NELNET INC, 10-Q filed on 5/8/2019
Quarterly Report
v3.19.1
Document and Entity Information Document - shares
3 Months Ended
Mar. 31, 2019
Apr. 30, 2019
Document Information [Line Items]    
Entity Registrant Name NELNET INC  
Document Type 10-Q  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
Entity Central Index Key 0001258602  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Entity Emerging Growth Company false  
Entity Small Business false  
Common Class A    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   28,438,279
Common Class B    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   11,459,641
v3.19.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Assets:    
Loans receivable (net of allowance for loan losses of $61,778 and $60,388, respectively) $ 21,946,153 $ 22,377,142
Cash and cash equivalents:    
Cash and cash equivalents - not held at a related party 11,844 9,472
Cash and cash equivalents - held at a related party 63,037 111,875
Total cash and cash equivalents 74,881 121,347
Investments and notes receivable 230,512 249,370
Restricted cash 760,273 701,366
Restricted cash - due to customers 216,471 369,678
Accrued interest receivable 715,838 679,197
Accounts receivable (net of allowance for doubtful accounts of $3,777 and $3,271, respectively) 76,013 59,531
Goodwill 156,912 156,912
Intangible assets, net 105,795 114,290
Property and equipment, net 335,070 344,784
Other assets 103,841 45,533
Fair value of derivative instruments 168 1,818
Total assets 24,721,927 25,220,968
Liabilities:    
Bonds and notes payable 21,835,723 22,218,740
Accrued interest payable 62,158 61,679
Other liabilities 277,281 256,092
Due to customers 216,471 369,678
Total liabilities 22,391,633 22,906,189
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 636 622
Retained earnings 2,321,407 2,299,556
Accumulated other comprehensive earnings 3,552 3,883
Total Nelnet, Inc. shareholders' equity 2,325,996 2,304,464
Noncontrolling interests 4,298 10,315
Total equity 2,330,294 2,314,779
Total liabilities and equity 24,721,927 25,220,968
Common Class A    
Common stock:    
Common stock 286 288
Common Class B    
Common stock:    
Common stock 115 115
Supplemental information - assets and liabilities of consolidated education lending variable interest entities:    
Assets:    
Loans receivable (net of allowance for loan losses of $61,778 and $60,388, respectively) 21,962,743 22,359,655
Cash and cash equivalents:    
Restricted cash 732,335 677,611
Other assets 716,820 679,735
Liabilities:    
Bonds and notes payable 21,775,724 22,146,374
Other liabilities 189,112 163,327
Common stock:    
Net assets of consolidated education lending variable interest entities $ 1,447,062 $ 1,407,300
v3.19.1
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Allowance for loan losses $ 61,778 $ 60,388
Allowance for doubtful accounts $ 3,777 $ 3,271
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) 28,628,528 28,798,464
Shares outstanding (in shares) 28,628,528 28,798,464
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) 11,459,641 11,459,641
Shares outstanding (in shares) 11,459,641 11,459,641
v3.19.1
CONSOLIDATED STATEMENTS OF INCOME - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Interest income:    
Loan interest $ 242,333 $ 197,723
Investment interest 8,253 5,134
Total interest income 250,586 202,857
Interest expense:    
Interest on bonds and notes payable 191,770 135,550
Net interest income 58,816 67,307
Less provision for loan losses 7,000 4,000
Net interest income after provision for loan losses 51,816 63,307
Other income:    
Other income 9,067 18,557
Derivative market value adjustments and derivative settlements, net (11,539) 66,799
Total other income 206,128 254,907
Cost of services:    
Cost of services 25,818 17,400
Operating expenses:    
Salaries and benefits 111,059 96,643
Depreciation and amortization 24,213 18,457
Loan servicing fees to third parties 2,893 3,136
Other expenses 40,923 33,417
Total operating expenses 179,088 151,653
Income before income taxes 53,038 149,161
Income tax expense 11,391 35,976
Net income 41,647 113,185
Net income attributable to noncontrolling interests (56) 740
Net income attributable to Nelnet, Inc. $ 41,591 $ 113,925
Earnings per common share:    
Net income attributable to Nelnet, Inc. shareholders - basic and diluted (in dollars per share) $ 1.03 $ 2.78
Weighted average common shares outstanding - basic and diluted (in shares) 40,373,295 40,950,528
Loan servicing and systems revenue    
Other income:    
Revenue $ 114,898 $ 100,141
Education technology, services, and payment processing revenue    
Other income:    
Revenue 79,159 60,221
Cost of services:    
Cost of services 21,059 13,683
Communications Services    
Other income:    
Revenue 14,543 9,189
Cost of services:    
Cost of services $ 4,759 $ 3,717
v3.19.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
Net income $ 41,647 $ 113,185
Available-for-sale securities:    
Unrealized holding losses arising during period, net of gains (436) (1,061)
Reclassification adjustment for gains recognized in net income, net of losses 0 (47)
Income tax effect 105 256
Total other comprehensive loss (331) (852)
Comprehensive income 41,316 112,333
Comprehensive (income) loss attributable to noncontrolling interests (56) 740
Comprehensive income attributable to Nelnet, Inc. $ 41,260 $ 113,073
v3.19.1
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Preferred stock shares
Common stock shares
Common Class A
Common stock shares
Common Class B
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) earnings
Noncontrolling interests
Balance (in shares) at Dec. 31, 2017   0 29,341,517 11,468,587        
Balance at Dec. 31, 2017 $ 2,165,387 $ 0 $ 293 $ 115 $ 521 $ 2,143,983 $ 4,617 $ 15,858
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Issuance of noncontrolling interests 26             26
Net income 113,185         113,925   (740)
Other comprehensive income (loss) (852)           (852)  
Distribution to noncontrolling interests (19)             (19)
Cash dividend on Class A and Class B common stock (6,506)         (6,506)    
Issuance of common stock, net of forfeitures (in shares)     170,346          
Issuance of common stock, net of forfeitures 2,173   $ 2   2,171      
Compensation expense for stock based awards 1,087       1,087      
Repurchase of common stock (in shares)     (222,174)          
Repurchase of common stock (11,418)   $ (2)   (3,331) (8,085)    
Acquisition of noncontrolling interest (19,101)         (13,449)   (5,652)
Balance at Mar. 31, 2018 2,245,226 $ 0 $ 293 $ 115 448 2,231,875 3,022 9,473
Balance (in shares) at Mar. 31, 2018   0 29,289,689 11,468,587        
Balance (in shares) at Dec. 31, 2018   0 28,798,464 11,459,641        
Balance at Dec. 31, 2018 2,314,779 $ 0 $ 288 $ 115 622 2,299,556 3,883 10,315
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Issuance of noncontrolling interests 26             26
Net income 41,647         41,591   56
Other comprehensive income (loss) (331)           (331)  
Distribution to noncontrolling interests (22)             (22)
Cash dividend on Class A and Class B common stock (7,232)         (7,232)    
Issuance of common stock, net of forfeitures (in shares)     131,391          
Issuance of common stock, net of forfeitures 2,494   $ 1   2,493      
Compensation expense for stock based awards 1,368       1,368      
Repurchase of common stock (in shares)     (301,327)          
Repurchase of common stock (16,358)   $ (3)   (3,847) (12,508)    
Balance at Mar. 31, 2019 $ 2,330,294 $ 0 $ 286 $ 115 $ 636 $ 2,321,407 $ 3,552 $ 4,298
Balance (in shares) at Mar. 31, 2019   0 28,628,528 11,459,641        
v3.19.1
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parentheticals) - $ / shares
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Common Class A    
Dividends paid per common share (in dollars per share) $ 0.18 $ 0.16
Common Class B    
Dividends paid per common share (in dollars per share) $ 0.18 $ 0.16
v3.19.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Cash Flows [Abstract]    
Net income attributable to Nelnet, Inc. $ 41,591 $ 113,925
Net income (loss) attributable to noncontrolling interests 56 (740)
Net income 41,647 113,185
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of acquisition:    
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 46,948 43,301
Loan discount accretion (9,693) (11,691)
Provision for loan losses 7,000 4,000
Derivative market value adjustments 30,574 (60,033)
Proceeds from termination of derivative instruments 2,119 0
(Payments to) proceeds from clearinghouse - initial and variation margin, net (13,974) 62,689
Gain from debt repurchases 0 (359)
Loss (gain) from investments and notes receivable, net 1,151 (8,249)
Deferred income tax (benefit) expense (2,807) 16,883
Non-cash compensation expense 1,476 1,161
Other (20) (2,891)
Increase in accrued interest receivable (36,722) (59,038)
(Increase) decrease in accounts receivable (16,571) 177
(Increase) decrease in other assets (32,324) 49,415
Increase in accrued interest payable 479 4,213
Decrease in other liabilities (5,741) (36,205)
Decrease in due to customers (153,207) (58,606)
Net cash (used in) provided by operating activities (139,665) 57,952
Cash flows from investing activities, net of acquisitions:    
Purchases of loans (344,631) (610,855)
Net proceeds from loan repayments, claims, capitalized interest, and other 769,996 863,270
Purchases of available-for-sale securities 0 (28,164)
Proceeds from sales of available-for-sale securities 0 21,951
Purchases of investments and issuance of notes receivable (15,970) (16,370)
Proceeds from investments and notes receivable 1,719 9,718
Purchases of property and equipment (24,813) (28,068)
Business acquisition, net of cash and restricted cash acquired 0 (109,152)
Net cash provided by investing activities 386,301 102,330
Cash flows from financing activities:    
Payments on bonds and notes payable (932,007) (901,008)
Proceeds from issuance of bonds and notes payable 570,532 756,700
Payments of debt issuance costs (2,776) (1,650)
Dividends paid (7,232) (6,506)
Repurchases of common stock (16,358) (11,418)
Proceeds from issuance of common stock 461 274
Acquisition of noncontrolling interest 0 (13,449)
Distribution to noncontrolling interests (22) (19)
Net cash used in financing activities (387,402) (177,076)
Net decrease in cash, cash equivalents, and restricted cash (140,766) (16,794)
Cash, cash equivalents, and restricted cash, beginning of period 1,192,391 942,066
Cash, cash equivalents, and restricted cash, end of period 1,051,625 925,272
Supplemental disclosures of cash flow information:    
Cash disbursements made for interest 176,876 114,243
Cash refunds received for income taxes, net of payments 9 30,569
Cash and cash equivalents:    
Cash, cash equivalents, and restricted cash $ 1,192,391 $ 942,066
v3.19.1
Basis of Financial Reporting
3 Months Ended
Mar. 31, 2019
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 March 31, 2019 and for the three months ended March 31, 2019 and 2018 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2018 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 months ended March 31, 2019 are not necessarily indicative of the results for the year ending December 31, 2019. 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, 2018 (the "2018 Annual Report").
Accounting Standard Adopted in 2019
In the first quarter of 2019, the Company adopted the following new accounting standard:
Leases
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification Topic 842, Leases ("ASC Topic 842"). The standard requires the identification of arrangements that should be accounted for as leases by lessees and the disclosure of key information about leasing arrangements. The standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability for all leases with a term longer than twelve months and classify the lease as operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases.
The Company adopted the standard effective January 1, 2019, using the effective date as its date of initial application. Consequently, financial information is not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company elected to utilize the ‘package of practical expedients’, which permitted it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs.
The most significant impact of the standard relates to (1) the recognition of new ROU assets and lease liabilities on the Company's balance sheet; (2) the deconsolidation of assets and liabilities for certain sale-leaseback transactions arising from build-to-suit lease arrangements for which construction was completed and the Company is leasing the constructed assets that did not qualify for sale accounting prior to the adoption of the new standard; and (3) significant new disclosures about the Company’s leasing activities. The build-to-suit lease arrangements have been reassessed as operating leases as of the effective date under ASC Topic 842.
Adoption of the new standard resulted in recognizing lease liabilities of $33.7 million based on the present value of the remaining minimum rental payments. In addition, the Company recognized ROU assets of $32.8 million, which corresponds to the lease liabilities reduced by deferred rent expense as of the effective date. The Company also deconsolidated total assets of $43.8 million and total liabilities of $34.8 million for entities that had been consolidated due to sale-leaseback transactions that failed to qualify for recognition as sales under the prior guidance. Deconsolidation of these entities reduced noncontrolling interests by $6.1 million. The cumulative effect of the changes made to the Company's consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was as follows:
Balances at December 31, 2018Adjustments from adoption of new lease standardBalances at January 1, 2019
Assets
   
Cash and cash equivalents$121,347 (646)120,701 
Investments and notes receivable249,370 (23,134)226,236 
Accounts receivable59,531 (89)59,442 
Property and equipment, net344,784 (16,974)327,810 
Other assets45,533 32,804 78,337 
Liabilities
Bonds and notes payable
22,218,740 (33,182)22,185,558 
Other liabilities256,092 31,220 287,312 
Equity
Noncontrolling interests10,315 (6,077)4,238 
At the inception of an arrangement, the Company determines if the arrangement is, or contains, a lease and records the lease in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available by the lessor. The Company primarily leases dark fiber to support its telecommunications operations and office and data center space. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The lease expense for these leases is recognized on a straight-line basis over the lease term. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. When the discount rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate.
The Company has elected to utilize the practical expedient to account for lease and non-lease components together as a single, combined lease component for its office and data center space. In addition, the Company has identified itself as the lessor in its Communications operating segment for services provided to customers that include customer-premise equipment. The Company has also elected to utilize the practical expedient to account for those services and associated leases as a single, combined component. The non-lease services are 'predominant' in those contracts. Therefore, the combined component is considered a single performance obligation under ASC Topic 606.
Most leases include one or more options to renew, with renewal terms that can be extended. The exercise of lease renewal options for the majority of leases is at the Company's discretion. Renewal options that the Company is reasonably certain to exercise are included in the lease term.
Certain leases include escalating rental payments or rental payments adjusted periodically for inflation. None of the lease agreements include any residual value guarantees, a transfer of title, or a purchase option that is reasonably certain to be exercised.
The following table provides supplemental balance sheet information related to leases:
As of
March 31, 2019
Operating lease ROU assets, which is included in "other assets" on the
consolidated balance sheet
$33,928 
Operating lease liabilities, which is included in "other liabilities" on the
consolidated balance sheet
$34,891 
The following table provides components of lease expense:
Three months ended March 31, 2019
Rental expense, which is included in "other expenses" on the
consolidated statement of income (a)
$2,795 
Rental expense, which is included in "cost to provide communications
services" on the consolidated statement of income
79
Total operating rental expense$2,874 

(a) Includes short-term and variable lease costs, which are immaterial.
The following table provides supplemental cash flow information related to leases:
Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2,376 
ROU assets obtained in exchange for lease obligations, excluding
impact of adoption:
Operating leases$3,233 
Weighted average remaining lease term and discount rate are shown below:
As of
March 31, 2019
Weighted average remaining lease term6.08 years
Weighted average discount rate4.00 %
Maturity of lease liabilities are shown below:
2019 (excluding the three months ended March 31, 2019)$7,354 
20208,962 
20216,356 
20224,229 
20233,395 
2024 and thereafter9,187 
Total lease payments39,483 
Imputed interest(4,592)
Total$34,891 

The Company adopted the new lease standard using the effective date as its date of initial application as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments as of December 31, 2018 are shown below:
2019$9,181 
20208,261 
20215,776 
20223,745 
20232,904 
2024 and thereafter5,479 
Total minimum lease payments$35,346 
v3.19.1
Loans Receivable and Allowance for Loan Losses
3 Months Ended
Mar. 31, 2019
Receivables [Abstract]  
Loans Receivable and Allowance for Loan Losses Loans Receivable and Allowance for Loan Losses
Loans receivable consisted of the following:
As ofAs of
 March 31, 2019December 31, 2018
Federally insured student loans:
Stafford and other$4,901,934 4,969,667 
Consolidation16,778,679 17,186,229 
Total21,680,613 22,155,896 
Private education loans211,029 225,975 
Consumer loans191,001 138,627 
 22,082,643 22,520,498 
Loan discount, net of unamortized loan premiums and deferred origination costs
(43,602)(53,572)
Non-accretable discount(31,110)(29,396)
Allowance for loan losses:
Federally insured loans(40,934)(42,310)
Private education loans(10,587)(10,838)
Consumer loans(10,257)(7,240)
 $21,946,153 22,377,142 
Activity in the Allowance for Loan Losses
The provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb losses, net of recoveries, inherent in the portfolio of loans. Activity in the allowance for loan losses is shown below.
 Three months ended March 31, 2019
 Balance at beginning of periodProvision for loan lossesCharge-offsRecoveriesOtherBalance at end of period
Federally insured loans$42,310 2,000 (3,376)— — 40,934 
Private education loans10,838 — (482)231 — 10,587 
Consumer loans7,240 5,000 (2,006)23 — 10,257 
$60,388 7,000 (5,864)254 — 61,778 
Three months ended March 31, 2018
Federally insured loans$38,706 2,000 (3,332)— 1,000 38,374 
Private education loans12,629 — (539)165 — 12,255 
Consumer loans3,255 2,000 (595)— 4,665 
$54,590 4,000 (4,466)170 1,000 55,294 
Loan Status and Delinquencies
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 delinquency amounts.
 As of March 31, 2019As of December 31, 2018As of March 31, 2018 
Federally insured loans:
    
Loans in-school/grace/deferment $1,288,011  $1,298,493  $1,312,319 
Loans in forbearance 1,358,343  1,430,291  1,650,913 
Loans in repayment status:  
Loans current16,550,665 87.0 %16,882,252 86.9 %16,368,668 88.5 %
Loans delinquent 31-60 days666,668 3.5  683,084 3.5  669,490 3.6  
Loans delinquent 61-90 days425,098 2.2  427,764 2.2  426,696 2.3  
Loans delinquent 91-120 days296,242 1.6  283,831 1.5  252,659 1.4  
Loans delinquent 121-270 days
718,409 3.8  806,692 4.2  570,538 3.1  
Loans delinquent 271 days or greater
377,177 1.9  343,489 1.7  210,265 1.1  
Total loans in repayment19,034,259 100.0 %19,427,112 100.0 %18,498,316 100.0 %
Total federally insured loans$21,680,613  $22,155,896  $21,461,548 
Private education loans:
Loans in-school/grace/deferment $4,208 $4,320 $5,532 
Loans in forbearance 1,473 1,494 2,574 
Loans in repayment status:
Loans current196,122 95.5 %208,977 95.0 %178,976 96.1 %
Loans delinquent 31-60 days2,292 1.1  3,626 1.6  1,630 0.9  
Loans delinquent 61-90 days1,481 0.7  1,560 0.7  1,110 0.6  
Loans delinquent 91 days or greater5,453 2.7  5,998 2.7  4,488 2.4  
Total loans in repayment205,348 100.0 %220,161 100.0 %186,204 100.0 %
Total private education loans$211,029  $225,975  $194,310 
Consumer loans:
Loans in repayment status:
Loans current$187,983 98.4 %$136,130 98.2 %$76,401 98.1 %
Loans delinquent 31-60 days1,162 0.6  1,012 0.7  748 1.0  
Loans delinquent 61-90 days917 0.5  832 0.6  369 0.5  
Loans delinquent 91 days or greater939 0.5  653 0.5  337 0.4  
Total loans in repayment191,001 100.0 %138,627 100.0 %77,855 100.0 %
Total consumer loans$191,001 $138,627 $77,855 
v3.19.1
Bonds and Notes Payable
3 Months Ended
Mar. 31, 2019
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 March 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$19,969,336 2.69% - 4.30% 11/25/24 - 4/25/67
Bonds and notes based on auction787,676 3.18% - 3.83% 3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes20,757,012 
FFELP warehouse facilities792,658 2.70% / 2.75%  5/20/20 / 5/31/21
Consumer loan warehouse facility63,732 4.14%  1/10/22
Variable-rate bonds and notes issued in private education loan asset-backed securitization
46,330 4.24%  12/26/40
Fixed-rate bonds and notes issued in private education loan asset-backed securitization
59,609 3.60% / 5.35%  12/26/40 / 12/28/43
Unsecured line of credit320,000 3.98% - 4.00% 6/22/23
Unsecured debt - Junior Subordinated Hybrid Securities20,381 5.97%  9/15/61
Other borrowings81,969 3.19% - 3.99% 4/1/19 - 12/20/19
 22,141,691   
Discount on bonds and notes payable and debt issuance costs(305,968)
Total$21,835,723 

 As of December 31, 2018
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$20,192,123 2.59% - 4.52% 11/25/24 - 2/25/67
Bonds and notes based on auction793,476 2.84% - 3.55% 3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes20,985,599 
FFELP warehouse facilities986,886 2.65% / 2.71%  5/20/20 / 5/31/21
Variable-rate bonds and notes issued in private education loan asset-backed securitization
50,720 4.26%  12/26/40
Fixed-rate bonds and notes issued in private education loan asset-backed securitization
63,171 3.60% / 5.35%  12/26/40 / 12/28/43
Unsecured line of credit310,000 3.92% - 4.01% 6/22/23
Unsecured debt - Junior Subordinated Hybrid Securities20,381 6.17%  9/15/61
Other borrowings120,342 3.05% - 5.22% 1/3/19 - 12/15/45
 22,537,099   
Discount on bonds and notes payable and debt issuance costs(318,359)
Total$22,218,740 
FFELP Warehouse Facilities
The Company funds the majority of its Federal Family Education Loan Program (the "FFEL Program" or "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 March 31, 2019, the Company had two FFELP warehouse facilities as summarized below.
NFSLW-I (a)NHELP-IITotal
Maximum financing amount
$500,000 500,000 1,000,000 
Amount outstanding447,564 345,094 792,658 
Amount available$52,436 154,906 207,342 
Expiration of liquidity provisions
May 20, 2019May 31, 2019
Final maturity dateMay 20, 2020May 31, 2021
Advanced as equity support$24,314 26,255 50,569 
(a) On March 8, 2019, the Company decreased the maximum financing amount for this warehouse facility to $500 million.
Asset-Backed Securitizations
The following table summarizes the asset-backed securitization transactions completed during the first three months of 2019.
2019-1
Class A-1 NotesClass A-2 Notes2019-1 total
Date securities issued2/27/192/27/192/27/19  
Class A senior notes:
Total principal amount
$35,700 448,000 483,700 
Cost of funds (1-month LIBOR plus:)
0.30%  0.75%  
Final maturity date4/25/674/25/67
Class B subordinated notes:
Total principal amount
13,100 
Cost of funds (1-month LIBOR plus:)
1.40%  
Final maturity date4/25/67
Total principal amount issued
$35,700 448,000 496,800 
Consumer Loan Warehouse Facility
On January 11, 2019, the Company closed on a consumer loan warehouse facility with an aggregate maximum financing amount available of $100.0 million, an advance rate of 70 or 75 percent depending on type of collateral and subject to certain concentration limits, and a maturity date of January 10, 2022. As of March 31, 2019, $63.7 million was outstanding under this warehouse facility and $36.3 million was available for future funding. Additionally, as of March 31, 2019, the Company had $26.5 million advanced as equity support under this facility.
Unsecured Line of Credit
The Company has a $382.5 million unsecured line of credit that has a maturity date of June 22, 2023. As of March 31, 2019, $320.0 million was outstanding under the line of credit and $62.5 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 $400.0 million, subject to certain conditions.
Other Borrowings
The Company has two repurchase agreements, the proceeds of which are collateralized by FFELP asset-backed security investments and private education loans, respectively. Included in "other borrowings" as of March 31, 2019 and December 31, 2018 was a total of $82.0 million and $86.4 million, respectively, subject to these repurchase agreements.
The Company had other notes payable included in its consolidated financial statements which were issued by partnerships for certain real estate development projects. Although the Company's ownership of these partnerships are 50 percent or less, because the Company was the developer of and is a current tenant in the associated buildings, the operating results of these partnerships were included in the Company's consolidated financial statements. On January 1, 2019, the Company adopted a new accounting standard for leases (see note 1). As a result of the adoption of this new standard, these real estate entities were deconsolidated, including $33.9 million of related debt. Prior to January 1, 2019, this debt was included in "other borrowings."
v3.19.1
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2019
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 2018 Annual Report. A tabular presentation of such derivatives outstanding as of March 31, 2019 and December 31, 2018 is presented below.
Basis Swaps
The following table summarizes the Company’s outstanding basis swaps 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"). 
As of March 31,As of December 31,
20192018
Maturity
Notional amount
Notional amount
2019$3,250,000 3,500,000 
2020(a)1,000,000 1,000,000 
2021(a)250,000 250,000 
2022(b)2,000,000 2,000,000 
2023750,000 750,000 
2024250,000 250,000 
20261,150,000 1,150,000 
2027375,000 375,000 
2028325,000 325,000 
2029100,000 100,000 
2031300,000 300,000 
$9,750,000 10,000,000 
(a) These derivatives have a forward effective start date in May 2019.
(b) $250 million and $750 million of the notional amount of these derivatives have forward effective start dates in      May 2019 and May 2020, respectively.
The weighted average rate paid by the Company on the 1:3 Basis Swaps as of March 31, 2019 and December 31, 2018 was one-month LIBOR plus 9.5 basis points and 9.4 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 March 31, 2019As of December 31, 2018
MaturityNotional amountWeighted average fixed rate paid by the Company (a)Notional amountWeighted average fixed rate paid by the Company (a)
2019$1,500,000 0.98 %$3,250,000 0.97 %
20201,500,000 1.01  1,500,000 1.01  
2021100,000 2.95  100,000 2.95  
2023400,000 2.24  400,000 2.24  
2024200,000 2.27  300,000 2.28  
2027— —  25,000 2.35  
 $3,700,000 1.25 %$5,575,000 1.18 %
(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.
Interest Rate Swap Options – Floor Income Hedges
During 2014 and 2018, the Company paid $9.1 million and $4.6 million, respectively, for interest rate swap options to economically hedge loans earning fixed rate floor income. The interest rate swap options give the Company the right, but not the obligation, to enter into interest rate swaps in which the Company would pay a fixed amount and receive discrete one-month LIBOR. The following table summarizes these derivative instruments as of March 31, 2019.
If exercised effective dateNotional amountWeighted average fixed rate paid by the CompanyIf exercised maturity date
August 21, 2019$750,000 3.28 %August 21, 2024
September 25, 2019250,000 3.00  September 25, 2024
$1,000,000 3.21 %
Interest Rate Caps
During 2015, the Company paid $2.9 million for two interest rate cap contracts with a total notional amount of $275.0 million to mitigate a rise in interest rates and its impact on earnings related to its student loan portfolio earning a fixed rate. The first interest rate cap has a notional amount of $125.0 million and a one-month LIBOR strike rate of 2.50%, and the second interest rate cap has a notional amount of $150.0 million and a one-month LIBOR strike rate of 4.99%. In the event that the one-month LIBOR rate rises above the applicable strike rate, the Company would receive monthly payments related to the spread difference. Both interest rate cap contracts have a maturity date of July 15, 2020.
Consolidated Financial Statement Impact Related to Derivatives
Balance Sheet
The following table summarizes the fair value of the Company’s derivatives as reflected in the consolidated balance sheets. There is no difference between the gross amounts of recognized assets presented in the consolidated balance sheets related to the Company's derivative portfolio and the net amount when excluding derivatives subject to enforceable master netting arrangements and cash collateral received.
 Fair value of asset derivativesFair value of liability derivatives
As of March 31, 2019As of December 31, 2018As of March 31, 2019As of December 31, 2018
Interest rate swap options - floor income hedges
$90 1,465 — — 
Interest rate caps78 353 — — 
Total$168 1,818 — — 
Income Statement Impact
The following table summarizes the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income.
Three months ended March 31,
 20192018
Settlements:  
1:3 basis swaps$2,334 (1,664)
Interest rate swaps - floor income hedges16,701 8,590 
Interest rate swaps - hybrid debt hedges— (160)
Total settlements - income19,035 6,766 
Change in fair value:  
1:3 basis swaps(2,212)13,297 
Interest rate swaps - floor income hedges(26,712)44,201 
Interest rate swap options - floor income hedges(1,376)747 
Interest rate caps(274)326 
Interest rate swaps - hybrid debt hedges— 1,462 
Total change in fair value - (expense) income
(30,574)60,033 
Derivative market value adjustments and derivative settlements, net - (expense) income
$(11,539)66,799 
v3.19.1
Investments and Notes Receivable
3 Months Ended
Mar. 31, 2019
Investments [Abstract]  
Investments and Notes Receivable Investments and Notes Receivable
A summary of the Company's investments and notes receivable follows:
As of March 31, 2019As of December 31, 2018
Amortized costGross unrealized gainsGross unrealized lossesFair valueAmortized costGross unrealized gainsGross unrealized lossesFair value
Investments (at fair value):
Student loan asset-backed and other debt securities - available-for-sale
$47,994 4,673 — 52,667 47,931 5,109 — 53,040 
Equity securities13,405 6,002 (1,037)18,370 12,909 5,145 (407)17,647 
Total investments (at fair value)$61,399 10,675 (1,037)71,037 60,840 10,254 (407)70,687 
Other Investments and Notes Receivable (not measured at fair value):
Venture capital and funds:
Measurement alternative
71,129 70,939 
Equity method
15,714 19,230 
Other
800 900 
Total venture capital and funds87,643 91,069 
Real estate:
Equity method
39,489 29,168 
Other
9,193 34,211 
Total real estate
48,682 63,379 
Notes receivable16,183 16,373 
Tax liens and affordable housing6,967 7,862 
Total investments and notes receivable (not measured at fair value)159,475 178,683 
 Total investments and notes receivable
$230,512 249,370 
v3.19.1
Intangible Assets
3 Months Ended
Mar. 31, 2019
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Intangible Assets Intangible Assets
Intangible assets consist of the following:
Weighted average remaining useful life as of March 31, 2019 (months)
As of As of 
March 31, 2019 December 31, 2018
Amortizable intangible assets, net:  
Customer relationships (net of accumulated amortization of $40,635 and $33,968, respectively)
82$91,818 98,484 
Trade names (net of accumulated amortization of $6,672 and $5,825, respectively)
8810,020 10,868 
Computer software (net of accumulated amortization of $9,268 and $15,420, respectively)
213,957 4,938 
Total - amortizable intangible assets, net81$105,795 114,290 
The Company recorded amortization expense on its intangible assets of $8.5 million and $6.2 million during the three months ended March 31, 2019 and 2018, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of March 31, 2019, the Company estimates it will record amortization expense as follows:
2019 (April 1 - December 31)$24,263 
202029,515 
202118,761 
20227,172 
20236,925 
2024 and thereafter19,159 
 $105,795 
v3.19.1
Goodwill
3 Months Ended
Mar. 31, 2019
Goodwill [Abstract]  
Goodwill Goodwill
The carrying amount of goodwill as of December 31, 2018 and March 31, 2019 by reportable operating segment was as follows:
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingCommunicationsAsset Generation and ManagementCorporate and Other ActivitiesTotal
Goodwill balance$23,639 70,278 21,112 41,883 — 156,912 
v3.19.1
Property and Equipment
3 Months Ended
Mar. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment Property and Equipment
Property and equipment consisted of the following:
As ofAs of
Useful lifeMarch 31, 2019December 31, 2018
Non-communications:
Computer equipment and software1-5 years$145,600 137,705 
Building and building improvements5-48 years37,526 50,138 
Office furniture and equipment1-10 years23,169 22,796 
Leasehold improvements1-15 years8,844 9,327 
Transportation equipment5-10 years5,067 5,123 
Land— 1,400 3,328 
Construction in progress— 2,568 3,578 
224,174 231,995 
Accumulated depreciation - non-communications (129,747)(123,003)
Non-communications, net property and equipment94,427 108,992 
Communications:
Network plant and fiber
5-15 years225,570 215,787 
Customer located property
3-7 years23,470 21,234 
Central office
5-15 years16,443 15,688 
Transportation equipment
4-10 years6,685 6,580 
Computer equipment and software
1-5 years5,035 4,943 
Other
1-39 years3,294 3,219 
Land
— 70 70 
Construction in progress
— 5,256 6,344 
285,823 273,865 
Accumulated depreciation - communications
(45,180)(38,073)
Communications, net property and equipment
240,643 235,792 
Total property and equipment, net$335,070