Freddie Mac announced earlier today that it has resumed regular quarterly reporting with the release of its first quarter results -- which promptly showed the GSE losing $211 million during the quarter, mostly due to mark-to-market losses on its derivatives holdings. From Freddie's press release:
Lower net income, year-over-year, was primarily due to higher mark-to-market losses on the company's portfolio of derivatives and on the company's single-family credit guarantee business. Revenues generated by the company's retained portfolio and credit guarantee portfolio declined modestly from first quarter 2006, as a decline in net interest income was partially offset by increased management and guarantee income. Expenses increased mainly as a result of higher administrative costs associated with improving the company's internal financial reporting and controls infrastructure, and higher credit costs.
Freddie said mark-to-market losses totalled $1.2 billion in the first quarter alone. Reuters framed Freddie's $211 million loss pretty succinctly:
The loss contrasts with a net gain of $2 billion the company reported for the same period in 2006.
Freddie's enduring some short term pain thanks to the housing downturn, clearly, but expanded its guaranteed portfolio volume by an annualized 16 percent in the first quarter and its retained portfolio holdings by annualized 6 percent. Company execs pointed to this growth as a sign of better things to come.
"The punch line is that while the printed numbers don't look great, we feel pretty good about the overall performance of the firm," [CFO Buddy] Piszel said. "We do feel that on a long-term basis that we're very well positioned."