Freddie Mac 2008 Annual Report Download - page 73

increase in the single-family guarantee asset of approximately $2.1 billion and cash receipts primarily related to management
and guarantee fees and other up-front fees.
See “CONSOLIDATED FAIR VALUE BALANCE SHEETS ANALYSIS” for additional information regarding
attribution of changes in the fair value of net assets.
CONSOLIDATED RESULTS OF OPERATIONS
The following discussion of our consolidated results of operations should be read in conjunction with our consolidated
financial statements, including the accompanying notes. Also see “CRITICAL ACCOUNTING POLICIES AND
ESTIMATES” for more information concerning the most significant accounting policies and estimates applied in determining
our reported financial position and results of operations.
Effective December 31, 2007, we retrospectively changed our method of accounting for our guarantee obligation: (a) to
a policy of no longer extinguishing our guarantee obligation when we purchase all or a portion of our issued PCs and
Structured Securities from a policy of effective extinguishment through the recognition of a Participation Certificate residual
and (b) to a policy that amortizes our guarantee obligation into earnings in a manner that corresponds more closely to our
economic release from risk under our guarantee than our former policy, which amortized our guarantee obligation according
to the contractual expiration of our guarantee as observed by the decline in the unpaid principal balance of securitized
mortgage loans. All years’ results presented herein reflect consistent application of this change.
Table 9 — Summary Consolidated Statements of Operations — GAAP Results
2008 2007 2006
Year Ended December 31,
(in millions)
Net interest income . . .............................................................. $ 6,796 $3,099 $ 3,412
Non-interest income (loss):
Management and guarantee income . . ................................................. 3,370 2,635 2,393
Gains (losses) on guarantee asset ..................................................... (7,091) (1,484) (978)
Income on guarantee obligation ...................................................... 4,826 1,905 1,519
Derivative gains (losses) . . . ........................................................ (14,954) (1,904) (1,173)
Gains (losses) on investment activity . ................................................. (16,108) 294 (473)
Gains (losses) on foreign-currency denominated debt recorded at fair value
(1)
....................... 406 — —
Gains (losses) on debt retirement ..................................................... 209 345 466
Recoveries on loans impaired upon purchase . . . .......................................... 495 505 —
Foreign-currency gains (losses), net
(1)
.................................................. — (2,348) 96
Low-income housing tax credit partnerships. . . . .......................................... (453) (469) (407)
Other income .................................................................. 125 246 236
Non-interest income (loss) ........................................................ (29,175) (275) 1,679
Non-interest expense............................................................ (22,190) (8,801) (2,809)
Income (loss) before income tax (expense) benefit . .......................................... (44,569) (5,977) 2,282
Income tax (expense) benefit . ........................................................ (5,550) 2,883 45
Net income (loss) . . . .............................................................. $(50,119) $(3,094) $ 2,327
(1) We elected the fair value option for our foreign-currency denominated debt effective January 1, 2008 in connection with our adoption of SFAS 159.
Accordingly, foreign-currency changes are now recorded in gains (losses) on foreign-currency denominated debt recorded at fair value. Prior to that
date, translation gains and losses on our foreign-currency denominated debt were reported in foreign-currency gains (losses), net in our consolidated
statements of operations.
Net Interest Income
Table 10 summarizes our net interest income and net interest yield and provides an attribution of changes in annual
results to changes in interest rates or changes in volumes of our interest-earning assets and interest-bearing liabilities.
Average balance sheet information is presented because we believe end-of-period balances are not representative of activity
throughout the periods presented. For most components of the average balances, a daily weighted average balance was
calculated for the period. When daily weighted average balance information was not available, a simple monthly average
balance was calculated.
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