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 201 Lincoln, Nebraska | 68508 | |
(Address of principal executive offices) | (Zip Code) |
Exhibit No. | Description | |
99.1 | Press Release dated August 8, 2013 - “Nelnet Reports Second Quarter 2013 Results” | |
99.2 | Supplemental Financial Information for the Quarter Ended June 30, 2013 |
Name: | Terry J. Heimes |
Title: | Chief Financial Officer |
• | GAAP net income $2.17 per share |
• | Net income $1.53 per share, excluding derivative market value and foreign currency adjustments, up 35 percent from prior year |
• | 59 percent increase in government loan servicing volume |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Interest income: | |||||||||||||||
Loan interest | $ | 158,063 | 155,539 | 150,988 | 313,602 | 304,046 | |||||||||
Investment interest | 1,483 | 1,617 | 1,055 | 3,100 | 2,150 | ||||||||||
Total interest income | 159,546 | 157,156 | 152,043 | 316,702 | 306,196 | ||||||||||
Interest expense: | |||||||||||||||
Interest on bonds and notes payable | 58,127 | 58,358 | 67,476 | 116,485 | 136,773 | ||||||||||
Net interest income | 101,419 | 98,798 | 84,567 | 200,217 | 169,423 | ||||||||||
Less provision for loan losses | 5,000 | 5,000 | 7,000 | 10,000 | 13,000 | ||||||||||
Net interest income after provision for loan losses | 96,419 | 93,798 | 77,567 | 190,217 | 156,423 | ||||||||||
Other income (expense): | |||||||||||||||
Loan and guaranty servicing revenue | 60,078 | 55,601 | 52,391 | 115,679 | 101,879 | ||||||||||
Tuition payment processing and campus commerce revenue | 18,356 | 23,411 | 16,834 | 41,767 | 38,747 | ||||||||||
Enrollment services revenue | 24,823 | 28,957 | 29,710 | 53,780 | 61,374 | ||||||||||
Other income | 12,288 | 9,416 | 8,800 | 21,704 | 19,754 | ||||||||||
Gain on sale of loans and debt repurchases | 7,355 | 1,407 | 935 | 8,762 | 935 | ||||||||||
Derivative settlements, net | (8,357 | ) | (8,184 | ) | (2,086 | ) | (16,541 | ) | (1,859 | ) | |||||
Derivative market value and foreign currency adjustments, net | 48,545 | 9,256 | (19,532 | ) | 57,801 | (34,939 | ) | ||||||||
Total other income | 163,088 | 119,864 | 87,052 | 282,952 | 185,891 | ||||||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | 47,432 | 47,905 | 48,703 | 95,337 | 97,798 | ||||||||||
Cost to provide enrollment services | 16,787 | 19,642 | 20,374 | 36,429 | 42,052 | ||||||||||
Depreciation and amortization | 4,320 | 4,377 | 8,226 | 8,697 | 16,362 | ||||||||||
Other | 34,365 | 34,941 | 30,908 | 69,306 | 63,171 | ||||||||||
Total operating expenses | 102,904 | 106,865 | 108,211 | 209,769 | 219,383 | ||||||||||
Income before income taxes | 156,603 | 106,797 | 56,408 | 263,400 | 122,931 | ||||||||||
Income tax expense | 54,746 | 38,447 | 14,878 | 93,193 | 38,108 | ||||||||||
Net income | 101,857 | 68,350 | 41,530 | 170,207 | 84,823 | ||||||||||
Net income attributable to noncontrolling interest | 614 | 271 | 136 | 885 | 288 | ||||||||||
Net income attributable to Nelnet, Inc. | $ | 101,243 | 68,079 | 41,394 | 169,322 | 84,535 | |||||||||
Earnings per common share: | |||||||||||||||
Net income attributable to Nelnet, Inc. shareholders - basic and diluted | $ | 2.17 | 1.46 | 0.87 | 3.63 | 1.78 | |||||||||
Weighted average common shares outstanding - basic and diluted | 46,626,853 | 46,658,031 | 47,434,915 | 46,642,356 | 47,369,776 |
As of | As of | As of | |||||||
June 30, 2013 | December 31, 2012 | June 30, 2012 | |||||||
(unaudited) | (unaudited) | ||||||||
Assets: | |||||||||
Student loans receivable, net | $ | 24,575,636 | 24,830,621 | 23,501,382 | |||||
Cash, cash equivalents, and investments | 245,825 | 149,343 | 130,310 | ||||||
Restricted cash and investments | 763,909 | 911,978 | 976,708 | ||||||
Goodwill and intangible assets, net | 124,849 | 126,511 | 136,124 | ||||||
Other assets | 592,958 | 589,442 | 524,618 | ||||||
Total assets | $ | 26,303,177 | 26,607,895 | 25,269,142 | |||||
Liabilities: | |||||||||
Bonds and notes payable | $ | 24,690,952 | 25,098,835 | 23,836,250 | |||||
Other liabilities | 292,630 | 343,847 | 287,994 | ||||||
Total liabilities | 24,983,582 | 25,442,682 | 24,124,244 | ||||||
Equity: | |||||||||
Total Nelnet, Inc. shareholders' equity | 1,319,482 | 1,165,208 | 1,144,605 | ||||||
Noncontrolling interest | 113 | 5 | 293 | ||||||
Total equity | 1,319,595 | 1,165,213 | 1,144,898 | ||||||
Total liabilities and equity | $ | 26,303,177 | 26,607,895 | 25,269,142 |
• | student 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 Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), risks related to the use of derivatives to manage exposure to interest rate fluctuations, and risks from changes in levels of student loan prepayment or default rates; |
• | financing and liquidity risks, including risks of changes in the general interest rate environment and in the securitization and other financing markets for student loans, 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 educational credit and services markets resulting from changes in applicable laws, regulations, and government programs, such as the expected decline over time in FFELP loan interest income and fee-based revenues due to the discontinuation of new FFELP loan originations in 2010 and potential government initiatives to consolidate existing FFELP loans to the Federal Direct Loan Program, and the Company's ability to maintain or increase volumes under its loan servicing contract with the Department and to comply with agreements with third-party customers for the servicing of FFELP and Federal Direct Loan Program loans; |
• | risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors |
• | uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations; and |
• | risks associated with litigation 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. |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Interest income: | |||||||||||||||
Loan interest | $ | 158,063 | 155,539 | 150,988 | 313,602 | 304,046 | |||||||||
Investment interest | 1,483 | 1,617 | 1,055 | 3,100 | 2,150 | ||||||||||
Total interest income | 159,546 | 157,156 | 152,043 | 316,702 | 306,196 | ||||||||||
Interest expense: | |||||||||||||||
Interest on bonds and notes payable | 58,127 | 58,358 | 67,476 | 116,485 | 136,773 | ||||||||||
Net interest income | 101,419 | 98,798 | 84,567 | 200,217 | 169,423 | ||||||||||
Less provision for loan losses | 5,000 | 5,000 | 7,000 | 10,000 | 13,000 | ||||||||||
Net interest income after provision for loan losses | 96,419 | 93,798 | 77,567 | 190,217 | 156,423 | ||||||||||
Other income (expense): | |||||||||||||||
Loan and guaranty servicing revenue | 60,078 | 55,601 | 52,391 | 115,679 | 101,879 | ||||||||||
Tuition payment processing and campus commerce revenue | 18,356 | 23,411 | 16,834 | 41,767 | 38,747 | ||||||||||
Enrollment services revenue | 24,823 | 28,957 | 29,710 | 53,780 | 61,374 | ||||||||||
Other income | 12,288 | 9,416 | 8,800 | 21,704 | 19,754 | ||||||||||
Gain on sale of loans and debt repurchases | 7,355 | 1,407 | 935 | 8,762 | 935 | ||||||||||
Derivative settlements, net | (8,357 | ) | (8,184 | ) | (2,086 | ) | (16,541 | ) | (1,859 | ) | |||||
Derivative market value and foreign currency adjustments, net | 48,545 | 9,256 | (19,532 | ) | 57,801 | (34,939 | ) | ||||||||
Total other income | 163,088 | 119,864 | 87,052 | 282,952 | 185,891 | ||||||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | 47,432 | 47,905 | 48,703 | 95,337 | 97,798 | ||||||||||
Cost to provide enrollment services | 16,787 | 19,642 | 20,374 | 36,429 | 42,052 | ||||||||||
Depreciation and amortization | 4,320 | 4,377 | 8,226 | 8,697 | 16,362 | ||||||||||
Other | 34,365 | 34,941 | 30,908 | 69,306 | 63,171 | ||||||||||
Total operating expenses | 102,904 | 106,865 | 108,211 | 209,769 | 219,383 | ||||||||||
Income before income taxes | 156,603 | 106,797 | 56,408 | 263,400 | 122,931 | ||||||||||
Income tax expense | 54,746 | 38,447 | 14,878 | 93,193 | 38,108 | ||||||||||
Net income | 101,857 | 68,350 | 41,530 | 170,207 | 84,823 | ||||||||||
Net income attributable to noncontrolling interest | 614 | 271 | 136 | 885 | 288 | ||||||||||
Net income attributable to Nelnet, Inc. | $ | 101,243 | 68,079 | 41,394 | 169,322 | 84,535 | |||||||||
Earnings per common share: | |||||||||||||||
Net income attributable to Nelnet, Inc. shareholders - basic and diluted | $ | 2.17 | 1.46 | 0.87 | 3.63 | 1.78 | |||||||||
Weighted average common shares outstanding - basic and diluted | 46,626,853 | 46,658,031 | 47,434,915 | 46,642,356 | 47,369,776 |
As of | As of | As of | |||||||
June 30, 2013 | December 31, 2012 | June 30, 2012 | |||||||
(unaudited) | (unaudited) | ||||||||
Assets: | |||||||||
Student loans receivable, net | $ | 24,575,636 | 24,830,621 | 23,501,382 | |||||
Cash, cash equivalents, and investments | 245,825 | 149,343 | 130,310 | ||||||
Restricted cash and investments | 763,909 | 911,978 | 976,708 | ||||||
Goodwill and intangible assets, net | 124,849 | 126,511 | 136,124 | ||||||
Other assets | 592,958 | 589,442 | 524,618 | ||||||
Total assets | $ | 26,303,177 | 26,607,895 | 25,269,142 | |||||
Liabilities: | |||||||||
Bonds and notes payable | $ | 24,690,952 | 25,098,835 | 23,836,250 | |||||
Other liabilities | 292,630 | 343,847 | 287,994 | ||||||
Total liabilities | 24,983,582 | 25,442,682 | 24,124,244 | ||||||
Equity: | |||||||||
Total Nelnet, Inc. shareholders' equity | 1,319,482 | 1,165,208 | 1,144,605 | ||||||
Noncontrolling interest | 113 | 5 | 293 | ||||||
Total equity | 1,319,595 | 1,165,213 | 1,144,898 | ||||||
Total liabilities and equity | $ | 26,303,177 | 26,607,895 | 25,269,142 |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
GAAP net income | $ | 101,243 | 68,079 | 41,394 | 169,322 | 84,535 | |||||||||
Derivative market value and foreign currency adjustments, net of tax | (30,098 | ) | (5,738 | ) | 12,110 | (35,837 | ) | 21,662 | |||||||
Net income, excluding derivative market value and foreign currency adjustments (a) | $ | 71,145 | 62,341 | 53,504 | 133,485 | 106,197 | |||||||||
Earnings per share: | |||||||||||||||
GAAP net income | $ | 2.17 | 1.46 | 0.87 | 3.63 | 1.78 | |||||||||
Derivative market value and foreign currency adjustments, net of tax | (0.64 | ) | (0.12 | ) | 0.26 | (0.77 | ) | 0.46 | |||||||
Net income, excluding derivative market value and foreign currency adjustments (a) | $ | 1.53 | 1.34 | 1.13 | 2.86 | 2.24 |
(a) | The Company provides non-GAAP information that reflects specific items management believes to be important in the evaluation of its financial position and performance. "Derivative market value and foreign currency adjustments" include (i) the unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars. The Company believes these point-in-time estimates of asset and liability values related to these financial instruments that are subject to interest and currency rate fluctuations affect the period-to-period comparability of the results of operations. |
• | Student Loan and Guaranty Servicing ("LGS") - referred to as Nelnet Diversified Solutions ("NDS") |
• | Tuition Payment Processing and Campus Commerce ("TPP&CC") - referred to as Nelnet Business Solutions ("NBS") |
• | Enrollment Services - commonly called Nelnet Enrollment Solutions ("NES") |
(a) | Revenue includes intersegment revenue of $13.9 million and $16.4 million for the three months ended June 30, 2013 and 2012, respectively, and $28.9 million and $33.4 million for the six months ended June 30, 2013 and 2012, respectively, earned by LGS as a result of servicing loans for AGM. |
(b) | Total revenue includes "net interest income after provision for loan losses" and "total other income" from the Company's segment statements of income, excluding the impact from changes in fair values of derivatives and foreign currency transaction adjustments, which was income of $43.1 million and an expense of $10.1 million for the three months ended June 30, 2013 and 2012, respectively, and income of $48.4 million and an expense of $31.7 million for the six months ended June 30, 2013 and 2012, respectively. Net income excludes changes in fair values of derivatives and foreign currency transaction adjustments, net of tax, which was income of $26.7 million and an expense of $6.2 million for the three months ended June 30, 2013 and 2012, respectively, and income of $30.0 million and an expense of $19.6 million for the six months ended June 30, 2013 and 2012, respectively. |
(c) | Computed as income before income taxes divided by total revenue. |
• | As of June 30, 2013, the Company was servicing $116.8 billion in student loans, as compared with $85.5 billion of loans as of June 30, 2012. Revenue increased in the three and six months ended June 30, 2013 compared to the same periods in 2012 due to growth in servicing volume under the Company's contract with the Department and an increase in collection revenue from getting defaulted FFELP loan assets current on behalf of guaranty agencies. These increases were partially offset by decreases in traditional FFELP and guaranty servicing revenue and software services revenue. |
• | As of June 30, 2013, the Company was servicing $89.2 billion of loans for 4.4 million borrowers on behalf of the Department, compared with $56.0 billion of loans for 3.1 million borrowers as of June 30, 2012. Revenue from this contract increased to $22.1 million and $42.5 million for the three and six months ended June 30, 2013, respectively, up from $16.1 million and $30.9 million for the same respective periods in 2012. The servicing contract with the Department spans five years (through June 2014), with a five-year renewal at the option of the Department. Although the Company currently anticipates that the Department will exercise its option to renew the servicing contract for an additional five years at the end of the current term in 2014, there can be no assurance of such renewal. |
• | Before tax operating margin increased in the three and six months ended June 30, 2013 compared to the same periods in 2012. The Company made investments and incurred certain costs in 2012 to improve performance metrics under the government servicing contract and to implement and comply with the Department's special direct consolidation loan initiative. In addition, intangible assets for this segment were fully amortized in 2012. The decrease in these costs in 2013 compared to 2012 were partially offset by an increase in costs incurred in 2013 to support the increase in volume under the government servicing contract. |
• | Revenue increased in the three and six months ended June 30, 2013 compared to the same periods in 2012 due to an increase in the number of managed tuition payment plans and campus commerce customers. |
• | Before tax operating margin increased in the three and six months ended June 30, 2013 compared to the same periods in 2012. The increase was the result of efficiencies gained in the operations of the business and a decrease in amortization expense related to intangible assets. These decreases in expenses in 2013 compared to 2012 were partially offset by an increase in salaries and benefits due to adding personnel to support the increase in the number of tuition payment plans and campus commerce customers. |
• | This segment is subject to seasonal fluctuations. Based on the timing of when revenue is recognized and when expenses are incurred, revenue and operating margin are higher in the first quarter as compared to the remainder of the year. |
• | Revenue decreased in the three and six months ended June 30, 2013 compared to the same periods in 2012 due to a decrease in inquiry generation and management revenue as a result of the regulatory uncertainty regarding recruiting and marketing to potential students in the for-profit college industry, which has caused schools to decrease spending on marketing efforts. Additionally, clients are shifting marketing budgets to more efficient or lower cost channels, which has caused a reduction in volume. |
• | Before tax operating margin increased in the three and six months ended June 30, 2013 compared to the same periods in 2012 due to cost saving measures initiated by the Company in reaction to the ongoing decline in revenue in this segment. |
• | The Company acquired $1.1 billion of FFELP student loans during the first six months of 2013, including $403.0 million purchased during the second quarter. |
• | During the six months ended June 30, 2013, the Company completed asset-backed securitization transactions for a total original principal amount of $2.8 billion, including $1.2 billion during the second quarter. |
• | Core student loan spread increased to 1.52% for the three months ended June 30, 2013, compared to 1.50% for the three months ended March 31, 2013, and increased to 1.51% for the six months ended June 30, 2013, compared to 1.43% for the same period in 2012. This increase was due to the tightening between the interest rate paid by the Company on its liabilities funding student loan assets and the rate earned by the Company on such student loan assets. |
• | Due to historically low interest rates, the Company continues to earn significant fixed rate floor income. During the three months ended June 30, 2013 and 2012, the Company earned $36.1 million and $37.0 million, respectively, of fixed rate floor income (net of $8.5 million and $3.5 million of derivative settlements, respectively, used to hedge such loans), compared to $71.8 million and $75.1 million for the six months ended June 30, 2013 and 2012, respectively (net of $16.8 million and $6.6 million of derivative settlements, respectively). |
• | Whitetail Rock Capital Management, LLC ("WRCM"), the Company's SEC-registered investment advisory subsidiary, recognized investment advisory revenue of $6.3 million and $3.0 million for the three months ended June 30, 2013 and 2012, respectively, and $9.2 million and $6.2 million for the six months ended June 30, 2013 and 2012, respectively. These amounts include performance fees earned from the sale of securities. As of June 30, 2013, WRCM was managing an investment portfolio of $753.4 million for third-party entities. |
• | As of June 30, 2013, the Company had cash and investments of $245.8 million. |
• | For the six months ended June 30, 2013, the Company generated $153.2 million in net cash provided by operating activities. |
• | Forecasted future cash flows from the Company's FFELP student loan portfolio financed in asset-backed securitization transactions are estimated to be approximately $2.10 billion as of June 30, 2013. |
• | During the six months ended June 30, 2013, the Company repurchased $69.4 million (face amount) of its own asset-backed debt securities for a gain totaling $8.7 million, including $56.4 million (face amount) for a gain of $7.4 million during the second quarter. |
• | During the six months ended June 30, 2013, the Company repurchased 279,156 shares of Class A common stock for $9.0 million ($32.20 per share), including 65,621 shares for $2.3 million ($34.82 per share) during the second quarter. |
• | During the six months ended June 30, 2013, the Company paid cash dividends of $9.3 million, including $4.6 million ($0.10 per share) during the second quarter. |
• | The Company intends to use its strong liquidity position to capitalize on market opportunities, including FFELP student loan acquisitions; strategic acquisitions and investments in its core business areas of loan financing, loan servicing, payment processing, and enrollment services; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. |
• | The operating results of WRCM, the Company's SEC-registered investment advisory subsidiary |
• | Income earned on certain investment activities |
• | Interest expense incurred on unsecured debt transactions |
• | Other product and service offerings that are not considered operating segments |
Three months ended June 30, 2013 | ||||||||||||||||||||||||
Fee-Based | ||||||||||||||||||||||||
Student Loan and Guaranty Servicing | Tuition Payment Processing and Campus Commerce | Enrollment Services | Total Fee- Based | Asset Generation and Management | Corporate Activity and Overhead | Eliminations | Total | |||||||||||||||||
Total interest income | $ | 9 | — | — | 9 | 158,175 | 2,196 | (834 | ) | 159,546 | ||||||||||||||
Interest expense | — | — | — | — | 56,920 | 2,041 | (834 | ) | 58,127 | |||||||||||||||
Net interest income (loss) | 9 | — | — | 9 | 101,255 | 155 | — | 101,419 | ||||||||||||||||
Less provision for loan losses | — | — | — | — | 5,000 | — | — | 5,000 | ||||||||||||||||
Net interest income (loss) after provision for loan losses | 9 | — | — | 9 | 96,255 | 155 | — | 96,419 | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loan and guaranty servicing revenue | 60,078 | — | — | 60,078 | — | — | — | 60,078 | ||||||||||||||||
Intersegment servicing revenue | 13,903 | — | — | 13,903 | — | — | (13,903 | ) | — | |||||||||||||||
Tuition payment processing and campus commerce revenue | — | 18,356 | — | 18,356 | — | — | — | 18,356 | ||||||||||||||||
Enrollment services revenue | — | — | 24,823 | 24,823 | — | — | — | 24,823 | ||||||||||||||||
Other income | — | — | — | — | 3,030 | 9,258 | — | 12,288 | ||||||||||||||||
Gain on sale of loans and debt repurchases | — | — | — | — | 7,355 | — | — | 7,355 | ||||||||||||||||
Derivative market value and foreign currency adjustments, net | — | — | — | — | 43,096 | 5,449 | — | 48,545 | ||||||||||||||||
Derivative settlements, net | — | — | — | — | (7,845 | ) | (512 | ) | — | (8,357 | ) | |||||||||||||
Total other income (expense) | 73,981 | 18,356 | 24,823 | 117,160 | 45,636 | 14,195 | (13,903 | ) | 163,088 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Salaries and benefits | 28,091 | 9,427 | 4,809 | 42,327 | 592 | 4,513 | — | 47,432 | ||||||||||||||||
Cost to provide enrollment services | — | — | 16,787 | 16,787 | — | — | — | 16,787 | ||||||||||||||||
Depreciation and amortization | 2,731 | 1,132 | 61 | 3,924 | — | 396 | — | 4,320 | ||||||||||||||||
Other | 18,031 | 2,192 | 1,243 | 21,466 | 7,923 | 4,976 | — | 34,365 | ||||||||||||||||
Intersegment expenses, net | 851 | 1,494 | 1,130 | 3,475 | 14,108 | (3,680 | ) | (13,903 | ) | — | ||||||||||||||
Total operating expenses | 49,704 | 14,245 | 24,030 | 87,979 | 22,623 | 6,205 | (13,903 | ) | 102,904 | |||||||||||||||
Income (loss) before income taxes and corporate overhead allocation | 24,286 | 4,111 | 793 | 29,190 | 119,268 | 8,145 | — | 156,603 | ||||||||||||||||
Corporate overhead allocation | (1,513 | ) | (504 | ) | (504 | ) | (2,521 | ) | (1,081 | ) | 3,602 | — | — | |||||||||||
Income (loss) before income taxes | 22,773 | 3,607 | 289 | 26,669 | 118,187 | 11,747 | — | 156,603 | ||||||||||||||||
Income tax (expense) benefit | (8,655 | ) | (1,370 | ) | (109 | ) | (10,134 | ) | (44,911 | ) | 299 | — | (54,746 | ) | ||||||||||
Net income (loss) | 14,118 | 2,237 | 180 | 16,535 | 73,276 | 12,046 | — | 101,857 | ||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | 614 | — | 614 | ||||||||||||||||
Net income attributable to Nelnet, Inc. | $ | 14,118 | 2,237 | 180 | 16,535 | 73,276 | 11,432 | — | 101,243 | |||||||||||||||
Three months ended March 31, 2013 | ||||||||||||||||||||||||
Fee-Based | ||||||||||||||||||||||||
Student Loan and Guaranty Servicing | Tuition Payment Processing and Campus Commerce | Enrollment Services | Total Fee- Based | Asset Generation and Management | Corporate Activity and Overhead | Eliminations | Total | |||||||||||||||||
Total interest income | $ | 10 | — | — | 10 | 155,654 | 2,311 | (819 | ) | 157,156 | ||||||||||||||
Interest expense | — | — | — | — | 57,482 | 1,695 | (819 | ) | 58,358 | |||||||||||||||
Net interest income (loss) | 10 | — | — | 10 | 98,172 | 616 | — | 98,798 | ||||||||||||||||
Less provision for loan losses | — | — | — | — | 5,000 | — | — | 5,000 | ||||||||||||||||
Net interest income (loss) after provision for loan losses | 10 | — | — | 10 | 93,172 | 616 | — | 93,798 | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loan and guaranty servicing revenue | 55,601 | — | — | 55,601 | — | — | — | 55,601 | ||||||||||||||||
Intersegment servicing revenue | 14,953 | — | — | 14,953 | — | — | (14,953 | ) | — | |||||||||||||||
Tuition payment processing and campus commerce revenue | — | 23,411 | — | 23,411 | — | — | — | 23,411 | ||||||||||||||||
Enrollment services revenue | — | — | 28,957 | 28,957 | — | — | — | 28,957 | ||||||||||||||||
Other income | — | — | — | — | 4,196 | 5,220 | — | 9,416 | ||||||||||||||||
Gain on sale of loans and debt repurchases | — | — | — | — | 1,407 | — | — | 1,407 | ||||||||||||||||
Derivative market value and foreign currency adjustments | — | — | — | — | 5,275 | 3,981 | — | 9,256 | ||||||||||||||||
Derivative settlements, net | — | — | — | — | (7,539 | ) | (645 | ) | — | (8,184 | ) | |||||||||||||
Total other income (expense) | 70,554 | 23,411 | 28,957 | 122,922 | 3,339 | 8,556 | (14,953 | ) | 119,864 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Salaries and benefits | 28,444 | 9,359 | 5,767 | 43,570 | 562 | 3,773 | — | 47,905 | ||||||||||||||||
Cost to provide enrollment services | — | — | 19,642 | 19,642 | — | — | — | 19,642 | ||||||||||||||||
Depreciation and amortization | 2,789 | 1,138 | 61 | 3,988 | — | 389 | — | 4,377 | ||||||||||||||||
Other | 18,390 | 2,287 | 1,651 | 22,328 | 7,513 | 5,100 | — | 34,941 | ||||||||||||||||
Intersegment expenses, net | 935 | 1,425 | 1,149 | 3,509 | 15,142 | (3,698 | ) | (14,953 | ) | — | ||||||||||||||
Total operating expenses | 50,558 | 14,209 | 28,270 | 93,037 | 23,217 | 5,564 | (14,953 | ) | 106,865 | |||||||||||||||
Income (loss) before income taxes and corporate overhead allocation | 20,006 | 9,202 | 687 | 29,895 | 73,294 | 3,608 | — | 106,797 | ||||||||||||||||
Corporate overhead allocation | (997 | ) | (332 | ) | (332 | ) | (1,661 | ) | (712 | ) | 2,373 | — | — | |||||||||||
Income (loss) before income taxes | 19,009 | 8,870 | 355 | 28,234 | 72,582 | 5,981 | — | 106,797 | ||||||||||||||||
Income tax (expense) benefit | (7,223 | ) | (3,371 | ) | (135 | ) | (10,729 | ) | (27,581 | ) | (137 | ) | — | (38,447 | ) | |||||||||
Net income (loss) | 11,786 | 5,499 | 220 | 17,505 | 45,001 | 5,844 | — | 68,350 | ||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | 271 | — | 271 | ||||||||||||||||
Net income (loss) attributable to Nelnet, Inc. | $ | 11,786 | 5,499 | 220 | 17,505 | 45,001 | 5,573 | — | 68,079 | |||||||||||||||
Three months ended June 30, 2012 | ||||||||||||||||||||||||
Fee-Based | ||||||||||||||||||||||||
Student Loan and Guaranty Servicing | Tuition Payment Processing and Campus Commerce | Enrollment Services | Total Fee- Based | Asset Generation and Management | Corporate Activity and Overhead | Eliminations | Total | |||||||||||||||||
Total interest income | $ | 12 | 1 | — | 13 | 151,240 | 1,747 | (957 | ) | 152,043 | ||||||||||||||
Interest expense | — | — | — | — | 66,017 | 2,416 | (957 | ) | 67,476 | |||||||||||||||
Net interest income (loss) | 12 | 1 | — | 13 | 85,223 | (669 | ) | — | 84,567 | |||||||||||||||
Less provision for loan losses | — | — | — | — | 7,000 | — | — | 7,000 | ||||||||||||||||
Net interest income (loss) after provision for loan losses | 12 | 1 | — | 13 | 78,223 | (669 | ) | — | 77,567 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loan and guaranty servicing revenue | 52,391 | — | — | 52,391 | — | — | — | 52,391 | ||||||||||||||||
Intersegment servicing revenue | 16,401 | — | — | 16,401 | — | — | (16,401 | ) | — | |||||||||||||||
Tuition payment processing and campus commerce revenue | — | 16,834 | — | 16,834 | — | — | — | 16,834 | ||||||||||||||||
Enrollment services revenue | — | — | 29,710 | 29,710 | — | — | — | 29,710 | ||||||||||||||||
Other income | — | — | — | — | 3,581 | 5,219 | — | 8,800 | ||||||||||||||||
Gain on sale of loans and debt repurchases | — | — | — | — | 935 | — | — | 935 | ||||||||||||||||
Derivative market value and foreign currency adjustments, net | — | — | — | — | (10,053 | ) | (9,479 | ) | — | (19,532 | ) | |||||||||||||
Derivative settlements, net | — | — | — | — | (1,339 | ) | (747 | ) | — | (2,086 | ) | |||||||||||||
Total other income (expense) | 68,792 | 16,834 | 29,710 | 115,336 | (6,876 | ) | (5,007 | ) | (16,401 | ) | 87,052 | |||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Salaries and benefits | 28,905 | 8,575 | 6,161 | 43,641 | 542 | 4,520 | — | 48,703 | ||||||||||||||||
Cost to provide enrollment services | — | — | 20,374 | 20,374 | — | — | — | 20,374 | ||||||||||||||||
Depreciation and amortization | 4,525 | 1,731 | 1,617 | 7,873 | — | 353 | — | 8,226 | ||||||||||||||||
Other | 17,539 | 2,456 | 1,745 | 21,740 | 3,120 | 6,048 | — | 30,908 | ||||||||||||||||
Intersegment expenses, net | 1,185 | 1,330 | 976 | 3,491 | 16,635 | (3,725 | ) | (16,401 | ) | — | ||||||||||||||
Total operating expenses | 52,154 | 14,092 | 30,873 | 97,119 | 20,297 | 7,196 | (16,401 | ) | 108,211 | |||||||||||||||
Income (loss) before income taxes and corporate overhead allocation | 16,650 | 2,743 | (1,163 | ) | 18,230 | 51,050 | (12,872 | ) | — | 56,408 | ||||||||||||||
Corporate overhead allocation | (1,275 | ) | (425 | ) | (425 | ) | (2,125 | ) | (1,400 | ) | 3,525 | — | — | |||||||||||
Income (loss) before income taxes | 15,375 | 2,318 | (1,588 | ) | 16,105 | 49,650 | (9,347 | ) | — | 56,408 | ||||||||||||||
Income tax (expense) benefit | (5,843 | ) | (881 | ) | 603 | (6,121 | ) | (18,866 | ) | 10,109 | — | (14,878 | ) | |||||||||||
Net income (loss) | 9,532 | 1,437 | (985 | ) | 9,984 | 30,784 | 762 | — | 41,530 | |||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | 136 | — | 136 | ||||||||||||||||
Net income (loss) attributable to Nelnet, Inc. | $ | 9,532 | 1,437 | (985 | ) | 9,984 | 30,784 | 626 | — | 41,394 | ||||||||||||||
Six months ended June 30, 2013 | ||||||||||||||||||||||||
Fee-Based | ||||||||||||||||||||||||
Student Loan and Guaranty Servicing | Tuition Payment Processing and Campus Commerce | Enrollment Services | Total Fee- Based | Asset Generation and Management | Corporate Activity and Overhead | Eliminations | Total | |||||||||||||||||
Total interest income | $ | 19 | — | — | 19 | 313,829 | 4,507 | (1,653 | ) | 316,702 | ||||||||||||||
Interest expense | — | — | — | — | 114,402 | 3,736 | (1,653 | ) | 116,485 | |||||||||||||||
Net interest income (loss) | 19 | — | — | 19 | 199,427 | 771 | — | 200,217 | ||||||||||||||||
Less provision for loan losses | — | — | — | — | 10,000 | — | — | 10,000 | ||||||||||||||||
Net interest income (loss) after provision for loan losses | 19 | — | — | 19 | 189,427 | 771 | — | 190,217 | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loan and guaranty servicing revenue | 115,679 | — | — | 115,679 | — | — | — | 115,679 | ||||||||||||||||
Intersegment servicing revenue | 28,856 | — | — | 28,856 | — | — | (28,856 | ) | — | |||||||||||||||
Tuition payment processing and campus commerce revenue | — | 41,767 | — | 41,767 | — | — | — | 41,767 | ||||||||||||||||
Enrollment services revenue | — | — | 53,780 | 53,780 | — | — | — | 53,780 | ||||||||||||||||
Other income | — | — | — | — | 7,226 | 14,478 | — | 21,704 | ||||||||||||||||
Gain on sale of loans and debt repurchases | — | — | — | — | 8,762 | — | — | 8,762 | ||||||||||||||||
Derivative market value and foreign currency adjustments, net | — | — | — | — | 48,371 | 9,430 | — | 57,801 | ||||||||||||||||
Derivative settlements, net | — | — | — | — | (15,384 | ) | (1,157 | ) | — | (16,541 | ) | |||||||||||||
Total other income (expense) | 144,535 | 41,767 | 53,780 | 240,082 | 48,975 | 22,751 | (28,856 | ) | 282,952 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Salaries and benefits | 56,535 | 18,786 | 10,576 | 85,897 | 1,154 | 8,286 | — | 95,337 | ||||||||||||||||
Cost to provide enrollment services | — | — | 36,429 | 36,429 | — | — | — | 36,429 | ||||||||||||||||
Depreciation and amortization | 5,520 | 2,270 | 122 | 7,912 | — | 785 | — | 8,697 | ||||||||||||||||
Other | 36,421 | 4,479 | 2,894 | 43,794 | 15,436 | 10,076 | — | 69,306 | ||||||||||||||||
Intersegment expenses, net | 1,786 | 2,919 | 2,279 | 6,984 | 29,250 | (7,378 | ) | (28,856 | ) | — | ||||||||||||||
Total operating expenses | 100,262 | 28,454 | 52,300 | 181,016 | 45,840 | 11,769 | (28,856 | ) | 209,769 | |||||||||||||||
Income (loss) before income taxes and corporate overhead allocation | 44,292 | 13,313 | 1,480 | 59,085 | 192,562 | 11,753 | — | 263,400 | ||||||||||||||||
Corporate overhead allocation | (2,510 | ) | (836 | ) | (836 | ) | (4,182 | ) | (1,793 | ) | 5,975 | — | — | |||||||||||
Income (loss) before income taxes | 41,782 | 12,477 | 644 | 54,903 | 190,769 | 17,728 | — | 263,400 | ||||||||||||||||
Income tax (expense) benefit | (15,878 | ) | (4,741 | ) | (244 | ) | (20,863 | ) | (72,492 | ) | 162 | — | (93,193 | ) | ||||||||||
Net income (loss) | 25,904 | 7,736 | 400 | 34,040 | 118,277 | 17,890 | — | 170,207 | ||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | 885 | — | 885 | ||||||||||||||||
Net income (loss) attributable to Nelnet, Inc. | $ | 25,904 | 7,736 | 400 | 34,040 | 118,277 | 17,005 | — | 169,322 | |||||||||||||||
Six months ended June 30, 2012 | ||||||||||||||||||||||||
Fee-Based | ||||||||||||||||||||||||
Student Loan and Guaranty Servicing | Tuition Payment Processing and Campus Commerce | Enrollment Services | Total Fee- Based | Asset Generation and Management | Corporate Activity and Overhead | Eliminations | Total | |||||||||||||||||
Total interest income | $ | 32 | 5 | — | 37 | 304,752 | 3,335 | (1,928 | ) | 306,196 | ||||||||||||||
Interest expense | — | — | — | — | 134,846 | 3,855 | (1,928 | ) | 136,773 | |||||||||||||||
Net interest income (loss) | 32 | 5 | — | 37 | 169,906 | (520 | ) | — | 169,423 | |||||||||||||||
Less provision for loan losses | — | — | — | — | 13,000 | — | — | 13,000 | ||||||||||||||||
Net interest income (loss) after provision for loan losses | 32 | 5 | — | 37 | 156,906 | (520 | ) | — | 156,423 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Loan and guaranty servicing revenue | 101,879 | — | — | 101,879 | — | — | — | 101,879 | ||||||||||||||||
Intersegment servicing revenue | 33,355 | — | — | 33,355 | — | — | (33,355 | ) | — | |||||||||||||||
Tuition payment processing and campus commerce revenue | — | 38,747 | — | 38,747 | — | — | — | 38,747 | ||||||||||||||||
Enrollment services revenue | — | — | 61,374 | 61,374 | — | — | — | 61,374 | ||||||||||||||||
Other income | — | — | — | — | 8,581 | 11,173 | — | 19,754 | ||||||||||||||||
Gain on sale of loans and debt repurchases | — | — | — | — | 935 | — | — | 935 | ||||||||||||||||
Derivative market value and foreign currency adjustments, net | — | — | — | — | (31,657 | ) | (3,282 | ) | — | (34,939 | ) | |||||||||||||
Derivative settlements, net | — | — | — | — | (1,112 | ) | (747 | ) | — | (1,859 | ) | |||||||||||||
Total other income (expense) | 135,234 | 38,747 | 61,374 | 235,355 | (23,253 | ) | 7,144 | (33,355 | ) | 185,891 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Salaries and benefits | 57,947 | 17,193 | 12,440 | 87,580 | 1,261 | 8,957 | — | 97,798 | ||||||||||||||||
Cost to provide enrollment services | — | — | 42,052 | 42,052 | — | — | — | 42,052 | ||||||||||||||||
Depreciation and amortization | 8,938 | 3,471 | 3,234 | 15,643 | — | 719 | — | 16,362 | ||||||||||||||||
Other | 36,205 | 5,272 | 3,701 | 45,178 | 6,752 | 11,241 | — | 63,171 | ||||||||||||||||
Intersegment expenses, net | 2,570 | 2,663 | 1,824 | 7,057 | 33,778 | (7,480 | ) | (33,355 | ) | — | ||||||||||||||
Total operating expenses | 105,660 | 28,599 | 63,251 | 197,510 | 41,791 | 13,437 | (33,355 | ) | 219,383 | |||||||||||||||
Income (loss) before income taxes and corporate overhead allocation | 29,606 | 10,153 | (1,877 | ) | 37,882 | 91,862 | (6,813 | ) | — | 122,931 | ||||||||||||||
Corporate overhead allocation | (2,778 | ) | (926 | ) | (926 | ) | (4,630 | ) | (2,792 | ) | 7,422 | — | — | |||||||||||
Income (loss) before income taxes | 26,828 | 9,227 | (2,803 | ) | 33,252 | 89,070 | 609 | — | 122,931 | |||||||||||||||
Income tax (expense) benefit | (10,195 | ) | (3,506 | ) | 1,065 | (12,636 | ) | (33,845 | ) | 8,373 | — | (38,108 | ) | |||||||||||
Net income (loss) | 16,633 | 5,721 | (1,738 | ) | 20,616 | 55,225 | 8,982 | — | 84,823 | |||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | 288 | — | 288 | ||||||||||||||||
Net income (loss) attributable to Nelnet, Inc. | $ | 16,633 | 5,721 | (1,738 | ) | 20,616 | 55,225 | 8,694 | — | 84,535 | ||||||||||||||
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Variable student loan interest margin, net of settlements on derivatives | $ | 58,076 | 55,621 | 47,606 | 113,697 | 94,941 | |||||||||
Fixed rate floor income, net of settlements on derivatives | 36,056 | 35,716 | 36,984 | 71,772 | 75,076 | ||||||||||
Investment interest | 1,483 | 1,617 | 1,055 | 3,100 | 2,150 | ||||||||||
Non-portfolio related derivative settlements | (512 | ) | (645 | ) | (748 | ) | (1,157 | ) | (748 | ) | |||||
Corporate debt interest expense | (2,041 | ) | (1,695 | ) | (2,416 | ) | (3,736 | ) | (3,855 | ) | |||||
Provision for loan losses | (5,000 | ) | (5,000 | ) | (7,000 | ) | (10,000 | ) | (13,000 | ) | |||||
Net interest income after provision for loan losses (net of settlements on derivatives) | $ | 88,062 | 85,614 | 75,481 | 173,676 | 154,564 |
Company owned | $23,139 | $23,727 | $22,650 | $22,277 | $21,926 | $21,504 | $21,237 | $20,820 | $20,629 | ||||||||||||||||||
% of total | 61.6% | 38.6% | 29.8% | 27.1% | 25.6% | 23.2% | 21.8% | 18.5% | 17.7% | ||||||||||||||||||
Number of servicing borrowers: | |||||||||||||||||||||||||||
Government servicing: | 441,913 | 2,804,502 | 3,036,534 | 3,096,026 | 3,137,583 | 3,588,412 | 3,892,929 | 4,261,637 | 4,396,341 | ||||||||||||||||||
FFELP servicing: | 2,311,558 | 1,912,748 | 1,799,484 | 1,779,245 | 1,724,087 | 1,659,020 | 1,626,146 | 1,586,312 | 1,529,203 | ||||||||||||||||||
Private servicing: | 152,200 | 155,947 | 164,554 | 163,135 | 161,763 | 175,070 | 173,948 | 170,224 | 173,588 | ||||||||||||||||||
Total: | 2,905,671 | 4,873,197 | 5,000,572 | 5,038,406 | 5,023,433 | 5,422,502 | 5,693,023 | 6,018,173 | 6,099,132 | ||||||||||||||||||
Number of remote hosted borrowers: | 684,996 | 545,456 | 9,566,296 | 8,645,463 | 7,909,300 | 7,505,693 | 6,912,204 | 5,001,695 | 3,218,896 |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Borrower late fee income | $ | 3,233 | 3,505 | 3,377 | 6,738 | 7,080 | |||||||||
Investment advisory fees | 6,334 | 2,830 | 3,000 | 9,164 | 6,155 | ||||||||||
Realized and unrealized gains/(losses) on investments, net | (214 | ) | 1,121 | 418 | 907 | 1,837 | |||||||||
Other | 2,935 | 1,960 | 2,005 | 4,895 | 4,682 | ||||||||||
Other income | $ | 12,288 | 9,416 | 8,800 | 21,704 | 19,754 |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Change in fair value of derivatives - income (expense) | $ | 63,236 | (19,507 | ) | (78,758 | ) | 43,729 | (61,923 | ) | ||||||
Foreign currency transaction adjustment - income (expense) | (14,691 | ) | 28,763 | 59,226 | 14,072 | 26,984 | |||||||||
Derivative market value and foreign currency adjustments - income (expense) | $ | 48,545 | 9,256 | (19,532 | ) | 57,801 | (34,939 | ) |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Settlements: | |||||||||||||||
1:3 basis swaps | $ | 782 | 911 | 1,169 | 1,692 | 2,551 | |||||||||
Interest rate swaps - floor income hedges | (8,534 | ) | (8,304 | ) | (3,505 | ) | (16,839 | ) | (6,642 | ) | |||||
Interest rate swaps - hybrid debt hedges | (512 | ) | (645 | ) | (723 | ) | (1,157 | ) | (746 | ) | |||||
Cross-currency interest rate swaps | (93 | ) | (146 | ) | 1,055 | (237 | ) | 3,163 | |||||||
Other | — | — | (82 | ) | — | (185 | ) | ||||||||
Total settlements - income (expense) | $ | (8,357 | ) | (8,184 | ) | (2,086 | ) | (16,541 | ) | (1,859 | ) |
As of | As of | As of | |||||||
June 30, 2013 | December 31, 2012 | June 30, 2012 | |||||||
Federally insured loans | |||||||||
Stafford and other | $ | 7,010,404 | 7,261,114 | 7,127,383 | |||||
Consolidation | 17,678,330 | 17,708,732 | 16,423,741 | ||||||
Total | 24,688,734 | 24,969,846 | 23,551,124 | ||||||
Non-federally insured loans | 29,634 | 26,034 | 31,471 | ||||||
24,718,368 | 24,995,880 | 23,582,595 | |||||||
Loan discount, net of unamortized loan premiums and deferred origination costs | (91,121 | ) | (113,357 | ) | (31,556 | ) | |||
Allowance for loan losses – federally insured loans | (39,848 | ) | (40,120 | ) | (36,992 | ) | |||
Allowance for loan losses – non-federally insured loans | (11,763 | ) | (11,782 | ) | (12,665 | ) | |||
$ | 24,575,636 | 24,830,621 | 23,501,382 | ||||||
Allowance for federally insured loans as a percentage of such loans | 0.16 | % | 0.16 | % | 0.16 | % | |||
Allowance for non-federally insured loans as a percentage of such loans | 39.69 | % | 45.26 | % | 40.24 | % |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Variable student loan yield, gross | 2.58 | % | 2.57 | % | 2.63 | % | 2.57 | % | 2.63 | % | |||||
Consolidation rebate fees | (0.77 | ) | (0.77 | ) | (0.75 | ) | (0.77 | ) | (0.75 | ) | |||||
Discount accretion, net of premium and deferred origination costs amortization | 0.03 | 0.03 | (0.01 | ) | 0.03 | (0.02 | ) | ||||||||
Variable student loan yield, net | 1.84 | 1.83 | 1.87 | 1.83 | 1.86 | ||||||||||
Student loan cost of funds - interest expense | (0.91 | ) | (0.93 | ) | (1.09 | ) | (0.91 | ) | (1.11 | ) | |||||
Student loan cost of funds - derivative settlements | 0.01 | 0.01 | 0.03 | 0.01 | 0.05 | ||||||||||
Variable student loan spread | 0.94 | 0.91 | 0.81 | 0.93 | 0.80 | ||||||||||
Fixed rate floor income, net of settlements on derivatives | 0.58 | 0.59 | 0.62 | 0.58 | 0.63 | ||||||||||
Core student loan spread | 1.52 | % | 1.50 | % | 1.43 | % | 1.51 | % | 1.43 | % | |||||
Average balance of student loans | $ | 24,798,537 | 24,781,426 | 23,863,104 | 24,789,981 | 23,990,998 | |||||||||
Average balance of debt outstanding | 24,832,555 | 24,823,397 | 23,953,317 | 24,828,001 | 24,094,693 |
(a) | The interest earned on the majority of the Company's FFELP student loan assets is indexed to the one-month LIBOR rate. The Company funds the majority of its assets with three-month LIBOR indexed floating rate securities. The relationship between the indices in which the Company earns interest on its loans and funds such loans has a significant impact on student loan spread. This table (the right axis) shows the difference between the Company's liability base rate and the one-month LIBOR rate by quarter. |
Three months ended | Six months ended | ||||||||||||||
June 30, 2013 | March 31, 2013 | June 30, 2012 | June 30, 2013 | June 30, 2012 | |||||||||||
Fixed rate floor income, gross | $ | 44,590 | 44,020 | 40,489 | 88,611 | 81,718 | |||||||||
Derivative settlements (a) | (8,534 | ) | (8,304 | ) | (3,505 | ) | (16,839 | ) | (6,642 | ) | |||||
Fixed rate floor income, net | $ | 36,056 | 35,716 | 36,984 | 71,772 | 75,076 | |||||||||
Fixed rate floor income contribution to spread, net | 0.58 | % | 0.59 | % | 0.62 | % | 0.58 | % | 0.63 | % |
(a) | Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income. |
Borrower/ | Estimated | |||||||
Fixed | lender | variable | ||||||
interest | weighted | conversion | Loan | |||||
rate range | average yield | rate (a) | Balance | |||||
< 3.0% | 2.87% | 0.23% | $ | 1,748,344 | ||||
3.0 - 3.49% | 3.20% | 0.56% | 2,117,816 | |||||
3.5 - 3.99% | 3.65% | 1.01% | 1,943,259 | |||||
4.0 - 4.49% | 4.20% | 1.56% | 1,460,224 | |||||
4.5 - 4.99% | 4.72% | 2.08% | 837,371 | |||||
5.0 - 5.49% | 5.24% | 2.60% | 574,321 | |||||
5.5 - 5.99% | 5.67% | 3.03% | 348,727 | |||||
6.0 - 6.49% | 6.18% | 3.54% | 406,755 | |||||
6.5 - 6.99% | 6.70% | 4.06% | 366,797 | |||||
7.0 - 7.49% | 7.17% | 4.53% | 150,637 | |||||
7.5 - 7.99% | 7.71% | 5.07% | 258,186 | |||||
8.0 - 8.99% | 8.17% | 5.53% | 599,016 | |||||
> 9.0% | 9.05% | 6.41% | 282,745 | |||||
$ | 11,094,198 |
(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, 2013, the weighted average estimated variable conversion rate was 1.82% and the short-term interest rate was 20 basis points. |
Maturity | Notional amount | Weighted average fixed rate paid by the Company (a) | ||||||
2013 | $ | 2,000,000 | 0.71 | % | ||||
2014 | 1,750,000 | 0.71 | ||||||
2015 | 1,100,000 | 0.89 | ||||||
2016 | 750,000 | 0.85 | ||||||
2017 | 1,250,000 | 0.86 | ||||||
$ | 6,850,000 | 0.78 | % |
(a) | For all interest rate derivatives, the Company receives discrete three-month LIBOR. |
(a) | The Company uses various assumptions, including prepayments and future interest rates, when preparing its cash flow forecast. These assumptions are further discussed below. |
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