Sallie Mae 2011 Annual Report Download - page 168

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) 2011 2010 2009
Total losses on cash flow hedges ................................... $(4)$(35) $(22)
Realized losses recognized in interest expense(1)(2)(3) .................... 35 40 63
Hedge ineffectiveness reclassified to earnings(1)(4) ..................... — — (1)
Total change in stockholders’ equity due to gains (losses) on derivatives . . . $31 $ 5 $ 40
(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 $1 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.
(4) Recorded in “Gains (losses) derivatives and hedging activities, net” in the consolidated statements of income.
Collateral
Collateral held and pledged related to derivative exposures between us and our derivative counterparties are
detailed in the following table:
(Dollars in millions)
December 31,
2011
December 31,
2010
Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)(1) . . . $1,326 $ 886
Securities at fair value — on-balance sheet securitization derivatives (not recorded in
financial statements)(2) ................................................ 841 585
Total collateral held .................................................... $2,167 $1,471
Derivative asset at fair value including accrued interest ........................ $2,607 $2,540
Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments) ......... $1,018 $ 809
Securities at fair value (recorded in restricted investments)(3) .................... — 36
Total collateral pledged ................................................. $1,018 $ 845
Derivative liability at fair value including accrued interest and premium
receivable .......................................................... $1,223 $ 747
(1) At December 31, 2011 and 2010, $26 million and $108 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.
(3) Counterparty has the right to sell or re-pledge securities.
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 $1,034 million 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
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