Segment | Description | Activities/Items | |
Single-family Guarantee | The Single-family Guarantee segment reflects results from our single-family credit guarantee activities. In our Single-family Guarantee segment, we purchase and guarantee single-family mortgage loans originated by our seller/servicers in the primary mortgage market. In most instances, we use the mortgage securitization process to package the mortgage loans into guaranteed mortgage-related securities. We guarantee the payment of principal and interest on the mortgage-related securities in exchange for management and guarantee fees. Segment Earnings for this segment consist primarily of management and guarantee fee revenues, including amortization of upfront fees, less credit-related expenses, administrative expenses, allocated funding costs, and amounts related to net float benefits or expenses. | • | Management and guarantee fees on PCs, including those retained by us, and single-family mortgage loans in the mortgage investments portfolio, inclusive of up-front credit delivery fees |
• | Recognition and remittance to Treasury of guarantee fees resulting from the 10 basis point legislated increase | ||
• | Adjustments for security performance | ||
• | Credit losses on all single-family assets | ||
• | Guarantee buy-downs | ||
• | Expected net float income or expense on the single-family credit guarantee portfolio | ||
• | Deferred tax asset valuation allowance | ||
• | Allocated debt costs, administrative expenses and taxes | ||
• | Representation and warranty settlements | ||
Investments | The Investments segment reflects results from three primary activities: (a) managing the company’s mortgage-related investments portfolio, excluding Multifamily segment investments; (b) managing the treasury function, including funding and liquidity, for the overall company; and (c) managing interest-rate risk for the overall company. In our Investments segment, we invest principally in mortgage-related securities and single-family performing mortgage loans. Segment Earnings for this segment consist primarily of the returns on these investments, less the related funding, hedging, and administrative expenses. In addition, the Investments segment reflects changes in the fair value of the Multifamily segment securities, primarily CMBS, and held-for-sale loans that are associated with changes in interest rates. | • | Investments in mortgage-related securities and single-family performing mortgage loans |
• | Investments in short-term asset-backed securities | ||
• | All other traded instruments / securities, excluding CMBS and multifamily housing revenue bonds | ||
• | Debt issuances | ||
• | Interest rate risk management returns | ||
• | Guarantee buy-ups, net of execution gains / losses | ||
• | Cash and liquidity management | ||
• | Deferred tax asset valuation allowance | ||
• | Allocated administrative expenses and taxes | ||
• | Non-agency mortgage-related securities settlements | ||
Multifamily | The Multifamily segment reflects results from our investment (both purchases and sales), securitization, and guarantee activities in multifamily mortgage loans and securities. Our primary business model is to purchase multifamily mortgage loans for aggregation and then securitization through issuance of multifamily K Certificates. To a lesser extent, we provide guarantees of the payment of principal and interest on tax-exempt multifamily pass-through certificates backed by multifamily housing revenue bonds. In addition, we guarantee the payment of principal and interest on tax-exempt multifamily housing revenue bonds secured by low- and moderate-income multifamily mortgage loans. Segment Earnings for this segment consist primarily of the interest earned on assets related to multifamily investment activities and management and guarantee fee income, less credit-related expenses, administrative expenses, and allocated funding costs. In addition, the Multifamily segment reflects the impact of changes in fair value of our investment securities and held-for-sale loans associated with market factors other than changes in interest rates, such as liquidity and credit. | • | Multifamily mortgage loans held-for-sale and associated securitization activities |
• | Investments in CMBS, multifamily housing revenue bonds, and multifamily mortgage loans held-for-investment | ||
• | Allocated debt costs, administrative expenses and taxes | ||
• | Other guarantee commitments on multifamily housing revenue bonds | ||
• | Other Structured Securities of multifamily housing revenue bonds | ||
• | Deferred tax asset valuation allowance | ||
All Other | The All Other category consists of material corporate-level activities that are: (a) infrequent in nature; and (b) based on decisions outside the control of the management of our reportable segments. | • | Tax settlements, as applicable |
• | Legal settlements, as applicable | ||
• | The deferred tax asset valuation allowance and release of tax asset valuation allowance associated with previously recognized income tax credits carried forward | ||
• | Termination of our pension plan |
• | Net guarantee fee is reclassified in Segment Earnings from net interest income to management and guarantee income. |
• | Implied management and guarantee fee related to unsecuritized mortgage loans held in the mortgage investments portfolio is reclassified in Segment Earnings from net interest income to management and guarantee income. |
• | The portion of the amount reversed for accrued but uncollected interest upon placing loans on a non-accrual status that relates to guarantee fees is reclassified in Segment Earnings from net interest income to management and guarantee income. The remaining portion of the allowance for lost interest is reclassified in Segment Earnings from net interest income to provision for credit losses. |
• | The accrual of periodic cash settlements of all derivatives is reclassified in Segment Earnings from derivative gains (losses) into net interest income to fully reflect the periodic cost associated with the protection provided by these contracts. |
• | Up-front cash paid or received upon the purchase or writing of swaptions and other option contracts is reclassified in Segment Earnings prospectively on a straight-line basis from derivative gains (losses) into net interest income over the contractual life of the instrument to fully reflect the periodic cost associated with the protection provided by these contracts. |
• | Amortization related to derivative commitment basis adjustments associated with mortgage-related and non-mortgage-related securities. |
• | Amortization related to accretion of other-than-temporary impairments on available-for-sale securities held. |
• | Amortization related to premiums and discounts associated with PCs and Other Guarantee Transactions issued by our consolidated trusts that we previously held and subsequently transferred to third parties. The amortization is related to deferred gains (losses) on transfers of these securities. |
• | We adjust our Segment Earnings management and guarantee income for the Single-family Guarantee segment to include the amortization of buy-down fees and credit delivery fees recorded in periods prior to the January 1, 2010 adoption of accounting guidance for the transfers of financial assets and the consolidation of VIEs. As of December 31, 2013, the unamortized balance of buy-down fees was $0.4 billion and the unamortized balance of credit delivery fees was $0.9 billion. We consider such fees to be part of the effective rate of the guarantee fee on guaranteed mortgage loans. These adjustments are necessary to better reflect the realization of revenue associated with guarantee contracts over the life of the underlying loans. |
• | We adjust our Segment Earnings net interest income for the Investments segment to include the amortization of cash premiums and discounts, as well as buy-up fees, on the consolidated Freddie Mac mortgage-related securities we purchase as investments. As of December 31, 2013, the unamortized balance of such premiums and discounts, net was $3.2 billion and the unamortized balance of buy-up fees was $0.5 billion. These adjustments are necessary to reflect the effective yield realized on investments in consolidated Freddie Mac mortgage-related securities purchased at a premium or discount or with buy-up fees. |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
(in millions) | |||||||||||
Segment Earnings (loss), net of taxes: | |||||||||||
Single-family Guarantee | $ | 5,796 | $ | (164 | ) | $ | (10,000 | ) | |||
Investments | 16,602 | 8,212 | 3,366 | ||||||||
Multifamily | 2,378 | 2,146 | 1,319 | ||||||||
All Other(1) | 23,892 | 788 | 49 | ||||||||
Total Segment Earnings (loss), net of taxes | 48,668 | 10,982 | (5,266 | ) | |||||||
Net income (loss) | $ | 48,668 | $ | 10,982 | $ | (5,266 | ) | ||||
Comprehensive income (loss) of segments: | |||||||||||
Single-family Guarantee | $ | 5,845 | $ | (227 | ) | $ | (9,970 | ) | |||
Investments | 20,287 | 11,397 | 6,473 | ||||||||
Multifamily | 1,455 | 4,081 | 2,218 | ||||||||
All Other(1) | 24,013 | 788 | 49 | ||||||||
Comprehensive income (loss) of segments | 51,600 | 16,039 | (1,230 | ) | |||||||
Comprehensive income (loss) | $ | 51,600 | $ | 16,039 | $ | (1,230 | ) |
(1) | For the year ended December 31, 2013, includes a benefit for federal income taxes that resulted from the release of our valuation allowance against our net deferred tax assets. |
Year Ended December 31, 2013 | |||||||||||||||||||||||||||||||||||
Total Segment Earnings (Loss), Net of Tax | Reconciliation to Consolidated Statements of Comprehensive Income | Total per Consolidated Statements of Comprehensive Income | |||||||||||||||||||||||||||||||||
Single-family Guarantee | Investments | Multifamily | All Other | Reclassifications(1) | Segment Adjustments(2) | Total Reconciling Items | |||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Net interest income | $ | 320 | $ | 3,525 | $ | 1,186 | $ | — | $ | 5,031 | $ | 10,400 | $ | 1,037 | $ | 11,437 | $ | 16,468 | |||||||||||||||||
Benefit (provision) for credit losses | 1,409 | — | 218 | — | 1,627 | 838 | — | 838 | 2,465 | ||||||||||||||||||||||||||
Non-interest income (loss): | |||||||||||||||||||||||||||||||||||
Management and guarantee income(3) | 4,930 | — | 206 | — | 5,136 | (4,171 | ) | (694 | ) | (4,865 | ) | 271 | |||||||||||||||||||||||
Net impairment of available-for-sale securities recognized in earnings | — | (974 | ) | (15 | ) | — | (989 | ) | (521 | ) | — | (521 | ) | (1,510 | ) | ||||||||||||||||||||
Derivative gains (losses) | (3 | ) | 6,806 | 18 | — | 6,821 | (4,189 | ) | — | (4,189 | ) | 2,632 | |||||||||||||||||||||||
Gains (losses) on trading securities | — | (1,588 | ) | (10 | ) | — | (1,598 | ) | — | — | — | (1,598 | ) | ||||||||||||||||||||||
Gains (losses) on mortgage loans | — | (817 | ) | 481 | — | (336 | ) | — | — | — | (336 | ) | |||||||||||||||||||||||
Other non-interest income | 1,165 | 9,612 | 640 | — | 11,417 | (2,357 | ) | — | (2,357 | ) | 9,060 | ||||||||||||||||||||||||
Non-interest expense: | |||||||||||||||||||||||||||||||||||
Administrative expenses | (1,025 | ) | (523 | ) | (257 | ) | — | (1,805 | ) | — | — | — | (1,805 | ) | |||||||||||||||||||||
REO operations income (expense) | 124 | — | 16 | — | 140 | — | — | — | 140 | ||||||||||||||||||||||||||
Other non-interest expense | (712 | ) | 349 | (24 | ) | (37 | ) | (424 | ) | — | — | — | (424 | ) | |||||||||||||||||||||
Segment adjustments(2) | (694 | ) | 1,037 | — | — | 343 | — | (343 | ) | (343 | ) | — | |||||||||||||||||||||||
Income tax (expense) benefit | 282 | (825 | ) | (81 | ) | 23,929 | 23,305 | — | — | — | 23,305 | ||||||||||||||||||||||||
Net income | 5,796 | 16,602 | 2,378 | 23,892 | 48,668 | — | — | — | 48,668 | ||||||||||||||||||||||||||
Total other comprehensive income (loss), net of taxes | 49 | 3,685 | (923 | ) | 121 | 2,932 | — | — | — | 2,932 | |||||||||||||||||||||||||
Comprehensive income | $ | 5,845 | $ | 20,287 | $ | 1,455 | $ | 24,013 | $ | 51,600 | $ | — | $ | — | $ | — | $ | 51,600 |
Year Ended December 31, 2012 | |||||||||||||||||||||||||||||||||||
Total Segment Earnings (Loss), Net of Tax | Reconciliation to Consolidated Statements of Comprehensive Income | Total per Consolidated Statements of Comprehensive Income | |||||||||||||||||||||||||||||||||
Single-family Guarantee | Investments | Multifamily | All Other | Reclassifications(1) | Segment Adjustments(2) | Total Reconciling Items | |||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Net interest income | $ | (147 | ) | $ | 5,726 | $ | 1,291 | $ | — | $ | 6,870 | $ | 9,942 | $ | 799 | $ | 10,741 | $ | 17,611 | ||||||||||||||||
Benefit (provision) for credit losses | (3,168 | ) | — | 123 | — | (3,045 | ) | 1,155 | — | 1,155 | (1,890 | ) | |||||||||||||||||||||||
Non-interest income (loss): | |||||||||||||||||||||||||||||||||||
Management and guarantee income(3) | 4,389 | — | 151 | — | 4,540 | (3,507 | ) | (832 | ) | (4,339 | ) | 201 | |||||||||||||||||||||||
Net impairment of available-for-sale securities recognized in earnings | — | (1,831 | ) | (123 | ) | — | (1,954 | ) | (214 | ) | — | (214 | ) | (2,168 | ) | ||||||||||||||||||||
Derivative gains (losses) | — | 1,970 | 7 | — | 1,977 | (4,425 | ) | — | (4,425 | ) | (2,448 | ) | |||||||||||||||||||||||
Gains (losses) on trading securities | — | (1,755 | ) | 81 | — | (1,674 | ) | — | — | — | (1,674 | ) | |||||||||||||||||||||||
Gains (losses) on mortgage loans | — | 303 | 707 | — | 1,010 | — | — | — | 1,010 | ||||||||||||||||||||||||||
Other non-interest income | 931 | 2,741 | 275 | — | 3,947 | (2,951 | ) | — | (2,951 | ) | 996 | ||||||||||||||||||||||||
Non-interest expense: | |||||||||||||||||||||||||||||||||||
Administrative expenses | (890 | ) | (430 | ) | (241 | ) | — | (1,561 | ) | — | — | — | (1,561 | ) | |||||||||||||||||||||
REO operations income (expense) | (62 | ) | — | 3 | — | (59 | ) | — | — | — | (59 | ) | |||||||||||||||||||||||
Other non-interest expense | (393 | ) | (1 | ) | (129 | ) | (50 | ) | (573 | ) | — | — | — | (573 | ) | ||||||||||||||||||||
Segment adjustments(2) | (832 | ) | 799 | — | — | (33 | ) | — | 33 | 33 | — | ||||||||||||||||||||||||
Income tax benefit | 8 | 690 | 1 | 838 | 1,537 | — | — | — | 1,537 | ||||||||||||||||||||||||||
Net income (loss) | (164 | ) | 8,212 | 2,146 | 788 | 10,982 | — | — | — | 10,982 | |||||||||||||||||||||||||
Total other comprehensive income (loss), net of taxes | (63 | ) | 3,185 | 1,935 | — | 5,057 | — | — | — | 5,057 | |||||||||||||||||||||||||
Comprehensive income (loss) | $ | (227 | ) | $ | 11,397 | $ | 4,081 | $ | 788 | $ | 16,039 | $ | — | $ | — | $ | — | $ | 16,039 | ||||||||||||||||
Year Ended December 31, 2011 | |||||||||||||||||||||||||||||||||||
Total Segment Earnings (Loss), Net of Tax | Reconciliation to Consolidated Statements of Comprehensive Income | Total per Consolidated Statements of Comprehensive Income | |||||||||||||||||||||||||||||||||
Single-family Guarantee | Investments | Multifamily | All Other | Reclassifications(1) | Segment Adjustments(2) | Total Reconciling Items | |||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Net interest income | $ | (23 | ) | $ | 7,168 | $ | 1,200 | $ | — | $ | 8,345 | $ | 9,391 | $ | 661 | $ | 10,052 | $ | 18,397 | ||||||||||||||||
Benefit (provision) for credit losses | (12,294 | ) | — | 196 | — | (12,098 | ) | 1,396 | — | 1,396 | (10,702 | ) | |||||||||||||||||||||||
Non-interest income (loss): | |||||||||||||||||||||||||||||||||||
Management and guarantee income(3) | 3,647 | — | 127 | — | 3,774 | (2,905 | ) | (699 | ) | (3,604 | ) | 170 | |||||||||||||||||||||||
Net impairment of available-for-sale securities recognized in earnings | — | (1,833 | ) | (353 | ) | — | (2,186 | ) | (115 | ) | — | (115 | ) | (2,301 | ) | ||||||||||||||||||||
Derivative gains (losses) | — | (3,597 | ) | 3 | — | (3,594 | ) | (6,158 | ) | — | (6,158 | ) | (9,752 | ) | |||||||||||||||||||||
Gains (losses) on trading securities | — | (993 | ) | 39 | — | (954 | ) | — | — | — | (954 | ) | |||||||||||||||||||||||
Gains (losses) on mortgage loans | — | 529 | 300 | — | 829 | — | — | — | 829 | ||||||||||||||||||||||||||
Other non-interest income | 1,216 | 1,437 | 86 | — | 2,739 | (1,609 | ) | — | (1,609 | ) | 1,130 | ||||||||||||||||||||||||
Non-interest expense: | |||||||||||||||||||||||||||||||||||
Administrative expenses | (888 | ) | (398 | ) | (220 | ) | — | (1,506 | ) | — | — | — | (1,506 | ) | |||||||||||||||||||||
REO operations income (expense) | (596 | ) | — | 11 | — | (585 | ) | — | — | — | (585 | ) | |||||||||||||||||||||||
Other non-interest expense | (321 | ) | (2 | ) | (69 | ) | — | (392 | ) | — | — | — | (392 | ) | |||||||||||||||||||||
Segment adjustments(2) | (699 | ) | 661 | — | — | (38 | ) | — | 38 | 38 | — | ||||||||||||||||||||||||
Income tax (expense) benefit | (42 | ) | 394 | (1 | ) | 49 | 400 | — | — | — | 400 | ||||||||||||||||||||||||
Net income (loss) | (10,000 | ) | 3,366 | 1,319 | 49 | (5,266 | ) | — | — | — | (5,266 | ) | |||||||||||||||||||||||
Total other comprehensive income, net of taxes | 30 | 3,107 | 899 | — | 4,036 | — | — | — | 4,036 | ||||||||||||||||||||||||||
Comprehensive income (loss) | $ | (9,970 | ) | $ | 6,473 | $ | 2,218 | $ | 49 | $ | (1,230 | ) | $ | — | $ | — | $ | — | $ | (1,230 | ) |
(1) | See “Segment Earnings — Investment Activity-Related Reclassifications” and “— Credit Guarantee Activity-Related Reclassifications” for information regarding these reclassifications. |
(2) | See “Segment Earnings — Segment Adjustments” for information regarding these adjustments. |
(3) | Management and guarantee income total per consolidated statements of comprehensive income is included in other income on our GAAP consolidated statements of comprehensive income. |
Year Ended December 31, 2013 | |||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Taxes | |||||||||||||||||||||||
Net Income (Loss) | Changes in Unrealized Gains (Losses) Related to Available-For-Sale Securities | Changes in Unrealized Gains (Losses) Related to Cash Flow Hedge Relationships | Changes in Defined Benefit Plans | Total Other Comprehensive Income (Loss), Net of Taxes | Comprehensive Income (Loss) | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Total comprehensive income (loss) of segments: | |||||||||||||||||||||||
Single-family Guarantee | $ | 5,796 | $ | — | $ | — | $ | 49 | $ | 49 | $ | 5,845 | |||||||||||
Investments | 16,602 | 3,338 | 316 | 31 | 3,685 | 20,287 | |||||||||||||||||
Multifamily | 2,378 | (932 | ) | — | 9 | (923 | ) | 1,455 | |||||||||||||||
All Other | 23,892 | — | — | 121 | 121 | 24,013 | |||||||||||||||||
Total per consolidated statements of comprehensive income | $ | 48,668 | $ | 2,406 | $ | 316 | $ | 210 | $ | 2,932 | $ | 51,600 | |||||||||||
Year Ended December 31, 2012 | |||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Taxes | |||||||||||||||||||||||
Net Income (Loss) | Changes in Unrealized Gains (Losses) Related to Available-For-Sale Securities | Changes in Unrealized Gains (Losses) Related to Cash Flow Hedge Relationships | Changes in Defined Benefit Plans | Total Other Comprehensive Income (Loss), Net of Taxes | Comprehensive Income (Loss) | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Total comprehensive income (loss) of segments: | |||||||||||||||||||||||
Single-family Guarantee | $ | (164 | ) | $ | — | $ | — | $ | (63 | ) | $ | (63 | ) | $ | (227 | ) | |||||||
Investments | 8,212 | 2,821 | 414 | (50 | ) | 3,185 | 11,397 | ||||||||||||||||
Multifamily | 2,146 | 1,948 | — | (13 | ) | 1,935 | 4,081 | ||||||||||||||||
All Other | 788 | — | — | — | — | 788 | |||||||||||||||||
Total per consolidated statements of comprehensive income | $ | 10,982 | $ | 4,769 | $ | 414 | $ | (126 | ) | $ | 5,057 | $ | 16,039 | ||||||||||
Year Ended December 31, 2011 | |||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Taxes | |||||||||||||||||||||||
Net Income (Loss) | Changes in Unrealized Gains (Losses) Related to Available-For-Sale Securities | Changes in Unrealized Gains (Losses) Related to Cash Flow Hedge Relationships | Changes in Defined Benefit Plans | Total Other Comprehensive Income (Loss), Net of Taxes | Comprehensive Income (Loss) | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Total comprehensive income (loss) of segments: | |||||||||||||||||||||||
Single-family Guarantee | $ | (10,000 | ) | $ | — | $ | — | $ | 30 | $ | 30 | $ | (9,970 | ) | |||||||||
Investments | 3,366 | 2,573 | 508 | 26 | 3,107 | 6,473 | |||||||||||||||||
Multifamily | 1,319 | 892 | 1 | 6 | 899 | 2,218 | |||||||||||||||||
All Other | 49 | — | — | — | — | 49 | |||||||||||||||||
Total per consolidated statements of comprehensive income | $ | (5,266 | ) | $ | 3,465 | $ | 509 | $ | 62 | $ | 4,036 | $ | (1,230 | ) |