Sallie Mae 2007 Annual Report Download - page 65

“Core Earnings” basis student loan spread includes the spread on loans that we have sold to securitization
trusts.
2007 2006 2005
Years Ended December 31,
“Core Earnings” basis student loan yield .................. 8.16% 8.09% 6.32%
Consolidation Loan Rebate Fees ........................ (.55) (.55) (.50)
Repayment Borrower Benefits ......................... (.11) (.09) (.07)
Premium and discount amortization ..................... (.16) (.16) (.17)
“Core Earnings” basis student loan net yield ............... 7.34 7.29 5.58
“Core Earnings” basis student loan cost of funds . . . ......... (5.57) (5.45) (3.80)
“Core Earnings” basis student loan spread, before Interim
ABCP Facility Fees
(1)(2)
............................ 1.77% 1.84% 1.78%
Interim ABCP Facility Fees
(2)
.......................... (.03) — —
“Core Earnings” basis student loan spread
(1)(3)
........... 1.74% 1.84% 1.78%
“Core Earnings” basis student loan spreads by product:
FFELP Loan Spreads, before Interim ABCP Facility Fees:
Stafford .......................................... 1.17% 1.40% 1.48%
Consolidation ...................................... 1.00 1.18 1.31
Total FFELP Loan Spread, before Interim ABCP Facility
Fees
(1)(2)
........................................ 1.04 1.26 1.39
Private Education Loan Spread, before Interim ABCP Facility
Fees
(2)
......................................... 5.15 5.13 4.62
Private Education Loan Spread, after provision and before
Interim ABCP Facility Fees
(2)
........................ .44 3.75 3.88
Average Balances
On-balance sheet student loans
(1)
....................... $104,740 $ 84,173 $ 74,724
Off-balance sheet student loans......................... 42,411 46,336 41,220
Managed student loans ............................... $147,151 $130,509 $115,944
(1)
Excludes the effect of the Wholesale Consolidation Loan portfolio on the student loan spread and average balances for the
years ended December 31, 2007 and 2006.
(2)
The Interim ABCP Facility Fees are the commitment and liquidity fees related to a financing facility in connection with
the Merger Agreement.
(3)
“Core Earnings” basis student loan spread, including the effect of Wholesale
Consolidation Loans . . ................................... 1.67% 1.84% 1.78%
The Company’s “Core Earnings” basis student loan spread before Interim ABCP Facility Fees and the
effect of Wholesale Consolidation Loans decreased 7 basis points from the prior year primarily due to the
interest income reserve on our Private Education Loans. We estimate the amount of Private Education Loan
accrued interest on our balance sheet that is not reasonably expected to be collected in the future using a
methodology consistent with the status-based migration analysis used for the allowance for Private Education
Loans. We use this estimate to offset accrued interest in the current period through a charge to student loan
interest income. As our provision for loan losses increased significantly in 2007, we had a similar rise in the
estimate of uncollectable accrued interest receivable. The Company experienced a higher cost of funds in 2007
primarily due to the disruption in the credit markets, as previously discussed. This was mostly offset by the
growth in the Private Education Loan portfolio which earns a higher margin (before considering provision).
The Company’s “Core Earnings” basis student loan spread before Interim ABCP Facility Fees and the
effect of Wholesale Consolidation Loans remained relatively consistent over all periods presented above,
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