Fannie Mae 2001 Annual Report Download - page 46

information on MBS is presented in MD&A in the
“Mortgage-Backed Securities” section.
At December 31, 2001, Fannie Mae had $55 billion in
outstanding mandatory commitments and $2 billion in
outstanding optional commitments for the purchase and
delivery of mortgages in 2002 that were funded in 2001.
At December 31, 2000, Fannie Mae had $16 billion in
outstanding mandatory commitments and $2 billion in
outstanding optional commitments for the purchase and
delivery of mortgages in 2001.
Fannie Mae’s core capital (defined by its regulator, Office of
Federal Housing Enterprise Oversight [OFHEO], as the
stated value of outstanding common stock, the stated value of
outstanding noncumulative perpetual preferred stock, paid-
in capital, and retained earnings) grew to $25.2 billion at
December 31, 2001 from $20.8 billion at December 31,
2000. Fannie Mae’s core capital, which excludes accumulated
other comprehensive income (AOCI), is a more accurate
reflection of its capital resources than total stockholder’s
equity. Core capital excludes AOCI because AOCI
incorporates unrealized gains (losses) on derivatives and
certain investment securities, but not the unrealized losses
(gains) on the remaining mortgages and securities or
liabilities used to fund the purchase of these items.
At December 31, 2001, AOCI totaled negative $7 billion,
compared with a positive balance of $10 million at December
31, 2000. Upon adoption of FAS 133 on January 1, 2001,
Fannie Mae recorded a $3.9 billion reduction in AOCI,
which was primarily attributable to recording derivatives
(mostly interest rate swaps used as substitutes for non-
callable debt) that qualify as cash flow hedges on the balance
sheet at fair value. The balance of the decline in AOCI was
attributable to a decline in the fair value of these derivatives
during the year with the reduction in interest rates. FAS 133
requires a mark-to-market through AOCI for derivatives
that qualify as cash flow hedges to the extent they are
effective hedges.
Fannie Mae had approximately 997 million common shares
outstanding, net of shares held in treasury, as of December
31, 2001, versus 999 million common shares outstanding at
the end of the prior year. Common stock issuances during
2001 totaled 4.5 million shares for employee and other stock
compensation plans. Fannie Mae repurchased 6.0 million
shares of stock at a weighted average cost of $76.95 per share
as part of the continuation of its capital restructuring
program. In 2000, Fannie Mae repurchased 25 million
shares of common stock. The stock repurchases were made
pursuant to the Board’s approval to repurchase up to
6 percent of outstanding common shares as of December 27,
1995 (adjusted for a stock split) and to repurchase shares to
offset the dilutive effect of common shares issued in
conjunction with various stock compensation plans.
Fannie Mae raised $400 million in additional equity in 2001
by issuing noncumulative preferred stock. In April 2001,
Fannie Mae issued 8.0 million shares of Series H preferred
stock at a stated value of $50 per share and initial rate of
5.81 percent. On March 1, 2001, Fannie Mae redeemed all of
the outstanding shares of its 6.41 percent Series A preferred
stock at a redemption price of $50.53 per share, which
included dividends of $.53417 per share for the period
commencing December 31, 2000, up to, but excluding,
March 1, 2001. On February 28, 2002, Fannie Mae
redeemed all outstanding shares of its 6.5 percent non-
cumulative preferred stock, Series B at $50.51458 per share,
which represents the stated redemption price of $50.00 per
share plus an amount equal to the dividend for the quarterly
dividend period ending March 31, 2002, accrued to, but
excluding, the redemption date of February 28, 2002.
In January 2002, the Board of Directors approved a quarterly
common stock dividend for 2002 of $.33 per common share.
In 2001, the quarterly dividend rate was $.30 per common
share. The Board of Directors also approved preferred stock
dividends for the period commencing December 31, 2001,
up to, but excluding, March 31, 2002, as identified in
Table 19.
TABLE 19: PREFERRED STOCK DIVIDENDS
Dividend
Preferred Stock Series per Share
Series B1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $.81250
Series C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80625
Series D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65625
Series E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63750
Series F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78690
Series G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75290
Series H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72630
1Fannie Mae redeemed all of the outstanding shares of its 6.50 percent Series B preferred stock on
February 28, 2002 at $50.5148 per share. The redemption price included dividends of $.5148 per share
for the period commencing December 31, 2001, up to, but excluding, February 28, 2002.
During 2001, Fannie Mae issued $5 billion of subordinated
debt that received a rating of AA from Standard & Poor’s and
Aa2 from Moody’s Investors Service. Fannie Mae’s
subordinated debt serves as a supplement to Fannie Mae’s
equity capital, although it is not a component of core capital.
It provides a risk-absorbing layer to supplement core capital
for the benefit of senior debt holders and serves as a
{ 44 } Fannie Mae 2001 Annual Report