Sallie Mae 2007 Annual Report Download - page 115

(Dollars in millions) Fair Value $ % $ %
Change from
Increase of
100 Basis
Points
Change from
Increase of
300 Basis
Points
Interest Rates:
At December 31, 2007
Effect on Fair Values
Assets
Total FFELP student loans ................. $111,552 $ (303) —% $ (603) (1)%
Private Education Loans ................... 17,289 — — — —
Other earning assets ...................... 16,321 (20) — (59) —
Other assets ............................ 15,092 (887) (6) (1,566) (10)
Total assets ............................ $160,254 $(1,210) (1)% $(2,228) (1)%
Liabilities
Interest bearing liabilities .................. $141,055 $(1,424) (1)% $(3,330) (2)%
Other liabilities ......................... 3,285 392 12 1,471 45
Total liabilities .......................... $144,340 $(1,032) (1)% $(1,859) (1)%
(Dollars in millions) Fair Value $ % $ %
Change from
Increase of
100 Basis
Points
Change from
Increase of
300 Basis
Points
Interest Rates:
At December 31, 2006
Effect on Fair Values
Assets
Total FFELP student loans .................. $ 87,797 $ (182) —% $ (313) —%
Private Education Loans ................... 12,063 — — — —
Other earning assets....................... 9,950 (38) — (109) (1)
Other assets............................. 10,299 (436) (4) (750) (7)
Total assets ............................. $120,109 $ (656) (1)% $(1,172) (1)%
Liabilities
Interest bearing liabilities ................... $108,142 $(1,427) (1)% $(3,610) (3)%
Other liabilities .......................... 3,680 877 24 2,613 71
Total liabilities .......................... $111,822 $ (550) —% $ (997) (1)%
A primary objective in our funding is to minimize our sensitivity to changing interest rates by generally
funding our floating rate student loan portfolio with floating rate debt. However, as discussed under
“LENDING BUSINESS SEGMENT — Summary of our Managed Student Loan Portfolio — Floor Income,”
we can have a fixed versus floating mismatch in funding if the student loan earns at the fixed borrower rate
and the funding remains floating. In addition, we can have a mismatch in the index of floating rate debt versus
floating rate assets.
During the year ended December 31, 2007 and 2006, certain FFELP student loans were earning Floor
Income and we locked in a portion of that Floor Income through the use of futures and Floor Income Contracts.
The result of these hedging transactions was to convert a portion of the fixed rate nature of student loans to
variable rate, and to fix the relative spread between the student loan asset rate and the variable rate liability.
In the above table, under the scenario where interest rates increase 100 and 300 basis points, the change
in pre-tax net income before the unrealized gains (losses) on derivative and hedging activities is primarily due
to the impact of (i) our off-balance sheet hedged FFELP Consolidation Loan securitizations and the related
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