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8-K - FORM 8-K - FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE | w82669e8vk.htm |
EX-99.2 - EX-99.2 - FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE | w82669exv99w2.htm |
Exhibit 99.1
Resource Center: 1-800-732-6643
Contact:
|
Pete Bakel 202-752-2034 |
|
Number:
|
5379a | |
Date:
|
May 6, 2011 |
Fannie
Mae Reports First-Quarter 2011 Results
Company Continues to Manage Losses on Legacy Book While Building
Strong New Book of Business
Strong New Book of Business
WASHINGTON, DC Fannie Mae (FNMA/OTC) today reported a net loss of $6.5 billion in the
first quarter of 2011, compared to net income of $73 million in the fourth quarter of 2010 (which
reflected a $1.2 billion reduction to credit-related expenses resulting from the successful
resolution of certain outstanding repurchase requests), and a net loss of $11.5 billion in the
first quarter of 2010. The change to a net loss in the first quarter of 2011 from net income in the
fourth quarter was due to an increase in credit-related expenses, primarily driven by a decline in
home prices during the quarter. The company estimates that, although home prices have improved in
some geographic regions, home prices on a national basis declined by 1.8 percent in the first
quarter of 2011, which had a direct and negative impact on its credit-related expenses.
Substantially all of the companys credit-related expenses in the first quarter were related to the
companys legacy (pre-2009) book of business. While the company continues to work through losses on
its legacy book, it expects that the single-family loans it has acquired since January 2009 will be
profitable over their lifetime.
We expect our credit-related expenses to remain elevated in 2011 as we continue to be negatively
impacted by the prolonged decline in home prices, said Michael J. Williams, president and chief
executive officer. As we move forward, we are building a strong new book of business that now
accounts for 45 percent of the companys overall single-family guaranty book of business. We
continue to be the leading provider of liquidity for single-family mortgages and affordable
multifamily rental housing while we remain focused on our responsibility to find solutions for
distressed homeowners and their families.
Fannie Mae continues to strengthen its book of business. Single-family loans acquired from January
2009 forward have a strong credit profile. For more information on the expected lifetime
profitability of the companys new single-family book of business, please refer to Table 1 in the
companys quarterly report on Form 10-Q for the quarter ended March 31, 2011.
The vast majority of the companys credit losses in the first quarter were attributable to
single-family loans that Fannie Mae purchased or guaranteed from 2005 through 2008. The companys
single-family book of business had $206 billion in nonperforming loans as of March 31, 2011. As
Fannie Mae manages losses on its legacy book, the company is maintaining a clear focus on its
priorities and providing liquidity to the market, setting new standards for sustainable lending,
and supporting programs to help families stay in their homes.
First-Quarter 2011 Results |
1 |
The companys net loss attributable to common stockholders in the first quarter of 2011 was $8.7
billion, or $(1.52) per diluted share, including $2.2 billion in dividend payments to the U.S.
Treasury. As of March 31, 2011, the companys net worth deficit was $8.4 billion. The Federal
Housing Finance Agency (FHFA) has requested $8.5 billion on the companys behalf from Treasury to
eliminate the deficit. Upon receipt of those funds, the companys total obligation to Treasury for
its senior preferred stock will be $99.7 billion. Since its senior preferred stock was issued, the
company has paid a total of $12.4 billion in dividends to Treasury.
Providing Liquidity to the Market
In the first quarter of 2011, Fannie Mae purchased or guaranteed approximately $189 billion in
loans, measured by unpaid principal balance, which includes approximately $20 billion in delinquent
loans purchased from its single-family mortgage-backed securities (MBS) trusts. Excluding
delinquent loans purchased from its MBS trusts, Fannie Maes purchases and guarantees enabled its
lender customers to finance approximately 759,000 single-family conventional loans and multifamily
loans secured by multifamily properties with approximately 83,000 units.
Fannie Mae remained the largest single issuer of mortgage-related securities in the secondary
market in the first quarter of 2011, with an estimated market share of new single-family
mortgage-related securities issuances of 48.6 percent, compared to 49.0 percent in the fourth
quarter of 2010. If the Federal Housing Administration continues to be the lower cost option for
some consumers, the companys market share could be adversely impacted if the market shifts away
from refinance activity, which is likely to occur when interest rates rise. Fannie Mae also remains
a constant source of liquidity in the multifamily market. Currently, the company owns or guarantees
approximately one-fifth of the outstanding debt on multifamily properties.
Credit Quality
New Single-Family Book of Business: Forty-five percent of Fannie Maes single-family
guaranty book of business as of March 31, 2011 consisted of loans it had purchased or guaranteed
since the beginning of 2009. The company continues to expect that these loans will be profitable
over their lifetime, given their strong credit risk profile and performance to date. Conventional
single-family loans added to Fannie Maes book of business since January 1, 2009 have a weighted
average loan-to-value ratio at origination of 68 percent, and a weighted average credit score at
origination of 762. The ultimate performance of loans the company has acquired since January 2009
will be affected by macroeconomic trends, including unemployment, the economy, and home prices.
2005 2008 Single-Family Book of Business: The single-family credit losses the company
realized from January 1, 2009 through March 31, 2011, combined with the amounts the company has
reserved for single-family credit losses as of March 31, 2011, total approximately $120 billion,
which includes a portion of the companys fair value losses on credit impaired loans that the
company deems an effective reserve for future credit losses. The vast majority of these losses
were attributable to single-family loans the company acquired from 2005 through 2008. The company
expects that future defaults on its legacy book and the resulting charge-offs will occur over a
period of years.
First-Quarter 2011 Results |
2 |
Fannie Maes single-family serious delinquency rate decreased to 4.27 percent as of March 31, 2011,
from 4.48 percent as of December 31, 2010, and from 5.47 percent as of March 31, 2010. The decrease
in Fannie Maes single-family serious delinquency rate was primarily the result of home retention
solutions, mainly loan modifications, and foreclosure alternatives completed, combined with
foreclosures when a viable solution was not available. The volume of loans impacted by these
actions continues to exceed the number of loans becoming seriously delinquent, thereby decreasing
the percentage of the companys seriously delinquent loans. The decrease also is attributable to
the companys acquisition of loans with stronger credit profiles in 2010 and the first quarter of
2011.
Foreclosure Prevention
Loan Workouts: During the first quarter of 2011, Fannie Mae completed more than 78,000
single-family loan workouts, including more than 60,000 home-retention solutions (modifications,
repayment plans, and forbearances). Details of the companys home-retention solutions and
foreclosure alternatives include:
| Loan modifications, which include permanent modifications under the Treasury Departments Home Affordable Modification Program, decreased in the first quarter of 2011 to 51,043 from 81,692 in the fourth quarter of 2010. These figures do not include modifications in trial periods. |
| Repayment plans/forbearances of 9,916, compared with 7,973 in the fourth quarter of 2010. |
| Preforeclosure sales and deeds-in-lieu of foreclosure of 17,120, compared with 15,632 in the fourth quarter of 2010. |
Homeowner Initiatives: In the first quarter of 2011, Fannie Mae continued to develop
programs and invest in initiatives that are designed to help keep people in homes, assist
prospective homeowners, and support the mortgage and housing markets overall. Fannie Mae expanded
its homeowner outreach initiatives and celebrated the one year anniversary of the Miami Mortgage
Help Center in March. Since opening a year ago, the centers staff has reached out to more than
5,000 struggling homeowners with loans owned by Fannie Mae. More than 1,000 responded, resulting in
nearly two-thirds of those families securing a solution to stay in their homes. As of March 31,
2011, Fannie Mae had established six Mortgage Help Centers that completed approximately 800 home
retention plans in the first quarter of 2011. Since the end of the quarter, the company has
established three more centers in Tampa, FL; Jacksonville, FL; and Philadelphia, PA. The company
also uses direct mail and phone calls to encourage homeowners to pursue foreclosure alternatives,
and also has established partnerships with counseling agencies in other communities to provide
similar services.
Foreclosures and REO
Fannie Mae acquired 53,549 single-family real-estate owned (REO) properties through foreclosure in
the first quarter of 2011, compared with 45,962 in the fourth quarter of 2010. As of March 31,
2011, the companys inventory of single-family REO properties was 153,224, compared with 162,489 as
of December 31, 2010. The carrying value of the companys single-family REO was $14.1 billion,
compared with $15.0 billion as of December 31, 2010.
First-Quarter 2011 Results |
3 |
The companys single-family foreclosure rate was 1.19 percent on an annualized basis in the first
quarter of 2011, compared with 1.03 percent in the fourth quarter of 2010. This reflects the
annualized number of single-family properties acquired through foreclosure, as a percentage of the
total number of loans in Fannie Maes conventional single-family guaranty book of business.
Summary of First-Quarter 2011 Results
Fannie Mae reported a net loss of $6.5 billion for the first quarter of 2011, compared to net
income of $73 million in the fourth quarter of 2010. The companys net loss attributable to common
stockholders was $8.7 billion, or $(1.52) per diluted share, compared with a loss of $2.1 billion
in the fourth quarter of 2010, or $(0.37) per diluted share. The net worth deficit of $8.4 billion
as of March 31, 2011 takes into account dividends paid on senior preferred stock held by Treasury.
(dollars in millions, except per share amounts) (1) | 1Q11 | 4Q10 | Variance | 1Q11 | 1Q10 | Variance | ||||||||||||||||||
Net interest income |
$ | 4,960 | $ | 4,637 | $ | 323 | $ | 4,960 | $ | 2,789 | $ | 2,171 | ||||||||||||
Fee and other income (1)(2) |
237 | 253 | (16 | ) | 237 | 233 | 4 | |||||||||||||||||
Net revenues |
5,197 | 4,890 | 307 | 5,197 | 3,022 | 2,175 | ||||||||||||||||||
Investment gains, net |
75 | 75 | | 75 | 166 | (91 | ) | |||||||||||||||||
Net other-than-temporary impairments |
(44 | ) | (23 | ) | (21 | ) | (44 | ) | (236 | ) | 192 | |||||||||||||
Fair value gains (losses), net |
289 | 366 | (77 | ) | 289 | (1,705 | ) | 1,994 | ||||||||||||||||
Administrative expenses |
(605 | ) | (592 | ) | (13 | ) | (605 | ) | (605 | ) | | |||||||||||||
Credit-related expenses (3) |
(11,042 | ) | (4,318 | ) | (6,724 | ) | (11,042 | ) | (11,884 | ) | 842 | |||||||||||||
Other non-interest expenses (1)(4) |
(339 | ) | (348 | ) | 9 | (339 | ) | (354 | ) | 15 | ||||||||||||||
Net losses and expenses |
(11,666 | ) | (4,840 | ) | (6,826 | ) | (11,666 | ) | (14,618 | ) | 2,952 | |||||||||||||
Income
(loss) before federal income taxes |
(6,469 | ) | 50 | (6,519 | ) | (6,469 | ) | (11,596 | ) | 5,127 | ||||||||||||||
Benefit (provision) for federal income taxes |
(2 | ) | 15 | (17 | ) | (2 | ) | 67 | (69 | ) | ||||||||||||||
Net income (loss) |
(6,471 | ) | 65 | (6,536 | ) | (6,471 | ) | (11,529 | ) | 5,058 | ||||||||||||||
Less: Net (income) loss attributable to the noncontrolling
interest |
| 8 | (8 | ) | | (1 | ) | 1 | ||||||||||||||||
Net income (loss) attributable to Fannie Mae |
$ | (6,471 | ) | $ | 73 | $ | (6,544 | ) | $ | (6,471 | ) | $ | (11,530 | ) | $ | 5,059 | ||||||||
Preferred stock dividends |
(2,216 | ) | (2,154 | ) | (62 | ) | (2,216 | ) | (1,527 | ) | (689 | ) | ||||||||||||
Net loss attributable to common stockholders |
$ | (8,687 | ) | $ | (2,081 | ) | $ | (6,606 | ) | $ | (8,687 | ) | $ | (13,057 | ) | $ | 4,370 | |||||||
Diluted loss per common share |
$ | (1.52 | ) | $ | (0.37 | ) | $ | (1.15 | ) | $ | (1.52 | ) | $ | (2.29 | ) | $ | 0.77 | |||||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Trust management income and guaranty fee income are included in fee and other income. | |
(3) | Consists of provision for loan losses, provision for guaranty losses and foreclosed property expense. | |
(4) | Consists of debt extinguishment losses, net, losses from partnership investments and other expenses. |
Net revenues were $5.2 billion in the first quarter of 2011, up six percent from $4.9
billion in the fourth quarter of 2010, due to an increase in net interest income.
First-Quarter 2011 Results |
4 |
Credit-related expenses, which are the total provision for credit losses plus foreclosed property
expense, were $11.0 billion in the first quarter of 2011, up from $4.3 billion in the fourth
quarter of 2010. The higher provision for credit losses during the period was primarily driven by
an increase in total loss reserves due to a decline in home prices and increase in initial
charge-off severity during the period, the number of loans that entered into a trial modification
period during the quarter, a decline in future
expected home prices, and an extended timeframe of loan delinquencies as a result of delays caused
by servicer foreclosure process deficiencies and the resulting foreclosure pause. In addition, the
fourth quarter of 2010 reflects a $1.2 billion reduction to credit-related expenses resulting from
the successful resolution of certain outstanding repurchase requests.
Credit losses, which the company defines generally as net charge-offs plus foreclosed property
expense, excluding the effect of certain fair-value losses, were $5.7 billion in the first quarter
of 2011, compared with $3.2 billion in the fourth quarter of 2010. As discussed above, the fourth
quarter of 2010 reflected a $1.2 billion reduction to charge-offs and foreclosed property expense
resulting from the successful resolution of certain outstanding repurchase requests. Additionally,
the increase in credit losses in the first quarter of 2011 continues to reflect an increase in
charge-offs due to higher loss severities arising from a continued decline in home prices.
Total loss reserves and fair value losses previously recognized on acquired credit-impaired loans
were $90.6 billion as of March 31, 2011, compared with $85.4 billion as of December 31, 2010. The
company considers a portion of total fair value losses previously recognized on loans purchased out
of MBS trusts as an effective reserve, apart from its total loss reserves, to the extent that the
company expects to realize credit losses on the acquired loans in the future.
Net fair value gains were $289 billion in the first quarter of 2011, compared to $366 million in
the fourth quarter of 2010. This was primarily due to gains recognized on trading securities.
Net Worth and U.S. Treasury Funding
The Acting Director of FHFA has requested $8.5 billion of funds from Treasury on the companys
behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and
Treasury to eliminate the companys net worth deficit as of March 31, 2011. Fannie Maes
first-quarter dividend of $2.2 billion on its senior preferred stock held by Treasury was declared
by FHFA and paid by the company on March 31, 2011.
In March 2011, Treasury provided to the company $2.6 billion to cure its net worth deficit as of
December 31, 2010. As a result of this draw, the aggregate liquidation preference of the senior
preferred stock increased from $88.6 billion to $91.2 billion as of March 31, 2011. It will
increase to $99.7 billion upon the receipt of funds from Treasury to eliminate the companys
first-quarter 2011 net worth deficit, which will require an annualized dividend payment of $10.0
billion. This amount exceeds the companys reported annual net income for each year since its
inception.
First-Quarter 2011 Results |
5 |
Fair Value Update
The fair value of Fannie Maes net assets decreased by $10.8 billion from December 31, 2010,
resulting in a fair value net deficit of $131.1 billion as of March 31, 2011, compared to a fair
value net deficit of $120.3 billion as of December 31, 2010. This decrease was due primarily to
credit-related items, principally related to declining actual and expected home prices, as well as
a decrease in the estimated rate of prepayments. These credit-related items increased the expected
life of the guaranty book of business and increased expected credit losses. The decrease due to
credit-related items was partially offset by an increase in the fair value of the net portfolio
attributable to the positive impact of the spread between mortgage assets and associated debt and
derivatives.
As part of Fannie Maes disclosure requirements with FHFA, the company discloses on a quarterly
basis supplemental non-GAAP consolidated fair value balance sheets, reflecting the companys assets
and liabilities at estimated fair value. The fair value of the companys net assets is not a
measure defined within generally accepted accounting principles and may not be comparable to
similarly titled measures reported by other companies. The estimated fair value of the companys
net assets is calculated as of a particular point in time based on its existing assets and
liabilities, and does not incorporate other factors that may have a significant impact on its
long-term fair value. As a result, the estimated fair value of the companys net assets presented
in its non-GAAP consolidated fair value balance sheets does not represent an estimate of its net
realizable value, liquidation value, or its market value as a whole. In addition, the fair value of
the companys net assets attributable to common stockholders presented in its fair value balance
sheet does not represent an estimate of the value it expects to realize from operating the company,
nor what it expects to draw from Treasury under the terms of the senior preferred stock purchase
agreement.
For more information on the change in the companys fair value net deficit, please refer to
Supplemental Non-GAAP Information Fair Value Balance Sheets in the companys quarterly report
on Form 10-Q for the quarter ended March 31, 2011. See also Supplemental Non-GAAP Consolidated
Fair Value Balance Sheets and Explanation and Reconciliation of Non-GAAP Measures to GAAP
Measures later in this release for a reconciliation of the companys fair value balance sheets to
its GAAP consolidated balance sheets.
Business Segment Results
Fannie Mae conducts its activities through three complementary businesses: its Single-Family
business, its Multifamily business, and its Capital Markets group. The companys Single-Family and
Multifamily businesses work with Fannie Maes lender customers, who deliver mortgage loans that the
company purchases and securitizes into Fannie Mae MBS. The Capital Markets group manages the
companys investment activity in mortgage-related assets, funding investments primarily with
proceeds received from the issuance of Fannie Mae debt securities in the domestic and international
capital markets. The Capital Markets group also provides liquidity to the mortgage market through
short-term financing and other activities.
First-Quarter 2011 Results |
6 |
Single-Family guaranty book of business was $2.90 trillion as of March 31, 2011, compared with
$2.87 trillion as of December 31, 2010. Single-Family guaranty fee income for the first quarter of
2011 was $1.9 billion, compared with $1.8 billion for the fourth quarter of 2010. The
Single-Family business lost $10.7 billion in the first quarter of 2011, compared with a loss of
$3.6 billion in the fourth quarter of 2010, due primarily to credit-related expenses of $11.1
billion, the vast majority of which were attributable to loans purchased or guaranteed from 2005
through 2008.
Multifamily guaranty book of business was $190.6 billion as of March 31, 2011, compared with $189.4
billion as of December 31, 2010. Multifamily recorded credit-related income of $64 million in the
first quarter of 2011, compared with credit-related expenses of $254 million in the fourth quarter
of 2010. Multifamily earned $247 million in the first quarter of 2011, compared with a $183 million
loss in the fourth quarter of 2010.
Capital Markets net interest income was $3.7 billion in the first quarter of 2011, the same as the
fourth quarter of 2010. Fair value gains were $218 million, compared with $358 million in the
fourth quarter of 2010. Net other-than-temporary impairments were $44 million, compared with $24
million in the fourth quarter of 2010. The net mortgage investment portfolio balance decreased to
$757.6 billion as of March 31, 2011, compared with $788.8 billion as of December 31, 2010,
resulting from purchases of $43.2 billion, liquidations of $38.9 billion, and sales of $35.4
billion during the quarter. Capital Markets earned $4.3 billion in the first quarter of 2011,
compared with $4.7 billion in the fourth quarter of 2010.
The company provides further discussion of its financial results and condition, credit performance,
fair value balance sheets, and other matters in its quarterly report on Form 10-Q for the quarter
ended March 31, 2011, which was filed today with the Securities and Exchange Commission. Further
information about the companys credit performance, the characteristics of its guaranty book of
business, the drivers of its credit losses, its foreclosure-prevention efforts, and other measures
is contained in the 2011 First-Quarter Credit Supplement on Fannie Maes Web site,
www.fanniemae.com.
# # #
In this release, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements regarding the companys future financial results; the
profitability of its loans; future credit losses, credit-related expenses, defaults, and
charge-offs; its draws from and dividends to be paid to Treasury; the performance and caliber of
loans it has acquired and will acquire; future home prices; future market share; future refinance
activity; and future prepayment rates. These estimates, forecasts, expectations, and statements are
forward-looking statements and are based on the companys current assumptions regarding numerous
factors, including assumptions about future home prices and the future performance of its loans.
The companys future estimates of these amounts, as well as the actual amounts, may differ
materially from its current estimates as a result of home price changes, interest rate changes,
unemployment, other macroeconomic variables, government policy matters, changes in generally
accepted accounting principles, credit availability, social behaviors, the volume of loans it
modifies, the effectiveness of its loss mitigation strategies, management of its real estate owned
inventory and pursuit of contractual remedies, changes in the fair value of its assets and
liabilities, impairments of its assets, the adequacy of its loss reserves, its ability to maintain
a positive net worth, effects from activities the company takes to support the mortgage market and
help homeowners, the conservatorship and its effect on the companys business, the investment by
Treasury and its effect on the companys business, changes in the structure and regulation of the
financial services industry, the companys ability to access the debt markets, disruptions in the
housing, credit, and stock markets, government investigations and litigation, the extent of the
servicer foreclosure process deficiencies and the duration of the related foreclosure pause, and
many other factors. Changes in the companys underlying assumptions and actual outcomes, which
could be affected by the economic environment, government policy, and many other factors, including
those discussed in the Risk Factors sections of the companys annual report on Form 10-K for the
year ended December 31, 2010 and quarterly report on Form 10-Q for the quarter ended March 31, 2011
and elsewhere in this release, could result in actual results being materially different from what
is set forth in the forward-looking statements.
Fannie Mae provides Web site addresses in its news releases
solely for readers information. Other content or information
appearing on these Web sites is not part of this release.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in Americas
secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to
mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those
who house America.
First-Quarter 2011 Results |
7 |
ANNEX I
FANNIE
MAE
(In conservatorship)
Condensed Consolidated Balance Sheets(Unaudited)
(Dollars in millions, except share amounts)
(In conservatorship)
Condensed Consolidated Balance Sheets(Unaudited)
(Dollars in millions, except share amounts)
As of | ||||||||
March 31, |
December 31, |
|||||||
2011 | 2010 | |||||||
ASSETS
|
||||||||
Cash and cash equivalents (includes $717 and $348, respectively,
related to consolidated trusts)
|
$ | 19,831 | $ | 17,297 | ||||
Restricted cash (includes $33,405 and $59,619, respectively,
related to consolidated trusts)
|
36,730 | 63,678 | ||||||
Federal funds sold and securities purchased under agreements to
resell or similar arrangements
|
26,250 | 11,751 | ||||||
Investments in securities:
|
||||||||
Trading, at fair value (includes $21 as of both periods related
to consolidated trusts)
|
57,035 | 56,856 | ||||||
Available-for-sale,
at fair value (includes $1,678 and $1,055, respectively, related
to consolidated trusts)
|
89,613 | 94,392 | ||||||
Total investments in securities
|
146,648 | 151,248 | ||||||
Mortgage loans:
|
||||||||
Loans held for sale, at lower of cost or fair value (includes
$1,055 and $661, respectively, related to consolidated trusts)
|
1,414 | 915 | ||||||
Loans held for investment, at amortized cost:
|
||||||||
Of Fannie Mae
|
402,352 | 407,228 | ||||||
Of consolidated trusts (includes $2,969 and $2,962,
respectively, at fair value and loans pledged as collateral that
may be sold or repledged of $2,241 and $2,522, respectively)
|
2,613,848 | 2,577,133 | ||||||
Total loans held for investment
|
3,016,200 | 2,984,361 | ||||||
Allowance for loan losses
|
(67,557 | ) | (61,556 | ) | ||||
Total loans held for investment, net of allowance
|
2,948,643 | 2,922,805 | ||||||
Total mortgage loans
|
2,950,057 | 2,923,720 | ||||||
Accrued interest receivable, net (includes $8,918 and $8,910,
respectively, related to consolidated trusts)
|
11,303 | 11,279 | ||||||
Acquired property, net
|
15,264 | 16,173 | ||||||
Other assets (includes $242 and $593, respectively, related to
consolidated trusts)
|
20,959 | 26,826 | ||||||
Total assets
|
$ | 3,227,042 | $ | 3,221,972 | ||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
Liabilities:
|
||||||||
Accrued interest payable (includes $9,673 and $9,712,
respectively, related to consolidated trusts)
|
$ | 13,828 | $ | 13,764 | ||||
Federal funds purchased and securities sold under agreements to
repurchase
|
25 | 52 | ||||||
Debt:
|
||||||||
Of Fannie Mae (includes $884 and $893, respectively, at fair
value)
|
761,187 | 780,044 | ||||||
Of consolidated trusts (includes $2,193 and $2,271,
respectively, at fair value)
|
2,447,589 | 2,416,956 | ||||||
Other liabilities (includes $713 and $893, respectively, related
to consolidated trusts)
|
12,831 | 13,673 | ||||||
Total liabilities
|
3,235,460 | 3,224,489 | ||||||
Commitments and contingencies (Note 14)
|
| | ||||||
Fannie Mae stockholders equity (deficit):
|
||||||||
Senior preferred stock, 1,000,000 shares issued and
outstanding
|
91,200 | 88,600 | ||||||
Preferred stock, 700,000,000 shares are
authorized576,868,039 and 576,868,139 shares issued and outstanding, respectively
|
20,204 | 20,204 | ||||||
Common stock, no par value, no maximum
authorization1,270,092,862 and 1,270,092,708 shares issued, respectively; 1,119,073,956 and
1,118,504,194 shares outstanding, respectively
|
667 | 667 | ||||||
Accumulated deficit
|
(111,669 | ) | (102,986 | ) | ||||
Accumulated other comprehensive loss
|
(1,501 | ) | (1,682 | ) | ||||
Treasury stock, at cost, 151,018,906 and
151,588,514 shares, respectively
|
(7,400 | ) | (7,402 | ) | ||||
Total Fannie Mae stockholders deficit
|
(8,499 | ) | (2,599 | ) | ||||
Noncontrolling interest
|
81 | 82 | ||||||
Total deficit
|
(8,418 | ) | (2,517 | ) | ||||
Total liabilities and equity (deficit)
|
$ | 3,227,042 | $ | 3,221,972 | ||||
See Notes to Condensed Consolidated Financial Statements
First-Quarter 2011 Results |
8 |
FANNIE
MAE
(In conservatorship)
Condensed Consolidated Statements of Operations and Comprehensive Loss(Unaudited)
(Dollars and shares in millions, except per share amounts)
(In conservatorship)
Condensed Consolidated Statements of Operations and Comprehensive Loss(Unaudited)
(Dollars and shares in millions, except per share amounts)
For the Three |
||||||||
Months Ended |
||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Interest income:
|
||||||||
Trading securities
|
$ | 284 | $ | 315 | ||||
Available-for-sale
securities
|
1,213 | 1,473 | ||||||
Mortgage loans (includes $31,865 and $34,321, respectively,
related to consolidated trusts)
|
35,590 | 37,619 | ||||||
Other
|
28 | 39 | ||||||
Total interest income
|
37,115 | 39,446 | ||||||
Interest expense:
|
||||||||
Short-term debt (includes $3 and $2, respectively, related to
consolidated trusts)
|
107 | 118 | ||||||
Long-term debt (includes $27,852 and $31,458, respectively,
related to consolidated trusts)
|
32,048 | 36,539 | ||||||
Total interest expense
|
32,155 | 36,657 | ||||||
Net interest income
|
4,960 | 2,789 | ||||||
Provision for loan losses
|
(10,587 | ) | (11,939 | ) | ||||
Net interest loss after provision for loan losses
|
(5,627 | ) | (9,150 | ) | ||||
Investment gains, net
|
75 | 166 | ||||||
Other-than-temporary
impairments
|
(57 | ) | (186 | ) | ||||
Noncredit portion of
other-than-temporary
impairments recognized in other comprehensive income
|
13 | (50 | ) | |||||
Net
other-than-temporary
impairments
|
(44 | ) | (236 | ) | ||||
Fair value gains (losses), net
|
289 | (1,705 | ) | |||||
Debt extinguishment gains (losses), net
|
13 | (124 | ) | |||||
Fee and other income
|
237 | 233 | ||||||
Non-interest income (loss)
|
570 | (1,666 | ) | |||||
Administrative expenses:
|
||||||||
Salaries and employee benefits
|
320 | 324 | ||||||
Professional services
|
189 | 194 | ||||||
Occupancy expenses
|
42 | 41 | ||||||
Other administrative expenses
|
54 | 46 | ||||||
Total administrative expenses
|
605 | 605 | ||||||
Benefit for guaranty losses
|
(33 | ) | (36 | ) | ||||
Foreclosed property expense (income)
|
488 | (19 | ) | |||||
Other expenses
|
352 | 230 | ||||||
Total expenses
|
1,412 | 780 | ||||||
Loss before federal income taxes
|
(6,469 | ) | (11,596 | ) | ||||
Provision (benefit) for federal income taxes
|
2 | (67 | ) | |||||
Net loss
|
(6,471 | ) | (11,529 | ) | ||||
Other comprehensive income:
|
||||||||
Changes in unrealized losses on
available-for-sale
securities, net of reclassification adjustments and taxes
|
179 | 1,370 | ||||||
Other
|
2 | 2 | ||||||
Total other comprehensive income
|
181 | 1,372 | ||||||
Total comprehensive loss
|
(6,290 | ) | (10,157 | ) | ||||
Less: Comprehensive income attributable to the noncontrolling
interest
|
| (1 | ) | |||||
Total comprehensive loss attributable to Fannie Mae
|
$ | (6,290 | ) | $ | (10,158 | ) | ||
Net loss
|
$ | (6,471 | ) | $ | (11,529 | ) | ||
Less: Net income attributable to the noncontrolling interest
|
| (1 | ) | |||||
Net loss attributable to Fannie Mae
|
(6,471 | ) | (11,530 | ) | ||||
Preferred stock dividends
|
(2,216 | ) | (1,527 | ) | ||||
Net loss attributable to common stockholders
|
$ | (8,687 | ) | $ | (13,057 | ) | ||
Loss per shareBasic and Diluted
|
$ | (1.52 | ) | $ | (2.29 | ) | ||
Weighted-average common shares outstandingBasic and Diluted
|
5,698 | 5,692 |
See Notes to Condensed Consolidated Financial Statements
First-Quarter 2011 Results |
9 |
FANNIE
MAE
(In conservatorship)
Condensed Consolidated Statements of Cash Flows(Unaudited)
(Dollars in millions)
(In conservatorship)
Condensed Consolidated Statements of Cash Flows(Unaudited)
(Dollars in millions)
For the Three |
||||||||
Months Ended |
||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net cash provided by (used in) operating activities
|
$ | 2,566 | $ | (30,885 | ) | |||
Cash flows provided by investing activities:
|
||||||||
Purchases of trading securities held for investment
|
(185 | ) | (6,695 | ) | ||||
Proceeds from maturities of trading securities held for
investment
|
522 | 805 | ||||||
Proceeds from sales of trading securities held for investment
|
409 | 15,068 | ||||||
Purchases of
available-for-sale
securities
|
(44 | ) | (107 | ) | ||||
Proceeds from maturities of
available-for-sale
securities
|
3,851 | 4,120 | ||||||
Proceeds from sales of
available-for-sale
securities
|
498 | 4,428 | ||||||
Purchases of loans held for investment
|
(15,745 | ) | (12,725 | ) | ||||
Proceeds from repayments of loans held for investment of Fannie
Mae
|
5,381 | 3,920 | ||||||
Proceeds from repayments of loans held for investment of
consolidated trusts
|
121,533 | 108,903 | ||||||
Net change in restricted cash
|
26,948 | 3,174 | ||||||
Advances to lenders
|
(15,646 | ) | (10,338 | ) | ||||
Proceeds from disposition of acquired property and
preforeclosure sales
|
10,979 | 7,678 | ||||||
Net change in federal funds sold and securities purchased under
agreements to resell or similar agreements
|
(14,499 | ) | (9,135 | ) | ||||
Other, net
|
(163 | ) | (382 | ) | ||||
Net cash provided by investing activities
|
123,839 | 108,714 | ||||||
Cash flows used in financing activities:
|
||||||||
Proceeds from issuance of debt of Fannie Mae
|
163,776 | 293,013 | ||||||
Payments to redeem debt of Fannie Mae
|
(183,073 | ) | (277,495 | ) | ||||
Proceeds from issuance of debt of consolidated trusts
|
72,567 | 88,750 | ||||||
Payments to redeem debt of consolidated trusts
|
(177,551 | ) | (172,385 | ) | ||||
Payments of cash dividends on senior preferred stock to Treasury
|
(2,216 | ) | (1,527 | ) | ||||
Proceeds from senior preferred stock purchase agreement with
Treasury
|
2,600 | 15,300 | ||||||
Net change in federal funds purchased and securities sold under
agreements to repurchase
|
26 | 180 | ||||||
Net cash used in financing activities
|
(123,871 | ) | (54,164 | ) | ||||
Net increase in cash and cash equivalents
|
2,534 | 23,665 | ||||||
Cash and cash equivalents at beginning of period
|
17,297 | 6,812 | ||||||
Cash and cash equivalents at end of period
|
$ | 19,831 | $ | 30,477 | ||||
Cash paid during the period for interest
|
$ | 32,689 | $ | 36,788 |
See Notes to Condensed Consolidated Financial Statements
First-Quarter 2011 Results |
10 |
Supplemental
Non-GAAP Consolidated Fair Value Balance Sheets
As of March 31, 2011 | As of December 31, 2010 | |||||||||||||||||||||||
GAAP |
GAAP |
|||||||||||||||||||||||
Carrying |
Fair Value |
Estimated |
Carrying |
Fair Value |
Estimated |
|||||||||||||||||||
Value | Adjustment(1) | Fair Value | Value | Adjustment(1) | Fair Value | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 56,561 | $ | | $ | 56,561 | $ | 80,975 | $ | | $ | 80,975 | ||||||||||||
Federal funds sold and securities purchased under agreements to
resell or similar arrangements
|
26,250 | | 26,250 | 11,751 | | 11,751 | ||||||||||||||||||
Trading securities
|
57,035 | | 57,035 | 56,856 | | 56,856 | ||||||||||||||||||
Available-for-sale
securities
|
89,613 | | 89,613 | 94,392 | | 94,392 | ||||||||||||||||||
Mortgage loans:
|
||||||||||||||||||||||||
Mortgage loans held for sale
|
1,414 | 44 | 1,458 | 915 | | 915 | ||||||||||||||||||
Mortgage loans held for investment, net of allowance for loan
losses:
|
||||||||||||||||||||||||
Of Fannie Mae
|
348,644 | (35,472 | ) | 313,172 | 358,698 | (39,331 | ) | 319,367 | ||||||||||||||||
Of consolidated trusts
|
2,599,999 | 18,737 | (2) | 2,618,736 | (3) | 2,564,107 | 46,038 | (2) | 2,610,145 | (3) | ||||||||||||||
Total mortgage loans
|
2,950,057 | (16,691 | ) | 2,933,366 | (4) | 2,923,720 | 6,707 | 2,930,427 | (4) | |||||||||||||||
Advances to lenders
|
3,091 | (151 | ) | 2,940 | (5)(6) | 7,215 | (225 | ) | 6,990 | (5)(6) | ||||||||||||||
Derivative assets at fair value
|
279 | | 279 | (5)(6) | 1,137 | | 1,137 | (5)(6) | ||||||||||||||||
Guaranty assets and
buy-ups, net
|
459 | 440 | 899 | (5)(6) | 458 | 356 | 814 | (5)(6) | ||||||||||||||||
Total financial assets
|
3,183,345 | (16,402 | ) | 3,166,943 | (7) | 3,176,504 | 6,838 | 3,183,342 | (7) | |||||||||||||||
Credit enhancements
|
471 | 3,406 | 3,877 | (5)(6) | 479 | 3,286 | 3,765 | (5)(6) | ||||||||||||||||
Other assets
|
43,226 | (240 | ) | 42,986 | (5)(6) | 44,989 | (261 | ) | 44,728 | (5)(6) | ||||||||||||||
Total assets
|
$ | 3,227,042 | $ | (13,236 | ) | $ | 3,213,806 | $ | 3,221,972 | $ | 9,863 | $ | 3,231,835 | |||||||||||
Liabilities:
|
||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to
repurchase
|
$ | 25 | $ | | $ | 25 | $ | 52 | $ | (1 | ) | $ | 51 | |||||||||||
Short-term debt:
|
||||||||||||||||||||||||
Of Fannie Mae
|
147,092 | 41 | 147,133 | 151,884 | 90 | 151,974 | ||||||||||||||||||
Of consolidated trusts
|
5,156 | | 5,156 | 5,359 | | 5,359 | ||||||||||||||||||
Long-term debt:
|
||||||||||||||||||||||||
Of Fannie Mae
|
614,095 | (8) | 19,055 | 633,150 | 628,160 | (8) | 21,524 | 649,684 | ||||||||||||||||
Of consolidated trusts
|
2,442,433 | (8) | 88,041 | (2) | 2,530,474 | 2,411,597 | (8) | 103,332 | (2) | 2,514,929 | ||||||||||||||
Derivative liabilities at fair value
|
941 | | 941 | (9)(10) | 1,715 | | 1,715 | (9)(10) | ||||||||||||||||
Guaranty obligations
|
760 | 2,667 | 3,427 | (9)(10) | 769 | 3,085 | 3,854 | (9)(10) | ||||||||||||||||
Total financial liabilities
|
3,210,502 | 109,804 | 3,320,306 | (7) | 3,199,536 | 128,030 | 3,327,566 | (7) | ||||||||||||||||
Other liabilities
|
24,958 | (398 | ) | 24,560 | (9)(10) | 24,953 | (472 | ) | 24,481 | (9)(10) | ||||||||||||||
Total liabilities
|
3,235,460 | 109,406 | 3,344,866 | 3,224,489 | 127,558 | 3,352,047 | ||||||||||||||||||
Equity (deficit):
|
||||||||||||||||||||||||
Fannie Mae stockholders equity (deficit):
|
||||||||||||||||||||||||
Senior
preferred(11)
|
91,200 | | 91,200 | 88,600 | | 88,600 | ||||||||||||||||||
Preferred
|
20,204 | (18,987 | ) | 1,217 | 20,204 | (19,829 | ) | 375 | ||||||||||||||||
Common
|
(119,903 | ) | (103,655 | ) | (223,558 | ) | (111,403 | ) | (97,866 | ) | (209,269 | ) | ||||||||||||
Total Fannie Mae stockholders deficit/non-GAAP fair
value of net assets
|
$ | (8,499 | ) | $ | (122,642 | ) | $ | (131,141 | ) | $ | (2,599 | ) | $ | (117,695 | ) | $ | (120,294 | ) | ||||||
Noncontrolling interests
|
81 | | 81 | 82 | | 82 | ||||||||||||||||||
Total deficit
|
(8,418 | ) | (122,642 | ) | (131,060 | ) | (2,517 | ) | (117,695 | ) | (120,212 | ) | ||||||||||||
Total liabilities and equity (deficit)
|
$ | 3,227,042 | $ | (13,236 | ) | $ | 3,213,806 | $ | 3,221,972 | $ | 9,863 | $ | 3,231,835 | |||||||||||
See Explanation and Reconciliation of Non-GAAP Measures to GAAP
Measures
First-Quarter 2011 Results |
11 |
Explanation
and Reconciliation of Non-GAAP Measures to
GAAP Measures
(1) | Each of the amounts listed as a fair value adjustment represents the difference between the carrying value included in our GAAP condensed consolidated balance sheets and our best judgment of the estimated fair value of the listed item. | |
(2) | Fair value exceeds carrying value of consolidated loans and consolidated debt as a significant portion of these were consolidated at unpaid principal balance as of January 1, 2010, upon adoption of accounting standards on transfers of financial assets and consolidation of VIEs. Also impacting the difference between fair value and carrying value of the consolidated loans is the credit component included in consolidated loans, which has no corresponding impact on the consolidated debt. | |
(3) | Includes certain mortgage loans that we elected to report at fair value in our GAAP condensed consolidated balance sheet of $3.0 billion as of both March 31, 2011 and December 31, 2010. | |
(4) | Performing loans had both a fair value and an unpaid principal balance of $2.8 trillion as of March 31, 2011 compared with a fair value of $2.8 trillion and an unpaid principal balance of $2.7 trillion as of December 31, 2010. Nonperforming loans, which include loans that are delinquent by one or more payments, had a fair value of $143.4 billion and an unpaid principal balance of $254.4 billion as of March 31, 2011 compared with a fair value of $168.5 billion and an unpaid principal balance of $287.4 billion as of December 31, 2010. See Note 13, Fair Value for additional information on valuation techniques for performing and nonperforming loans. | |
(5) | The following line items: (a) Advances to lenders; (b) Derivative assets at fair value; (c) Guaranty assets and buy-ups, net; (d) Credit enhancements; and (e) Other assets, together consist of the following assets presented in our GAAP condensed consolidated balance sheets: (a) Accrued interest receivable, net; (b) Acquired property, net; and (c) Other assets. | |
(6) | Other assets include the following GAAP condensed consolidated balance sheets line items: (a) Accrued interest receivable, net and (b) Acquired property, net. The carrying value of these items in our GAAP condensed consolidated balance sheets totaled $26.6 billion and $27.5 billion as of March 31, 2011 and December 31, 2010, respectively. Other assets in our GAAP condensed consolidated balance sheets include the following: (a) Advances to Lenders; (b) Derivative assets at fair value; (c) Guaranty assets and buy-ups, net; and (d) Credit enhancements. The carrying value of these items totaled $4.3 billion and $9.3 billion as of March 31, 2011 and December 31, 2010, respectively. | |
(7) | We determined the estimated fair value of these financial instruments in accordance with the fair value accounting standard as described in Note 13, Fair Value. | |
(8) | Includes certain long-term debt instruments that we elected to report at fair value in our GAAP condensed consolidated balance sheets of $3.1 billion and $3.2 billion as of March 31, 2011 and December 31, 2010, respectively. | |
(9) | The following line items: (a) Derivative liabilities at fair value; (b) Guaranty obligations; and (c) Other liabilities, consist of the following liabilities presented in our GAAP condensed consolidated balance sheets: (a) Accrued interest payable and (b) Other liabilities. | |
(10) | Other liabilities include the Accrued interest payable in our GAAP condensed consolidated balance sheets. The carrying value of this item in our GAAP condensed consolidated balance sheets totaled $13.8 billion as of both March 31, 2011 and December 31, 2010. We assume that certain other liabilities, such as deferred revenues, have no fair value. Although we report the Reserve for guaranty losses as part of Other liabilities in our GAAP condensed consolidated balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP supplemental consolidated fair value balance sheets. Other liabilities in our GAAP condensed consolidated balance sheets include the following: (a) Derivative liabilities at fair value and (b) Guaranty obligations. The carrying value of these items totaled $1.7 billion and $2.5 billion as of March 31, 2011 and December 31, 2010, respectively. | |
(11) | The amount included in estimated fair value of the senior preferred stock is the liquidation preference, which is the same as the GAAP carrying value, and does not reflect fair value. |
First-Quarter 2011 Results |
12 |