Fannie Mae 2010 Annual Report Download - page 121

“Risk Management—Market Risk Management, Including Interest Rate Risk Management—Derivative
Instruments,” and “Note 10, Derivative Instruments and Hedging Activities.” The primary sources of revenue
for our Capital Markets group are net interest income and fee and other income. Expenses and other items that
impact income or loss primarily include fair value gains and losses, investment gains and losses,
other-than-temporary impairment, and administrative expenses.
Table 22: Capital Markets Group Results
2010 2009 2008
For the Year Ended December 31,
(Dollars in millions)
Statement of operations data:
(1)
Net interest income
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,321 $14,275 $ 8,664
Investment gains (losses), net
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,047 1,460 (174)
Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (720) (9,861) (6,974)
Fair value gains (losses), net
(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 (2,811) (20,129)
Feeandotherincome ............................................... 519 319 264
Other expenses
(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,359) (2,446) (2,209)
Income (loss) before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,047 936 (20,558)
Benefit (provision) for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (79) (8,450)
Extraordinary losses, net of tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (409)
Net income (loss) attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,074 $ 857 $(29,417)
(1)
Segment statement of operations data reported under the current segment reporting basis is not comparable to the
segment statement of operations data reported in prior periods.
(2)
Includes contractual interest on nonaccrual loans received from Single-Family and Multifamily segments. In 2010,
Capital Markets net interest income is reported based on the mortgage-related assets held in the segment’s portfolio
and excludes interest income on mortgage-related assets held by consolidated MBS trusts that are owned by third
parties and the interest expense on the corresponding debt of such trusts. In 2009 and 2008, the Capital Markets
group’s net interest income included interest income on mortgage-related assets underlying MBS trusts that we
consolidated under the prior consolidation accounting standards and the interest expense on the corresponding debt of
such trusts.
(3)
In 2010, we include the securities that we own regardless of whether the trust has been consolidated in reporting of
gains and losses on securitizations and sales of available-for-sale securities. In 2009 and 2008, we excluded the
securities of consolidated trusts that we own in reporting of gains and losses on securitizations and sales of
available-for-sale securities.
(4)
In 2010, fair value gains or losses on trading securities include the trading securities that we own, regardless of
whether the trust has been consolidated. In 2009 and 2008, MBS trusts that were consolidated were reported as loans
and thus any securities we owned issued by these trusts did not have fair value adjustments.
(5)
Includes allocated guaranty fee expense, debt extinguishment losses, net, administrative expenses, and other expenses.
In 2010, gains or losses related to the extinguishment of debt issued by consolidated trusts are excluded from the
Capital Markets group because purchases of securities are recognized as such. In 2009 and 2008, gains or losses
related to the extinguishment of debt issued by consolidated trusts were included in the Capital Markets group’s results
as debt extinguishment gain or loss.
2010 compared with 2009
Key factors affecting the results of our Capital Markets group for 2010 compared with 2009 included the
following:
Net Interest Income
The Capital Markets group’s interest income consists of interest on the segment’s interest-earning assets,
which differs from interest-earning assets in our consolidated balance sheets. We exclude loans and securities
that underlie the consolidated trusts from our Capital Markets group’s balance sheets. The net interest income
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