Sallie Mae 2005 Annual Report Download - page 172

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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)
F-50
12. Fair Values of Financial Instruments (Continued)
Short-term Borrowings and Long-term Borrowings
For borrowings with remaining maturities of three months or less, carrying value approximated fair
value. The fair value of all other financial liabilities was determined through standard bond pricing
formulas using current market interest rates, foreign currency exchange rates and credit spreads and
quotes from third parties.
Derivative Financial Instruments
The fair values of derivative financial instruments were determined by a combination of pricing
through standard bond pricing formulas using current market interest rates, foreign currency exchange
rates, and credit spreads, and obtaining fair values from third parties.
The following table summarizes the fair values of the Company’s financial assets and liabilities,
including derivative financial instruments.
December 31, 2005 December 31, 2004
(Dollars in millions)
Fair
Value
Carrying
Value Difference
Fair
Value
Carrying
Value Difference
Earning assets
FFELPloans............................ $ 76,492 $ 74,847 $ 1,645 $ 61,531 $ 60,561 $ 970
PrivateEducationLoans.................. 9,189 7,757 1,432 5,900 5,420 480
Otherloans.............................. 1,176 1,139 37 1,099 1,048 51
Cashandinvestments..................... 8,168 8,168 — 9,186 9,186 —
Totalearningassets ...................... 95,025 91,911 3,114 77,716 76,215 1,501
Interest bearing liabilities
Short-term borrowings .................... 3,806 3,810 4 2,210 2,207 (3)
Long-term borrowings .................... 88,220 88,119 (101) 76,085 75,915 (170)
Totalinterestbearingliabilities............ 92,026 91,929 (97) 78,295 78,122 (173)
Derivative financial instruments
FloorIncome/CapContracts .............. (371) (371) — (625) (625) —
Interest rate swaps ....................... (390) (390) — (235) (235) —
Cross currency interest rate swaps.......... (148) (148) — 1,839 1,839 —
Equity forwards .......................... 67 67 — 139 139 —
Futurescontracts......................... (1) (1) — (2) (2) —
Excess of fairvalue over carrying value...... $3,017 $1,328
13. Commitments, Contingencies and Guarantees
JPMorgan Chase/Bank One Relationships
On March 22, 2005, the Company announced that it extended both its JPMorgan Chase and Bank One
student loan and loan purchase commitments to August 31, 2010. This comprehensive agreement provided
for the dissolution of the joint venture between Chase and Sallie Mae that had been making student loans
under the Chase brand since 1996 and resolved a lawsuit filed by Chase on February 17, 2005. In
consideration for extending the agreement, the Company received a $40 million payment that will be
recognized over the life of the agreement.