Segment Reporting

3 Months Ended

Mar. 31, 2020

9. Segment Reporting

We have two reportable business segments: Single-Family and Multifamily. Results of our two business segments are intended to reflect each segment as if it were a stand-alone business. The sum of the results for our two business segments equals our condensed consolidated results of operations.

Segment Allocations and Results

The majority of our revenues and expenses are directly associated with each respective business segment and are included in determining its operating results. Those revenues and expenses that are not directly attributable to a particular business segment are allocated based on the size of each segment’s guaranty book of business. The substantial majority of the gains and losses associated with our risk management derivatives are allocated to our Single-Family business segment.

The following table displays our segment results.


	For the Three Months Ended March 31,
	2020										2019
	Single-Family		Multifamily		Total		Single-Family		Multifamily		Total
	(Dollars in millions)
Net interest income⁽¹⁾	$	4,541	$	806	$	5,347	$	4,039	$	757	$	4,796
Fee and other income⁽²⁾	152		156		308		106		28		134
Net revenues	4,693		962		5,655		4,145		785		4,930
Investment gains (losses), net⁽³⁾	(152)		(6)		(158)		94		39		133
Fair value gains (losses), net⁽⁴⁾	(460)		184		(276)		(887)		56		(831)
Administrative expenses	(629)		(120)		(749)		(631)		(113)		(744)
Credit-related income (expense)⁽⁵⁾
Benefit (provision) for credit losses	(2,172)		(411)		(2,583)		661		(11)		650
Foreclosed property income (expense)	(78)		(2)		(80)		(143)		3		(140)
Total credit-related income (expense)	(2,250)		(413)		(2,663)		518		(8)		510
TCCA fees⁽⁶⁾	(637)		—		(637)		(593)		—		(593)
Credit enhancement expense⁽⁷⁾	(312)		(19)		(331)		(167)		(4)		(171)
Other expenses, net	(167)		(96)		(263)		(170)		(37)		(207)
Income before federal income taxes	86		492		578		2,309		718		3,027
Provision for federal income taxes	(18)		(99)		(117)		(484)		(143)		(627)
Net income	$	68	$	393	$	461	$	1,825	$	575	$	2,400

⁽¹⁾Net interest income primarily consists of guaranty fees received as compensation for assuming and managing the credit risk on loans underlying Fannie Mae MBS held by third parties for the respective business segment, and the difference between the interest income earned on the respective business segment’s mortgage assets in our retained mortgage portfolio and the interest expense associated with the debt funding those assets. Revenues from single-family guaranty fees include revenues generated by the 10 basis point increase in guaranty fees pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.

⁽²⁾Single-Family fee and other income primarily consists of compensation for engaging in structured transactions and providing other lender services. Multifamily fee and other income consists of the benefit or costs associated with freestanding credit enhancements and fees associated with Multifamily business activities.

⁽³⁾Investment gains and losses primarily consist of gains and losses on the sale of mortgage assets for the respective business segment.

⁽⁴⁾Single-Family fair value gains and losses primarily consist of fair value gains and losses on risk management and mortgage commitment derivatives, trading securities, fair value option debt, and other financial instruments associated with our single-family guaranty book of business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS commitment derivatives, trading securities and other financial instruments associated with our multifamily guaranty book of business.

⁽⁵⁾Credit-related income or expense is based on the guaranty book of business of the respective business segment and consists of the applicable segment’s benefit or provision for credit losses and foreclosed property income or expense on loans underlying the segment’s guaranty book of business. The presentation of our credit-related income or expense for the three months ended March 31, 2019 represents amounts recognized prior to our transition to the lifetime loss model prescribed by the CECL standard.

⁽⁶⁾Consists of the portion of our single-family guaranty fees that is remitted to Treasury pursuant to the TCCA.

⁽⁷⁾Single-family credit enhancement expense primarily consists of costs associated with our CIRT, CAS and EPMI programs. Multifamily credit enhancement expense primarily consists of costs associated with our MCIRT and MCAS programs.