Fannie Mae 2007 Annual Report Download - page 135

capital requirement. Quarterly changes in economic conditions (such as interest rates, market spreads and
home prices) can materially impact the risk-based capital requirement, as was the case in 2007. As a
consequence, we generally seek to maintain a larger surplus over the risk-based capital requirement to ensure
continued compliance.
While we are able to reasonably estimate the size of our book of business and therefore our minimum capital
requirement, the amount of our reported core capital holdings at each period end is less certain without hedge
accounting treatment. Changes in the fair value of our derivatives may result in significant fluctuations in our
capital holdings from period to period. Accordingly, we target a surplus above the statutory minimum capital
requirement and OFHEO-directed minimum capital requirement to accommodate a wide range of possible
valuation changes that might adversely impact our core capital base.
Capital Classification Measures
Table 38 below shows our statutory and OFHEO-directed minimum capital classification measures and our
statutory critical capital classification measure as of December 31, 2007 and 2006. For a description of our
regulatory capital adequacy requirements, refer to “Part I—Item 1—Business—Our Charter and Our
Activities—Regulation and Oversight of Our Activities—OFHEO Regulation—Capital Adequacy
Requirements.”
Table 38: Regulatory Capital Measures
2007
(1)
2006
As of December 31,
(Dollars in millions)
Core capital
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,373 $41,950
Statutory minimum capital
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,927 29,359
Surplus of core capital over statutory minimum capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,446 $12,591
Surplus of core capital percentage over statutory minimum capital . . . . . . . . . . . . . . . . . . . . . . . . . 42.1% 42.9%
Core capital
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,373 $41,950
OFHEO-directed minimum capital
(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,505 38,166
Surplus of core capital over OFHEO-directed minimum capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,868 $ 3,784
Surplus of core capital percentage over OFHEO-directed minimum capital . . . . . . . . . . . . . . . . . . . 9.3% 9.9%
Core capital
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,373 $41,950
Statutory critical capital
(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,525 15,149
Surplus of core capital over statutory critical capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,848 $26,801
Surplus of core capital percentage over statutory critical capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 174.6% 176.9%
Total capital
(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,658 $42,703
(1)
Amounts as of December 31, 2007 represent estimates that will be submitted to OFHEO for its certification and are
subject to its review and approval. Amounts as of December 31, 2006 represent OFHEO’s announced capital
classification measures.
(2)
The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated
value of our outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained
earnings. Core capital excludes accumulated other comprehensive income (loss).
(3)
Generally, the sum of (a) 2.50% of on-balance sheet assets; (b) 0.45% of the unpaid principal balance of outstanding
Fannie Mae MBS held by third parties; and (c) up to 0.45% 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).
(4)
Defined as a 30% surplus over the statutory minimum capital requirement. We are currently required to maintain this
surplus under the OFHEO consent order until such time as the Director of OFHEO determines that the requirement
should be modified or allowed to expire, taking into account certain specified factors.
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