Freddie Mac · OTC:FMCC
Freddie Mac — FY2006 Earnings Presentation
17 slides from Freddie Mac's earnings presentation, Mar 23, 2007
Slide 1: Freddie Mac's 2006 Financial Results
Freddie Mac’s 2006 Financial Results March 23, 2007
Slide 2: 2006 financial summary
2006 financial summary Financial performance reduced by market conditions Capital position remains strong Asset quality continues to be very high Risk management exposure kept low Guarantee business volumes grew strongly Significant core spread generated on debt funded mortgage portfolio
Slide 3: GAAP financial results
GAAP financial results ($ Millions) 2005 2006 Change 1 Net interest income $ 5,370 $ 4,235 $ (1,135) 2 Management and guarantee income 1,450 1,672 222 3 Non-interest income (loss) (excluding G-Fees) (1,251) (757) 494 4 Total revenues 5,569 5,150 (419) 5 Administrative expenses $ (1,535) $ (1,641) $
Slide 4: Net interest income (NII) and net interest yield (NIY)
Net interest income (NII) and net interest yield (NIY) ($ Millions) 2005 2006 Change $ % $ % $ % 1 Contractual amounts of NII $ 8,897 $ 8,059 $ (838) 2 Debt and mortgage amortization, net (2,469) (2,242) 227 3 NII (excluding effect of derivatives) $ 6,428 0.86% $ 5,817 0.73% $ (611) (0.13%) 4 Effect
Slide 5: Detail of change in net interest yield
Detail of change in net interest yield 1 NIY (FTE) - Full year 2005 0.76% Estimated impact of: 2 Expense related to derivatives (0.05%) 3 Increased interest spread on short-term investments 0.02% 4 Retained portfolio asset spread compression due to increased cost of short-term debt (0.03%) 5 Retaine
Slide 6: Guarantee fee analysis
Guarantee fee analysis ($ Millions, Rates in Basis Points) 2005 Rate 2006 Rate 1 Contractual management and guarantee fees $ 1,431 15.7 bps $ 1,613 15.4 bps 2 Amortization of pre-2003 deferred fees 19 0.2 59 0.6 3 Total (Line 1 + Line 2) $ 1,450 15.9 bps $ 1,672 16.0 bps 4 Amortization of deferred f
Slide 7: Realized gains (losses) and mark-to-market items
Realized gains (losses) and mark-to-market items Change 2006 vs ($ Millions) 2005 1Q06 2Q06 3Q06 4Q06 2006 2005 1 Mark-to-market on Guarantee asset $ (165) $ 404 $ 295 $ (433) $ (57) $ 209 $ 374 2 Mark-to-market on Participation Certificate residuals (45) 206 196 (187) (47) 168 213 3 Losses on certa
Slide 8: Fair value attributable to common stockholders
Fair value attributable to common stockholders Change 2006 vs ($ Billions) 2005 1Q06 2Q06 3Q06 4Q06 2006 2005 1 Investment activities $ 0.5 $ (0.1) $ 1.0 $ 0.5 $ (0.1) $ 1.3 $ 0.8 2 Impact of OAS (2.7) (0.7) 0.1 - (0.3) (0.9) 1.8 3 Guarantee activities 1.1 1.1 1.2 (0.4) - 1.9 0.8 4 Effect of net GA/
Slide 9: Customer focus improved growth in guarantee business
Customer focus improved growth in guarantee business PCs and Structured Securities Freddie Mac’s total PCs and ($ Trillions) Structured Securities issued + 10.6% 1.5 + 10.5% + 4.0% + 6.6% + 13.4% 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 8
Slide 10: Changed guarantee activities reflect market demand
Changed guarantee activities reflect market demand Total mortgage portfolio purchases Total mortgage portfolio Twelve months ended December 31, 2006 As of December 31, 2006 $373 Billion $1.5 Trillion Option ARM 2% Option ARM 1% IO 16% IO 5% Variable Rate & Variable Rate & Other Other 12% 9% Fixed-ra
Slide 11: Portfolio characteristics demonstrate relatively low inherent risk
Portfolio characteristics demonstrate relatively low inherent risk Current loan-to-value FICO score (Percent) Above 90 4% 80 to 90 Less than 620 8% 5% 620 to 659 9% 700 and above 68% Less than 60 60 to 80 53% 35% 660 to 699 18% 10 Note: As of December 31, 2006.
Slide 12: Retained portfolio mix has shifted
Retained portfolio mix has shifted Percent 100 9% 9% 6% 12% 75 23% 19% 50 18% 34% 25 42% 28% 0 2003 2006 Mortgage Loans FNMA / GNMA Freddie Mac REMICs Non-agency securities Freddie Mac PCs and Structured Securities 11
Slide 13: Interest-rate risk remained low in 2006
Interest-rate risk remained low in 2006 Average quarterly PMVS-Level Average quarterly duration gap Percent Months 4 6 5 4 3 3 2 1 2 0 -1 1% 1% 1% 1% 1% -2 1 -3 -4 -5 0 -6 4Q05 1Q06 2Q06 3Q06 4Q06 4Q05 1Q06 2Q06 3Q06 4Q06 12
Slide 14: Capitalized on improved funding levels in 2006
Capitalized on improved funding levels in 2006 US$ Reference Notes® versus LIBOR Spread (Basis Points) 0 -5 -1 0 -1 5 -2 0 2 -ye ar 5 -ye ar 1 0 -ye ar 1 2 /3 1 /2 0 0 4 1 2 /31 /2 0 0 5 1 2 /3 1 /2 0 0 6 13
Slide 15: Progress on returning capital
Progress on returning capital $ Billions $7.1 $2.0 $2.6 $1.3 $1.1 $0.8 $4.5 $0.7 $0.6 Common Repurchases Common Dividends $0.6 2002 2003 2004 2005 2006 Cumulative 14
Slide 16: Safe Harbor Statements
Safe Harbor Statements Freddie Mac obligations Freddie Mac’s securities are obligations of Freddie Mac only. The securities, including any interest or return of discount on the securities, are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrument
Slide 17: Freddie Mac: We make home possible
Freddie Mac We make home possible“ a