance for loan losses as of March 31, 2021.

AGM's total allowance for loan losses of $144.9 million at June 30, 2021 represents reserves equal to 0.6% of AGM's federally insured loans (or 23.8% of the risk sharing component of the loans that is not covered by the federal guaranty), 5.5% of AGM's private education loans, and 11.0% of AGM's consumer loans.




Student Loan Spread Analysis

The following table analyzes the student loan spread on the Company’sAGM’s portfolio of student loans, which represents the spread between the yield earned on student 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 student loans or debt outstanding.
 Three months ended June 30,Six months ended June 30,
2021202020212020
Variable loan yield, gross2.63 %3.09 %2.67 %3.55 %
Consolidation rebate fees(0.84)(0.84)(0.85)(0.83)
Discount accretion, net of premium and deferred origination costs amortization0.01 0.02 0.01 0.02 
Variable loan yield, net1.80 2.27 1.83 2.74 
Loan cost of funds - interest expense (a)(1.04)(1.67)(1.06)(2.14)
Loan cost of funds - derivative settlements (b) (c)(0.01)0.14 (0.00 )0.09 
Variable loan spread0.75 0.74 0.77 0.69 
Fixed rate floor income, gross0.78 0.63 0.76 0.49 
Fixed rate floor income - derivative settlements (b) (d)(0.12)(0.02)(0.10)0.01 
Fixed rate floor income, net of settlements on derivatives0.66 0.61 0.66 0.50 
Core loan spread1.41 %1.35 %1.43 %1.19 %
Average balance of AGM's loans$18,958,042 20,242,054 19,226,022 20,517,906 
Average balance of AGM's debt outstanding18,656,465 20,217,401 18,905,249 20,417,086 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Variable student loan yield, gross3.62 % 2.93 % 3.44 % 2.87 %
Consolidation rebate fees(0.85) (0.83) (0.84) (0.83)
Discount accretion, net of premium and deferred origination costs amortization (a)0.07
 0.06
 0.07
 0.06
Variable student loan yield, net2.84
 2.16
 2.67
 2.10
Student loan cost of funds - interest expense(2.09) (1.44) (1.91) (1.36)
Student loan cost of funds - derivative settlements (b) (c)(0.07) (0.01) (0.04) (0.01)
Variable student loan spread0.68
 0.71
 0.72
 0.73
Fixed rate floor income, gross0.42
 0.63
 0.47
 0.64
Fixed rate floor income - derivative
settlements (b) (d)
0.07
 (0.08) 0.03
 (0.07)
Fixed rate floor income, net of settlements on derivatives0.49
 0.55
 0.50
 0.57
Core student loan spread1.17 % 1.26 % 1.22 % 1.30 %
        
Average balance of student loans$23,188,577
 26,368,507
 23,948,108
 27,305,128
Average balance of debt outstanding22,892,789
 26,235,053
 23,687,067
 27,188,069


(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 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 in the table above.
(a)In the third quarter of 2016, the Company revised its policy to correct for an error in its method of applying the interest method used to amortize premiums and accrete discounts on its student loan portfolio. Under the Company's revised policy, as of September 30, 2016, the constant prepayment rate used by the Company to amortize/accrete student loan premiums/discounts was decreased. During the third quarter of 2016, the Company recorded an adjustment to reflect the net impact on prior periods for the correction of this error that resulted in an $8.2 million reduction to the Company's net loan discount balance and a corresponding increase in interest income. The impact of this adjustment was excluded from the above table.

(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 (student loan(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 it 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 periods presented in the table under the caption "Income Statement Impact" in note 4 and in this table.

(c)Reflects the net settlements paid/received related to the Company’s 1:3 basis swaps and cross-currency interest rate swap. 

(d)Derivative settlements include the net settlements paid/received related to the Company’s floor income interest rate swaps.


A trend analysis of the Company's core and variable student loan spreads is summarized below.

slsgraph2017q3a01.jpg
(a)The interest earned on a large portion of the Company's FFELP student loan assets is indexed to the one-month LIBOR rate.  The Company funds a majority of its assets with three-month LIBOR indexed floating rate securities.  The relationship between the indices in which the Company earns interest on its loans and funds such loans has a significant impact on student loan spread.  This table (the right axis) shows the difference between the Company'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,” which provides additional detail on the Company’s FFELP student loan assets and related funding for those assets.

Variable student loan spread decreased during the three months ended September 30, 2017 as compared to the same period in 2016 due to an increase in derivative settlements paid related to the Company's 1:3 basis swaps.

The primary difference between variable student loan spread and core student loan spread is fixed rate floor income.  A summary of fixed rate floor income and its contribution to core student loan spread follows:
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Fixed rate floor income, gross$24,586
 41,509
 84,382
 131,720
Derivative settlements (a)3,883
��(5,157) 5,877
 (15,241)
Fixed rate floor income, net$28,469
 36,352
 90,259
 116,479
Fixed rate floor income contribution to spread, net0.49% 0.55% 0.50% 0.57%
(a)Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.

The high levels of fixed rate floor income earned during 2017 and 2016 are due to historically low interest rates.  If interest rates remain low, the Company anticipates continuing to earn significant fixed rate floor income in future periods. The decrease in gross fixed rate floor income for the three and nine months ended September 30, 2017 compared to the same periods in 2016 was due to an increase in interest rates. See Item 3, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk,” 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.


Summary and Comparison of Operating Results
 Three months ended September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Net interest income after provision for loan losses$67,894
 93,318
 218,763
 281,861
 See table below for additional analysis.
Other income2,753
 4,265
 9,152
 12,362
 The primary component of other income is borrower late fees, which were $2.7 million and $3.2 million for the three months ended September 30, 2017 and 2016, respectively, and $9.1 million and $9.9 million for the nine months ended September 30, 2017 and 2016, respectively.
Gain from debt repurchases116
 2,160
 1,097
 2,260
 Gains were from the Company repurchasing its own asset-backed debt securities.
Derivative settlements, net(382) (6,028) (1,721) (17,596) 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 and foreign currency transaction adjustments, net7,702
 42,546
 (23,121) (8,763) Includes (i) 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; and (ii) the unrealized foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.
Total other income (expense)10,189
 42,943
 (14,593) (11,737)  
Salaries and benefits392
 486
 1,156
 1,504
  
Loan servicing fees7,939
 5,880
 19,584
 20,024
 Increase for the three months ended September 30, 2017 compared to the same period in 2016 due to a payment of $2.8 million in conversion fees related to a transfer of loans in August 2017 from a third-party servicer to the LSS operating segment's servicing platform. Excluding the $2.8 million conversion fee paid in the third quarter of 2017, loan servicing fees paid to third parties decreased $0.7 million and $3.2 million for the three and nine months ended September 30, 2017 compared to the same periods in 2016 due to runoff of the Company's student loan portfolio and transfers of loans in August 2017 and June 2016 from third-party servicers to the LSS operating segment's servicing platform.
Other expenses1,451
 1,769
 4,269
 4,766
  
Intersegment expenses, net10,659
 11,146
 31,114
 34,791
 Amounts include fees paid to the LSS operating segment for the servicing of the Company’s student loan portfolio. These amounts exceed the actual cost of servicing the loans. Decrease due to a decrease in loans serviced by the LSS operating segment during the comparable periods due to portfolio runoff. In addition, 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 expenses20,441
 19,281
 56,123
 61,085
 Total operating expenses were 35 basis points and 29 basis points of the average balance of student loans for the three months ended September 30, 2017 and 2016, respectively, and 31 basis points and 30 basis points for the nine months ended September 30, 2017 and 2016, respectively. When excluding the $2.8 million conversion fees paid in August 2017 to a third-party to transfer loans to the LSS operating segment's servicing platform, total operating expenses were 30, 29, 30 and 30 basis points for the three months ended September 30, 2017 and 2016 and nine months ended September 30, 2017 and 2016, respectively.
Income before income taxes57,642
 116,980
 148,047
 209,039
  
Income tax expense(21,904) (44,571) (56,258) (79,434)  
Net income$35,738
 72,409
 91,789
 129,605
  
          


Additional information:         
Net income$35,738
 72,409
 91,789
 129,605
  
Derivative market value and foreign currency transaction adjustments, net(7,702) (42,546) 23,121
 8,763
 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 and foreign currency transaction adjustments. Net income, excluding derivative market value and foreign currency transaction adjustments, decreased in 2017 as compared to 2016 due to (i) a decrease in the Company's student loan portfolio, (ii) a decrease in core student loan spread, (iii) a $2.8 million ($1.7 million after tax) expense related to conversion fees paid in August 2017 to a third-party to transfer loans to the LSS operating segment's servicing platform, and (iv) an increase in interest income of $8.2 million ($5.1 million after tax) recognized in the third quarter of 2016 related to a correction of an error as further described in note 2 of the notes to consolidated financial statements included under Part I, Item 1 of this report.
Net tax effect2,927
 16,167
 (8,786) (3,330) 
Net income, excluding derivative market value and foreign currency transaction adjustments$30,963
 46,030
 106,124
 135,038
 


Net interest income, 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 September 30, Nine months ended September 30, Additional information
 2017 2016 2017 2016  
Variable interest income, gross$211,785
 194,877
 616,474
 585,299
 Increase due to an increase in the gross yield earned on student loans, partially offset by a decrease in the average balance of student loans.
Consolidation rebate fees(48,986) (55,131) (151,469) (170,352) Decrease due to a decrease in the average consolidation loan balance.
Discount accretion, net of premium and deferred origination costs amortization4,371
 12,466
 13,064
 21,109
 Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years. In the third quarter of 2016, the Company revised its policy to correct for an error in its method of applying the interest method used to amortize premiums and accrete discounts on its student loan portfolio. Under the Company's revised policy, as of September 30, 2016, the constant prepayment rate used by the Company to amortize/accrete student loan premiums/discounts was decreased. During the third quarter of 2016, the Company recorded an adjustment to reflect the net impact on prior periods for the correction of this error that resulted in an $8.2 million reduction to the Company's net loan discount balance and a corresponding increase in interest income.
Variable interest income, net167,170
 152,212
 478,069
 436,056
  
Interest on bonds and notes payable(120,487) (94,770) (338,987) (276,124) Increase due to an increase in cost of funds, partially offset by a decrease in the average balance of debt outstanding.
Derivative settlements, net (a)(4,265) (871) (7,598) (2,355) Derivative settlements include the net settlements paid/received related to the Company’s 1:3 basis swaps and cross-currency interest rate swap.
Variable student loan interest margin, net of settlements on derivatives (a)42,418
 56,571
 131,484
 157,577
  
Fixed rate floor income, gross24,586
 41,509
 84,382
 131,720
 The high levels of fixed rate floor income earned are due to historically low interest rates. Fixed rate floor income has decreased due to the rising interest rate environment. Derivative settlements include the net settlements paid/received related to the Company’s floor income interest rate swaps.
Derivative settlements, net (a)3,883
 (5,157) 5,877
 (15,241) Derivative settlements include the settlements paid/received related to the Company's floor income interest rate swaps.
Fixed rate floor income, net of settlements on derivatives28,469
 36,352
 90,259
 116,479
  
Core student loan interest income70,887
 92,923
 221,743
 274,056
  
Investment interest3,213
 980
 6,210
 2,614
 Increase due to a higher balance of interest-earning investments and an increase in interest rates.
Intercompany interest(588) (613) (1,911) (1,905)  
Provision for loan losses - federally insured loans(7,000) (7,000) (11,000) (11,000) See "Allowance for Loan Losses and Loan Delinquencies" included above under "Asset Generation and Management Operating Segment - Results of Operations."
Negative provision for loan losses - private education loans1,000
 1,000
 2,000
 500
 
Net interest income after provision for loan losses (net of settlements on derivatives) (a)$67,512
 87,290
 217,042
 264,265
  

(a)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 on 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 as presented in this table. Core student loan interest income and net interest income after provision for loan losses (net of settlements on derivatives) are non-GAAP financial measures, and 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
46

Company for each type of derivative for the 2021 and 2020 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,
2021202020212020
Core loan spread1.41 %1.35 %1.43 %1.19 %
Derivative settlements (1:3 basis swaps)0.01 (0.14)0.00 (0.09)
Derivative settlements (fixed rate floor income)0.12 0.02 0.10 (0.01)
Loan spread1.54 %1.23 %1.53 %1.09 %

(c)    Derivative settlements consist of net settlements (paid) received related to the Company’s 1:3 basis swaps.
(d)    Derivative settlements consist of net settlements (paid) received related to the Company’s floor income interest rate swaps.
A trend analysis of AGM's core and variable loan spreads is summarized below.
nni-20210630_g3.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, 2021 compared to the same periods in 2020 due to a narrowing of the basis between the asset and debt indices in which the Company earns interest on its loans and funds such loans (as reflected in the table above). The significant widening during the first and second quarters of 2020 was the result of a significant decrease in interest rates during March 2020 and the first half of the second quarter of 2020. In a declining interest rate environment, student loan spread is compressed, 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 the AGM’s FFELP student loan assets and related funding for those assets.
47

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,
2021202020212020
Fixed rate floor income, gross$36,639 31,866 72,178 50,625 
Derivative settlements (a)(5,153)(1,308)(9,438)816 
Fixed rate floor income, net$31,486 30,558 62,740 51,441 
Fixed rate floor income contribution to spread, net0.66 %0.61 %0.66 %0.50 %

(a)    Derivative settlements consist of net settlements (paid) received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
The increase in gross fixed rate floor income for the three and six months ended June 30, 2021 compared to the same periods in 2020 was due to lower interest rates in 2021 as compared to 2020. The Company has a portfolio of derivative instruments in which the Company pays a fixed rate and receives a floating rate to economically hedge a portion of loans earning fixed rate floor income. 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
On March 5, 2021, the ICE Benchmark Administration Limited (the “IBA”), which administers LIBOR, published the results of a consultation confirming its intention to cease the publication of LIBOR (i) after June 30, 2023 in the case of U.S. Dollar LIBOR rates for one-month, three-month, and certain other tenors, and (ii) after December 31, 2021 in all other cases. Also on March 5, 2021, the United Kingdom’s Financial Conduct Authority, which regulates the IBA, announced that it does not intend to sustain LIBOR by requiring panel banks to continue providing quotations of LIBOR beyond the dates for which they have notified their departure from IBA’s LIBOR quotation scheme, or to require IBA to publish LIBOR beyond such dates. As a result, immediately after the announced LIBOR discontinuation dates specified above, respectively, LIBOR will no longer be representative of the underlying market and economic reality that the rates are intended to measure. As of June 30, 2021, the interest earned on a principal amount of $17.7 billion of AGM's FFELP student loan asset portfolio was indexed to one-month LIBOR, and the interest paid on a principal amount of $17.0 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. New LIBOR contracts are generally not expected to be entered into after December 31, 2021. 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, 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 2020 Annual Report for additional information.
Summary and Comparison of Operating Results
 Three months ended June 30,Six months ended June 30,
 2021202020212020Additional information
Net interest income after provision for loan losses$80,990 63,095 197,912 39,475 See table below for additional analysis.
Other income2,316 732 2,760 3,947 During the second quarter of 2021, the Company recognized income of $1.5 million on certain investments. Excluding income from these investments, other income consists primarily of borrower late fees. Borrower late fees for the three months ended June 30, 2021 and 2020 was $0.7 million and $0.3 million, respectively, and for the six months ended June 30, 2021 and 2020 was $1.2 million and $3.5 million, respectively. The decrease in borrower late fees for the six months ended June 30, 2021 as compared to the same period in 2020 was due to the Company suspending borrower late fees effective March 13, 2020 to provide borrowers relief as a result of the COVID-19 pandemic.
Gain on sale of loans15,271 — 15,271 18,206 The Company sold $77.4 million (par value) and $124.2 million (par value) of consumer loans in May 2021 and January 2020, respectively, and recognized gains of $15.3 million and $18.2 million, respectively.
Impairment expense and provision for beneficial interests, net— — 2,436 (26,303)In March 2020, the Company recognized a provision expense of $26.3 million related to its beneficial interest in consumer loan securitization investments as a result of the expected impacts of the COVID-19 pandemic. During the first quarter of 2021, $2.4 million of such provision was reversed due to improved economic conditions.
48

Derivative settlements, net(5,374)5,821 (9,678)10,058 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, net(1,615)(3,911)37,194 (24,513)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 the six months ended June 30, 2021 and 2020 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/expense10,598 2,642 47,983 (18,605)
Salaries and benefits556 421 1,051 863 
Other expenses3,567 4,863 7,344 8,581 The primary component of other expenses is servicing fees paid to third parties.
Intersegment expenses8,549 9,055 16,976 20,971 Amounts include fees paid to the LSS operating segment for the servicing of the AGM’s loan portfolio. These amounts exceed the actual cost of servicing the loans. The decrease in servicing fees for the six months ended June 30, 2021 as compared to the same period in 2020 was due to the expected amortization of AGM's FFELP portfolio and a decrease in certain servicing activities due to borrower relief initiatives and policies as a result of the COVID-19 pandemic. The decrease in servicing fees for the three months ended June 30, 2021 as compared to the same period in 2020 was due to 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 expenses12,672 14,339 25,371 30,415 Total operating expenses were 27 basis points and 28 basis points of the average balance of loans for the three months ended June 30, 2021 and 2020, respectively, and 26 basis points and 30 basis points for the six months ended June 30, 2021 and 2020, respectively. The decrease for the six months ended June 30, 2021 as compared to the same period in 2020 was due to a decrease in certain servicing activities beginning in March 2020 due to borrower relief initiatives and policies as a result of the COVID-19 pandemic.
Income (loss) before income taxes78,916 51,398 220,524 (9,545)


Income tax (expense) benefit(18,940)(12,336)(52,926)2,291 Represents income tax (expense) benefit at an effective tax rate of 24%.
Net income (loss)$59,976 39,062 167,598 (7,254)The increase in GAAP net income for the three months ended June 30, 2021 as compared to the same period in 2020 was due to (i) an increase in core loan spread; (ii) a gain on sale of consumer loans during the second quarter of 2021; and (iii) an increase in interest income from consumer loan beneficial interests. These items were partially offset by a decrease in the average balance of loans in 2021 as compared to 2020. The increase in GAAP net income for the six months ended June 30, 2021 as compared to the same period in 2020 was due to (i) an increase in core loan spread; (ii) a decrease in interest expense in 2021 as a result of reversing a historical accrued interest liability on certain bonds; (iii) the recognition of a negative provision in the first quarter of 2021 as compared to provision for loan losses in 2020 as a result of the COVID-19 pandemic; (iv) provision expense recognized during the first quarter of 2020 related to beneficial interest investments in consumer loans as a result of the expected impacts of the COVID-19 pandemic; and (v) an increase in interest income from consumer loan beneficial interests. These items were partially offset due to (i) a decrease in the average balance of loans in 2021 as compared to 2020; and (ii) a decrease in servicing costs beginning in March 2020 due to borrower relief initiatives and policies as a result of the COVID-19 pandemic.
Additional information:
Net income (loss)$59,976 39,062 167,598 (7,254)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, net1,615 3,911 (37,194)24,513 
Tax effect(388)(939)8,927 (5,883)
Net income, excluding derivative market value adjustments$61,203 42,034 139,331 11,376 
49

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,
 2021202020212020Additional information
Variable interest income, gross$124,267 155,646 253,436 361,156 Decrease in 2021 compared to 2020 was due to a decrease in the gross yield earned on loans and a decrease in the average balance of loans.
Consolidation rebate fees(40,250)(42,387)(81,323)(85,524)Decrease in 2021 compared to 2020 was due to a decrease in the average consolidation loan balance.
Discount accretion, net of
     premium and deferred
     origination costs amortization		427 1,015 546 1,675 Net discount accretion is due to the Company's purchases of loans at a net discount over the last several years.
Variable interest income, net84,444 114,274 172,659 277,307 
Interest on bonds and notes
     payable		(48,542)(84,141)(75,312)(216,808)Decrease in 2021 compared to 2020 was due to a decrease in cost of funds and 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)(221)7,129 (240)9,242 Derivative settlements include the net settlements (paid) received related to the Company’s 1:3 basis swaps.
Variable loan interest margin,
     net of settlements on
     derivatives (a)		35,681 37,262 97,107 69,741 
Fixed rate floor income, gross36,639 31,866 72,178 50,625 Fixed rate floor income increased in 2021 compared to 2020 due to lower interest rates in 2021 as compared to 2020.
Derivative settlements, net (a)(5,153)(1,308)(9,438)816 Derivative settlements include the settlements (paid) received related to the Company's floor income interest rate swaps. The increase in net settlements paid in 2021 as compared to the same periods in 2020 was due to a decrease in interest rates.
Fixed rate floor income, net of settlements on derivatives31,486 30,558 62,740 51,441 
Core loan interest income (a)67,167 67,820 159,847 121,182 
Investment interest8,882 4,443 11,530 8,577 Increase in 2021 compared to 2020 was due to an increase in interest income on the Company's consumer loan beneficial interest investments, partially offset by lower interest rates and lower weighted average cash and restricted cash balances in 2021 as compared to 2020.
Intercompany interest(128)(348)(308)(929)Decrease in 2021 compared to 2020 was due to lower interest rates and lower weighted average debt outstanding in 2021 as compared to 2020.
Negative provision (provision) for loan losses - federally insured loans397 1,950 7,880 (37,373)See "Allowance for Loan Losses and Loan Delinquencies" included above under "Asset Generation and Management Operating Segment - Results of Operations."
Negative provision (provision) for loan losses - private education loans1,004 (2,322)(427)(12,121)
(Provision) negative provision for loan losses - consumer loans(1,706)(2,627)9,712 (29,803)
Net interest income after provision for loan losses (net of settlements on derivatives) (a)$75,616 68,916 188,234 49,533 Increase for the three months ended June 30, 2021 as compared to the same period in 2020 was due to (i) an increase in core loan spread; and (ii) an increase in interest income on the Company's consumer loan beneficial interest investments. These items were partially offset by a decrease in the average balance of loans. Increase for the six months ended June 30, 2021 as compared to the same period in 2020 was due to (i) an increase in core loan spread; (ii) a decrease in interest expense in 2021 as a result of reversing a historical accrued interest liability on certain bonds; (iii) an increase in interest income on the Company's consumer loan beneficial interest investments; and (iv) the recognition of a negative provision for loan losses in 2021 as compared to provision for loan losses in 2020 as a result of the COVID-19 pandemic. These items were partially offset by a decrease in the average balance of loans.
(a)    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 on 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 as presented in this table. Core loan interest income and net interest income after provision for loan losses (net of settlements on derivatives) are non-GAAP financial measures, and 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 referred to in the "Additional information" column of this table, for the 2021 and 2020 periods presented in the table under the caption "Income"Consolidated Financial Statement Impact"Impact Related to Derivatives - Statements of Income" in note 4 and in this table.

50

NELNET BANK OPERATING SEGMENT – RESULTS OF OPERATIONS
Loan Portfolio
As of June 30, 2021, Nelnet Bank had a $190.6 million loan portfolio, consisting of $97.2 million of FFELP loans and $93.4 million of private education loans.
As of June 30, 2021, Nelnet Bank's allowance for loan losses on its portfolio was $0.8 million, which represents reserves equal to 0.3% of Nelnet Bank's federally insured loans (or 10.0% of the risk sharing component of the loans that is not covered by the federal guaranty), and 0.6% of Nelnet Bank's private education loans. There were no charge offs recognized by the bank during the three and six months ended June 30, 2021.
The following table sets forth the activity in Nelnet Bank's loan portfolio:
 Three months endedSix months ended
June 30, 2021June 30, 2021
Beginning balance:$79,231 17,543 
Federally insured student loan acquisitions99,973 99,973 
Private education loan originations21,246 86,155 
Repayments(9,004)(10,998)
Sales to AGM segment(875)(2,102)
Ending balance:$190,571 190,571 

Deposits
As of June 30, 2021, Nelnet Bank had $299.4 million of deposits. All of Nelnet Bank’s deposits are interest-bearing deposits and consist of brokered certificates of deposit (CDs), intercompany savings deposits, and retail and other savings deposits and CDs. The intercompany deposits are deposits from Nelnet, Inc. (Parent Company) and its subsidiaries and include a pledged deposit of $40.0 million from Nelnet, Inc. (Parent Company), as required under the Capital and Liquidity Maintenance Agreement with the FDIC, deposits required for intercompany transactions, operating deposits, and Nelnet Business Services custodial deposits consisting of tuition payments collected which are subsequently remitted to the appropriate school. Retail and other deposits include savings deposits from Educational 529 College Savings and Health Savings plans and commercial and institutional CDs. Union Bank and Trust Company ("Union Bank"), a related party, is the program manager for the College Savings plans.
Average Balance Sheet
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities.
Three months endedSix months ended
June 30, 2021June 30, 2021
BalanceRateBalanceRate
Average assets
Federally insured student loans$71,440 1.35 %35,917 1.35 %
Private education loans86,497 3.16 65,240 3.23 
Cash and investments223,322 2.01 219,489 1.96 
Total interest-earning assets381,259 2.15 %320,646 2.15 %
Non-interest-earning assets9,237 7,896 
Total assets$390,496 328,542 
Average liabilities and equity
Brokered deposits72,324 0.84 %37,846 0.83 %
Intercompany deposits93,434 0.25 75,161 0.26 
Retail and other deposits117,770 0.62 109,661 0.61 
Total interest-bearing liabilities283,528 0.55 %222,668 0.53 %
Non-interest-bearing liabilities4,297 3,587 
Equity102,671 102,287 
Total liabilities and equity$390,496 328,542 

51

Regulatory Capital Requirements
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, 2021 with a leverage ratio of 26.4%. 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.
Summary of Operating Results
On November 2, 2020, Nelnet Bank obtained final approval for federal deposit insurance from the FDIC and for a bank charter from the UDFI and Nelnet Bank launched operations. Nelnet Bank's operations are presented by the Company as a reportable operating segment. Costs associated with Nelnet Bank prior to November 2, 2020 are included in the Corporate operating segment. In addition, certain shared service and support costs incurred by the Company are not and will not be reflected as part of the Nelnet Bank operating segment through 2023 (the bank's de novo period). The shared service and support costs incurred by the Company related to Nelnet Bank and not reflected in the bank's operating segment were $1.0 million and $1.7 million for the three and six months ended June 30, 2021, respectively.
 Three months endedSix months ended
 June 30, 2021June 30, 2021Additional information
Total interest income$2,041 3,418 Represents interest earned on Nelnet Bank's FFELP and private education student loans, cash, and investments.
Interest expense392 586 Represents interest expense on deposits.
Net interest income1,649 2,832 
Less: Provision for loan losses69 491 Represents provision expense during the period, primarily related to loans originated or purchased during the current period.
Net interest income after provision for loan losses1,580 2,341 
Other income4 26 
Salaries and benefits1,578 3,065 Represents salaries and benefits of Nelnet Bank associates and third-party contract labor.
Other expenses237 781 Represents various expenses such as postage, consulting and professional fees, Nelnet Bank director fees, occupancy, certain information technology-related costs, insurance, marketing, and other operating expenses.
Intersegment expenses37 40 Represents primarily servicing costs paid to the LSS operating segment.
Total operating expenses1,852 3,886 
Loss before income taxes(268)(1,519)
Income tax benefit64 351 Represents income tax benefit at an effective tax rate of 24.1% and 23.1% for the three and six months ended June 30, 2021, respectively.
Net loss$(204)(1,168)



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LIQUIDITY AND CAPITAL RESOURCES

The Company’s Loan Servicing and Systems, and ServicingEducation Technology, Services, and Tuition Payment Processing and Campus Commerce 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 following 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 capital needs to expand Allo's communications network in the Company's Communications operating segment.

other initiatives to pursue additional strategic investments.
Sources of Liquidity and Available Capacity

The Company has historically generated positive cash flow from operations. For the nine months ended September 30, 2017 and the year ended December 31, 2016,2020 and the Company'ssix months ended June 30, 2021, the Company’s net cash provided fromby operating activities was $230.3$212.8 million and $325.3$187.6 million, respectively.

As of SeptemberJune 30, 2017,2021, the Company had cash and cash equivalents of $254.4$213.0 million. Cash held by Nelnet Bank is generally not available for Company activities outside of Nelnet Bank. Excluding Nelnet Bank, cash and cash equivalents as of June 30, 2021 was $190.1 million.
The Company alsoinvests excess cash in federally insured asset-backed securities, and the cash proceeds from the sale of these securities could be used for operating and/or other investing opportunities. The Company had a portfolio of available-for-sale investments, consisting primarily offederally insured student loan asset-backed securities (classified as available-for-sale) with a fair value of $75.4$371.4 million as of SeptemberJune 30, 2017.2021. Investments held by Nelnet Bank are generally not available for Company activities outside of Nelnet Bank. Excluding Nelnet Bank, the fair value of federally insured student loan asset-backed securities as of June 30, 2021 was $183.4 million. As of June 30, 2021, the Company had participated $132.1 million of its non-Nelnet Bank federally insured student loan asset-backed securities, and such participation is reflected as debt on the Company's consolidated balance sheet.

The Company also has a $350.0$455.0 million unsecured line of credit that matures on December 12, 2021.16, 2024. As of SeptemberJune 30, 2017,2021, there was $210.0$85.0 million outstanding on the unsecured line of credit and $140.0$370.0 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 $550.0 million, subject to certain conditions. In addition, the Company has a $22.0 million secured line of credit agreement that matures on May 30, 2022. As of June 30, 2021, the secured line of credit had $5.0 million outstanding and $17.0 million was available for future use.
In addition, the Company has retained certain of its own asset-backed securities upon their initial issuance or repurchased certain of its own asset-backed securities (bonds and notes payable) in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. As of SeptemberJune 30, 2017,2021, the Company holds $81.1$42.6 million (par value) of its own asset-backed securities.

The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP, private education, and consumer loan acquisitions;acquisitions (or investment interests therein); strategic acquisitions and investments; expansion of Allo's telecommunications network; 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.

On October 18, 2017, the Company entered into an agreement to purchase 100 percent of the outstanding stock of Great Lakes for a purchase price of $150.0 million in cash. The transaction is scheduled to close on January 1, 2018, subject to customary closing conditions. The Company plans to finance the acquisition with existing cash and by using its $350.0 million unsecured line of credit.



Cash Flows

During the ninesix months ended SeptemberJune 30, 2017,2021, the Company generated $230.3$187.6 million fromin operating activities, compared to $258.8using $105.6 million for the same period in 2016.2020. The decreaseincrease in such cash provided byflows from operating activities reflects the decreasewas due to:
•An increase in net income;
•Adjustments to net income for the impact of loss from investments during the six months ended June 30, 2021, as compared to a gain for the same period in 2020, and the non-cash change in deferred income taxes;
•Proceeds from the Company's clearinghouse for margin payments on derivatives for the six months ended June 30, 2021 compared to payments to the clearinghouse in 2020; and
•The impact of changes to the due to customers liability account, other liabilities, accrued interest receivable, and other assets during the six months ended June 30, 2021 as compared to the same period in the2020.
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These factors were partially offset by:
•The adjustments to net income fromfor derivative market value adjustments andadjustments;
•Adjustments to net income for the impact of the non-cash provision for loan losses, beneficial interests, and impairment charges (a significant portion of which during the six months ended June 30, 2020 were related to COVID-19), and depreciation and amortization;
•Purchases of equity securities classified as trading; and
•The impact of changes into accounts receivable and accrued interest payable during the ninesix months ended SeptemberJune 30, 20172021 as compared to the same period in 2016. These factors were partially offset by an increase in the adjustments to net income for depreciation and amortization, changes in adjustments for foreign currency transaction adjustments, the impact of changes in other liabilities, and net proceeds received in 2017 from the Company's clearinghouse to settle variation margin.

2020.
The primary items included in the statement of cash flows for investing activities are the purchase and repayment of student loans. The primary items included in financing activities are the proceeds from the issuance of and payments on bonds and notes payable used to fund student loans. Cash used in investing activities and provided by financing activities for the six months ended June 30, 2021 was $243.4 million and $174.9 million, respectively. Cash provided by investing activities for the nine months ended September 30, 2017 and 2016 was $2.5 billion and $2.7 billion, respectively. Cash used in financing activities was $2.6 billion and $2.9 billion for the ninesix months ended SeptemberJune 30, 20172020 was $717.3 million and 2016,$913.0 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 Student Loan Assets and Related Collateral

The following table shows the Company'sAGM's debt obligations outstanding that are secured by student loan assets and related collateral.
As of June 30, 2021
Carrying amountFinal maturity
Bonds and notes issued in asset-backed securitizations$18,682,301 5/27/25 - 7/25/69
FFELP and private education loan warehouse facilities441,907 11/22/22 - 2/26/24
$19,124,208 
 As of September 30, 2017
 
Carrying
amount
 Final maturity
Bonds and notes issued in asset-backed securitizations$21,632,934
 8/25/21 - 9/25/65
FFELP warehouse facilities745,107
 11/19/19 - 4/27/20
 $22,378,041
  


Bonds and Notes Issued in Asset-backed Securitizations

The majority of the Company’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 the Company receives on the loans and cost of financing within these transactions, and (ii) the servicing and administration fees the Company earns from these transactions, the Company has created a portfolio that will generate earnings and significant cash flow over the life of these transactions.

As of SeptemberJune 30, 2017,2021, based on cash flow models developed to reflect management’s current estimate of, among other factors, prepayments, defaults, deferment, forbearance, and interest rates, the Company currently expects future undiscounted cash flows from its portfolio to be approximately $1.93$2.22 billion as detailed below.  The $1.93 billion includes approximately $821.9 million (as of September 30, 2017) of overcollateralization included in the asset-backed securitizations.  These excess net asset positions are reflected variously in the following balances in the consolidated balance sheet:  "student loans receivable," "restricted cash," and "accrued interest receivable."

The forecasted cash flow presented below includes all loans funded in asset-backed securitizations as of SeptemberJune 30, 2017.2021. As of SeptemberJune 30, 2017,2021, the Company had $21.9$18.7 billion of loans included in asset-backed securitizations, which represented 96.596.8 percent of its total FFELP and private education student 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 as of SeptemberJune 30, 2017,2021, private education and consumer loans funded with operating cash, on the balance sheet, and loans acquired subsequent to SeptemberJune 30, 20172021, 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).



54








Asset-backed Securitization Cash Flow Forecast
$1.932.22 billion
(dollars in millions)
abscashflowfcst2017q3.jpgnni-20210630_g4.jpg
The forecasted future undiscounted cash flows of approximately $2.22 billion include approximately $1.23 billion (as of June 30, 2021) 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 $0.99 billion, or approximately $0.75 billion after income taxes based on the estimated effective tax rate, is expected to be accretive to the Company's June 30, 2021 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 that are generally consistent with those utilized in the Company’s recent asset-backed securitization transactions. If management used a prepayment rate assumption two times greater than what was used to forecast the cash flow, the cash flow forecast would be reduced by approximately $220$135 million to $250$170 million.

Interest rates: The Company funds a majoritylarge 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 $95$40 million to $115$65 million. As the percentage of the Company's outstanding debt financed by three-month LIBOR declines, the Company's basis risk will be reduced.

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 -
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Interest rate risk - replacement of LIBOR as a benchmark rate" in the Company's 2020 Annual Report for additional information.
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 hedging interest rate risks. 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.Risk - AGM Operating Segment."

FFELP Warehouse Facilities

The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements. As of SeptemberJune 30, 2017,2021, the Company had threetwo FFELP warehouse facilities with an aggregate maximum financing amount available


of $1.2 billion,$360.0 million, of which $0.7 billion$301.1 million was outstanding and $0.5 billion$58.9 million was available for additional funding. OfOne warehouse facility has a static advance rate until the three facilities, oneexpiration date of the liquidity provisions (November 22, 2021). 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, provides for formula-based advance rates, depending on FFELP loan type, upsubject to a maximumfloor. The loans would then be funded at this new advance rate until the final maturity date of the principal and interest of loans financed. The advance rates for collateral may increase or decrease based on market conditions.facility (November 22, 2022). The other two FFELP warehouse facilities havefacility has a static advance ratesrate that requirerequires initial equity for loan funding but doand does not require increased equity based on market movements. As of SeptemberJune 30, 2017,2021, the Company had $28.4$24.8 million advanced as equity support on these facilities. For further discussion of the Company's FFELP warehouse facilities outstanding at SeptemberJune 30, 2017,2021, see note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report. On July 27, 2021, the Company downsized its warehouse facility with a previous maximum financing amount of $310.0 million as of June 30, 2021 to a maximum financing amount of $60.0 million. Upon the downsizing of this warehouse facility, a portion of the loans previously funded in this facility were funded via the participation agreement with Union Bank.

The Company has a private education loan warehouse facility that, as of June 30, 2021, had an aggregate maximum financing amount available of $175.0 million, an advance rate of 80 to 90 percent, liquidity provisions through February 13, 2022, and a final maturity date of February 13, 2023. As of June 30, 2021, $140.8 million was outstanding under this warehouse facility, $34.2 million was available for future funding, and $15.0 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.

The Company had a $100.0 million consumer loan warehouse facility that was terminated on March 31, 2021. The Company used operating cash to pay off the $20.7 million outstanding balance on this facility upon its termination.
Other Uses of Liquidity

Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made through the Federal Direct Loan Program.  As a result, theThe Company no longer originates new FFELP loans, but continues to acquire FFELP loan portfolios from third parties and believes additional loan purchase opportunities exist.

exist, including opportunities to purchase private education and consumer loans (or investment interests therein).
The Company plans to fund additional FFELP student loan acquisitions and related investments using current cash and investments; using its unsecured line of credit, Union Bank student loan participation agreement, (asUnion 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 FFELPexisting 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.

Private Education Loan Investment
In December of 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education loans representing approximately 445,000 borrowers. The Company has entered into a joint venture with other investors to acquire the loans, and under the joint venture, the Company has an approximately 8 percent interest in the loans. In conjunction with the sale, the Company was selected as servicer of the portfolio. During March and throughout the second quarter of 2021, the borrowers were converted to the Company's servicing platform. The joint venture established a limited partnership that purchased the private education loans and funded such loans with a temporary warehouse facility. As of June 30, 2021, the Company has contributed a net amount of $8.3 million into the limited partnership.
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On May 20, 2021 and June 30, 2021, the joint venture completed asset-backed securitization transactions to permanently finance a total of $5.8 billion of the private education loans purchased by the joint venture. The Company is accounting for its approximately 8 percent residual interest in these securitizations as held-to-maturity beneficial interest investments. These investments are reflected on the Company's consolidated balance sheet as "investments." On behalf of the joint venture, the Company is the sponsor and administrator for these loan securitizations. 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 as of June 30, 2021, the fair value of these bonds was $307.3 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, the proceeds of which were used to purchase a portion of the asset-backed investments, and such investments serve as collateral on the repurchase obligations.
As of June 30, 2021, $255.3 million was outstanding on the repurchase agreements. The maturity dates on the repurchase agreements are various dates between September 24, 2021 and December 20, 2023, but are subject to early termination upon required notice provided by the Company or the applicable counterparty prior to the maturity dates. The Company pays interest on amounts outstanding on the repurchase agreements based on LIBOR plus an applicable spread, and is also 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 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 SeptemberJune 30, 2017, $461.32021, $771.6 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 $750.0$900.0 million or an amount in excess of $750.0$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-BackedAsset-backed Securities Transactions

On May 24, 2017 and July 26, 2017,June 30, 2021, the Company completed a FFELP asset-backed securitizationssecuritization totaling $535.0$797.0 million (par value) and $399.4 million (par value), respectively.. The proceeds from these transactions werethis transaction was used primarily to refinance student loans included in the Company's FFELP warehouse facilities. See note 3 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on this securitization.

The Company, through its subsidiaries, has historically funded student loans by completing asset-backed securitizations. Depending on future rating agency actions and 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, student loans purchased from third parties, and/or student loans in its existing asset-backed securitizations.

Liquidity Impact Related to Nelnet Bank
On November 2, 2020, the Company obtained final approval for federal deposit insurance from the FDIC and for a bank charter from the UDFI in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. 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 FDIC approval, 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
57

requirements for a “well capitalized” bank, including a leverage ratio of capital to total assets of at least 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.
Based on Nelnet Bank's business plan and current financial condition, the Company currently believes that the initial capital contribution of $100.0 million and pledged deposit of $40.0 million should provide sufficient capital and liquidity to Nelnet Bank for the next two to three years.
Liquidity Impact Related to ALLO Communications LLC
As previously disclosed, on October 1, 2020, the Company entered into various agreements with SDC, a third party global digital infrastructure investor, and ALLO, for various transactions contemplated by the parties in connection with a recapitalization and additional funding for ALLO. After completion of the initial transactions subject to these agreements, SDC, the Company, and members of ALLO's management own approximately 48 percent, 45 percent, and 7 percent, respectively, of the outstanding voting membership interests of a holding company for ALLO, and upon the receipt of regulatory approvals for the transactions on December 21, 2020 the Company deconsolidated ALLO from the Company's consolidated financial statements. In addition, on January 19, 2021, ALLO obtained certain private debt financing facilities from unrelated third-party lenders providing for aggregate financing of up to $230.0 million. With proceeds from this transaction, a portion of the non-voting preferred membership interests of a holding company for ALLO held by the Company were redeemed in exchange for an aggregate redemption price payment to the Company of $100.0 million.
The agreements among the Company, SDC, and ALLO provide that they will use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause the redemption, on or before April 2024, of the remaining non-voting preferred membership interests of a holding company for ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such interests. As of June 30, 2021, such outstanding preferred membership interests and accrued and unpaid preferred return held by the Company was $129.7 million and $3.6 million, respectively. The non-voting preferred membership interests earn a preferred annual return of 6.25 percent.
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. However, ALLO has obtained third-party debt financing to support its current growth plans, and thus the Company currently believes additional equity contributions to ALLO are not likely in the immediate future.
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 SeptemberJune 30, 2017,2021, 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 meet potential collateral deposits with its counterparties and/ormake variation margin payments withto 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 deposit additional collateral with its derivative instrument counterparties and/or pay additionalmake variation margin payments to aits third-party clearinghouse. Derivative contracts executed through a clearinghouse require daily movement of variation margin to be exchanged based on the net fair value of the contracts. The collateral deposits or 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 under Part I, Item 1 of this report for additional information on the Company's derivative portfolio.


Liquidity Impact Related to the Communications Operating Segment

Allo has made significant investments in its communications network and currently provides fiber directly to homes and businesses in seven Nebraska communities. In the first quarter of 2016, Allo announced plans to expand its network to make its services available to substantially all commercial and residential premises in Lincoln, Nebraska, and currently plans to expand to additional communities in Nebraska and surrounding states over the next several years. For the nine months ended September 30, 2017, Allo's capital expenditures were $78.4 million. The Company anticipates total Allo network capital expenditures of approximately $30.0 million in the fourth quarter of 2017 and approximately $100.0 million in 2018. However, such amounts could change based on customer demand for Allo's services. Allo had a $200.0 million line of credit with Nelnet, Inc. (parent company) that was increased on September 30, 2017 by $70.0 million to a total of $270.0 million, which Allo uses for its operating activities and capital expenditures. The outstanding amount owed by Allo to Nelnet, Inc. and the related interest expense incurred by Allo and the interest income recognized by Nelnet, Inc. under this line of credit is eliminated in the Company's consolidated financial statements. The Company currently plans to use cash from operating activities and its third-party unsecured line of credit to fund Allo's operating activities and capital expenditures.

Other Debt Facilities

As discussed above, the Company has a $350.0$455.0 million unsecured line of credit with a maturity date of December 12, 2021.16, 2024. As of SeptemberJune 30, 2017,2021, the unsecured line of credit had $210.0$85.0 million outstanding and $140.0$370.0 million was available for future use. The Company also has a $22.0 million secured line of credit agreement with a maturity date of May 30, 2022. As of June 30, 2021, the secured line of credit had $5.0 million outstanding with $17.0 million available for future use. The secured line of credit is secured by several Company-owned properties. Upon the maturity date in 2021,of these facilities, there can be no assurance that the Company will be able to maintain this linethese lines of credit, increase the amount outstanding under the line,lines, or find alternative funding if necessary.

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The Company has issued Junior Subordinated Hybrid Securities (the "Hybrid Securities") that have a final maturity date of September 15, 2061. The Hybrid Securities are unsecured obligations of the Company. During the first quarter of 2017,2020, the Company initiated a cash tender offerentered into an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase any and all of its outstanding Hybrid Securities, including a related consent solicitation to effect certain amendments to the indenture governing the notes to eliminate a provision requiring a minimum principal amount of the notes to remain outstanding after a partial redemption. The aggregate principal amount of notes tendered tofrom the Company was $29.7 million. The Company paid $25.3 million to redeem these notes, and the amendments described above were made to the indenture.participation interests in federally insured student loan asset-backed securities. As of SeptemberJune 30, 2017, the Company had $20.52021, $132.1 million of Hybrid Securities that remain outstanding.

The Company alsostudent loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. This participation agreement has two notes payable, which were each issued by TDP Phase Three, LLC ("TDP") on December 30, 2015 in connection with the development of a commercial building in Lincoln, Nebraska that is to be the new corporate headquartersbeen accounted for Hudl, a related party. TDP is an entity established during 2015 for the sole purpose of developing and operating this building. The Company owns 25 percent of TDP. However, because the Company plans to be a tenant in this building once the development is complete, the operating results of TDP are included in the Company's consolidated financial statements. As of September 30, 2017, one of the TDP notes has $12.0 million outstanding with a maturity date of March 31, 2023; the other TDP note has $6.4 million outstanding with a maturity date of December 15, 2045. Recourse to the Company on the outstanding balance of these notes is equal to its ownership percentage of TDP.

Debt Repurchases

Due to the Company's positive liquidity position and opportunities in the capital markets, the Company has repurchased its own debt over the last several years, and may continue to do so in the future. See note 4 of the notes to consolidated financial statements included in the 2016 Annual Report for information on debt repurchased by the Company during the years 2014 through 2016 and note 3 of the notes to consolidated financial statements included under Part I, Item 1as a secured borrowing. Upon termination or expiration of this report for debt repurchased byagreement, the Company duringwould expect to use operating cash, consider the nine months ended September 30, 2017.

sale of assets, or transfer collateral to satisfy any remaining obligations.
Stock Repurchases

The Board of Directors has 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 25, 2019.7, 2022. As of June 30, 2021, 3,246,732 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, 2017,2021 and June 30, 2017 and September 30, 20172021 are shown below. CertainSuch shares were repurchased from employees to satisfy tax withholding obligations upon the vesting of these repurchases were made pursuant to a trading plan adopted byrestricted stock, and not as part of the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. For additional information on stock repurchases during the third quarter of 2017, see "Stock Repurchases" under Part II, Item 2 of this report.


 Total shares repurchased Purchase price (in thousands) Average price of shares repurchased (per share)
   
Quarter ended March 31, 201731,716
 $1,369
 43.18
Quarter ended June 30, 2017384,061
 16,826
 43.81
Quarter ended September 30, 2017947,794
 45,136
 47.62
  Total1,363,571
 $63,331
 46.44

Subsequent to September 30, 2017, from October 1, 2017 through November 7, 2017, the Company has repurchased an additional 69,541 shares of Class A common stock for $3.5 million ($50.45 per share). These purchases were made pursuant to a trading plan adopted by the Company in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. As of November 7, 2017, 3,179,339 shares remain authorized for repurchase under the Company's stock repurchase program.

Total shares repurchasedPurchase price
(in thousands)		Average price of shares repurchased (per share)
Quarter ended March 31, 202126,199 $2,009 76.70 
Quarter ended June 30, 20215,368 399 74.25 
  Total31,567 $2,408 76.28 

Dividends

On September 15, 2017,June 14, 2021, the Company paid a thirdsecond quarter 20172021 cash dividend on the Company's Class A and Class B common stock of $0.14$0.22 per share. In addition, the Company's Board of Directors has declared a fourththird quarter 20172021 cash dividend on the Company's outstanding shares of Class A and Class B common stock of $0.16$0.22 per share. The fourththird quarter cash dividend will be paid on DecemberSeptember 15, 20172021 to shareholders of record at the close of business on DecemberSeptember 1, 2017.

2021.
The Company currently plans to continue making regular quarterly dividend payments, subject to future earnings, capital requirements, financial condition, and other factors.  In addition, the payment of dividends is subject to the terms of the Company’s outstanding Hybrid Securities, which generally provide that if the Company defers interest payments on those securities it cannot pay dividends on its capital stock.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of Operations addresses the Company's consolidated financial statements, which have been prepared in accordance with GAAP. A discussion of the Company's critical accounting policies, which include allowance for loan losses, revenue recognition, consolidation of Variable Interest Entities, income taxes, and accounting for derivatives can be found in the Company's 2016 Annual Report. There were no significant changes to these critical accounting policies during the first nine months of 2017.

RECENT ACCOUNTING PRONOUNCEMENTS

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued accounting guidance regarding the recognition of revenue from contracts with customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue recognition guidance once it becomes effective on January 1, 2018 and the standard allows the use of either the retrospective or cumulative effect transition method. The Company currently plans to use the cumulative effect transition method. The Company is evaluating the impact this pronouncement will have on its ongoing financial reporting. However, it does not currently believe the implementation will have a material impact to its financial statements. The majority of the Company's revenue earned in its Asset Generation and Management segment, including loan interest and derivative activity, is explicitly excluded from the scope of the new guidance. The Company continues to evaluate the impact to revenue earned from its fee-based operating segments and the presentation and disclosures. In regards to the Company's fee-based operating segments, the Company's implementation efforts to date include the identification of revenue and review of related contracts within these segments. Based upon this review, the Company has not yet identified nor does it anticipate material changes in the timing of revenue recognition. However, the Company's review is ongoing as it continues to evaluate both contract revenue and certain contract costs.



Classification and Measurement

In January 2016, the FASB issued accounting guidance regarding the recognition and measurement of financial assets and financial liabilities, which will change the income statement impact of equity investments, and the recognition of changes in fair value of financial liabilities when the fair value option is elected.   The new guidance requires all equity investments to be measured at fair value, with changes in the fair value recognized through net income (other than those equity investments accounted for under the equity method of accounting or those that result in consolidation of the investee), and requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.  This guidance will be effective for the Company beginning January 1, 2018 and requires a cumulative effect adjustment to retained earnings as of the beginning of the reporting period of adoption. The Company is evaluating the impact this pronouncement will have on its ongoing financial reporting. However, it does not currently believe the implementation will have a material impact to its financial statements.

Leases

In February 2016, the FASB issued accounting guidance regarding the accounting for leases. The new standard will require the identification of arrangements that should be accounted for as leases by lessees and the disclosure of key information about leasing arrangements. In general, lease arrangements exceeding a twelve-month term will be recognized as assets and liabilities on the balance sheet of the lessee. A right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption must be calculated using the applicable incremental borrowing rate at the date of adoption. The standard requires the use of the modified retrospective transition method, which will require adjustment to all comparative periods presented with certain practical expedients available. It will be effective for the Company beginning January 1, 2019 with early adoption permitted. The Company currently expects to adopt the new standard on its effective date and to elect all of the standard's available practical expedients on adoption. The Company is evaluating the impact this pronouncement will have on its ongoing financial reporting.

Allowance for Loan Losses

In June 2016, the FASB issued accounting guidance regarding the measurement of credit losses on financial instruments, which will change the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the asset's remaining life. The Company currently uses an incurred loss model when calculating its allowance for loan losses. As a result, the Company expects the new guidance will increase the allowance for loan losses. This guidance will be effective for the Company beginning January 1, 2020. Early application is permitted beginning January 1, 2019. This standard represents a significant departure from existing GAAP, and may result in significant changes to the Company's accounting for the allowance for loan losses. The Company is evaluating the impact this pronouncement will have on its ongoing financial reporting.

Statement of Cash Flows

In August 2016, the FASB issued accounting guidance regarding the presentation and classification of certain cash receipts and cash payments in the statement of cash flows.  Among the cash flow matters addressed in the update are payments for costs related to debt prepayments or extinguishments, payments related to settlement of certain types of debt instruments, payments of contingent consideration made after a business combination, and distributions received from equity method investees, among others.  This guidance will be effective for the Company beginning January 1, 2018 with early adoption permitted.  The guidance will be applied using a retrospective transition method to each period presented, unless impracticable for specific cash flow matters, in which case the update would be applied prospectively as of the earliest date practicable.  The Company believes the adoption of this guidance will not have a significant impact on its consolidated financial statements.

In November 2016, the FASB issued accounting guidance which provides amendments to current guidance to address the classifications and presentation of changes in restricted cash in the statement of cash flows.  This guidance will be effective for the Company beginning January 1, 2018 with early adoption permitted.  The amendments will be applied using a retrospective transition method to each period presented.  The Company is evaluating the impact this pronouncement will have on its ongoing financial reporting. 






Goodwill

In January 2017, the FASB issued accounting guidance which will eliminate the two-step process that requires identification of potential impairment and a separate measure of the actual impairment. The annual assessment of goodwill impairment will be determined by using the difference between the carrying amount and the fair value of the reporting unit. The new standard will be effective for the Company beginning January 1, 2020 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

The Company’sAGM’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact the CompanyAGM due to shifts in market interest rates.

The following table sets forth the Company’sAGM’s loan assets and debt instruments by rate characteristics:
As of September 30, 2017 As of December 31, 2016 As of June 30, 2021As of December 31, 2020
Dollars Percent Dollars Percent DollarsPercentDollarsPercent
Fixed-rate loan assets$5,334,565
 23.5% $8,585,283
 34.2%Fixed-rate loan assets$8,203,961 42.4 %$8,720,480 44.6 %
Variable-rate loan assets17,379,348
 76.5
 16,518,360
 65.8
Variable-rate loan assets11,127,764 57.6 10,838,628 55.4 
Total$22,713,913
 100.0% $25,103,643
 100.0%Total$19,331,725 100.0 %$19,559,108 100.0 %
       
Fixed-rate debt instruments$109,251
 0.5% $131,733
 0.5%Fixed-rate debt instruments$925,835 4.8 %$960,327 5.0 %
Variable-rate debt instruments22,517,671
 99.5
 24,968,687
 99.5
Variable-rate debt instruments18,198,373 95.2 18,354,964 95.0 
Total$22,626,922
 100.0% $25,100,420
 100.0%Total$19,124,208 100.0 %$19,315,291 100.0 %
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
59

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.

NoAs a result of the significant drop in interest rates in March 2020 and the first half of the second quarter of 2020, the Company earned $3.9 million and $4.8 million of variable-rate floor income was earned byon approximately $1.4 billion of FFELP loans during the three and six months ended June 30, 2020, respectively. Since the borrower rate reset on July 1, 2020, the Company duringno longer earns such variable-rate floor income on these loans, reflecting the nine months ended September 30, 2017 and 2016. lower interest rate environment.
A summary of fixed rate floor income earned by the CompanyAGM operating segment follows.
Three months ended June 30,Six months ended June 30,
2021202020212020
Fixed rate floor income, gross$36,639 31,866 72,178 50,625 
Derivative settlements (a)(5,153)(1,308)(9,438)816 
Fixed rate floor income, net$31,486 30,558 62,740 51,441 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Fixed rate floor income, gross$24,586
 41,509
 84,382
 131,720
Derivative settlements (a)3,883
 (5,157) 5,877
 (15,241)
Fixed rate floor income, net$28,469
 36,352
 90,259
 116,479

(a)Includes settlement payments on(a)    Derivative settlements consist of settlements (paid) received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.





The high levels of gross fixed rate floor income earned during 2017 and 2016 are due to historically low interest rates.  If interest rates remain low, the Company anticipates continuing to earn significant fixed rate floor income in future periods. income.
Gross fixed rate floor income decreasedincreased for the three and ninesix months ended SeptemberJune 30, 20172021 as compared to the same periods in 20162020 due to an increaselower interest rates in interest rates.

2021 as compared to 2020.
Absent the use of derivative instruments, a rise in interest rates maywill reduce the amount of floor income received and this may havehas 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 special allowance paymentSAP 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 increase in net settlements paid in 2021 as compared to the same periods in 2020 was due to a decrease in interest rates.
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-20210630_g5.jpg
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The following table shows the Company’sAGM’s federally insured student loan assets that were earning fixed rate floor income as of SeptemberJune 30, 2017.2021.
Fixed interest rate rangeBorrower/lender weighted average yieldEstimated variable conversion rate (a)Loan balance
< 3.0%2.87%0.23%$1,135,956 
3.0 - 3.49%3.19%0.55%1,428,781 
3.5 - 3.99%3.65%1.01%1,362,618 
4.0 - 4.49%4.20%1.56%1,021,626 
4.5 - 4.99%4.71%2.07%636,077 
5.0 - 5.49%5.22%2.58%426,502 
5.5 - 5.99%5.67%3.03%283,883 
6.0 - 6.49%6.19%3.55%326,037 
6.5 - 6.99%6.70%4.06%320,469 
7.0 - 7.49%7.17%4.53%118,328 
7.5 - 7.99%7.71%5.07%217,577 
8.0 - 8.99%8.18%5.54%512,800 
> 9.0%9.05%6.41%194,953 
$7,985,607 
Fixed interest rate range Borrower/lender weighted average yield Estimated variable conversion rate (a) Loan balance
3.5 - 3.99% 3.92% 1.28% $1,090
4.0 - 4.49% 4.20% 1.56% 1,408,663
4.5 - 4.99% 4.71% 2.07% 851,229
5.0 - 5.49% 5.22% 2.58% 539,482
5.5 - 5.99% 5.67% 3.03% 379,443
6.0 - 6.49% 6.19% 3.55% 437,761
6.5 - 6.99% 6.70% 4.06% 421,737
7.0 - 7.49% 7.17% 4.53% 150,722
7.5 - 7.99% 7.71% 5.07% 252,994
8.0 - 8.99% 8.18% 5.54% 584,749
> 9.0% 9.05% 6.41% 202,455
      $5,230,325


(a)The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of September 30, 2017, the weighted average estimated variable conversion rate was 3.11% and the short-term interest rate was 125(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, 2021, the weighted average estimated variable conversion rate was 1.94% and the short-term interest rate was 10 basis points.



The following table summarizes the outstanding derivative instruments as of SeptemberJune 30, 20172021 used by the CompanyAGM to economically hedge loans earning fixed rate floor income.
MaturityNotional amountWeighted average fixed rate paid by the Company (a)
2021$100,000 2.95 %
2022500,000 0.94 
2023900,000 0.62 
20242,500,000 0.35 
2025500,000 0.35 
2026150,000 0.85 
2031100,000 1.53 
$4,750,000 0.56 %
Maturity Notional amount Weighted average fixed rate paid by the Company (a)
  
2018 $1,350,000
 1.07%
2019 3,250,000
 0.97
2020 1,500,000
 1.01
2025 100,000
 2.32
  $6,200,000
 1.02%

(a)
(a)    For all interest rate derivatives, the Company receives discrete three-month LIBOR.
In addition, on August 20, 2014, the Company paid $9.1 million for an interest rate swap option to economically hedge loans earning fixed rate floor income. The interest rate swap option gives the Company the right, but not the obligation, to enter into a $250.0 million notional interest rate swap in which the Company would pay a fixed amount of 3.30% and receivereceives discrete one-monththree-month LIBOR. If the interest rate swap option is exercised, the swap would become effective in 2019 and mature in 2024.

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The CompanyAGM is also exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of the Company’sAGM’s assets do not match the interest rate characteristics of the funding for those assets. The following table presents the Company’sAGM’s FFELP student loan assets and related funding for those assets arranged by underlying indices as of SeptemberJune 30, 2017.2021.
IndexFrequency of variable resetsAssetsFunding of student loan assets
1 month LIBOR (a)Daily$17,675,866 — 
3 month H15 financial commercial paperDaily684,041 — 
3 month Treasury billDaily578,957 — 
1 month LIBORMonthly— 10,956,453 
3 month LIBOR (a)Quarterly— 6,017,633 
Fixed rate—— 893,093 
Auction-rate (b)Varies— 742,350 
Asset-backed commercial paper (c)Varies— 301,144 
Other (d)—1,375,742 1,403,933 
  $20,314,606 20,314,606 
Index Frequency of variable resets Assets Funding of student loan assets
1 month LIBOR (a) Daily $20,692,662
 —
3 month H15 financial commercial paper Daily 1,146,947
 —
3 month Treasury bill Daily 647,675
 —
3 month LIBOR (a) (b) Quarterly —
 12,274,155
1 month LIBOR Monthly —
 8,550,438
Auction-rate (c) Varies —
 781,276
Asset-backed commercial paper (d) Varies —
 596,395
Other (e)   1,074,851
 1,359,871
    $23,562,135
 23,562,135
(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, 2021.

(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 September 30, 2017.
MaturityNotional amount (i)
2022$2,000,000 
2023750,000 
20241,750,000 
20261,150,000 
2027250,000 
$5,900,000 
Maturity Notional amount
2018 $4,000,000
2019 3,000,000
2024 250,000
2026 1,150,000
2027 375,000
2028 325,000
2029 100,000
2031 300,000
  $9,500,000

(i)    The weighted average rate paid by the Company on the 1:3 Basis Swaps as of SeptemberJune 30, 20172021 was one-month LIBOR plus 13.49.1 basis points.

(b)    As of June 30, 2021, the Company was sponsor for $742.4 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 rates on the Company's warehouse facilities are indexed to asset-backed commercial paper rates.

(b)As of September 30, 2017, the Company had Euro-denominated notes that repriced on the EURIBOR index. The Company had entered into a cross-currency interest rate swap that converted the EURIBOR index to three-month LIBOR. As a result, these notes are reflected in the three-month LIBOR category in the above table. See “Foreign Currency Exchange Risk” below.

(c)The interest rates on certain of the Company's asset-backed securities are set and periodically reset via a "dutch auction" (“Auction Rate Securities”). As of September 30, 2017, the Company was sponsor for $781.3 million of Auction Rate Securities. Since February 2008, problems in the auction rate securities market as a whole have led to failures of the auctions pursuant to which the Company's Auction Rate Securities' interest rates are set. As a result, 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.

(d)The interest rates on certain of the Company's warehouse facilities are indexed to asset-backed commercial paper rates.

(e)(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 - Replacement 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 2020 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 by the Companyon 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 the Company’sAGM’s variable rate assets (including loans earning fixed rate floor income) and liabilities. The analysis includes the effects of the Company’s interest rate and basis swapsAGM’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, 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 $— $(0.01)
 Three months ended June 30, 2020
Effect on earnings:   
Decrease in pre-tax net income before
   impact of derivative settlements		$(16,475)(15.2)%$(31,843)(29.5)%$(1,780)(1.6)%$(5,343)(5.0)%
Impact of derivative settlements1,865 1.7 5,594 5.2 1,429 1.3 4,286 4.0 
Increase (decrease) in net income
   before taxes		$(14,610)(13.5)%$(26,249)(24.3)%$(351)(0.3)%$(1,057)(1.0)%
Increase (decrease) in basic and
   diluted earnings per share		$(0.28)$(0.51)$— $(0.02)
 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 $— $(0.01)
 Six months ended June 30, 2020
Effect on earnings:        
Decrease in pre-tax net income before
   impact of derivative settlements		$(26,505)(45.7)%$(48,738)(84.1)%$(3,754)(6.5)%$(11,267)(19.4)%
Impact of derivative settlements6,216 10.7 18,647 32.2 3,020 5.2 9,060 15.6 
Increase (decrease) in net income
   before taxes		$(20,289)(35.0)%$(30,091)(51.9)%$(734)(1.3)%$(2,207)(3.8)%
Increase (decrease) in basic and
   diluted earnings per share		$(0.39)$(0.58)$(0.01)$(0.04)

63

 Interest rates Asset 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
   
 Dollars Percent Dollars Percent Dollars Percent Dollars Percent
 Three months ended September 30, 2017
Effect on earnings:               
Decrease in pre-tax net income before impact of derivative settlements$(9,044) (13.1)% $(16,828) (24.4)% $(3,296) (4.8)% $(9,889) (14.3)%
Impact of derivative settlements14,179
 20.5
 42,534
 61.6
 1,890
 2.7
 5,671
 8.2
Increase (decrease) in net income before taxes$5,135
 7.4 % $25,706
 37.2 % $(1,406) (2.1)% $(4,218) (6.1)%
Increase (decrease) in basic and diluted earnings per share$0.08
   $0.38
   $(0.02)   $(0.06)  
                
 Three months ended September 30, 2016
Effect on earnings:             
  
Decrease in pre-tax net income before impact of derivative settlements$(16,758) (12.6)% $(31,121) (23.6)% $(3,987) (3.0)% $(11,960) (9.1)%
Impact of derivative settlements15,775
 11.9
 47,324
 35.9
 436
 0.3
 1,307
 1.0
Increase (decrease) in net income before taxes$(983) (0.7)% $16,203
 12.3 % $(3,551) (2.7)% $(10,653) (8.1)%
Increase (decrease) in basic and diluted earnings per share$(0.01)   $0.24
   $(0.05)   $(0.15)  
                
 Nine months ended September 30, 2017
Effect on earnings:             
  
Decrease in pre-tax net income before impact of derivative settlements$(30,205) (16.2)% $(54,221) (29.1)% $(10,314) (5.5)% $(30,943) (16.6)%
Impact of derivative settlements45,396
 24.3
 136,182
 73.1
 4,368
 2.3
 13,105
 7.0
Increase (decrease) in net income before taxes$15,191
 8.1 % $81,961
 44.0 % $(5,946) (3.2)% $(17,838) (9.6)%
Increase (decrease) in basic and diluted earnings per share$0.23
   $1.20
   $(0.08)   $(0.25)  
                
 Nine months ended September 30, 2016
Effect on earnings: 
  
  
  
  
  
  
  
Decrease in pre-tax net income before impact of derivative settlements$(52,798) (21.5)% $(97,144) (39.4)% $(12,235) (4.9)% $(36,705) (14.9)%
Impact of derivative settlements45,025
 18.3
 135,074
 55.0
 2,776
 1.1
 8,327
 3.4
Increase (decrease) in net income before taxes$(7,773) (3.2)%
$37,930
 15.6 % $(9,459) (3.8)% $(28,378) (11.5)%
Increase (decrease) in basic and diluted earnings per share$(0.11)   $0.55
   $(0.14)   $(0.41)  
Interest Rate Risk - Nelnet Bank


Foreign Currency Exchange Risk

In 2006,To manage Nelnet Bank's risk from market interest rates, the Company issued €352.7 millionactively monitors interest rates and other interest sensitive components to minimize the impact that changes in interest rates have on the fair value of student loan asset-backed Euro Notes (the "Euro Notes") with an interest rate based on a spread to the EURIBOR index. As a result,assets, net income, and cash flow. To achieve this objective, the Company was exposed to market risk relatedmanages and mitigates its exposure to fluctuations in foreign currency exchangemarket interest rates betweenthrough several techniques, include managing the U.S. dollarmaturity, repricing, and Euro. mix of fixed and variable rate assets and liabilities.
The Company entered into a cross-currency interestfollowing table presents Nelnet Bank's loan assets and deposits by rate swap in connection with the issuance of the Euro Notes. See note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information, including a summary of the terms of the cross-currency interest rate swap associated with the Euro Notes and the related financial statement impact.characteristics:

 As of June 30, 2021As of December 31, 2020
 DollarsPercentDollarsPercent
Fixed-rate loan assets$124,212 65.2 %$16,866 96.1 %
Variable-rate loan assets66,359 34.8 677 3.9 
Total$190,571 100.0 %$17,543 100.0 %
Fixed-rate deposits$202,841 67.8 %$54,633 48.3 %
Variable-rate deposits96,530 32.2 58,413 51.7 
Total$299,371 100.0 %$113,046 100.0 %
On October 25, 2017, the Company completed a remarketing of the Euro Notes which reset the principal amount outstanding on the Euro Notes to $450.0 million U.S. dollars, with an interest rate based on the 3-month LIBOR index, and resulted in the termination of the cross-currency interest rate swap. See note 14 of the notes to consolidated financial statements included under Part I, Item 1 of this report for additional information on this remarketing.

Financial Statement Impact – Derivatives and Foreign Currency Transaction Adjustments

For a table summarizing the effect of derivative instruments in the consolidated statements of income, including the components of "derivative market value and foreign currency transaction adjustments and derivative settlements, net" included in the consolidated statements of income, see note 4 of the notes to consolidated financial statements included under Part I, Item 1 of this report.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under supervision andThe Company’s management, with the participation of certain members of the Company’s management, including the chiefCompany's principal executive and chiefprincipal financial officers, the Company completed an evaluation ofevaluated the effectiveness of the design and operation of itsCompany’s disclosure controls and procedures (as defined in SEC Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). as of June 30, 2021. 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 the end of the period covered by this report to provide reasonable assurance that information required to be disclosed in reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to the Company's management, including the chief executive and chief financial officers, as appropriate to allow timely decisions regarding required disclosure.

June 30, 2021.
Changes in Internal Control over Financial Reporting

There waswere no changechanges in the Company’s internal control over financial reporting during the Company’s last fiscal quarter ended June 30, 2021 that hashave materially affected, or isare 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 set forthreferred to in the Legal Proceedings section of the Company's Annual Report on Form 10-K for the year ended December 31, 20162020 under Item 3 of Part I of such Form 10-K.

ITEM 1A.  RISK FACTORS

There have been no material changes from the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162020 in response to Item 1A of Part I of such Form 10-K.

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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 thirdsecond quarter of 20172021 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
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, 2021— $— — 3,246,732 
May 1 - May 31, 2021— — — 3,246,732 
June 1 - June 30, 20215,368 74.25 — 3,246,732 
Total5,368 $74.25 — 
(a) The total number of shares consist of shares owned and tendered by employees to satisfy tax withholding obligations upon the table belowvesting of restricted shares. Unless otherwise indicated, shares owned and tendered by employees to satisfy tax withholding obligations were made pursuantpurchased 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 trading plan adopted bytotal of five million shares of the Company in accordance with Rule 10b5-1 underCompany's Class A common stock during the Securities Exchange Act of 1934.
Period Total number of shares purchased (a) Average price paid per share Total 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)
July 1 - July 31, 2017 318,610
 $47.83
 318,200
 3,875,613
August 1 - August 31, 2017 325,983
 46.84
 325,983
 3,549,630
September 1 - September 30, 2017 303,201
 48.24
 300,750
 3,248,880
Total 947,794
 $47.62
 944,933
  

(a)The total number of shares includes: (i) shares repurchased pursuant to the stock repurchase program 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 410 shares, 0 shares, and 2,451 shares in July, August, and September, respectively. 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 August 4, 2016, the Company announced that its Board of Directors authorized a new stock repurchase program in May 2016 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 25, 2019.

three-year period ending May 7, 2022.
Working capital and dividend restrictions/limitations

The Company’s credit facilities, including its revolvingCompany's $455.0 million unsecured line of credit, which is available through December 12, 2021, impose16, 2024, imposes restrictions with respect toon the Company’spayment of dividends through covenants requiring a minimum consolidated net worth the ratioand a minimum level of the Company’s adjusted EBITDA to corporate debt interest, the amount of recourse indebtedness, the amount and nature ofunencumbered cash, cash equivalent investments, and business acquisitions, andavailable borrowing capacity under the amountline of private education loans held by the Company.credit. In addition, trust indentures and other financing agreements governing debt issued by the Company's education lending subsidiaries maygenerally have general limitations on the amounts of funds that can be transferred to the Company by its subsidiaries through cash dividends.

The supplemental indenture fordividends at certain times. Further, Nelnet Bank is subject to laws and regulations that restrict the Company’s Hybrid Securities issued in September 2006 provides that so long as any Hybrid Securities remain outstanding, ifability of Nelnet Bank to pay dividends to the Company, gives noticeand authorize regulatory authorities to prohibit or limit the payment of its electiondividends by Nelnet Bank to defer interest payments but the related deferral period hasCompany. These provisions do not yet commenced or a deferral period is continuing, thencurrently 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 not, and will not permit any of its subsidiaries to:

declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment regarding, any ofmaterially limit the Company’s capital stock.

except as required in connection with the repayment of principal, and except for any partial payments of deferred interest that may be made through the alternative payment mechanism described in the Hybrid Securities indenture, make anyfuture payment of principal of, or interest or premium, if any, on, or repay, repurchase, or redeem any of the Company’s debt securities that rank pari passu with or junior to the Hybrid Securities.dividends.
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make any guarantee payments regarding any guarantee by the Company of the subordinated debt securities of any of the Company’s subsidiaries if the guarantee ranks pari passu with or junior in interest to the Hybrid Securities.

In addition, if any deferral period lasts longer than one year, the limitation on the Company’s ability to redeem or repurchase any of its securities that rank pari passu with or junior in interest to the Hybrid Securities will continue until the first anniversary of the date on which all deferred interest has been paid or canceled.


If the Company is involved in a business combination where immediately after its consummation more than 50% of the surviving entity’s voting stock is owned by the shareholders of the other party to the business combination, then the immediately preceding sentence will not apply to any deferral period that is terminated on the next interest payment date following the date of consummation of the business combination.

However, at any time, including during a deferral period, the Company will be permitted to:

pay dividends or distributions in additional shares of the Company’s capital stock.

declare or pay a dividend in connection with the implementation of a shareholders’ rights plan, or issue stock under such a plan, or redeem or repurchase any rights distributed pursuant to such a plan.

purchase common stock for issuance pursuant to any employee benefit plans.

ITEM 6.  EXHIBITS
31.1*10.1
Form of Modification of Contract dated effective as of June 15, 2021 for Student Loan Servicing Contract between the United States Department of Education and Nelnet Servicing, LLC, filed as Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on June 10, 2021 and incorporated herein by reference.
10.2
Form of Modification of Contract dated effective as of June 15, 2021 for Student Loan Servicing Contract between the United States Department of Education and Great Lakes Educational Loan Services, Inc., filed as Exhibit 10.2 to the registrant's Current Report on Form 8-K filed on June 10, 2021 and incorporated herein by reference.
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
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
*Filed herewith
**Furnished herewith



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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:November 7, 2017August 5, 2021By:/s/ JEFFREY R. NOORDHOEK
Name:Jeffrey R. Noordhoek
Title:
Chief Executive Officer
Principal Executive Officer
Date:August 5, 2021By:/s/ JAMES D. KRUGER
Date:November 7, 2017Name:James D. Kruger
Title: 
Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer





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