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Navy Federal Credit Union • 2013 Financial Section
31
2013 ANNUAL REPORT
and the forward sales contracts as derivative instruments at fair value on its Consolidated Statements
of Financial Condition and records changes in their fair values in current earnings.
The table below presents gains (losses) on these derivatives for 2013 and 2012. These gains (losses) are
largely oset by the income or expense that is recorded on the IRLCs and funded loans in Net gains on
mortgage loan sales on the Consolidated Statements of Income.

Recognized in Income
(dollars in thousands)  
Interest Rate Lock Commitments
Gains $ 5,593 $ 50,282
(Losses) (45) (18)
Total $  $

Gains $ 2,558 $ 1,401
(Losses) (86) (3,115)
Total $  $
 $ $
Derivatives Accounted For as Qualifying Accounting Hedges
Under the provisions of ASC 815, derivative instruments may be designated as a qualifying fair value or
cash flow hedge.
Fair Value Accounting Hedges
Navy Federal uses qualifying fair value hedges to protect certain fixed-rate investments against the
adverse changes in fair value attributable to changes in interest rates. For derivative instruments that are
designated and qualify as a fair value hedge under ASC 815, the gain or loss on the derivative instrument
and the gain or loss on the hedged item attributable to the hedged risk are recognized in current
earnings. When interest rate fluctuations cause changes in the fair value of fixed-rate investments, the
gains or losses on the derivative instruments are expected to be highly eective in providing an oset.
Navy Federal includes the unrealized gains or losses on its fair value hedge derivatives with the unrealized
gain or loss on the hedged instrument in Other income on the Consolidated Statements of Income.
The table below summarizes gains and losses recognized in earnings related to Navy Federal’s derivatives
designated as fair value hedges during the years ended December 31, 2013 and 2012.

Income on Derivative
(Loss) Recognized in

(dollars in thousands)    
Interest rate contracts $ 708 $ 144 $ (650) $ (139)