Freddie Mac 2015 Annual Report Download - page 32

Management's Discussion and Analysis Our Business Segments | Segment Earnings
Freddie Mac 2015 Form 10-K 30
OUR BUSINESS SEGMENTS
As shown in the table below, we have three reportable segments, which are based on the way we
manage our business. Certain activities that are not part of a reportable segment are included in the All
Other category.
Segment Description Primary Income Drivers Primary Expense Drivers
Single-
family
Guarantee
Reflects results from our
purchase, securitization, and
guarantee of single-family loans
and the management of single-
family mortgage credit risk
• Management and guarantee
fee income
• Credit-related expenses
• Administrative expenses
Multifamily Reflects results from our
investment, securitization, and
guarantee activities in multifamily
loans and securities, and the
management of multifamily
mortgage credit risk
• Net interest income • Gains and losses on loans
• Management and guarantee
fee income
• Investment gains and losses
• Derivative gains and losses
• Gains and losses on loans • Administrative expenses
• Investment gains and losses • Credit-related expenses
• Derivative gains and losses
Investments Reflects results from managing
the company’s mortgage-related
investments portfolio (excluding
Multifamily investments and
single-family seriously delinquent
loans), treasury function, and
interest-rate risk
•Net interest income • Other-than-temporary
impairments on non-agency
mortgage-related securities
• Investment gains and losses
• Derivative gains and losses
• Investment gains and losses
• Derivative gains and losses
• Administrative expenses
All Other Consists of material corporate
level activities that are infrequent
in nature and based on decisions
outside the control of the
management of our reportable
segments
N/A N/A
SEGMENT EARNINGS
We evaluate segment performance and allocate resources based on a Segment Earnings approach:
• We make significant reclassifications among certain line items in our GAAP financial statements to
reflect measures of management and guarantee fee income on guarantees and net interest income
on investments that are in line with how we manage our business.
• We allocate certain revenues and expenses, including certain returns on assets and funding costs,
and all administrative expenses to our three reportable segments.
• The sum of Segment Earnings for each segment and the All Other category equals GAAP net income
(loss) and the sum of comprehensive income (loss) for each segment and the All Other category
equals GAAP comprehensive income (loss).
In the second quarter of 2015, we changed our Segment Earnings definition associated with the expense
related to the Temporary Payroll Tax Cut Continuation Act of 2011. As a result of this change, the expense
related to the legislated 10 basis point increase is now netted within management and guarantee fee
income. The purpose of this change is to better reflect how management evaluates the Single-family