nni-20220509
0001258602false00012586022022-05-092022-05-09

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 9, 2022
NELNET, INC.
(Exact name of registrant as specified in its charter)
Nebraska001-3192484-0748903
(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification No.)
121 South 13th Street, Suite 100
Lincoln,Nebraska68508
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (402) 458-2370
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.                        ☐



Item 2.02 Results of Operations and Financial Condition.
On May 9, 2022, Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended March 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this report. In addition, a copy of the supplemental financial information for the quarter ended March 31, 2022, which was made available on the Company's website at www.nelnetinvestors.com on May 9, 2022 in connection with the press release, is furnished as Exhibit 99.2 to this report.
The above information and Exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall such information and Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. In addition, information on the Company's website is not incorporated by reference into this report and should not be considered part of this report.
Certain statements contained in the exhibits furnished with this report may be considered forward looking in nature and are subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated, estimated, or expected. Among the key risks and uncertainties that may have a direct bearing on the Company's future operating results, performance, or financial condition expressed or implied by the forward-looking statements are the matters discussed in the Risk Factors sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022 and the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2022 filed with the SEC on May 9, 2022. Although the Company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits. The following exhibits are furnished as part of this report:
Exhibit
No.
Description
99.1
99.2
104Cover Page Interactive Data File (formatted as Inline XBRL and included as Exhibit 101).





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 hereunto duly authorized.
Dated: May 9, 2022
NELNET, INC.
By:    /s/ JAMES D. KRUGER
Name:    James D. Kruger
Title:    Chief Financial Officer




Nelnet Reports First Quarter 2022 Results
LINCOLN, Neb., May 9, 2022 - Nelnet (NYSE: NNI) today reported GAAP net income of $186.6 million, or $4.91 per share, for the first quarter of 2022, compared with GAAP net income of $123.6 million, or $3.20 per share, for the same period a year ago.
Net income, excluding derivative market value adjustments1, was $75.9 million, or $1.99 per share, for the first quarter of 2022, compared with $94.1 million, or $2.44 per share, for the same period in 2021.
"We are pleased with the results of the first quarter," said Jeff Noordhoek, Chief Executive Officer of Nelnet. "We are proud of our team of associates who are truly responsible for our success. Their perseverance, optimism, and, most importantly, dedication to our customers through the current economic and political challenges and uncertainty is remarkable and gives us confidence for the future."
Nelnet currently operates four primary business segments, earning interest income on loans in its Asset Generation and Management (AGM) and Nelnet Bank segments, and fee-based revenue in its Loan Servicing and Systems and Education Technology, Services, and Payment Processing segments.
Asset Generation and Management
The AGM operating segment reported net interest income of $72.6 million during the first quarter of 2022, compared with $99.5 million for the same period a year ago. During the first quarter of 2021, the company reduced interest expense by $23.8 million (or $18.1 million after tax, or $0.47 per share) as a result of reversing historical accrued interest liabilities on certain bonds acquired in 2011 and 2013, which the company determined were no longer probable of being required to be paid. Excluding the reversal, net interest income decreased in the first quarter of 2022 as compared with the same period in 2021 due to the expected decrease in the average balance of loans outstanding from $19.5 billion in the first quarter of 2021 to $17.2 billion for the same period in 2022. This decrease was partially offset by an increase in interest income earned on AGM's beneficial interest investments.
AGM recognized a negative provision for loan losses in the first quarter of 2022 of $0.9 million ($0.7 million after tax), compared with a negative provision for loan losses of $17.5 million ($13.3 million after tax) in the first quarter of 2021.
Net income after tax for the AGM segment was $162.2 million for the three months ended March 31, 2022, compared with $107.6 million for the same period in 2021. AGM recognized $145.7 million ($110.8 million after tax) in income related to changes in the fair value of derivative instruments that do not qualify for hedge accounting in the first quarter of 2022, compared with $38.8 million ($29.5 million after tax) during the same period in 2021.
Nelnet Bank
As of March 31, 2022, Nelnet Bank had a $368.3 million loan portfolio, consisting of $285.5 million of private education loans and $82.8 million of Federal Family Education Loan (FFEL) Program loans, and had $546.7 million of deposits. Nelnet Bank's net income after tax for the quarter ended March 31, 2022 was $0.7 million, as compared to a net loss of $1.0 million for the same period in 2021.
In April 2022, Nelnet Bank began originating in-school private education loans.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was $136.4 million for the first quarter of 2022, compared with $111.5 million for the same period in 2021. During the first quarter of 2022, the company earned additional revenue on its contract with the Department of Education (Department) for incremental work performed on the Total and Permanent Disability ("TPD") discharge program and to support the expected expiration of the Coronavirus Aid, Relief, and Economic Security (CARES) Act benefits on government-owned student loans. The increase was also due to additional servicing volume because of the company beginning to service the former Wells Fargo private education loan portfolio during March 2021 and an increase in borrowers serviced for the Department.
As of March 31, 2022, the company was servicing $556.7 billion in government-owned, FFEL Program, private education, and consumer loans for 16.8 million borrowers, as compared to $505.2 billion in servicing volume for 15.4 million borrowers as of March 31, 2021.
1 Net income, excluding derivative market value adjustments, is a non-GAAP measure. See "Non-GAAP Performance Measures" at the end of this press release and the "Non-GAAP Disclosures" section below for explanatory information and reconciliations of GAAP to non-GAAP financial information.


The Loan Servicing and Systems segment reported net income after tax of $9.2 million for the three months ended March 31, 2022, compared with $12.2 million for the same period in 2021. Operating margin decreased in the first quarter of 2022 as compared to the same period in 2021 due to costs incurred to prepare for the expected January 31, 2022 expiration of the CARES Act benefits on government-owned student loans, which was extended to May 1, 2022 (and then again to August 31, 2022).
Education Technology, Services, and Payment Processing
For the first quarter of 2022, revenue from the Education Technology, Services, and Payment Processing operating segment was $112.3 million, an increase from $95.3 million for the same period in 2021. Revenue less direct costs to provide services for the first quarter of 2022 was $76.7 million, as compared to $68.2 million for the same period in 2021.
Net income after tax for the Education Technology, Services, and Payment Processing segment was $25.2 million for the three months ended March 31, 2022, compared with $23.5 million for the same period in 2021. Operating margin decreased for the first quarter of 2022 as compared to the same period in 2021 due to increased expenses to support customer growth and investments in the development of new technologies.
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.
Board of Directors Declares Second Quarter Dividend and Authorizes New Stock Repurchase Program
The Nelnet Board of Directors declared a second quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.24 per share. The dividend will be paid on June 15, 2022, to shareholders of record at the close of business on June 1, 2022.
In addition, the Board of Directors has authorized a new stock repurchase program to repurchase up to five million shares of the company's Class A common stock during the three-year period ending May 8, 2025. The five million shares authorized under the new program includes the remaining unpurchased shares from the prior repurchase program, which expired on May 7, 2022. Shares may be repurchased under the new program from time to time in the open market or private transactions (including with related parties), and the timing and amount of repurchases will depend on market conditions, share prices, trading volumes, and other factors, including compliance with credit agreements and securities laws.
During the first quarter of 2022, the company repurchased 380,053 Class A common shares for $32.9 million ($86.56 per share). Subsequent to March 31, 2022 (through May 9, 2022), the company purchased an additional 253,838 Class A common shares for $21.2 million ($83.62 per share).
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of federal securities laws. The words “anticipate,” “assume," "believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” "scheduled," “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements. These statements are based on management's current expectations as of the date of this release and 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. Such risks and uncertainties include, but are not limited to: risks and uncertainties related to the severity, magnitude, and duration of the COVID-19 pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on business, educational, individual, or travel activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic; 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 Department, which current contracts accounted for 29 percent of the company's revenue in 2021; risks to the company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the company may not be successful in obtaining any of such potential new contracts, and risks related to the company's ability to comply with agreements with third-party customers for the servicing of loans; risks related to the company's loan portfolio, such as interest rate basis and repricing risk and changes in levels of loan repayment or default rates; the use of derivatives to manage exposure to interest rate fluctuations; uncertainties regarding the expected benefits from purchased FFEL Program, private education, and consumer loans, or investment interests therein, and initiatives to purchase additional FFEL Program, private education, and consumer loans; financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans; 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 CARES Act and the expected decline over time in FFEL Program loan interest income due to the discontinuation of new FFEL Program loan originations in 2010, and government initiatives or proposals to consolidate FFEL Program loans to Federal Direct Loan Program loans, otherwise encourage or allow FFEL Program loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs; risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration; risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom), acquisitions, and other activities, including activities that are intended to diversify the company both within and outside of its historical core education-related businesses; risks from changes in economic conditions and consumer behavior; and cybersecurity risks, including disruptions to systems, disclosure of confidential information, and/or damage to reputation resulting from cyber-breaches.
For more information, see the "Risk Factors" sections and other cautionary discussions of risks and uncertainties included in documents filed or furnished by the company with the Securities and Exchange Commission, including the cautionary information about forward-looking statements contained in the company's supplemental financial information for the first quarter ended March 31, 2022. All forward-looking statements in this release are as of the date of this release. Although the company may voluntarily update or revise its forward-looking statements from time to time to reflect actual results or changes in the company's expectations, the company disclaims any commitment to do so except as required by law.
Non-GAAP Performance Measures
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. Reconciliations of GAAP to non-GAAP financial information, and a discussion of why the company believes providing this additional information is useful to investors, is provided in the "Non-GAAP Disclosures" section below.




Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)
Three months ended
March 31, 2022December 31, 2021March 31, 2021
Interest income:
Loan interest$111,377 112,118 124,117 
Investment interest13,819 12,376 4,986 
Total interest income125,196 124,494 129,103 
Interest expense on bonds and notes payable and bank deposits48,079 48,294 27,773 
Net interest income77,117 76,200 101,330 
Less negative provision for loan losses(435)(1,578)(17,048)
Net interest income after provision for loan losses77,552 77,778 118,378 
Other income/expense:
Loan servicing and systems revenue136,368 150,402 111,517 
Education technology, services, and payment processing revenue112,286 80,950 95,258 
Other9,877 44,360 (2,168)
Gain on sale of loans2,989 — — 
Derivative market value adjustments and derivative settlements, net142,925 42,579 34,505 
Total other income/expense404,445 318,291 239,112 
Cost to provide education technology, services, and payment processing services35,545 28,597 27,052 
Operating expenses:
Salaries and benefits149,414 143,781 115,791 
Depreciation and amortization16,956 17,612 20,184 
Other expenses39,499 37,857 36,698 
Total operating expenses205,869 199,250 172,673 
Income before income taxes240,583 168,222 157,765 
Income tax expense(55,697)(39,075)(34,861)
Net income184,886 129,147 122,904 
Net loss attributable to noncontrolling interests1,761 3,536 694 
Net income attributable to Nelnet, Inc.$186,647 132,683 123,598 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$4.91 3.46 3.20 
Weighted average common shares outstanding - basic and diluted38,041,834 38,352,942 38,603,555 



Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
March 31, 2022December 31, 2021March 31, 2021
Assets:
Loans and accrued interest receivable, net$17,621,576 18,335,197 19,737,530 
Cash, cash equivalents, and investments1,812,363 1,714,482 1,117,328 
Restricted cash1,014,881 1,068,626 802,962 
Goodwill and intangible assets, net191,636 194,121 208,810 
Other assets349,285 365,615 300,578 
Total assets$20,989,741 21,678,041 22,167,208 
Liabilities:
Bonds and notes payable$16,736,701 17,631,089 18,754,715 
Bank deposits484,047 344,315 111,830 
Other liabilities683,930 749,799 551,562 
Total liabilities17,904,678 18,725,203 19,418,107 
Equity:
Total Nelnet, Inc. shareholders' equity3,088,313 2,951,206 2,752,190 
Noncontrolling interests(3,250)1,632 (3,089)
Total equity3,085,063 2,952,838 2,749,101 
Total liabilities and equity$20,989,741 21,678,041 22,167,208 
Contacts:
Media, Ben Kiser, 402.458.3024, or Investors, Phil Morgan, 402.458.3038, both of Nelnet, Inc.



Non-GAAP Disclosures
(Dollars in thousands, except share data)
(unaudited)
Non-GAAP financial measures disclosed by management are meant to provide additional information and insight relative to business trends to investors and, in certain cases, to present financial information as measured by rating agencies and other users of financial information. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies. 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.
Net income, excluding derivative market value adjustments
Three months ended March 31,
20222021
GAAP net income attributable to Nelnet, Inc.$186,647 123,598 
Realized and unrealized derivative market value adjustments (a)(145,734)(38,809)
Tax effect (b)34,976 9,314 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments $75,889 94,103 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$4.91 3.20 
Realized and unrealized derivative market value adjustments (a)(3.83)(1.01)
Tax effect (b)0.91 0.25 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments $1.99 2.44 

(a)    "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. "Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the company's derivative instruments based on their contractual terms.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria is met. Management has structured all of the company’s derivative transactions with the intent that each is economically effective; however, the company’s derivative instruments do not qualify for hedge accounting. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.
The company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations. Accordingly, the company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the company’s performance and in presentations with credit rating agencies, lenders, and investors.
(b)    The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.







For Release: May 9, 2022
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the first quarter 2022
(All dollars are in thousands, except per share amounts, unless otherwise noted)
The following information should be read in connection with Nelnet, Inc.'s (the “Company's”) press release for first quarter 2022 earnings, dated May 9, 2022, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the "Q1 2022 10-Q Quarterly Report").
Forward-looking and cautionary statements
This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “scheduled,” “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.
The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report"), the "Risk Factors" section of the Company's Q1 2022 10-Q Quarterly Report, and subsequent reports filed by the Company with the SEC 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 combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;
•risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and any future servicing contracts with the U.S. Department of Education (the "Department"), which current contracts accounted for 29 percent of the Company's revenue in 2021, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the Company may not be successful in obtaining any of such potential new contracts, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), private education, and consumer loans;
•loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, 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 loan prepayment or default rates;
•financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from unanticipated repayment trends on student loans in the 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 loan interest income due to the discontinuation of new FFELP loan originations in 2010 and government initiatives or
1

proposals to consolidate existing FFELP loans to Federal Direct Loan Program loans, otherwise encourage or allow FFELP loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs;
•risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to a disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;
•uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
•risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration;
•risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;
•risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom), acquisitions, and other activities, including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;
•risks and uncertainties associated with climate change, including extreme weather events and related natural disasters, which could result in increased loan portfolio credit risks and other asset and operational risks, as well as risks and uncertainties associated with efforts to address climate change; and
•risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, reputational and other risks, including the risk of increased regulatory costs resulting from the politicization of student loan servicing, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.
All forward-looking statements contained in this supplement are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by law.
2

Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)
Three months ended
March 31, 2022December 31, 2021March 31, 2021
Interest income:
Loan interest$111,377 112,118 124,117 
Investment interest13,819 12,376 4,986 
Total interest income125,196 124,494 129,103 
Interest expense on bonds and notes payable and bank deposits48,079 48,294 27,773 
Net interest income77,117 76,200 101,330 
Less negative provision for loan losses(435)(1,578)(17,048)
Net interest income after provision for loan losses77,552 77,778 118,378 
Other income/expense:
Loan servicing and systems revenue136,368 150,402 111,517 
Education technology, services, and payment processing revenue112,286 80,950 95,258 
Other9,877 44,360 (2,168)
Gain on sale of loans2,989 — — 
Derivative settlements, net(2,809)(5,780)(4,304)
Derivative market value adjustments, net145,734 48,359 38,809 
Total other income/expense404,445 318,291 239,112 
Cost to provide education technology, services, and payment processing services35,545 28,597 27,052 
Operating expenses:
Salaries and benefits149,414 143,781 115,791 
Depreciation and amortization16,956 17,612 20,184 
Other expenses39,499 37,857 36,698 
Total operating expenses205,869 199,250 172,673 
Income before income taxes240,583 168,222 157,765 
Income tax expense(55,697)(39,075)(34,861)
Net income184,886 129,147 122,904 
Net loss attributable to noncontrolling interests1,761 3,536 694 
Net income attributable to Nelnet, Inc.$186,647 132,683 123,598 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$4.91 3.46 3.20 
Weighted average common shares outstanding - basic and diluted38,041,834 38,352,942 38,603,555 

3

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
March 31, 2022December 31, 2021March 31, 2021
Assets:
Loans and accrued interest receivable, net$17,621,576 18,335,197 19,737,530 
Cash, cash equivalents, and investments1,812,363 1,714,482 1,117,328 
Restricted cash1,014,881 1,068,626 802,962 
Goodwill and intangible assets, net191,636 194,121 208,810 
Other assets349,285 365,615 300,578 
Total assets$20,989,741 21,678,041 22,167,208 
Liabilities:
Bonds and notes payable$16,736,701 17,631,089 18,754,715 
Bank deposits484,047 344,315 111,830 
Other liabilities683,930 749,799 551,562 
Total liabilities17,904,678 18,725,203 19,418,107 
Equity:
Total Nelnet, Inc. shareholders' equity3,088,313 2,951,206 2,752,190 
Noncontrolling interests(3,250)1,632 (3,089)
Total equity3,085,063 2,952,838 2,749,101 
Total liabilities and equity$20,989,741 21,678,041 22,167,208 

4

Overview
The Company is a diverse, innovative company with a purpose to serve others and a vision to make dreams possible. The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in early-stage and emerging growth companies, real estate, and renewable energy (solar). The Company is also actively expanding its private education and consumer loan portfolios, and in November 2020 launched Nelnet Bank.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
The Company prepares its financial statements and presents its financial results in accordance with GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. A reconciliation of the Company's GAAP net income to net income, excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, is provided below.
Three months ended
March 31, 2022December 31, 2021March 31, 2021
GAAP net income attributable to Nelnet, Inc.$186,647 132,683 123,598 
Realized and unrealized derivative market value adjustments(145,734)(48,359)(38,809)
Tax effect (a)34,976 11,606 9,314 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$75,889 95,930 94,103 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$4.91 3.46 3.20 
Realized and unrealized derivative market value adjustments(3.83)(1.26)(1.01)
Tax effect (a)0.91 0.30 0.25 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$1.99 2.50 2.44 

(a) The tax effects are calculated by multiplying the realized and unrealized derivative market value adjustments by the applicable statutory income tax rate.
(b) "Derivative market value adjustments" includes both the realized portion of gains and losses (corresponding to variation margin received or paid on derivative instruments that are settled daily at a central clearinghouse) and the unrealized portion of gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP. "Derivative market value adjustments" does not include "derivative settlements" that represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria is met. Management has structured all of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting. As a result, the change in fair value of derivative instruments is reported in current period earnings with no consideration for the corresponding change in fair value of the hedged item. Under GAAP, the cumulative net realized and unrealized gain or loss caused by changes in fair values of derivatives in which the Company plans to hold to maturity will equal zero over the life of the contract. However, the net realized and unrealized gain or loss during any given reporting period fluctuates significantly from period to period.
The Company believes these point-in-time estimates of asset and liability values related to its derivative instruments that are subject to interest rate fluctuations are subject to volatility mostly due to timing and market factors beyond the control of management, and affect the period-to-period comparability of the results of operations. Accordingly, the Company’s management utilizes operating results excluding these items for comparability purposes when making decisions regarding the Company’s performance and in presentations with credit rating agencies, lenders, and investors. Consequently, the Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.

5

Operating Segments
The Company's reportable operating segments are described in note 1 of the notes to consolidated financial statements included in the 2021 Annual Report. They include:
•Loan Servicing and Systems ("LSS") - referred to as Nelnet Diversified Services ("NDS")
•Education Technology, Services, and Payment Processing ("ETS&PP") - referred to as Nelnet Business Services ("NBS")
•Asset Generation and Management ("AGM")
•Nelnet Bank
The Company earns fee-based revenue through its NDS and NBS operating segments. The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM operating segment. This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes. The Company actively works to maximize the amount and timing of cash flows generated by its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.
On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation ("FDIC") and for a bank charter from the Utah Department of Financial Institutions ("UDFI") in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. Nelnet Bank operates as an internet industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.
Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate"). Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured and other corporate related debt transactions.
The information below provides the operating results (net income before taxes) for each reportable operating segment and Corporate and Other Activities for the three months ended March 31, 2022 and 2021.
Three months ended March 31,
20222021Certain Items Impacting Comparability (All dollar amounts below are pre-tax)
NDS$12,094 16,084 
NBS33,113 30,974 
AGM213,429 141,609 
•A net gain of $145.7 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first quarter of 2022 as compared to a net gain of $38.8 million for the same period in 2021

•An increase of $6.5 million in investment interest income in 2022 as compared to 2021 primarily from beneficial interest investments

•A decrease of $23.8 million in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid

•The recognition of $17.5 million negative provision for loan losses on AGM’s loan portfolio in the first quarter of 2021, as compared to a negative provision of $0.9 million for the same period in 2022

•A decrease of $8.2 million in net interest income due to the decrease in the average balance of loans and the decrease in fixed rate floor income in the first quarter of 2022 as compared to 2021

•The recognition of $3.0 million on the sale of loans during the first quarter of 2022
Nelnet Bank961 (1,254)
Corporate(19,013)(29,650)
•The recognition of a net loss of $13.1 million for the first quarter of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $22.2 million for the same period in 2021
Net income before taxes240,583 157,765 
Income tax expense(55,697)(34,861)
Net loss attributable to noncontrolling interests1,761 694 
Net income$186,647 123,598 
6

Recent Developments
On April 19, 2022, the Department issued a press release, and the Department’s Office of Federal Student Aid (“FSA”) posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment (“IDR”) plans for federal student loans. In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan before the Department completes implementation of these changes, which the Department estimates to be no sooner than January 1, 2023. The Company currently believes these announced changes could significantly increase FFEL Program loan prepayments.
A significant increase in FFEL Program loan prepayments could have a materially adverse impact in future periods on the Company’s net interest income in its AGM operating segment, FFELP servicing revenue in the Company’s LSS operating segment, investment advisory services revenue earned by the Company’s SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on the Company’s FFELP loan asset-backed securities investments. In addition, student loan forgiveness under the Federal Direct Loan Program as a result of the changes described in the announcements could have a materially adverse impact on future revenue earned by the LSS operating segment under the Company’s government servicing contracts, including software services revenue earned by the Company in providing remote hosted services to other government servicers.
See “Risk Factors” in the Company's Q1 2022 10-Q Quarterly Report for additional information.

7

Segment Reporting
The following tables include the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.
 Three months ended March 31, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$67 339 118,598 3,030 3,992 (828)125,196 
Interest expense24 — 46,003 856 2,026 (828)48,079 
Net interest income43 339 72,595 2,174 1,966 — 77,117 
Less (negative provision) provision for loan losses— — (864)429 — — (435)
Net interest income after provision for loan losses43 339 73,459 1,745 1,966 — 77,552 
Other income/expense:
Loan servicing and systems revenue136,368 — — — — — 136,368 
Intersegment revenue8,480 3 — — — (8,483)— 
Education technology, services, and payment processing revenue— 112,286 — — — — 112,286 
Other740 — 6,511 1,500 1,125 — 9,877 
Gain on sale of loans— — 2,989 — — — 2,989 
Derivative settlements, net— — (2,809)— — — (2,809)
Derivative market value adjustments, net— — 145,734 — — — 145,734 
Total other income/expense145,588 112,289 152,425 1,500 1,125 (8,483)404,445 
Cost of services— 35,545 — — — — 35,545 
Operating expenses:
Salaries and benefits91,972 31,286 591 1,554 24,012 — 149,414 
Depreciation and amortization4,954 2,315 — 3 9,684 — 16,956 
Other expenses16,213 5,764 3,033 682 13,804 — 39,499 
Intersegment expenses, net20,398 4,605 8,831 45 (25,396)(8,483)— 
Total operating expenses133,537 43,970 12,455 2,284 22,104 (8,483)205,869 
Income (loss) before income taxes12,094 33,113 213,429 961 (19,013)— 240,583 
Income tax (expense) benefit(2,903)(7,947)(51,223)(223)6,598 — (55,697)
Net income (loss)9,191 25,166 162,206 738 (12,415)— 184,886 
Net loss attributable to noncontrolling interests— — — — 1,761 — 1,761 
Net income (loss) attributable to Nelnet, Inc.$9,191 25,166 162,206 738 (10,654)— 186,647 



8

Three months ended December 31, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$42 258 118,753 2,242 4,423 (1,222)124,494 
Interest expense24 — 48,636 499 358 (1,222)48,294 
Net interest income18 258 70,117 1,743 4,065 — 76,200 
Less (negative provision) provision for loan losses— — (1,994)416 — — (1,578)
Net interest income after provision for loan losses18 258 72,111 1,327 4,065 — 77,778 
Other income/expense:
Loan servicing and systems revenue150,402 — — — — — 150,402 
Intersegment revenue8,587 3 — — — (8,590)— 
Education technology, services, and payment processing revenue— 80,950 — — — — 80,950 
Other765 (14)38,820 237 4,552 — 44,360 
Gain on sale of loans— — — — — — — 
Derivative settlements, net— — (5,780)— — — (5,780)
Derivative market value adjustments, net— — 48,359 — — — 48,359 
Total other income/expense159,754 80,939 81,399 237 4,552 (8,590)318,291 
Cost of services— 28,597 — — — — 28,597 
Operating expenses:
Salaries and benefits87,255 29,892 542 1,086 25,006 — 143,781 
Depreciation and amortization5,239 2,615 — — 9,755 — 17,612 
Other expenses13,424 5,254 724 549 17,910 — 37,857 
Intersegment expenses, net19,964 4,324 9,241 35 (24,974)(8,590)— 
Total operating expenses125,882 42,085 10,507 1,670 27,697 (8,590)199,250 
Income (loss) before income taxes33,890 10,515 143,003 (106)(19,080)— 168,222 
Income tax (expense) benefit(8,134)(2,523)(34,321)24 5,879 — (39,075)
Net income (loss)25,756 7,992 108,682 (82)(13,201)— 129,147 
Net loss attributable to noncontrolling interests— — — — 3,536 — 3,536 
Net income (loss) attributable to Nelnet, Inc.$25,756 7,992 108,682 (82)(9,665)— 132,683 



















9

 Three months ended March 31, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management		Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$34 263 126,402 1,376 1,246 (218)129,103 
Interest expense23 — 26,950 194 824 (218)27,773 
Net interest income11 263 99,452 1,182 422 — 101,330 
Less (negative provision) provision for loan losses— — (17,470)422 — — (17,048)
Net interest income after provision for loan losses11 263 116,922 760 422 — 118,378 
Other income/expense:
Loan servicing and systems revenue111,517 — — — — — 111,517 
Intersegment revenue8,268 3 — — — (8,271)— 
Education technology, services, and payment processing revenue— 95,258 — — — — 95,258 
Other1,113 — 2,881 22 (6,184)— (2,168)
Gain on sale of loans— — — — — — — 
Derivative settlements, net— — (4,304)— — — (4,304)
Derivative market value adjustments, net— — 38,809 — — — 38,809 
Total other income/expense120,898 95,261 37,386 22 (6,184)(8,271)239,112 
Cost of services— 27,052 — — — — 27,052 
Operating expenses:
Salaries and benefits66,458 25,941 495 1,488 21,409 — 115,791 
Depreciation and amortization8,192 3,071 — — 8,920 — 20,184 
Other expenses13,285 4,822 3,777 545 14,272 — 36,698 
Intersegment expenses, net16,890 3,664 8,427 3 (20,713)(8,271)— 
Total operating expenses104,825 37,498 12,699 2,036 23,888 (8,271)172,673 
Income (loss) before income taxes16,084 30,974 141,609 (1,254)(29,650)— 157,765 
Income tax (expense) benefit(3,860)(7,434)(33,987)286 10,133 — (34,861)
Net income (loss)12,224 23,540 107,622 (968)(19,517)— 122,904 
Net loss attributable to noncontrolling interests— — — — 694 — 694 
Net income (loss) attributable to Nelnet, Inc.$12,224 23,540 107,622 (968)(18,823)— 123,598 











10

Loan Servicing and Systems Revenue
The following table provides disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.
Three month ended
March 31, 2022December 31, 2021March 31, 2021
Government servicing - Nelnet$61,049 59,736 34,872 
Government servicing - Great Lakes48,076 59,560 43,302 
Private education and consumer loan servicing12,873 12,739 8,548 
FFELP servicing4,248 4,351 4,670 
Software services7,400 11,821 8,454 
Outsourced services and other2,722 2,195 11,671 
Loan servicing and systems revenue$136,368 150,402 111,517 

Loan Servicing Volumes
As of
December 31,
2020		March 31,
2021		June 30,
2021		September 30,
2021		December 31,
2021		March 31,
2022
Servicing volume (dollars in millions):
Nelnet Servicing:
Government$191,678 195,875 195,030 198,743 215,797 243,011 
FFELP30,763 30,084 29,361 28,244 26,916 25,646 
Private and consumer16,226 21,397 24,758 24,229 23,702 23,433 
Great Lakes:
Government251,570 257,806 257,420 262,311 262,605 264,642 
Total$490,237 505,162 506,569 513,527 529,020 556,732 
Number of servicing borrowers:
Nelnet Servicing:
Government5,645,946 5,664,094 5,636,781 5,791,521 6,399,414 6,978,548 
FFELP1,300,677 1,233,461 1,198,863 1,150,214 1,092,066 1,034,913 
Private and consumer636,136 882,477 1,039,537 1,097,252 1,065,439 1,030,863 
Great Lakes:
Government7,605,984 7,637,270 7,616,270 7,778,535 7,797,106 7,749,312 
Total15,188,743 15,417,302 15,491,451 15,817,522 16,354,025 16,793,636 
Number of remote hosted borrowers:6,555,841 4,307,342 4,338,570 4,548,541 4,799,368 5,487,943 


11

Education Technology, Services, and Payment Processing
The following table provides disaggregated revenue by servicing offering for the Education Technology, Services, and Payment Processing operating segment.
Three months ended
March 31, 2022December 31, 2021March 31, 2021
Tuition payment plan services$30,716 24,264 29,550 
Payment processing38,071 29,182 33,038 
Education technology and services43,251 27,222 32,527 
Other248 282 143 
Education technology, services, and payment processing revenue$112,286 80,950 95,258 
Other Income/Expense
The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income:
 Three months ended
 March 31, 2022December 31, 2021March 31, 2021
Income/gains from investments, net$11,856 51,451 8,498 
Borrower late fee income2,431 1,745 442 
ALLO preferred return2,117 2,043 2,321 
Investment advisory services1,282 1,531 2,697 
Negative provision for beneficial interests investment— — 2,436 
Impairment expense— (4,137)— 
Loss from ALLO voting membership interest investment(13,130)(10,528)(22,219)
Loss from solar investments(1,030)(2,757)(1,679)
Other6,351 5,012 5,336 
  Other income$9,877 44,360 (2,168)
Derivative Settlements
The following table summarizes the components of "derivative settlements, net" included in the attached consolidated statements of income.
 Three months ended
 March 31, 2022December 31, 2021March 31, 2021
1:3 basis swaps$396 (699)(19)
Interest rate swaps - floor income hedges(3,205)(5,081)(4,285)
Total derivative settlements - expense$(2,809)(5,780)(4,304)


12

Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable and allowance for loan losses consisted of the following:
As ofAs ofAs of
 March 31, 2022December 31, 2021March 31, 2021
Non-Nelnet Bank:
Federally insured student loans:
Stafford and other$3,741,495 3,904,000 4,283,566 
Consolidation12,553,882 13,187,047 14,321,817 
Total16,295,377 17,091,047 18,605,383 
Private education loans278,537 299,442 314,048 
Consumer loans44,713 51,301 110,792 
Non-Nelnet Bank loans16,618,627 17,441,790 19,030,223 
Nelnet Bank:
Federally insured student loans82,789 88,011 — 
Private education loans285,468 169,890 79,231 
Nelnet Bank loans368,257 257,901 79,231 
 
Accrued interest receivable774,774 788,552 794,561 
Loan discount, net of unamortized loan premiums and deferred origination costs(22,257)(25,933)(9,091)
Allowance for loan losses:
Non-Nelnet Bank:
Federally insured loans(95,995)(103,381)(121,846)
Private education loans(14,622)(16,143)(20,670)
Consumer loans(5,710)(6,481)(14,134)
Non-Nelnet Bank allowance for loan losses(116,327)(126,005)(156,650)
Nelnet Bank:
Federally insured loans(247)(268)— 
Private education loans(1,251)(840)(744)
Nelnet Bank allowance for loan losses(1,498)(1,108)(744)
 $17,621,576 18,335,197 19,737,530 

The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.
As ofAs ofAs of
March 31, 2022December 31, 2021March 31, 2021
Non-Nelnet Bank:
Federally insured student loans (a)0.59 %0.60 %0.65 %
Private education loans5.25 %5.39 %6.58 %
Consumer loans12.77 %12.63 %12.76 %
Nelnet Bank:
Federally insured student loans (a)0.30 %0.30 %— 
Private education loans0.44 %0.49 %0.94 %
(a) As of March 31, 2022, December 31, 2021, and March 31, 2021, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 21.6%, 22.2%, and 25.5%, respectively, and for Nelnet Bank as of March 31, 2022 and December 31, 2021 was 11.8% and 12.1%, respectively.

13

Loan Activity
The following table sets forth the activity of the Company's loan portfolios:
 Three months ended
 March 31, 2022December 31, 2021March 31, 2021
Non-Nelnet Bank:
Beginning balance$17,441,790 18,437,694 19,559,108 
Loan acquisitions:
Federally insured student loans10,202 70,775 64,731 
Private education loans1,026 1,177 23,038 
Consumer loans18,522 20,604 19,456 
Total loan acquisitions29,750 92,556 107,225 
Repayments, claims, capitalized interest, participations, and other, net(447,140)(711,459)(406,565)
Loans lost to external parties(387,648)(376,981)(229,545)
Consumer loans sold(18,125)(20)— 
Ending balance$16,618,627 17,441,790 19,030,223 
Nelnet Bank:
Beginning balance:$257,901 192,325 17,543 
Private education loan originations130,342 80,588 64,909 
Repayments(18,394)(14,318)(1,995)
Sales to AGM segment(1,592)(694)(1,226)
Ending balance:$368,257 257,901 79,231 
The Company has also purchased partial ownership in certain private education, consumer, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of March 31, 2022, the Company’s ownership correlates to approximately $680 million, $190 million, and $450 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.

14

Loan Spread Analysis
The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets.
Three months ended
 March 31, 2022December 31, 2021March 31, 2021
Variable loan yield, gross2.75 %2.62 %2.71 %
Consolidation rebate fees(0.85)(0.85)(0.84)
Discount accretion, net of premium and deferred origination costs amortization (a)0.03 0.02 0.00 
Variable loan yield, net1.93 1.79 1.87 
Loan cost of funds - interest expense (b)(1.09)(1.06)(1.07)
Loan cost of funds - derivative settlements (c) (d)0.01 (0.02)(0.00 )
Variable loan spread0.85 0.71 0.80 
Fixed rate floor income, gross0.68 0.76 0.74 
Fixed rate floor income - derivative settlements (c) (e)(0.08)(0.11)(0.09)
Fixed rate floor income, net of settlements on derivatives0.60 0.65 0.65 
Core loan spread1.45 %1.36 %1.45 %
Average balance of AGM's loans$17,208,90918,063,78719,494,002
Average balance of AGM's debt outstanding16,773,69817,777,23019,156,797
(a)    During the fourth quarter of 2021, the Company changed its estimate of the constant prepayment rate used to amortize/accrete federally insured loan premium/discounts for its consolidation loans from 3 percent to 4 percent, which resulted in a $6.2 million increase to the Company’s net loan discount balance and a corresponding decrease to interest income. The impact of this adjustment was excluded from the above table.
(b)    During the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest expense on bonds and notes payable and bank deposits" in the consolidated statements of income and the impact of this reduction to interest expense was excluded from the table above.
(c)    Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms. Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income. The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the Company’s net interest income (loan spread) as presented in this table. The Company reports this non-GAAP information because the Company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance. See "Derivative Settlements" included in this supplement for the net settlement activity recognized by the Company for each type of derivative for the periods presented in the 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
March 31, 2022December 31, 2021March 31, 2021
Core loan spread1.45 %1.36 %1.45 %
Derivative settlements (1:3 basis swaps)(0.01)0.02 0.00 
Derivative settlements (fixed rate floor income)0.08 0.11 0.09 
Loan spread1.52 %1.49 %1.54 %

(d)    Derivative settlements consist of net settlements received (paid) related to the Company’s 1:3 basis swaps.
(e)    Derivative settlements consist of net settlements paid related to the Company’s floor income interest rate swaps.
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A trend analysis of AGM's core and variable loan spreads is summarized below.
(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.
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
 March 31, 2022December 31, 2021March 31, 2021
Fixed rate floor income, gross$28,993 34,577 35,539 
Derivative settlements (a)(3,205)(5,081)(4,285)
Fixed rate floor income, net$25,788 29,496 31,254 
Fixed rate floor income contribution to spread, net0.60 %0.65 %0.65 %

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

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Fixed Rate Floor Income
The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of March 31, 2022.
Fixed interest rate rangeBorrower/lender weighted average yieldEstimated variable conversion rate (a)Loan balance
< 3.0%2.88%0.24%$896,417 
3.0 - 3.49%3.19%0.55%1,216,340 
3.5 - 3.99%3.65%1.01%1,170,382 
4.0 - 4.49%4.19%1.55%881,110 
4.5 - 4.99%4.71%2.07%547,249 
5.0 - 5.49%5.22%2.58%368,303 
5.5 - 5.99%5.67%3.03%239,988 
6.0 - 6.49%6.19%3.55%277,698 
6.5 - 6.99%6.70%4.06%274,368 
7.0 - 7.49%7.17%4.53%102,274 
7.5 - 7.99%7.71%5.07%189,295 
8.0 - 8.99%8.18%5.54%444,724 
> 9.0%
9.05%6.41%172,229 
  $6,780,377 

(a)    The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of March 31, 2022, the weighted average estimated variable conversion rate was 1.97% and the short-term interest rate was 23 basis points.
The following table summarizes the outstanding derivative instruments as of March 31, 2022 used by AGM to economically hedge loans earning fixed rate floor income.
MaturityNotional amountWeighted average fixed rate paid by the Company (a)
2023$750,000 0.30 %
20242,500,000 0.35 
2025500,000 0.35 
2026500,000 1.02 
2031100,000 1.53 
 $4,350,000 0.44 %

(a)    For all interest rate derivatives, the Company receives discrete three-month LIBOR.
On April 28, 2022, the Company terminated $1.25 billion in notional amount of derivatives ($500 million, $250 million, and $500 million that had maturity dates in 2023, 2024, and 2025, respectively) that are included in the table above.
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