NELNET INC, 10-Q filed on 11/5/2020
Quarterly Report
v3.20.2
Cover Page - shares
9 Months Ended
Sep. 30, 2020
Oct. 31, 2020
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 001-31924  
Entity Registrant Name NELNET, INC.  
Entity Incorporation, State or Country Code NE  
Entity Tax Identification Number 84-0748903  
Entity Address, Address Line One 121 South 13th Street, Suite 100  
Entity Address, City or Town Lincoln,  
Entity Address, State or Province NE  
Entity Address, Postal Zip Code 68508  
City Area Code 402  
Local Phone Number 458-2370  
Title of 12(b) Security Class A Common Stock, Par Value $0.01 per Share  
Trading Symbol NNI  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
Entity Central Index Key 0001258602  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Common Class A    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   27,169,876
Common Class B    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   11,171,609
v3.20.2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Assets:    
Loans and accrued interest receivable (net of allowance for loan losses of $185,899 and $61,914, respectively) $ 20,076,542 $ 21,402,868
Cash and cash equivalents:    
Cash and cash equivalents - not held at a related party 31,998 13,922
Cash and cash equivalents - held at a related party 64,318 119,984
Total cash and cash equivalents 96,316 133,906
Investments 476,827 247,099
Restricted cash 519,143 650,939
Restricted cash - due to customers 286,082 437,756
Accounts receivable (net of allowance for doubtful accounts of $3,731 and $4,455, respectively) 69,916 115,391
Goodwill 156,912 156,912
Intangible assets, net 58,701 81,532
Property and equipment, net 360,490 348,259
Other assets 121,597 134,308
Total assets 22,222,526 23,708,970
Liabilities:    
Bonds and notes payable 19,215,053 20,529,054
Accrued interest payable 29,612 47,285
Other liabilities 288,948 303,781
Due to customers 286,082 437,756
Total liabilities 19,819,695 21,317,876
Commitments and contingencies
Nelnet, Inc. shareholders' equity:    
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding 0 0
Common stock:    
Additional paid-in capital 1,704 5,715
Retained earnings 2,393,113 2,377,627
Accumulated other comprehensive earnings 4,284 2,972
Total Nelnet, Inc. shareholders' equity 2,399,485 2,386,712
Noncontrolling interests 3,346 4,382
Total equity 2,402,831 2,391,094
Total liabilities and equity 22,222,526 23,708,970
Variable Interest Entity, Primary Beneficiary    
Assets:    
Loans and accrued interest receivable (net of allowance for loan losses of $185,899 and $61,914, respectively) 20,085,382 21,399,382
Cash and cash equivalents:    
Restricted cash 501,080 639,847
Liabilities:    
Bonds and notes payable 19,349,111 20,742,798
Other liabilities 88,911 162,494
Common stock:    
Net assets of consolidated education and other lending variable interest entities 1,148,440 1,133,937
Class A, $0.01 par value. Authorized 600,000,000 shares; issued and outstanding 27,163,588 shares and 28,458,495 shares, respectively    
Common stock:    
Common stock 272 285
Class B, convertible, $0.01 par value. Authorized 60,000,000 shares; issued and outstanding 11,171,609 shares and 11,271,609 shares, respectively    
Common stock:    
Common stock $ 112 $ 113
v3.20.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Allowance for loan losses $ 185,899 $ 61,914
Allowance for doubtful accounts $ 3,731 $ 4,455
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, authorized shares (in shares) 50,000,000 50,000,000
Preferred stock, issued shares (in shares) 0 0
Preferred stock, outstanding shares (in shares) 0 0
Common Class A    
Par value (in dollars per share) $ 0.01 $ 0.01
Shares authorized (in shares) 600,000,000 600,000,000
Shares issued (in shares) 27,163,588 28,458,495
Shares outstanding (in shares) 27,163,588 28,458,495
Common Class B    
Par value (in dollars per share) $ 0.01 $ 0.01
Shares authorized (in shares) 60,000,000 60,000,000
Shares issued (in shares) 11,171,609 11,271,609
Shares outstanding (in shares) 11,171,609 11,271,609
v3.20.2
CONSOLIDATED STATEMENTS OF INCOME - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Interest income:        
Loan interest $ 134,507 $ 229,063 $ 462,439 $ 709,618
Investment interest 5,238 9,882 18,379 26,701
Total interest income 139,745 238,945 480,818 736,319
Interest expense:        
Interest on bonds and notes payable 58,423 172,488 277,788 551,221
Net interest income 81,322 66,457 203,030 185,098
Less (negative provision) provision for loan losses (5,821) 10,000 73,476 26,000
Net interest income after provision for loan losses 87,143 56,457 129,554 159,098
Other income/expense:        
Gain on sale of loans 14,817 0 33,023 1,712
Other income 1,502 13,439 69,910 36,946
Impairment expense 0 0 (34,419) 0
Derivative market value adjustments and derivative settlements, net 1,049 1,668 (13,406) (33,959)
Total other income/expense 225,494 219,114 667,169 607,391
Cost of services:        
Cost of services 31,157 30,907 80,664 77,697
Operating expenses:        
Salaries and benefits 126,096 116,670 365,220 338,942
Depreciation and amortization 30,308 27,701 87,349 76,398
Other expenses 34,744 58,329 115,184 147,562
Total operating expenses 191,148 202,700 567,753 562,902
Income before income taxes 90,332 41,964 148,306 125,890
Income tax expense 19,156 8,829 30,286 26,429
Net income 71,176 33,135 118,020 99,461
Net loss (income) attributable to noncontrolling interests 327 77 (568) (38)
Net income attributable to Nelnet, Inc. $ 71,503 $ 33,212 $ 117,452 $ 99,423
Earnings per common share:        
Net (loss) income attributable to Nelnet, Inc. shareholders - basic and diluted (in dollars per share) $ 1.86 $ 0.83 $ 2.99 $ 2.48
Weighted average common shares outstanding - basic and diluted (in shares) 38,538,476 39,877,129 39,229,932 40,098,346
Loan servicing and systems        
Other income/expense:        
Revenue $ 113,794 $ 113,286 $ 337,571 $ 342,169
Education technology, services, and payment processing        
Other income/expense:        
Revenue 74,121 74,251 217,100 213,753
Cost of services:        
Cost of services 25,243 25,671 63,424 62,601
Communications services        
Other income/expense:        
Revenue 20,211 16,470 57,390 46,770
Cost of services:        
Cost of services $ 5,914 $ 5,236 $ 17,240 $ 15,096
v3.20.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net income $ 71,176 $ 33,135 $ 118,020 $ 99,461
Available-for-sale securities:        
Unrealized holding gains (losses) arising during period, net 1,893 (334) 2,114 (1,306)
Reclassification adjustment for (gains) losses recognized in net income, net (513) 0 (390) 0
Income tax effect (329) 80 (412) 313
Total other comprehensive income (loss) 1,051 (254) 1,312 (993)
Comprehensive income 72,227 32,881 119,332 98,468
Comprehensive loss (income) attributable to noncontrolling interests 327 77 (568) (38)
Comprehensive income attributable to Nelnet, Inc. $ 72,554 $ 32,958 $ 118,764 $ 98,430
v3.20.2
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Cumulative Effect, Period Of Adoption, Adjustment
Preferred stock
Common stock
Common Class A
Common stock
Common Class B
Additional paid-in capital
 Retained earnings
 Retained earnings
Cumulative Effect, Period Of Adoption, Adjustment
Accumulated other comprehensive (loss) earnings
Noncontrolling interests
Noncontrolling interests
Cumulative Effect, Period Of Adoption, Adjustment
Balance (in shares) at Dec. 31, 2018     0 28,798,464 11,459,641            
Balance at Dec. 31, 2018 $ 2,314,779 $ (6,077) $ 0 $ 288 $ 115 $ 622 $ 2,299,556   $ 3,883 $ 10,315 $ (6,077)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Issuance of noncontrolling interests 4,217                 4,217  
Net income 99,461           99,423     38  
Other comprehensive loss (993)               (993)    
Distribution to noncontrolling interests (3,978)                 (3,978)  
Cash dividend on Class A and Class B common stock (21,546)           (21,546)        
Issuance of common stock, net of forfeitures (in shares)       156,874              
Issuance of common stock, net of forfeitures 4,401     $ 1   4,400          
Compensation expense for stock based awards 4,663         4,663          
Repurchase of common stock (in shares)       (723,832)              
Repurchase of common stock (40,262)     $ (7)   (6,007) (34,248)        
Conversion of common stock (in shares)       180,000 (180,000)            
Conversion of common stock 0     $ 2 $ (2)            
Balance (in shares) at Sep. 30, 2019     0 28,411,506 11,279,641            
Balance at Sep. 30, 2019 2,354,665   $ 0 $ 284 $ 113 3,678 2,343,185   2,890 4,515  
Balance (in shares) at Jun. 30, 2019     0 28,399,526 11,279,641            
Balance at Jun. 30, 2019 2,326,618   $ 0 $ 284 $ 113 1,670 2,317,115   3,144 4,292  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Issuance of noncontrolling interests 4,165                 4,165  
Net income 33,135           33,212     (77)  
Other comprehensive loss (254)               (254)    
Distribution to noncontrolling interests (3,865)                 (3,865)  
Cash dividend on Class A and Class B common stock (7,142)           (7,142)        
Issuance of common stock, net of forfeitures (in shares)       15,345              
Issuance of common stock, net of forfeitures 524         524          
Compensation expense for stock based awards 1,705         1,705          
Repurchase of common stock (in shares)       (3,365)              
Repurchase of common stock (221)         (221)          
Balance (in shares) at Sep. 30, 2019     0 28,411,506 11,279,641            
Balance at Sep. 30, 2019 2,354,665   $ 0 $ 284 $ 113 3,678 2,343,185   2,890 4,515  
Balance (in shares) at Dec. 31, 2019     0 28,458,495 11,271,609            
Balance at Dec. 31, 2019 2,391,094 $ (18,867) $ 0 $ 285 $ 113 5,715 2,377,627 $ (18,867) 2,972 4,382  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Issuance of noncontrolling interests 66                 66  
Net income 118,020           117,452     568  
Other comprehensive loss 1,312               1,312    
Distribution to noncontrolling interests (920)                 (920)  
Cash dividend on Class A and Class B common stock (23,343)           (23,343)        
Issuance of common stock, net of forfeitures (in shares)       196,407              
Issuance of common stock, net of forfeitures 5,155     $ 2   5,153          
Compensation expense for stock based awards 5,459         5,459          
Repurchase of common stock (in shares)       (1,591,314)              
Repurchase of common stock (73,145)     $ (16)   (14,623) (58,506)        
Conversion of common stock (in shares)       100,000 (100,000)            
Conversion of common stock       $ 1 $ (1)            
Acquisition of noncontrolling interest (2,000)           (1,250)     (750)  
Balance (in shares) at Sep. 30, 2020     0 27,163,588 11,171,609            
Balance at Sep. 30, 2020 2,402,831   $ 0 $ 272 $ 112 1,704 2,393,113   4,284 3,346  
Balance (in shares) at Jun. 30, 2020     0 27,232,836 11,171,609            
Balance at Jun. 30, 2020 2,340,786   $ 0 $ 272 $ 112 1,867 2,331,312   3,233 3,990  
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Issuance of noncontrolling interests 14                 14  
Net income 71,176           71,503     (327)  
Other comprehensive loss 1,051               1,051    
Distribution to noncontrolling interests (331)                 (331)  
Cash dividend on Class A and Class B common stock (7,664)           (7,664)        
Issuance of common stock, net of forfeitures (in shares)       24,132              
Issuance of common stock, net of forfeitures 553         553          
Compensation expense for stock based awards 1,864         1,864          
Repurchase of common stock (in shares)       (93,380)              
Repurchase of common stock (4,618)         (2,580) (2,038)        
Balance (in shares) at Sep. 30, 2020     0 27,163,588 11,171,609            
Balance at Sep. 30, 2020 $ 2,402,831   $ 0 $ 272 $ 112 $ 1,704 $ 2,393,113   $ 4,284 $ 3,346  
v3.20.2
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Common Class A        
Cash dividend on common stock (in dollars per share) $ 0.20 $ 0.18 $ 0.60 $ 0.54
Common Class B        
Cash dividend on common stock (in dollars per share) $ 0.20 $ 0.18 $ 0.60 $ 0.54
v3.20.2
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Net cash provided by operating activities:    
Net income attributable to Nelnet, Inc. $ 117,452 $ 99,423
Net income attributable to noncontrolling interests 568 38
Net income 118,020 99,461
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 149,175 142,519
Loan discount accretion (27,814) (27,554)
Provision for loan losses 73,476 26,000
Derivative market value adjustments 21,072 73,265
Payments from termination of derivative instruments, net 0 (13,940)
Payments to clearinghouse - initial and variation margin, net (20,405) (59,967)
Gain on sale of loans (33,023) (1,712)
Gain from investments, net (37,766) (4,891)
(Gain) loss on repurchases and extinguishment of debt, net (508) 15,679
Deferred income tax benefit (10,975) (9,592)
Non-cash compensation expense 5,538 4,948
Impairment expense 34,419 0
Increase in loan and investment accrued interest receivable (27,192) (57,864)
Decrease (increase) in accounts receivable 45,475 (7,637)
Decrease (increase) in other assets, net 19,491 (28,646)
Decrease in the carrying amount of ROU asset 9,150 6,529
Decrease in accrued interest payable (17,673) (9,334)
Increase in other liabilities 32,733 62,757
Decrease in the carrying amount of lease liability (8,484) (6,734)
Decrease in due to customers (151,674) (60,369)
Net cash provided by operating activities 173,035 142,918
Cash flows from investing activities:    
Purchases of loans (1,032,636) (1,360,873)
Purchases of loans from a related party (75,118) (32,580)
Net proceeds from loan repayments, claims, and capitalized interest 2,209,797 2,628,156
Proceeds from sale of loans 136,126 42,215
Purchases of available-for-sale securities (221,427) (1,010)
Proceeds from sales of available-for-sale securities 97,278 169
Proceeds from beneficial interest in loan securitizations 34,371 2,166
Purchases of other investments (122,584) (70,600)
Proceeds from other investments 8,528 52,653
Purchases of property and equipment (80,698) (67,681)
Net cash provided by investing activities 953,637 1,192,615
Cash flows from financing activities:    
Payments on bonds and notes payable (2,803,214) (3,718,851)
Proceeds from issuance of bonds and notes payable 1,460,524 2,410,363
Payments of debt issuance costs (7,144) (10,527)
Payments to extinguish debt 0 (14,030)
Dividends paid (23,343) (21,546)
Repurchases of common stock (73,145) (40,262)
Proceeds from issuance of common stock 1,250 1,171
Acquisition of noncontrolling interest (2,000) 0
Issuance of noncontrolling interests 0 4,138
Distribution to noncontrolling interests (660) (173)
Net cash used in financing activities (1,447,732) (1,389,717)
Net decrease in cash, cash equivalents, and restricted cash (321,060) (54,184)
Cash, cash equivalents, and restricted cash, beginning of period 1,222,601 1,192,391
Cash, cash equivalents, and restricted cash, end of period 901,541 1,138,207
Supplemental disclosures of cash flow information:    
Cash disbursements made for interest 259,120 518,557
Cash disbursements made for income taxes, net of refunds and credits received 13,413 14,820
Cash disbursements made for operating leases 9,457 7,307
Non-cash operating, investing, and financing activity:    
ROU assets obtained in exchange for lease obligations 4,158 7,972
Receipt of beneficial interest in consumer loan securitizations 52,501 7,921
Distribution to noncontrolling interest 260 3,805
Cash and cash equivalents:    
Cash, cash equivalents, and restricted cash $ 901,541 $ 1,138,207
v3.20.2
Basis of Financial Reporting
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Financial Reporting Basis of Financial Reporting
The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2019 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020. The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Annual Report").
Reclassifications
Certain amounts previously reported have been reclassified to conform to the current period presentation. These reclassifications include:
Reclassifying the line item "accrued interest receivable" on the Company's consolidated balance sheet to "loans and accrued interest receivable" and "investments"; and
Reclassifying "gain on sale of loans" that was previously included in "other income" to a new line item on the Company's consolidated statements of income.
Accounting Standard Adopted in 2020
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASC 326”), which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. Since its original issuance in 2016, the FASB has issued several updates to the original ASU.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for financial assets measured at amortized cost at the time the financial asset is originated or acquired, including, for the Company, loans receivable, accounts receivable, and held-to-maturity beneficial interests in loan securitizations. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. For available-for-sale debt securities where fair value is less than amortized cost, credit-related impairment, if any, is recognized through an allowance for credit losses and adjusted each period for changes in credit risk.
On January 1, 2020, the Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 (recognizing estimated credit losses expected to occur over the asset's remaining life) while prior period amounts continue to be reported in accordance with previously applicable GAAP (recognizing estimated credit losses using an incurred loss model); therefore, the comparative information for 2019 is not comparable to the information presented for 2020. Adoption of the new guidance primarily impacted the allowance for loan losses related to the Company's loan portfolio. Upon adoption, the Company recorded an increase to the allowance for loan losses of $91.0 million, which included a reclassification of the non-accretable discount balance and premiums related to loans purchased with evidence of credit deterioration, and decreased retained earnings, net of tax, by $18.9 million. The following table illustrates the impact of the adoption of ASC 326.
Balances at
December 31, 2019
Impact of ASC 326 adoptionBalances at
January 1, 2020
Assets
Loans and accrued interest receivable, net of allowance
Loans receivable$20,798,719 — 20,798,719 
Accrued interest receivable733,497 — 733,497 
Loan discount, net(35,036)33,790 (1,246)
Non-accretable discount(32,398)32,398 — 
Allowance for loan losses(61,914)(91,014)(152,928)
Loans and accrued interest receivable, net of allowance21,402,868 (24,826)21,378,042 
Liabilities
Other liabilities (deferred taxes)303,781 (5,958)297,823 
Equity
Retained earnings2,377,627 (18,868)2,358,759 

The Company adopted ASC 326 using the prospective transition approach for loans receivable purchased with credit deterioration ("PCD") that were previously classified as purchased credit impaired ("PCI"). In accordance with the standard, the Company did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the unamortized cost basis of the PCD assets were adjusted to reflect the addition of $32.4 million in the allowance for loan losses (as reflected in the table above). The remaining noncredit premium on these loans as of January 1, 2020 (based on the adjusted amortized cost basis) will be amortized into interest income over the life of the loans. Changes to the allowance for loan losses on these loans after adoption are recorded through provision expense.
Summary of Significant Accounting Policies Affected by Implementation of ASC 326
Allowance for Loan Losses
The allowance for loan losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of prepayments. Loans are charged off when management determines the loan is uncollectible. Charge-offs are recognized as a reduction to the allowance for loan losses. Expected recoveries of amounts previously charged off, not to exceed the aggregate of the amount previously charged off, are included in the estimate of the allowance for loan losses at the balance sheet date.
The Company aggregates loans with similar risk characteristics into homogeneous pools to estimate its expected credit losses. The Company continuously evaluates such pooling decisions and adjusts as needed from period to period as risk characteristics change.
The Company determines its estimated credit losses for the following financial assets as follows:
Loans receivable
Management has determined that the federally insured, private education, and consumer loan portfolios each meet the definition of a portfolio segment, which is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. Accordingly, the portfolio segment disclosures are presented on this basis in note 2 for each of these portfolios. The Company does not disaggregate its portfolio segment loan portfolios into classes of financing receivables.
The Company utilizes an undiscounted cash flow methodology in determining its lifetime expected credit losses on its federally insured and private education loan portfolios and a remaining life methodology for its consumer loan portfolio. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company has determined that, for modeling current expected credit losses, in general, the Company can reasonably estimate expected losses that incorporate current and forecasted economic conditions up to a one-year period. After this "reasonable and supportable" period, the Company uses a reversion period to the Company's actual long-term historical loss experience over a full economic life cycle. Historical credit loss experience provides
the basis for the estimation of expected credit losses. Qualitative and quantitative adjustments to historical loss information are made separately on each of the Company’s federally insured, private education, and consumer loan portfolios.
Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider the following factors, as applicable, for each of the Company’s loan portfolios: student loans in repayment versus those in nonpaying status; delinquency status; type of private education or consumer loan program; trends in defaults in the portfolio based on Company and industry data; past experience; trends in federally insured student loan claims rejected for payment by guarantors; changes in federal student loan programs; current economic conditions, including changes in unemployment rates and gross domestic product growth; and other relevant qualitative factors. The federal government guarantees 97 percent of the principal of and the interest on federally insured student loans disbursed on and after July 1, 2006 (and 98 percent for those loans disbursed on and after October 1, 1993 and prior to July 1, 2006), which limits the Company’s loss exposure on the outstanding balance of the Company’s federally insured portfolio. Student loans disbursed prior to October 1, 1993 are fully insured. The Company places private education loans on nonaccrual status when the collection of principal and interest is 90 days past due and charges off the loan when the collection of principal and interest is 120 days past due. The Company places consumer loans on nonaccrual status when the collection of principal and interest is 90 days past due and charges off the loan when the collection of principal and interest is 120 days or 180 days past due, depending on type of loan program. Collections, if any, are reflected as a recovery through the allowance for loan losses.
Purchased Loans Receivable with Credit Deterioration (“PCD”)
The Company has purchased federally insured rehabilitation loans that have experienced more than insignificant credit deterioration since origination. Rehabilitation loans are loans that have previously defaulted, but for which the borrower has made a specified number of on-time payments. Although rehabilitation loans benefit from the same guarantees as other federally insured loans, rehabilitation loans have generally experienced redefault rates that are higher than default rates for federally insured loans that have not previously defaulted. These PCD loans are recorded at the amount paid. An allowance for loan losses is determined using the same methodology as for other loans held for investment. The sum of the loans’ purchase price and allowance for loan losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized or accreted into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense.
Loan Accrued Interest Receivable
The Company has elected to present its loan accrued interest receivable balance combined in its consolidated balance sheets with the loans receivable amortized cost balance.
For the Company’s federally insured loan portfolio, the Company has elected to measure an allowance for credit losses for accrued interest receivables. For federally insured loans, accrued interest receivable is typically charged-off when the contractual payment of principal or interest has become greater than 270 days past due. Charge-offs of accrued interest receivable are recognized as a reduction to the allowance for loan losses.
For the Company’s private education and consumer loan portfolios, the Company has elected not to measure an allowance for credit losses for accrued interest receivables. For private education and consumer loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due. Charge-offs of accrued interest receivable are recognized by reversing interest income.
v3.20.2
Loans and Accrued Interest Receivable and Allowance for Loan Losses
9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Loans and Accrued Interest Receivable and Allowance for Loan Losses Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable consisted of the following:
As ofAs of
 September 30, 2020December 31, 2019
Federally insured student loans:
Stafford and other$4,372,469 4,684,314 
Consolidation14,773,110 15,644,229 
Total19,145,579 20,328,543 
Private education loans273,807 244,258 
Consumer loans100,180 225,918 
 19,519,566 20,798,719 
Accrued interest receivable760,787 733,497 
Loan discount, net of unamortized loan premiums and deferred origination costs
(17,912)(35,036)
Non-accretable discount— (32,398)
Allowance for loan losses:
Federally insured loans(139,943)(36,763)
Private education loans(20,013)(9,597)
Consumer loans(25,943)(15,554)
 $20,076,542 21,402,868 
On January 30, 2020 and July 29, 2020, the Company sold $124.2 million (par value) and $60.8 million (par value), respectively, of consumer loans to an unrelated third party who securitized such loans. The Company recognized a gain of $18.2 million (pre-tax) and $14.8 million (pre-tax), respectively, as part of these transactions. As partial considerations received for the consumer loans sold, the Company received a 31.4 percent and 25.4 percent residual interest, respectively, in the consumer loan securitizations that are included in "investments" on the Company's consolidated balance sheet.
Activity in the Allowance for Loan Losses
The following table presents the activity in the allowance for loan losses by portfolio segment.
Balance at beginning of periodImpact of ASC 326 adoptionProvision (negative provision) for loan lossesCharge-offsRecoveriesInitial allowance on loans purchased with credit deterioration (a)Loan saleBalance at end of period
 Three months ended September 30, 2020
Federally insured loans$144,829 — (5,299)(2,487)— 2,900 — 139,943 
Private education loans25,535 — (5,650)(5)133 — — 20,013 
Consumer loans39,081 — 5,128 (2,723)381 — (15,924)25,943 
$209,445 — (5,821)(5,215)514 2,900 (15,924)185,899 
Three months ended September 30, 2019
Federally insured loans$39,056 — 2,000 (3,380)— — — 37,676 
Private education loans10,157 — — (459)184 — — 9,882 
Consumer loans13,378 — 8,000 (2,759)240 — — 18,859 
$62,591 — 10,000 (6,598)424 — — 66,417 
Nine months ended September 30, 2020
Federally insured loans$36,763 72,291 32,074 (14,885)— 13,700 — 139,943 
Private education loans9,597 4,797 6,471 (1,360)508 — — 20,013 
Consumer loans15,554 13,926 34,931 (9,893)849 — (29,424)25,943 
$61,914 91,014 73,476 (26,138)1,357 13,700 (29,424)185,899 
Nine months ended September 30, 2019
Federally insured loans$42,310 — 6,000 (10,634)— — — 37,676 
Private education loans10,838 — — (1,529)573 — — 9,882 
Consumer loans7,240 — 20,000 (7,417)536 — (1,500)18,859 
$60,388 — 26,000 (19,580)1,109 — (1,500)66,417 
a) During the three and nine months ended September 30, 2020, the Company acquired $137.5 million (par value) and $721.4 million (par value), respectively, of federally insured rehabilitation loans. These loans met the definition of PCD loans when they were purchased by the Company. The Company estimated that the expected credit losses relating to these loans was $2.9 million and $13.7 million, respectively, at the time of purchase. The noncredit discount recorded as part of these acquisitions will be recognized into interest income using an effective yield over the life of the loans.
In March 2020, the rapid outbreak of the respiratory disease caused by a novel strain of coronavirus, coronavirus 2019 or COVID-19 ("COVID-19"), was declared a global pandemic by the World Health Organization and a national emergency by the President, and caused significant disruptions in the U.S. and world economies. Apart from the impact of the adoption of ASC 326 effective January 1, 2020, the Company’s allowance for loan losses increased during the first quarter of 2020 primarily as a result of the COVID-19 pandemic and its effects on current and forecasted economic conditions.
The Company's provision expense for the three months ended June 30, 2020 was impacted by the Company's estimate of certain improved economic conditions as of June 30, 2020 in comparison to what was used by the Company to determine the allowance for loan losses as of March 31, 2020. These improved economic conditions were partially offset by the Company extending its reversion period (to the Company's actual long-term historical loss experience) as of June 30, 2020, as the Company currently believes the economy will take longer to recover from the COVID-19 pandemic than what was originally estimated as of March 31, 2020.
The Company's provision expense for the three months ended September 30, 2020 was impacted by the Company's ongoing loan portfolio amortization; management's estimate of certain continued improved economic conditions as of September 30, 2020 in comparison to what was used by the Company to determine the allowance for loan losses as of June 30, 2020; and a decrease in the amount of loans in forbearance at September 30, 2020 as compared to June 30, 2020.
Loan Status and Delinquencies
The key credit quality indicators for the Company's federally insured, private education, and consumer loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The table below shows the Company’s loan status and delinquency amounts.
As of September 30, 2020As of December 31, 2019As of September 30, 2019
Federally insured loans:
    
Loans in-school/grace/deferment $1,037,754 5.4 % $1,074,678 5.3 % $1,243,705 6.0 %
Loans in forbearance 1,916,906 10.0  1,339,821 6.6  1,391,482 6.7 
Loans in repayment status:  
Loans current14,845,519 91.7 %15,410,993 86.0 %15,646,231 86.7 %
Loans delinquent 31-60 days945,411 5.9 650,796 3.6 662,431 3.8 
Loans delinquent 61-90 days249,523 1.5 428,879 2.4 402,197 2.2 
Loans delinquent 91-120 days129,994 0.8 310,851 1.7 279,524 1.5 
Loans delinquent 121-270 days
605 0.0 812,107 4.5 795,230 4.4 
Loans delinquent 271 days or greater
19,867 0.1 300,418 1.8 275,037 1.4 
Total loans in repayment16,190,919 84.6 100.0 %17,914,044 88.1 100.0 %18,060,650 87.3 100.0 %
Total federally insured loans19,145,579 100.0 % 20,328,543 100.0 % 20,695,837 100.0 %
Accrued interest receivable757,960 730,059 732,608 
Loan discount, net of unamortized premiums and deferred origination costs(20,554)(35,822)(36,210)
Non-accretable discount (a)— (28,036)(27,809)
Allowance for loan losses(139,943)(36,763)(37,676)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses$19,743,042 $20,957,981 $21,326,750 
Private education loans:
Loans in-school/grace/deferment $3,839 1.4 %$4,493 1.8 %$3,944 2.1 %
Loans in forbearance 5,437 2.0 3,108 1.3 2,242 1.2 
Loans in repayment status:
Loans current261,514 98.8 %227,013 95.9 %173,883 94.7 %
Loans delinquent 31-60 days1,820 0.7 2,814 1.2 3,011 1.6 
Loans delinquent 61-90 days454 0.2 1,694 0.7 1,370 0.7 
Loans delinquent 91 days or greater743 0.3 5,136 2.2 5,462 3.0 
Total loans in repayment264,531 96.6 100.0 %236,657 96.9 100.0 %183,726 96.7 100.0 %
Total private education loans273,807 100.0 % 244,258 100.0 % 189,912 100.0 %
Accrued interest receivable1,960 1,558 1,440 
Loan premium, net of unaccreted discount1,137 46 (1,421)
Non-accretable discount (a)— (4,362)(4,798)
Allowance for loan losses(20,013)(9,597)(9,882)
Total private education loans and accrued interest receivable, net of allowance for loan losses$256,891 $231,903 $175,251 
Consumer loans:
Loans in deferment$1,084 1.1 %$— $— 
Loans in repayment status:
Loans current96,038 96.9 %220,404 97.5 %315,708 98.3 %
Loans delinquent 31-60 days1,044 1.1 2,046 0.9 2,249 0.7 
Loans delinquent 61-90 days776 0.8 1,545 0.7 1,617 0.5 
Loans delinquent 91 days or greater1,238 1.2 1,923 0.9 1,625 0.5 
Total loans in repayment99,096 98.9 100.0 %225,918 100.0 %321,199 100.0 %
Total consumer loans100,180 100.0 %225,918 321,199 
Accrued interest receivable867 1,880 2,605 
Loan premium1,505 740 1,148 
Allowance for loan losses(25,943)(15,554)(18,859)
Total consumer loans and accrued interest receivable, net of allowance for loan losses$76,609 $212,984 $306,093 
(a)    Upon adoption of ASC 326 on January 1, 2020, the Company reclassified the non-accretable discount balance related to loans purchased with evidence of credit deterioration to allowance for loan losses.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act, among other things, provides broad relief, effective March 13, 2020 through September 30, 2020, for borrowers that have student loans owned by the Department of Education (the "Department"). On August 8, 2020, the President directed the Secretary of the Department to continue to suspend loan payments, stop collections, and waive interest on student loans owned by the Department until December 31, 2020. This relief package excluded Federal Family Education Loan Program ("FFELP" or "FFEL Program"), private education, and consumer loans.
Although the Company's loans are excluded from the provisions of the CARES Act, the Company is providing relief for its borrowers.
For the Company's federally insured and private education loans, effective March 13, 2020 through June 30, 2020, the Company proactively applied a 90 day natural disaster forbearance to any loan that was 31-269 days past due (for federally insured loans) and 80 days past due (for private education loans), and to any current loan upon request. Beginning July 1, 2020, the Company discontinued proactively applying 90 day natural disaster forbearances on past due loans. However, the Company will continue to apply a natural disaster forbearance with an end date of December 31, 2020 to any federally insured and private education loan upon request. In addition, for both federally insured and private education loans, effective March 13, 2020 through December 31, 2020, borrower late fees are being waived and borrower payments made after March 13, 2020 are refunded upon a borrower's request.
For the majority of the Company's consumer loans, borrowers are generally being offered, upon request and/or documented evidence of financial distress, a two-month deferral of payments, with an option of additional deferrals if the COVID-19 pandemic continues. In addition, effective March 13, 2020 through September 30, 2020, the majority of fees (non-sufficient funds, late charges, check fees) and credit bureau reporting were suspended. The specific relief terms on the Company's consumer loan portfolio vary depending on the loan program and servicer of such loans.
The Company will continue to review whether additional and/or extended borrower relief policies and activities are needed. When providing relief for its borrowers, the Company follows the guidance under the CARES Act to determine if a modification is subject to troubled debt restructuring classification. All relief provided to borrowers by the Company through September 30, 2020 have met the criteria under the CARES Act and the modifications have not been accounted for as troubled debt restructuring.
Nonaccrual Status
The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private and consumer loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2019 and September 30, 2020, was not material.
Amortized Cost Basis by Origination Year
The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of September 30, 2020 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all the Company’s federally insured loans were originated prior to July 1, 2010.
Nine months ended September 30, 20202019201820172016Prior YearsTotal
Private education loans:
Loans in school/grace/deferment$— 909 — — 169 2,761 3,839 
Loans in forbearance273 683 — — 333 4,148 5,437 
Loans in repayment status:
Loans current30,088 89,772 1,053 — 5,917 134,684 261,514 
Loans delinquent 31-60 days— 71 — — 17 1,732 1,820 
Loans delinquent 61-90 days— — — — — 454 454 
Loans delinquent 91 days or greater— — — — — 743 743 
Total loans in repayment30,088 89,843 1,053 — 5,934 137,613 264,531 
Total private education loans$30,361 91,435 1,053 — 6,436 144,522 273,807 
Accrued interest receivable1,960 
Loan premium, net of unaccreted discount1,137 
Allowance for loan losses(20,013)
Total private education loans and accrued interest receivable, net of allowance for loan losses$256,891 
Consumer loans:
Loans in deferment$72 497 495 20 — — 1,084 
Loans in repayment status:
Loans current38,927 26,259 27,419 3,433 — — 96,038 
Loans delinquent 31-60 days228 589 226 — — 1,044 
Loans delinquent 61-90 days146 322 280 28 — — 776 
Loans delinquent 91 days or greater326 339 535 38 — — 1,238 
Total loans in repayment39,627 27,509 28,460 3,500 — — 99,096 
Total consumer loans$39,699 28,006 28,955 3,520 — — 100,180 
Accrued interest receivable867 
Loan premium1,505 
Allowance for loan losses(25,943)
Total consumer loans and accrued interest receivable, net of allowance for loan losses$76,609 
v3.20.2
Bonds and Notes Payable
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Bonds and Notes Payable Bonds and Notes Payable
The following tables summarize the Company’s outstanding debt obligations by type of instrument:
 As of September 30, 2020
Carrying
amount
Interest rate
range
Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
   
Bonds and notes based on indices$17,265,435 
0.32% - 2.05%
5/27/25 - 3/26/68
Bonds and notes based on auction751,675 
1.15% - 2.11%
3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes18,017,110 
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations
939,132 
1.42% - 3.45%
10/25/67 - 8/27/68
FFELP warehouse facilities145,149 
0.34% / 0.46%
11/22/21 / 2/26/23
Private education loan warehouse facility102,564 0.45%2/13/22
Consumer loan warehouse facility30,290 0.33%4/23/22
Variable-rate bonds and notes issued in private education loan asset-backed securitizations
54,122 
1.65% / 1.90%
12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization
39,977 
3.60% / 5.35%
12/26/40 / 12/28/43
Unsecured line of credit— 12/16/24
Unsecured debt - Junior Subordinated Hybrid Securities20,381 3.60%9/15/61
Other borrowings113,672 
0.85% / 1.91%
5/4/21 / 5/30/22
 19,462,397   
Discount on bonds and notes payable and debt issuance costs(247,344)
Total$19,215,053 

 As of December 31, 2019
Carrying
amount
Interest rate
range
Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
   
Bonds and notes based on indices$18,428,998 
1.98% - 3.61%
5/27/25 - 1/25/68
Bonds and notes based on auction768,626 
2.75% - 3.60%
3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes19,197,624 
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations
512,836 
2.00% - 3.45%
10/25/67 / 11/25/67
FFELP warehouse facilities778,094 
1.98% / 2.07%
5/20/21 / 5/31/22
Consumer loan warehouse facility116,570 1.99%4/23/22
Variable-rate bonds and notes issued in private education loan asset-backed securitizations
73,308 
3.15% / 3.54%
12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization
49,367 
3.60% / 5.35%
12/26/40 / 12/28/43
Unsecured line of credit50,000 3.29%12/16/24
Unsecured debt - Junior Subordinated Hybrid Securities20,381 5.28%9/15/61
Other borrowings5,000 3.44%5/30/22
 20,803,180   
Discount on bonds and notes payable and debt issuance costs(274,126)
Total$20,529,054 
FFELP Warehouse Facilities
The Company funds the majority of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.
As of September 30, 2020, the Company had two FFELP warehouse facilities as summarized below.
NFSLW-I (a)NHELP-II (b)Total
Maximum financing amount
$300,000 250,000 550,000 
Amount outstanding68,099 77,050 145,149 
Amount available$231,901 172,950 404,851 
Expiration of liquidity provisions
November 20, 2020February 26, 2021
Final maturity dateNovember 22, 2021February 26, 2023
Advanced as equity support$4,524 6,644 11,168 
(a)    On May 20, 2020, the Company decreased the maximum financing amount for this warehouse facility to $300 million, extended the expiration of liquidity provisions to November 20, 2020, and extended the maturity date to November 22, 2021.
(b)    On May 29, 2020, the Company decreased the maximum financing amount for this warehouse facility to $250 million, extended the expiration of liquidity provisions to February 26, 2021, and extended the maturity date to February 26, 2023.
On November 2, 2020, the Company decreased the maximum financing amount for each of its FFELP warehouse facilities to $50.0 million.
Asset-Backed Securitizations
The following table summarizes the asset-backed securitization transactions completed during the first nine months of 2020.
2020-12020-22020-32020-4 (a)Total
Date securities issued2/20/203/11/203/19/208/27/20
Total original principal amount$435,600 272,100 352,600 191,300 1,251,600 
Class A senior notes:
Total principal amount$424,600 264,300 343,600 191,300 1,223,800 
Bond discount— (44)(1,503)(19)(1,566)
Issue price$424,600 264,256 342,097 191,281 1,222,234 
Cost of funds
1-month LIBOR plus 0.74%
1.83%
1-month LIBOR plus 0.92%
1.42%
Final maturity date3/26/684/25/683/26/688/27/68
Class B subordinated notes:
Total principal amount$11,000 7,800 9,000 27,800 
Bond discount— (574)(284)(858)
Issue price$11,000 7,226 8,716 26,942 
Cost of funds
1-month LIBOR plus 1.75%
2.50%
1-month LIBOR plus 1.90%
Final maturity date3/26/684/25/683/26/68
(a) Total original principal amount excludes the Class B subordinated tranche for the 2020-4 transaction totaling $5.0 million that was retained by the Company at issuance. As of September 30, 2020, the Company had a total of $20.8 million (par value) of its own asset-backed securities that were retained upon initial issuance or repurchased in the secondary market. For accounting purposes, these notes are eliminated in consolidation and are not included in the Company's consolidated financial statements. However, these securities remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated in the trust estate. Upon a sale of these notes to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. Upon sale, these notes would be
shown as "bonds and notes payable" in the Company's consolidated balance sheet. The Company believes the market value of such notes is currently less than par value. Any excess of the par value over the market value on the date of sale would be recognized by the Company as interest expense over the life of the bonds.
Private Education Loan Warehouse Facility
On February 13, 2020, the Company obtained a private education loan warehouse facility with an aggregate maximum financing amount available of $100.0 million. On March 20, 2020, the facility was amended to increase the maximum financing amount to $200.0 million. The facility has an advance rate of 80 to 90 percent, liquidity provisions through February 13, 2021, and a final maturity date of February 13, 2022. As of September 30, 2020, $102.6 million was outstanding under this warehouse facility and $97.4 million was available for future funding. Additionally, as of September 30, 2020, the Company had $11.1 million advanced as equity support under this facility.
Consumer Loan Warehouse Facility
The Company has a consumer loan warehouse facility that as of September 30, 2020 had an aggregate maximum financing amount available of $200.0 million. The facility has an advance rate of 70 or 75 percent depending on the type of collateral and subject to certain concentration limits, liquidity provisions to April 23, 2021, and a final maturity date of April 23, 2022. As of September 30, 2020, $30.3 million was outstanding under this warehouse facility and $169.7 million was available for future funding. Additionally, as of September 30, 2020, the Company had $13.8 million advanced as equity support under this facility. On November 3, 2020, the Company decreased the maximum financing amount on this facility to $100.0 million.
Unsecured Line of Credit
The Company has a $455.0 million unsecured line of credit that has a maturity date of December 16, 2024. As of September 30, 2020, no amount was outstanding on the line of credit and $455.0 million was available for future use. The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $550.0 million, subject to certain conditions.
Junior Subordinated Hybrid Securities ("Hybrid Securities")
Subsequent to September 30, 2020, the Company redeemed all the outstanding $20.4 million of Hybrid Securities at par.
Other Borrowings
During the second quarter of 2020, the Company entered into an agreement with Union Bank and Trust Company ("Union Bank"), a related party, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loan asset-backed securities. As of September 30, 2020, $108.7 million of student loan asset-backed securities were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. The Company can participate student loan asset-backed securities to Union Bank to the extent of availability under the grantor trusts, up to $100.0 million or an amount in excess of $100.0 million if mutually agreed to by both parties. Student loan asset-backed securities under this agreement have been accounted for by the Company as a secured borrowing.
v3.20.2
Derivative Financial Instruments
9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
The Company uses derivative financial instruments to manage interest rate risk. Derivative instruments used as part of the Company's risk management strategy are further described in note 5 of the notes to consolidated financial statements included in the 2019 Annual Report. A tabular presentation of such derivatives outstanding as of September 30, 2020 and December 31, 2019 is presented below.
Basis Swaps
The following table summarizes the Company’s outstanding basis swaps as of December 31, 2019 and September 30, 2020, in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").
MaturityNotional amount
As ofAs of
September 30, 2020December 31, 2019
2020$— 1,000,000 
2021250,000 250,000 
20222,000,000 2,000,000 (a)
2023750,000 750,000 
20241,750,000 1,750,000 
20261,150,000 1,150,000 
2027250,000 250,000 
$6,150,000 7,150,000 
(a) $750 million of the notional amount of these derivatives had forward effective start dates in May 2020.
The weighted average rate paid by the Company on the 1:3 Basis Swaps as of September 30, 2020 and December 31, 2019 was one-month LIBOR plus 9.1 basis points and 9.7 basis points, respectively.
Interest Rate Swaps – Floor Income Hedges
The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.
As of September 30, 2020As of December 31, 2019
MaturityNotional amountWeighted average fixed rate paid by the Company (a)(c)Notional amountWeighted average fixed rate paid by the Company (a)
2020$— — %$1,500,000 1.01 %
2021600,000 2.15 600,000