Nelnet (NNI) 8-K Nelnet Reports Second Quarter 2010 Results

Exhibit 99.1

Nelnet Reports Second Quarter 2010 Results

·   Base net income of $1.17 per share for the second quarter of 2010

·   Payment processing and enrollment services revenue increased 19 percent

·   Servicing 1.5 million borrowers for the Department of Education

·   Repurchased 663,443 shares of common stock

LINCOLN, Neb., August 9, 2010 -- Nelnet (NYSE: NNI) today reported base net income of $58.4 million, or $1.17 per share, for the second quarter of 2010, compared with $29.7 million, or $0.60 per share, for the same quarter a year ago. For the six months ended June 30, 2010, the company reported base net income of $114.9 million, or $2.31 per share, compared with $62.2 million, or $1.26 per share, for the same period in 2009.Base net income excludes restructuring charges.

Base net income in the second quarter of 2010 includes pre-tax gains of $8.8 million, or $0.11 per share after tax, from the company's repurchase of $118 million of asset-backed debt and is compared with pre-tax gains of $5.9 million, or $0.07 per share after tax, from the repurchase of debt in the second quarter of 2009.

“Through the first two quarters of 2010, we are excited with our operating results and the progress we are making toward key objectives,” said Mike Dunlap, Nelnet Chairman and Chief Executive Officer. “Nelnet is a strong, diverse, and dynamic company with a bright future. Growing and diversifying our fee-based revenue, maximizing the value of our loan portfolio, managing our expense structure as we grow, and using our financial strength and liquidity to make the most of opportunities will continue to be priorities.”

Diversifying and increasing fee-based revenue

In the second quarter of 2010, Nelnet's fee-based revenue from the company's payment processing and enrollment services businesses increased $7.6 million, or 19 percent, to $48.2 million, compared with the same period in 2009.

In September 2009, Nelnet began servicing student loans for the Department of Education under a contract that will increase the company's fee-based revenue as the servicing volume increases. As of June 30, 2010, the company was servicing $12.9 billion of loans for 1.5 million borrowers on behalf of the Department. In the second quarter of 2010, Nelnet reported revenue from this servicing contract of $6.1 million, compared with $3.5 million for the first quarter of 2010.

Maximizing the value of existing portfolio

At June 30, 2010, net student loan assets were $26.7 billion, including $1.9 billion of federal student loans purchased from third parties during the second quarter and $2.0 billion of federal student loans classified as held for sale. The loans held for sale are expected to generate a pre-tax gain of $30 million to $33 million when the loans are sold to the Department under its Loan Purchase Program during the fourth quarter of 2010.

Substantially all of Nelnet's federal student loans are financed for the life of the loan at rates the company currently believes will generate significant future cash flow. Narrower spreads and historically low interest rates are continuing to provide an opportunity for the company to generate substantial near-term value and cash flow from its student loan portfolio. For the second quarter of 2010, Nelnet reported net interest income of $97.4 million, compared with $57.1 million for the same period a year ago. Net interest income includes $31.1 million and $37.1 million of fixed rate floor income for the second quarters of 2010 and 2009, respectively. If interest rates remain low, the company anticipates earning significant fixed rate floor income in future quarters as well.

The company reported core student loan spread of 1.54 percent for the second quarter of 2010, compared with 1.09 percent for the same period of 2009 and 1.45 percent for the first quarter of 2010. Core student loan spread is benefiting from the significant tightening between the three-month financial commercial paper rate (CP) and three-month LIBOR indices. Most of the company’s federal student loans are indexed to CP and the company’s debt is indexed to LIBOR, therefore, disparity between these indices has a negative impact on the company’s interest income.

Managing operating expenses

From the same period a year ago, comparable operating expenses increased $2.4 million, or 3 percent, for the three months ended June 30, 2010.

Repurchasing common stock

During the three-month period ended June 30, 2010, Nelnet repurchased and retired 663,443 shares of Class A common stock, under the company’s stock repurchase program, for $12.8 million, or an average price of $19.33 per share.

GAAP net income

Nelnet reported GAAP net income for the second quarter of 2010 of $50.0 million, or $0.99 per dilutive share, compared with $8.2 million, or $0.16 per dilutive share, for the second quarter of 2009. For the six months ended June 30, 2010, the company reported GAAP net income of $104.3 million, or $2.08 per dilutive share, compared with $33.7 million, or $0.68 per dilutive share, for the same period in 2009.

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.

Board of Directors declares dividend

The Nelnet Board of Directors declared a third quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.07 per share. The dividend will be paid on September 15, 2010, to shareholders of record at the close of business on September 1, 2010. Nelnet currently has 38.0 million shares of Class A common stock and 11.5 million shares of Class B common stock outstanding.

Nelnet will host a conference call to discuss this earnings release at 11:00 a.m. (Eastern) Tuesday, August 10, 2010. To access the call live, participants in the United States and Canada should dial 877.303.9101, and international callers should dial 760.666.4786 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 August 20, 2010. To access the replay via telephone within the United States and Canada, callers should dial 800.642.1687. International callers should dial 706.645.9291. All callers accessing the replay will need to use the confirmation code 82397628. A replay of the audio webcast will also be available at www.nelnetinvestors.com.

This press release contains forward-looking statements based on management's current expectations as of the date of this release. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and regulations; adverse results in legal disputes; changes in the demand for educational financing or in financing preferences of educational institutions, students, and their families; increased financing costs; and changes in the general interest rate environment. For more information, see the company's filings with the Securities and Exchange Commission, including the forward-looking statements contained in the company's supplemental financial information for the second quarter of 2010. All information in this release is as of August 9, 2010. The company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in the company's expectations.

Condensed Consolidated Statements of Income

	Three months ended									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2010			2010			2009			2010			2009
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Interest income:
Loan interest	$	167,902			151,048			177,202			318,950			366,772
Amortization of loan premiums and deferred origination costs		(12,549	)		(16,081	)		(16,789	)		(28,630	)		(35,440	)
Investment interest		1,304			1,001			2,776			2,305			6,867
Total interest income		156,657			135,968			163,189			292,625			338,199
Interest expense:
Interest on bonds and notes payable		59,243			50,859			106,082			110,102			252,584
Net interest income		97,414			85,109			57,107			182,523			85,615
Less provision for loan losses		6,200			5,000			8,000			11,200			15,500
Net interest income after provision for loan losses		91,214			80,109			49,107			171,323			70,115
Other income (expense):
Loan and guaranty servicing revenue		36,652			36,394			28,803			73,046			55,274
Tuition payment processing and campus commerce revenue		12,795			17,382			11,848			30,177			27,386
Enrollment services revenue		35,403			33,271			28,747			68,674			57,518
Software services revenue		5,499			4,344			6,119			9,843			11,824
Other income		8,496			7,260			5,665			15,756			14,452
Gain on sale of loans and debt repurchases, net		8,759			10,177			5,666			18,936			13,535
Derivative market value and foreign currency adjustments		(7,231	)		4,105			(34,013	)		(3,126	)		(38,893	)
Derivative settlements, net		(3,377	)		(2,423	)		9,535			(5,800	)		33,893
Total other income		96,996			110,510			62,370			207,506			174,989
Operating expenses:
Salaries and benefits		41,034			41,641			40,180			82,675			78,406
Other expenses		36,844			33,522			33,299			70,366			63,697
Cost to provide enrollment services		24,111			22,025			18,092			46,136			35,885
Amortization of intangible assets		6,232			6,516			5,785			12,748			11,939
Total operating expenses		108,221			103,704			97,356			211,925			189,927
Income before income taxes		79,989			86,915			14,121			166,904			55,177
Income tax expense		(29,996	)		(32,593	)		(5,918	)		(62,589	)		(21,519	)
Net income	$	49,993			54,322			8,203			104,315			33,658
Earnings per common share:
Net earnings - basic	$	1.00			1.09			0.16			2.08			0.68
Net earnings - diluted	$	0.99			1.08			0.16			2.08			0.68
Dividends per common share	$	0.07			0.07			—			0.14			—
Weighted average shares outstanding:
Basic		49,735,398			49,716,696			49,534,413			49,726,099			49,339,451
Diluted		49,934,648			49,912,589			49,733,561			49,923,680			49,543,461

Condensed Consolidated Balance Sheets

	As of		As of		As of
	June 30,		December 31,		June 30,
	2010		2009		2009
	(unaudited)				(unaudited)
Assets:
Student loans receivable, net	$	24,746,932		23,926,957		23,889,571
Student loans receivable - held for sale		1,995,869		—		1,749,290
Cash, cash equivalents, and investments (trading securities)		305,778		338,181		371,380
Restricted cash and investments		706,965		717,233		1,123,607
Goodwill		143,717		143,717		175,178
Intangible assets, net		48,708		53,538		65,115
Other assets		620,054		696,801		736,401
Total assets	$	28,568,023		25,876,427		28,110,542
Liabilities:
Bonds and notes payable	$	27,428,772		24,805,289		27,169,573
Other liabilities		265,306		286,575		259,782
Total liabilities		27,694,078		25,091,864		27,429,355
Shareholders' equity		873,945		784,563		681,187
Total liabilities and shareholders' equity	$	28,568,023		25,876,427		28,110,542

Media contact: Ben Kiser, 402.458.3024

Investor contact: Phil Morgan, 402.458.3038