Freddie Mac 2009 Annual Report Download - page 101

Table 24 presents the Segment Earnings of our Multifamily segment.
Table 24 — Segment Earnings and Key Metrics — Multifamily
(1)
2009 2008 2007
Year Ended December 31,
(in millions)
Segment Earnings:
Net interest income .............................................................. $ 852 $ 771 $ 752
Non-interest income (loss):
Management and guarantee income . ................................................. 90 76 59
LIHTC partnerships ............................................................ (502) (453) (469)
Other non-interest income (loss) . . . ................................................. (124) 39 24
Total non-interest income (loss). . ................................................. (536) (338) (386)
Non-interest expense:
Administrative expenses . ........................................................ (220) (190) (189)
Provision for credit losses ........................................................ (573) (229) (38)
REO operations expense . ........................................................ (20) — (1)
Other non-interest expense ........................................................ (18) (17) (25)
Total non-interest expense ...................................................... (831) (436) (253)
Segment Earnings (loss) before income tax benefit (expense) .................................. (515) (3) 113
LIHTC partnerships tax benefit ...................................................... 594 589 534
Income tax benefit (expense) ........................................................ 180 1 (40)
Less: Net (Income) loss-noncontrolling interest .......................................... 2 2 3
Segment Earnings, net of taxes ..................................................... 261 589 610
Reconciliation to GAAP net income (loss):
Derivative and debt-related adjustments................................................. (27) (14) (27)
Credit guarantee-related adjustments . . ................................................. 8 8 1
Investment sales, debt retirements and fair value-related adjustments ............................. (3,825) (47) —
Tax-related adjustments
(2)
.......................................................... (997) (451) 8
Total reconciling items, net of taxes
(2)
................................................ (4,841) (504) (18)
GAAP net income (loss) ....................................................... $(4,580) $ 85 $ 592
Key metrics — Multifamily:
Balances and Growth:
Average balance of Multifamily loan portfolio . . .......................................... $78,371 $64,424 $48,814
Average balance of Multifamily guarantee portfolio . . . . .................................... 16,237 14,118 8,751
Average balance of Multifamily investment securities portfolio . . . .............................. 63,797 65,513 56,262
Purchases, net — Multifamily loan portfolio
(3)
............................................ 14,011 18,887 18,011
Issuances — Multifamily guarantee portfolio . . . .......................................... 2,950 5,085 3,435
Liquidation rate — Multifamily loan portfolio (annualized rate) . . .............................. 4% 6% 13%
Credit:
Delinquency rate
(4)
.............................................................. 0.15% 0.01% 0.02%
Allowance for loan losses . . ........................................................ $ 831 $ 277 $ 62
(1) Prior year amounts have been revised to conform to the current presentation.
(2) 2009 and 2008 include an allocation of the non-cash charge related to the establishment of the partial valuation allowance against our deferred tax
assets, net that are not included in Segment Earnings.
(3) Consists of unpaid principal balance of all multifamily mortgage loan purchases, net of $2 billion in 2009 associated with issuances for the Multifamily
guarantee portfolio. These purchases primarily represent those loans designated held-for-investment rather than designated held-for-sale and subsequent
securitization.
(4) Based on net carrying value of mortgages in the multifamily loan and guarantee portfolios that are 90 days or more delinquent as well as those in the
process of foreclosure. Excludes Structured Transactions and loans underlying the multifamily investment securities portfolio.
Segment Earnings for our Multifamily segment decreased 56% to $261 million for 2009 compared to $589 million for
2008, primarily due to higher provision for credit losses and credit-related impairment on CMBS. Net interest income
increased $81 million, or 11%, for 2009 compared to 2008, primarily driven by a 22% increase in the average balances of
our Multifamily loan portfolio and significantly lower interest rates resulting in lower cost of funding. We continued to
provide stability and liquidity for the financing of rental housing nationwide by continuing our purchases and credit
guarantees of multifamily mortgage loans. We completed structured securitization transactions with multifamily mortgage
loans totaling approximately $2.4 billion in 2009. We may consider additional transactions in the future, as market conditions
allow.
Segment Earnings non-interest income (loss) was $(536) million in 2009 compared to $(338) million in 2008, and the
increase in loss is primarily attributed to credit-related impairment losses on CMBS recognized in the second half of 2009.
Impairment on CMBS for both GAAP and Segment Earnings during 2009 totaled $137 million. There were no impairments
recognized for either GAAP or Segment Earnings on available-for-sale CMBS during 2008. We view the performance of the
individual securities impaired during 2009 as significantly worse than the remainder of our CMBS. While delinquencies for
the remaining securities increased, we believe the credit enhancement related to the non-impaired bonds is currently
sufficient to cover expected losses on the underlying loans. Since we generally hold these securities to maturity, we do not
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