Condensed Parent Company Financial Statements

The following represents the condensed balance sheets as of December 31, 2017 and 2016 and condensed statements of income, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2017 for Nelnet, Inc.

The Company is limited in the amount of funds that can be transferred to it by its subsidiaries through intercompany loans, advances, or cash dividends. These limitations relate to the restrictions by trust indentures under the education lending subsidiaries debt financing arrangements. The amounts of cash and investments restricted in the respective reserve accounts of the education lending subsidiaries are shown on the consolidated balance sheets as restricted cash.



Balance Sheets
(Parent Company Only)
As of December 31, 2017 and 2016
	2017		2016
Assets:
Cash and cash equivalents	$	21,001	29,734
Investments and notes receivable	149,236		167,711
Investment in subsidiary debt	75,659		71,815
Restricted cash	44,149		7,805
Investment in subsidiaries	1,681,690		1,537,507
Notes receivable from subsidiaries	212,077		161,284
Other assets	131,790		136,685
Fair value of derivative instruments	818		86,379
Total assets	$	2,316,420	2,198,920
Liabilities:
Notes payable	$	79,120	48,085
Other liabilities	76,638		74,706
Fair value of derivative instruments	7,063		10,221
Total liabilities	162,821		133,012
Equity:
Nelnet, Inc. shareholders' equity:
Common stock	408		421
Additional paid-in capital	521		420
Retained earnings	2,143,983		2,056,084
Accumulated other comprehensive earnings	4,617		4,730
Total Nelnet, Inc. shareholders' equity	2,149,529		2,061,655
Noncontrolling interest	4,070		4,253
Total equity	2,153,599		2,065,908
Total liabilities and shareholders' equity	$	2,316,420	2,198,920



Statements of Income
(Parent Company Only)
Years ended December 31, 2017, 2016, and 2015
	2017			2016	2015
Investment interest income	$	13,060		9,794	5,776
Interest expense on bonds and notes payable	3,315			6,049	6,242
Net interest income (expense)	9,745			3,745	(466	)
Other income:
Other income	3,483			7,037	4,012
Gain from debt repurchases, net	2,964			8,083	4,904
Equity in subsidiaries income	170,897			239,405	276,825
Derivative market value adjustments and derivative settlements, net	(603		)	45,203	8,416
Total other income	176,741			299,728	294,157
Operating expenses	6,117			8,183	5,057
Income before income taxes	180,369			295,290	288,634
Income tax expense	7,491			38,642	20,655
Net income	172,878			256,648	267,979
Net loss attributable to noncontrolling interest	288			103	—
Net income attributable to Nelnet, Inc.	$	173,166		256,751	267,979



Statements of Comprehensive Income
(Parent Company Only)
Years ended December 31, 2017, 2016, and 2015
	2017			2016		2015
Net income	$	172,878		256,648		267,979
Other comprehensive (loss) income:
Available-for-sale securities:
Unrealized holding gains (losses) arising during period, net	2,349			5,789		(1,570	)
Reclassification adjustment for gains recognized in net income, net of losses	(2,528		)	(1,907	)	(2,955	)
Income tax effect	66			(1,436	)	1,674
Total other comprehensive (loss) income	(113		)	2,446		(2,851	)
Comprehensive income	172,765			259,094		265,128
Comprehensive loss attributable to noncontrolling interest	288			103		—
Comprehensive income attributable to Nelnet, Inc.	$	173,053		259,197		265,128



Statements of Cash Flows
(Parent Company Only)
Years ended December 31, 2017, 2016, and 2015
	2017			2016		2015
Net income attributable to Nelnet, Inc.	$	173,166		256,751		267,979
Net loss attributable to noncontrolling interest	(288		)	(103	)	—
Net income	172,878			256,648		267,979
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	420			391		327
Derivative market value adjustment	7,591			(62,268	)	(31,411	)
Proceeds from termination of derivative instruments, net of payments	2,100			3,999		65,527
Payment to enter into derivative instrument	(929		)	—		—
Proceeds from clearinghouse to settle variation margin, net	48,985			—		—
Equity in earnings of subsidiaries	(170,897		)	(239,405	)	(276,825	)
Gain from sales of available-for-sale securities, net of losses	(2,528		)	(1,907	)	(2,955	)
Gain from debt repurchases, net	(2,964		)	(8,083	)	(4,904	)
Deferred income tax (benefit) expense	(8,056		)	20,071		3,228
Non-cash compensation expense	4,416			4,348		5,347
Other	2,967			1,117		1,946
Decrease (increase) in other assets	4,171			32,262		(8,541	)
Increase (decrease) in other liabilities	10,104			(594	)	6,597
Net cash provided by operating activities	68,258			6,579		26,315
Cash flows from investing activities:
(Increase) decrease in restricted cash	(9,004		)	6,997		(13,825	)
Purchases of available-for-sale securities	(127,567		)	(94,920	)	(98,332	)
Proceeds from sales of available-for-sale securities	156,727			139,427		94,722
Capital contributions/distributions to/from subsidiaries, net	29,426			223,386		120,291
(Increase) decrease in notes receivable from subsidiaries	(50,793		)	8,561		(84,061	)
Proceeds from investments and notes receivable	4,823			9,952		12,253
(Purchases of) proceeds from subsidiary debt, net	(3,844		)	(13,800	)	72,125
Purchases of investments and issuances of notes receivable	(18,023		)	(4,365	)	(53,388	)
Business acquisition, net of cash acquired	—			—		(45,916	)
Net cash (used in) provided by investing activities	(18,255		)	275,238		3,869
Cash flows from financing activities:
Payments on notes payable	(27,480		)	(412,000	)	(42,541	)
Proceeds from issuance of notes payable	61,059			230,000		116,460
Payments of debt issuance costs	—			(613	)	(773	)
Dividends paid	(24,097		)	(21,188	)	(19,025	)
Repurchases of common stock	(68,896		)	(69,091	)	(96,169	)
Proceeds from issuance of common stock	678			889		801
Issuance of noncontrolling interest	—			501		—
Distribution to noncontrolling interest	—			—		(230	)
Net cash used in financing activities	(58,736		)	(271,502	)	(41,477	)
Net (decrease) increase in cash and cash equivalents	(8,733		)	10,315		(11,293	)
Cash and cash equivalents, beginning of period	29,734			19,419		30,712
Cash and cash equivalents, end of period	$	21,001		29,734		19,419

Cash disbursements made for:
Interest	$	2,882		5,533		5,914
Income taxes, net of refunds	$	96,721		115,415		147,130

Noncash investing and financing activities:
Issuance of noncontrolling interest	$	—		—		3,750
Contributions of investments to subsidiaries, net	$	2,092		1,884		—