LINCOLN, Neb., Jul 29, 2004 /PRNewswire-FirstCall via COMTEX/ -- Nelnet, Inc. (NYSE: NNI) today reported year to date 2004 net income of $94.4 million or $1.76 per share compared to $17.9 million or $0.40 per share for the first six months of 2003. For the second quarter of 2004, net income of $85.3 million or $1.59 per share was recorded compared to $8.3 million or $0.19 per share a year ago. Nelnet's 2004 earnings per share increased more than 22% year to date and 68% for the second quarter as compared to 2003, exclusive of a special allowance yield adjustment and related expenses.
Net student loan assets have grown to $12.2 billion at June 30, 2004, an increase of $2.7 billion or 29% from a year ago. This represents a 17% increase from Nelnet's position at December 31, 2003.
"We had a great six months, and are particularly excited about our student loan growth," said Stephen Butterfield, Nelnet Vice Chairman and Co-CEO.
Two already announced items had a significant financial impact on Nelnet. Net interest income increased $130 million in the second quarter of 2004 as compared to last year. Included in net interest income for the second quarter of 2004 is $124 million related to an increase in yield of which $79 million was previously deferred at March 31, 2004.
Second, the U.S. Department of Education designated Nelnet with Exceptional Performance status. This designation eliminates the 2% risk share on student loans serviced by Nelnet and reduces required allowances for loan losses related to the company's federally insured loan portfolio.
"Our continued strong asset growth and operational excellence as highlighted by our Exceptional Performance designation are examples of our commitment to operate this business with focus on long term fundamental value," Butterfield continued.
Net interest income includes variable-rate floor income, or floor income generated by the annual reset of borrower rates on July 1, of $348,000 for the six months ended June 30, 2004. No variable-rate floor income was earned in the second quarter. For 2003, amounts include $12.7 million and $6.9 million of variable-rate floor income for the corresponding periods.
Amortization expense related to identifiable intangible assets amounted to $4.2 million and $2.1 million for the six months and quarter ended June 30, 2004, respectively. In 2003, amortization expense for the corresponding periods were $7.2 million and $3.5 million.
Included in the derivative market value adjustment and net settlements on the company's consolidated statement of income are gains in the fair value of derivative instruments of $548,000 year to date 2004 and $3.1 million for the second quarter 2004 and net settlement expense of $2.9 million year to date 2004 and $1.7 million for the second quarter 2004.
Nelnet will host a conference call to discuss this earnings release at 2:00 p.m. (Eastern) today. To access the call live, participants in the U.S. and Canada should dial 800.289.0544 and international callers should dial 913.981.5533 at least 15 minutes prior to the call. A live audio Web cast of the call will also be available at www.nelnetinvestors.net under the conference calls and Web casts menu. A replay of the conference call will be available between 5:00 p.m. (Eastern) today and 11:59 p.m. (Eastern) August 5. To access the replay via telephone within the U.S. 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 656727. A replay of the audio Web cast will also be available at www.nelnetinvestors.net.
Supplemental financial information to this earnings release is available online at http://www.nelnetinvestors.net/releases.cfm?reltype=Financial.
Nelnet is one of the leading education finance companies in the United States and is focused on providing quality student loan products and services to students and schools nationwide. With over $13 billion in total assets, Nelnet originates in excess of $3 billion for itself and its service partners annually, and its servicing software is used by approximately 35 clients, including Nelnet, to service nearly $50 billion in student loans. Nelnet ranks among the nation's leaders in terms of total student loan assets.
Nelnet offers a broad range of student loan and financial services and technology-based products, including student loan origination and lending, guarantee servicing, and a suite of software solutions. Our products are designed to simplify the student loan process by automating financial aid delivery, loan processing, and funds disbursement. Our services help to facilitate and streamline education finance for all involved in the industry, including student and parent borrowers, lenders, financial aid officers, guaranty agencies, governmental agencies, servicers, and the capital markets.
Additional information is available at www.nelnet.net.
Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or expected. Among the key factors that may have a direct bearing on Nelnet's operating results, performance, or financial condition are changes in terms of student loans and the educational credit marketplace, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, or changes in the general interest rate environment and in the securitization markets for education loans.
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Condensed Statements of Income and Financial Data
Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
(unaudited)
(dollars in thousands, except share data)
Interest income:
Loan interest, excluding
variable rate floor
income $239,436 $99,982 $347,632 $199,991
Variable rate floor
income -- 6,900 348 12,700
Amortization of loan
premiums (15,037) (14,209) (34,854) (30,336)
Investment interest 3,181 5,343 6,832 9,268
Total interest income 227,580 98,016 319,958 191,623
Interest expense:
Interest on bonds and
notes payable 52,352 52,826 101,395 104,175
Net interest income 175,228 45,190 218,563 87,448
Less provision (recovery)
for loan losses (6,421) 2,450 (3,306) 4,860
Net interest income
after provision
(recovery)
for loan losses 181,649 42,740 221,869 82,588
Other income:
Loan servicing and other
fee income 22,512 24,400 48,221 50,237
Software services and
other income 5,029 4,471 10,607 9,111
Derivative market value
adjustment and net
settlements 1,357 -- (2,384) --
Total other income 28,898 28,871 56,444 59,348
Operating expenses:
Salaries and benefits 49,036 30,343 76,805 56,848
Other expenses 25,081 23,602 48,446 48,526
Amortization of
intangible assets 2,079 3,500 4,157 7,196
Total operating
expenses 76,196 57,445 129,408 112,570
Income before income
taxes 134,351 14,166 148,905 29,366
Income tax expense 49,098 5,840 54,531 11,462
Net income $85,253 $8,326 $94,374 $17,904
Earnings per share,
basic and diluted $1.59 $0.19 $1.76 $0.40
Weighted average shares
outstanding 53,647,697 45,038,488 53,641,664 45,011,757
Condensed Balance Sheets and Financial Data
As of As of As of
June 30, December 31, June 30,
2004 2003 2003
(unaudited) (unaudited)
(dollars in thousands)
Assets
Student loans receivable, net $12,194,097 $10,455,442 $9,466,523
Cash, cash equivalents and
investments 908,087 1,155,215 659,874
Other assets 357,395 320,852 286,717
Total assets $13,459,579 $11,931,509 $10,413,114
Liabilities and shareholders'
equity
Liabilities:
Bonds and notes payable $12,844,539 $11,366,458 $10,179,726
Other liabilities 214,058 259,562 106,199
Total liabilities 13,058,597 11,626,020 10,285,925
Shareholders' equity 400,982 305,489 127,189
Total liabilities and
shareholders' equity $13,459,579 $11,931,509 $10,413,114
Average student loans $10,869,351 $9,451,035 $8,648,786
Return on average total assets 1.50% 0.25% 0.35%
Return on average equity 57.1% 19.4% 30.3%
SOURCE Nelnet, Inc.
media, Sheila Odom, +1-402-458-2329,
nelnetcommunications@nelnet.net, or investors, Cheryl Watson, +1-317-469-2064,
investorrelations@nelnet.net, both of Nelnet, Inc.
http://www.nelnetinvestors.net/releases.cfm?reltype=Financial
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