Sallie Mae 2014 Annual Report Download - page 39

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management incentive compensation and (ii) we believe it better reflects the financial results for derivatives that are economic
hedges of interest rate risk but do not qualify for hedge accounting treatment.
GAAP provides a uniform, comprehensive basis of accounting. Our “Core Earnings” basis of presentation differs from
GAAP in the way it treats ineffective hedges as described above.
The following table shows the amount in “Gains (losses) on derivative and hedging activities, net” that relates to the
interest reclassification on the derivative contracts.
Years Ended December 31,
(Dollars in thousands)
2014
2013
2012
Hedge ineffectiveness losses .........
$
(1,746
)
$
(645
)
$
(5,548
)
Interest reclassification.................
(2,250
)
1,285
87
(Losses) gains on derivatives and
hedging activities, net ..................
$
(3,996
)
$
640
$
(5,461
)
The following table reflects adjustments associated with our derivative activities.
Years Ended December 31,
(Dollars in thousands, except per share amounts)
2014
2013
2012
“Core Earnings” adjustments to GAAP:
GAAP net income attributable to SLM
Corporation ....................................................
$
194,219
$
258,945
$
217,620
Preferred stock dividends .................................
12,933
—
—
GAAP net income attributable to SLM
Corporation common stock ...............................
$
181,286
$
258,945
$
217,620
GAAP net income attributable to SLM
Corporation ....................................................
$
194,219
$
258,945
$
217,620
Adjustments:
Net impact of derivative accounting
(1)
................
1,746
645
5,548
Net tax effect
(2)
................................................
659
246
2,047
Total “Core Earnings” adjustments to GAAP ......
1,087
399
3,501
“Core Earnings” ..............................................
$
195,306
$
259,344
$
221,121
GAAP diluted earnings per common share .........
$
0.42
$
0.58
$
0.45
Derivative adjustments, net of tax .....................
—
—
0.01
“Core Earnings” diluted earnings per common
share ..............................................................
$
0.42
$
0.58
$
0.46
______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market
valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized
gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. Under GAAP, for our
derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.
(2) “Core Earnings” tax rate is based on the effective tax rate at the Bank where the derivative instruments are held.
37