Sallie Mae 2012 Annual Report Download - page 166

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Derivative Financial Instruments (Continued)
Impact of Derivatives on Consolidated Statements of Changes in Stockholders’ Equity (net of tax)
Years Ended
December 31,
(Dollars in millions) 2012 2011 2010
Total losses on cash flow hedges ............................. $(7) $(4) $(35)
Realized losses recognized in interest expense(1)(2)(3) .............. 16 35 40
Total change in stockholders’ equity for unrealized gains on
derivatives ............................................. $ 9 $31 $ 5
(1) Amounts included in “Realized gain (loss) on derivatives” in the “Impact of Derivatives on Consolidated Statements of
Income” table above.
(2) Includes net settlement income/expense.
(3) We expect to reclassify $0.3 million of after-tax net losses from accumulated other comprehensive income to earnings during
the next 12 months related to net settlement accruals on interest rate swaps.
Collateral
The following table details collateral held and pledged related to derivative exposure between us and our
derivative counterparties.
(Dollars in millions)
December 31,
2012
December 31,
2011
Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)(1) . . . $1,423 $1,326
Securities at fair value — on-balance sheet securitization derivatives (not recorded in
financial statements)(2) ................................................ 613 841
Total collateral held .................................................... $2,036 $2,167
Derivative asset at fair value including accrued interest ........................ $2,570 $2,607
Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments) ......... $ 973 $1,018
Total collateral pledged ................................................. $ 973 $1,018
Derivative liability at fair value including accrued interest and premium
receivable .......................................................... $1,204 $1,223
(1) At December 31, 2012 and 2011, $9 million and $26 million, respectively, were held in restricted cash accounts.
(2) The trusts do not have the ability to sell or re-pledge securities they hold as collateral.
Our corporate derivatives contain credit contingent features. At our current unsecured credit rating, we have
fully collateralized our corporate derivative liability position (including accrued interest and net of premiums
receivable) of $1.0 billion with our counterparties. Further downgrades would not result in any additional
collateral requirements, except to increase the frequency of collateral calls. Two counterparties have the right to
terminate the contracts with further downgrades. We currently have a liability position with these derivative
counterparties (including accrued interest and net of premiums receivable) of $272 million and have posted $273
million of collateral to these counterparties. If the credit contingent feature was triggered for these two
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