Nelnet Reports Third Quarter 2009 Results; Declares Dividend

LINCOLN, Neb., Nov. 9 /PRNewswire-FirstCall/ -- Nelnet (NYSE: NNI) today
reported base net income of $50.2 million, or $1.01 per share, for the third
quarter of 2009, compared with $23.4 million, or $0.47 per share, for the same
quarter a year ago. For the first nine months of 2009, the company reported
base net income of $113.5 million, or $2.30 per share, compared with $65.2
million, or $1.33 per share, for the first nine months of 2008. Base net
income excludes discontinued operations, restructuring charges, and certain
liquidity-related charges.

Base net income in the third quarter of 2009 includes pre-tax gains of $9.7
million, or $0.13 per share after tax, on the sale of federal student loans to
the Department of Education (Department) and $5.2 million, or $0.07 per share
after tax, from the company's repurchase of debt.

"We are pleased with our increasing fee-based revenues, servicing of student
loans for the Department, and decreasing operating expenses," said Mike
Dunlap, Chairman and Chief Executive Officer of Nelnet. "Continuing to focus
on these areas will drive future growth. The low interest rate environment and
improving capital markets have allowed us to reduce our debt and improve the
spread we earn on our student loan portfolio."

Board of Directors Declares Dividend

The Nelnet Board of Directors declared a fourth-quarter cash dividend on its
outstanding shares of Class A common stock and Class B common stock of $0.07
per share. The dividend will be paid on December 15, 2009, to shareholders of
record at the close of business on December 1, 2009. Nelnet currently has 38.3
million shares of Class A common stock and 11.5 million shares of Class B
common stock outstanding.

Diversifying and increasing fee-based revenue

In the third quarter of 2009, Nelnet's fee-based revenue from the company's
tuition payment plan, campus commerce, and certain enrollment services
businesses increased $5.4 million, or 17 percent, to $36.6 million, compared
with the same period in 2008.

In September 2009, Nelnet began servicing federally owned student loans for
the Department under a contract that the company was awarded in June 2009. As
of October 31, 2009, the company was servicing approximately $2.5 billion of
loans on behalf of the Department, of which approximately $740 million, or
approximately 87,000 borrowers, is incremental volume previously serviced by
other companies. The initial servicing volume includes loans purchased by the
Department from Nelnet and other lenders through the Department's Loan
Purchase Commitment Program. Servicing loans for the Department will increase
Nelnet's fee-based revenue as servicing volume increases.

Total revenue from fee-based businesses for the third quarter of 2009 was
$74.6 million, or 47 percent of total revenue, and is compared with $76.7
million for the same period a year ago.

Maximizing the value of existing portfolio

Excluding loans added to government-related participation and conduit
programs, more than 99 percent of Nelnet's federal student loans are financed
for the life of the loan at rates the company currently believes will generate
future cash flow in excess of $1.3 billion. Narrower spreads and historically
low interest rates are providing an opportunity for the company to generate
substantial near-term value and cash flow from its student loan portfolio. For
the third quarter of 2009, Nelnet reported net interest income including
derivative settlements of $74.1 million, compared with $60.4 million for the
same period a year ago.

The company reported core student loan spread of 1.27 percent for the third
quarter of 2009 compared with 1.04 percent for the same period of 2008 and
1.09 percent for the second quarter of 2009. Two factors in the third quarter
improved core student loan spread: 1) Lower interest rates increased fixed
rate floor income, net of settlements on derivatives, to $38.8 million for the
third quarter of 2009, compared with $6.8 million for the same period a year
ago and $37.1 million in the second quarter of 2009 and 2) The relationship
between three-month financial commercial paper rate (CP) and three-month LIBOR
has tightened significantly from as high as 54 basis points in the first
quarter of 2009 to as low as 13 basis points in the third quarter of 2009.
Most of the company's federal student loans are indexed to CP, and its debt is
indexed to LIBOR; therefore, disparity between these indexes can impact the
company's interest income. Core student loan spread may continue to increase
in the fourth quarter of 2009 if interest rates remain low and the capital
markets continue to improve.

At September 30, 2009, net student loan assets were $25.4 billion, of which
$1.6 billion were classified as held for sale to the Department. In the third
quarter of 2009, Nelnet reported a gain of $9.7 million on the sale of $428
million of federal student loans to the Department. Loans held for sale at
quarter end are funded primarily using the Department's Loan Participation
Program and were sold to the Department in October 2009. Nelnet recognized a
gain on the sale of these loans of $26.9 million, which will be reflected in
the company's fourth quarter results.

In addition to loans held to term, Nelnet has liquidity for new loan
originations through the Department's Loan Participation and Loan Purchase
Programs, which will allow Nelnet to make loans to all eligible students for
the 2009-2010 academic year.

Managing operating expenses

Management continues to focus on managing operating expenses. As a result,
operating expenses, excluding restructuring charges, decreased $16.8 million,
or 20 percent, for the three months ended September 30, 2009, compared with
the same period in 2008. Total operating expenses for the third quarter of
2009 were $92.7 million.

GAAP net income

Nelnet reported GAAP net income for the third quarter of 2009 of $46.4
million, or $0.93 per share, compared with $23.8 million, or $0.48 per share,
for the third quarter of 2008. For the first nine months of 2009, the company
reported GAAP net income of $80.1 million, or $1.60 per share, compared with a
loss of $2.3 million, or $0.05 per share, for the first nine months of 2008.

While base net income is not a substitute for reported results under GAAP,
base net income is the primary financial performance measure used by
management to develop financial plans, allocate resources, track results,
evaluate performance, establish corporate performance targets, and determine
incentive compensation. The company utilizes base net income in operating its
business because base net income permits management to make meaningful
period-to-period comparisons by eliminating the temporary volatility in the
company's performance that arises from certain items that are primarily
affected by factors beyond the control of management.

A description of base net income and a reconciliation of GAAP net income to
base net income can be found in supplemental financial information to this
earnings release online at www.nelnetinvestors.com/results.cfm.

Nelnet will host a conference call to discuss this earnings release at 11:00
a.m. (Eastern) Tuesday, November 10, 2009. To access the call live,
participants in the United States and Canada should dial 888.427.9412, and
international callers should dial 719.325.2321 at least 15 minutes prior to
the call. A live audio webcast of the call will also be available at
www.nelnetinvestors.com under the Events & Webcasts menu. A replay of the
conference call will be available through November 21, 2009. To access the
replay via telephone within the United States and Canada, callers should dial
888.203.1112. International callers should dial 719.457.0820. All callers
accessing the replay will need to use the confirmation code 7074698. A replay
of the audio webcast will also be available at www.nelnetinvestors.com.

This press release 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 expectations and statements that assume or are dependent upon
future events, are forward-looking statements. These forward-looking
statements are subject to risks, uncertainties, assumptions, and other factors
that may cause the actual results to be materially different from those
reflected in such forward-looking statements. These factors include, among
others, changes in the terms of student loans and the educational credit
marketplace arising from the implementation of, or changes in, applicable laws
and regulations, including changes resulting from new laws such as any new
laws enacted to implement the Administration's 2010 budget proposals as they
relate to the Federal Family Education Loan Program (FFEL Program or FFELP),
which may reduce the volume, average term, special allowance payments, and
yields on student loans under the FFEL Program of the Department or result in
loans being originated or refinanced under non-FFEL programs or may affect the
terms upon which banks and others agree to sell FFELP loans to the company.
The company could also be affected by changes in the demand for educational
financing or in financing preferences of lenders, educational institutions,
students, and their families; the company's ability to maintain its credit
facilities or obtain new facilities; the ability of lenders under the
company's credit facilities to fulfill their lending commitments under these
facilities; changes to the terms and conditions of the liquidity programs
offered by the Department; changes in the general interest rate environment
and in the securitization markets for education loans, which may increase the
costs or limit the availability of financings necessary to initiate, purchase,
or carry education loans; losses from loan defaults; changes in prepayment
rates, guaranty rates, loan floor rates, and credit spreads; the uncertain
nature of estimated expenses that may be incurred and cost savings that may
result from restructuring plans; incorrect estimates or assumptions by
management in connection with the preparation of the consolidated financial
statements; and changes in general economic conditions. Additionally,
financial projections may not prove to be accurate and may vary materially.
The reader should not place undue reliance on forward-looking statements,
which speak only as of the date of this press release.

For more information see the company's filings with the Securities and
Exchange Commission. The company is not obligated to publicly release any
revisions to forward-looking statements to reflect events after the date of
this press release or unforeseen events. Although the company may from time to
time voluntarily update its prior forward-looking statements, it disclaims any
commitment to do so except as required by securities laws.

Condensed Consolidated Statements of Operations

Three months ended Nine months ended
------------------ -----------------
September June September September September
30, 30, 30, 30, 30,
2009 2009 2008 2009 2008
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
--------- --------- --------- --------- ---------

Interest income:
Loan interest $162,786 177,202 305,806 529,558 980,724
Amortization
of loan
premiums and
deferred
origination
costs (19,531) (16,789) (21,338) (54,971) (69,584)
Investment
interest 1,943 2,776 9,118 8,810 29,914
----- ----- ----- ----- ------
Total
interest
income 145,198 163,189 293,586 483,397 941,054

Interest expense:
Interest on bonds
and notes
payable 76,016 106,082 234,016 328,600 791,621
------ ------- ------- ------- -------

Net interest
income 69,182 57,107 59,570 154,797 149,433
Less provision for
loan losses 7,500 8,000 7,000 23,000 18,000
----- ----- ----- ------ ------

Net interest
income after
provision for
loan losses 61,682 49,107 52,570 131,797 131,433
------ ------ ------ ------- -------

Other income (expense):
Loan and guaranty
servicing
revenue 26,006 28,803 29,691 81,280 78,173
Tuition payment
processing and
campus commerce
revenue 12,987 11,848 11,863 40,373 35,980
Enrollment
services
revenue 30,670 28,747 29,858 88,188 83,148
Software services
revenue 4,600 6,119 5,159 16,424 19,342
Other income 11,094 11,527 5,408 39,483 17,787
Gain (loss) on
sale of loans,
net 8,788 (196) - 8,386 (47,426)
Derivative market
value, foreign
currency, and
put option
adjustments 2,826 (34,013) 6,085 (36,067) (35,521)
Derivative
settlements,
net 4,914 9,535 789 38,807 45,989
----- ----- --- ------ ------
Total other
income 101,885 62,370 88,853 276,874 197,472
------- ------ ------ ------- -------

Operating expenses:
Salaries and
benefits 37,810 40,180 44,739 116,216 142,131
Cost to provide
enrollment
services 20,323 18,092 17,904 56,208 48,062
Other expenses 29,217 33,299 34,428 92,914 101,682
Amortization of
intangible
assets 5,312 5,785 6,598 17,251 19,719
Impairment
expense - - - - 18,834
--- --- --- --- ------
Total
operating
expenses 92,662 97,356 103,669 282,589 330,428
------ ------ ------- ------- -------

Income (loss)
before income
taxes 70,905 14,121 37,754 126,082 (1,523)

Income tax
expense (24,501) (5,918) (13,969) (46,020) (1,793)
------- ------ ------- ------- ------

Income (loss)
from
continuing
operations 46,404 8,203 23,785 80,062 (3,316)

Income from
discontinued
operations,
net of tax - - - - 981
--- --- --- --- ---

Net income
(loss) $46,404 8,203 23,785 80,062 (2,335)
======= ===== ====== ====== ======

Earnings (loss)
per share, basic
and diluted:
Income (loss)
from
continuing
operations $0.93 0.16 0.48 1.60 (0.07)
Income from
discontinued
operations,
net of tax - - - - 0.02
--- --- --- --- ----
Net income
(loss) $0.93 0.16 0.48 1.60 (0.05)
===== ==== ==== ==== =====

Weighted average
shares
outstanding 49,611,423 49,534,413 49,176,436 49,432,165 49,109,340

Condensed Consolidated Balance Sheets and Financial Data

As of As of As of
September December September
30, 31, 30,
2009 2008 2008
---- ---- ----
(unaudited) (unaudited)

Assets:
Student loans receivable, net $23,764,263 25,413,008 26,376,269
Student loans receivable - held
for sale 1,627,794 - -
Cash and cash equivalents 334,293 189,847 325,007
Restricted cash and investments 849,419 1,158,257 1,129,874
Goodwill 175,178 175,178 175,178
Intangible assets, net 59,803 77,054 83,565
Other assets 781,112 841,553 880,122
------- ------- -------
Total assets $27,591,862 27,854,897 28,970,015
=========== ========== ==========

Liabilities:
Bonds and notes payable $26,586,093 26,787,959 28,004,835
Other liabilities 277,695 423,712 355,450
------- ------- -------
Total liabilities 26,863,788 27,211,671 28,360,285
---------- ---------- ----------

Shareholders' equity 728,074 643,226 609,730
------- ------- -------

Total liabilities and
shareholders' equity $27,591,862 27,854,897 28,970,015
=========== ========== ==========

(code #: nnif)

SOURCE Nelnet, Inc.

Media, Ben Kiser, +1-402-458-3024, or Investors, Phil Morgan, +1-402-458-3038,
both of Nelnet