Nelnet Reports Strong 4Q Earnings; Details Servicing Contract With Dept. of Education

Stock was up 6% on the news to $17.96.  Here are the details from their earnings release which discuss their servicing contract with ED:

"In September 2009, Nelnet began servicing student loans for the Department under a contract that will increase the company's fee-based revenue as the servicing volume increases. As of December 31, 2009, the company was servicing approximately $3.4 billion of loans on behalf of the Department, of which approximately $1.5 billion was incremental volume previously serviced by other companies. As of March 1, 2010, servicing volume for the Department has grown to $6.3 billion, up from $177 million on September 30, 2009."

So, we now have two pieces of the servicing puzzle:

• Sallie Mae noted in the 4Q supplement that they were servicing $19 billion in loans through this contract as of December 31, 2009, which basically represented the loans that they have originated that they would retain servicing rights on.
• The expectation was that Nelnet, Great Lakes and AES/PHEAA would be servicing the bulk of the non-Sallie Mae originated loans that were sold to ED to provide a more equitable distribution (allocations driven by servicer performance comes later).  So, if we were to assume that Nelnet, Great Lakes and AES/PHEAA each had $6.3 billion currently (which seems a fair assumption), then Sallie Mae would have roughly 50% share while others each had 16-17% share. 
  
  • Perhaps this question will be asked during the conference call, as well as whether opportunity exists to service the existing portfolio of Direct Loans serviced by ACS.  

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Here is conference call information for later today:

Nelnet will host a conference call to discuss this earnings release at 11:00 a.m. (Eastern) Thursday, March 4, 2010. To access the call live, participants in the United States and Canada should dial 888.427.9415, and international callers should dial 719.785.1751 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 March 14, 2010. 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 4363322. A replay of the audio webcast will also be available at www.nelnetinvestors.com.