Fannie Mae 2004 Annual Report Download - page 131

The changing product mix of originations in our underlying market had a pronounced effect on the
composition of mortgage assets purchased for our portfolio during 2004. Due to an increase in the percentage
of adjustable-rate mortgage originations in 2004, a substantially higher proportion of our purchases in 2004
consisted of ARMs and floating-rate mortgage-related securities. These floating-rate securities and adjustable-
rate mortgage products typically have lower initial interest yields than fixed-rate mortgage products.
Accordingly, our purchase of a greater proportion of these lower initial yield mortgage products adversely
affected our net interest yield during 2004.
Non-mortgage Investments
Our Capital Markets group also purchases non-mortgage investments. Our non-mortgage investments consist
primarily of high-quality securities that are readily marketable or have short-term maturities, such as
commercial paper. As of December 31, 2004 and 2003, we had approximately $55.1 billion and $67.1 billion,
respectively, in liquid assets, net of any cash and cash equivalents pledged as collateral. Our investments in
non-mortgage securities, which account for the majority of our liquid assets, totaled $43.9 billion and
$46.8 billion as of December 31, 2004 and 2003, respectively.
Table 23 shows the amortized cost, maturity and weighted average yield of our investments in mortgage and
non-mortgage securities.
Table 23: Amortized Cost, Maturity and Average Yield of Investments in Securities
Total
Amortized
Cost
(1)
Total
Fair
Value
Amortized
Cost
(1)
Fair
Value
Amortized
Cost
(1)
Fair
Value
Amortized
Cost
(1)
Fair
Value
Amortized
Cost
(1)
Fair
Value
One Year or Less
After One Year
Through Five Years
After Five Years
Through Ten Years After Ten Years
As of December 31, 2004
(Dollars in millions)
Fannie Mae single-class MBS
(2)
. . . $238,386 $241,828 $ — $ — $ 701 $ 746 $3,163 $3,338 $234,522 $237,744
Non-Fannie Mae single-class
mortgage securities
(2)
........ 34,429 35,168 — — 58 61 420 435 33,951 34,672
Fannie Mae structured MBS
(2)
. . . . 72,093 73,367 188 239 78 79 426 444 71,401 72,605
Non-Fannie Mae structured
mortgage securities
(2)
........ 109,564 109,820 4 4 10 10 56 57 109,494 109,749
Mortgage revenue bonds ........ 22,124 22,657 180 179 687 686 658 674 20,599 21,118
Other mortgage-related
securities
(3)
............... 5,043 5,346 — (3) — — — — 5,043 5,349
Asset-backed securities
(2)
....... 25,632 25,645 5,094 5,094 17,532 17,521 1,552 1,554 1,454 1,476
Corporate debt securities ........ 15,102 15,098 5,302 5,305 9,700 9,693 100 100 — —
Municipal bonds ............. 865 863 865 863 — — — — — —
Other non-mortgage-related
securities . . . ............. 2,302 2,303 1,782 1,783 520 520 — — — —
Total . .................. $525,540 $532,095 $13,415 $13,464 $29,286 $29,316 $6,375 $6,602 $476,464 $482,713
Yield
(4)
................. 4.64% 2.78% 1.74% 5.50% 4.86%
(1)
Amortized cost includes unamortized premiums, discounts and other deferred price adjustments, as well as
other-than-temporary impairment write downs.
(2)
Asset-backed securities, including mortgage-backed securities, are reported based on contractual maturities assuming
no prepayments.
(3)
Includes commitments related to mortgage securities that are accounted for as securities.
(4)
Yields are determined by dividing interest income (including the amortization and accretion of premiums, discounts
and other deferred price adjustments) by amortized cost balances as of year-end.
SUPPLEMENTAL NON-GAAP INFORMATION—FAIR VALUE BALANCE SHEET
Because our assets and liabilities consist predominately of financial instruments, we routinely use fair value
measures to make investment decisions and to measure, monitor and manage our risk. The balance sheets
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