Fannie Mae 2006 Annual Report Download - page 303

(1)
Except for statutory risk-based capital amounts, all amounts represent estimates that will be resubmitted to OFHEO for their
certification. Statutory risk-based capital amounts represent previously announced results by OFHEO. OFHEO may determine that
results require restatement in the future based upon analysis provided by us.
(2)
The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value of our
outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings. Core capital excludes
AOCI.
(3)
Generally, the sum of (a) 2.50% of on-balance sheet assets; (b) 0.45% of the unpaid principal balance of outstanding Fannie Mae
MBS held by third parties; and (c) up to 0.45% of other off-balance sheet obligations, which may be adjusted by the Director of
OFHEO under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the Director of OFHEO).
(4)
Defined as the surplus of core capital over statutory minimum capital expressed as a percentage of statutory minimum capital.
(5)
This requirement was effective as of September 30, 2005, and is defined as a 30% surplus over the statutory minimum capital
requirement. We are currently required to maintain this surplus under the OFHEO consent order until such time as the Director of
OFHEO determines that the requirement should be modified or allowed to expire, taking into account factors such as the resolution
of accounting and internal control issues.
(6)
Defined as the surplus of core capital over the OFHEO-directed minimum capital expressed as a percentage of the OFHEO-directed
minimum capital.
(7)
The sum of (a) core capital and (b) the total allowance for loan losses and reserve for guaranty losses, less (c) the specific loss
allowance (that is, the allowance required on individually-impaired loans). The specific loss allowance totaled $106 million and
$66 million as of December 31, 2006 and 2005, respectively.
(8)
Defined as the amount of total capital required to be held to absorb projected losses flowing from future adverse interest rate and
credit risk conditions specified by statute (see 12 CFR 1750.13 for conditions), plus 30% mandated by statute to cover management
and operations risk.
(9)
Defined as the surplus of total capital over statutory risk-based capital expressed as a percentage of statutory risk-based capital.
(10)
Generally, the sum of (a) 1.25% of on-balance sheet assets; (b) 0.25% of the unpaid principal balance of outstanding Fannie Mae
MBS held by third parties; and (c) up to 0.25% of other off-balance sheet obligations, which may be adjusted by the Director of
OFHEO under certain circumstances.
(11)
Defined as the surplus of core capital over statutory critical capital, expressed as a percentage of statutory critical capital.
Capital Classification
The 1992 Act requires the Director of OFHEO to determine the capital level and classification at least
quarterly. If OFHEO finds that we fail to meet these regulatory capital standards, we become subject to certain
restrictions and requirements. OFHEO classified us as significantly undercapitalized as of December 31, 2004.
OFHEO has classified us as adequately capitalized as of March 31, 2005 and for all quarterly periods
thereafter through March 31, 2007.
In response to the initial findings from OFHEO’s September 2004 special examination interim report, we
entered into the September 27, 2004 agreement with OFHEO (the “OFHEO Agreement”), which required us
to take a series of steps with respect to our internal controls, organization and staffing, governance, accounting
and capital. In accordance with the OFHEO Agreement, which, as described below, has since been terminated,
we were required to obtain prior written approval from the Director of OFHEO before engaging in certain
capital transactions, including payments made to repurchase, redeem, retire or otherwise acquire any of our
shares, the calling of preferred stock, as well as restrictions on dividend payments described below.
As part of the OFHEO Agreement, we pledged to maintain the computed minimum capital surplus percentage
of 18.5% that we reported as of August 31, 2004, and to achieve a targeted capital surplus equal to 30% over
the statutory required minimum capital requirement within 270 days of the agreement. In November 2004,
pursuant to the OFHEO Agreement, we submitted a capital plan to OFHEO for the Director’s approval
detailing how management intended to achieve the 30% surplus requirement, including alternative strategies
that might be employed in response to various market developments.
On December 21, 2004, following the SEC’s determination that we should restate our financial statements,
OFHEO classified us as significantly undercapitalized as of September 30, 2004 and directed us to submit a
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)