Federal National Mortgage Association · OTC:FNMA
Federal National Mortgage Association — Federal National Mortgage Association Fannie MAE — Q3 2007 Earnings Presentation
19 slides from Federal National Mortgage Association's earnings presentation, Nov 9, 2007
Slide 1: Materials Presented with 2007 Q1-Q3 Form 10-Qs
These materials present tables and other information about Fannie Mae, including information contained in Fannie Mae's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007, and September 30, 2007. These materials should be reviewed together with the 2007 Q1-Q3 Form 10-
Slide 2: Current Highlights
Current Highlights Continue to hit key milestones With this filing, we are a current filer ahead of our February 2008 goal 2007 Q1-Q3 10-Qs - 11/9/07 2006 10-K - 8/16/07 2005 10-K - 5/2/07 2004 10-K with Restated Historical Results - 12/6/06 This filing caps a period of significant organizational pr
Slide 3: 2007 Q1-Q3 Results
2007 Q1-Q3 Results Net income available to common stockholders decreased to $1.1 billion, a $1.9 billion or 63% decrease Administrative expenses decreased to $2.0 billion from $2.2 billion Mortgage credit book of business grew 10% from year-end 2006 (13% annualized) to $2.8 trillion Credit-related e
Slide 4: 2007 Q1-Q3 Financial Results by Segment
2007 Q1-Q3 Financial Results by Segment 3 Single-Family net revenues increased to $5.0 billion, up 14%. Net income declined to $0.3 billion, down 81% from Q1 - Q3 2006. Key drivers included higher losses on certain guaranty contracts, higher credit expenses and higher credit enhancement expenses, of
Slide 5: 2007 Q1-Q3 Income Statement by Segment
2007 Q1-Q3 Income Statement by Segment Q1-Q3 2007 Income Statement Single- Family Net interest income (expense) Guaranty fee income (expense) Losses on certain guaranty contracts Trust management income Investment gains (losses), net Derivatives fair value losses, net Debt extinguishment gains, net
Slide 6: Consolidated Financial Results
Consolidated Financial Results 5 Fannie Mae Total Corporate 2007 2006 2007 Q1-Q3 2007 Q2 2007 Q3 $ 3,445 3,450 460 546 7,901 (1,038) (102) (891) (527) (2,018) (2,039) (242) 1,044 468 (3) $ 1,509 $ 1.17 2007 Q1 Net interest income Guaranty fee income Trust management income Fee and other income Net r
Slide 7: Selected Financial and Operating Statistics
Selected Financial and Operating Statistics 6 Ratios: 2007 Q1 2006 2005 2004 Return on assets ratio 0.39% 0.42% 0.63% 0.47% Return on equity ratio 10.1 11.3 19.5 16.6 Equity to assets ratio 4.9 4.8 4.2 3.5 Dividend payout ratio 47.2 32.4 17.2 42.1 Average effective guaranty fee rate (bps) 21.8 21.8
Slide 8: Selected On- and Off-Balance Sheet Data and Capital
Selected On- and Off-Balance Sheet Data and Capital 7 0 10,000 20,000 30,000 40,000 2003 2004 2005 2006 2007Q3 $mm $mm Total Stockholders' Equity 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2003 2004 2005 2006 2007Q3 Total Assets 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000
Slide 9: Net Interest Yield
Net Interest Yield 8 Key Driver: Replacement of low cost maturing debt with higher cost debt 0.000% 0.200% 0.400% 0.600% 0.800% 1.000% 1.200% 1.400% 1.600% 1.800% 2.000% 2004 2005 2006 2007 Q1 2007Q2 2007Q3
Slide 10: Derivative Fair Value & Purchased Options Premiums Data
Derivative Fair Value & Purchased Options Premiums Data Money spent or received to purchase options Money spent to terminate derivatives 9 Net cash exchanged on interest rate swaps Change primarily due to decrease in 5-yr swap rate between 12/31/06 and 9/30/07 Changes in Risk Management Derivative A
Slide 11: Key Accounting Treatment - SOP 03-3
(1) Our cure rate has declined in recent periods and may decline further. Accretion of past SOP 03-3 charges into net interest income is not included in the table, and did not have a material impact on net income or net interest yield in 2006 or the first three quarters of 2007. Key Accounting Treat
Slide 12: Key Accounting Treatment - Losses on Certain Guaranty Contracts
Key Accounting Treatment - Losses on Certain Guaranty Contracts If a guaranty has a negative fair value, we record that "Day 1 Loss" at the time of acquisition through "losses on certain guaranty contracts". If a guaranty has positive fair value, the gain is deferred and recognized over the life of
Slide 13: Guaranty Fee Analysis
Guaranty Fee Analysis 12 Guaranty fee income/average effective guaranty fee rate, excluding certain fair value adjustments and buy-up impairment Net change in fair value of buy-ups and guaranty assets (1) Buy-up impairments Guaranty fee income/average effective guaranty fee rate Average outstanding
Slide 14: Credit Costs
Credit Costs 13 Higher credit loss ratio (excluding the impact of SOP 03-3), primarily due to continued weakness in the Midwest region of the U.S. and national decline in home prices Credit Losses/Book of Business (bps) * FY 2003 FY 2004 FY 2005 FY 2006 Q1-Q3 2007 Single-Family Serious Delinquency R
Slide 15: Administrative Expenses
Administrative Expenses Elevated due to costs associated with our efforts to return to current financial reporting and an increase in our ongoing operating costs. 14 2007 Q3 2007 Q2 2007 Q1 2006 2005 2004 Salaries and Employee Benefits $ 356 $ 1,219 $ 959 $ 892 Professional Services 246 1,393 792 43
Slide 16: Investment Gains/(Losses), Net
Investment Gains/(Losses), Net 15 Other-than-temporary impairment of investment securities $ (3) $ (853) $ (1,246) $ (389) Lower-of-cost-or-market adjustments on HFS loans (3) (47) (114) (110) Gains (losses) on Fannie Mae portfolio securitizations, net 49 152 259 (34) Gains on sale of investment sec
Slide 17: Fee and Other Income
2007 Q3 2007 Q2 2007 Q1 2006 2005 2004 Fee and Other Income 16 Transaction fees $ 124 $ 136 $ 152 Technology fees 216 223 214 Multifamily fees 292 432 244 Foreign currency exchange gains (losses) (230) 625 (304) Other 457 110 98 Fee and other income $ 208 $ 859 $ 1,526 $ 404 $ 262 $ 76 (Dollars in m
Slide 18: Change in Estimated Fair Value of Net Assets (Non-GAAP)
Change in Estimated Fair Value of Net Assets (Non-GAAP) Estimated fair value of net assets, has decreased by $8.7 billion, $7.0 billion net of capital transactions 17 Key Drivers: Balance as of December 31 of prior year ...................................................... Capital transactions: Com
Slide 19: Appendix: Reconciliation of Estimated Fair Value of Net Assets
APPENDIX The following sets forth a reconciliation of the estimated fair value of our net assets (non-GAAP) to total stockholders' equity (GAAP). A more detailed reconciliation is contained in Table 21 of the 2006 Form 10-K, and table 15 of the 2007 third quarter 10-Q. Represents fair value increase
Federal National Mortgage Association Fannie MAE — Q3 2007 Earnings Presentation on 6ix