UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 5, 2021

NELNET, INC.
(Exact name of registrant as specified in its charter)
															
Nebraska		001-31924		84-0748903	
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)	

121 South 13th Street, Suite 100			
Lincoln,	Nebraska		68508	
(Address of principal executive offices)		(Zip Code)	
Registrant's telephone number, including area code (402) 458-2370
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
									
Title of each class	Trading Symbol	Name of each exchange on which registered	
Class A Common Stock, Par Value $0.01 per Share	NNI	New York Stock Exchange	
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company    ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                        ☐

Item 2.02 Results of Operations and Financial Condition.
On August 5, 2021, Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended June 30, 2021. A copy of the press release is furnished as Exhibit 99.1 to this report. In addition, a copy of the supplemental financial information for the quarter ended June 30, 2021, which was made available on the Company's website at www.nelnetinvestors.com on August 5, 2021 in connection with the press release, is furnished as Exhibit 99.2 to this report.
The above information and Exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall such information and Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. In addition, information on the Company's website is not incorporated by reference into this report and should not be considered part of this report.
Certain statements contained in the exhibits furnished with this report may be considered forward looking in nature and are subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated, estimated, or expected. Among the key risks and uncertainties that may have a direct bearing on the Company's future operating results, performance, or financial condition expressed or implied by the forward-looking statements are the matters discussed in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. Although the Company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits. The following exhibits are furnished as part of this report:

Exhibit
No.		Description	
			
99.1		Press Release dated August 5, 2021 - "Nelnet Reports Second Quarter 2021 Results"	
			
99.2		Supplemental Financial Information for the Quarter Ended June 30, 2021	

	
104		Cover Page Interactive Data File (formatted as Inline XBRL and included as Exhibit 101).	

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 5, 2021
NELNET, INC.
By:    /s/ JAMES D. KRUGER
Name:    James D. Kruger
Title:    Chief Financial Officer

Nelnet Reports Second Quarter 2021 Results
LINCOLN, Neb., August 5, 2021 - Nelnet (NYSE: NNI) today reported GAAP net income of $83.9 million, or $2.16 per share, for the second quarter of 2021, compared with GAAP net income of $86.5 million, or $2.21 per share, for the same period a year ago.
Net income, excluding derivative market value adjustments1, was $85.1 million, or $2.20 per share, for the second quarter of 2021, compared with $89.5 million, or $2.28 per share, for the same period in 2020.
Included in the operating results for the second quarter of 2020 was a gain of $51.0 million (or $38.8 million after tax, or $0.99 per share) to increase the carrying value of the company's investment in Hudl to fair value after Hudl's May 2020 equity raise.
"Nelnet delivered strong results across our core business segments," said Jeff Noordhoek, Chief Executive Officer of Nelnet. "In the second half of 2021, we will continue to focus on opportunities to improve our customer experiences, enhance our culture and work environment for our associates, and invest in and diversify our businesses.”
Nelnet currently operates four primary business segments, earning interest income on loans in its Asset Generation and Management (AGM) segment and fee-based revenue in its Loan Servicing and Systems and Education Technology, Services, and Payment Processing segments. On November 2, 2020, Nelnet Bank launched operations and its financial results are presented by the company as a reportable segment.
Asset Generation and Management
The AGM operating segment reported net interest income of $81.3 million during the second quarter of 2021, compared with $66.1 million for the same period a year ago. The company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. The company recognized expense from derivative settlements of $5.4 million during the second quarter of 2021, compared with income of $5.8 million for the same period in 2020. Derivative settlements for each applicable period should be evaluated with the company's net interest income. Net interest income and derivative settlements increased to a net of $75.9 million in the second quarter of 2021, up from a total of $71.9 million in the second quarter of 2020, due to an increase in core loan spread. The increase in spread was partially offset by the expected decrease in the average balance of loans outstanding from $20.2 billion in the second quarter of 2020 to $19.0 billion for the same period in 2021.
Core loan spread2, which includes the impact of derivative settlements, increased to 1.41 percent for the quarter ended June 30, 2021, compared with 1.35 percent for the same period in 2020. Core loan spread was positively impacted in the second quarter of 2021 by lower interest rates. The company has a portfolio of student loans that are earning interest at a fixed borrower rate and that are financed with variable rate debt. As a result, in a low interest rate environment, the company earns additional spread income that it refers to as floor income. During the three months ended June 30, 2021, the company recognized $31.5 million of floor income (net of $5.2 million in derivative settlements paid), compared with $30.6 million (net of $1.3 million in derivative settlements paid) for the comparable period in 2020.
Net income for the AGM segment was $60.0 million for the three months ended June 30, 2021, compared with $39.1 million for the same period in 2020. Included in the operating results for the second quarter of 2021 was a gain of $15.3 million (or $11.6 million after tax, or $0.30 per share) from the sale of a portfolio of consumer loans.
Loan Servicing and Systems
Revenue from the Loan Servicing and Systems segment was $112.1 million for the second quarter of 2021, compared with $111.0 million for the same period in 2020. As of June 30, 2021, the company was servicing $506.6 billion in government-owned, Federal Family Education Loan (FFEL) Program, private education, and consumer loans for 15.5 million borrowers.
Net income for the Loan Servicing and Systems segment was $11.8 million for the three months ended June 30, 2021, compared with $11.1 million for the same period in 2020.
On June 9, 2021, Nelnet Servicing and Great Lakes Educational Loan Services each received modifications to extend their servicing contracts with the Department of Education (Department) from June 14, 2021 through December 14, 2021. The

1 Net income, excluding derivative market value adjustments, is a non-GAAP measure. See "Non-GAAP Performance Measures" at the end of this press release and the "Non-GAAP Disclosures" section below for explanatory information and reconciliations of GAAP to non-GAAP financial information.

2 Core loan spread is a non-GAAP measure. See "Non-GAAP Performance Measures" at the end of this press release and the "Non-GAAP Disclosures" section below for explanatory information and reconciliations of GAAP to non-GAAP financial information.

Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, provides that the Department may extend the contracts for up to two additional years to December 14, 2023.
Education Technology, Services, and Payment Processing
For the second quarter of 2021, revenue from the Education Technology, Services, and Payment Processing operating segment was $76.7 million, compared to $59.3 million for the same period in 2020. On December 31, 2020, the company acquired HigherSchool Instructional Services (HigherSchool), a services company that provides supplemental instructional services and educational professional development for K-12 schools in New York City, and CD2 LLC (CD2), a platform technology solution that includes learning management, collaboration/workflow, gamification, customer management/document storage, and employee boarding. The results of HigherSchool and CD2 are reported in the company’s consolidated financial statements from the date of acquisition. Revenue recognized by these acquisitions during the three months ended June 30, 2021 was $7.1 million.
Net income for the Education Technology, Services, and Payment Processing segment was $13.1 million for the three months ended June 30, 2021, compared with $8.9 million for the same period in 2020.
Nelnet Bank
On November 2, 2020, the company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation (FDIC) and for a bank charter from the Utah Department of Financial Institutions (UDFI) in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. Nelnet Bank operates as an internet Utah-chartered industrial bank franchise focused on the private education loan marketplace. As of June 30, 2021, Nelnet Bank had a $190.6 million loan portfolio, consisting of $97.2 million of FFEL Program loans and $93.4 million of private education loans, and had $299.4 million of deposits. Nelnet Bank incurred a $0.2 million net loss for the quarter ended June 30, 2021.
Other Income
Included in other income for the three months ended June 30, 2021 is investment gains and income of $15.6 million (or $11.8 million, or $0.31 per share) related to certain venture capital and real estate investments.
Board of Directors Declares Third Quarter Dividend
The Nelnet Board of Directors declared a third quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.22 per share. The dividend will be paid on September 15, 2021 to shareholders of record at the close of business on September 1, 2021.
Supplemental Financial Information
The company has provided supplemental financial information for the second quarter ended June 30, 2021 and certain other periods in a Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2021, and has made such information available on the company’s website at nelnetinvestors.com.

Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of federal securities laws. The words “anticipate,” “assume," "believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” "scheduled," “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements. These statements are based on management's current expectations as of the date of this release and are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: risks and uncertainties related to the severity, magnitude, and duration of the COVID-19 pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on business, educational, individual, or travel activities intended to slow the spread of the pandemic, and volatility in market conditions resulting from the pandemic; risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the company under existing and any future servicing contracts with the Department, which current contracts accounted for 27 percent of the company's revenue in 2020; risks to the company related to the Department's initiatives to procure new contracts for federal student loan servicing and awards of contracts to other parties, including the pending and uncertain nature of the Department's procurement process, risks that the company may not be successful in obtaining any of such potential new contracts, and risks related to the company's ability to comply with agreements with third-party customers for the servicing of loans; risks related to the company's loan portfolio, such as interest rate basis and repricing risk and changes in levels of loan repayment or default rates; the use of derivatives to manage exposure

to interest rate fluctuations; the uncertain nature of expected benefits from FFEL Program, private education, and consumer loan purchases and initiatives to purchase additional FFEL Program, private education, and consumer loans; financing and liquidity risks, including risks of changes in the securitization and other financing markets for loans; risks and uncertainties from changes in terms of education loans and in the educational credit and services marketplace resulting from changes in applicable laws, regulations, and government programs and budgets, such as changes resulting from the Coronavirus Aid, Relief, and Economic Security Act and the expected decline over time in FFEL Program loan interest income due to the discontinuation of new FFEL Program loan originations in 2010 and the resulting initiatives by the company to adjust to a post-FFEL Program environment, as well as the possibility of new student loan forgiveness or broad debt cancellation programs by the government; risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration; risks and uncertainties related to other initiatives to pursue additional strategic investments, acquisitions, and other activities, including activities that are intended to diversify the company both within and outside of its historical core education-related businesses; risks from changes in economic conditions and consumer behavior; cybersecurity risks, including potential disruptions to systems, disclosure of confidential information, and/or damage to reputation resulting from cyber-breaches; and changes in the general interest rate environment, including the availability of any relevant money-market index rate such as LIBOR or the relationship between the relevant money-market index rate and the rate at which the company's assets and liabilities are priced.
For more information, see the "Risk Factors" sections and other cautionary discussions of risks and uncertainties included in documents filed or furnished by the company with the Securities and Exchange Commission, including the cautionary information about forward-looking statements contained in the company's supplemental financial information for the second quarter ended June 30, 2021. All forward-looking statements in this release are as of the date of this release. Although the company may voluntarily update or revise its forward-looking statements from time to time to reflect actual results or changes in the company's expectations, the company disclaims any commitment to do so except as required by law.
Non-GAAP Performance Measures
The company prepares its financial statements and presents its financial results in accordance with U.S. GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. Reconciliations of GAAP to non-GAAP financial information, and a discussion of why the company believes providing this additional information is useful to investors, is provided in the "Non-GAAP Disclosures" section below.

Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)

	Three months ended		Six months ended	
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Interest income:										
Loan interest	$	122,005 			124,117 			146,140 			246,123 			327,933 		
Investment interest	11,578 			4,986 			5,743 			16,563 			13,141 		
Total interest income	133,583 			129,103 			151,883 			262,686 			341,074 		
Interest expense:										
Interest on bonds and notes payable and bank deposits	49,991 			27,773 			85,248 			77,764 			219,366 		
Net interest income	83,592 			101,330 			66,635 			184,922 			121,708 		
Less provision (negative provision) for loan losses	374 			(17,048)			2,999 			(16,674)			79,297 		
Net interest income after provision for loan losses	83,218 			118,378 			63,636 			201,596 			42,411 		
Other income/expense:										
Loan servicing and systems revenue	112,094 			111,517 			111,042 			223,611 			223,778 		
Education technology, services, and payment processing revenue	76,702 			95,258 			59,304 			171,960 			142,979 		
Communications revenue	— 			— 			18,998 			— 			37,179 		
Other	22,921 			(4,604)			60,127 			18,317 			68,408 		
Gain on sale of loans	15,271 			— 			— 			15,271 			18,206 		
	
Impairment expense and provision for beneficial interests, net	(500)			2,436 			(332)			1,936 			(34,419)		
Derivative market value adjustments and derivative settlements, net	(6,989)			34,505 			1,910 			27,516 			(14,455)		
Total other income/expense	219,499 			239,112 			251,049 			458,611 			441,676 		
Cost of services:										
Cost to provide education technology, services, and payment processing services	21,676 			27,052 			15,376 			48,728 			38,181 		
Cost to provide communications services	— 			— 			5,743 			— 			11,325 		
Total cost of services	21,676 			27,052 			21,119 			48,728 			49,506 		
Operating expenses:										
Salaries and benefits	118,968 			115,791 			119,247 			234,759 			239,125 		
Depreciation and amortization	20,236 			20,184 			29,393 			40,419 			57,041 		

Other expenses	32,587 			36,698 			37,052 			69,286 			80,439 		
Total operating expenses	171,791 			172,673 			185,692 			344,464 			376,605 		
Income before income taxes	109,250 			157,765 			107,874 			267,015 			57,976 		
Income tax expense	(26,237)			(34,861)			(21,264)			(61,098)			(11,131)		
Net income	83,013 			122,904 			86,610 			205,917 			46,845 		
Net loss (income) attributable to noncontrolling interests	854 			694 			(128)			1,548 			(895)		
Net income attributable to Nelnet, Inc.	$	83,867 			123,598 			86,482 			207,465 			45,950 		
Earnings per common share:										
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	2.16 			3.20 			2.21 			5.36 			1.16 		
Weighted average common shares outstanding - basic and diluted	38,741,486 			38,603,555 			39,203,404 			38,672,902 			39,579,459 		

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
																		
	As of		As of		As of	
	June 30, 2021		December 31, 2020		June 30, 2020	
	
Assets:						
Loans and accrued interest receivable, net	$	20,187,670 			20,185,656 			20,460,873 		
Cash, cash equivalents, and investments	1,480,946 			1,114,189 			517,240 		
Restricted cash	864,384 			837,146 			853,775 		
Goodwill and intangible assets, net	200,556 			217,162 			223,645 		
Other assets	295,307 			292,007 			555,675 		
Total assets	$	23,028,863 			22,646,160 			22,611,208 		
Liabilities:						
Bonds and notes payable	$	19,381,835 			19,320,726 			19,726,158 		
Bank deposits	202,841 			54,633 			— 		
Other liabilities	615,569 			642,452 			544,264 		
Total liabilities	20,200,245 			20,017,811 			20,270,422 		
Equity:						
Total Nelnet, Inc. shareholders' equity	2,833,800 			2,632,042 			2,336,796 		
Noncontrolling interests	(5,182)			(3,693)			3,990 		
Total equity	2,828,618 			2,628,349 			2,340,786 		
Total liabilities and equity	$	23,028,863 			22,646,160 			22,611,208 		
Contacts:
Media, Ben Kiser, 402.458.3024, or Investors, Phil Morgan, 402.458.3038, both of Nelnet, Inc.

Non-GAAP Disclosures
(Dollars in thousands, except share data)
(unaudited)
Non-GAAP financial measures disclosed by management are meant to provide additional information and insight relative to business trends to investors and, in certain cases, to present financial information as measured by rating agencies and other users of financial information. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies. The company reports this non-GAAP information because the company believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance.
Net income, excluding derivative market value adjustments
												
	Three months ended June 30,	
	2021		2020	
GAAP net income attributable to Nelnet, Inc.	$	83,867 			86,482 		
Realized and unrealized derivative market value adjustments (a)	1,615 			3,911 		
Tax effect (b)	(388)			(939)		
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments	$	85,094 			89,454 		
				
Earnings per share:				
GAAP net income attributable to Nelnet, Inc.	$	2.16 			2.21 		
Realized and unrealized derivative market value adjustments (a)	0.04 			0.10 		
Tax effect (b)	— 			(0.03)		
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments	$	2.20 			2.28 		

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

Core loan spread
The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets. The spread amounts included in the following table are calculated by using the notional dollar values found in the "Net interest income, net of settlements on derivatives" table on the following page, divided by the average balance of loans or debt outstanding.

 	Three months ended June 30,	
	2021		2020	
Variable loan yield, gross	2.63 	%		3.09 	%	
Consolidation rebate fees	(0.84)			(0.84)		
Discount accretion, net of premium and deferred origination costs amortization	0.01 			0.02 		
Variable loan yield, net	1.80 			2.27 		
Loan cost of funds - interest expense	(1.04)			(1.67)		
Loan cost of funds - derivative settlements (a) (b)	(0.01)			0.14 		
Variable loan spread	0.75 			0.74 		
Fixed rate floor income, gross	0.78 			0.63 		
Fixed rate floor income - derivative settlements (a) (c)	(0.12)			(0.02)		
Fixed rate floor income, net of settlements on derivatives	0.66 			0.61 		
Core loan spread	1.41 	%		1.35 	%	
				
Average balance of AGM's loans	$	18,958,042		20,242,054	
Average balance of AGM's debt outstanding	18,656,465		20,217,401	
(a)    Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the company's derivative instruments based on their contractual terms. Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income. The company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the company’s net interest income (loan spread) as presented in this table.
A reconciliation of core loan spread, which includes the impact of derivative settlements on loan spread, to loan spread without derivative settlements follows.
												
	Three months ended June 30,	
	2021		2020	
Core loan spread	1.41 	%		1.35 	%	
Derivative settlements (1:3 basis swaps)	0.01 			(0.14)		
Derivative settlements (fixed rate floor income)	0.12 			0.02 		
Loan spread	1.54 	%		1.23 	%	

(b)    Derivative settlements consist of net settlements (paid) received related to the company’s 1:3 basis swaps.
(c)    Derivative settlements consist of net settlements (paid) received related to the company’s floor income interest rate swaps.

Net interest income, net of settlements on derivatives
The following table summarizes the components of "net interest income" and "derivative settlements, net" from the AGM segment statements of income.

 	Three months ended June 30,	
 	2021		2020	
Variable interest income, gross	$	124,267 			155,646 		
Consolidation rebate fees	(40,250)			(42,387)		
Discount accretion, net of premium and deferred origination costs amortization	427 			1,015 		
Variable interest income, net	84,444 			114,274 		
Interest on bonds and notes payable	(48,542)			(84,141)		
Derivative settlements (basis swaps), net (a)	(221)			7,129 		
Variable loan interest margin, net of settlements on derivatives (a)	35,681 			37,262 		
Fixed rate floor income, gross	36,639 			31,866 		
Derivative settlements (interest rate swaps), net (a)	(5,153)			(1,308)		
Fixed rate floor income, net of settlements on derivatives (a)	31,486 			30,558 		
Core loan interest income (a)	67,167 			67,820 		
Investment interest	8,882 			4,443 		
Intercompany interest	(128)			(348)		
Net interest income (net of settlements on derivatives) (a)	$	75,921 			71,915 		

(a)    Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the company's derivative instruments based on their contractual terms. Derivative accounting requires that net settlements on derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income. The company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the company’s net interest income as presented in this table. Core loan interest income and net interest income (net of settlements on derivatives) are non-GAAP financial measures.
A reconciliation of net interest income (net of settlements on derivatives) to net interest income for the company's AGM segment follows.
												
	Three months ended June 30,	
	2021		2020	
Net interest income (net of settlements on derivatives)	$	75,921 			71,915 		
Derivative settlements (1:3 basis swaps)	221 			(7,129)		
Derivative settlements (fixed rate floor income)	5,153 			1,308 		
Net interest income	$	81,295 			66,094 		

For Release: August 5, 2021
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the second quarter 2021
(All dollars are in thousands, except per share amounts, unless otherwise noted)
The following information should be read in connection with Nelnet, Inc.'s (the “Company's”) press release for second quarter 2021 earnings, dated August 5, 2021, and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
Forward-looking and cautionary statements
This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “scheduled,” “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.
The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report"), and include such risks and uncertainties as:
•risks and uncertainties related to the severity, magnitude, and duration of the coronavirus disease 2019 (“COVID-19”) pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on business, educational, individual, or travel activities intended to slow the spread of the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;
•risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and any future servicing contracts with the U.S. Department of Education (the "Department"), which current contracts accounted for 27 percent of the Company's revenue in 2020, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process (under which awards of new contracts have been made to other service providers), risks that the Company may not be successful in obtaining any of such potential new contracts, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), private education, and consumer loans;
•loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, and consumer loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, and consumer loans, and risks from changes in levels of loan prepayment or default rates;
•financing and liquidity risks, including risks of changes in the general interest rate environment, including the availability of any relevant money market index rate such as LIBOR or the relationship between the relevant money market index rate and the rate at which the Company's assets and liabilities are priced, and changes in the securitization and other financing markets for loans, including adverse changes resulting from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay repayment of the associated bonds, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;
•risks from changes in the terms of education loans and in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets, such as changes resulting from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and the expected decline over time in FFELP loan interest income due to the discontinuation of new FFELP loan originations in 2010 and potential government initiatives or proposals to consolidate existing FFELP loans to the Federal Direct Loan Program, otherwise allow FFELP loans to be refinanced with Federal Direct Loan Program loans, or create additional loan forgiveness or broad debt cancellation programs;
•risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to the potential disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;
•uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
•risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration;
•risks related to the expected benefits to the Company and to ALLO Communications LLC (“ALLO”) from the recapitalization and additional funding for ALLO and the Company’s continuing investment in ALLO, and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;
•risks and uncertainties related to other initiatives to pursue additional strategic investments, acquisitions, and other activities, such as the completed and additional planned transactions associated with the sale by Wells Fargo of its private education loan portfolio for which the Company was selected as the new servicer (including risks associated with errors that occasionally occur in converting loan servicing portfolio acquisitions to a new servicing platform), including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses; and
•risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, reputational and other risks, including the risk of increased regulatory costs resulting from the politicization of student loan servicing, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.
All forward-looking statements contained in this supplement are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by law.
1

Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)
																														
	Three months ended		Six months ended	
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Interest income:										
Loan interest	$	122,005 			124,117 			146,140 			246,123 			327,933 		
Investment interest	11,578 			4,986 			5,743 			16,563 			13,141 		
Total interest income	133,583 			129,103 			151,883 			262,686 			341,074 		
Interest expense:										
Interest on bonds and notes payable and bank deposits	49,991 			27,773 			85,248 			77,764 			219,366 		
Net interest income	83,592 			101,330 			66,635 			184,922 			121,708 		
Less provision (negative provision) for loan losses	374 			(17,048)			2,999 			(16,674)			79,297 		
Net interest income after provision for loan losses	83,218 			118,378 			63,636 			201,596 			42,411 		
Other income/expense:										
Loan servicing and systems revenue	112,094 			111,517 			111,042 			223,611 			223,778 		
Education technology, services, and payment processing revenue	76,702 			95,258 			59,304 			171,960 			142,979 		
Communications revenue	— 			— 			18,998 			— 			37,179 		
Other	22,921 			(4,604)			60,127 			18,317 			68,408 		
Gain on sale of loans	15,271 			— 			— 			15,271 			18,206 		
	
Impairment expense and provision for beneficial interests, net	(500)			2,436 			(332)			1,936 			(34,419)		
Derivative settlements, net	(5,374)			(4,304)			5,821 			(9,678)			10,058 		
Derivative market value adjustments, net	(1,615)			38,809 			(3,911)			37,194 			(24,513)		
Total other income/expense	219,499 			239,112 			251,049 			458,611 			441,676 		
Cost of services:										
Cost to provide education technology, services, and payment processing services	21,676 			27,052 			15,376 			48,728 			38,181 		
Cost to provide communications services	— 			— 			5,743 			— 			11,325 		
Total cost of services	21,676 			27,052 			21,119 			48,728 			49,506 		
Operating expenses:										
Salaries and benefits	118,968 			115,791 			119,247 			234,759 			239,125 		
Depreciation and amortization	20,236 			20,184 			29,393 			40,419 			57,041 		

Other expenses	32,587 			36,698 			37,052 			69,286 			80,439 		
Total operating expenses	171,791 			172,673 			185,692 			344,464 			376,605 		
Income before income taxes	109,250 			157,765 			107,874 			267,015 			57,976 		
Income tax expense	(26,237)			(34,861)			(21,264)			(61,098)			(11,131)		
Net income	83,013 			122,904 			86,610 			205,917 			46,845 		
Net loss (income) attributable to noncontrolling interests	854 			694 			(128)			1,548 			(895)		
Net income attributable to Nelnet, Inc.	$	83,867 			123,598 			86,482 			207,465 			45,950 		
Earnings per common share:										
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	2.16 			3.20 			2.21 			5.36 			1.16 		
Weighted average common shares outstanding - basic and diluted	38,741,486 			38,603,555 			39,203,404 			38,672,902 			39,579,459 		

2

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
																		
	As of		As of		As of	
	June 30, 2021		December 31, 2020		June 30, 2020	
Assets:						
Loans and accrued interest receivable, net	$	20,187,670 			20,185,656 			20,460,873 		
Cash, cash equivalents, and investments	1,480,946 			1,114,189 			517,240 		
Restricted cash	864,384 			837,146 			853,775 		
Goodwill and intangible assets, net	200,556 			217,162 			223,645 		
Other assets	295,307 			292,007 			555,675 		
Total assets	$	23,028,863 			22,646,160 			22,611,208 		
Liabilities:						
Bonds and notes payable	$	19,381,835 			19,320,726 			19,726,158 		
Bank deposits	202,841 			54,633 			— 		
Other liabilities	615,569 			642,452 			544,264 		
Total liabilities	20,200,245 			20,017,811 			20,270,422 		
Equity:						
Total Nelnet, Inc. shareholders' equity	2,833,800 			2,632,042 			2,336,796 		
Noncontrolling interests	(5,182)			(3,693)			3,990 		
Total equity	2,828,618 			2,628,349 			2,340,786 		
Total liabilities and equity	$	23,028,863 			22,646,160 			22,611,208 		

3

Overview
The Company is a diverse company with a purpose to serve others and a vision to make customers' dreams possible by delivering customer focused products and services. The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes investments to further diversify both within and outside of its historical core education-related businesses, including, but not limited to, investments in real estate, early-stage and emerging growth companies, and renewable energy.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
The Company prepares its financial statements and presents its financial results in accordance with U.S. GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. A reconciliation of the Company's GAAP net income to net income, excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, is provided below.
																														
	Three months ended		Six months ended	
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
GAAP net income attributable to Nelnet, Inc.	$	83,867 			123,598 			86,482 			207,465 			45,950 		
Realized and unrealized derivative market value adjustments	1,615 			(38,809)			3,911 			(37,194)			24,513 		
Tax effect (a)	(388)			9,314 			(939)			8,927 			(5,883)		
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)	$	85,094 			94,103 			89,454 			179,198 			64,580 		
										
Earnings per share:										
GAAP net income attributable to Nelnet, Inc.	$	2.16 			3.20 			2.21 			5.36 			1.16 		
Realized and unrealized derivative market value adjustments	0.04 			(1.01)			0.10 			(0.96)			0.62 		
Tax effect (a)	— 			0.25 			(0.03)			0.23 			(0.15)		
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)	$	2.20 			2.44 			2.28 			4.63 			1.63 		

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

4

Operating Results
The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its Asset Generation and Management ("AGM") operating segment. This segment is expected to generate a stable net interest margin and significant amounts of cash as the FFELP portfolio amortizes. As of June 30, 2021, AGM had a $19.3 billion loan portfolio that management anticipates will amortize over the next approximately 20 years and has a weighted average remaining life of 9.5 years. The Company actively works to maximize the amount and timing of cash flows generated by its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.
In addition, the Company earns fee-based revenue through the following reportable operating segments:
•Loan Servicing and Systems ("LSS") - referred to as Nelnet Diversified Services ("NDS")
•Education Technology, Services, and Payment Processing ("ETS&PP") - referred to as Nelnet Business Services ("NBS")
Further, the Company earned communications revenue through ALLO, formerly a majority owned subsidiary of the Company prior to a recapitalization of ALLO resulting in the deconsolidation of ALLO from the Company’s financial statements on December 21, 2020. The recapitalization of ALLO was not considered a strategic shift in the Company’s involvement with ALLO, and ALLO’s results of operations, prior to the deconsolidation, are presented by the Company as a reportable operating segment.
On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation ("FDIC") and for a bank charter from the Utah Department of Financial Institutions ("UDFI") in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. Nelnet Bank operates as an internet Utah-chartered industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah. Nelnet Bank’s operations are presented by the Company as a reportable operating segment.
Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate"). Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured and other corporate related debt transactions. In addition, the Corporate segment includes direct incremental costs associated with Nelnet Bank prior to the UDFI’s approval for its bank charter and certain shared service and support costs incurred by the Company that will not be reflected in Nelnet Bank’s operating results through 2023 (the bank’s de novo period). Such Nelnet Bank-related costs included in the Corporate segment totaled $1.0 million (pre-tax) and $1.3 million (pre-tax) for the three months ended June 30, 2021 and 2020, respectively, and $1.7 million (pre-tax) and $2.5 million (pre-tax) for the six months ended June 30, 2021 and 2020, respectively.

5

The information below provides the operating results for each reportable operating segment for the three and six months ended June 30, 2021 and 2020 (dollars in millions).

	LSS (a)		ETS&PP		ALLO (b)		AGM (c)		Bank (c)	

(a)    Revenue includes intersegment revenue.
(b)    On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements. Accordingly, there are no operating results for the (former) Communications operating segment in 2021.
(c)    Total revenue includes "net interest income" and "total other income/expense" from the Company's segment statements of income, excluding from AGM the impact from changes in fair values of derivatives. Net income (loss) excludes from AGM changes in fair values of derivatives, net of tax. For information regarding the exclusion of the impact from changes in fair values of derivatives, see "GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments" above.

6

Segment Reporting
The following tables include the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.
																																																
 	Three months ended June 30, 2021	
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing		Communications (a)		Asset
Generation and
Management		Nelnet Bank		Corporate and Other Activities		Eliminations		Total	
Total interest income	$	30 			210 			— 			129,965 			2,041 			1,524 			(187)			133,583 		
Interest expense	23 			— 			— 			48,670 			392 			1,093 			(187)			49,991 		
Net interest income	7 			210 			— 			81,295 			1,649 			431 			— 			83,592 		
Less provision (negative provision) for loan losses	— 			— 			— 			305 			69 			— 			— 			374 		
Net interest income after provision for loan losses	7 			210 			— 			80,990 			1,580 			431 			— 			83,218 		
Other income/expense:																
Loan servicing and systems revenue	112,094 			— 			— 			— 			— 			— 			— 			112,094 		
Intersegment revenue	8,480 			3 			— 			— 			— 			— 			(8,483)			— 		
Education technology, services, and payment processing revenue	— 			76,702 			— 			— 			— 			— 			— 			76,702 		
Communications revenue	— 			— 			— 			— 			— 			— 			— 			— 		
Other	701 			— 			— 			2,316 			4 			19,900 			— 			22,921 		
Gain on sale of loans	— 			— 			— 			15,271 			— 			— 			— 			15,271 		
	
Impairment expense and provision for beneficial interests, net	— 			— 			— 			— 			— 			(500)			— 			(500)		
Derivative settlements, net	— 			— 			— 			(5,374)			— 			— 			— 			(5,374)		
Derivative market value adjustments, net	— 			— 			— 			(1,615)			— 			— 			— 			(1,615)		
Total other income/expense	121,275 			76,705 			— 			10,598 			4 			19,400 			(8,483)			219,499 		
Cost of services:																
Cost to provide education technology, services, and payment processing services	— 			21,676 			— 			— 			— 			— 			— 			21,676 		
Cost to provide communications services	— 			— 			— 			— 			— 			— 			— 			— 		
Total cost of services	— 			21,676 			— 			— 			— 			— 			— 			21,676 		
Operating expenses:																
Salaries and benefits	68,388 			27,094 			— 			556 			1,578 			21,351 			— 			118,968 		
Depreciation and amortization	7,974 			2,956 			— 			— 			— 			9,305 			— 			20,236 		
Other expenses	13,273 			4,437 			— 			3,567 			237 			11,074 			— 			32,587 		
Intersegment expenses, net	16,134 			3,520 			— 			8,549 			37 			(19,757)			(8,483)			— 		
Total operating expenses	105,769 			38,007 			— 			12,672 			1,852 			21,973 			(8,483)			171,791 		
Income (loss) before income taxes	15,513 			17,232 			— 			78,916 			(268)			(2,142)			— 			109,250 		
Income tax (expense) benefit (b)	(3,723)			(4,136)			— 			(18,940)			64 			497 			— 			(26,237)		
Net income (loss)	11,790 			13,096 			— 			59,976 			(204)			(1,645)			— 			83,013 		
Net loss (income) attributable to noncontrolling interests	— 			— 			— 			— 			— 			854 			— 			854 		
Net income (loss) attributable to Nelnet, Inc.	$	11,790 			13,096 			— 			59,976 			(204)			(791)			— 			83,867 		

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

7

																																																
	Three months ended March 31, 2021	
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing		Communications (a)		Asset
Generation and
Management		Nelnet Bank		Corporate and Other Activities		Eliminations		Total	
Total interest income	$	34 			263 			— 			126,402 			1,376 			1,246 			(218)			129,103 		
Interest expense	23 			— 			— 			26,950 			194 			824 			(218)			27,773 		
Net interest income	11 			263 			— 			99,452 			1,182 			422 			— 			101,330 		
Less provision (negative provision) for loan losses	— 			— 			— 			(17,470)			422 			— 			— 			(17,048)		
Net interest income after provision for loan losses	11 			263 			— 			116,922 			760 			422 			— 			118,378 		
Other income/expense:																
Loan servicing and systems revenue	111,517 			— 			— 			— 			— 			— 			— 			111,517 		
Intersegment revenue	8,268 			3 			— 			— 			— 			— 			(8,271)			— 		
Education technology, services, and payment processing revenue	— 			95,258 			— 			— 			— 			— 			— 			95,258 		
Communications revenue	— 			— 			— 			— 			— 			— 			— 			— 		
Other	1,113 			— 			— 			445 			22 			(6,184)			— 			(4,604)		
Gain on sale of loans	— 			— 			— 			— 			— 			— 			— 			— 		
	
Impairment expense and provision for beneficial interests, net	— 			— 			— 			2,436 			— 			— 			— 			2,436 		
Derivative settlements, net	— 			— 			— 			(4,304)			— 			— 			— 			(4,304)		
Derivative market value adjustments, net	— 			— 			— 			38,809 			— 			— 			— 			38,809 		
Total other income/expense	120,898 			95,261 			— 			37,386 			22 			(6,184)			(8,271)			239,112 		
Cost of services:																
Cost to provide education technology, services, and payment processing services	— 			27,052 			— 			— 			— 			— 			— 			27,052 		
Cost to provide communications services	— 			— 			— 			— 			— 			— 			— 			— 		
Total cost of services	— 			27,052 			— 			— 			— 			— 			— 			27,052 		
Operating expenses:																
Salaries and benefits	66,458 			25,941 			— 			495 			1,488 			21,409 			— 			115,791 		
Depreciation and amortization	8,192 			3,071 			— 			— 			— 			8,920 			— 			20,184 		
Other expenses	13,285 			4,822 			— 			3,777 			545 			14,272 			— 			36,698 		
Intersegment expenses, net	16,890 			3,664 			— 			8,427 			3 			(20,713)			(8,271)			— 		
Total operating expenses	104,825 			37,498 			— 			12,699 			2,036 			23,888 			(8,271)			172,673 		
Income (loss) before income taxes	16,084 			30,974 			— 			141,609 			(1,254)			(29,650)			— 			157,765 		
Income tax (expense) benefit (b)	(3,860)			(7,434)			— 			(33,987)			286 			10,133 			— 			(34,861)		
Net income (loss)	12,224 			23,540 			— 			107,622 			(968)			(19,517)			— 			122,904 		
Net loss (income) attributable to noncontrolling interests	— 			— 			— 			— 			— 			(17)			711 			694 		
Net income (loss) attributable to Nelnet, Inc.	$	12,224 			23,540 			— 			107,622 			(968)			(19,534)			711 			123,598 		

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

8

																																																
 	Three months ended June 30, 2020	
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing		Communications		Asset
Generation and
Management		Nelnet Bank (a)		Corporate and Other Activities		Eliminations		Total	
Total interest income	$	52 			420 			— 			150,583 			— 			1,196 			(368)			151,883 		
Interest expense	28 			21 			— 			84,489 			— 			1,078 			(368)			85,248 		
Net interest income	24 			399 			— 			66,094 			— 			118 			— 			66,635 		
Less provision (negative provision) for loan losses	— 			— 			— 			2,999 			— 			— 			— 			2,999 		
Net interest income after provision for loan losses	24 			399 			— 			63,095 			— 			118 			— 			63,636 		
Other income/expense:																
Loan servicing and systems revenue	111,042 			— 			— 			— 			— 			— 			— 			111,042 		
Intersegment revenue	8,537 			3 			— 			— 			— 			— 			(8,540)			— 		
Education technology, services, and payment processing revenue	— 			59,304 			— 			— 			— 			— 			— 			59,304 		
Communications revenue	— 			— 			18,998 			— 			— 			— 			— 			18,998 		
Other	1,914 			— 			392 			732 			— 			57,089 			— 			60,127 		
Gain on sale of loans	— 			— 			— 			— 			— 			— 			— 			— 		
	
Impairment expense and provision for beneficial interests, net	— 			— 			— 			— 			— 			(332)			— 			(332)		
Derivative settlements, net	— 			— 			— 			5,821 			— 			— 			— 			5,821 		
Derivative market value adjustments, net	— 			— 			— 			(3,911)			— 			— 			— 			(3,911)		
Total other income/expense	121,493 			59,307 			19,390 			2,642 			— 			56,757 			(8,540)			251,049 		
Cost of services:																
Cost to provide education technology, services, and payment processing services	— 			15,376 			— 			— 			— 			— 			— 			15,376 		
Cost to provide communications services	— 			— 			5,743 			— 			— 			— 			— 			5,743 		
Total cost of services	— 			15,376 			5,743 			— 			— 			— 			— 			21,119 		
Operating expenses:																
Salaries and benefits	68,401 			24,522 			5,570 			421 			— 			20,334 			— 			119,247 		
Depreciation and amortization	9,142 			2,362 			10,824 			— 			— 			7,065 			— 			29,393 		
Other expenses	13,380 			2,326 			3,774 			4,863 			— 			12,710 			— 			37,052 		
Intersegment expenses, net	15,996 			3,429 			536 			9,055 			— 			(20,476)			(8,540)			— 		
Total operating expenses	106,919 			32,639 			20,704 			14,339 			— 			19,633 			(8,540)			185,692 		
Income (loss) before income taxes	14,598 			11,691 			(7,057)			51,398 			— 			37,242 			— 			107,874 		
Income tax (expense) benefit	(3,504)			(2,806)			1,694 			(12,336)			— 			(4,312)			— 			(21,264)		
Net income (loss)	11,094 			8,885 			(5,363)			39,062 			— 			32,930 			— 			86,610 		
Net loss (income) attributable to noncontrolling interests	— 			— 			— 			— 			— 			(128)			— 			(128)		
Net income (loss) attributable to Nelnet, Inc.	$	11,094 			8,885 			(5,363)			39,062 			— 			32,802 			— 			86,482 		

(a) Nelnet Bank launched operations on November 2, 2020. Accordingly, there are no operating results for the Nelnet Bank operating segment in the three months ended June 30, 2020.
9

																																																
	Six months ended June 30, 2021	
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing		Communications (a)		Asset
Generation and
Management		Nelnet Bank		Corporate and Other Activities		Eliminations		Total	
Total interest income	$	63 			473 			— 			256,367 			3,418 			2,770 			(405)			262,686 		
Interest expense	47 			— 			— 			75,620 			586 			1,916 			(405)			77,764 		
Net interest income	16 			473 			— 			180,747 			2,832 			854 			— 			184,922 		
Less provision (negative provision) for loan losses	— 			— 			— 			(17,165)			491 			— 			— 			(16,674)		
Net interest income after provision for loan losses	16 			473 			— 			197,912 			2,341 			854 			— 			201,596 		
Other income/expense:																
Loan servicing and systems revenue	223,611 			— 			— 			— 			— 			— 			— 			223,611 		
Intersegment revenue	16,748 			6 			— 			— 			— 			— 			(16,754)			— 		
Education technology, services, and payment processing revenue	— 			171,960 			— 			— 			— 			— 			— 			171,960 		
Communications revenue	— 			— 			— 			— 			— 			— 			— 			— 		
Other	1,814 			— 			— 			2,760 			26 			13,716 			— 			18,317 		
Gain on sale of loans	— 			— 			— 			15,271 			— 			— 			— 			15,271 		
	
Impairment expense and provision for beneficial interests, net	— 			— 			— 			2,436 			— 			(500)			— 			1,936 		
Derivative settlements, net	— 			— 			— 			(9,678)			— 			— 			— 			(9,678)		
Derivative market value adjustments, net	— 			— 			— 			37,194 			— 			— 			— 			37,194 		
Total other income/expense	242,173 			171,966 			— 			47,983 			26 			13,216 			(16,754)			458,611 		
Cost of services:																
Cost to provide education technology, services, and payment processing services	— 			48,728 			— 			— 			— 			— 			— 			48,728 		
Cost to provide communications services	— 			— 			— 			— 			— 			— 			— 			— 		
Total cost of services	— 			48,728 			— 			— 			— 			— 			— 			48,728 		
Operating expenses:																
Salaries and benefits	134,846 			53,035 			— 			1,051 			3,065 			42,761 			— 			234,759 		
Depreciation and amortization	16,166 			6,027 			— 			— 			— 			18,225 			— 			40,419 		
Other expenses	26,557 			9,259 			— 			7,344 			781 			25,346 			— 			69,286 		
Intersegment expenses, net	33,024 			7,184 			— 			16,976 			40 			(40,470)			(16,754)			— 		
Total operating expenses	210,593 			75,505 			— 			25,371 			3,886 			45,862 			(16,754)			344,464 		
Income (loss) before income taxes	31,596 			48,206 			— 			220,524 			(1,519)			(31,792)			— 			267,015 		
Income tax (expense) benefit (b)	(7,583)			(11,570)			— 			(52,926)			351 			10,630 			— 			(61,098)		
Net income (loss)	24,013 			36,636 			— 			167,598 			(1,168)			(21,162)			— 			205,917 		
Net loss (income) attributable to noncontrolling interests	— 			— 			— 			— 			— 			1,548 			— 			1,548 		
Net income (loss) attributable to Nelnet, Inc.	$	24,013 			36,636 			— 			167,598 			(1,168)			(19,614)			— 			207,465 		

(a) On December 21, 2020, the Company deconsolidated ALLO from the Company’s consolidated financial statements. Accordingly, there are no operating results for the (former) Communications operating segment in 2021.
(b) Income taxes for the Nelnet Bank operating segment reflect Nelnet Bank's actual tax expense/benefit as allocated and reflected in its Call Report filed with the Federal Deposit Insurance Corporation. Income taxes for all other operating segments are allocated based on 24% of that segment's income before taxes. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities.
10

																																																
	Six months ended June 30, 2020	
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing		Communications		Asset
Generation and
Management		Nelnet Bank (a)		Corporate and Other Activities		Eliminations		Total	
Total interest income	$	369 			2,411 			— 			336,509 			— 			2,751 			(967)			341,074 		
Interest expense	73 			38 			— 			217,737 			— 			2,485 			(967)			219,366 		
Net interest income	296 			2,373 			— 			118,772 			— 			266 			— 			121,708 		
Less provision (negative provision) for loan losses	— 			— 			— 			79,297 			— 			— 			— 			79,297 		
Net interest income after provision for loan losses	296 			2,373 			— 			39,475 			— 			266 			— 			42,411 		
Other income/expense:																
Loan servicing and systems revenue	223,778 			— 			— 			— 			— 			— 			— 			223,778 		
Intersegment revenue	19,591 			14 			— 			— 			— 			— 			(19,605)			— 		
Education technology, services, and payment processing revenue	— 			142,979 			— 			— 			— 			— 			— 			142,979 		
Communications revenue	— 			— 			37,179 			— 			— 			— 			— 			37,179 		
Other	4,544 			— 			745 			3,947 			— 			59,172 			— 			68,408 		
Gain on sale of loans	— 			— 			— 			18,206 			— 			— 			— 			18,206 		
	
Impairment expense and provision for beneficial interests, net	— 			— 			— 			(26,303)			— 			(8,116)			— 			(34,419)		
Derivative settlements, net	— 			— 			— 			10,058 			— 			— 			— 			10,058 		
Derivative market value adjustments, net	— 			— 			— 			(24,513)			— 			— 			— 			(24,513)		
Total other income/expense	247,913 			142,993 			37,924 			(18,605)			— 			51,056 			(19,605)			441,676 		
Cost of services:																
Cost to provide education technology, services, and payment processing services	— 			38,181 			— 			— 			— 			— 			— 			38,181 		
Cost to provide communications services	— 			— 			11,325 			— 			— 			— 			— 			11,325 		
Total cost of services	— 			38,181 			11,325 			— 			— 			— 			— 			49,506 		
Operating expenses:																
Salaries and benefits	138,894 			48,218 			10,986 			863 			— 			40,163 			— 			239,125 		
Depreciation and amortization	17,990 			4,749 			21,330 			— 			— 			12,972 			— 			57,041 		
Other expenses	30,870 			8,418 			7,463 			8,581 			— 			25,108 			— 			80,439 		
Intersegment expenses, net	32,235 			6,756 			1,160 			20,971 			— 			(41,517)			(19,605)			— 		
Total operating expenses	219,989 			68,141 			40,939 			30,415 			— 			36,726 			(19,605)			376,605 		
Income (loss) before income taxes	28,220 			39,044 			(14,340)			(9,545)			— 			14,596 			— 			57,976 		
Income tax (expense) benefit	(6,773)			(9,371)			3,442 			2,291 			— 			(720)			— 			(11,131)		
Net income (loss)	21,447 			29,673 			(10,898)			(7,254)			— 			13,876 			— 			46,845 		
Net loss (income) attributable to noncontrolling interests	— 			— 			— 			— 			— 			(895)			— 			(895)		
Net income (loss) attributable to Nelnet, Inc.	$	21,447 			29,673 			(10,898)			(7,254)			— 			12,981 			— 			45,950 		
(a) Nelnet Bank launched operations on November 2, 2020. Accordingly, there are no operating results for the Nelnet Bank operating segment in the six months ended June 30, 2020.

11

Loan Servicing and Systems Revenue
The following table provides disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.

	Three month ended		Six months ended	
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Government servicing - Nelnet	$	35,376 			34,872 			37,360 			70,248 			76,010 		
Government servicing - Great Lakes	43,863 			43,302 			45,213 			87,165 			91,660 		
Private education and consumer loan servicing	12,816 			8,548 			8,196 			21,364 			16,805 		
FFELP servicing	4,703 			4,670 			4,917 			9,373 			10,531 		
Software services	7,374 			8,454 			10,651 			15,827 			21,969 		
Outsourced services	7,962 			11,671 			4,705 			19,634 			6,803 		
Loan servicing and systems revenue	$	112,094 			111,517 			111,042 			223,611 			223,778 		

Loan Servicing Volumes
																																										
	As of	
	December 31,
2019		March 31,
2020		June 30,
2020		September 30,
2020		December 31,
2020		March 31,
2021		June 30,
2021	
Servicing volume (dollars in millions):														
Nelnet Servicing:														
Government	$	183,790 			185,477 			185,315 			189,932 			191,678 			195,875 			195,030 		
FFELP	33,185 			32,326 			31,392 			31,122 			30,763 			30,084 			29,361 		
Private and consumer	16,033 			16,364 			16,223 			16,267 			16,226 			21,397 			24,758 		
Great Lakes:														
Government	239,980 			243,205 			243,609 			249,723 			251,570 			257,806 			257,420 		

Total	$	472,988 			477,372 			476,539 			487,044 			490,237 			505,162 			506,569 		
														
Number of servicing borrowers:														
Nelnet Servicing:														
Government	5,574,001 			5,498,872 			5,496,662 			5,604,685 			5,645,946 			5,664,094 			5,636,781 		
FFELP	1,478,703 			1,423,286 			1,370,007 			1,332,908 			1,300,677 			1,233,461 			1,198,863 		
Private and consumer	682,836 			670,702 			653,281 			649,258 			636,136 			882,477 			1,039,537 		
Great Lakes:														
Government	7,396,657 			7,344,509 			7,346,691 			7,542,679 			7,605,984 			7,637,270 			7,616,270 		

Total	15,132,197 			14,937,369 			14,866,641 			15,129,530 			15,188,743 			15,417,302 			15,491,451 		
														
Number of remote hosted borrowers:	6,433,324 			6,354,158 			6,264,559 			6,251,598 			6,555,841 			4,307,342 			4,338,570 		

Private Education Loan Servicing
In December of 2020, Wells Fargo announced the sale of its approximately $10.0 billion portfolio of private education student loans representing approximately 445,000 borrowers. In conjunction with the sale, the Company was selected as servicer of the portfolio. During March 2021, approximately 261,000 borrowers were converted to the Company's servicing platform, with the remaining borrowers converted in the second quarter of 2021.
12

Education Technology, Services, and Payment Processing
The following table provides disaggregated revenue by servicing offering for the Education Technology, Services, and Payment Processing operating segment.
																														
	Three months ended		Six months ended	
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Tuition payment plan services	$	26,538 			29,550 			22,947 			56,088 			54,534 		
Payment processing	25,008 			33,038 			21,168 			58,046 			52,910 		
Education technology and services	24,733 			32,322 			14,927 			57,055 			34,980 		
Other	423 			348 			262 			771 			555 		
Education technology, services, and payment processing revenue	$	76,702 			95,258 			59,304 			171,960 			142,979 		

Other Income/Expense
The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income:

 	Three months ended		Six months ended	
 	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Income/gains from investments, net	$	15,591 			8,498 			51,111 			24,089 			50,085 		
ALLO preferred return	2,020 			2,321 			— 			4,342 			— 		
Investment advisory services	1,145 			2,697 			922 			3,842 			3,724 		
Income (loss) from ALLO voting membership interest investment (a)	1,094 			(22,219)			— 			(21,125)			— 		
Borrower late fee income	744 			442 			319 			1,184 			3,506 		
Management fee revenue	701 			1,113 			1,914 			1,814 			4,544 		
(Loss) income from solar investments	(2,302)			(1,679)			2,040 			(3,982)			(799)		
Other	3,928 			4,223 			3,821 			8,153 			7,348 		
	$	22,921 			(4,604)			60,127 			18,317 			68,408 		
(a)    The Company accounts for its voting membership interest in ALLO under the Hypothetical Liquidation at Book Value ("HLBV") method of accounting. In the second quarter of 2021, the Company revised its accounting policy to correct an error in its method of accounting for its investment in ALLO and recorded an adjustment to reflect the cumulative net impact on prior periods (since the deconsolidation of ALLO on December 21, 2020) for the correction of this error that resulted in a $14.0 million increase to the Company’s ALLO investment balance and a corresponding pre-tax increase to other income (a $10.6 million after tax, or $0.27 per share, increase to net income). The Company concluded this error had an immaterial impact on 2021 results as well as the results for prior periods.
Assuming ALLO continues its planned growth in existing and new communities, it will continue to invest substantial amounts in property and equipment to build the network and connect customers. The resulting recognition of depreciation and development costs could result in continuing net operating losses by ALLO under GAAP. Applying the HLBV method of accounting, the Company will continue to recognize a significant portion of ALLO’s anticipated losses over the next several years. The Company currently anticipates such losses in the second half of 2021 to approximate the amount of total losses incurred during the first half of 2021.
Derivative Settlements
The following table summarizes the components of "derivative settlements, net" included in the attached consolidated statements of income.
																														
 	Three months ended		Six months ended	
 	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
1:3 basis swaps	$	(221)			(19)			7,129 			(240)			9,242 		
Interest rate swaps - floor income hedges	(5,153)			(4,285)			(1,308)			(9,438)			816 		
	
Total derivative settlements - (expense) income	$	(5,374)			(4,304)			5,821 			(9,678)			10,058 		

13

Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable and allowance for loan losses consisted of the following:

	As of		As of		As of	
 	June 30, 2021		December 31, 2020		June 30, 2020	
Non-Nelnet Bank:						
Federally insured student loans:						
Stafford and other	$	4,420,716 			4,383,000 			4,439,492 		
Consolidation	14,518,148 			14,746,173 			14,948,379 		
Total	18,938,864 			19,129,173 			19,387,871 		
Private education loans	350,094 			320,589 			293,218 		
Consumer loans	42,767 			109,346 			149,308 		
Non-Nelnet Bank loans	19,331,725 			19,559,108 			19,830,397 		
Nelnet Bank:						
Federally insured student loans	97,167 			— 			— 		

	
Private education loans	93,404 			17,543 			— 		
	
Nelnet Bank loans	190,571 			17,543 			— 		
 						
Accrued interest receivable	834,989 			794,611 			856,880 		
Loan discount, net of unamortized loan premiums and deferred origination costs	(23,896)			(9,908)			(16,959)		
	
Allowance for loan losses:						
Non-Nelnet Bank:						
Federally insured loans	(120,802)			(128,590)			(144,829)		
Private education loans	(19,403)			(19,529)			(25,535)		
Consumer loans	(4,702)			(27,256)			(39,081)		
Non-Nelnet Bank allowance for loan losses	(144,907)			(175,375)			(209,445)		
Nelnet Bank:						
Federally insured loans	(245)			— 			— 		
Private education loans	(567)			(323)			— 		
	
Nelnet Bank allowance for loan losses	(812)			(323)			— 		
 	$	20,187,670 			20,185,656 			20,460,873 		

The Company's total allowance for loan losses of $145.7 million at June 30, 2021 represents reserves equal to 0.6% of the Company's federally insured loans (or 23.7% of the risk sharing component of the loans that is not covered by the federal guaranty), 4.5% of the Company's private education loans, and 11.0% of the Company's consumer loans.
14

Loan Activity
The following table sets forth the activity of the Company's loan portfolio:
																														
 	Three months ended		Six months ended	
 	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Beginning balance	$	19,109,454 			19,576,651 			20,605,065 			19,576,651 			20,798,719 		
Loan acquisitions - Non-Nelnet Bank:										
Federally insured student loans	697,738 			64,731 			460,513 			762,469 			809,574 		
Private education loans	62,538 			21,812 			33,303 			84,349 			80,908 		
Consumer loans	20,924 			19,456 			22,980 			40,380 			85,811 		
Total loan acquisitions - Non-Nelnet Bank	781,200 			105,999 			516,796 			887,198 			976,293 		
Loan originations - Nelnet Bank	21,246 			64,909 			— 			86,155 			— 		
Federally insured student loan acquisitions - Nelnet Bank	99,973 			— 			— 			99,973 			— 		
Repayments, claims, capitalized interest, participations, and other, net	(199,134)			(408,560)			(1,124,686)			(607,693)			(1,437,265)		
Consolidation loans lost to external parties	(213,026)			(229,545)			(166,778)			(442,571)			(383,105)		
Consumer loans sold	(77,417)			— 			— 			(77,417)			(124,245)		
	
Ending balance	$	19,522,296 			19,109,454 			19,830,397 			19,522,296 			19,830,397 		

The Company has also purchased partial ownership in certain private education, federally insured, and consumer loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to June 30, 2021, the Company’s ownership correlates to approximately $460 million, $495 million and $280 million of private education, federally insured, and consumer loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.
Loan Spread Analysis
The following table analyzes the loan spread on AGM’s portfolio of loans, which represents the spread between the yield earned on loan assets and the costs of the liabilities and derivative instruments used to fund the assets.

	Three months ended		Six months ended	
 	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Variable loan yield, gross	2.63 	%		2.71 	%		3.09 	%		2.67 	%		3.55 	%	
Consolidation rebate fees	(0.84)			(0.84)			(0.84)			(0.85)			(0.83)		
Discount accretion, net of premium and deferred origination costs amortization	0.01 			0.00 			0.02 			0.01 			0.02 		
Variable loan yield, net	1.80 			1.87 			2.27 			1.83 			2.74 		
Loan cost of funds - interest expense (a)	(1.04)			(1.07)			(1.67)			(1.06)			(2.14)		
Loan cost of funds - derivative settlements (b) (c)	(0.01)			(0.00 	)		0.14 			(0.00 	)		0.09 		
Variable loan spread	0.75 			0.80 			0.74 			0.77 			0.69 		
Fixed rate floor income, gross	0.78 			0.74 			0.63 			0.76 			0.49 		
Fixed rate floor income - derivative settlements (b) (d)	(0.12)			(0.09)			(0.02)			(0.10)			0.01 		
Fixed rate floor income, net of settlements on derivatives	0.66 			0.65 			0.61 			0.66 			0.50 		
Core loan spread	1.41 	%		1.45 	%		1.35 	%		1.43 	%		1.19 	%	
										
Average balance of AGM's loans	$	18,958,042		19,494,002		20,242,054		19,226,022 			20,517,906 		
Average balance of AGM's debt outstanding	18,656,465		19,156,797		20,217,401		18,905,249 			20,417,086 		
(a)    In the first quarter of 2021, the Company reversed a historical accrued interest liability of $23.8 million on certain bonds, which liability the Company determined is no longer probable of being required to be paid. The liability was initially recorded when certain asset-backed securitizations were acquired in 2011 and 2013. The reduction of this liability is reflected in (a reduction of) "interest on
15

bonds and notes payable and bank deposits" in the consolidated statements of income and the impact of this reduction to interest expense was excluded in the table above.
(b)    Derivative settlements represent the cash paid or received during the current period to settle with derivative instrument counterparties the economic effect of the Company's derivative instruments based on their contractual terms. Derivative accounting requires that net settlements with respect to derivatives that do not qualify for "hedge treatment" under GAAP be recorded in a separate income statement line item below net interest income. The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. As such, management believes derivative settlements for each applicable period should be evaluated with the Company’s net interest income (loan spread) as presented in this table. The Company reports this non-GAAP information because it believes that it provides additional information regarding operational and performance indicators that are closely assessed by management. There is no comprehensive, authoritative guidance for the presentation of such non-GAAP information, which is only meant to supplement GAAP results by providing additional information that management utilizes to assess performance. See "Derivative Settlements" included in this supplement for additional information on the Company's derivative instruments, including the net settlement activity recognized by the Company for each type of derivative for the periods presented in the table.
A reconciliation of core loan spread, which includes the impact of derivative settlements on loan spread, to loan spread without
derivative settlements follows.
																														
	Three months ended		Six months ended	
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Core loan spread	1.41 	%		1.45 	%		1.35 	%		1.43 	%		1.19 	%	
Derivative settlements (1:3 basis swaps)	0.01 			0.00 			(0.14)			0.00 			(0.09)		
Derivative settlements (fixed rate floor income)	0.12 			0.09 			0.02 			0.10 			(0.01)		
Loan spread	1.54 	%		1.54 	%		1.23 	%		1.53 	%		1.09 	%	

(c)    Derivative settlements consist of net settlements (paid) received related to the Company’s 1:3 basis swaps.
(d)    Derivative settlements consist of net settlements (paid) received related to the Company’s floor income interest rate swaps.
A trend analysis of AGM's core and variable loan spreads is summarized below.

(a)    The interest earned on a large portion of AGM's FFELP student loan assets is indexed to the one-month LIBOR rate. AGM funds a portion of its assets with three-month LIBOR indexed floating rate securities. The relationship between the indices in which AGM earns interest on its loans and funds such loans has a significant impact on loan spread. This table (the right axis) shows the difference between AGM's liability base rate and the one-month LIBOR rate by quarter.
16

The difference between variable loan spread and core loan spread is fixed rate floor income earned on a portion of AGM's federally insured student loan portfolio. A summary of fixed rate floor income and its contribution to core loan spread follows:

	Three months ended		Six months ended	
 	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020	
Fixed rate floor income, gross	$	36,639 			35,539 			31,866 			72,178 			50,625 		
Derivative settlements (a)	(5,153)			(4,285)			(1,308)			(9,438)			816 		
Fixed rate floor income, net	$	31,486 			31,254 			30,558 			62,740 			51,441 		
Fixed rate floor income contribution to spread, net	0.66 	%		0.65 	%		0.61 	%		0.66 	%		0.50 	%	

(a)    Derivative settlements consist of net settlements (paid) received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
Fixed Rate Floor Income
The following table shows AGM’s federally insured student loan assets that were earning fixed rate floor income as of June 30, 2021.
																					
Fixed interest rate range		Borrower/lender weighted average yield		Estimated variable conversion rate (a)		Loan balance	
< 3.0%		2.87%		0.23%		$	1,135,956 		
3.0 - 3.49%		3.19%		0.55%		1,428,781 		
3.5 - 3.99%		3.65%		1.01%		1,362,618 		
4.0 - 4.49%		4.20%		1.56%		1,021,626 		
4.5 - 4.99%		4.71%		2.07%		636,077 		
5.0 - 5.49%		5.22%		2.58%		426,502 		
5.5 - 5.99%		5.67%		3.03%		283,883 		
6.0 - 6.49%		6.19%		3.55%		326,037 		
6.5 - 6.99%		6.70%		4.06%		320,469 		
7.0 - 7.49%		7.17%		4.53%		118,328 		
7.5 - 7.99%		7.71%		5.07%		217,577 		
8.0 - 8.99%		8.18%		5.54%		512,800 		
> 9.0%		9.05%		6.41%		194,953 		
 		 				$	7,985,607 		

(a)    The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of June 30, 2021, the weighted average estimated variable conversion rate was 1.94% and the short-term interest rate was 10 basis points.
The following table summarizes the outstanding derivative instruments as of June 30, 2021 used by AGM to economically hedge loans earning fixed rate floor income.

Maturity		Notional amount		Weighted average fixed rate paid by the Company (a)	
					
2021		$	100,000 			2.95 	%	
2022		500,000 			0.94 		
2023		900,000 			0.62 		
2024		2,500,000 			0.35 		
2025		500,000 			0.35 		
2026		150,000 			0.85 		
2031		100,000 			1.53 		
	
 		$	4,750,000 			0.56 	%	

(a)    For all interest rate derivatives, the Company receives discrete three-month LIBOR.
17