EXHIBIT 99.2
FOR RELEASE: 04/28/04
MEDIA CONTACT: Sheila Odom, 402.458.2329
INVESTOR CONTACT: Cheryl Watson, 317.469.2064
NELNET, INC. SUPPLEMENTAL FINANCIAL INFORMATION FIRST QUARTER 2004
The following supplemental information should be read in connection with the
first quarter 2004 earnings press release of Nelnet, Inc. (the "Company"), dated
April 28, 2004.
Statements in this supplemental financial information release, which refer to
expectations as to future developments, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements contemplate risks, uncertainties, and other factors
that may cause the actual results to differ materially from such forward-looking
statements. Such factors include among others, changes in, or arising from, the
implementation of applicable laws and regulations or changes in laws and
regulations affecting the education finance marketplace. 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, changes in the demand for educational financing or in financing
preferences of educational institutions, students and their families, and
changes in the general interest rate environments, could also have substantial
impact on future results. For more information see our filings with the
Securities and Exchange Commission.
CONDENSED STATEMENTS OF INCOME AND FINANCIAL DATA
Three Months Ended
March 31,
---------------------------
2004 2003
------------ -------------
(Unaudited)
(dollars in thousands,
except share data)
Interest income:
Loan interest, excluding variable
rate floor income $ 108,196 $ 100,009
Variable rate floor income 348 5,800
Amortization of loan premiums (19,817) (16,127)
Investment interest 3,651 3,925
------------ ------------
Total interest income 92,378 93,607
Interest expense:
Interest on bonds and notes payable 49,043 51,349
------------ ------------
Net interest income 43,335 42,258
Less provision for loan losses 3,115 2,410
------------ ------------
Net interest income after provision
for loan losses 40,220 39,848
------------ ------------
Other income:
Loan servicing and other fee income 25,709 25,837
Software services and other income 5,578 4,640
Derivative market value adjustment and
net settlements (3,741) -
------------ ------------
Total other income 27,546 30,477
------------ ------------
Operating expenses:
Salaries and benefits 27,769 26,505
Other expenses 23,365 24,924
Amortization of intangible assets 2,078 3,696
------------ ------------
Total operating expenses 53,212 55,125
------------ ------------
Income before income taxes 14,554 15,200
Income tax expense 5,433 5,622
------------ ------------
Net income $ 9,121 $ 9,578
============ ============
Earnings per share, basic and diluted $ 0.17 $ 0.21
============ ============
Weighted average shares outstanding 53,635,631 44,982,490
CONDENSED BALANCE SHEETS AND FINANCIAL DATA
As of March 31,
----------------------------
2004 2003
------------- ------------
(Unaudited)
(dollars in thousands)
Assets
Student loans receivable, net $ 11,206,609 $ 9,035,318
Cash, cash equivalents and investments 1,099,678 790,433
Other assets 322,280 282,888
------------ ------------
Total assets $ 12,628,567 $ 10,108,639
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bonds and notes payable $ 12,140,725 $ 9,890,819
Other liabilities 173,205 98,957
------------ ------------
Total liabilities 12,313,930 9,989,776
------------ ------------
Shareholders' equity 314,637 118,863
------------ ------------
Total liabilities and shareholders' equity $ 12,628,567 $ 10,108,639
============ ============
Average student loans $ 10,453,826 $ 8,348,923
Return on average total assets 0.30% 0.39%
Return on average equity 11.7% 33.8%
DERIVATIVE ACCOUNTING
The Company maintains an overall interest rate risk management strategy that
incorporates the use of derivative instruments to reduce the economic effect of
interest rate volatility. Derivative instruments that are currently used as part
of the Company's interest rate risk management strategy include interest rate
swaps and basis swaps. The Company's goal is to manage interest rate sensitivity
by modifying the re-pricing or maturity characteristics of certain balance sheet
assets and liabilities. Management has structured all of the Company's
derivative transactions with the intent that each is economically effective.
However, such derivative instruments may not qualify for hedge accounting under
Statement of Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, and thus may adversely impact
earnings.
A recent interpretation of SFAS No. 133 requires net settlements on derivatives
that do not qualify as hedges under SFAS No. 133 to be included with the
derivative market value adjustment on the income statement. The following is a
summary of the amounts included in derivative market value adjustment and net
settlements on the consolidated statements of income:
Three months ended
March 31,
--------------------
2004 2003
------- -------
(unaudited)
(dollars in thousands)
Change in fair value of
derivative instruments $(2,527) $ -
Settlements, net (1,214) -
-------- ---------
Derivative market value adjustment
and net settlements $(3,741) $ -
======== =========
STUDENT LOAN SPREAD
The following table analyzes the student loan spread on our portfolio of student
loans. This table represents the spread on assets earned in conjunction with the
liabilities used to fund the assets.
Three months ended
March 31,
--------------------
2004 2003
------- -------
(unaudited)
Student loan yield 4.71 % 5.48 %
Consolidation rebate fees (0.55) (0.41)
Premium amortization (0.76) (0.77)
------- -------
Student loan net yield 3.40 4.30
Student loan cost of funds (1.69) (2.13)
------- -------
Student loan spread, including
variable rate floor income 1.71 2.17
Variable rate floor income (0.01) (0.28)
------- -------
Student loan spread, excluding
variable rate floor income 1.70 % 1.89 %
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Average balance of student loans
(dollars in thousands) $10,453,826 $8,348,923
STUDENT LOANS RECEIVABLE, NET
Student loans receivable, net includes all student loans owned by or on behalf
of the Company and includes the unamortized cost of acquisition or origination
less an allowance for losses. The table below describes the components of our
loan portfolio:
As of March 31,
---------------------------------------------
2004 2003
-------------------- -------------------
Percent Percent
Dollars of total Dollars of total
--------- --------- -------- --------
(unaudited)
(dollars in thousands)
FFELP:
Stafford $4,821,308 43.0 % $5,053,270 55.9 %
PLUS/SLS (a) 258,406 2.3 303,099 3.4
Consolidation 5,894,594 52.6 3,436,352 38.0
Non-FFELP:
Private loans 91,557 0.8 88,839 1.0
---------- ------ ----------- -----
Total 11,065,865 98.7 8,881,560 98.3
Unamortized premiums 157,367 1.4 166,980 1.8
Allowance for loan losses:
Allowance - FFELP (11,225) (0.1) (10,092) (0.1)
Allowance - private (5,398) (0.0) (3,130) (0.0)
----------- ------- ---------- -------
Net $11,206,609 100.0 % $9,035,318 100.0 %
=========== ======= ========== =======
- ------------
(a) Supplemental loans for students, or SLS, are the predecessor to
unsubsidized Stafford loans.
The table below sets forth the loans originated or acquired through each of our
channels:
Three months ended
March 31,
--------------------
2004 2003
------- -------
(unaudited)
(dollars in thousands)
Beginning balance $10,314,874 $8,404,388
Direct channel:
Consolidation loan originations 806,565 444,224
Less consolidation of existing portfolio (321,009) (235,000)
----------- -----------
Net consolidation loan originations 485,556 209,224
Stafford/PLUS loan originations 92,927 86,116
Branding partner channel 354,503 366,322
Forward flow channel 85,204 140,607
Other channels 20,996 28,620
----------- -----------
Total channel acquisitions 1,039,186 830,889
Repayments, claims, capitalized
interest and other (288,195) (353,717)
----------- -----------
Ending balance $11,065,865 $8,881,560
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