Derivative Financial Instruments (Tables)
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Mar. 31, 2014
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Derivative Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Rate Swaps - 1:3 Basis swaps | The following table summarizes the Company’s basis swaps outstanding as of March 31, 2014 and December 31, 2013 in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the "1:3 Basis Swaps").
(a)This derivative has a forward effective start date in 2015. (b)This derivative has a forward effective start date in 2020.
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Interest Rate Swaps - Floor Income Hedges | The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income as of March 31, 2014 and December 31, 2013.
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Interest Rate Swaps - Unsecured Debt Hedges | The Company had the following derivatives outstanding as of March 31, 2014 and December 31, 2013 that are used to effectively convert the variable interest rate on a portion of the Junior Subordinated Hybrid Securities ("Hybrid Securities") to a fixed rate.
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Impact of Foreign Exchange Contracts on the Statement of Income | Foreign Currency Exchange Risk In 2006, the Company issued €352.7 million of student loan asset-backed Euro Notes (the "Euro Notes") with an interest rate based on a spread to the EURIBOR index. As a result of the Euro Notes, the Company is exposed to market risk related to fluctuations in foreign currency exchange rates between the U.S. dollar and Euro. The principal and accrued interest on these notes are re-measured at each reporting period and recorded in the Company’s consolidated balance sheet in U.S. dollars based on the foreign currency exchange rate on that date. The Company entered into a cross-currency interest rate swap in connection with the issuance of the Euro Notes. Under the terms of the cross-currency interest rate swap, the Company receives from the counterparty a spread to the EURIBOR index based on a notional amount of €352.7 million and pays a spread to the LIBOR index based on a notional amount of $450.0 million. In addition, under the terms of this agreement, all principal payments on the Euro Notes will effectively be paid at the exchange rate in effect between the U.S. dollar and Euro as of the issuance of the notes. The following table shows the income statement impact as a result of the re-measurement of the Euro Notes and the change in the fair value of the related derivative instrument.
The re-measurement of the Euro-denominated bonds generally correlates with the change in fair value of the cross-currency interest rate swaps. However, the Company will experience unrealized gains or losses related to the cross-currency interest rate swaps if the two underlying indices (and related forward curve) do not move in parallel. |
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | Consolidated Financial Statement Impact Related to Derivatives The following table summarizes the fair value of the Company’s derivatives as reflected in the consolidated balance sheets:
During the three months ended March 31, 2013, the Company terminated certain derivatives for gross proceeds and payments of $2.7 million and $2.9 million, respectively. There were no derivative terminations during the first quarter of 2014. |
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Schedule of Derivative Instruments [Table Text Block] | Offsetting of Derivative Assets/Liabilities The Company records derivative instruments in the consolidated balance sheets on a gross basis as either an asset or liability measured at its fair value. Certain of the Company's derivative instruments are subject to right of offset provisions with counterparties. The following tables include the gross amounts related to the Company's derivative portfolio recognized in the consolidated balance sheets, reconciled to the net amount when excluding derivatives subject to enforceable master netting arrangements and cash collateral received/pledged:
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance | The following table summarizes the effect of derivative instruments in the consolidated statements of income.
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