Fannie Mae 2010 Annual Report Download - page 91

Table 8: Rate/Volume Analysis of Changes in Net Interest Income
Total
Variance Volume Rate
Total
Variance Volume Rate
Variance Due to:
(1)
Variance Due to:
(1)
2010 vs. 2009 2009 vs. 2008
(Dollars in millions)
Interest income:
Mortgage loans of Fannie Mae . . . . . . . . . . . . . . $ (386) $ 1,849 $(2,235) $(3,169) $(1,212) $ (1,957)
Mortgage loans of consolidated trusts . . . . . . . . . 126,448 127,426 (978) 1,998 1,923 75
Total mortgage loans . . . . . . . . . . . . . . . . . . . 126,062 129,275 (3,213) (1,171) 711 (1,882)
Total mortgage-related securities, net . . . . . . . . . . (10,910) (9,779) (1,131) (114) 765 (879)
Non-mortgage securities
(2)
. . . . . . . . . . . . . . . . . (26) 125 (151) (1,501) (171) (1,330)
Federal funds sold and securities purchased under
agreements to resell or similar arrangements . . . (198) (75) (123) (898) 103 (1,001)
Advances to lenders. . . . . . . . . . . . . . . . . . . . . . (13) (24) 11 (84) 44 (128)
Total interest income . . . . . . . . . . . . . . . . . . . . . . . 114,915 119,522 (4,607) (3,768) 1,452 (5,220)
Interest expense:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (1,686) (458) (1,228) (5,501) 76 (5,577)
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (3,338) 821 (4,159) (3,950) 867 (4,817)
Total short-term and long-term funding debt . . . . . (5,024) 363 (5,387) (9,451) 943 (10,394)
Federal funds purchased and securities sold under
agreements to repurchase . . . . . . . . . . . . . . . . (1) — (1) (8) (6) (2)
Total debt securities of consolidated trusts held by
third parties. . . . . . . . . . . . . . . . . . . . . . . . . . 118,041 118,099 (58) (37) (25) (12)
Total interest expense . . . . . . . . . . . . . . . . . . . . . . 113,016 118,462 (5,446) (9,496) 912 (10,408)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,899 $ 1,060 $ 839 $ 5,728 $ 540 $ 5,188
(1)
Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance.
(2)
Includes cash equivalents.
Net interest income increased during 2010 compared with 2009 primarily as a result of an increase in interest
income due to the recognition of contractual guaranty fees in interest income upon adoption of the new
accounting standards and a reduction in the interest expense on debt that we have issued as lower borrowing
rates allowed us to replace higher-cost debt with lower-cost debt. Partially offsetting these positive effects for
2010 was lower interest income from the interest earning assets that we own due to lower yields on our
mortgage and non-mortgage assets. The increase in net interest income was further offset by a significant
increase in the number of loans on nonaccrual status in our consolidated balance sheets, because we do not
recognize interest income on loans that have been placed on nonaccrual status, except when cash payments are
received. The increase in loans on nonaccrual status in 2010 was due to our adoption of the new accounting
standards.
For 2010, interest income that we did not recognize for nonaccrual mortgage loans, net of recoveries, was
$8.4 billion, which resulted in a 26 basis point reduction in net interest yield, compared with $1.2 billion for
2009, which resulted in a 14 basis point reduction in net interest yield and $381 million for 2008, which
resulted in a 4 basis point reduction in net interest yield. Of the $8.4 billion of interest income that we did not
recognize for nonaccrual mortgage loans for 2010, $4.7 billion was related to the unsecuritized mortgage loans
that we own.
Net interest yield significantly decreased for 2010 compared with 2009. We recognize the contractual guaranty
fee and the amortization of deferred cash fees received after December 31, 2009 on the underlying mortgage
loans of consolidated trusts as interest income, which represents the spread between the net interest yield on
the underlying mortgage assets and the rate on the debt of the consolidated trusts. Upon adoption of the new
accounting standards, our interest-earning assets and interest-bearing liabilities both increased by
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