Freddie Mac 2014 Annual Report Download - page 77

72 Freddie Mac
Managing REO Activities” and "CONSOLIDATED BALANCE SHEET ANALYSIS — REO, Net" for additional information
about our REO activity.
Expenses related to the legislated 10 basis point increase in guarantee fees were $775 million, $533 million, and $108
million in 2014, 2013, and 2012, respectively. We recognized a similar amount of associated management and guarantee
income in each period. As of December 31, 2014, loans with an aggregate UPB of $866.7 billion were subject to these fees, and
the cumulative total of the amounts paid and due to Treasury was $1.4 billion.
Segment Earnings income tax (expense) benefit for the Single-family Guarantee segment was $(600) million, $282
million, and $8 million in 2014, 2013, and 2012, respectively. The income tax benefit in 2013 resulted from the release of the
valuation allowance on our deferred tax asset.
Investments
The table below presents the Segment Earnings of our Investments segment. In the first quarter of 2014, we revised our
inter-segment allocations between the Multifamily and the Investments segments for the Multifamily segment's investment
securities and held-for-sale loans. Prior period results have been revised to conform with the current period presentation. For
additional information about this change, see “NOTE 13: SEGMENT REPORTING — Segment Earnings" and "Table 13.2 —
Segment Earnings and Reconciliation to GAAP Results.”
Table 23 — Segment Earnings and Key Metrics — Investments
Year Ended December 31,
2014 2013 2012
(dollars in millions)
Segment Earnings:
Net interest income $ 2,966 $ 3,525 $ 5,726
Non-interest income (loss):
Net impairment of available-for-sale securities recognized in earnings (140) (974) (1,831)
Derivative gains (losses) (5,158) 5,543 1,034
Gains (losses) on trading securities (276) (1,466) (1,794)
Non-agency mortgage-related securities settlements 6,084 5,501 —
Other non-interest income 2,797 3,401 2,719
Total non-interest income (loss) 3,307 12,005 128
Non-interest expense:
Administrative expense (437) (523) (430)
Other non-interest expense (income) (6) 349 (1)
Total non-interest expense (443) (174) (431)
Segment adjustments 635 1,037 799
Segment Earnings before income tax (expense) benefit 6,465 16,393 6,222
Income tax (expense) benefit (1,945) (463) 1,145
Segment Earnings, net of taxes 4,520 15,930 7,367
Total other comprehensive income, net of taxes 1,951 4,357 4,030
Comprehensive income $ 6,471 $ 20,287 $ 11,397
Key metrics:
Portfolio balances:
Average balances of interest-earning assets (based on amortized cost):
Mortgage-related securities(1) $ 235,847 $ 278,200 $ 308,698
Non-mortgage-related investments(2) 63,408 97,070 98,176
Single-family unsecuritized performing loans 83,023 88,827 97,951
Total average balances of interest-earning assets $ 382,278 $ 464,097 $ 504,825
Return:
Net interest yield — Segment Earnings basis 0.78% 0.76% 1.13%
(1) Includes our investments in single-family PCs and certain Other Guarantee Transactions, which are consolidated under GAAP on our consolidated
balance sheets.
(2) Includes the average balances of interest-earning cash and cash equivalents, non-mortgage-related securities, and federal funds sold and securities
purchased under agreements to resell.
2014 vs. 2013
Comprehensive income for our Investments segment decreased by $13.8 billion to $6.5 billion in 2014 compared to
$20.3 billion in 2013. The drivers of comprehensive income primarily consist of: (a) net interest income generated on our
investments; (b) settlement income associated with our investments in non-agency mortgage-related securities; (c) derivative-
and investments-related fair value gains and losses; and (d) income taxes.
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