Sallie Mae 2011 Annual Report Download - page 94
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Sensitivity Analysis
Our interest rate risk management seeks to limit the impact of short-term movements in interest rates on our
results of operations and financial position. The following tables summarize the potential effect on earnings over
the next 12 months and the potential effect on fair values of balance sheet assets and liabilities at December 31,
2011 and 2010, based upon a sensitivity analysis performed by management assuming a hypothetical increase in
market interest rates of 100 basis points and 300 basis points while funding spreads remain constant.
Additionally, as it relates to the effect on earnings, a sensitivity analysis was performed assuming the funding
index increases 25 basis points while holding the asset index constant, if the funding index is different than the
asset index. The earnings sensitivity is applied only to financial assets and liabilities, including hedging
instruments, that existed at the balance sheet date and does not take into account new assets, liabilities or hedging
instruments that may arise in 2012.
As of December 31, 2011
Impact on Annual Earnings If:
As of December 31, 2010
Impact on Annual Earnings If:
Interest Rates:
Funding
Spreads Interest Rates:
Funding
Spreads
(Dollars in millions, except per share amounts)
Increase
100 Basis
Points
Increase
300 Basis
Points
Increase
25 Basis
Points(1)
Increase
100 Basis
Points
Increase
300 Basis
Points
Increase
25 Basis
Points(1)
Effect on Earnings
Change in pre-tax net income before unrealized
gains (losses) on derivative and hedging
activities ................................ $ 3 $ 61 $(419) $(129) $ (140) $ (368)
Unrealized gains (losses) on derivative and hedging
activities ................................ 493 814 (16) 131 82 (28)
Increase in net income before taxes ............. $496 $ 875 $(435) $ 2 $ (58) $ (396)
Increase in diluted earnings per common share .... $.965 $1.702 $(.846) $.004 $(0.110) $(.746)
(1) If an asset is not funded with the same index/frequency reset of the asset then it is assumed the funding index increases 25 basis points
while holding the asset index constant.
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