Freddie Mac 2011 Annual Report Download - page 90

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 information concerning certain significant accounting policies and estimates applied in
determining our reported results of operations.
Change in Accounting Principles
Our adoption of amendments to the accounting guidance applicable to the accounting for transfers of financial assets
and the consolidation of VIEs had a significant impact on our consolidated financial statements and other financial
disclosures beginning in the first quarter of 2010.
The cumulative effect of these changes in accounting principles was a net decrease of $11.7 billion to total equity
(deficit) as of January 1, 2010, which included changes to the opening balances of retained earnings (accumulated deficit)
and AOCI. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” “NOTE 3: VARIABLE
INTEREST ENTITIES,” and “NOTE 19: SELECTED FINANCIAL STATEMENT LINE ITEMS” for additional
information regarding these changes.
As these changes in accounting principles were applied prospectively, our results of operations for the years ended
December 31, 2011 and 2010 (on both a GAAP and Segment Earnings basis), which reflect the consolidation of trusts
that issue our single-family PCs and certain Other Guarantee Transactions, are not directly comparable with the results of
operations for the year ended December 31, 2009, which reflect the accounting policies in effect during that time (i.e.,
when the majority of the securitization entities were accounted for off-balance sheet).
Table 9 — Summary Consolidated Statements of Income and Comprehensive Income
2011 2010 2009
Year Ended December 31,
(in millions)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,397 $ 16,856 $ 17,073
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,702) (17,218) (29,530)
Net interest income (loss) after provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,695 (362) (12,457)
Non-interest income (loss):
Gains (losses) on extinguishment of debt securities of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . (219) (164) —
Gains (losses) on retirement of other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (219) (568)
Gains (losses) on debt recorded at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 580 (404)
Derivative gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,752) (8,085) (1,900)
Impairment of available-for-sale securities:
Total other-than-temporary impairment of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . (2,101) (1,778) (23,125)
Portion of other-than-temporary impairment recognized in AOCI . . . . . . . . . . . . . . . . . . . . . . . . . . . (200) (2,530) 11,928
Net impairment of available-for-sale securities recognized in earnings. . . . . . . . . . . . . . . . . . . . . . (2,301) (4,308) (11,197)
Other gains (losses) on investment securities recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . (896) (1,252) 5,965
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,155 1,860 5,372
Total non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,878) (11,588) (2,732)
Non-interest expense:
Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,506) (1,597) (1,685)
REO operations expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (585) (673) (307)
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (392) (662) (5,203)
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,483) (2,932) (7,195)
Loss before income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,666) (14,882) (22,384)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 856 830
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,266) (14,026) (21,554)
Other comprehensive income, net of taxes and reclassification adjustments:
Changes in unrealized gains (losses) related to available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . 3,465 13,621 17,825
Changes in unrealized gains (losses) related to cash flow hedge relationships . . . . . . . . . . . . . . . . . . . . 509 673 773
Changes in defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 13 42
Total other comprehensive income, net of taxes and reclassification adjustments . . . . . . . . . . . . . . . . 4,036 14,307 18,640
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,230) 281 (2,914)
Less: Comprehensive loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 1
Total comprehensive income (loss) attributable to Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,230) $ 282 $ (2,913)
Net Interest Income
The table below 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
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