Annual Report - CoBank

Derivative Financial Instruments in Cash FlowHedging RelationshipsYear EndedDecember 31, 2011Amount of Gainor (Loss)Recognized inOCI onDerivative (1)Amount of Gainor (Loss)Reclassifiedfrom OCI toIncome onDerivative (1)Amount of Gainor (Loss)Recognized inIncome onDerivative (2)Interest RateContracts $ (3,640) $(3)(2,401) $-Foreign ExchangeContracts (5,072) (4,311) (4) (5) (2,178) (4)Total $ (8,712) $ (6,712) $ (2,178)(1)(2)(3)(4)(5)Effective portionIneffective portion and amount excluded from effectiveness assessmentLocated in Interest Expense in the consolidated income statement for the yearended December 31, 2011Located in Interest Income – Loans in the consolidated income statement for theyear ended December 31, 2011Fully offset by a $4,311 gain on foreign currency denominated loans (hedgeditems) which is also located in Interest Income - Loans in the consolidatedincome statement for the year ended December 31, 2011Derivative Financial Instruments in Cash FlowHedging RelationshipsYear EndedDecember 31, 2009Amount of Gainor (Loss)Recognized inOCI onDerivative (1)Amount of Gainor (Loss)Reclassifiedfrom OCI toIncome onDerivative (1)Amount of Gainor (Loss)Recognized inIncome onDerivative (2)Interest RateContracts $ 1,680 $(3)(698) $-Foreign ExchangeContracts 6,384 8,028 (4) (5) (800) (4)Total $ 8,064 $ 7,330 $(800)(1)(2)(3)(4)(5)Effective portionIneffective portion and amount excluded from effectiveness assessmentLocated in Interest Expense in the consolidated income statement for the yearended December 31, 2009Located in Interest Income – Loans in the consolidated income statement for theyear ended December 31, 2009Fully offset by an $8,028 loss on foreign currency denominated loans (hedgeditems) which is also located in Interest Income - Loans in the consolidatedincome statement for the year ended December 31, 2009Derivative Financial Instruments in Cash FlowHedging RelationshipsYear EndedDecember 31, 2010Amount of Gainor (Loss)Recognized inOCI onDerivative (1)Amount of Gainor (Loss)Reclassifiedfrom OCI toIncome onDerivative (1)Amount of Gainor (Loss)Recognized inIncome onDerivative (2)Interest RateContracts $ (7,171) $(3)(1,311) $-Foreign ExchangeContracts (3,393) (2,974) (4) (5) (459) (4)Total $ (10,564) $ (4,285) $(459)(1)(2)(3)(4)(5)Effective portionIneffective portion and amount excluded from effectiveness assessmentLocated in Interest Expense in the consolidated income statement for the yearended December 31, 2010Located in Interest Income – Loans in the consolidated income statement for theyear ended December 31, 2010Fully offset by an $2,974 gain on foreign currency denominated loans (hedgeditems) which is also located in Interest Income - Loans in the consolidatedincome statement for the year ended December 31, 2010Derivative Financial Instruments not Designated asHedging RelationshipsNet Amount of Gain or (Loss) Recognized inIncome On Derivative (1)Year Ended December 31, 2011 2010 2009Interest Rate Contracts $ 11,930 $ 537 $ 1,997Foreign Exchange Contracts 20 (29) (33)Total $ 11,950 $ 508 $ 1,964(1) Located in Other Noninterest Income / Expense in the consolidated incomestatements for the years ended December 31, 2011, 2010 and 2009Note 12 – Disclosure About EstimatedFair Value of Financial InstrumentsThe fair values of financial instruments represent theestimated amount to be received to sell an asset or paid totransfer or extinguish a liability (an exit price) in activemarkets among willing participants at the reporting date. TheFinancial Accounting Standards Board (FASB) hasestablished a three-level fair value hierarchy aimed atmaximizing the use of observable inputs – that is, inputs thatreflect the assumptions market participants would use inpricing an asset or liability. Observable inputs reflect theassumptions market participants would use in pricing an assetor liability based on market data obtained from sourcesindependent of the reporting entity. Unobservable inputs aresupported by limited or no market activity and requiresignificant management judgment or estimation.CoBank 2011 Annual Report97