Freddie Mac 2014 Annual Report Download - page 207

202 Freddie Mac
• 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, 2014, the unamortized balance of buy-down fees was $0.3 billion and the unamortized balance of credit
delivery fees was $0.7 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, 2014, the unamortized balance of such premiums and discounts, net was
$3.5 billion and the unamortized balance of buy-up fees was $0.4 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.
Segment Allocations
The results of each reportable segment include directly attributable revenues and expenses. Administrative expenses that
are not directly attributable to a segment are allocated to our segments using various methodologies, depending on the nature of
the expense (i.e., semi-direct versus indirect). Net interest income for each segment includes allocated debt funding and
hedging costs related to certain assets of each segment. The Investments segment manages the funding and interest rate risk for
all business segments. In connection with this activity, the Investments segment transfers a cost to the other segments. The
actual costs may vary relative to these intra-company transfers. In addition, the financial statement volatility associated with the
use of derivatives to hedge certain assets outside the Investments segment is not fully allocated to other segments. These
allocations do not include the effects of dividends paid on our senior preferred stock. The release of the deferred tax asset
valuation allowance, termination of our pension plan, and legal and tax settlements, as applicable, are allocated to the All Other
category.
The table below presents Segment Earnings by segment.
Table 13.1 — Summary of Segment Earnings and Comprehensive Income (Loss)
Year Ended December 31,
2014 2013 2012
(in millions)
Segment Earnings (loss), net of taxes:
Single-family Guarantee $ 1,547 $ 5,796 $ (164)
Investments 4,520 15,930 7,367
Multifamily 1,636 3,050 2,991
All Other (13) 23,892 788
Total Segment Earnings, net of taxes 7,690 48,668 10,982
Net income $ 7,690 $ 48,668 $ 10,982
Comprehensive income (loss) of segments:
Single-family Guarantee $ 1,537 $ 5,845 $ (227)
Investments 6,471 20,287 11,397
Multifamily 1,459 1,455 4,081
All Other (41) 24,013 788
Comprehensive income of segments 9,426 51,600 16,039
Comprehensive income $ 9,426 $ 51,600 $ 16,039
The table below presents detailed reconciliations between our GAAP financial statements and Segment Earnings by
financial statement line item for our reportable segments and All Other.
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