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33
FANNIE MAE 2002 ANNUAL REPORT
FAS 133 accounting treatment for purchased options, which affects our Portfolio Investment business. The FAS 133 related
reconciling items between our core business earnings and reported results have no effect on our Credit Guaranty business.
TABLE 4: RECONCILIATION OF CORE BUSINESS EARNINGS TO REPORTED RESULTS
20021
Total Core Reconciling
Portfolio Credit Business Items Related to Reported
Dollars in millions Investment Guaranty Earnings Purchased Options Results
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,869 $ 697 $10,566 $ — $10,566
Purchased options amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,814) — (1,814) 1,814(a) —
Core net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,055 697 8,752 1,814 10,566
Guaranty fee income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,374) 3,190 1,816 — 1,816
Fee and other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 (116) 232 — 232
Credit-related expenses2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —(92) (92) — (92)
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (357) (862) (1,219) — (1,219)
Purchased options expense under FAS 133 . . . . . . . . . . . . . . . . . . . . . . . . . . . . ——— (4,545)(b) (4,545)
Debt extinguishments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (710) — (710) — (710)
Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,962 2,817 8,779 (2,731) 6,048
Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,747) (638) (2,385) 956(d) (1,429)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,215 $2,179 $ 6,394 $(1,775) $ 4,619
20011
Total Core Reconciling
Portfolio Credit Business Items Related to Reported
Investment Guaranty Earnings Purchased Options Results
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,369 $ 721 $ 8,090$—$8,090
Purchased options amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (590) — (590) 590(a) —
Core net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,779 721 7,500 590 8,090
Guaranty fee income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,109) 2,591 1,482 — 1,482
Fee and other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 (60) 151 — 151
Credit-related expenses2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (78) (78) — (78)
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (302) (715) (1,017) — (1,017)
Special contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (192) (108) (300) — (300)
Purchased options expense under FAS 133 . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (37)(b) (37)
Debt extinguishments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (524) — (524) — (524)
Income before federal income taxes and effect of accounting change . . . . . . . 4,863 2,351 7,214 553 7,767
Cumulative effect of accounting change, net of tax effect . . . . . . . . . . . . . . . . — — — 168(c) 168
Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,374) (473) (1,847) (194)(d) (2,041)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,489 $ 1,878 $ 5,367$527 $ 5,894
2000
Total Core Reconciling
Portfolio Credit Business Items Related to Reported
Investment Guaranty Earnings Purchased Options Results
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,055 $ 619 $ 5,674 $ — $ 5,674
Purchased options amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — —
Core net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,055 619 5,674 — 5,674
Guaranty fee income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,079) 2,430 1,351 — 1,351
Fee and other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (71) (44) — (44)
Credit-related expenses2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (94) (94) — (94)
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (254) (651) (905) — (905)
Debt extinguishments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 — 49 — 49
Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,798 2,233 6,031 — 6,031
Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,053) (530) (1,583) — (1,583)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,745 $ 1,703 $ 4,448 $ — $ 4,448
1Reported net income for 2002 and 2001 includes the effect of FAS 133, which was adopted on January 1, 2001.
2Credit-related expenses include the income statement line items “Provision for losses” and “ Foreclosed property expense (income).”