Nelnet(NNI) - 2022 Q1 - Quarterly Report

Financial Performance - GAAP net income for Q1 2022 was $186,647,000, compared to $123,598,000 in Q1 2021, representing a 51% increase[100] - Net income attributable to Nelnet, Inc., excluding derivative market value adjustments, was $75,889,000 in Q1 2022, down from $94,103,000 in Q1 2021, a decrease of 19%[100] - The AGM segment generated net income before taxes of $213,429,000 in Q1 2022, up from $141,609,000 in Q1 2021, reflecting a significant increase of 51%[106] - Nelnet Bank reported a net income of $961,000 in Q1 2022, recovering from a net loss of $1,254,000 in Q1 2021[106] - The Company reported a net income of $184.9 million for Q1 2022, compared to $122.9 million in Q1 2021, reflecting a year-over-year increase of 50.4%[117] - The company reported a net income of $162.2 million for Q1 2022, compared to $107.6 million in Q1 2021, representing a 50.7% increase[149] Revenue and Income Sources - The Company’s revenue from the NBS segment increased to $33,113,000 in Q1 2022, compared to $30,974,000 in Q1 2021, marking an increase of 7%[106] - The Company recognized a net gain of $145.7 million related to changes in the fair values of derivative instruments in Q1 2022, compared to a net gain of $38.8 million in Q1 2021[106] - LSS revenue increased to $136.4 million in Q1 2022 from $111.5 million in Q1 2021, indicating growth in the Company's servicing segment[117] - Education technology, services, and payment processing revenue rose to $112.286 million in Q1 2022, up from $95.258 million in Q1 2021, driven by higher payment plans in the K-12 market[133] - The revenue from the Great Lakes' Department servicing contract increased to $48,076 million in Q1 2022, compared to $43,302 million in Q1 2021, reflecting a growth of approximately 11.5%[129] Operating Expenses - Total operating expenses rose to $205.9 million in Q1 2022, up from $172.7 million in Q1 2021, driven by increased headcount and technology investments[117] - The before-tax operating margin decreased to 8.3% in 2022 from 13.3% in 2021, attributed to increased operating expenses in preparation for the expiration of the federal student loan payment pause[128] - Total operating expenses increased to $43.970 million in Q1 2022, compared to $37.498 million in Q1 2021, primarily due to increased headcount and investments in new technologies[132] Interest Income and Loan Performance - The Company's loan interest income for Q1 2022 was $111.4 million, a decrease of 10.2% from $124.1 million in Q1 2021, primarily due to a decrease in the average balance of loans[116] - Net interest income after provision for loan losses was $77.6 million in Q1 2022, down from $118.4 million in Q1 2021, reflecting a negative provision for loan losses of $0.4 million compared to a negative provision of $17.0 million in the prior year[116] - Core loan interest income decreased to $61.4 million in Q1 2022 from $92.7 million in Q1 2021, a decline of 33.7%[151] - Net interest income after provision for loan losses decreased to $73.5 million in Q1 2022 from $116.9 million in Q1 2021, a decline of 37%[149] Loan Portfolio and Acquisitions - The AGM operating segment had a loan portfolio of $16.6 billion as of March 31, 2022, primarily consisting of federally insured loans[134] - Total loan acquisitions in the AGM segment decreased to $29.750 million in Q1 2022 from $107.225 million in Q1 2021[135] - As of March 31, 2022, Nelnet Bank's loan portfolio totaled $368.3 million, consisting of $285.5 million in private education loans and $82.8 million in FFELP loans[153] - Nelnet Bank's loan portfolio increased significantly, with an ending balance of $368.3 million as of March 31, 2022, compared to $79.2 million in 2021, reflecting a growth of 365%[156] Cash Flow and Liquidity - The company generated $185.5 million in net cash from operating activities for the three months ended March 31, 2022, compared to $48.7 million in the same period in 2021, reflecting a 281% increase[168] - As of March 31, 2022, the company held $162.8 million in cash and cash equivalents, with $144.8 million available excluding Nelnet Bank[164] - The company has a $495 million unsecured line of credit, fully available for future use as of March 31, 2022[165] - The forecasted future undiscounted cash flows from the loan portfolio are approximately $1.83 billion as of March 31, 2022[173] Tax and Regulatory Considerations - The effective tax rate for Q1 2022 was 23%, slightly higher than 22% in Q1 2021, with an expected range of 22% to 24% for the full year 2022[117] - The effective tax rate for the three months ended March 31, 2022, was 23.2%, compared to 22.8% in the same period in 2021[160] - The effective tax rate for income tax expense was 24% in Q1 2022, resulting in an income tax expense of $51.2 million[149] Market and Economic Outlook - The Company anticipates that changes in federal student loan repayment plans could significantly increase FFEL Program loan prepayments, adversely affecting future net interest income and servicing revenue[108] - The Company anticipates that a change in the forward interest rate curve could impact future cash flows, with potential reductions of $70 million to $90 million if the spread between three-month and one-month LIBOR increases[185] - The Company expects to access the asset-backed securitization market to refinance student loans included in its warehouse facilities[199] Shareholder Returns - The Company declared a cash dividend of $0.24 per share for both the first and second quarters of 2022[217] - The company plans to continue regular quarterly dividend payments, subject to future earnings and financial conditions[218] - The Company repurchased 380,053 shares for a total of $32.9 million at an average price of $86.56 per share during the three months ended March 31, 2022[216] - An additional 253,838 Class A common shares were repurchased for $21.2 million at an average price of $83.62 per share after March 31, 2022[216]