Sallie Mae 2008 Annual Report Download - page 52
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in the on-balance sheet student loan and other asset spreads. The student loan portfolio as a percentage of the
overall interest earning asset portfolio did not change substantially from 2006 to 2007. The decrease in spread
from 2006 to 2007 primarily related to the previously discussed changes in the on-balance sheet student loan
and other asset spreads.
The 2008 Asset-Backed Financing Facilities closed on February 29, 2008. Amortization of the upfront
commitment and liquidity fees began on that date.
“Core Earnings” Net Interest Margin
The following table analyzes the earnings from our portfolio of Managed interest-earning assets on a
“Core Earnings” basis (see “BUSINESS SEGMENTS — Limitations of ‘Core Earnings’ — Pre-tax Differences
between ‘Core Earnings’ and GAAP by Business Segment”). The “‘Core Earnings’ Net Interest Margin”
presentation and certain components used in the calculation differ from the “Net Interest Margin — On-
Balance Sheet” presentation. The “Core Earnings” presentation, when compared to our on-balance sheet
presentation, is different in that it:
• includes the net interest margin related to our off-balance sheet student loan securitization trusts. This
includes any related fees or costs such as the Consolidation Loan Rebate Fees, premium/discount
amortization and Repayment Borrower Benefits yield adjustments;
• includes the reclassification of certain derivative net settlement amounts. The net settlements on certain
derivatives that do not qualify as SFAS No. 133 hedges are recorded as part of the “gain (loss) on
derivative and hedging activities, net” line on the income statement and are therefore not recognized in
the on-balance sheet student loan spread. Under this presentation, these gains and losses are reclassified
to the income statement line item of the economically hedged item. For our “Core Earnings” net
interest margin, this would primarily include: (a) reclassifying the net settlement amounts related to our
written Floor Income Contracts to student loan interest income and (b) reclassifying the net settlement
amounts related to certain of our basis swaps to debt interest expense;
• excludes unhedged Floor Income earned on the Managed student loan portfolio; and
• includes the amortization of upfront payments on Floor Income Contracts in student loan income that
we believe are economically hedging the Floor Income.
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