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Form 8-K NELNET INC For: Aug 08

August 8, 2022 4:18 PM EDT

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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)
August 8, 2022
nni-20220808_g1.jpg
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 August 8, 2022, Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended June 30, 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 June 30, 2022, which was made available on the Company's website at www.nelnetinvestors.com on August 8, 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 June 30, 2022 filed with the SEC on August 8, 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: August 8, 2022
NELNET, INC.
By:    /s/ JAMES D. KRUGER
Name:    James D. Kruger
Title:    Chief Financial Officer




Nelnet Reports Second Quarter 2022 Results
LINCOLN, Neb., August 8, 2022 - Nelnet (NYSE: NNI) today reported GAAP net income of $85.1 million, or $2.26 per share, for the second quarter of 2022, compared with GAAP net income of $83.9 million, or $2.16 per share, for the same period a year ago.
Net income, excluding derivative market value adjustments1, was $54.4 million, or $1.44 per share, for the second quarter of 2022, compared with $85.1 million, or $2.20 per share, for the same period in 2021.
"Our strong second quarter results reflect our long-term focus,” said Jeff Noordhoek, chief executive officer of Nelnet. "In the quarter, we made several investments for long-term growth and value creation, including product and technology investments to serve our customers well into the future. Our core loan servicing and payment processing businesses increased revenue, added customers, and made investments in product development, which also compressed near-term margins. We will continue to deploy capital to create long-term value in our existing businesses, including investments to support ALLO’s expansion, Nelnet Bank, and our solar capabilities with the recent acquisition of GRNE Solar.”
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 $70.7 million during the second quarter of 2022, compared with $81.3 million for the same period a year ago. The company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. The company recognized income from derivative settlements of $4.6 million during the second quarter of 2022, compared with an expense of $5.4 million for the same period in 2021. Derivative settlements for each applicable period should be evaluated with the company's net interest income. Net interest income and derivative settlements decreased to $75.3 million in the second quarter of 2022, compared with $75.9 million for the same period in 2021, due to the expected decrease in the average balance of loans outstanding from $19.0 billion to $16.4 billion, respectively. This decrease was partially offset by an increase in core loan spread.
Core loan spread2, which includes the impact of derivative settlements, increased to 1.61 percent for the quarter ended June 30, 2022, compared with 1.41 percent for the same period in 2021. Core loan spread was positively impacted for the three months ended June 30, 2022 by an increase in interest rates during the quarter. In an increasing interest rate environment, student loan spread increases in the short term because of the timing of interest rate resets on the company's assets occurring daily in contrast to the timing of the interest rate resets on the company's debt that occurs either monthly or quarterly.
AGM recognized a provision for loan losses in the second quarter of 2022 of $8.8 million ($6.7 million after tax), compared with $0.3 million ($0.2 million after tax) in the second quarter of 2021. In addition, in the second quarter of 2022, AGM recognized $40.4 million ($30.7 million after tax) in income related to changes in the fair value of derivative instruments that do not qualify for hedge accounting, and in the second quarter of 2021 recognized a gain of $15.3 million (or $11.6 million after tax, or $0.30 per share) from the sale of a portfolio of consumer loans.
Net income after tax for the AGM segment was $75.5 million for the three months ended June 30, 2022, compared with $60.0 million for the same period in 2021.
Nelnet Bank
As of June 30, 2022, Nelnet Bank had a $423.6 million loan portfolio, consisting of $346.1 million of private education loans and $77.4 million of Federal Family Education Loan (FFEL) Program loans, and had $751.3 million of deposits. Nelnet Bank's net income after tax for the quarter ended June 30, 2022 was $0.4 million, as compared to a net loss of $0.2 million for the same period in 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.

2 Core loan spread 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.



Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment increased to $124.9 million for the second quarter of 2022, compared with $112.1 million for the same period in 2021, due primarily to an increase in the number of borrowers serviced under the company's contracts with the Department of Education (Department).
As of June 30, 2022, the company was servicing $589.5 billion in government-owned, FFEL Program, private education, and consumer loans for 17.4 million borrowers, as compared to $506.6 billion in servicing volume for 15.5 million borrowers as of June 30, 2021.
The Loan Servicing and Systems segment reported net income after tax of $10.3 million for the three months ended June 30, 2022, compared with $11.8 million for the same period in 2021. Operating margin decreased in the second quarter of 2022 as compared to the same period in 2021 due to costs incurred to prepare for the expected May 1, 2022 expiration of the CARES Act benefits on government-owned student loans, which was extended to August 31, 2022.
Education Technology, Services, and Payment Processing
For the second quarter of 2022, revenue from the Education Technology, Services, and Payment Processing operating segment was $91.0 million, an increase from $76.7 million for the same period in 2021. Revenue less direct costs to provide services for the second quarter of 2022 was $60.2 million, as compared to $55.0 million for the same period in 2021.
Net income after tax for the Education Technology, Services, and Payment Processing segment was $11.2 million for the three months ended June 30, 2022, compared with $13.1 million for the same period in 2021. Operating margin decreased for the second 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.
Share Repurchases
During the six months ended June 30, 2022, the company repurchased a total of 938,310 Class A common shares for $78.9 million ($84.12 per share), including 558,257 shares repurchased during the second quarter of 2022 for $46.0 million ($82.46 per share).
Board of Directors Declares Third Quarter Dividend
The Nelnet Board of Directors declared a third 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 September 15, 2022, to shareholders of record at the close of business on September 1, 2022.
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 various 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 second quarter ended June 30, 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 endedSix months ended
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Interest income:
Loan interest$134,706 111,377 122,005 246,083 246,123 
Investment interest16,881 13,819 11,578 30,700 16,563 
Total interest income151,587 125,196 133,583 276,783 262,686 
Interest expense on bonds and notes payable and bank deposits73,642 48,079 49,991 121,721 77,764 
Net interest income77,945 77,117 83,592 155,062 184,922 
Less provision (negative provision) for loan losses9,409 (435)374 8,974 (16,674)
Net interest income after provision for loan losses68,536 77,552 83,218 146,088 201,596 
Other income/expense:
Loan servicing and systems revenue124,873 136,368 112,094 261,241 223,611 
Education technology, services, and payment processing revenue91,031 112,286 76,702 203,317 171,960 
Other12,647 9,877 22,921 22,524 18,317 
Gain on sale of loans— 2,989 15,271 2,989 15,271 
Impairment expense and provision for beneficial interests, net(6,284)— (500)(6,284)1,936 
Derivative market value adjustments and derivative settlements, net45,024 142,925 (6,989)187,949 27,516 
Total other income/expense267,291 404,445 219,499 671,736 458,611 
Cost to provide education technology, services, and payment processing services30,852 35,545 21,676 66,397 48,728 
Operating expenses:
Salaries and benefits141,398 149,414 118,968 290,813 234,759 
Depreciation and amortization18,250 16,956 20,236 35,206 40,419 
Other expenses36,940 39,499 32,587 76,439 69,286 
Total operating expenses196,588 205,869 171,791 402,458 344,464 
Income before income taxes108,387 240,583 109,250 348,969 267,015 
Income tax expense(25,483)(55,697)(26,237)(81,180)(61,098)
Net income82,904 184,886 83,013 267,789 205,917 
Net loss attributable to noncontrolling interests2,225 1,761 854 3,987 1,548 
Net income attributable to Nelnet, Inc.$85,129 186,647 83,867 271,776 207,465 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$2.26 4.91 2.16 7.18 5.36 
Weighted average common shares outstanding - basic and diluted37,710,214 38,041,834 38,741,486 37,875,108 38,672,902 




Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
June 30, 2022December 31, 2021June 30, 2021
Assets:
Loans and accrued interest receivable, net$16,916,344 18,335,197 20,187,670 
Cash, cash equivalents, and investments2,116,949 1,714,482 1,480,946 
Restricted cash1,045,543 1,068,626 864,384 
Goodwill and intangible assets, net219,203 194,121 200,556 
Other assets325,974 365,615 295,307 
Total assets$20,624,013 21,678,041 23,028,863 
Liabilities:
Bonds and notes payable$16,115,269 17,631,089 19,381,835 
Bank deposits588,474 344,315 202,841 
Other liabilities829,125 749,799 615,569 
Total liabilities17,532,868 18,725,203 20,200,245 
Equity:
Total Nelnet, Inc. shareholders' equity3,097,382 2,951,206 2,833,800 
Noncontrolling interests(6,237)1,632 (5,182)
Total equity3,091,145 2,952,838 2,828,618 
Total liabilities and equity$20,624,013 21,678,041 23,028,863 
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 June 30,
20222021
GAAP net income attributable to Nelnet, Inc.$85,129 83,867 
Realized and unrealized derivative market value adjustments (a)(40,401)1,615 
Tax effect (b)9,696 (388)
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments $54,424 85,094 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$2.26 2.16 
Realized and unrealized derivative market value adjustments (a)(1.07)0.04 
Tax effect (b)0.25 — 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments $1.44 2.20 

(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.



Core loan spread
The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets. The spread amounts included in the following table are calculated by using the notional dollar values found in the "Net interest income, net of settlements on derivatives" table on the following page, divided by the average balance of loans or debt outstanding.
 Three months ended June 30,
20222021
Variable loan yield, gross3.59 %2.63 %
Consolidation rebate fees(0.85)(0.84)
Discount accretion, net of premium and deferred origination costs amortization0.03 0.01 
Variable loan yield, net2.77 1.80 
Loan cost of funds - interest expense(1.73)(1.04)
Loan cost of funds - derivative settlements (a) (b)0.02 (0.01)
Variable loan spread1.06 0.75 
Fixed rate floor income, gross0.46 0.78 
Fixed rate floor income - derivative settlements (a) (c)0.09 (0.12)
Fixed rate floor income, net of settlements on derivatives0.55 0.66 
Core loan spread1.61 %1.41 %
Average balance of AGM's loans$16,437,861 18,958,042 
Average balance of AGM's debt outstanding15,923,648 18,656,465 
(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 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.
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,
20222021
Core loan spread1.61 %1.41 %
Derivative settlements (1:3 basis swaps)(0.02)0.01 
Derivative settlements (fixed rate floor income)(0.09)0.12 
Loan spread1.50 %1.54 %
(b)    Derivative settlements consist of net settlements received (paid) related to the company’s 1:3 basis swaps.
(c)    Derivative settlements consist of net settlements received (paid) related to the company’s floor income interest rate swaps.




Net interest income, net of settlements on derivatives
The following table summarizes the components of "net interest income" and "derivative settlements, net" from the AGM segment statements of income.
 Three months ended June 30,
 20222021
Variable interest income, gross$146,911 124,267 
Consolidation rebate fees(34,952)(40,250)
Discount accretion, net of premium and deferred origination costs amortization1,474 427 
Variable interest income, net113,433 84,444 
Interest on bonds and notes payable (68,616)(48,542)
Derivative settlements (basis swaps), net (a)931 (221)
Variable loan interest margin, net of settlements on derivatives (a)45,748 35,681 
Fixed rate floor income, gross18,292 36,639 
Derivative settlements (interest rate swaps), net (a)3,692 (5,153)
Fixed rate floor income, net of settlements on derivatives (a)21,984 31,486 
Core loan interest income (a)67,732 67,167 
Investment interest8,671 8,882 
Intercompany interest(1,092)(128)
Net interest income (net of settlements on derivatives) (a)$75,311 75,921 
(a)    Core loan interest income and net interest income (net of settlements on derivatives) are non-GAAP financial measures. For an explanation of GAAP accounting for derivative settlements and the reasons why the company reports these non-GAAP measures, see footnote (a) to the table immediately under the caption "Core loan spread" above.
A reconciliation of net interest income (net of settlements on derivatives) to net interest income for the company's AGM segment follows.
Three months ended June 30,
20222021
Net interest income (net of settlements on derivatives)$75,311 75,921 
Derivative settlements (1:3 basis swaps)(931)221 
Derivative settlements (fixed rate floor income)(3,692)5,153 
Net interest income$70,688 81,295 


For Release: August 8, 2022
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the second 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 second quarter 2022 earnings, dated August 8, 2022, and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the "Q2 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 Q2 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 various activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;
risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and any future servicing contracts with the U.S. Department of Education (the "Department"), which current contracts accounted for 29 percent of the Company's revenue in 2021, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the Company may not be successful in obtaining any of such potential new contracts, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), private education, and consumer loans;
loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans, and risks from changes in levels of loan prepayment or default rates;
financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from recent market volatility resulting from rising interest rates and other economic pressures and from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay 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
1


loan interest income due to the discontinuation of new FFELP loan originations in 2010 and government initiatives or proposals to consolidate existing FFELP loans to Federal Direct Loan Program loans, otherwise encourage or allow FFELP loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs;
risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to a disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;
uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration;
risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;
risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom), acquisitions, and other activities, including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;
risks and uncertainties associated with climate change, including extreme weather events and related natural disasters, which could result in increased loan portfolio credit risks and other asset and operational risks, as well as risks and uncertainties associated with efforts to address climate change; and
risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, reputational and other risks, including the risk of increased regulatory costs resulting from the politicization of student loan servicing, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.
All forward-looking statements contained in this 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 Six months ended
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Interest income:
Loan interest$134,706 111,377 122,005 246,083 246,123 
Investment interest16,881 13,819 11,578 30,700 16,563 
Total interest income151,587 125,196 133,583 276,783 262,686 
Interest expense on bonds and notes payable and bank deposits73,642 48,079 49,991 121,721 77,764 
Net interest income77,945 77,117 83,592 155,062 184,922 
Less provision (negative provision) for loan losses9,409 (435)374 8,974 (16,674)
Net interest income after provision for loan losses68,536 77,552 83,218 146,088 201,596 
Other income/expense:
Loan servicing and systems revenue124,873 136,368 112,094 261,241 223,611 
Education technology, services, and payment processing revenue91,031 112,286 76,702 203,317 171,960 
Other12,647 9,877 22,921 22,524 18,317 
Gain on sale of loans— 2,989 15,271 2,989 15,271 
Impairment expense and provision for beneficial interests, net(6,284)— (500)(6,284)1,936 
Derivative settlements, net4,623 (2,809)(5,374)1,814 (9,678)
Derivative market value adjustments, net40,401 145,734 (1,615)186,135 37,194 
Total other income/expense267,291 404,445 219,499 671,736 458,611 
Cost to provide education technology, services, and payment processing services30,852 35,545 21,676 66,397 48,728 
Operating expenses:
Salaries and benefits141,398 149,414 118,968 290,813 234,759 
Depreciation and amortization18,250 16,956 20,236 35,206 40,419 
Other expenses36,940 39,499 32,587 76,439 69,286 
Total operating expenses196,588 205,869 171,791 402,458 344,464 
Income before income taxes108,387 240,583 109,250 348,969 267,015 
Income tax expense(25,483)(55,697)(26,237)(81,180)(61,098)
Net income82,904 184,886 83,013 267,789 205,917 
Net loss attributable to noncontrolling interests2,225 1,761 854 3,987 1,548 
Net income attributable to Nelnet, Inc.$85,129 186,647 83,867 271,776 207,465 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$2.26 4.91 2.16 7.18 5.36 
Weighted average common shares outstanding - basic and diluted37,710,214 38,041,834 38,741,486 37,875,108 38,672,902 

3


Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
June 30, 2022December 31, 2021June 30, 2021
Assets:
Loans and accrued interest receivable, net$16,916,344 18,335,197 20,187,670 
Cash, cash equivalents, and investments2,116,949 1,714,482 1,480,946 
Restricted cash1,045,543 1,068,626 864,384 
Goodwill and intangible assets, net219,203 194,121 200,556 
Other assets325,974 365,615 295,307 
Total assets$20,624,013 21,678,041 23,028,863 
Liabilities:
Bonds and notes payable$16,115,269 17,631,089 19,381,835 
Bank deposits588,474 344,315 202,841 
Other liabilities829,125 749,799 615,569 
Total liabilities17,532,868 18,725,203 20,200,245 
Equity:
Total Nelnet, Inc. shareholders' equity3,097,382 2,951,206 2,833,800 
Noncontrolling interests(6,237)1,632 (5,182)
Total equity3,091,145 2,952,838 2,828,618 
Total liabilities and equity$20,624,013 21,678,041 23,028,863 

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, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
The Company prepares its financial statements and presents its financial results in accordance with GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. A reconciliation of the Company's GAAP net income to net income, excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, is provided below.
Three months endedSix months ended
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
GAAP net income attributable to Nelnet, Inc.$85,129 186,647 83,867 271,776 207,465 
Realized and unrealized derivative market value adjustments(40,401)(145,734)1,615 (186,135)(37,194)
Tax effect (a)9,696 34,976 (388)44,672 8,927 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$54,424 75,889 85,094 130,313 179,198 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$2.26 4.91 2.16 7.18 5.36 
Realized and unrealized derivative market value adjustments(1.07)(3.83)0.04 (4.91)(0.96)
Tax effect (a)0.25 0.91 — 1.17 0.23 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$1.44 1.99 2.20 3.44 4.63 

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

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 (income (loss) before income taxes) for each reportable operating segment and Corporate and Other Activities for the three and six months ended June 30, 2022 and 2021.
Three months ended June 30,
20222021Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS$13,488 15,513 
NBS14,687 17,232 
AGM99,348 78,916 
A net gain of $40.4 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the second quarter of 2022 as compared to a net loss of $1.6 million for the same period in 2021
An increase of $8.2 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
A decrease of $10.1 million in net interest income due to the decrease in the average balance of FFELP loans in the second quarter of 2022 as compared to 2021
The recognition of an $8.8 million provision for loan losses in the second quarter of 2022, as compared to $0.3 million for the same period in 2021
The recognition of a gain of $15.3 million on the sale of loans during the second quarter of 2021
Nelnet Bank474 (268)
Corporate(19,609)(2,142)
The recognition of a net loss of $16.9 million for the second quarter of 2022 related to the Company’s investment in ALLO, as compared to net income of $1.1 million for the same period in 2021. During the second quarter of 2021, the Company recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of an error that resulted in a $14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to income
The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)
The recognition of a $15.2 million gain in the second quarter of 2022 as a result of the revaluation of the Company's previously held 50 percent ownership interests in NGWeb Solutions, LLC ("NextGen") (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests
Investment income of $3.1 million in the second quarter of 2022 as compared to $14.3 million for the same period in 2021. During the second quarter of 2021, the Company recognized realized and unrealized gains from certain real estate and venture capital investments, including realized gains of $6.0 million from the sale of certain real estate investments.
Income before income taxes108,387 109,250 
Income tax expense(25,483)(26,237)
Net loss attributable to noncontrolling interests2,225 854 
Net income$85,129 83,867 
6


Six months ended June 30,
20222021Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS$25,580 31,596 
NBS47,800 48,206 
AGM312,777 220,524 
A net gain of $186.1 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first half of 2022 as compared to a net gain of $37.2 million for the same period in 2021
A decrease of $23.8 million in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid
The recognition of provision for loan losses of $8.0 million in the first half of 2022 as compared to negative provision of $17.2 million for the same period in 2021
The recognition of a gain of $15.3 million on the sale of loans during the second quarter of 2021
An increase of $8.4 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
A decrease of $18.4 million in net interest income due to the decrease in the average balance of FFELP loans in the first half of 2022 as compared to 2021
An increase of $6.3 million in investment interest income in 2022 as compared to 2021 primarily related to AGM's investments in private education loan beneficial interests obtained throughout 2021 as securitizations were being completed by the joint venture to purchase and securitize loans sold by Wells Fargo, and an increase of $4.1 million in revenue recognized during the first half of 2022 from serving as administrator and sponsor for such securitizations
Nelnet Bank1,434 (1,519)
Corporate(38,623)(31,792)
The recognition of a net loss of $30.1 million for the first half of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $21.1 million for the same period in 2021
The recognition of a $15.2 million gain in the second quarter of 2022 as a result of the revaluation of the Company's previously held 50 percent ownership interests in NextGen (previously accounted for under the equity method) as a result of the Company purchasing an additional 30 percent ownership interests
Investment income of $11.9 million for the first half of 2022 as compared to $22.8 million for the same period in 2021. During the first half of 2021, the Company recognized realized and unrealized gains from certain real estate and venture capital investments, including realized gains of $11.1 million from the sale of certain real estate investments.
The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)
Income before income taxes348,969 267,015 
Income tax expense(81,180)(61,098)
Net loss attributable to noncontrolling interests3,987 1,548 
Net income$271,776 207,465 
Recent Developments
On April 19, 2022, the Department issued a press release, and the Department’s Office of Federal Student Aid (“FSA”) posted a related public announcement, which together announced, among other things, several adjustments, updates, and other changes under income-driven repayment (“IDR”) plans for federal student loans. In the announcements, the Department and FSA indicated that as part of these changes, any borrower with loans that have accumulated time in repayment, including time in certain forbearances and deferments, of at least 20 or 25 years will see automatic forgiveness, even if the borrower is not currently in an IDR plan, and that if a borrower has a commercially held FFEL Program loan, the borrower can only benefit from these changes if they consolidate their FFEL Program loan to a Federal Direct Loan Program loan before the Department completes implementation of these changes, which the Department estimates to be no sooner than January 1, 2023. In addition, on July 6, 2022, the Department announced the issuance of proposed regulations that would expand major student loan discharge programs under the Higher Education Act through changes related to borrower defense to repayment where there is a dispute with the higher education institution, the Public Service Loan Forgiveness program under the Federal Direct Loan Program, the interest capitalization rules, and closed school discharges, as well as other matters, which changes may also result in an increase in consolidations of FFELP loans into Federal Direct Loan Program loans. The announced changes have increased, and the Company currently believes these announced changes may continue to increase, FFEL Program loan prepayments. In addition, if the federal government and the Department initiate additional loan forgiveness or cancellation, other repayment options or plans, consolidation loan programs, or further extend the suspension of borrower payments under the CARES Act, such initiatives could also increase prepayments.
7


A significant increase in FFEL Program loan prepayments could have a materially adverse impact in future periods on the Company’s net interest income in its AGM operating segment, FFELP servicing revenue in the Company’s LSS operating segment, investment advisory services revenue earned by the Company’s SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on the Company’s FFELP loan asset-backed securities investments. In addition, student loan forgiveness or discharge under the Federal Direct Loan Program as a result of the changes described in the announcements and proposals could have a materially adverse impact on future revenue earned by the LSS operating segment under the Company’s government servicing contracts, including software services revenue earned by the Company in providing remote hosted services to other government servicers.
See “Risk Factors” in the Company's Q2 2022 10-Q Quarterly Report for additional information.

8


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



9


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 provision (negative 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 — — — (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 
Impairment expense and provision for beneficial interests, net— — — — — — — 
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 — 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 



















10


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







11


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

12


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



13


Loan Servicing and Systems Revenue
The following table provides disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.
Three month endedSix months ended
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Government servicing$98,815 109,125 79,239 207,940 157,413 
Private education and consumer loan servicing12,122 12,873 12,816 24,995 21,364 
FFELP servicing4,011 4,248 4,703 8,259 9,373 
Software services7,907 7,400 7,374 15,308 15,827 
Outsourced services and other2,018 2,722 7,962 4,739 19,634 
Loan servicing and systems revenue$124,873 136,368 112,094 261,241 223,611 
Loan Servicing Volumes
As of
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
March 31,
2022
June 30,
2022
Servicing volume (dollars in millions):
Government$443,248 453,681 452,450 461,054 478,402 507,653 542,398 
FFELP30,763 30,084 29,361 28,244 26,916 25,646 24,224 
Private and consumer16,226 21,397 24,758 24,229 23,702 23,433 22,838 
Total$490,237 505,162 506,569 513,527 529,020 556,732 589,460 
Number of servicing borrowers:
Government13,251,930 13,301,364 13,253,051 13,570,056 14,196,520 14,727,860 15,426,607 
FFELP1,300,677 1,233,461 1,198,863 1,150,214 1,092,066 1,034,913 977,785 
Private and consumer636,136 882,477 1,039,537 1,097,252 1,065,439 1,030,863 998,454 
Total15,188,743 15,417,302 15,491,451 15,817,522 16,354,025 16,793,636 17,402,846 
Number of remote hosted borrowers:6,555,841 4,307,342 4,338,570 4,548,541 4,799,368 5,487,943 5,738,381 
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 endedSix months ended
June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Tuition payment plan services$27,637 30,716 26,538 58,352 56,088 
Payment processing27,968 38,071 25,008 66,039 58,046 
Education technology and services34,956 43,251 24,930 78,207 57,457 
Other470 248 226 719 369 
Education technology, services, and payment processing revenue$91,031 112,286 76,702 203,317 171,960 
14


Other Income/Expense
The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income:
 Three months endedSix months ended
 June 30, 2022March 31, 2022June 30, 2021June 30, 2022June 30, 2021
Income/gains from investments, net$18,127 11,856 15,591 29,983 24,089 
Borrower late fee income2,436 2,431 744 4,867 1,184 
ALLO preferred return2,140 2,117 2,020 4,257 4,342 
Administration/sponsor fee income2,012 2,123 — 4,134 — 
Investment advisory services1,482 1,282 1,145 2,764 3,842 
Loss from ALLO voting membership interest investment(16,941)(13,130)1,094 (30,071)(21,125)
Loss from solar investments(1,854)(1,030)(2,302)(2,884)(3,982)
Other5,245 4,228