Sallie Mae 2011 Annual Report Download - page 46

Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities
Derivative accounting requires net settlement income/expense on derivatives and realized gains/losses
related to derivative dispositions (collectively referred to as “realized gains (losses) on derivative and hedging
activities”) that do not qualify as hedges to be recorded in a separate income statement line item below net
interest income. Under our “Core Earnings” presentation, these gains and losses are reclassified to the income
statement line item of the economically hedged item. For our “Core Earnings” net interest margin, this would
primarily include: (a) reclassifying the net settlement amounts related to our Floor Income Contracts to student
loan interest income and (b) reclassifying the net settlement amounts related to certain of our basis swaps to debt
interest expense. The table below summarizes the realized losses on derivative and hedging activities and the
associated reclassification on a “Core Earnings” basis.
Years Ended December 31,
(Dollars in millions) 2011 2010 2009
Reclassification of realized gains (losses) on derivative and hedging
activities:
Net settlement expense on Floor Income Contracts reclassified to net
interest income ............................................. $(902) $(888) $(717)
Net settlement income (expense) on interest rate swaps reclassified to net
interest income ............................................. 71 69 412
Foreign exchange derivatives gains/(losses) reclassified to other
income .................................................... — — (15)
Net realized gains (losses) on terminated derivative contracts reclassified
to other income ............................................. 25 4 (2)
Total reclassifications of realized (gains) losses on derivative and
hedging activities ........................................... (806) (815) (322)
Add: Unrealized gains (losses) on derivative and hedging activities,
net(1) ...................................................... (153) 454 (282)
Gains (losses) on derivative and hedging activities, net ................ $(959) $(361) $(604)
(1) “Unrealized gains (losses) on derivative and hedging activities, net” comprises the following unrealized mark-to-market gains
(losses):
Years Ended December 31,
(Dollars in millions) 2011 2010 2009
Floor Income Contracts ........................ $(267) $156 $ 483
Basis swaps ................................. 104 341 (413)
Foreign currency hedges ....................... (32) (83) (255)
Other ...................................... 42 40 (97)
Total unrealized gains (losses) on derivative and
hedging activities, net ....................... $(153) $454 $(282)
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