Entity A's accounting for the loan sale with servicing and interest-only strip
receivable retained are calculated as follows.
The following table presents a reconciliation of net income and diluted earnings per share (as reported) to net income and diluted earnings per share excluding the after-tax effect of gains from the sales of SBA interest-only strip
Pursuant to paragraph 14 of SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, certain MBSs that are subject to substantial prepayment risk, such as interest-only strips
, cannot be classified as held-to-maturity securities.
3 million gain on sale of an SBA interest-only strip
security in the 2011 first quarter.
Financial services revenue; total revenue; selling, distribution, and administrative expenses; operating income; other non-operating income; provision for income taxes; net income; and earnings per diluted share are presented below both as reported (on a GAAP basis) and excluding (i) the effect of the $18 million charge recorded in the first quarter of fiscal 2010 relating to matters arising out of the Federal Deposit Insurance Corporation's compliance examination of World's Foremost Bank, (ii) the impact of valuations of our interest-only strips
, cash reserve accounts, and cash accounts associated with our securitized loans recorded in fiscal 2009, and (iii) the impairment and restructuring charges recorded in fiscal 2009.
Other income increased $673 million reflecting the antitrust settlement and higher discount and interchange revenue, partially offset by a write-down of the interest-only strip
receivable and the transfer of balance transfer fees to interest income.
Other income increased primarily due to a write-down of the interest-only strip
receivable in the fourth quarter of 2006 and lower rewards costs.
5 million larger reduction in fair value primarily related to the impact of receivable attrition on a higher interest-only strip
receivable and a $25.
Expect to see more innovation in products in the ETF space that navigate interest rate risks, including those that utilize interest-only strips
that can provide income with a negative duration.
6) The first is credit-enhancing, interest-only strips
Since these residuals, called retained interest-only strips
, are reported on a bank's balance sheet, they overstate the bank's book value if they are overvalued.
1 million payment due to an unnamed lender, which PacificAmerica says at this point is requiring only payments on the interest-only strips
receivable securing the financing.