Fannie Mae 2005 Annual Report Download - page 322

Single-Family
Credit Guaranty HCD
Capital
Markets Total
For the Quarter Ended December 31, 2005
(Dollars in millions)
Net interest income (expense)
(1)
. . . . . . . . . . . . . . . . . . . . . . . $ 256 $ (57) $1,958 $2,157
Guaranty fee income (expense)
(2)
. . . . . . . . . . . . . . . . . . . . . . 1,081 79 (291) 869
Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . 41 — (348) (307)
Derivatives fair value losses, net. . . . . . . . . . . . . . . . . . . . . . . — — (267) (267)
Debt extinguishment losses, net . . . . . . . . . . . . . . . . . . . . . . . — — (30) (30)
Losses from partnership investments . . . . . . . . . . . . . . . . . . . . — (228) — (228)
Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 217 147 416
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311) (139) (228) (678)
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . (87) — — (87)
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) (33) (2) (93)
Income (loss) before federal income taxes and extraordinary
losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974 (161) 939 1,752
Provision (benefit) for federal income taxes . . . . . . . . . . . . . . . 326 (260) 255 321
Income before extraordinary losses . . . . . . . . . . . . . . . . . . . . . 648 99 684 1,431
Extraordinary losses, net of tax effect . . . . . . . . . . . . . . . . . . . — — (7) (7)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 648 $ 99 $ 677 $1,424
(1)
Includes cost of capital charge.
(2)
Includes intercompany guaranty fee revenue (expense) of $243 million allocated to Single-Family Credit Guaranty and
HCD from Capital Markets for absorbing the credit risk on mortgage loans and Fannie Mae MBS held in our
portfolio.
21. Subsequent Events
Stock Repurchase Program
On May 9, 2006, we announced a stock repurchase program under which we may repurchase up to
$100 million of Fannie Mae shares from non-officer employees. Prior to the creation of this employee stock
repurchase program, we repurchased shares in a limited number of instances relating to financial hardship as
well as reacquired common stock from employees as payment for the cost of option exercises and tax
withholding.
Final OFHEO Report and Settlements with OFHEO and SEC
On May 23, 2006, OFHEO issued its final report on its special examination of our accounting policies,
internal controls, financial reporting, corporate governance, and other safety and soundness matters. Concur-
rently with OFHEO’s release of its final report, we entered into comprehensive settlements that resolved open
matters with OFHEO and with the SEC. As part of the settlements, we agreed to pay a $400 million civil
penalty to the U.S. government, with $50 million payable to the U.S. Treasury and $350 million payable to
the SEC for distribution to shareholders pursuant to the Fair Funds for Investors provision of the Sarbanes-
Oxley Act of 2002, both of which were paid in 2006. See “Note 19, Commitments and Contingencies” for
additional information.
Increase in Common Stock Dividend
On December 6, 2006, the Board of Directors increased the quarterly common stock dividend to $0.40 per
share. On May 1, 2007, the Board of Directors increased the common stock dividend again to $0.50 per share.
The Board determined that this increased dividend would be effective beginning in the second quarter of 2007,
and therefore declared a special common stock dividend of $0.10 per share, payable on May 25, 2007, to
stockholders of record on May 18, 2007. This special dividend of $0.10 per share, combined with our
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)