Freddie Mac 2012 Annual Report Download - page 105

Segment Earnings — Results
Investments
The table below presents the Segment Earnings of our Investments segment.
Table 17 — Segment Earnings and Key Metrics — Investments(1)
Year Ended December 31,
2012 2011 2010
(dollars in millions)
Segment Earnings:
Net interest income ................................................................ $ 6,110 $ 7,339 $ 6,192
Non-interest income (loss):
Net impairment of available-for-sale securities recognized in earnings .......................... (1,831) (1,833) (3,819)
Derivative gains (losses) ........................................................... 1,970 (3,597) (1,859)
Gains (losses) on trading securities ................................................... (1,755) (993) (1,386)
Gains (losses) on sale of mortgage loans ............................................... 6 28 (76)
Gains (losses) on mortgage loans recorded at fair value .................................... 297 501 34
Other non-interest income (loss) ..................................................... 2,357 1,266 1,023
Total non-interest income (loss) .................................................... 1,044 (4,628) (6,083)
Non-interest expense:
Administrative expenses ........................................................... (430) (398) (455)
Other non-interest expense ......................................................... (1) (2) (18)
Total non-interest expense ........................................................ (431) (400) (473)
Segment adjustments(2) .............................................................. 799 661 1,358
Segment Earnings before income tax benefit .............................................. 7,522 2,972 994
Income tax benefit ................................................................. 690 394 259
Segment Earnings, net of taxes, including noncontrolling interest ............................... 8,212 3,366 1,253
Less: Net income — noncontrolling interest .............................................. — — (2)
Segment Earnings attributable to Freddie Mac ............................................. 8,212 3,366 1,251
Total other comprehensive income, net of taxes ............................................ 3,185 3,107 10,226
Total comprehensive income attributable to Freddie Mac ..................................... $ 11,397 $ 6,473 $ 11,477
Key metrics:
Portfolio balances:
Average balances of interest-earning assets:(3)(4)
Mortgage-related securities(5) ........................................................ $308,698 $386,115 $465,048
Non-mortgage-related investments(6) .................................................. 98,176 97,519 123,537
Single-family unsecuritized loans(7) ................................................... 97,951 94,894 59,028
Total average balances of interest-earning assets ........................................ $504,825 $578,528 $647,613
Return:
Net interest yield — Segment Earnings basis .............................................. 1.21% 1.27% 0.96%
(1) For reconciliations of the Segment Earnings line items to the comparable line items in our consolidated financial statements prepared in accordance with
GAAP, see “NOTE 13: SEGMENT REPORTING — Table 13.2 — Segment Earnings and Reconciliation to GAAP Results.”
(2) For a description of our segment adjustments, see “NOTE 13: SEGMENT REPORTING — Segment Earnings.”
(3) Excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(4) We calculate average balances based on amortized cost.
(5) Includes our investments in single-family PCs and certain Other Guarantee Transactions, which are consolidated under GAAP on our consolidated
balance sheets.
(6) Includes the average balances of interest-earning cash and cash equivalents, non-mortgage-related securities, and federal funds sold and securities
purchased under agreements to resell.
(7) Excludes unsecuritized seriously delinquent single-family mortgage loans.
2012 vs. 2011
Segment Earnings for our Investments segment increased by $4.8 billion to $8.2 billion in 2012, compared to $3.4
billion in 2011, primarily due to derivative gains during 2012 versus derivative losses during 2011. Comprehensive income
for our Investments segment increased by $4.9 billion to $11.4 billion in 2012, compared to $6.5 billion in 2011, primarily
due to higher Segment Earnings. Other comprehensive income was relatively unchanged in 2012 compared to 2011, as
higher gains on our non-agency mortgage-related securities were largely offset by the impact of a smaller decline in interest
rates and less spread tightening on our agency securities.
During 2012, the UPB of the Investments segment mortgage investments portfolio decreased by 16%. We held $208.1
billion and $253.6 billion of agency securities, $76.5 billion and $86.5 billion of non-agency mortgage-related securities, and
$91.4 billion and $109.2 billion of single-family unsecuritized mortgage loans at December 31, 2012 and 2011, respectively.
The decline in UPB of agency securities is due mainly to liquidations. The decline in UPB of non-agency mortgage-related
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