Freddie Mac 2005 Annual Report Download - page 5

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Not only did we gain substantial GSE market share, but in the face of stiff competition from
the banking sector, we also grew overall market share. And we diversified our customer
base by reaching beyond our usual largest customers.
Building Shareholder Value
Increasing market share and customer satisfaction is only part of our strategy to build
shareholder value. A strong balance sheet and expert risk management are also essential.
In 2005, we built on these enduring strengths.
Turning to our balance sheet, Freddie Mac’s regulatory core capital grew to over $35 billion
— well above the capital requirements set by our safety and soundness regulator.
As a result of our strong capital position and confidence in our profitability, we increased
our quarterly common stock dividend twice last year. In fact, since December 2003, we
have raised this dividend by 81 percent.
Regarding our credit and interest-rate risk management record, it remains a hallmark
of the industry. Our ready access to callable debt and specialized mortgage risk
expertise are key competitive advantages. The company’s interest-rate and credit risks
are near historic lows. Our delinquency rates remain low as well. Our key measures
of interest-rate risk are disclosed monthly — transparent to all — demonstrating that
we continue to manage risk prudently and consistently in a world of rapidly changing
rate conditions.
In May we reported 2005 earnings in excess of $2 billion in GAAP net income. These results
reflect a cyclical narrowing of spreads as well as costs associated with the settlement of
litigation stemming from the events of 2003, charges related to Hurricane Katrina, and the
cumulative impact of a number of accounting changes. Fair value, another very important
measure of our performance, grew before capital transactions, but at a rate well below our
long-term expectations and continuing guidance.
Creating value for shareholders depends in part on our ability to hold down expenses, and in
2005 we were successful in this area. But I want to be clear: we also have an absolute duty