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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 11/02/2018
Entire Document
 
 
MD&A | Consolidated Results of Operations


The table below displays the components of our net interest income from our portfolios and our guaranty book of business.
Components of Net Interest Income
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2018
 
2017
 
Variance
 
2018
 
2017
 
Variance
 
 
(Dollars in millions)
Net interest income from portfolios(1)
$
1,132

 
$
1,109

 
$
23

 
$
3,425

 
$
3,318

 
$
107

 
Net interest income from guaranty book of business:
 
 
 
 
 
 
 
 
 
 
 
 
Base guaranty fee income, net of TCCA
2,153

 
2,050

 
103

 
6,352

 
6,060

 
292

 
Base guaranty fee income related to TCCA(2)
576

 
531

 
45

 
1,698

 
1,552

 
146

 
Net amortization income
1,508

 
1,584

 
(76
)
 
4,503

 
4,692

 
(189
)
 
Total net interest income from guaranty book of business
4,237

 
4,165

 
72

 
12,553

 
12,304

 
249

 
Total net interest income
$
5,369

 
$
5,274

 
$
95

 
$
15,978

 
$
15,622

 
$
356

 
__________
(1) 
Includes interest income from assets held in our retained mortgage portfolio and our other investments portfolio, as well as other assets used to generate lender liquidity. Also includes interest expense on our outstanding Connecticut Avenue Securities® of $366 million and $274 million for the three months ended September 30, 2018 and 2017, respectively, and $1.0 billion and $723 million for the nine months ended September 30, 2018 and 2017, respectively.
(2) 
Revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.
Net interest income increased slightly in the third quarter and first nine months of 2018 compared with the third quarter and first nine months of 2017 due to:
An increase in base guaranty fee income as the size of our guaranty book of business increased and loans with higher base guaranty fees comprised a larger part of our guaranty book of business in the third quarter and first nine months of 2018 compared with the third quarter and first nine months of 2017.
An increase in income from our other investments portfolio, primarily due to higher interest rates in the third quarter and first nine months of 2018 compared with the third quarter and first nine months of 2017.
These increases were partially offset by a decline in net amortization income as higher interest rates in the third quarter and first nine months of 2018 compared with the third quarter and first nine months of 2017 slowed down loan prepayments, resulting in lower amortization of cost basis adjustments on mortgage loans of consolidated trusts and related debt.
Amortization of Cost Basis Adjustments
We initially recognize mortgage loans and debt of consolidated trusts in our consolidated balance sheet at fair value. We recognize the difference between the initial fair value and the carrying value of these mortgage loans and debt as cost basis adjustments in our consolidated balance sheet. We amortize these cost basis adjustments as a yield adjustment over the contractual lives of these loans or debt as a component of net interest income.

Fannie Mae Third Quarter 2018 Form 10-Q
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