NNI - NYSE

Phil Morgan – Investor Relations Jeffrey R. Noordhoek – President Terry J. Heimes – Chief Financial Officer

Sameer Gokhale – Keefe, Bruyette & Woods Michael Taiano – Sandler O'Neill & Partners [Mark Kehoe] – Goldman Sachs Lance Ettus – Eos Mortar Rock Capital Management

Good day everyone and welcome to Nelnet's fourth quarter 2008 conference call. (Operator Instructions). At this time I would now like to turn it over to Mr. Phil Morgan. Please go ahead, sir.

Good afternoon and welcome to Nelnet's 2008 conference call. On today's call we have Jeff Noordhoek, President and Terry Heimes, Chief Financial Officer. Please note that during the conference call we may discuss predictions and expectations and may make other forward-looking statements. Actual results may differ from those discussed here and based on a variety of factors. These factors are discussed in the company's Form 10-K and other filings with the SEC. The company does not intend to update any forward-looking statements made during the call. During the course of the call we will refer to our non-GAAP financial measure, which the company defines as base net income. A description of base net income and a reconciliation of GAAP net income to base net income is included in our fourth quarter 2008 supplemental earnings disclosure, which is posted on our Investor Relations website at www.netlentinvestors.com. After Jeff and Terry have concluded their formal remarks we will open up the call for questions. Thank you I will now turn the call over to Jeff.

Given the global credit crisis we are pleased with our 2008 results. The strength of our diversified business model helped us achieve positive operating results, despite the unprecedented reduction in liquidity for consumer loan assets. Since we're received so many questions in regards to the president's budget proposal. I will hit the issue head on before I discuss our evolving business model and our annual results. While we appreciate the proposals focus on making college accessible. We obviously disagree with the recommendation to go to 100% direct lending. And believe Congress should go in a different direction as it considers what is in the best interest of American students and taxpayers. We are confident the budget proposal will receive a full public debate before it's completed by Congress. We look forward to being a part of this conversation to help shape the federal student loan programs for the future. As we have stated many times, we strongly support keeping both loan programs in order for the nation's students to maintain the benefits of choice, competition and stabile access to loans, while retaining the infrastructure in place for private capital to fund loans when the capital markets do stabilize. The FFEL program has provided efficient uninterrupted access to student loans for over 40 years and today serves students at more than 4,000 colleges and universities. Students and schools have overwhelmingly selected the FFEL programs because it provides students with the benefits of consumer choice, competition between lenders and superior customer service. In the midst of the credit crisis we are continuing to provide loans to any student attending any school in the country. Through the government provided participation facility we have liquidity to fund all new loan originations, capitalizing on our infrastructure and delivery systems. Of all of the credit programs that failed in the credit crisis, the one that continued to function through it all has been the public private partnership for guaranteed student loans. Shifting to a 100% government lending monopoly will drastically increase the federal deficit by an estimated $1 trillion in 10 years, which seems illogical given the current proposed growth in the national debt. This proposal also seems to be inconsistent with other new government proposals for public private programs to help get capital flowing such as TALF, TARP and the CPFF to name a few. The FFEL program is a shinning example of how a public private partnership has generated hundreds of billions of dollars of private investment in consumer loans even in the midst of the credit crisis. With all of that said regardless of the outcome of the budget proposal, earnings and revenue diversification continues to be our number one priority. And our business model has us well positioned for significant changes in our industry. In 2008 we earned approximately $300 million in fee-based revenue. Consider that even if you would have monetized the entire value of new loan originations in 2008 it would have represented less than 15% of our operating income. In addition we have submitted a very competitive bid to service direct loans. We have been a leading student loan servicer for more than 30 years earning a reputation for quality. We are confident our pricing is competitive and our service levels are high. And importantly we have a market differentiator of keeping our jobs right here in the USA. We feel this is important as we participate in a federally-sponsored education programs. For these reasons we feel we have a good shot at serving students under this contract which provides another option in [perceived] business growth. In 2009 we will continue to transform our business model to focus on education fee generating businesses that are not capital or balance sheet intensive, have healthy operating margins and generate significant cash flow. We have felt for some time that our business model and the cash flows it generates are being significantly under valued, especially in light of market reaction to the budget proposal last week. We believe at some point our earnings will start to drive our market valuation. We have no doubt the growth and diversification of our revenues combined with the value generated by our existing portfolio has positioned us well for future success. Now I will turn the call over to Terry to discuss our operating results, Terry.

First off let me apologize for any inconvenience caused by our decision to delay our earnings release until this morning. While we employ relatively vanilla derivative products the need for KPMG to independently model and review the recorded market value caused a delay. There was no disagreement between management and the auditors. No issues of internal control or numbers in the financial statements. We just needed to allow enough time for everyone to do their job and reach the appropriate comfort level prior to the release. KPMG has also apologized to the company for the unexpected delay. Turning to our results we reported strong performance for the quarter and for the year. In the midst of one of the most challenging economic times in our countries history we were profitable, had strong cash flow from operations and our financial position improved. Not something everyone can say in this environment. Our GAAP net income for the year was $0.58 per share. For the quarter it was $0.63 per share. Our adjusted base net income or our base net income excluding the unusual items that won't impact run rate was $1.72 per share for all of 2008 and $0.32 per share for the fourth quarter. Our tangible equity to tangible assets increased to 1.96% compared to 1.67% at the end of 2007. Our 2008 results reflect our focus on liquidity, diversification, operating expenses and the legislative developments related to the student loan program. We dramatically improved our liquidity position during 2008, reducing the amount of loans in our warehouse facility by more than $5 billion. During 2008 we issued more than $4 billion in asset-backed securitizations in a very difficult market. We were also able to execute whole loan sales totaling $1.8 billion. Through these activities we created liquidity and reduced our risk to mark-to-market valuations. The loan sales resulted in a $4 million loss recognized in the fourth quarter. Also during the fourth quarter the company incurred $13.5 million in nonrecurring expenses related to contingent liquidity planning activities. We have excluded these fees and the loss in the sale of loans from our base net income for comparison purposes. We continue to be pleased with the growth of our non-student loan-related fee-based revenues. Specifically our enrollment services, tuition payment plan and campus commerce businesses. During 2008 revenue from these businesses was $153 million, an increase of $25 million or 20%. We believe these businesses will continue to provide significant growth opportunities for us in the future. While continuing to focus on growing and diversifying our revenue streams we also took a very aggressive and proactive approach to managing and reducing our operating costs. Excluding restructuring, impairment and other charges, operating expenses decreased more than $18 million or 16% for the quarter and $75 million or 16% for the year. Creating efficiencies and reducing expenses will remain a priority for the company as we move into 2009. So from a financial performance perspective in 2008 we reduced our liquidity risk. We continued to grow and diversify our fee-based revenues and we reduced our operating costs given the change in the economics of the student loan program and the economy in general. We also continued to benefit from our existing portfolio which will serve as an annuity for us over the next several years. Related to our existing portfolio core spread for the period was 90 basis points, stabilized by the temporary solution implemented by the Department of Education to deal with the dislocation of the 90 day H15, CB and LIBOR rates. In mid to late fourth quarter we saw the beginning of a sustained and unprecedented divergence in the CB LIBOR spread. While mitigated by the department's actions and clarification for the fourth quarter of 2008, this issue remains at the forefront of the industry. Again given the challenges and the market volatility during 2008 we're pleased with our performance. We believe we have taken, and will continue to take the proactive prudent steps to position the company for its continued success. I'll now turn the call back over to our operator for questions.

Sameer, I think it is too early to tell. The market is absorbing all this information today. I think in the next few weeks we will see transactions come to market and we’ll have a better idea of what it looks like.

Depending on what happens with happens with the CB LIBOR first quarter fixed, that 90 basis point is where we would – assuming a similar treatment in the first quarter as the fourth quarter, we would expect the first quarter rate to be right in that 90 basis point area as well. In terms of the run rate, the fourth quarter run rate adjusted for kind of the unusual activity, specifically the $13.5 million is a pretty good run rate.

Sure, Jeff. There are three different or more, actually four to refinance loans out of the warehouse lines, when it gets room. We can sell loans into the new AAA funding or Superconduit is one option. We can issue a new securitization under the TALF. We can sell loans to a third party or we could actually issue a non-TALF eligible securitization also, and I would point out that one of those has been done in the student loan market in the last month, which we find encouraging. So there are four different ways that we can use to clear that out to zero in the time period that we have left.

(Operator Instructions). I'd like to turn the call back over to Jeff Noordhoek for any closing or additional remarks.

In closing, it is important to remember the fundamentals of our business remain strong. Approximately 90% of our portfolio is financed to term for the life of the loan rates, at rates which will create a significant and valuable cash flow stream of approximately $1.4 billion. We have capital and liquidity for new loan originations due to government participation and put programs. If we would have montaged the entire value of the new loan originations in 2008 it would have represented less than 15% of our normal operating income. We have maintained the value of our service and delivery platforms while reducing our operating costs by $75 million. We have developed a broad, diversified offering of fee-based businesses with significant growth opportunities and operating margins, and we have a strong capital base with which to create long-term value for our shareholders. I want to thank you for your participation in the call and I want you to have a great day.