Fannie Mae 2002 Annual Report Download - page 115

113
FANNIE MAE 2002 ANNUAL REPORT
The Portfolio Investment business represented
$869 billion, or 98 percent of total assets, at December 31,
2002 and $785 billion, or 98 percent of total assets, at
December 31, 2001.
11. Dividend Restrictions and Regulatory Capital
Ratios
Our ability to pay dividends may be subject to certain
statutory restrictions. We would need approval by the
Director of OFHEO for any dividend payment that would
cause our capital to fall below specified capital levels.
We have exceeded the applicable capital standard since
the adoption of these restrictions in 1992; therefore, we
have been making dividend payments without the need for
director approval. The capital adequacy standard requires
that our core capital equal or exceed a minimum capital
standard and a critical capital standard.
OFHEO published regulations under the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 in
September 2001, as amended on March 15, 2002,
establishing a risk-based capital test to determine the amount
of total capital we must hold under the risk-based capital
standard on a quarterly basis. The risk-based capital standard
was implemented by OFHEO on September 13, 2002.
The following table shows how our capital at December 31,
2002 and 2001 compared with these requirements.
Dollars in millions 2002 2001
Core capital1. . . . . . . . . . . . . . . . . . . . . . . . . . . $28,079 $25,182
Required minimum capital2, 5 . . . . . . . . . . . . . . 27,203 24,182
Excess of core capital over minimum capital5. . . $877 $ 1,000
Total capital3. . . . . . . . . . . . . . . . . . . . . . . . . . . $28,871 $25,976
Required risk-based capital . . . . . . . . . . . . . . . . 17,434 NA
Excess of total capital over required
risk-based capital. . . . . . . . . . . . . . . . . . . . . . 11,437 NA
Required critical capital4, 5 . . . . . . . . . . . . . . . . . $13,880 $12,324
Excess of core capital over required
critical capital5. . . . . . . . . . . . . . . . . . . . . . . . 14,199 12,859
1The sum of (a) the stated value of common stock; (b) the stated value of outstanding noncumulative
perpetual preferred stock; (c) paid-in capital; and (d) retained earnings, less treasury stock. Core capital
excludes accumulated other comprehensive income (AOCI).
2The sum of (a) 2.50 percent of on-balance sheet assets; (b) .45 percent of outstanding MBS; and
(c) .45 percent of other off-balance sheet obligations, which may be adjusted by the Director of OFHEO
under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the
Director of OFHEO).
3The sum of (a) core capital and (b) the total allowance for loan losses and guaranty liability, less (c) the
specific loss allowance. Specific loss allowances totaled $19 million and $13 million for the years ended
December 31, 2002 and December 31, 2001 respectively.
4The sum of (a) 1.25 percent of on-balance sheet assets; (b) .25 percent of outstanding MBS; and
(c) .25 percent of other off-balance sheet obligations, which may be adjusted by the Director of OFHEO
under certain circumstances.
5These amounts do not reflect the reclassification from our “Allowance for loan losses” to a “Guaranty
liability for MBS” the amount associated with the guaranty obligation for MBS that we own that
occurred in 2002. See Note 1 to the Notes to the Financial Statements, “Summary of Significant
Accounting Policies—Allowance for Loan Losses and Guaranty Liability for MBS.” The reclassification
will not have a material effect on these amounts.
Payment of dividends on common stock is subordinate to
any payment of dividends on preferred stock outstanding.
Payment of preferred stock dividends is not mandatory.
12. Preferred Stock
The following table presents preferred stock outstanding
as of December 31, 2002.
Shares Issued Stated
Issue and Value Annual Redeemable on
Date Outstanding per Share Dividend Rate or After
Series D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 30, 1998 3,000,000 $50 5.250% September 30, 1999
Series E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 15, 1999 3,000,000 50 5.100 April 15, 2004
Series F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 20, 2000 13,800,000 50 3.5401March 31, 20023
Series G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 8, 2000 5,750,000 50 1.8302September 30, 20023
Series H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 6, 2001 8,000,000 50 5.810 April 6, 2006
Series I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 28, 2002 6,000,000 50 5.375 October 28, 2007
Series J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 26, 2002 14,000,000 50 3.7804November 26, 2004
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,550,000
1Rate effective March 31, 2002. Variable dividend rate that resets every two years thereafter at the Constant Maturity U.S. Treasury Rate minus .16 percent with a cap of 11 percent per year.
2Rate effective September 30, 2002. Variable dividend rate that resets every two years thereafter at the Constant Maturity U.S. Treasury Rate minus .18 percent with a cap of 11 percent per year.
3Represents initial call date. Redeemable every two years thereafter.
4Initial rate. Variable dividend rate that resets every two years thereafter at the two-year U.S. Dollar Swap Rate plus 1.38 percent with a cap of 8 percent per year.
In general, our preferred stock has no par value, has a stated
value and liquidation preference of $50 per share, and is not
convertible into or exchangeable for any of our other stock
or obligations. Holders of preferred stock are entitled to
receive noncumulative, quarterly dividends when, and if,
declared by our Board of Directors, but will have no right
to require redemption of any shares of preferred stock.
Payment of dividends on preferred stock is not mandatory,
but has priority over payment of dividends on common
stock. After a specified period, we have the option to redeem
preferred stock at its stated value. All outstanding preferred
stock is nonvoting.
We redeemed all 7.5 million of our outstanding Series B
preferred stock on February 28, 2002 and all 5.0 million
shares of our outstanding Series C preferred stock on
July 31, 2002.