EX-99.2 3 aex992-11722xsupplement.htm EX-99.2 Document

For Release: November 7, 2022
Investor Contact: Phil Morgan, 402.458.3038
Nelnet, Inc. supplemental financial information for the third quarter 2022
(All dollars are in thousands, except per share amounts, unless otherwise noted)
The following information should be read in connection with Nelnet, Inc.'s (the “Company's”) press release for third quarter 2022 earnings, dated November 7, 2022, and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the "Q3 2022 10-Q Quarterly Report").
Forward-looking and cautionary statements
This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “scheduled,” “should,” “will,” “would,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.
The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report"), the "Risk Factors" section of the Company's Q3 2022 10-Q Quarterly Report, and subsequent reports filed by the Company with the SEC and include such risks and uncertainties as:
risks and uncertainties related to the duration, ultimate severity, and continuing impacts of the coronavirus disease 2019 (“COVID-19”) pandemic, including changes in the macroeconomic environment and consumer behavior, restrictions on various activities intended to combat the pandemic, and volatility in market conditions resulting from the pandemic, including interest rates, the value of equities, and other financial assets;
risks related to the ability to successfully maintain and increase allocated volumes of student loans serviced by the Company under existing and any future servicing contracts with the U.S. Department of Education (the "Department"), which current contracts accounted for 29 percent of the Company's revenue in 2021, risks to the Company related to the Biden-Harris Administration's student debt relief plan announced on August 24, 2022 that may significantly decrease the number of borrowers serviced and revenue earned by the Company under such contracts, risks to the Company related to the Department's initiatives to procure new contracts for federal student loan servicing, including the pending and uncertain nature of the Department's procurement process, risks that the Company may not be successful in obtaining any of such potential new contracts, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of Federal Direct Loan Program, Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), private education, and consumer loans;
loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the FFEL Program, risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from purchased securitized and unsecuritized FFELP, private education, consumer, and other loans, or investment interests therein, and initiatives to purchase additional FFELP, private education, consumer, and other loans, and risks from changes in levels of loan prepayment or default rates;
financing and liquidity risks, including risks of changes in the interest rate environment, such as risks from the recent increases in interest rates resulting from inflationary pressures and the transition from LIBOR to an alternative reference rate, and changes in the securitization and other financing markets for loans, including adverse changes resulting from recent market volatility resulting from rising interest rates and other economic pressures and from unanticipated repayment trends on student loans in the Company's securitization trusts that could accelerate or delay repayment of the associated bonds, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;
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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 government initiatives or proposals to consolidate existing FFELP loans to Federal Direct Loan Program loans, otherwise encourage or allow FFELP loans to be refinanced with Federal Direct Loan Program loans, and/or create additional loan forgiveness or broad debt cancellation programs;
risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors, including cybersecurity risks related to a disclosure of confidential loan borrower and other customer information, the potential disruption of the Company's systems or those of third-party vendors or customers, and/or the potential damage to the Company's reputation resulting from cyber-breaches;
uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations;
risks and uncertainties of the expected benefits from the November 2020 launch of Nelnet Bank operations, including the ability to successfully conduct banking operations and achieve expected market penetration;
risks related to the expected benefits to the Company from its continuing investment in ALLO Holdings, LLC (referred to collectively with its subsidiary ALLO Communications LLC as "ALLO"), and risks related to investments in solar projects, including risks of not being able to realize tax credits which remain subject to recapture by taxing authorities;
risks and uncertainties related to other initiatives to pursue additional strategic investments (and anticipated income therefrom), acquisitions, and other activities, including activities that are intended to diversify the Company both within and outside of its historical core education-related businesses;
risks and uncertainties associated with climate change, including extreme weather events and related natural disasters, which could result in increased loan portfolio credit risks and other asset and operational risks, as well as risks and uncertainties associated with efforts to address climate change; and
risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, reputational and other risks, including the risk of increased regulatory costs resulting from the politicization of student loan servicing, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.
All forward-looking statements contained in this supplement are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by law.
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Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)
Three months ended Nine months ended
September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Interest income:
Loan interest$176,244 134,706 124,096 422,327 370,219 
Investment interest26,889 16,881 12,558 57,589 29,122 
Total interest income203,133 151,587 136,654 479,916 399,341 
Interest expense on bonds and notes payable and bank deposits126,625 73,642 50,176 248,347 127,939 
Net interest income76,508 77,945 86,478 231,569 271,402 
Less provision (negative provision) for loan losses9,665 9,409 5,827 18,640 (10,847)
Net interest income after provision for loan losses66,843 68,536 80,651 212,929 282,249 
Other income/expense:
Loan servicing and systems revenue134,197 124,873 112,351 395,438 335,961 
Education technology, services, and payment processing revenue106,894 91,031 85,324 310,211 257,284 
Solar construction revenue9,358 — — 9,358 — 
Other2,225 12,647 11,867 24,750 30,183 
Gain on sale of loans2,627 — 3,444 5,616 18,715 
Impairment expense and provision for beneficial interests, net121 (6,284)(14,159)(6,163)(12,223)
Derivative settlements, net10,271 4,623 (5,909)12,085 (15,587)
Derivative market value adjustments, net52,991 40,401 7,260 239,125 44,455 
Total other income/expense318,684 267,291 200,178 990,420 658,788 
Cost of services:
Cost to provide education technology, services, and payment processing services42,676 30,852 31,335 109,073 80,063 
Cost to provide solar construction services5,968 — — 5,968 — 
Total cost of services48,644 30,852 31,335 115,041 80,063 
Operating expenses:
Salaries and benefits147,198 141,398 128,592 438,010 363,351 
Depreciation and amortization18,772 18,250 15,710 53,978 56,129 
Other expenses43,858 36,940 38,324 120,297 107,611 
Total operating expenses209,828 196,588 182,626 612,285 527,091 
Income before income taxes127,055 108,387 66,868 476,023 333,883 
Income tax expense(26,586)(25,483)(15,649)(107,765)(76,747)
Net income100,469 82,904 51,219 368,258 257,136 
Net loss attributable to noncontrolling interests4,329 2,225 1,919 8,315 3,467 
Net income attributable to Nelnet, Inc.$104,798 85,129 53,138 376,573 260,603 
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted$2.80 2.26 1.38 9.99 6.74 
Weighted average common shares outstanding - basic and diluted37,380,493 37,710,214 38,595,721 37,708,425 38,646,892 

3


Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
As ofAs ofAs of
September 30, 2022December 31, 2021September 30, 2021
Assets:
Loans and accrued interest receivable, net$15,876,251 18,335,197 19,304,203 
Cash, cash equivalents, and investments2,126,712 1,714,482 1,566,849 
Restricted cash980,131 1,068,626 1,059,142 
Goodwill and intangible assets, net242,401 194,121 197,268 
Other assets338,038 365,615 275,277 
Total assets$19,563,533 21,678,041 22,402,739 
Liabilities:
Bonds and notes payable$15,042,595 17,631,089 18,610,748 
Bank deposits580,825 344,315 200,651 
Other liabilities773,754 749,799 734,377 
Total liabilities16,397,174 18,725,203 19,545,776 
Equity:
Total Nelnet, Inc. shareholders' equity3,180,614 2,951,206 2,859,254 
Noncontrolling interests(14,255)1,632 (2,291)
Total equity3,166,359 2,952,838 2,856,963 
Total liabilities and equity$19,563,533 21,678,041 22,402,739 

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Overview
The Company is a diverse, innovative company with a purpose to serve others and a vision to make dreams possible. The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes investments to further diversify both within and outside of its historical core education-related businesses including, but not limited to, investments in early-stage and emerging growth companies, real estate, and renewable energy (solar). The Company is also actively expanding its private education, consumer, and other loan portfolios, and in November 2020 launched Nelnet Bank.
GAAP Net Income and Non-GAAP Net Income, Excluding Adjustments
The Company prepares its financial statements and presents its financial results in accordance with GAAP. However, it also provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results and performance. A reconciliation of the Company's GAAP net income to net income, excluding derivative market value adjustments, and a discussion of why the Company believes providing this additional information is useful to investors, is provided below.
Three months endedNine months ended
September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
GAAP net income attributable to Nelnet, Inc.$104,798 85,129 53,138 376,573 260,603 
Realized and unrealized derivative market value adjustments(52,991)(40,401)(7,260)(239,125)(44,455)
Tax effect (a)12,718 9,696 1,742 57,390 10,669 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$64,525 54,424 47,620 194,838 226,817 
Earnings per share:
GAAP net income attributable to Nelnet, Inc.$2.80 2.26 1.38 9.99 6.74 
Realized and unrealized derivative market value adjustments(1.42)(1.07)(0.19)(6.34)(1.15)
Tax effect (a)0.35 0.25 0.04 1.52 0.28 
Net income attributable to Nelnet, Inc., excluding derivative market value adjustments (b)$1.73 1.44 1.23 5.17 5.87 

(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.

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Operating Segments
The Company's reportable operating segments are described in note 1 of the notes to consolidated financial statements included in the 2021 Annual Report. They include:
Loan Servicing and Systems ("LSS") - referred to as Nelnet Diversified Services ("NDS")
Education Technology, Services, and Payment Processing ("ETS&PP") - referred to as Nelnet Business Services ("NBS")
Asset Generation and Management ("AGM")
Nelnet Bank
The Company earns fee-based revenue through its NDS and NBS operating segments. The Company earns net interest income on its loan portfolio, consisting primarily of FFELP loans, in its AGM operating segment. This segment is expected to generate significant amounts of cash as the FFELP portfolio amortizes. The Company actively works to maximize the amount and timing of cash flows generated by its FFELP portfolio and seeks to acquire additional loan assets to leverage its servicing scale and expertise to generate incremental earnings and cash flow.
On November 2, 2020, the Company obtained final approval for federal deposit insurance from the Federal Deposit Insurance Corporation ("FDIC") and for a bank charter from the Utah Department of Financial Institutions ("UDFI") in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. Nelnet Bank operates as an internet industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.
Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities ("Corporate"). Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured and other corporate related debt transactions. On July 1, 2022, the Company purchased 80 percent of the ownership interests of GRNE Solar. The operating results from this acquisition are also included in Corporate.
The information below provides the operating results (income (loss) before income taxes) for each reportable operating segment and Corporate and Other Activities for the three and nine months ended September 30, 2022 and 2021.
Three months ended September 30,
20222021Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS$21,914 (3,042)
The recognition of an impairment charge of $13.2 million in the third quarter of 2021 related primarily to building and building improvement assets due to an evaluation of the use of office space as a large number of employees continued to work from home as a result of the COVID-19 pandemic
NBS18,655 13,992 
The recognition of $3.7 million of interest income in the third quarter of 2022 as compared to $0.3 million in the same period of 2021 due to higher interest rates
AGM111,872 60,085 
A net gain of $53.0 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the third quarter of 2022 as compared to a net gain of $7.3 million for the same period in 2021
An increase of $6.2 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
A decrease of $14.3 million in net interest income due to the decrease in the average balance of FFELP loans in the third quarter of 2022 as compared to 2021
The recognition of a $6.3 million investment loss during the third quarter of 2021
Nelnet Bank1,055 836 
Corporate(26,442)(5,003)
The recognition of a net loss of $17.6 million in the third quarter of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $10.5 million for the same period in 2021
Investment income of $10.5 million in the third quarter of 2022 as compared to $21.9 million for the same period in 2021. In 2022, the Company recognized $5.9 million in gains from the sale of real estate investments, as compared to $11.2 million in 2021. In addition, the Company recognized $5.8 million in net realized and unrealized gains from marketable securities in 2021.
Income before income taxes127,055 66,868 
Income tax expense(26,586)(15,649)
Net loss attributable to noncontrolling interests4,329 1,919 
Net income$104,798 53,138 
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Nine months ended September 30,
20222021Certain Items Impacting Comparability
(All dollar amounts below are pre-tax)
NDS$47,494 28,554 
The recognition of an impairment charge of $13.2 million in the third quarter of 2021 related primarily to building and building improvement assets due to an evaluation of the use of office space as a large number of employees continued to work from home as a result of the COVID-19 pandemic
NBS66,454 62,199 
The recognition of $4.9 million of interest income in the first three quarters of 2022 as compared to $0.8 million in the same period of 2021 due to higher interest rates
AGM424,647 280,613 
A net gain of $239.1 million related to changes in the fair values of derivative instruments that do not qualify for hedge accounting in the first three quarters of 2022 as compared to a net gain of $44.5 million for the same period in 2021
A decrease of $23.8 million in interest expense during the first quarter of 2021 as a result of the Company reversing a historical accrued interest liability on certain bonds, which liability the Company determined is no longer probable of being required to be paid
The recognition of provision for loan losses of $17.2 million in the first three quarters of 2022 as compared to negative provision of $11.2 million for the same period in 2021
The recognition of $18.7 million of gains from the sale of loans during the first three quarters of 2021 compared to $5.6 million for the same period in 2022
An increase of $13.5 million in net interest income due to an increase in FFELP core loan spread in 2022 as compared to 2021
A decrease of $32.4 million in net interest income due to the decrease in the average balance of FFELP loans in the first three quarters of 2022 as compared to 2021
Nelnet Bank2,489 (686)
Corporate(65,061)(36,796)
The recognition of a net loss of $47.6 million for the first three quarters of 2022 related to the Company’s investment in ALLO, as compared to a net loss of $31.6 million for the same period in 2021
Investment income of $37.2 million for the first three quarters of 2022 as compared to $43.7 million for the same period in 2021. Investment income in 2022 included $13.5 million in gains from the sale of real estate investments and a $15.2 million gain as a result of the revaluation of the Company's previously held 50 percent ownership interests in NextGen. In 2021, the Company recognized $22.2 million from the sale of real estate investments and $6.3 million in net realized and unrealized gains from marketable securities.
The recognition of an impairment charge of $6.3 million in the second quarter of 2022 related primarily to a venture capital investment and certain real estate leases (as the Company continues to downsize its facility footprint as a result of associates working from home)
Income before income taxes476,023 333,883 
Income tax expense(107,765)(76,747)
Net loss attributable to noncontrolling interests8,315 3,467 
Net income$376,573 260,603 
Recent Developments
On August 24, 2022, the Department issued a bulletin titled “Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation to Smooth Transition to Repayment” (the “August 24, 2022 Bulletin”). The August 24, 2022 Bulletin extends the CARES Act repayment pause on Department held student loans through December 31, 2022 and indicates the Department will provide targeted student debt cancellation to borrowers with loans held by the Department, and that borrowers whose annual income for either 2020 or 2021 was under $125,000 (for single or married, filing separately) or under $250,000 (for married couples, filing jointly or heads of household) will be eligible for otherwise unconditional loan cancellation in amounts of up to $20,000 for eligible borrowers who received a Pell Grant, or of up to $10,000 for eligible borrowers who did not receive a Pell Grant.
Following the initial announcement, the Department provided more specific publicly available guidance on the student debt relief plan through the website of the Department’s Office of Federal Student Aid (“FSA”) on September 29, 2022, which guidance was subsequently revised and published in the Federal Register on October 12, 2022. As of November 7, 2022, the following guidance on loan forgiveness was provided on the FSA website (information on the FSA website is not incorporated by reference in this report):
All loans eligible for the CARES Act student loan payment pause are also eligible for debt relief, including loans held by the Department and guaranty agencies
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As of September 29, 2022, borrowers with federal student loans not held by the Department cannot obtain one-time debt relief by consolidating those loans into Federal Direct Loan Program loans by the Department
Borrowers with FFEL Program loans not held by the Department and who applied to consolidate into the Federal Direct Loan Program prior to September 29, 2022, are eligible for one-time debt relief through the Federal Direct Loan Program, subject to meeting the other terms and conditions
The Department has indicated it is assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by the Department, including FFEL Program loans
On October 21, 2022, the U.S. Court of Appeals for the Eighth Circuit issued a temporary administrative stay of implementation of the Department's student debt relief plan in response to a legal challenge that was initiated by other parties (not the Company).
In view of this recent announcement and guidance by the Department, the Company does not currently expect there to be significant FFELP loan consolidation activity specifically as a result of the one-time student debt relief plan announced in the August 24, 2022 Bulletin. However, since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act payment pause on Department held loans and the initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs. Sustained higher FFELP loan prepayments will impact net interest income in the Company’s AGM operating segment, FFELP servicing revenue in the Company’s LSS operating segment, investment advisory services revenue earned by the Company’s SEC-registered investment advisor subsidiary (Whitetail Rock Capital Management, LLC) on FFELP loan asset-backed securities under management, and interest income earned on the Company’s FFELP loan asset-backed securities investments in future periods.
In addition, as of September 30, 2022, the Company was servicing 15.7 million borrowers under its government servicing contracts. The Company cannot currently estimate how many borrowers meet the eligibility requirements and other terms and conditions for one-time debt relief under the Department's announcement. If there was a broad $10,000 or $20,000 per borrower forgiveness on all government owned loans, the Company estimates it would decrease the number of borrowers serviced (based on the borrower loan information as of September 30, 2022) by approximately 4.4 million borrowers and 7.5 million borrowers, respectively. The actual impact to the number of borrowers serviced is expected to be less than these amounts due to annual income ceilings for borrowers to qualify for forgiveness and the impact of whether a Pell Grant was received on the amount of forgiveness for a borrower.
Revenue earned under the current Department servicing contracts, and software services revenue earned in providing remote hosted services to other Department servicers, will decrease in future periods if the Department's student debt relief plan or other broad based loan forgiveness is implemented.
See “Risk Factors” in the Company's Q3 2022 10-Q Quarterly Report for additional information.

8


Segment Reporting
The following tables include the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.
 Three months ended September 30, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$831 3,707 182,932 7,551 10,860 (2,748)203,133 
Interest expense— — 120,009 3,298 6,067 (2,748)126,625 
Net interest income831 3,707 62,923 4,253 4,793 — 76,508 
Less provision (negative provision) for loan losses— — 9,215 450 — — 9,665 
Net interest income after provision for loan losses831 3,707 53,708 3,803 4,793 — 66,843 
Other income/expense:
Loan servicing and systems revenue134,197 — — — — — 134,197 
Intersegment revenue8,281 — — — (8,289)— 
Education technology, services, and payment processing revenue— 106,894 — — — — 106,894 
Solar construction revenue— — — — 9,358 — 9,358 
Other596 — 4,627 566 (3,564)— 2,225 
Gain on sale of loans— — 2,627 — — — 2,627 
Impairment expense and provision for beneficial interests, net— — — — 121 — 121 
Derivative settlements, net— — 10,271 — — — 10,271 
Derivative market value adjustments, net— — 52,991 — — — 52,991 
Total other income/expense143,074 106,902 70,516 566 5,915 (8,289)318,684 
Cost of services:
Cost to provide education technology, services, and payment processing services— 42,676 — — — — 42,676 
Cost to provide solar construction services— — — — 5,968 — 5,968 
Total cost of services— 42,676 — — 5,968 — 48,644 
Operating expenses:
Salaries and benefits82,067 34,950 653 1,814 27,713 — 147,198 
Depreciation and amortization5,784 2,532 — 10,452 — 18,772 
Other expenses16,654 7,034 3,349 1,427 15,395 — 43,858 
Intersegment expenses, net17,486 4,762 8,350 69 (22,378)(8,289)— 
Total operating expenses121,991 49,278 12,352 3,314 31,182 (8,289)209,828 
Income (loss) before income taxes21,914 18,655 111,872 1,055 (26,442)— 127,055 
Income tax (expense) benefit(5,259)(4,475)(26,849)(246)10,244 — (26,586)
Net income (loss)16,655 14,180 85,023 809 (16,198)— 100,469 
Net (income) loss attributable to noncontrolling interests— (61)— — 4,390 — 4,329 
Net income (loss) attributable to Nelnet, Inc.$16,655 14,119 85,023 809 (11,808)— 104,798 



9


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



















10


 Three months ended September 30, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$31 344 131,781 2,061 2,609 (172)136,654 
Interest expense24 — 48,662 421 1,242 (172)50,176 
Net interest income344 83,119 1,640 1,367 — 86,478 
Less provision (negative provision) for loan losses— — 5,940 (113)— — 5,827 
Net interest income after provision for loan losses344 77,179 1,753 1,367 — 80,651 
Other income/expense:
Loan servicing and systems revenue112,351 — — — — — 112,351 
Intersegment revenue8,621 — — — (8,624)— 
Education technology, services, and payment processing revenue— 85,324 — — — — 85,324 
Solar construction revenue— — — — — — — 
Other727 13 (7,275)450 17,952 — 11,867 
Gain on sale of loans— — 3,444 — — — 3,444 
Impairment expense and provision for beneficial interests, net(13,243)— — — (916)— (14,159)
Derivative settlements, net— — (5,909)— — — (5,909)
Derivative market value adjustments, net— — 7,260 — — — 7,260 
Total other income/expense108,456 85,340 (2,480)450 17,036 (8,624)200,178 
Cost of services:
Cost to provide education technology, services, and payment processing services— 31,335 — — — — 31,335 
Cost to provide solar construction services— — — — — — — 
Total cost of services— 31,335 — — — — 31,335 
Operating expenses:
Salaries and benefits75,305 29,119 542 890 22,735 — 128,592 
Depreciation and amortization4,245 2,762 — — 8,702 — 15,710 
Other expenses12,738 4,804 5,420 445 14,918 — 38,324 
Intersegment expenses, net19,217 3,672 8,652 32 (22,949)(8,624)— 
Total operating expenses111,505 40,357 14,614 1,367 23,406 (8,624)182,626 
Income (loss) before income taxes(3,042)13,992 60,085 836 (5,003)— 66,868 
Income tax (expense) benefit730 (3,358)(14,421)(200)1,600 — (15,649)
Net income (loss)(2,312)10,634 45,664 636 (3,403)— 51,219 
Net (income) loss attributable to noncontrolling interests— — — — 1,919 — 1,919 
Net income (loss) attributable to Nelnet, Inc.$(2,312)10,634 45,664 636 (1,484)— 53,138 







11


Nine months ended September 30, 2022
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$1,144 4,920 441,926 15,792 21,087 (4,953)479,916 
Interest expense44 — 235,720 5,792 11,745 (4,953)248,347 
Net interest income1,100 4,920 206,206 10,000 9,342 — 231,569 
Less provision (negative provision) for loan losses— — 17,178 1,462 — — 18,640 
Net interest income after provision for loan losses1,100 4,920 189,028 8,538 9,342 — 212,929 
Other income/expense:
Loan servicing and systems revenue395,438 — — — — — 395,438 
Intersegment revenue25,142 16 — — — (25,158)— 
Education technology, services, and payment processing revenue— 310,211 — — — — 310,211 
Solar construction revenue— — — — 9,358 — 9,358 
Other1,946 — 16,270 2,224 4,309 — 24,750 
Gain on sale of loans— — 5,616 — — — 5,616 
Impairment expense and provision for beneficial interests, net— — — — (6,163)— (6,163)
Derivative settlements, net— — 12,085 — — — 12,085 
Derivative market value adjustments, net— — 239,125 — — — 239,125 
Total other income/expense422,526 310,227 273,096 2,224 7,504 (25,158)990,420 
Cost of services:
Cost to provide education technology, services, and payment processing services— 109,073 — — — — 109,073 
Cost to provide solar construction services— — — — 5,968 — 5,968 
Total cost of services— 109,073 — — 5,968 — 115,041 
Operating expenses:
Salaries and benefits257,259 98,356 1,858 5,082 75,455 — 438,010 
Depreciation and amortization16,056 7,544 — 11 30,366 — 53,978 
Other expenses46,375 19,549 9,925 3,009 41,438 — 120,297 
Intersegment expenses, net56,442 14,171 25,694 171 (71,320)(25,158)— 
Total operating expenses376,132 139,620 37,477 8,273 75,939 (25,158)612,285 
Income (loss) before income taxes47,494 66,454 424,647 2,489 (65,061)— 476,023 
Income tax (expense) benefit(11,399)(15,947)(101,915)(574)22,070 — (107,765)
Net income (loss)36,095 50,507 322,732 1,915 (42,991)— 368,258 
Net (income) loss attributable to noncontrolling interests— (8)— — 8,323 — 8,315 
Net income (loss) attributable to Nelnet, Inc.$36,095 50,499 322,732 1,915 (34,668)— 376,573 

12


Nine months ended September 30, 2021
Loan Servicing and SystemsEducation Technology, Services, and Payment ProcessingAsset
Generation and
Management
Nelnet BankCorporate and Other ActivitiesEliminationsTotal
Total interest income$95 818 388,149 5,479 5,379 (578)399,341 
Interest expense70 — 124,282 1,007 3,158 (578)127,939 
Net interest income25 818 263,867 4,472 2,221 — 271,402 
Less provision (negative provision) for loan losses— — (11,225)378 — — (10,847)
Net interest income after provision for loan losses25 818 275,092 4,094 2,221 — 282,249 
Other income/expense:
Loan servicing and systems revenue335,961 — — — — — 335,961 
Intersegment revenue25,369 — — — (25,378)— 
Education technology, services, and payment processing revenue— 257,284 — — — — 257,284 
Solar construction revenue— — — — — — — 
Other2,541 13 (4,514)475 31,668 — 30,183 
Gain on sale of loans— — 18,715 — — — 18,715 
Impairment expense and provision for beneficial interests, net(13,243)— 2,436 — (1,416)— (12,223)
Derivative settlements, net— — (15,587)— — — (15,587)
Derivative market value adjustments, net— — 44,455 — — — 44,455 
Total other income/expense350,628 257,306 45,505 475 30,252 (25,378)658,788 
Cost of services:
Cost to provide education technology, services, and payment processing services— 80,063 — — — — 80,063 
Cost to provide solar construction services— — — — — — — 
Total cost of services— 80,063 — — — — 80,063 
Operating expenses:
Salaries and benefits210,151 82,154 1,594 3,956 65,496 — 363,351 
Depreciation and amortization20,411 8,789 — — 26,927 — 56,129 
Other expenses39,296 14,063 12,763 1,227 40,265 — 107,611 
Intersegment expenses, net52,241 10,856 25,627 72 (63,419)(25,378)— 
Total operating expenses322,099 115,862 39,984 5,255 69,269 (25,378)527,091 
Income (loss) before income taxes28,554 62,199 280,613 (686)(36,796)— 333,883 
Income tax (expense) benefit(6,853)(14,928)(67,347)151 12,230 — (76,747)
Net income (loss)21,701 47,271 213,266 (535)(24,566)— 257,136 
Net (income) loss attributable to noncontrolling interests— — — — 3,467 — 3,467 
Net income (loss) attributable to Nelnet, Inc.$21,701 47,271 213,266 (535)(21,099)— 260,603 



13


Loan Servicing and Systems Revenue
The following table provides disaggregated revenue by service offering for the Loan Servicing and Systems operating segment.
Three month endedNine months ended
September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Government servicing$104,428 98,815 84,084 312,368 241,497 
Private education and consumer loan servicing12,198 12,122 13,198 37,194 34,563 
FFELP servicing4,127 4,011 4,557 12,386 13,930 
Software services8,229 7,907 6,952 23,536 22,779 
Outsourced services and other5,215 2,018 3,560 9,954 23,192 
Loan servicing and systems revenue$134,197 124,873 112,351 395,438 335,961 
Loan Servicing Volumes
As of
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
March 31,
2022
June 30,
2022
September 30,
2022
Servicing volume (dollars in millions):
Government$443,248 453,681 452,450 461,054 478,402 507,653 542,398 545,546 
FFELP30,763 30,084 29,361 28,244 26,916 25,646 24,224 22,412 
Private and consumer16,226 21,397 24,758 24,229 23,702 23,433 22,838 22,461 
Total$490,237 505,162 506,569 513,527 529,020 556,732 589,460 590,419 
Number of servicing borrowers:
Government13,251,930 13,301,364 13,253,051 13,570,056 14,196,520 14,727,860 15,426,607 15,657,942 
FFELP1,300,677 1,233,461 1,198,863 1,150,214 1,092,066 1,034,913 977,785 910,188 
Private and consumer636,136 882,477 1,039,537 1,097,252 1,065,439 1,030,863 998,454 979,816 
Total15,188,743 15,417,302 15,491,451 15,817,522 16,354,025 16,793,636 17,402,846 17,547,946 
Number of remote hosted borrowers:6,555,841 4,307,342 4,338,570 4,548,541 4,799,368 5,487,943 5,738,381 6,025,377 
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 endedNine months ended
September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Tuition payment plan services$25,779 27,637 23,618 84,131 79,706 
Payment processing47,957 27,968 39,852 113,996 97,898 
Education technology and services32,548 34,956 21,295 110,755 78,752 
Other610 470 559 1,329 928 
Education technology, services, and payment processing revenue$106,894 91,031 85,324 310,211 257,284 
14


Other Income/Expense
The following table summarizes the components of "other" in "other income/expense" on the consolidated statements of income:
 Three months endedNine months ended
 September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Income/gains from investments, net$10,701 18,127 16,050 40,685 40,141 
Borrower late fee income2,824 2,436 514 7,693 1,698 
ALLO preferred return2,164 2,140 2,043 6,420 6,384 
Administration/sponsor fee income1,920 2,012 1,670 6,055 1,670 
Investment advisory services1,612 1,482 2,400 4,375 6,242 
Loss from ALLO voting membership interest investment(17,562)(16,941)(10,495)(47,633)(31,620)
Loss from solar investments(4,216)(1,854)(3,393)(7,100)(7,375)
Other4,782 5,245 3,078 14,255 13,043 
  Other income$2,225 12,647 11,867 24,750 30,183 
Derivative Settlements
The following table summarizes the components of "derivative settlements, net" included in the attached consolidated statements of income.
 Three months endedNine months ended
 September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
1:3 basis swaps$(1,085)931 (700)242 (939)
Interest rate swaps - floor income hedges11,356 3,692 (5,209)11,843 (14,648)
Total derivative settlements - income (expense)$10,271 4,623 (5,909)12,085 (15,587)


15


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 ofAs ofAs of
 September 30, 2022December 31, 2021September 30, 2021
Non-Nelnet Bank:
Federally insured student loans:
Stafford and other$3,298,138 3,904,000 4,142,059 
Consolidation11,002,253 13,187,047 13,939,429 
Total14,300,391 17,091,047 18,081,488 
Private education loans262,183 299,442 319,212 
Consumer and other loans231,441 51,301 36,994 
Non-Nelnet Bank loans14,794,015 17,441,790 18,437,694 
Nelnet Bank:
Federally insured student loans72,905 88,011 93,930 
Private education loans356,571 169,890 98,395 
Nelnet Bank loans429,476 257,901 192,325 
 
Accrued interest receivable793,838 788,552 834,831 
Loan discount, net of unamortized loan premiums and deferred origination costs(22,021)(25,933)(22,603)
Allowance for loan losses:
Non-Nelnet Bank:
Federally insured loans(87,778)(103,381)(115,859)
Private education loans(15,577)(16,143)(17,053)
Consumer and other loans(13,290)(6,481)(4,429)
Non-Nelnet Bank allowance for loan losses(116,645)(126,005)(137,341)
Nelnet Bank:
Federally insured loans(164)(268)(289)
Private education loans(2,248)(840)(414)
Nelnet Bank allowance for loan losses(2,412)(1,108)(703)
 $15,876,251 18,335,197 19,304,203 
The following table summarizes the allowance for loan losses as a percentage of the ending loan balance for each of the Company's loan portfolios.
As ofAs ofAs of
September 30, 2022December 31, 2021September 30, 2021
Non-Nelnet Bank:
Federally insured student loans (a)0.61 %0.60 %0.64 %
Private education loans5.94 %5.39 %5.34 %
Consumer and other loans (b)5.74 %12.63 %11.97 %
Nelnet Bank:
Federally insured student loans (a)0.22 %0.30 %0.31 %
Private education loans0.63 %0.49 %0.42 %
(a)    As of September 30, 2022, December 31, 2021, and September 30, 2021, the allowance for loan losses as a percent of the risk sharing component of federally insured student loans not covered by the federal guaranty for non-Nelnet Bank was 22.3%, 22.2%, and 23.6%, respectively, and for Nelnet Bank was 8.9%, 12.1%, and 12.2%, respectively.
(b)    During 2022, the Company purchased home equity loans that generally have lower default rates than unsecured consumer loans. As such, the allowance for loan losses as a percentage of the ending loan balance has decreased as of September 30, 2022 as compared to December 31, 2021.
16


Loan Activity
The following table sets forth the activity of the Company's loan portfolios:
 Three months endedNine months ended
 September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Non-Nelnet Bank:
Beginning balance$15,855,137 16,618,627 19,331,725 17,441,790 19,559,108 
Loan acquisitions:
Federally insured student loans896 43,747 70,844 54,845 833,313 
Private education loans667 6,484 1,680 8,177 88,131 
Consumer and other loans120,465 118,012 20,939 256,998 61,319 
Total loan acquisitions122,028 168,243 93,463 320,020 982,763 
Repayments, claims, capitalized interest, participations, and other, net(385,312)(478,461)(818,554)(1,310,913)(1,415,249)
Loans lost to external parties(768,923)(453,158)(145,270)(1,609,728)(587,841)
Loans sold(28,915)(114)(23,670)(47,154)(101,087)
Ending balance$14,794,015 15,855,137 18,437,694 14,794,015 18,437,694 
Nelnet Bank:
Beginning balance$423,553 368,257 190,571 257,901 17,543 
Federally insured student loan acquisitions— — — — 99,973 
Private education loan acquisitions6,856 — — 6,856 — 
Private education loan originations14,311 75,204 13,006 219,857 99,161 
Repayments(15,244)(17,373)(10,865)(51,011)(21,863)
Sales to AGM segment— (2,535)(387)(4,127)(2,489)
Ending balance$429,476 423,553 192,325 429,476 192,325 
The Company has also purchased partial ownership in certain private education, consumer, and federally insured student loan securitizations that are accounted for as held-to-maturity beneficial interest investments and included in "investments and notes receivable" in the Company's consolidated financial statements. As of the latest remittance reports filed by the various trusts prior to or as of September 30, 2022, the Company’s ownership correlates to approximately $630 million, $150 million, and $420 million of private education, consumer, and federally insured student loans, respectively, included in these securitizations. The loans held in these securitizations are not included in the above table.
Since late 2021, the Company has experienced accelerated run-off of its FFELP portfolio due to FFELP borrowers consolidating their loans into Federal Direct Loan Program loans as a result of the continued extension of the CARES Act payment pause on Department held loans and the initiatives offered by the Department for FFELP borrowers to consolidate their loans to qualify for loan forgiveness under the Public Service Loan Forgiveness and other programs.

17


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 endedNine months ended
 September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Variable loan yield, gross5.05 %3.59 %2.61 %3.76 %2.65 %
Consolidation rebate fees(0.84)(0.85)(0.85)(0.85)(0.84)
Discount accretion, net of premium and deferred origination costs amortization0.02 0.03 0.03 0.03 0.01 
Variable loan yield, net4.23 2.77 1.79 2.94 1.82 
Loan cost of funds - interest expense (a) (b)(3.11)(1.73)(0.99)(1.95)(1.03)
Loan cost of funds - derivative settlements (c) (d)(0.03)0.02 (0.02)0.00 (0.01)
Variable loan spread1.09 1.06 0.78 0.99 0.78 
Fixed rate floor income, gross0.19 0.46 0.75 0.45 0.75 
Fixed rate floor income - derivative settlements (c) (e)0.30 0.09 (0.11)0.10 (0.10)
Fixed rate floor income, net of settlements on derivatives0.49 0.55 0.64 0.55 0.65 
Core loan spread1.58 %1.61 %1.42 %1.54 %1.43 %
Average balance of AGM's loans$15,466,505 16,437,861 19,084,320 16,371,092 19,178,788 
Average balance of AGM's debt outstanding15,060,823 15,923,648 18,863,730 15,905,170 18,890,832 
(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 expense on bonds and notes payable and bank deposits" in the consolidated statements of income and the impact of this reduction to interest expense was excluded from the table above.
(b)    In the third quarter of 2021, the Company redeemed certain asset-backed debt securities prior to their legal maturity, resulting in the recognition of $1.5 million in interest expense from the write-off of all remaining debt issuance costs related to the initial issuance of such bonds. This expense was excluded from the table above.
(c)    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 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. See "Derivative Settlements" included in this supplement for 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 endedNine months ended
September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Core loan spread1.58 %1.61 %1.42 %1.54 %1.43 %
Derivative settlements (1:3 basis swaps)0.03 (0.02)0.02 (0.00 )0.01 
Derivative settlements (fixed rate floor income)(0.30)(0.09)0.11 (0.10)0.10 
Loan spread1.31 %1.50 %1.55 %1.44 %1.54 %

(d)    Derivative settlements consist of net settlements (paid) received related to the Company’s 1:3 basis swaps.
(e)    Derivative settlements consist of net settlements received (paid) related to the Company’s floor income interest rate swaps.
18


Variable loan spread increased during the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to a significant increase in short-term interest rates during each of the first three quarters of 2022. In an increasing interest rate environment, student loan spread increases due to the timing of interest rate resets on the Company's assets occurring daily in contrast to the timing of the interest resets on the Company's debt that occurs either monthly or quarterly.
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 endedNine months ended
 September 30, 2022June 30, 2022September 30, 2021September 30, 2022September 30, 2021
Fixed rate floor income, gross$7,585 18,292 35,850 54,870 108,029 
Derivative settlements (a)11,356 3,692 (5,209)11,843 (14,648)
Fixed rate floor income, net$18,941 21,984 30,641 66,713 93,381 
Fixed rate floor income contribution to spread, net0.49 %0.55 %0.64 %0.55 %0.65 %

(a)    Derivative settlements consist of net settlements received (paid) 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 September 30, 2022.
Fixed interest rate rangeBorrower/lender weighted average yieldEstimated variable conversion rate (a)Loan balance
5.0 - 5.49%5.35%2.71%$177,056 
5.5 - 5.99%5.68%3.04%199,123 
6.0 - 6.49%6.19%3.55%245,508 
6.5 - 6.99%6.70%4.06%238,899 
7.0 - 7.49%7.17%4.53%87,432 
7.5 - 7.99%7.72%5.08%167,776 
8.0 - 8.99%8.18%5.54%390,549 
> 9.0%
9.05%6.41%150,258 
  $1,656,601 

(a)    The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of September 30, 2022, the weighted average estimated variable conversion rate was 4.41% and the short-term interest rate was 251 basis points.
The following table summarizes the outstanding derivative instruments as of September 30, 2022 used by AGM to economically hedge loans earning fixed rate floor income.
MaturityNotional amountWeighted average fixed rate paid by the Company (a)
2024$2,000,000 0.35 %
2026500,000 1.02 
2031100,000 1.53 
 $2,600,000 0.52 %

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

19