Freddie Mac 2004 Annual Report Download - page 52

Analysis of Quarterly Results
Table 16 summarizes quarterly Net interest income and net interest yield for 2004 and 2003.
Table 16 Ì Quarterly Net interest income (quarterly yields annualized)
Full year
1Q 2004 2Q 2004 3Q 2004 4Q 2004 2004
(dollars in millions)
Contractual amounts of net interest income ÏÏÏÏÏÏÏÏÏÏ $3,146 $2,897 $3,008 $2,695 $11,746
Deferred item amortization expense, net(1)
Asset-related amortization expense, net ÏÏÏÏÏÏÏÏÏÏÏÏ (592) (62) (446) (308) (1,408)
Debt-related amortization expense, net ÏÏÏÏÏÏÏÏÏÏÏÏ (298) (322) (366) (315) (1,301)
Amortization expense, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (890) (384) (812) (623) (2,709)
Income (expense) related to derivatives
Amortization of deferred balances in AOCI, net(2) ÏÏ (367) (482) (481) (484) (1,814)
Accrual of periodic settlements of derivatives(3)
Pay-Ñxed swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (427) Ì Ì Ì (427)
Receive-Ñxed swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 527 494 525 422 1,968
Foreign-currency swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 138 101 82 55 376
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (1) (1) Ì (3)
Accrual of periodic settlements of derivatives ÏÏÏ 237 594 606 477 1,914
Total income (expense) related to derivativesÏÏÏÏÏÏÏÏÏ (130) 112 125 (7) 100
Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,126 2,625 2,321 2,065 9,137
Fully taxable-equivalent adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 63 67 74 267
Net interest income (fully taxable-equivalent basis) ÏÏÏ $2,189 $2,688 $2,388 $2,139 $ 9,404
Net interest yield (fully taxable-equivalent basis) ÏÏÏÏÏ 1.15% 1.44% 1.24% 1.13% 1.24%
Full year
1Q 2003 2Q 2003 3Q 2003 4Q 2003 2003
(dollars in millions)
Contractual amounts of net interest income ÏÏÏÏÏÏÏÏÏÏ $3,056 $3,088 $3,353 $3,493 $12,990
Deferred item amortization expense, net(1)
Asset-related amortization expense, net ÏÏÏÏÏÏÏÏÏÏÏÏ (238) (540) (280) (364) (1,422)
Debt-related amortization expense, net ÏÏÏÏÏÏÏÏÏÏÏÏ (257) (241) (216) (265) (979)
Amortization expense, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (495) (781) (496) (629) (2,401)
Income (expense) related to derivatives
Amortization of deferred balances in AOCI, net(2) ÏÏ (446) (363) (341) (332) (1,482)
Accrual of periodic settlements of derivatives(3)(4) ÏÏÏ 306 241 (74) (82) 391
Total income (expense) related to derivativesÏÏÏÏÏÏÏÏÏ (140) (122) (415) (414) (1,091)
Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,421 2,185 2,442 2,450 9,498
Fully taxable-equivalent adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 64 60 62 227
Net interest income (fully taxable-equivalent basis) ÏÏÏ $2,462 $2,249 $2,502 $2,512 $ 9,725
Net interest yield (fully taxable-equivalent basis) ÏÏÏÏÏ 1.40% 1.26% 1.27% 1.26% 1.30%
(1) Amortization relates to premiums, discounts, deferred fees and other basis adjustments. Basis adjustments are modiÑcations to the
carrying value of our Ñnancial instruments.
(2) Represents changes in fair values of derivatives in cash Öow hedge relationships that were previously deferred in AOCI and have
been reclassiÑed to earnings as the associated hedged forecasted issuances of debt and forecasted mortgage purchase transactions
aÅect earnings.
(3) ReÖects the accrual of periodic cash settlements in accordance with the contractual terms of all derivatives in qualifying hedge
accounting relationships.
(4) Data for 2003 not available at the level of detail provided for 2004.
The various drivers of Net interest income and yields are described in detail below.
Investment asset mix. The purchase, sale and liquidation of assets within the Retained portfolio and the
Cash and investments portfolio, which we collectively refer to as our portfolios, has a signiÑcant impact
Freddie Mac
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