Federal National Mortgage Association · OTC:FNMA
Federal National Mortgage Association — Fannie Mae — IPO Roadshow (May 2008)
21 slides from Federal National Mortgage Association's IPO roadshow presentation, May 2008
Slide 1: Fannie Mae Capital Raise Roadshow
Fannie Mae Capital Raise Roadshow May 2008
Slide 2: Disclaimer/Forward-Looking Statements/Risk Factors
Disclaimer/Forward-Looking Statements/Risk Factors This presentation includes forward-looking statements, including statements relating to our future capital position, financial performance and condition, portfolio growth, ability to take advantage of business opportunities, market share and credit
Slide 3: Offering Summaries
Offering Summaries Issuer: Fannie Mae Symbol / Exchange: FNM / NYSE Offering Size: $2 billion – Common Stock (100% primary) $2 billion – Mandatory Convertible Preferred (100% primary) This offering will be followed in the very near future by an offering of non-cumulative, non-convertible preferred s
Slide 4: Transaction Rationale and Investment Highlights
Transaction Rationale and Investment Highlights 3
Slide 5: Transaction Rationale
Transaction Rationale Maintain a strong, conservative balance sheet ¾ Build capital to allow Fannie Mae to operate and grow from a position of strength ¾ Maintain a prudent capital cushion in a volatile and challenging market through 2008 and 2009 ¾ Mix of the offering maintains an appropriate rat
Slide 6: Investment Highlights
Investment Highlights Long-term growth and profitability prospects ¾ Rising guaranty fees and net interest yields ¾ Highly accretive growth opportunities ¾ Improved underwriting ¾ Estimated 50% Q1 2008 market share on the issuance of new single-family mortgage- related securities Addressing mark
Slide 7: Strong, Stable Revenues
Strong, Stable Revenues Net Revenues ($ in billions) $4.0 $3.8 $3.5 $3.3 $3.1 $3.0 $3.0 $3.0 $2.8 $2.7 $2.7 $2.7 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 Revenues Note: Revenues defined as net interest income plus guaranty fee, trust management, and fee and
Slide 8: Increased Market Share
Increased Market Share GSE-eligible originations have increased rapidly, as has Fannie Mae’s share of the overall single- family mortgage securitization market. Percentage of GSE Eligible Originations (1) Fannie Mae’s Market Share (2) Conforming Fannie Mae Originations Market Share as % of Total 9
Slide 9: Guaranty Fees and Net Interest Yield
Guaranty Fees and Net Interest Yield Guaranty Fees Net Interest Yield Average Effective G-Fee (bps) Average O/S MBS ($ in trillions) Net Interest Yield (bps) Average Balance ($ in billions) 35 $2.5 110 $950 $2.4 $2.3 $826.9 $833.2 29.5 $797.6 $805.2 $804.5 30 $2.2 28.5 90 86 $2.1 $750 $2.0 25 $2.0 7
Slide 10: Spreads on Mortgage Investments
Spreads on Mortgage Investments Illustrative Spreads on Select Mortgage Assets (bps) 500 471 400 300 200 163 100 82 80 28 30 8 12 10 17 0 Agency Fixed Agency ARM's Agency CMO's CMBS AAA Private Label MBS June 2007 April 2008 Source: LehmanLive Note: Spreads to LIBOR. Alt-A fixed super senior AAA use
Slide 11: Credit
Credit 10
Slide 12: Credit Outlook
Credit Outlook Home prices fell an estimated 3% in Q1, more than previously expected New estimate of national home price decline of 7-9% in 2008 ¾ Projected peak-to-trough decline of 15-19% Based on this new estimate and related increases in anticipated severity, we currently expect a credit l
Slide 13: Forecast: Home Price Growth Rate in the U.S.
Home Price Growth Rate in the U.S. 15.0% 11.8% Fannie Mae Home 10.9% Price Index 10.0% 8.7% 7.9% 7.2% 5.9% 5.0% 2.4% 0.0% Forecast -3.5% -5.0% -7 to -9% -10.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 S&P/Case Shiller 9.8% 7.7% 10.6% 10.7% 14.6% 14.7% 0.2% -8.9% Index Growth rates are from perio
Slide 14: Fannie Mae Credit Profile by Key Product Features
Fannie Mae Credit Profile by Key Product Features Credit Characteristics of Single-Family Conventional Mortgage Credit Book of Business FICO < 620 and Overall Interest FICO OLTV OLTV as of March 31, 2008 Book NegAm Only < 620 > 90% > 90% Subprime Alt-A UPB (billions) $2,605.6 $20.6 $214.9 $128.1 $26
Slide 15: Credit Loss Ratio/Delinquency Rates
Credit Loss Ratio/Delinquency Rates Credit Loss Ratio (bps)¹ Single-Family Serious Delinquency Rate (%) 14 3.5 12 3.0 10 2.5 8 2.0 6 1.5 4 1.0 2 0.5 0 0.0 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 Credit Loss Ratio Credit Enhanced Total Non-Credit Enhanced ¹ Not
Slide 16: Proactive Credit Management
Proactive Credit Management Tightening underwriting and eligibility standards / reduced participation in riskier segments ¾ Stricter eligibility requirements — increasing FICOs, lowering LTVs and increasing documentation requirements ¾ Significantly reduced Alt-A acquisitions Increasing loss mit
Slide 17: Financial Overview
Financial Overview 16
Slide 18: Consolidated Financial Results
Consolidated Financial Results (1) (1) (1) (1) (dollars in millions, except per share amounts) 2008 Q1 2007 Q4 2007 Q3 2007 Q2 2007 Q1 1 Net interest income $ 1,690 $ 1,136 $ 1,058 $ 1,193 $ 1,194 2 Guaranty fee income 1,752 1,621 1,232 1,120 1,098 3 Trust management income 107 128 146 150 164 4 Fee
Slide 19: Fair Value Items
Fair Value Items Effect on Earnings of Significant Market-Based Valuation Adjustments (dollars in millions) 2008 Q1 2007 Q4 2007 Q3 2007 Q2 2007 Q1 Derivatives fair value gains (losses), net $ (3,003) $ (3,222) $ (2,244) $ 1,916 $ (563) Gains (losses) on trading securities, net (1,227) (215) 290 (50
Slide 20: Credit-Related Expenses/Credit Loss Performance Metrics
Credit-Related Expenses/Credit Loss Performance Metrics 2008 Q1 2007 Q4 2007 Q3 2007 Q2 2007 Q1 Rate Rate Rate Rate Rate (1) (1) (1) (1) (dollars in millions) Amount (bps) Amount (bps) Amount (bps) Amount (bps) Amount (bps) Charge-offs, net of recoveries $ 630 9.0 $ 307 4.6 $ 197 3.0 $ 154 2.5 $ 121
Slide 21: Investment Highlights
Investment Highlights Long-term growth and profitability prospects ¾ Rising guaranty fees and net interest yields ¾ Highly accretive growth opportunities ¾ Improved underwriting ¾ Estimated 50% Q1 2008 market share on the issuance of new single-family mortgage- related securities Addressing mark