Sallie Mae 2012 Annual Report Download - page 165

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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Derivative Financial Instruments (Continued)
and $190 million, respectively. In addition, the above fair values reflect adjustments for illiquid derivatives as
indicated by a wide bid/ask spread in the interest rate indices to which the derivatives are indexed. These
adjustments decreased the overall net asset positions at December 31, 2012 and 2011 by $107 million and
$111 million, respectively.
Cash Flow Fair Value Trading Total
(Dollars in billions)
Dec. 31,
2012
Dec. 31,
2011
Dec. 31,
2012
Dec. 31,
2011
Dec. 31,
2012
Dec. 31,
2011
Dec. 31,
2012
Dec. 31,
2011
Notional Values:
Interest rate swaps ................ $0.7 $1.1 $15.8 $14.0 $ 56.9 $ 73.6 $ 73.4 $ 88.7
Floor Income Contracts ............ — — — — 51.6 57.8 51.6 57.8
Cross-currency interest rate swaps .... — — 13.7 15.5 0.3 .3 14.0 15.8
Other(1) ......................... — — — — 1.4 1.4 1.4 1.4
Total derivatives .................. $0.7 $1.1 $29.5 $29.5 $110.2 $133.1 $140.4 $163.7
(1) “Other” includes embedded derivatives bifurcated from securitization debt, as well as derivatives related to our Total Return Swap
Facility.
Impact of Derivatives on Consolidated Statements of Income
Years Ended December 31,
Unrealized Gain
(Loss) on
Derivatives(1)(2)
Realized Gain
(Loss) on
Derivatives(3)
Unrealized Gain
(Loss) on
Hedged Item(1) Total Gain (Loss)
(Dollars in millions) 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010
Fair Value Hedges:
Interest rate swaps ............. $(75) $ 503 $ 289 $ 449 $ 481 $ 487 $ 41 $(554) $ (334) $ 415 $ 430 $ 442
Cross-currency interest rate
swaps ..................... 42 (723) (1,871) 167 314 348 (182) 664 1,732 27 255 209
Total fair value derivatives ....... (33) (220) (1,582) 616 795 835 (141) 110 1,398 442 685 651
Cash Flow Hedges:
Interest rate swaps ............. (1) (1) — (26) (39) (58) — — — (27) (40) (58)
Total cash flow derivatives ....... (1) (1) — (26) (39) (58) — — — (27) (40) (58)
Trading:
Interest rate swaps ............. (66) 183 412 108 69 11 — — — 42 252 423
Floor Income Contracts ......... 412 (267) 156 (859) (903) (888) — — — (447) (1,170) (732)
Cross-currency interest rate
swaps ..................... (59) 29 57 7 8 7 — — — (52) 37 64
Other ........................ 5 22 37 (1) 11 31 — — — 4 33 68
Total trading derivatives ......... 292 (33) 662 (745) (815) (839) — — — (453) (848) (177)
Total ........................ 258 (254) (920) (155) (59) (62) (141) 110 1,398 (38) (203) 416
Less: realized gains (losses)
recorded in interest expense .... — — — 590 756 777 — — — 590 756 777
Gains (losses) on derivative and
hedging activities, net ......... $258 $(254) $ (920) $(745) $(815) $(839) $(141) $ 110 $1,398 $(628) $ (959) $(361)
(1) Recorded in “Gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.
(2) Represents ineffectiveness related to cash flow hedges.
(3) For fair value and cash flow hedges, recorded in interest expense. For trading derivatives, recorded in “Gains (losses) on derivative and
hedging activities, net.”
F-55