Fannie Mae reported net income of $4.6 billion for the second quarter of 2015 and comprehensive income of $4.4 billion.
The company reported a positive net worth of $6.2 billion as of June 30, 2015 resulting in a dividend obligation to Treasury of $4.4 billion, which the company expects to pay in September 2015.
Fannie Mae’s net income of $4.6 billion and comprehensive income of $4.4 billion for the second quarter of 2015 compares to net income of $1.9 billion and comprehensive income of $1.8 billion for the first quarter of 2015. Net income increased due primarily to fair value gains, partially offset by credit-related expense, in the second quarter of 2015.
The company’s financial results for the second quarter of 2015 were affected by an increase in interest rates. Although the increase in interest rates had a positive impact on the fair value of the company’s financial instruments, the increase in interest rates had a negative impact on its credit-related expense. The negative impact on credit-related expense was partially offset by an increase in home prices during the second quarter of 2015.
Also contributing to credit-related expense was the redesignation of certain nonperforming single-family loans from “held for investment” to “held for sale” in the second quarter of 2015. Fannie Mae recognized a provision for federal income taxes of $2.2 billion for the second quarter of 2015, reflecting an effective tax rate of 32%.
“We reported another strong quarter of financial performance with solid revenues and an impressive book of business that only continues to improve. We have reduced the risk of our business and have made great strides in transferring credit risk to private capital to better protect taxpayers,” said Timothy Mayopoulos, president and chief executive officer. “We are committed to serving our customers and the market with solutions that promote simplicity and certainty. We are creating revolutionary new tools, products, and solutions – and enhancing our existing foundational resources – to support our lenders. We continue to make changes throughout our company that improve the way we work and increase the value we provide to the housing finance system.”
Net revenues, which consist of net interest income and fee and other income, were $6.2 billion for the second quarter of 2015, compared with $5.4 billion for the first quarter of 2015.
Net interest income, which includes guaranty fee revenue, was $5.7 billion for the second quarter of 2015 compared with $5.1 billion for the first quarter of 2015. Net interest income for the second quarter was driven by guaranty fee revenue, including amortization income from prepayments, and interest income earned on mortgage assets in the company’s retained mortgage portfolio.
An increasing portion of Fannie Mae’s net interest income in recent years has been derived from guaranty fees rather than from interest income earned on the company’s retained mortgage portfolio assets.
This is a result of both the impact of guaranty fee increases implemented in 2012 and the shrinking of the retained mortgage portfolio. The company estimates that a majority of its net interest income for the second quarter of 2015 was derived from guaranty fees on loans underlying its Fannie Mae MBS. The company expects that guaranty fees will continue to account for an increasing portion of its net interest income.