Navy Federal Credit Union 2015 Annual Report Download - page 52

Download and view the complete annual report

Please find page 52 of the 2015 Navy Federal Credit Union annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 78

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78

Financial Section 33
2015—SHARED SUCCESS
Gain/(Loss)
(dollars in thousands) 2015 2014
Interest Rate Lock Commitments
Gains $ 18,570 $ 8,771
(Losses) (19) (3)
Total $ 18,551 $ 8,768
Forward Sales Contracts
Gains $ 1,385 $ 943
(Losses) (688) (3,558)
Total 697 (2,615)
Grand Total $ 19,248 $ 6,153
Derivatives Accounted For as Qualifying Accounting Hedges
Under the provisions of ASC 815, Derivatives and Hedging, 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, Derivatives and
Hedging, 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 in 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, 2015 and 2014.
(Loss)/Gain Recognized in
Income on Derivative
Gain/(Loss) Recognized in
Income on Hedged Item
(dollars in thousands) 2015 2014 2015 2014
Interest rate contracts $ (297) $ (774) $ 354 $ 820
Navy Federal recognized $0.5 thousand in net losses and $5 thousand in net losses, in income
representing the ineectiveness of fair value hedges for the years ended December 31, 2015 and
2014, respectively.
Cash Flow Accounting Hedges
Navy Federal funds a portion of its operations with variable rate obligations. Navy Federal
uses pay-fixed interest rate swaps to hedge the variability in cash flows related to existing and
anticipated replacement funding that reprices based on LIBOR. For derivative instruments that
are designated and qualify as cash flow hedges under ASC 815, Derivatives and Hedging, the