Fannie Mae 2008 Annual Report Download - page 103

(1)
Average balances were calculated based on the average of the amortized cost amounts at the beginning of the year and
at the end of each month in the year for mortgage loans, advances to lenders, and short- and long-term debt for 2008
and 2007. Average balances for all other categories have been calculated based on a daily average for 2008 and 2007.
Average balances were calculated based on the average of the amortized cost amounts at the beginning of the year and
at the end of each quarter in the year for 2006.
(2)
Average balance amounts include nonaccrual loans with an average balance totaling $10.3 billion, $6.5 billion and
$6.7 billion for the years ended December 31, 2008, 2007 and 2006, respectively. Interest income includes interest
income on loans purchased from MBS trusts subject to SOP 03-3, which totaled $634 million, $496 million and
$361 million for 2008, 2007 and 2006, respectively. These interest income amounts included accretion of $158 million,
$80 million and $43 million for 2008, 2007 and 2006 relating to a portion of the fair value losses recorded upon the
purchase of SOP 03-3 loans.
(3)
Includes cash equivalents.
(4)
We compute net interest yield by dividing net interest income for the period by the average balance of our total
interest-earning assets during the period.
(5)
Data obtained from British Bankers’ Association, Thomson Reuters Indices and Bloomberg.
Net interest income of $8.8 billion for 2008 reflected an increase of 92% over net interest income of
$4.6 billion for 2007, driven by an 81% (46 basis points) expansion of our net interest yield to 1.03% and a
6% increase in our average interest-earning assets. Net interest income of $4.6 billion for 2007 reflected a
decrease of 32% from net interest income of $6.8 billion in 2006, driven by a 33% (28 basis points) decline in
our net interest yield to 0.57%, which was partially offset by a 2% increase in our average interest-earning
assets.
Table 5 presents the change in our net interest income between periods and the extent to which that variance
is attributable to: (1) changes in the volume of our interest-earning assets and interest-bearing liabilities or
(2) changes in the interest rates of these assets and liabilities.
Table 5: Rate/Volume Analysis of Net Interest Income
Total
Variance Volume Rate
Total
Variance Volume Rate
Variance Due to:
(1)
Variance Due to:
(1)
2008 vs. 2007 2007 vs. 2006
(Dollars in millions)
Interest income:
Mortgage loans
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . $ 474 $ 1,258 $ (784) $ 1,414 $ 999 $ 415
Mortgage securities . . . . . . . . . . . . . . . . . . . . . . . . (708) 200 (908) (1,261) (1,540) 279
Non-mortgage securities
(3)
. . . . . . . . . . . . . . . . . . . (1,693) (201) (1,492) 707 1,050 (343)
Federal funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . . . . . . . . 330 886 (556) 187 104 83
Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . (46) (132) 86 92 36 56
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . (1,643) 2,011 (3,654) 1,139 649 490
Interest expense:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,186) 3,873 (5,059) 1,268 561 707
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,660) (2,760) (1,900) 2,047 46 2,001
Federal funds purchased and securities sold under
agreements to repurchase . . . . . . . . . . . . . . . . . . 2 7 (5) (5) (7) 2
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . (5,844) 1,120 (6,964) 3,310 600 2,710
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . $ 4,201 $ 891 $ 3,310 $(2,171) $ 49 $(2,220)
(1)
Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance.
(2)
Refer to footnote 2 in Table 4.
(3)
Includes cash equivalents.
The 46 basis point increase in our net interest yield during 2008 was mainly driven by a 99 basis point
reduction in the average cost of our debt to 4.15%, which more than offset the 49 basis point decline in the
average yield on our interest-earning assets to 5.04%. The reduction in our borrowing costs was attributable to
the general decline during 2008 in short-term borrowing rates, which fell to record lows of near zero at the
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