SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): April 21, 2010
SLM CORPORATION
(Exact name of registrant as specified in its charter)
| DELAWARE | File No. 001-13251 | 52-2013874 | ||
| (State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
| of incorporation) | Identification No.) |
12061 Bluemont Way, Reston, Virginia 20190
(Address if principal executive offices)(zip code)
(Address if principal executive offices)(zip code)
Registrant’s telephone number, including area code: (703) 810-3000
Not Applicable
(Former name or former address, if changed since last report)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On
April 21, 2010, SLM Corporation (the “Company”) issued a press release with
respect to its earnings for the fiscal quarter ended March 31,
2010, which is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The Supplemental Financial Information Release
for the First Quarter 2010 is available on the Company’s Web site at www.salliemae.com/about/investors/stockholderinfo/earningsinfo. Presentation slides used during the Company’s investor
conference call, set for April 22, 2010,
at 8:00 a.m. EDT., may be accessed at www.salliemae.com/about/investors/stockholderinfo/webcast no later than the starting time of the conference call.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly authorized.
| SLM CORPORATION |
||||
| By: | /s/ JOHN F. REMONDI | |||
| Name: | John F. Remondi | |||
| Title: | Vice Chairman and Chief Financial Officer | |||
Dated:
April 21, 2010
3
SLM CORPORATION
Form 8-K
CURRENT REPORT
EXHIBIT INDEX
Form 8-K
CURRENT REPORT
EXHIBIT INDEX
| Exhibit | ||
| No. | Description | |
99.1 |
Press Release dated April 21, 2010 |
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
|
Media Contact: | Investor Contacts: | ||
| Martha Holler | Steve McGarry | |||
| 703/984-5178 | 703/984-6746 | |||
| Joe Fisher | ||||
| 703/984-5755 |
SALLIE MAE REPORTS FIRST-QUARTER 2010 RESULTS
RESTON, Va., April 21, 2010—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported
net income on a core earnings basis of $212 million ($.39 per diluted share) for the first quarter
ended March 31, 2010. On a GAAP basis, first-quarter 2010 net income was $240 million ($.45 per
diluted share).
During the quarter, President Obama signed student loan reform legislation that prohibits private
sector companies from making new federal student loans after June 30, 2010; terms of existing loans
remain unchanged. As a result, the company has begun to significantly restructure its operations to
align its cost structure with future revenues. First-quarter core earnings and GAAP results were
reduced by $19 million ($.04 per diluted share) for after-tax restructuring and asset impairment
costs related to the legislation.
“As we expected, first-quarter results improved as the financial storm has receded,” said Albert L.
Lord, vice chairman and CEO. “Ironically, one quarter before the government takes over loan
originations, Sallie Mae broke its own FFELP origination record, a testament to the service
provided by our talented employees. Of more immediate concern, however, is the unpleasant task of
reducing our work force by 2,500 persons and restructuring our operations.”
During the quarter, the company repurchased $1.3 billion of unsecured debt, resulting in an
after-tax gain of $57 million ($.11 per diluted share).
Core earnings net interest income after provision for loan losses was $343 million in the first
quarter, compared to $320 million in the prior quarter and $80 million in the year-ago quarter.
The company originated $7.7 billion in federal student loans in the first quarter, up 16 percent
from the year-ago quarter.
Private education loan originations were $840 million in the first quarter, compared to $1.5
billion one year ago, a reflection of tightened underwriting and significant increases in federal
programs.
Private Education Loan Portfolio Quality
Managed private education loan charge-offs declined to $284 million in the first quarter from $298
million in the previous quarter. Managed delinquencies as a percentage of private education loans
in
| Sallie Mae | • | 12061 Bluemont Way | • | Reston, VA 20190 | • | www.SallieMae.com |
repayment were 12.2 percent, compared to 12.1 percent in the previous quarter, primarily due to the
seasonal effect of customers entering repayment. The core earnings provision for private education
loan losses was $325 million in the first quarter, down from $327 million in the fourth quarter.
Funding
The company continued to improve its balance sheet strength during the quarter. It completed a $1.6
billion private education loan securitization and issued $1.5 billion in senior unsecured notes,
the first such issuance in 21 months. Subsequent to the quarter end, the company closed a $1.2
billion federal student loan securitization at the most favorable terms since 2007.
Other Income and Operating Expenses
Core earnings fee income, which includes the gain on debt repurchases, was $336 million in the
first quarter, up from the year-ago quarter’s $304 million.
Core earnings operating expenses were $318 million for the quarter, compared to $285 million in the
year-ago quarter.
GAAP
Sallie Mae officially reports financial results on a GAAP basis and also presents certain core
earnings performance measures. The company’s management, equity investors, credit rating agencies
and debt capital providers use these core earnings measures to monitor the company’s business
performance. Both a description of the core earnings treatment and a full reconciliation to the
GAAP income statement can be found at:
www.salliemae.com/about/investors/stockholderinfo/earningsinfo/, click on the First Quarter 2010
Supplemental Earnings Disclosure.
The company adopted Financial Accounting Standards Board updates as of Jan. 1, 2010, and as a
result, the company’s GAAP and core earnings presentations for securitization accounting are the
same, and managed and on-balance sheet (GAAP) student loan portfolios are now the same size.
The primary difference between the company’s first-quarter 2010 core earnings and GAAP results is
the impact of derivative and hedge accounting. First-quarter 2010 GAAP results include the net
impact of a $122 million unrealized, mark-to-market, pre-tax gain on certain derivative contracts
that are recognized in GAAP, but not in core earnings, results.
Presentation slides for the conference call discussed below may be accessed on
www.salliemae.com/about/investors/stockholderinfo/webcast.
***
The company will host an earnings conference call tomorrow, April 22, 2010, at 8 a.m. EDT. Sallie
Mae executives will discuss various highlights of the quarter and to answer questions related to
the company’s performance. Individuals interested in participating should call the following
number tomorrow, April 22, starting at 7:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706)
679-0623 (International) and use access code 63277857. The conference call will be replayed
continuously beginning at 11:30 a.m. EDT on April 22, 2010, and concluding at midnight EDT on May
6,
| Sallie Mae | • | 12061 Bluemont Way | • | Reston, VA 20190 | • | www.SallieMae.com |
2010. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291
(International) and use access code 63277857. In addition, there will be a live audio Web cast of
the conference call, which may be accessed at www.SallieMae.com. A replay will be available 30 to
45 minutes after the live broadcast.
This press release contains “forward-looking statements” based on management’s current expectations
as of the date of this release. These statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Because such statements inherently
involve risks and uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Such risks include, among others, changes in the terms
of student loans and the educational credit marketplace arising from the implementation of
applicable laws and regulations, and from changes in such laws and regulations, adverse results in
legal disputes, changes in the demand for educational financing or in financing preferences of
educational institutions, students and their families, limited liquidity, increased financing costs
and changes in the general interest rate environment. For more information, see the company’s
filings with the Securities and Exchange Commission, including the forward-looking statements
contained in the company’s Supplemental Financial Information First Quarter 2010. All information
in this release is as of April 21, 2010. The Company does not undertake any obligation to update
or revise these forward-looking statements to conform the statement to actual results or changes in
the Company’s expectations.
***
SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the nation’s leading saving, planning
and paying for education company. Sallie Mae’s saving programs, planning resources and financing
options have helped more than 31 million people make the investment in higher education. Through
its subsidiaries, the company manages $182 billion in education loans and serves 10 million student
and parent customers. In addition, the company’s Upromise program has enabled 12 million members to
earn more than $525 million in rewards to help pay for college. Its Upromise affiliates also manage
more than $25 billion in 529 college-savings plans. Sallie Mae offers services to a range of
institutional clients, including colleges and universities, student loan guarantors and state and
federal agencies. More information is available at www.SallieMae.com. SLM Corporation and its
subsidiaries are not sponsored by or agencies of the United States of America.
###
| Sallie Mae | • | 12061 Bluemont Way | • | Reston, VA 20190 | • | www.SallieMae.com |
SLM
CORPORATION
Supplemental
Earnings Disclosure
March 31,
2010
(In
millions, except per share amounts)
| Quarters ended | ||||||||||||
|
March 31, |
December 31, |
March 31, |
||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
SELECTED FINANCIAL INFORMATION AND RATIOS
|
||||||||||||
|
GAAP Basis(1)
|
||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 240 | $ | 309 | $ | (21 | ) | |||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders
|
$ | .45 | $ | .52 | $ | (.10 | ) | |||||
|
Return on assets
|
.50 | % | .77 | % | (.05 | )% | ||||||
|
“Core Earnings”
Basis(1)(2)(3)
|
||||||||||||
|
“Core Earnings” net income attributable to SLM
Corporation
|
$ | 212 | $ | 249 | $ | 14 | ||||||
|
“Core Earnings” diluted earnings (loss) per common
share attributable to SLM Corporation common shareholders
|
$ | .39 | $ | .41 | $ | (.03 | ) | |||||
|
“Core Earnings” return on assets
|
.44 | % | .51 | % | .03 | % | ||||||
|
OTHER OPERATING STATISTICS
|
||||||||||||
|
Average on-balance sheet student loans
|
$ | 181,533 | $ | 145,964 | $ | 149,662 | ||||||
|
Average off-balance sheet student loans
|
— | 33,277 | 35,577 | |||||||||
|
Average Managed student loans
|
$ | 181,533 | $ | 179,241 | $ | 185,239 | ||||||
|
Ending on-balance sheet student loans, net
|
$ | 181,866 | $ | 143,807 | $ | 150,374 | ||||||
|
Ending off-balance sheet student loans, net
|
— | 32,638 | 34,961 | |||||||||
|
Ending Managed student loans, net
|
$ | 181,866 | $ | 176,445 | $ | 185,335 | ||||||
|
Ending Managed FFELP Stafford and Other Student Loans, net
|
$ | 64,346 | $ | 58,174 | $ | 64,690 | ||||||
|
Ending Managed FFELP Consolidation Loans, net
|
82,178 | 83,176 | 86,228 | |||||||||
|
Ending Managed Private Education Loans, net
|
35,362 | 35,095 | 34,417 | |||||||||
|
Ending Managed student loans, net
|
$ | 181,886 | $ | 176,445 | $ | 185,335 | ||||||
| (1) | Diluted earnings per common share attributable to SLM Corporation common shareholders from continuing and discontinued operations on both a GAAP basis and “Core Earnings” basis for the three months ended March 31, 2010, December 31, 2009 and March 31, 2009 was: |
| Quarters ended | ||||||||||||
|
March 31, |
December 31, |
March 31, |
||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
GAAP Basis
|
||||||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||
|
Continuing operations
|
$ | .45 | $ | .71 | $ | — | ||||||
|
Discontinued operations
|
$ | — | $ | (.19 | ) | $ | (.10 | ) | ||||
|
Total
|
$ | .45 | $ | .52 | $ | (.10 | ) | |||||
|
“Core Earnings”
Basis(2)(3)
|
||||||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||
|
Continuing operations
|
$ | .39 | $ | .60 | $ | .07 | ||||||
|
Discontinued operations
|
$ | — | $ | (.19 | ) | $ | (.10 | ) | ||||
|
Total
|
$ | .39 | $ | .41 | $ | (.03 | ) | |||||
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. | |
| (3) | “Core Earnings” does not include Floor Income unless it is Fixed Rate Floor Income that is economically hedged. The amount of this Economic Floor Income (net of tax) excluded from “Core Earnings” for the three months ended March 31, 2010, December 31, 2009 and March 31, 2009 was: |
| Quarters ended | ||||||||||||
|
March 31, |
December 31, |
March 31, |
||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
Total Economic Floor Income earned on Managed loans, not
included in “Core Earnings” (net of tax)
|
$ | 3 | $ | 14 | $ | 79 | ||||||
|
Total Economic Floor Income earned, not included in “Core
Earnings” (net of tax) per common share attributable to SLM
Corporation common shareholders
|
$ | .01 | $ | .03 | $ | .17 | ||||||
SLM
CORPORATION
Consolidated
Balance Sheets
(In
thousands, except per share amounts)
|
March 31, |
December 31, |
March 31, |
||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
Assets
|
||||||||||||
|
FFELP Stafford and Other Student Loans (net of allowance for
losses of $119,522; $104,219; and $101,375, respectively)
|
$ | 47,928,753 | $ | 42,978,874 | $ | 43,444,179 | ||||||
|
FFELP Stafford Loans
Held-for-Sale
|
16,418,101 | 9,695,714 | 14,399,802 | |||||||||
|
FFELP Consolidation Loans (net of allowance for losses of
$66,693; $56,949; and $50,919, respectively)
|
82,177,664 | 68,378,560 | 70,885,647 | |||||||||
|
Private Education Loans (net of allowance for losses of
$2,018,676; $1,443,440; and $1,384,455, respectively)
|
35,361,689 | 22,753,462 | 21,644,579 | |||||||||
|
Other loans (net of allowance for losses of $77,159; $73,985;
and $66,011, respectively)
|
334,879 | 420,233 | 684,913 | |||||||||
|
Cash and investments
|
8,241,961 | 8,083,841 | 3,748,192 | |||||||||
|
Restricted cash and investments
|
6,115,399 | 5,168,871 | 3,855,546 | |||||||||
|
Retained Interest in off-balance sheet securitized loans
|
— | 1,828,075 | 1,950,566 | |||||||||
|
Goodwill and acquired intangible assets, net
|
1,167,599 | 1,177,310 | 1,239,556 | |||||||||
|
Other assets
|
9,767,040 | 9,500,358 | 9,698,331 | |||||||||
|
Total assets
|
$ | 207,513,085 | $ | 169,985,298 | $ | 171,551,311 | ||||||
|
Liabilities
|
||||||||||||
|
Short-term borrowings
|
$ | 41,102,389 | $ | 30,896,811 | $ | 46,331,461 | ||||||
|
Long-term borrowings
|
157,983,266 | 130,546,272 | 116,669,381 | |||||||||
|
Other liabilities
|
3,671,734 | 3,263,593 | 3,586,610 | |||||||||
|
Total liabilities
|
202,757,389 | 164,706,676 | 166,587,452 | |||||||||
|
Commitments and contingencies
|
||||||||||||
|
Equity
|
||||||||||||
|
Preferred stock, par value $.20 per share, 20,000 shares
authorized:
|
||||||||||||
|
Series A: 3,300; 3,300; and 3,300 shares,
respectively, issued at stated value of $50 per share
|
165,000 | 165,000 | 165,000 | |||||||||
|
Series B: 4,000; 4,000; and 4,000 shares,
respectively, issued at stated value of $100 per share
|
400,000 | 400,000 | 400,000 | |||||||||
|
Series C: 7.25% mandatory convertible preferred stock: 810;
810; and 1,150 shares, respectively, issued at liquidation
preference of $1,000 per share
|
810,370 | 810,370 | 1,149,770 | |||||||||
|
Common stock, par value $.20 per share, 1,125,000 shares
authorized:
|
||||||||||||
|
553,408; 552,220; and 534,698 shares, respectively, issued
|
110,682 | 110,444 | 106,940 | |||||||||
|
Additional paid-in capital
|
5,106,094 | 5,090,891 | 4,694,155 | |||||||||
|
Accumulated other comprehensive loss, net of tax benefit
|
(42,511 | ) | (40,825 | ) | (70,450 | ) | ||||||
|
Retained earnings
|
72,062 | 604,467 | 378,387 | |||||||||
|
Total SLM Corporation stockholders’ equity before treasury
stock
|
6,621,697 | 7,140,347 | 6,823,802 | |||||||||
|
Common stock held in treasury: 67,564; 67,222; and
67,105 shares, respectively
|
1,866,020 | 1,861,738 | 1,859,955 | |||||||||
|
Total SLM Corporation stockholders’ equity
|
4,755,677 | 5,278,609 | 4,963,847 | |||||||||
|
Noncontrolling interest
|
19 | 13 | 12 | |||||||||
|
Total equity
|
4,755,696 | 5,278,622 | 4,963,859 | |||||||||
|
Total liabilities and equity
|
$ | 207,513,085 | $ | 169,985,298 | $ | 171,551,311 | ||||||
2
SLM
CORPORATION
Consolidated
Statements of Income
(In
thousands, except per share amounts)
| Quarters ended | ||||||||||||
|
March 31, |
December 31, |
March 31, |
||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
Interest income:
|
||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 283,437 | $ | 241,640 | $ | 342,816 | ||||||
|
FFELP Consolidation Loans
|
523,325 | 450,551 | 489,362 | |||||||||
|
Private Education Loans
|
565,154 | 406,115 | 387,041 | |||||||||
|
Other loans
|
8,996 | 10,075 | 16,420 | |||||||||
|
Cash and investments
|
4,949 | 6,168 | 5,971 | |||||||||
|
Total interest income
|
1,385,861 | 1,114,549 | 1,241,610 | |||||||||
|
Total interest expense
|
531,384 | 515,763 | 1,026,547 | |||||||||
|
Net interest income
|
854,477 | 598,786 | 215,063 | |||||||||
|
Less: provisions for loan losses
|
359,120 | 269,442 | 250,279 | |||||||||
|
Net interest income (loss) after provisions for loan losses
|
495,357 | 329,344 | (35,216 | ) | ||||||||
|
Other income:
|
||||||||||||
|
Servicing and securitization revenue (loss)
|
— | 148,049 | (95,305 | ) | ||||||||
|
Gains on sales of loans and securities, net
|
8,653 | 271,084 | — | |||||||||
|
Gains (losses) on derivative and hedging activities, net
|
(82,410 | ) | (35,209 | ) | 104,025 | |||||||
|
Contingency fee revenue
|
80,311 | 65,500 | 74,815 | |||||||||
|
Collections revenue (loss)
|
21,966 | (37,678 | ) | 43,656 | ||||||||
|
Guarantor servicing fees
|
36,090 | 28,695 | 34,008 | |||||||||
|
Other
|
190,410 | 187,922 | 192,458 | |||||||||
|
Total other income
|
255,020 | 628,363 | 353,657 | |||||||||
|
Expenses:
|
||||||||||||
|
Restructuring expenses
|
26,282 | 4,169 | 3,773 | |||||||||
|
Operating expenses
|
328,020 | 339,122 | 295,116 | |||||||||
|
Total expenses
|
354,302 | 343,291 | 298,889 | |||||||||
|
Income from continuing operations, before income tax expense
(benefit)
|
396,075 | 614,416 | 19,552 | |||||||||
|
Income tax expense (benefit)
|
155,795 | 206,568 | (5,517 | ) | ||||||||
|
Net income from continuing operations
|
240,280 | 407,848 | 25,069 | |||||||||
|
Loss from discontinued operations, net of tax
|
— | (98,557 | ) | (46,174 | ) | |||||||
|
Net income (loss)
|
240,280 | 309,291 | (21,105 | ) | ||||||||
|
Less: net income attributable to noncontrolling interest
|
140 | 157 | 281 | |||||||||
|
Net income (loss) attributable to SLM Corporation
|
240,140 | 309,134 | (21,386 | ) | ||||||||
|
Preferred stock dividends
|
18,678 | 51,014 | 26,395 | |||||||||
|
Net income (loss) attributable to SLM Corporation common stock
|
$ | 221,462 | $ | 258,120 | $ | (47,781 | ) | |||||
|
Net income (loss) attributable to SLM Corporation:
|
||||||||||||
|
Continuing operations, net of tax
|
$ | 240,140 | $ | 407,691 | $ | 24,788 | ||||||
|
Discontinued operations, net of tax
|
— | (98,557 | ) | (46,174 | ) | |||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 240,140 | $ | 309,134 | $ | (21,386 | ) | |||||
|
Basic earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||
|
Continuing operations
|
$ | .46 | $ | .74 | $ | — | ||||||
|
Discontinued operations
|
$ | — | $ | (.20 | ) | $ | (.10 | ) | ||||
|
Total
|
$ | .46 | $ | .54 | $ | (.10 | ) | |||||
|
Average common shares outstanding
|
484,259 | 479,459 | 466,761 | |||||||||
|
Diluted earnings (loss) per common share attributable to SLM
Corporation common shareholders:
|
||||||||||||
|
Continuing operations
|
$ | .45 | $ | .71 | $ | — | ||||||
|
Discontinued operations
|
$ | — | $ | (.19 | ) | $ | (.10 | ) | ||||
|
Total
|
$ | .45 | $ | .52 | $ | (.10 | ) | |||||
|
Average common and common equivalent shares outstanding
|
526,631 | 521,740 | 466,761 | |||||||||
|
Dividends per common share attributable to SLM Corporation
common shareholders
|
$ | — | $ | — | $ | — | ||||||
3
SLM
CORPORATION
Segment
and “Core Earnings”
Consolidated
Statements of Income
(In
thousands)
| Quarter ended March 31, 2010 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Corporate |
Total “Core |
Total |
|||||||||||||||||||||
| Lending | Group | and Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 274,347 | $ | — | $ | — | $ | 274,347 | $ | 9,090 | $ | 283,437 | ||||||||||||
|
FFELP Consolidation Loans
|
363,755 | — | — | 363,755 | 159,570 | 523,325 | ||||||||||||||||||
|
Private Education Loans
|
565,154 | — | — | 565,154 | — | 565,154 | ||||||||||||||||||
|
Other loans
|
8,996 | — | — | 8,996 | — | 8,996 | ||||||||||||||||||
|
Cash and investments
|
445 | — | 4,504 | 4,949 | — | 4,949 | ||||||||||||||||||
|
Total interest income
|
1,212,697 | — | 4,504 | 1,217,201 | 168,660 | 1,385,861 | ||||||||||||||||||
|
Total interest expense
|
515,130 | — | — | 515,130 | 16,254 | 531,384 | ||||||||||||||||||
|
Net interest income
|
697,567 | — | 4,504 | 702,071 | 152,406 | 854,477 | ||||||||||||||||||
|
Less: provisions for loan losses
|
359,120 | — | — | 359,120 | — | 359,120 | ||||||||||||||||||
|
Net interest income after provisions for loan losses
|
338,447 | — | 4,504 | 342,951 | 152,406 | 495,357 | ||||||||||||||||||
|
Contingency fee revenue
|
— | 80,311 | — | 80,311 | — | 80,311 | ||||||||||||||||||
|
Collections revenue
|
— | 21,966 | — | 21,966 | — | 21,966 | ||||||||||||||||||
|
Guarantor servicing fees
|
— | — | 36,090 | 36,090 | — | 36,090 | ||||||||||||||||||
|
Other income
|
141,317 | — | 56,521 | 197,838 | (81,185 | ) | 116,653 | |||||||||||||||||
|
Total other income
|
141,317 | 102,277 | 92,611 | 336,205 | (81,185 | ) | 255,020 | |||||||||||||||||
|
Restructuring expenses
|
21,336 | 1,608 | 3,338 | 26,282 | — | 26,282 | ||||||||||||||||||
|
Direct operating expenses
|
145,758 | 75,557 | 62,218 | 283,533 | 9,712 | 293,245 | ||||||||||||||||||
|
Overhead expenses
|
20,613 | 10,773 | 3,389 | 34,775 | — | 34,775 | ||||||||||||||||||
|
Operating expenses
|
166,371 | 86,330 | 65,607 | 318,308 | 9,712 | 328,020 | ||||||||||||||||||
|
Total expenses
|
187,707 | 87,938 | 68,945 | 344,590 | 9,712 | 354,302 | ||||||||||||||||||
|
Income from continuing operations, before income tax expense
|
292,057 | 14,339 | 28,170 | 334,566 | 61,509 | 396,075 | ||||||||||||||||||
|
Income tax
expense(1)
|
107,068 | 5,257 | 10,327 | 122,652 | 33,143 | 155,795 | ||||||||||||||||||
|
Net income from continuing operations
|
184,989 | 9,082 | 17,843 | 211,914 | 28,366 | 240,280 | ||||||||||||||||||
|
Loss from discontinued operations, net of tax
|
— | — | — | — | — | — | ||||||||||||||||||
|
Net income
|
184,989 | 9,082 | 17,843 | 211,914 | 28,366 | 240,280 | ||||||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 140 | — | 140 | — | 140 | ||||||||||||||||||
|
Net income attributable to SLM Corporation
|
$ | 184,989 | $ | 8,942 | $ | 17,843 | $ | 211,774 | $ | 28,366 | $ | 240,140 | ||||||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 2,866 | $ | — | $ | — | $ | 2,866 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
|
Net income attributable to SLM Corporation:
|
||||||||||||||||||||||||
|
Continuing operations, net of tax
|
$ | 184,989 | $ | 8,942 | $ | 17,843 | $ | 211,774 | $ | 28,366 | $ | 240,140 | ||||||||||||
|
Discontinued operations, net of tax
|
— | — | — | — | — | — | ||||||||||||||||||
|
Net income attributable to SLM Corporation
|
$ | 184,989 | $ | 8,942 | $ | 17,843 | $ | 211,774 | $ | 28,366 | $ | 240,140 | ||||||||||||
4
SLM
CORPORATION
Segment
and “Core Earnings”
Consolidated
Statements of Income
(In
thousands)
| Quarter ended December 31, 2009 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Corporate |
Total “Core |
Total |
|||||||||||||||||||||
| Lending | Group | and Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 269,297 | $ | — | $ | — | $ | 269,297 | $ | (27,657 | ) | $ | 241,640 | |||||||||||
|
FFELP Consolidation Loans
|
382,681 | — | — | 382,681 | 67,870 | 450,551 | ||||||||||||||||||
|
Private Education Loans
|
571,423 | — | — | 571,423 | (165,308 | ) | 406,115 | |||||||||||||||||
|
Other loans
|
10,075 | — | — | 10,075 | — | 10,075 | ||||||||||||||||||
|
Cash and investments
|
1,052 | — | 5,477 | 6,529 | (361 | ) | 6,168 | |||||||||||||||||
|
Total interest income
|
1,234,528 | — | 5,477 | 1,240,005 | (125,456 | ) | 1,114,549 | |||||||||||||||||
|
Total interest expense
|
554,461 | — | — | 554,461 | (38,698 | ) | 515,763 | |||||||||||||||||
|
Net interest income
|
680,067 | — | 5,477 | 685,544 | (86,758 | ) | 598,786 | |||||||||||||||||
|
Less: provisions for loan losses
|
365,211 | — | — | 365,211 | (95,769 | ) | 269,442 | |||||||||||||||||
|
Net interest income after provisions for loan losses
|
314,856 | — | 5,477 | 320,333 | 9,011 | 329,344 | ||||||||||||||||||
|
Contingency fee revenue
|
— | 65,500 | — | 65,500 | — | 65,500 | ||||||||||||||||||
|
Collections revenue (loss)
|
— | (37,678 | ) | — | (37,678 | ) | — | (37,678 | ) | |||||||||||||||
|
Guarantor servicing fees
|
— | — | 28,695 | 28,695 | — | 28,695 | ||||||||||||||||||
|
Other income
|
383,093 | — | 63,017 | 446,110 | 125,736 | 571,846 | ||||||||||||||||||
|
Total other income
|
383,093 | 27,822 | 91,712 | 502,627 | 125,736 | 628,363 | ||||||||||||||||||
|
Restructuring expenses
|
3,627 | 331 | 211 | 4,169 | — | 4,169 | ||||||||||||||||||
|
Direct operating expenses
|
132,761 | 72,273 | 58,492 | 263,526 | 46,472 | 309,998 | ||||||||||||||||||
|
Overhead expenses
|
17,263 | 9,023 | 2,838 | 29,124 | — | 29,124 | ||||||||||||||||||
|
Operating expenses
|
150,024 | 81,296 | 61,330 | 292,650 | 46,472 | 339,122 | ||||||||||||||||||
|
Total expenses
|
153,651 | 81,627 | 61,541 | 296,819 | 46,472 | 343,291 | ||||||||||||||||||
|
Income (loss) from continuing operations, before income tax
expense (benefit)
|
544,298 | (53,805 | ) | 35,648 | 526,141 | 88,275 | 614,416 | |||||||||||||||||
|
Income tax expense
(benefit)(1)
|
188,105 | (20,497 | ) | 11,343 | 178,951 | 27,617 | 206,568 | |||||||||||||||||
|
Net income (loss) from continuing operations
|
356,193 | (33,308 | ) | 24,305 | 347,190 | 60,658 | 407,848 | |||||||||||||||||
|
Loss from discontinued operations, net of tax
|
— | (98,250 | ) | — | (98,250 | ) | (307 | ) | (98,557 | ) | ||||||||||||||
|
Net income (loss)
|
356,193 | (131,558 | ) | 24,305 | 248,940 | 60,351 | 309,291 | |||||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 157 | — | 157 | — | 157 | ||||||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 356,193 | $ | (131,715 | ) | $ | 24,305 | $ | 248,783 | $ | 60,351 | $ | 309,134 | |||||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 14,111 | $ | — | $ | — | $ | 14,111 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
|
Net income (loss) attributable to SLM Corporation:
|
||||||||||||||||||||||||
|
Continuing operations, net of tax
|
$ | 356,193 | $ | (33,465 | ) | $ | 24,305 | $ | 347,033 | $ | 60,658 | $ | 407,691 | |||||||||||
|
Discontinued operations, net of tax
|
— | (98,250 | ) | — | (98,250 | ) | (307 | ) | (98,557 | ) | ||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 356,193 | $ | (131,715 | ) | $ | 24,305 | $ | 248,783 | $ | 60,351 | $ | 309,134 | |||||||||||
5
SLM
CORPORATION
Segment
and “Core Earnings”
Consolidated
Statements of Income
(In
thousands)
| Quarter ended March 31, 2009 | ||||||||||||||||||||||||
|
Asset |
||||||||||||||||||||||||
|
Performance |
Corporate |
Total “Core |
Total |
|||||||||||||||||||||
| Lending | Group | and Other | Earnings”(2) | Adjustments | GAAP | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
|
Interest income:
|
||||||||||||||||||||||||
|
FFELP Stafford and Other Student Loans
|
$ | 361,919 | $ | — | $ | — | $ | 361,919 | $ | (19,103 | ) | $ | 342,816 | |||||||||||
|
FFELP Consolidation Loans
|
438,896 | — | — | 438,896 | 50,466 | 489,362 | ||||||||||||||||||
|
Private Education Loans
|
563,282 | — | — | 563,282 | (176,241 | ) | 387,041 | |||||||||||||||||
|
Other loans
|
16,420 | — | — | 16,420 | — | 16,420 | ||||||||||||||||||
|
Cash and investments
|
2,179 | — | 5,128 | 7,307 | (1,336 | ) | 5,971 | |||||||||||||||||
|
Total interest income
|
1,382,696 | — | 5,128 | 1,387,824 | (146,214 | ) | 1,241,610 | |||||||||||||||||
|
Total interest expense
|
958,879 | — | — | 958,879 | 67,668 | 1,026,547 | ||||||||||||||||||
|
Net interest income
|
423,817 | — | 5,128 | 428,945 | (213,882 | ) | 215,063 | |||||||||||||||||
|
Less: provisions for loan losses
|
349,086 | — | — | 349,086 | (98,807 | ) | 250,279 | |||||||||||||||||
|
Net interest income (loss) after provisions for loan losses
|
74,731 | — | 5,128 | 79,859 | (115,075 | ) | (35,216 | ) | ||||||||||||||||
|
Contingency fee revenue
|
— | 74,815 | — | 74,815 | — | 74,815 | ||||||||||||||||||
|
Collections revenue
|
— | 42,967 | — | 42,967 | 689 | 43,656 | ||||||||||||||||||
|
Guarantor servicing fees
|
— | — | 34,008 | 34,008 | — | 34,008 | ||||||||||||||||||
|
Other income
|
102,368 | — | 49,781 | 152,149 | 49,029 | 201,178 | ||||||||||||||||||
|
Total other income
|
102,368 | 117,782 | 83,789 | 303,939 | 49,718 | 353,657 | ||||||||||||||||||
|
Restructuring expenses
|
1,537 | 656 | 1,580 | 3,773 | — | 3,773 | ||||||||||||||||||
|
Direct operating expenses
|
123,715 | 83,420 | 45,786 | 252,921 | 9,759 | 262,680 | ||||||||||||||||||
|
Overhead expenses
|
19,227 | 10,048 | 3,161 | 32,436 | — | 32,436 | ||||||||||||||||||
|
Operating expenses
|
142,942 | 93,468 | 48,947 | 285,357 | 9,759 | 295,116 | ||||||||||||||||||
|
Total expenses
|
144,479 | 94,124 | 50,527 | 289,130 | 9,759 | 298,889 | ||||||||||||||||||
|
Income from continuing operations, before income tax expense
(benefit)
|
32,620 | 23,658 | 38,390 | 94,668 | (75,116 | ) | 19,552 | |||||||||||||||||
|
Income tax expense
(benefit)(1)
|
12,010 | 8,247 | 14,136 | 34,393 | (39,910 | ) | (5,517 | ) | ||||||||||||||||
|
Net income from continuing operations
|
20,610 | 15,411 | 24,254 | 60,275 | (35,206 | ) | 25,069 | |||||||||||||||||
|
Loss from discontinued operations, net of tax
|
— | (46,110 | ) | — | (46,110 | ) | (64 | ) | (46,174 | ) | ||||||||||||||
|
Net income (loss)
|
20,610 | (30,699 | ) | 24,254 | 14,165 | (35,270 | ) | (21,105 | ) | |||||||||||||||
|
Less: net income attributable to noncontrolling interest
|
— | 281 | — | 281 | — | 281 | ||||||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 20,610 | $ | (30,980 | ) | $ | 24,254 | $ | 13,884 | $ | (35,270 | ) | $ | (21,386 | ) | |||||||||
|
Economic Floor Income (net of tax) not included in “Core
Earnings”
|
$ | 79,388 | $ | — | $ | — | $ | 79,388 | ||||||||||||||||
| (1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
| (2) | “Core Earnings” are non-GAAP measures and do not represent a comprehensive system of accounting. For a greater explanation of “Core Earnings,” see the section titled “Reconciliation of ‘Core Earnings’ Net Income to GAAP Net Income” and subsequent sections. |
|
Net income (loss) attributable to SLM Corporation:
|
||||||||||||||||||||||||
|
Continuing operations, net of tax
|
$ | 20,610 | $ | 15,130 | $ | 24,254 | $ | 59,994 | $ | (35,206 | ) | $ | 24,788 | |||||||||||
|
Discontinued operations, net of tax
|
— | (46,110 | ) | — | (46,110 | ) | (64 | ) | (46,174 | ) | ||||||||||||||
|
Net income (loss) attributable to SLM Corporation
|
$ | 20,610 | $ | (30,980 | ) | $ | 24,254 | $ | 13,884 | $ | (35,270 | ) | $ | (21,386 | ) | |||||||||
6
SLM
CORPORATION
Reconciliation
of “Core Earnings” Net Income to GAAP Net
Income
(In
thousands, except per share amounts)
| Quarters ended | ||||||||||||
|
March 31, |
December 31, |
March 31, |
||||||||||
| 2010 | 2009 | 2009 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
|
“Core Earnings” net income attributable to SLM
Corporation(1)(2)
|
$ | 211,774 | $ | 248,783 | $ | 13,884 | ||||||
|
“Core Earnings” adjustments:
|
||||||||||||
|
Net impact of securitization accounting
|
— | (4,094 | ) | (198,590 | ) | |||||||
|
Net impact of derivative accounting
|
120,107 | 171,068 | 54,010 | |||||||||
|
Net impact of Floor Income
|
(48,886 | ) | (32,222 | ) | 79,023 | |||||||
|
Net impact of acquired intangibles
|
(9,712 | ) | (46,784 | ) | (9,623 | ) | ||||||
|
Total “Core Earnings” adjustments before income tax
effect
|
61,509 | 87,968 | (75,180 | ) | ||||||||
|
Net income tax effect
|
(33,143 | ) | (27,617 | ) | 39,910 | |||||||
|
Total “Core Earnings” adjustments
|
28,366 | 60,351 | (35,270 | ) | ||||||||
|
GAAP net income (loss) attributable to SLM Corporation
|
$ | 240,140 | $ | 309,134 | $ | (21,386 | ) | |||||
|
GAAP diluted earnings (loss) per common share attributable to
SLM Corporation common shareholders
|
$ | .45 | $ | .52 | $ | (.10 | ) | |||||
|
(1) “Core
Earnings” diluted earnings (loss) per common share
attributable to SLM Corporation common shareholders
|
$ | .39 | $ | .41 | $ | (.03 | ) | |||||
|
(2) Total
Economic Floor Income earned on Managed loans, not included in
“Core Earnings” (net of tax)
|
$ | 2,866 | $ | 14,111 | $ | 79,388 | ||||||
|
Total Economic Floor Income
earned, not included in “Core Earnings” (net of tax)
per common share attributable to SLM Corporation common
shareholders
|
$ | .01 | $ | .03 | $ | .17 | ||||||
“Core
Earnings”
In accordance with the rules and regulations of the Securities
and Exchange Commission (“SEC”), we prepare financial
statements in accordance with GAAP. In addition to evaluating
the Company’s GAAP-based financial information, management
evaluates the Company’s business segments on a basis that,
as allowed under the Financial Accounting Standards Board’s
(“FASB’s”) Accounting Standards Codification
(“ASC”) 280, “Segment Reporting,” differs
from GAAP. We refer to management’s basis of evaluating our
segment results as “Core Earnings” presentations for
each business segment and we refer to this information in our
presentations with credit rating agencies and lenders. While
“Core Earnings” are not a substitute for reported
results under GAAP, we rely on “Core Earnings” to
manage each operating segment because we believe these measures
provide additional information regarding the operational and
performance indicators that are most closely assessed by
management.
Our “Core Earnings” are not defined terms within GAAP
and may not be comparable to similarly titled measures reported
by other companies. “Core Earnings” net income
reflects only current period adjustments to GAAP net income as
described below. Unlike financial accounting, there is no
comprehensive, authoritative guidance for management reporting
and as a result, our management reporting is not necessarily
comparable with similar information for any other financial
institution. Our operating segments are defined by products and
services or by types of customers, and reflect the manner in
which financial information is currently evaluated by
management. Intersegment revenues and expenses are netted within
the appropriate financial statement line items consistent with
the income statement presentation provided to management.
Changes in management structure or allocation methodologies and
procedures may result in changes in reported segment financial
information.
7
Limitations
of “Core Earnings”
While GAAP provides a uniform, comprehensive basis of
accounting, for the reasons described above, management believes
that “Core Earnings” are an important additional tool
for providing a more complete understanding of the
Company’s results of operations. Nevertheless, “Core
Earnings” are subject to certain general and specific
limitations that investors should carefully consider. For
example, as stated above, unlike financial accounting, there is
no comprehensive, authoritative guidance for management
reporting. Our “Core Earnings” are not defined terms
within GAAP and may not be comparable to similarly titled
measures reported by other companies. Unlike GAAP, “Core
Earnings” reflect only current period adjustments to GAAP.
Accordingly, the Company’s “Core Earnings”
presentation does not represent a comprehensive basis of
accounting. Investors, therefore, may not compare our
Company’s performance with that of other financial services
companies based upon “Core Earnings.” “Core
Earnings” results are only meant to supplement GAAP results
by providing additional information regarding the operational
and performance indicators that are most closely used by
management, the Company’s board of directors, rating
agencies and lenders to assess performance.
Other limitations arise from the specific adjustments that
management makes to GAAP results to derive “Core
Earnings” results. For example, in reversing the unrealized
gains and losses that result from ASC 815,
“Derivatives and Hedging,” on derivatives that do not
qualify for “hedge accounting treatment,” as well as
on derivatives that do qualify but are in part ineffective
because they are not perfect hedges, we focus on the long-term
economic effectiveness of those instruments relative to the
underlying hedged item and isolate the effects of interest rate
volatility and changing credit spreads on the fair value of such
instruments during the period. Under GAAP, the effects of these
factors on the fair value of the derivative instruments (but
often not on the underlying hedged item) tend to show more
volatility in the short term. While our presentation of our
results on a “Core Earnings” basis provides important
information regarding the performance of our Managed portfolio,
a limitation of this presentation is that we are presenting the
ongoing spread income on loans that have been sold to a trust
managed by us. While we believe that our “Core
Earnings” presentation presents the economic substance of
our Managed loan portfolio, it understates earnings volatility
from securitization gains. Our “Core Earnings” results
exclude certain Floor Income, which is real cash income, from
our reported results and therefore may understate earnings in
certain periods. Management’s financial planning and
valuation of operating results, however, does not take into
account Floor Income because of its inherent uncertainty, except
when it is Fixed Rate Floor Income that is economically hedged
through Floor Income Contracts.
Pre-Tax
Differences between “Core Earnings” and GAAP
Our “Core Earnings” are the primary financial
performance measures used by management to evaluate performance
and to allocate resources. Accordingly, financial information is
reported to management on a “Core Earnings” basis by
reportable segment, as these are the measures used regularly by
our chief operating decision makers. Our “Core
Earnings” are used in developing our financial plans and
tracking results, and also in establishing corporate performance
targets and incentive compensation. Management believes this
information provides additional insight into the financial
performance of the Company’s core business activities.
“Core Earnings” net income reflects only current
period adjustments to GAAP net income, as described in the more
detailed discussion of the differences between “Core
Earnings” and GAAP that follows, which includes further
detail on each specific adjustment required to reconcile our
“Core Earnings” segment presentation to our GAAP
earnings.
| 1) | Securitization Accounting: Under GAAP, prior to the adoption of topic updates to ASC 810, “Consolidation,” certain securitization transactions in our Lending operating segment were accounted for as sales of assets. Under “Core Earnings” for the Lending operating segment, we presented all securitization transactions on a “Core Earnings” basis as long-term non-recourse financings. The upfront “gains” on sale from securitization transactions, as well as ongoing “servicing and securitization revenue” presented in accordance with GAAP, were excluded from “Core Earnings” and were replaced by interest income, provisions for loan losses, and interest expense as earned or incurred on the securitization loans. We also excluded transactions with our off-balance sheet trusts from “Core |
8
| Earnings” as they were considered intercompany transactions on a “Core Earnings” basis. On January 1, 2010, the Company prospectively adopted the topic updates to ASC 810, which resulted in the consolidation of these off-balance sheet securitization trusts at their historical cost basis. As a result, there are no longer differences between the Company’s GAAP and “Core Earnings” presentation for securitization accounting. |
| On January 1, 2010, upon the adoption of topic updates to ASC 810, the Company removed the $1.8 billion of Residual Interests (associated with its off-balance sheet securitization trusts as of December 31, 2009) from the consolidated balance sheet and the Company consolidated $35.0 billion of assets ($32.6 billion of which are student loans, net of a $550 million allowance for loan loss) and $34.4 billion of liabilities (primarily trust debt), which resulted in an approximate $750 million after-tax reduction of stockholders’ equity (recorded as a cumulative effect adjustment to retained earnings). After the adoption of topic updates to ASC 810, related to the securitization trusts that were consolidated on January 1, 2010, the Company’s results of operations no longer reflect servicing and securitization income related to these securitization trusts, but instead report interest income, provisions for loan losses associated with the securitized assets and interest expense associated with the debt issued from the securitization trusts to third parties, consistent with the Company’s accounting treatment of prior on-balance securitization trusts. |
| 2) | Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market derivative valuations prescribed by ASC 815 on derivatives that do not qualify for “hedge accounting treatment” under GAAP. These unrealized gains and losses occur in our Lending operating segment. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item’s life. | |
| 3) | Floor Income: The timing and amount (if any) of Floor Income earned in our Lending operating segment is uncertain and in excess of expected spreads. Therefore, we only include such income in “Core Earnings” when it is Fixed Rate Floor Income that is economically hedged. We employ derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed above in “Derivative Accounting,” these derivatives do not qualify as effective accounting hedges, and therefore, under GAAP, they are marked-to-market through the “gains (losses) on derivative and hedging activities, net” line in the consolidated statement of income with no offsetting gain or loss recorded for the economically hedged items. For “Core Earnings,” we reverse the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and include in income the amortization of net premiums received on contracts economically hedging Fixed Rate Floor Income. | |
| 4) | Acquired Intangibles: Our “Core Earnings” exclude goodwill and intangible impairment and the amortization of acquired intangibles. |
9