Navy Federal Credit Union 2011 Annual Report Download - page 38

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NAVY FEDERAL CREDIT UNION22
e notional value of mortgage loan commitments totaled $659.8 million and $327.1 million, respectively, as of December 31, 2011 and 2010. e net
unrealized gains and losses on these derivatives at December 31 were as follows:
(dollars in thousands) 2011 2010
Gain $ 16,172 $ 4,079
Loss — (3,283)
Net $ 16,172 $ 796
e notional value of forward sales contracts was $1.08 billion and $720.0 million, respectively, as of December 31, 2011 and 2010. All of these forward
sales contracts are scheduled to settle within a three-month period and their note rates range between 3% and 4%. Management has the intent and
ability to ll the incremental balance of forward sales contracts over the open mortgage loan commitments with the balance of closed loans classied
on the Consolidated Statements of Financial Condition as mortgage loans awaiting sale.
e unrealized gain or loss on these derivatives at December 31 was as follows:
(dollars in thousands) 2011 2010
Gain $ 25 $ 13,074
Loss (7,337) (1,659)
Net $ (7,312) $ 11,415
Navy Federal fair-valued these derivative instruments and recognized a net loss of $2.6 million and a net gain of $12.6 million during 2011 and 2010,
respectively. e net gains or losses are included in “Unrealized loss/(gain) from derivative and economic hedging activities” on the Consolidated
Statements of Income.
Note 12: Legal Contingencies
Navy Federal is a party to various legal actions normally associated with nancial institutions, the aggregate eect of which, in management’s and legal
counsel’s opinion, would not be material to Navy Federal’s nancial condition or results of operations.
Note 13: Commitments
In the normal course of business, Navy Federal enters into conditional commitments to meet the nancing needs of its members. Unused
commitments for loans to members are amounts which Navy Federal has agreed to lend a member as long as the member does not default on existing
loans or violate any condition of the loan agreement. Commitments generally have xed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements. Navy Federal uses the same credit policies in making commitments as it does for all loans to members and, accordingly, at December
31, 2011, the credit risk related to these commitments was similar to that on its existing loans.