Sallie Mae 2010 Annual Report Download - page 94

Asset and Liability Funding Gap
The tables below present our assets and liabilities (funding) arranged by underlying indices as of December 31,
2010. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective
hedges (those derivatives which are reflected in net interest margin, as opposed to those reflected in the “gains
(losses) on derivatives and hedging activities, net” line on the consolidated statements of income). The difference
between the asset and the funding is the funding gap for the specified index. This represents our exposure to
interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at
different frequencies or may not move in the same direction or at the same magnitude.
Management analyzes interest rate risk and in doing so includes all derivatives that are economically hedging
our debt whether they qualify as effective hedges or not (“Core Earnings” basis). Accordingly, we are also presenting
the asset and liability funding gap on a “Core Earnings” basis in the table that follows the GAAP presentation.
GAAP-Basis
Index
(Dollars in billions)
Frequency of
Variable
Resets Assets Funding
(1)
Funding
Gap
3-month Commercial paper ............... daily $139.2 $ .1 $ 139.1
3-month Treasury bill ................... weekly 8.2 — 8.2
Prime ............................... annual .8 — .8
Prime ............................... quarterly 5.4 — 5.4
Prime ............................... monthly 23.1 — 23.1
Prime ............................... daily — 3.0 (3.0)
PLUS Index .......................... annual .5 — .5
3-month LIBOR ....................... daily — — —
3-month LIBOR ....................... quarterly — 132.1 (132.1)
1-month LIBOR ....................... monthly 7.3 15.3 (8.0)
CMT/CPI Index ....................... monthly/quarterly — 2.0 (2.0)
Non Discrete reset
(2)
.................... monthly — 34.6 (34.6)
Non Discrete reset
(3)
.................... daily/weekly 11.5 2.3 9.2
Fixed Rate
(4)
.......................... 9.3 15.9 (6.6)
Total................................ $205.3 $205.3 $ —
(1) Funding includes all derivatives that qualify as hedges.
(2) Funding consists of auction rate securities, the ABCP Facilities and the ED Conduit Program facility.
(3) Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes retail and other
deposits and cash collateral held related to derivatives exposures that are recorded as a short-term debt obligation.
(4) Assets include receivables and other assets (including goodwill and acquired intangibles). Funding includes other liabilities and
stockholders’ equity (excluding series B Preferred Stock).
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