13 unchanged sentences
FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the special allowance payment ("SAP") formula set by the Department.
−Removed: is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status.
+Added: The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status.
The Company generally finances its student loan portfolio with variable rate debt.
4 unchanged sentences
All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for those loans to the Department.
−Removed: No variable-rate floor income was earned by the Company during the years ended December 31, 2019 and 2018.
+Added: As a result of the significant drop in interest rates during the first half of 2020, the Company earned $4.8 million of variable-rate floor income on approximately $1.4 billion of FFELP loans during the six months ended June 30, 2020.
+Added: Since the borrower rate reset on July 1, 2020, the Company no longer earns such variable-rate floor income on these loans, reflecting the lower interest rate environment.
+Added: No variable-rate floor income was earned by the Company in 2019.
A summary of fixed rate floor income earned by the Company during these years follows.
3 unchanged sentences
Fixed rate floor income, net $ 116,761 89,869
−Removed: (a) Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.
−Removed: Gross fixed rate floor income decreased in 2019 as compared to 2018 due to higher interest rates in 2019 as compared to 2018.
+Added: (a) Derivative settlements consist of settlements (paid) received related to the Company's derivatives used to hedge student loans earning fixed rate floor income.
+Added: Gross fixed rate floor income increased in 2020 as compared to 2019 due to lower interest rates in 2020 as compared to 2019.
Absent the use of derivative instruments, a rise in interest rates will reduce the amount of floor income received and has an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas.
In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.
−Removed: The decrease in derivative settlements from the floor income interest rate swaps in 2019 as compared to 2018 was due to a decrease in the notional amount of derivatives outstanding, partially offset by higher interest rates in 2019 as compared to 2018.
+Added: The decrease in net derivative settlements (paid) received from the floor income interest rate swaps in 2020 as compared to 2019 was due to a decrease in the weighted average of notional amount of derivatives outstanding in 2020 as compared to 2019 and a decrease in interest rates.
+Added: The Company added $2.75 billion (notional amount) of additional derivatives during the fourth quarter of 2020, resulting in a total of $4.5 billion (notional amount) of derivatives outstanding as of December 31, 2020, to hedge loans earning fixed rate floor income.
The following graph depicts fixed rate floor income for a borrower with a fixed rate of 6.75% and a SAP rate of 2.64%:
10 unchanged sentences
6.5 - 6.99% 6.70% 4.06% 339,577
+Added: 7.0 - 7.49% 7.17% 4.53% 125,250
+Added: 7.5 - 7.99% 7.71% 5.07% 227,133
+Added: 8.0 - 8.99% 8.18% 5.54% 537,150
+Added: > 9.0% 9.05% 6.41% 200,936
(a) The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate.
3 unchanged sentences
2021 $ 600,000 2.15 %
−Removed: 2021 600,000 2.15
2022 (b) 500,000 0.94
2023 900,000 0.62
+Added: 2024 (c) 2,000,000 0.32
2025 500,000 0.35
+Added: $ 4,500,000 0.70 %
(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.
−Removed: (b) These derivatives have forward effective start dates in June 2021.
+Added: (b) $250.0 million of these derivatives have forward effective start dates in June 2021.
+Added: (c) $750.0 million of these derivatives have forward effective start dates in June 2021.
The Company is also exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of the Company’s assets do not match the interest rate characteristics of the funding for those assets.
6 unchanged sentences
3 month LIBOR (a) Quarterly — 6,468,648
−Removed: Asset-backed commercial paper (b) Varies — 778,094
−Removed: Auction-rate (c) Varies — 768,626
Fixed rate — — 923,076
+Added: Auction-rate (b) Varies — 749,925
+Added: Asset-backed commercial paper (c) Varies — 252,165
Other (d) — 1,281,065 1,357,429
5 unchanged sentences
2021 $ 250,000
−Removed: 2022 (ii) 2,000,000
2022 2,000,000
2024 1,750,000
−Removed: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of
−Removed: December 31, 2019 was one-month LIBOR plus 9.7 basis points.
−Removed: (ii) $750 million of the notional amount of these derivatives have forward effective start
−Removed: dates in May 2020.
−Removed: (b) The interest rates on the Company's warehouse facilities are indexed to asset-backed commercial paper rates.
−Removed: (c) As of December 31, 2019, the Company was sponsor for $768.6 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (“Auction Rate Securities”).
+Added: 2026 1,150,000
+Added: (i) The weighted average rate paid by the Company on the 1:3 Basis Swaps as of December 31, 2020 was one-month LIBOR plus 9.1 basis points.
+Added: (b) As of December 31, 2020, the Company was sponsor for $749.9 million of outstanding asset-backed securities that were set and provide for interest rates to be periodically reset via a "dutch auction" (“Auction Rate Securities”).
Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture.
While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents.
+Added: (c) The interest rates on the Company's warehouse facilities are indexed to asset-backed commercial paper rates.
(d) Assets include accrued interest receivable and restricted cash.
17 unchanged sentences
Decrease in pre-tax net income before impact of derivative settlements $ (57,447) (12.8) % $ (108,018) (24.0) % $ (7,157) (1.6) % $ (21,477) (4.8) %
−Removed: $ (23,199) (13.1) % $ (43,368) (24.5) % $ (9,462) (5.3) % $ (28,385) (16.1) %
Impact of derivative settlements 13,955 3.1 41,864 9.3 6,112 1.4 18,336 4.1
−Removed: 28,793 16.3 86,380 48.8 6,780 3.8 20,340 11.5
Increase (decrease) in net income before taxes $ (43,492) (9.7) % $ (66,154) (14.7) % $ (1,045) (0.2) % $ (3,141) (0.7) %
−Removed: $ 5,594 3.2 % $ 43,012 24.3 % $ (2,682) (1.5) % $ (8,045) (4.6) %
Increase (decrease) in basic and diluted earnings per share $ (0.85) $ (1.29) $ (0.02) $ (0.06)
−Removed: $ 0.11 $ 0.82 $ (0.05) $ (0.15)
Year ended December 31, 2019
1 unchanged sentence
Decrease in pre-tax net income before impact of derivative settlements $ (23,199) (13.1) % $ (43,368) (24.5) % $ (9,462) (5.3) % $ (28,385) (16.1) %
−Removed: $ (20,162) (7.0) % $ (35,592) (12.4) % $ (11,769) (4.1) % $ (35,306) (12.3) %
Impact of derivative settlements 28,793 16.3 86,380 48.8 6,780 3.8 20,340 11.5
−Removed: 62,310 21.8 186,927 65.3 7,775 2.7 23,326 8.1
Increase (decrease) in net income before taxes $ 5,594 3.2 % $ 43,012 24.3 % $ (2,682) (1.5) % $ (8,045) (4.6) %
−Removed: $ 42,148 14.8 % $ 151,335 52.9 % $ (3,994) (1.4) % $ (11,980) (4.2) %
Increase (decrease) in basic and diluted earnings per share $ 0.11 $ 0.82 $ (0.05) $ (0.15)
−Removed: $ 0.78 $ 2.81 $ (0.07) $ (0.22)
Financial Statement Impact – Derivatives
−Removed: For a table summarizing the effect of derivative instruments in the consolidated statements of income, including the components of "derivative market value and foreign currency transaction adjustments and derivative settlements, net" included in the consolidated statements of income, see note 5 of the notes to consolidated financial statements included in this report.
+Added: For a table summarizing the effect of derivative instruments in the consolidated statements of income, including the components of "derivative market value adjustments and derivative settlements, net" included in the consolidated statements of income, see note 6 of the notes to consolidated financial statements included in this report.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.