Sallie Mae 2014 Annual Report Download - page 133

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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)
15.
Fair Value Measurements (Continued)
Accrued Interest Receivable
Accrued interest receivable is carried at cost. The carrying value approximates fair value due to its short-term nature.
This is a level 1 valuation.
Tax Indemnification Receivable
Tax indemnification receivable is carried at cost. The carrying value approximates fair value. This is a level 1 valuation.
Money Market, Savings Accounts and NOW Accounts
The fair value of money market, savings, and NOW accounts equal the amounts payable on demand at the balance sheet
date and are reported at their carrying value. These are level 1 valuations.
Certificates of Deposit
The fair value of certificates of deposit are estimated using discounted cash flows based on rates currently offered for
deposits of similar remaining maturities. These are level 2 valuations.
Accrued Interest Payable
Accrued interest payable is carried at cost. The carrying value approximates fair value due to its short-term nature. This is a
level 1 valuation.
Derivatives
All derivatives are accounted for at fair value in the financial statements. The fair value of derivative financial
instruments was determined by a standard derivative pricing and option model using the stated terms of the contracts and
observable market inputs. It is our policy to compare the derivative fair values to those received from our counterparties in
order to evaluate the model’s outputs.
When determining the fair value of derivatives, we take into account counterparty credit risk for positions where we are
exposed to the counterparty on a net basis by assessing exposure net of collateral held. When the counterparty has exposure to
us under derivative contracts with the Company, we fully collateralize the exposure (subject to certain thresholds).
Interest rate swaps are valued using a standard derivative cash flow model with a LIBOR swap yield curve which is an
observable input from an active market. These derivatives are level 2 fair value estimates in the hierarchy.
The carrying value of borrowings designated as the hedged item in a fair value hedge is adjusted for changes in fair value
due to changes in the benchmark interest rate (one-month LIBOR). These valuations are determined through standard pricing
models using the stated terms of the borrowings and observable yield curves.
F-49