Freddie Mac 2004 Annual Report Download - page 101

Capital Resources
We manage our capital resources to provide attractive returns on our common equity, while maintaining
suÇcient capital to satisfy regulatory capital requirements and assuring that capital is available to absorb
unforeseen losses that might arise in fulÑlling our obligations and conducting our business programs.
Table 48 summarizes the components of our Core capital as of the dates presented. Core capital excludes
AOCI consistent with our regulatory capital requirements, which are described under ""Capital Adequacy''
below.
Table 48 Ì Summary of Core Capital
December 31,
2004 2003
(dollars in millions)
Common stock, at par valueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 152 $ 152
Preferred stock, at redemption value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,609 4,609
Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 873 814
Retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,728 28,837
Treasury stock, at cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,353) (1,427)
Core capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $35,009 $32,985
Capital Transactions
During 2004 and 2003, we added approximately $2.0 billion and $4.0 billion, respectively, to Core capital
primarily from Net income, partially oÅset by the payment of common and preferred stock dividends.
Our Board of Directors approved a dividend per common share of $0.35 for Ñrst quarter 2005, an increase
of 17 percent over the quarterly dividend in 2004. The dividend per common share was $0.30 for each quarter
in 2004, an increase of 15 percent over the $0.26 quarterly dividend paid each quarter during 2003. We paid a
quarterly dividend per common share of $0.22 in 2002. Dividends declared and paid in any quarter will be
determined by our Board of Directors after considering our capital position and earnings and growth prospects,
among other factors.
In addition, under the capital monitoring framework established by OFHEO in January 2004, we are
required to obtain prior written approval from the Director of OFHEO before engaging in certain capital
transactions, including the repurchase of any shares of common stock, redemption of any preferred stock or
payment of preferred stock dividends above stated contractual rates. We also must submit a written report to
the Director of OFHEO after the declaration, but before the payment, of any dividend on our common stock.
The report must contain certain information on the amount of the dividend, the rationale for the payment and
the impact on our capital surplus.
As we return to timely Ñnancial reporting, in periods when we are adequately capitalized and attractive
investment opportunities are not available, we will consult with OFHEO and consider options to return capital
to our stockholders through dividends or common stock repurchases. The amount of capital available to
distribute to our stockholders will be aÅected primarily by our capital position and earnings and growth
prospects, among other factors.
All repurchases of our common stock have been made as part of the stock repurchase plan approved by
our Board of Directors on September 5, 1997. This plan allows repurchases of common stock not to exceed
Ñve percent of shares outstanding as of September 5, 1997, which was approximately 34 million shares. At
December 31, 2004, approximately 13 million common shares remained available for repurchase under this
plan. During 2003, 2004 and the Ñrst Ñve months of 2005, we did not repurchase any common shares. We
repurchased approximately 9.1 million shares of common stock during 2002 for approximately $555 million. In
addition, we may not be able to issue or redeem preferred stock or subordinated debt until we resume timely
Ñnancial reporting and therefore, changes in Core capital will generally be limited to net income and
dividends. See ""BUSINESS Ì Regulatory and Governmental Matters Ì OFHEO'' for a discussion of the
framework established by OFHEO for monitoring our capital. In addition, we periodically reissue treasury
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