Freddie Mac 2010 Annual Report Download - page 90

Segment Earnings income tax benefit was $608 million and $3.6 billion in 2010 and 2009, respectively. The income tax
benefit in 2010 primarily resulted from carrying back a portion of our expected current year tax loss to offset prior years’
income. We exhausted our capacity for carrying back net operating losses for tax purposes during 2010.
Multifamily
Table 20 presents the Segment Earnings of our Multifamily segment.
Table 20 — Segment Earnings and Key Metrics — Multifamily
(1)
2010 2009 2008
Year Ended December 31,
(dollars in millions)
Segment Earnings:
Net interest income .............................................................. $ 1,114 $ 856 $ 772
Provision for credit losses . . ........................................................ (99) (574) (229)
Non-interest income (loss):
Management and guarantee income . ................................................. 101 90 76
Security impairments . . . ........................................................ (96) (137) —
Derivative gains (losses) . ........................................................ 6 (27) (3)
Other non-interest income (loss) . . . ................................................. 237 (462) (517)
Total non-interest income (loss). . ................................................. 248 (536) (444)
Non-interest expense:
Administrative expenses . ........................................................ (212) (221) (193)
REO operations income (expense). . ................................................. 3 (20) —
Other non-interest expense ........................................................ (66) (18) (21)
Total non-interest expense ...................................................... (275) (259) (214)
Segment adjustments
(2)
............................................................ — — —
Segment Earnings (loss) before income tax benefit (expense) .................................. 988 (513) (115)
LIHTC partnerships tax benefit ...................................................... 585 594 589
Income tax benefit (expense) ........................................................ (611) (594) (532)
Less: Net (income) loss — noncontrolling interest . . . . .................................... 3 2 2
Segment Earnings (loss), net of taxes . . . . . . .......................................... 965 (511) (56)
Reconciliation to GAAP net income (loss):
Credit guarantee-related adjustments
(3)
................................................. — 7 (2)
Fair value-related adjustments ....................................................... — (3,761) —
Tax-related adjustments . . . ........................................................ — 1,313 1
Total reconciling items, net of taxes ................................................. — (2,441) (1)
Net income (loss) attributable to Freddie Mac ......................................... $ 965 $(2,952) $ (57)
Key metrics — Multifamily:
Balances and Growth:
Average balance of Multifamily loan portfolio . . .......................................... $83,096 $78,371 $64,424
Average balance of Multifamily guarantee portfolio . . . . .................................... $21,756 $16,188 $14,118
Average balance of Multifamily investment securities portfolio . . . .............................. $61,332 $63,797 $65,513
Liquidation rate — Multifamily loan portfolio . . .......................................... 5.7% 3.6% 6.4%
Growth rate ................................................................... 8.6% 14.6% 27.9%
Yield and Rate:
Net interest yield — Segment Earnings basis . . . .......................................... 0.77% 0.60% 0.59%
Average Management and guarantee fee rate, in bps
(4)
....................................... 50.1 53.3 50.5
Credit:
Delinquency rate
(5)
.............................................................. 0.26% 0.20% 0.05%
Loan loss reserves, in bps . . ........................................................ 75.3 82.1 31.3
Loan loss reserves at period end ..................................................... $ 828 $ 831 $ 277
Credit losses, in bps
(6)
............................................................ 9.6 4.4 1.1
(1) Beginning January 1, 2010, under our revised method, Segment Earnings for the Multifamily segment equals GAAP net income (loss) attributable to
Freddie Mac for the Multifamily segment. For reconciliations of Segment Earnings for the Multifamily segment in 2010, 2009, and 2008 and the
Segment Earnings line items to the comparable line items in our consolidated financial statements prepared in accordance with GAAP, see “NOTE 17:
SEGMENT REPORTING — Table 17.2 — Segment Earnings and Reconciliation to GAAP Results.”
(2) For a description of our segment adjustments see “NOTE 17: SEGMENT REPORTING — Segment Earnings — Segment Adjustments.”
(3) Consists primarily of amortization and valuation adjustments pertaining to the guarantee asset and guarantee obligation, which were excluded from
Segment Earnings in 2009 and 2008.
(4) Represents Multifamily Segment Earnings — management and guarantee income, excluding prepayment and certain other fees, divided by the average
balance of the multifamily guarantee portfolio, excluding certain bonds under the NIBP.
(5) See “RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Credit Performance — Delinquencies” for information on our reported
multifamily delinquency rate.
(6) Credit losses are equal to REO operations expenses plus charge-offs, net of recoveries, associated with multifamily mortgage loans. Calculated as the
amount of credit losses divided by the combined average balances of our multifamily loan portfolio and multifamily guarantee portfolio.
Segment Earnings (loss) for our Multifamily segment increased to $965 million for 2010 compared to $(511) million for
2009. Segment Earnings (loss) improved in 2010 primarily due to increased net interest income and lower provision for
credit losses in 2010. Segment Earnings (loss) declined to $(511) million in 2009 from $(56) million in 2008, primarily due
to higher provision for credit losses and recognition of security impairments in 2009.
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