Sallie Mae 2015 Annual Report Download - page 69

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Contractual Loan Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing
for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of origination, but
instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent
trimesters). At December 31, 2015, we had $1.5 billion of outstanding contractual loan commitments which we expect to fund
during the remainder of the 2015/2016 academic year. At December 31, 2015, we had a $2 million reserve recorded in “Other
Liabilities” to cover expected losses that may occur during the one-year loss emergence period on these unfunded
commitments.
Contractual Cash Obligations
The following table provides a summary of our contractual principal obligations associated with long-term Bank deposits,
the ABCP Facility, term funding commitments, loan commitments and lease obligations at December 31, 2015.
1 Year
or Less 1 to 3 Years 3 to 5 Years Over 5 Years Total
(Dollars in thousands)
Long-term bank deposits(1)(2) . . . . . . . . . $ 2,668,240 $ 2,262,669 827,063 $ 165,047 $ 5,923,019
ABCP Facility(1)(3) . . . . . . . . . . . . . . . . . 81,608 418,567 — — 500,175
Private Education Loan term
securitizations(1)(4) . . . . . . . . . . . . . . . . . 67,214 136,236 106,442 279,032 588,924
Loan commitments(1) . . . . . . . . . . . . . . . 1,527,077 171 — — 1,527,248
Lease obligations . . . . . . . . . . . . . . . . . . 1,433 2,630 766 — 4,829
Total contractual cash obligations . . . . . $ 4,345,572 $ 2,820,273 $ 934,271 $ 444,079 $ 8,544,195
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(1) Interest obligations are either variable or fixed in nature.
(2) Excludes derivative market value adjustments of $8.4 million.
(3) Amounts reflect the contractual requirements of the ABCP Facility, based on the expected paydown of the underlying collateral.
Management has the intent to pay off advances on the ABCP Facility on a short term basis.
(4) Amounts reflect the contractual requirements of the Private Education Loan term securitizations, based on the expected paydown
of the underlying collateral.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated
financial statements, which have been prepared in accordance with GAAP. Notes to Consolidated Financial Statements, Note 2,
“Significant Accounting Policies” includes a summary of the significant accounting policies and methods used in the
preparation of our consolidated financial statements. The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income
and expenses during the reporting periods. Actual results may differ from these estimates under varying assumptions or
conditions. On a quarterly basis, management evaluates its estimates, particularly those that include the most difficult,
subjective or complex judgments and are often about matters that are inherently uncertain. The most significant judgments,
estimates and assumptions relate to the following critical accounting policies that are discussed in more detail below.
Allowance for Loan Losses
In determining the allowance for loan losses on our Private Education Loan non-TDR portfolio, we estimate the principal
amount of loans that will default over the next year (one year being the expected "loss emergence period," which represents the
expected period between the first occurrence of an event likely to cause a loss on a loan and the date the loan is expected to be
charged off, taking into consideration account management practices that affect the timing of a loss, such as the usage of