Freddie Mac Reports Net Income of $1.7 Billion and

Comprehensive Income of $1.8 Billion for Third Quarter 2019

The Company Continues Its Solid Financial Performance As It Works Toward Exiting Conservatorship

Third Quarter 2019 Financial Results 

• Comprehensive income of $1.8 billion, substantially unchanged from the prior quarter, driven by

strong and consistent business performance.

Market-related losses were $0.3 billion, driven by a $0.4 billion loss from net interest rate 

impacts(1) due to higher fair value losses resulting from declining long-term interest rates. These 

losses were partially offset by a $0.1 billion gain from market spread impacts, both after-tax.

Gains from sales of single-family reperforming loans were $0.4 billion, after-tax, substantially 

unchanged from the prior quarter. 

• Return on Conservatorship Capital (ROCC)(2) increased to 14.4% due to a small increase in

earnings and lower conservatorship capital compared to the prior quarter.

• Total equity increased to $6.7 billion at September 30, 2019 from $4.8 billion at June 30, 2019,

driven by the company's increased ability to retain earnings, pursuant to the September 2019 Letter

Agreement(3).

“In the third quarter, Freddie Mac took an important first step toward exiting conservatorship by adding 

more than $1.8 billion to our total equity, bringing our capital reserve to $6.7 billion. As we look to the 

future, we are squarely focused on serving our mission and meeting the milestones necessary to move 

the company forward.”

David M. Brickman Chief Executive Officer

Reducing Risks. Maintaining Strong Business Fundamentals. Serving the Mission. 

Reducing Risk and Protecting Taxpayers(2)(4)

• Conservatorship capital declined by $5.2 billion from the prior year, due to credit risk transfer (CRT)

activity, home price appreciation, legacy asset dispositions, and a decrease in deferred tax assets.

• Conservatorship capital needed for credit risk declined by 75% for Single-Family and 90% for

Multifamily on new business activity in the twelve months ended September 30, 2018.

Producing Solid Results through Strong Business Fundamentals 

• 6% total guarantee book growth, year over year — Single-Family grew 5% and Multifamily grew

15%. 

• Credit quality remains strong — Single-Family serious delinquency rate declined to 0.61%, while

Multifamily delinquency rate continued near zero at 0.04%.

Supporting Homebuyers, Renters, and Lenders of All Sizes

• Helped nearly 810,000 families to own or rent a home in the third quarter of 2019; provided $173

billion in liquidity to the mortgage market.

• Served 865 regional and community-oriented single-family lenders, representing more than 90% of

all single-family lenders in the third quarter of 2019.

• Remained a vital source of funding for affordable housing — First-time homebuyers represented

45% of new single-family purchase loans in the third quarter of 2019, and 95% of the eligible

multifamily rental units financed were affordable to families earning at or below 120% of area median

incomes.

(1) Net of hedge accounting amortization.

(2) See page 5 for additional information on the Return on Conservatorship Capital.

(3) See page 10 for additional information related to the September 2019 Letter Agreement with the U.S. Treasury.

(4) See pages 6-7 for information related to the reduction in conservatorship capital needed for credit risk.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 2

McLean, VA — Freddie Mac (OTCQB: FMCC) today reported net income of $1.7 billion for the third quarter of 

2019, compared to net income of $1.5 billion for the second quarter of 2019. The company also reported 

comprehensive income of $1.8 billion for both the second and third quarters of 2019.

• Comprehensive income reflected the following:

Market-related losses of $0.3 billion, compared to a minimal impact in the prior quarter, driven by:

$0.4 billion loss, after-tax, from net interest rate impacts due to higher fair value losses resulting 

from declining long-term interest rates; partially offset by

$0.1 billion gain, after-tax, from market spread impacts due to basis differences between swap 

and Treasury rates associated with the company's Treasury futures. 

Gains from sales of single-family reperforming loans of $0.4 billion, after-tax, which was substantially 

unchanged from the prior quarter.

Summary of Consolidated Statements of Comprehensive Income (Loss) 

(Dollars in millions) 3Q 2019 2Q 2019 Change 3Q 2018 Change

Net interest income $2,410 $2,927 $(517) $3,257 $(847)

Guarantee fee income 231 222 9 209 22

Other income (loss) 146 209 (63) 79 67

Net revenues 2,787 3,358 (571) 3,545 (758)

Other non-interest income (loss):

Mortgage loans gains (losses) 1,702 1,541 161 94 1,608

Investment securities gains (losses) 164 390 (226) (443) 607

Debt gains (losses) (56) 49 (105) 158 (214)

Derivative gains (losses) (1,217) (2,089) 872 728 (1,945)

Total other non-interest income (loss) 593 (109) 702 537 56

Benefit (provision) for credit losses 179 160 19 380 (201)

Non-interest expense (1,423) (1,511) 88 (1,200) (223)

Income (loss) before income tax (expense) benefit 2,136 1,898 238 3,262 (1,126)

Income tax (expense) benefit (427) (392) (35) (556) 129

Net income (loss) 1,709 1,506 203 2,706 (997)

Total other comprehensive income (loss), net of

taxes and reclassification adjustments 139 320 (181) (147) 286

Comprehensive income (loss) $1,848 $1,826 $22 $2,559 $(711)
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 3

Selected Financial Measures 

Net Interest Income and Net Interest Yield

(Dollars in billions) 

 

Amounts may not add due to rounding.

• Net interest income and net interest yield decreased from the prior quarter, primarily driven by higher 

amortization expense due to an increase in loan prepayments combined with compressed net yields due 

to the flattening of the yield curve. 

Guarantee Fee Income(1), Guarantee Fee Rate, and 

Multifamily Guarantee Portfolio 

 

(1) Guarantee fee income on a GAAP basis is primarily from the company’s multifamily business.

• Guarantee fee income increased from the prior quarter, primarily due to continued growth in the Multifamily 

guarantee portfolio.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 4

Non-GAAP Financial Measure Highlights 

In addition to analyzing the company’s results on a GAAP basis, management reviews net interest income and 

guarantee fee income on an “adjusted,” or non-GAAP, basis. These adjusted financial measures are calculated by 

reclassifying certain credit guarantee-related activities and investment-related activities between various line items 

on the company’s GAAP consolidated statements of comprehensive income. The company also presents two 

additional non-GAAP financial measures, adjusted net interest yield and adjusted guarantee fee rate, that are 

calculated based on adjusted net interest income and adjusted guarantee fee income, respectively. Management 

believes that these non-GAAP financial measures are useful because they more clearly reflect the company’s 

sources of revenue and return.

For additional information about the company's non-GAAP financial measures and reconciliations to the 

comparable amounts under GAAP, see pages 14 - 15 of this press release.

Adjusted Net Interest Income(1), Adjusted Net Interest Yield(1), and 

Investments Portfolio

(Dollars in billions)

 

(1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see page 14 of this press release.

Amounts may not add due to rounding.

• Adjusted net interest income and adjusted net interest yield declined from the prior quarter, primarily driven 

by higher amortization expense resulting from an increase in loan prepayments combined with a decrease 

in interest income on unsecuritized loans. 

• The mortgage-related investments portfolio was $222 billion, up $3 billion, or 1%, from the prior quarter, 

but down $6 billion, or 3%, from the prior year. In February 2019, FHFA directed the company to maintain 

the mortgage-related investments portfolio at or below $225 billion at all times.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 5

Adjusted Guarantee Fee Income(1), Adjusted Guarantee Fee Rate(1), and 

Total Guarantee Portfolio 

(Dollars in billions)

 

 

(1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see page 14 of this press release.

Amounts may not add due to rounding.

• Adjusted guarantee fee income and adjusted guarantee fee rate increased from the prior quarter, primarily 

driven by higher amortization of single-family upfront fees resulting from an increase in loan prepayments. 

• The total guarantee portfolio grew $37 billion, or 2%, from the prior quarter and $120 billion, or 6%, from 

the prior year, driven by increases in both the Single-Family and Multifamily guarantee portfolios.

Return on Conservatorship Capital 

The table below provides the ROCC, calculated as (1) annualized comprehensive income for the period divided by 

(2) average conservatorship capital during the period. 

ROCC is not based on the company's total equity and does not reflect actual returns on total equity. The company 

does not believe that returns on total equity are meaningful because of the net worth limit imposed since 2012 

under the Purchase Agreement. In addition, the company believes that returns post-conservatorship would most 

likely be lower than the levels calculated below, assuming the same portfolio of risk assets, as it expects that it 

would hold capital above the minimum required regulatory capital levels and that it would be required to pay fees 

for federal government support, thereby reducing its total comprehensive income.

Return on Conservatorship Capital 

(Dollars in billions) 3Q 2019 2Q 2019 Change 3Q 2018 Change

GAAP comprehensive income $1.8 $1.8 $0.0 $2.6 $(0.8)

Conservatorship capital (average during the period)(1)(2) $51.3 $51.7 $(0.4) $56.5 $(5.2)

ROCC, based on GAAP comprehensive income 14.4% 14.1% 0.3% 18.1% (3.7)%

(1) Average conservatorship capital and ROCC for 3Q19 are preliminary and subject to change until official submission to the Federal Housing Finance Agency (FHFA). 

(2) Average conservatorship capital for each period is based on the Conservatorship Capital Framework (CCF) in effect during that period, except that the 3Q18 figure has been revised to 

include capital for deferred tax assets. The CCF in effect as of September 30, 2019 was largely unchanged from the CCF as of June 30, 2019.

Amounts may not add due to rounding.

ROCC increased compared to the prior quarter, driven by a small increase in earnings and the lower level of 

conservatorship capital needed, primarily resulting from a decrease in deferred tax assets and the efficient 

disposition of legacy assets. 

For additional information on the CCF and ROCC, see the company’s Quarterly Report on Form 10-Q for the 

quarter ended September 30, 2019.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 6

Segment Financial Results and Business Highlights

Freddie Mac’s operations consist of three reportable segments, which are based on the types of business activities 

they perform – Single-Family Guarantee, Multifamily, and Capital Markets. The company presents Segment 

Earnings for each reportable segment by reclassifying certain credit guarantee-related activities and investmentrelated activities between various line items on its GAAP consolidated statements of comprehensive income and 

allocating certain revenues and expenses, including funding costs and administrative expenses, to its three 

reportable segments.

For more information about Segment Earnings, see Note 13 to the financial statements included in the company’s 

Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.

Single-Family Guarantee Segment 

Providing liquidity to the market while transforming U.S. housing finance

Third Quarter 2019 Financial Results(1) 

(Dollars in millions) 3Q 2019 2Q 2019 Change 3Q 2018 Change

Guarantee fee income $2,075 $1,889 $186 $1,676 $399

Benefit (provision) for credit losses 134 79 55 205 (71)

Financial instruments gains (losses)(2) 51 77 (26) (5) 56

Other non-interest income (loss) 318 269 49 387 (69)

Administrative expense (399) (400) 1 (371) (28)

REO operations income (expense) (61) (86) 25 (42) (19)

Other non-interest expense (554) (625) 71 (413) (141)

Segment Earnings before income tax expense 1,564 1,203 361 1,437 127

Income tax (expense) benefit (314) (248) (66) (254) (60)

Segment Earnings, net of taxes 1,250 955 295 1,183 67

Total other comprehensive income (loss), net of tax (3) (2) (1) (2) (1)

Total comprehensive income (loss) $1,247 $953 $294 $1,181 $66

(1) The financial performance of the company’s Single-Family Guarantee segment is measured based on its contribution to GAAP net income (loss).

(2) Consists of fair value gains and losses on debt for which the company has elected the fair value option and derivatives.

• Segment Earnings increased from the prior quarter, primarily driven by higher amortization of single-family 

upfront fees resulting from an increase in loan prepayments. 

Third Quarter 2019 Business Highlights

• New business activity was $134 billion, an increase of $32 billion, or 31%, from the prior quarter. 

Home purchase volume increased 17%, while refinance volume increased 57%. 

• The Single-Family credit guarantee portfolio increased to $1,961 billion.

• Average guarantee fees charged on new acquisitions increased to 45 basis points.

Average guarantee fees on the single-family credit guarantee portfolio were 43 basis points, up from 

39 basis points for the prior quarter, due to the increased amortization of single-family upfront fees.

• As of September 30, 2019, the company had cumulatively transferred a portion of credit risk on nearly $1.4 

trillion of single-family mortgages, based upon the UPB at issuance of the CRT transactions.

Conservatorship capital needed for credit risk was reduced by approximately 75%(1) through CRT 

transactions on new business activity in the twelve months ended September 30, 2018.

• The company provided funding for 514,000 single-family homes, more than 299,000 of which were home 

purchase loans.

(1) The reduction in the amount of conservatorship capital needed for credit risk on new business activity is calculated as conservatorship credit capital released from the CRT 

transactions (primarily through STACR and ACIS) divided by total conservatorship credit capital on new business activity at the time of purchase.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 7

Multifamily Segment 

Leading through innovation

Third Quarter 2019 Financial Results(1) 

(Dollars in millions) 3Q 2019 2Q 2019 Change 3Q 2018 Change

Net interest income $292 $266 $26 $280 $12

Guarantee fee income 233 222 11 210 23

Benefit (provision) for credit losses (1) (1) 0 2 (3)

Financial instrument gains (losses)(2) 256 27 229 266 (10)

Administrative expense (125) (120) (5) (109) (16)

Other non-interest income (expense) 72 89 (17) 13 59

Segment Earnings before income tax expense 727 483 244 662 65

Income tax (expense) benefit (146) (100) (46) (113) (33)

Segment Earnings, net of taxes 581 383 198 549 32

Total other comprehensive income (loss), net of tax 10 57 (47) (44) 54

Total comprehensive income (loss) $591 $440 $151 $505 $86

(1) The financial performance of the company’s Multifamily segment is measured based on its contribution to GAAP comprehensive income (loss).

(2) Primarily consists of fair value gains and losses on loan purchase commitments, mortgage loans and debt for which the company has elected the fair value option, 

certain investment securities, and derivatives.

• Comprehensive income increased from the prior quarter, driven by higher fair value gains on held-for-sale 

commitments primarily due to targeted price increases related to changing market conditions.

Third Quarter 2019 Business Highlights

• New business activity was $29 billion, an increase of 66% from the prior quarter, while outstanding 

purchase commitments decreased 33% to $16 billion, primarily reflecting higher funding volume.

On September 13, 2019, FHFA announced a revised loan purchase cap structure for the multifamily 

business. The loan purchase cap will be $100.0 billion for the five-quarter period from the fourth 

quarter of 2019 through the fourth quarter of 2020 and at least 37.5% of the new multifamily business 

must be mission-driven, affordable housing. 

• The Multifamily guarantee portfolio increased to $260 billion, driven by strong new business activity. 

Average guarantee fees on the Multifamily guarantee portfolio were 36 basis points, substantially 

unchanged from the prior quarter.

• As of September 30, 2019, the company had cumulatively transferred a large majority of credit risk on the 

Multifamily guarantee portfolio. 

Conservatorship capital needed for credit risk was reduced by approximately 90%(1) through CRT 

transactions on new business activity in the twelve months ended September 30, 2018. 

• The company provided financing for 296,000 rental units.

(1) The reduction in the amount of conservatorship capital needed for credit risk on new business activity is calculated as conservatorship credit capital released from the CRT 

transactions (primarily through K Certificates and SB Certificates) divided by total conservatorship credit capital on new business activity.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 8

Capital Markets Segment 

Innovating to enhance the liquidity of the mortgage market and actively reduce risk for taxpayers

Third Quarter 2019 Financial Results(1) 

(Dollars in millions) 3Q 2019 2Q 2019 Change 3Q 2018 Change

Net interest income $497 $747 $(250) $845 $(348)

Investment securities gains (losses) 136 367 (231) (336) 472

Debt gains (losses) (17) (3) (14) 137 (154)

Derivative gains (losses) (438) (990) 552 427 (865)

Other non-interest income (expense) (237) 190 (427) 179 (416)

Administrative expense (96) (99) 3 (89) (7)

Segment Earnings before income tax expense (155) 212 (367) 1,163 (1,318)

Income tax (expense) benefit 33 (44) 77 (189) 222

Segment Earnings, net of taxes (122) 168 (290) 974 (1,096)

Total other comprehensive income (loss), net of tax 132 265 (133) (101) 233

Total comprehensive income (loss) $10 $433 $(423) $873 $(863)

(1) The financial performance of the company’s Capital Markets segment is measured based on its contribution to GAAP comprehensive income (loss).

• Comprehensive income decreased from the prior quarter, primarily driven by:

Lower net interest income driven by higher amortization expense due to increased loan prepayments 

combined with compressed net yields due to the flattening of the yield curve; 

Higher amortization expense in non-interest income (expense) due to the timing difference in 

amortization related to prepayments between the debt of consolidated trusts and the underlying 

mortgage loans, as security prepayments are recognized in the month after the loan prepayments are 

recognized; and

Higher interest rate-related fair value losses due to the decline in long-term interest rates. In addition, 

the volume of derivatives increased related to the hedging of Single-Family upfront fees, which are 

recorded in the Single-Family Guarantee Segment, resulting in lower overall reduction in GAAP fair 

value interest rate risk from hedge accounting.

Third Quarter 2019 Business Highlights

• The company continued to maintain a presence in the agency mortgage-related securities market to 

strategically support the guarantee business.

The overall liquidity of the mortgage investments portfolio continued to improve as less liquid assets 

decreased during the quarter. 
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 9

Housing Market Support 

Freddie Mac supports the U.S. housing market by executing its charter mission to ensure credit availability for new 

and refinanced single-family mortgages as well as for rental housing and by helping struggling homeowners avoid 

foreclosure.

Mortgage Funding – Freddie Mac provided approximately $385 billion in liquidity to the market in the nine months 

ended September 30, 2019, funding: 

• Nearly 1,217,000 single-family homes, approximately 744,000 of which were home purchase loans; and

• More than 638,000 multifamily rental units.

Number of Families Helped to Own or Rent a Home

(In thousands)

(1) As of September 30.

Amounts may not add due to rounding.

Preventing Foreclosures – Freddie Mac continued to help struggling borrowers retain their homes or otherwise

avoid foreclosure, completing approximately 36,000 single-family loan workouts in the nine months ended 

September 30, 2019. 
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 10

About Freddie Mac’s Conservatorship 

Since September 2008, Freddie Mac has been operating under conservatorship with FHFA as Conservator. The 

support provided by Treasury pursuant to the Purchase Agreement enables the company to maintain access to the 

debt markets and have adequate liquidity to conduct its normal business operations. 

Treasury Draws(1) and Dividend Payments

(Dollars in billions) 

(1) Excludes the initial $1 billion liquidation preference of senior preferred stock issued to Treasury in September 2008 as consideration for Treasury’s funding commitment, the $3 billion 

increase in the aggregate liquidation preference of the senior preferred stock pursuant to the December 2017 Letter Agreement, and the $1.8 billion increase in the aggregate 

liquidation preference of the senior preferred stock pursuant to the September 2019 Letter Agreement. The company received no cash proceeds in connection with the initial $1 billion 

liquidation preference of senior preferred stock or the $3 billion and $1.8 billion increases on December 31, 2017 and September 30, 2019, respectively.

(2) As of September 30, 2019.

• On September 27, 2019, the Conservator, acting on Freddie Mac's behalf, entered into a Letter Agreement 

with Treasury (the September 2019 Letter Agreement), increasing the applicable Capital Reserve Amount 

used in calculating the company's dividend requirement to Treasury from $3.0 billion to $20.0 billion.

As a result of this increase in the Capital Reserve Amount, the company was not required to pay a 

dividend on the senior preferred stock to Treasury on September 30, 2019 based on the Net Worth 

Amount of $4.8 billion as of June 30, 2019, and will not have a dividend requirement to Treasury in 

December 2019. The company will not be required to pay a dividend on the senior preferred stock to 

Treasury again until its Net Worth Amount exceeds the applicable Capital Reserve Amount of $20.0 

billion.

Pursuant to the September 2019 Letter Agreement, the liquidation preference of the senior preferred 

stock increased from $75.6 billion to $77.5 billion on September 30, 2019 based on the $1.8 billion 

increase in the Net Worth Amount during the second quarter of 2019.

• The amount of funding available to Freddie Mac under the Purchase Agreement remained $140.2 billion at 

September 30, 2019.

Amounts may not add due to rounding.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 11

Additional Information

For more information, including information related to Freddie Mac’s financial results, conservatorship, and related 

matters, see the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and the 

company’s Financial Results Supplement. These documents are available on the Investor Relations page of the 

company’s website at www.FreddieMac.com/investors.

Additional information about Freddie Mac and its business is also set forth in the company’s other filings with the 

SEC, which are available on the Investor Relations page of the company’s website at www.FreddieMac.com/

investors and the SEC’s website at www.sec.gov. Freddie Mac encourages all investors and interested members of 

the public to review these materials for a more complete understanding of the company’s financial results and 

related disclosures.

Webcast Announcement

Management will host a conference call at 9 a.m. Eastern Time on October 30, 2019 to discuss the company’s 

results with the media. The conference call will be concurrently webcast. To access the live audio webcast, use the 

following link: https://edge.media-server.com/mmc/p/zgqrvfbn. The replay will be available on the company’s 

website at www.FreddieMac.com/investors for approximately 30 days. All materials related to the call will be 

available on the Investor Relations page of the company’s website at www.FreddieMac.com/investors.

Media Contact: Frederick Solomon (703) 903-3861 Investor Contact: Laurie Garthune (571) 382-4732 

* * * *

This press release contains forward-looking statements, which may include statements pertaining to the 

conservatorship, the company’s current expectations and objectives for its Single-Family Guarantee, Multifamily, 

and Capital Markets segments, its efforts to assist the housing market, liquidity and capital management, 

economic and market conditions and trends, market share, the effect of legislative and regulatory developments 

and new accounting guidance, credit quality of loans the company owns or guarantees, the costs and benefits of 

the company’s credit risk transfer transactions, and results of operations and financial condition on a GAAP, 

Segment Earnings, non-GAAP, and fair value basis. Forward-looking statements involve known and unknown risks 

and uncertainties, some of which are beyond the company’s control. Management’s expectations for the 

company’s future necessarily involve a number of assumptions, judgments, and estimates, and various factors, 

including changes in market conditions, liquidity, mortgage spreads, credit outlook, actions by the U.S. 

government (including FHFA, Treasury, and Congress), and the impacts of legislation or regulations and new or 

amended accounting guidance, could cause actual results to differ materially from these expectations. These 

assumptions, judgments, estimates, and factors are discussed in the company’s Quarterly Reports on Form 10-Q 

for the quarters ended March 31, 2019, June 30, 2019, and September 30, 2019, which are available on the 

Investor Relations page of the company’s website at www.FreddieMac.com/investors and the SEC’s website at 

www.sec.gov. The company undertakes no obligation to update forward-looking statements it makes to reflect 

events or circumstances occurring after the date of this press release.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. 

Since its creation by Congress in 1970, the company has made housing more accessible and affordable for 

homebuyers and renters in communities nationwide. The company is building a better housing finance system for 

homebuyers, renters, lenders, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie 

Mac’s blog FreddieMac.com/blog.
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 12

FREDDIE MAC

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) 

(In millions, except share-related amounts) 3Q 2019 2Q 2019 3Q 2018

Interest income

Mortgage loans $16,428 $17,358 $16,787

Investments in securities 686 684 755

Other 426 420 261

Total interest income 17,540 18,462 17,803

Interest expense (15,130) (15,535) (14,546)

Net interest income 2,410 2,927 3,257

Benefit (provision) for credit losses 179 160 380

Net interest income after benefit (provision) for credit losses 2,589 3,087 3,637

Non-interest income (loss)

Guarantee fee income 231 222 209

Mortgage loans gains (losses) 1,702 1,541 94

Investment securities gains (losses) 164 390 (443)

Debt gains (losses) (56) 49 158

Derivative gains (losses) (1,217) (2,089) 728

Other income (loss) 146 209 79

Non-interest income (loss) 970 322 825

Non-interest expense

Salaries and employee benefits (333) (328) (301)

Professional services (115) (122) (120)

Other administrative expense (172) (169) (148)

Total administrative expense (620) (619) (569)

Real estate owned operations expense (58) (81) (38)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (408) (399) (375)

Other expense (337) (412) (218)

Non-interest expense (1,423) (1,511) (1,200)

Income (loss) before income tax (expense) benefit 2,136 1,898 3,262

Income tax (expense) benefit (427) (392) (556)

Net income (loss) 1,709 1,506 2,706

Other comprehensive income (loss), net of taxes and reclassification adjustments:

 Changes in unrealized gains (losses) related to available-for-sale securities 124 304 (169)

Changes in unrealized gains (losses) related to cash flow hedge relationships 19 20 25

Changes in defined benefit plans (4) (4) (3)

Total other comprehensive income (loss), net of taxes and reclassification

adjustments 139 320 (147)

Comprehensive income (loss) $1,848 $1,826 $2,559

Net income (loss) $1,709 $1,506 $2,706

Undistributed net worth sweep, senior preferred stock dividends, or future

increase in senior preferred stock liquidation preference (1,848) (1,826) (2,559)

Net income (loss) attributable to common stockholders $(139) $(320) $147

Net income (loss) per common share — basic and diluted $(0.04) $(0.10) $0.05

Weighted average common shares outstanding (in millions) — basic and diluted 3,234 3,234 3,234
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 13

FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited) 

September 30, December 31,

(In millions, except share-related amounts) 2019 2018

Assets

Cash and cash equivalents (includes $3,560 and $596 of restricted cash and cash equivalents) $8,708 $7,273

Securities purchased under agreements to resell 51,187 34,771

Investments in securities, at fair value 72,982 69,111

Mortgage loans held-for-sale (includes $21,538 and $23,106 at fair value) 41,118 41,622

Mortgage loans held-for-investment (net of allowance for loan losses of $4,854 and $6,139) 1,956,372 1,885,356

Accrued interest receivable 6,790 6,728

Derivative assets, net 1,592 335

Deferred tax assets, net 5,784 6,888

Other assets (includes $4,590 and $3,929 at fair value) 25,713 10,976

Total assets $2,170,246 $2,063,060

Liabilities and equity

Liabilities

Accrued interest payable $6,688 $6,652

Debt, net (includes $4,600 and $5,112 at fair value) 2,149,259 2,044,950

Derivative liabilities, net 355 583

Other liabilities 7,270 6,398

Total liabilities 2,163,572 2,058,583

Commitments and contingencies

Equity

Senior preferred stock (redemption value of $77,474 and $75,648) 72,648 72,648

Preferred stock, at redemption value 14,109 14,109

Common stock, $0.00 par value, 4,000,000,000 shares authorized, 725,863,886 shares

issued and 650,059,033 shares and 650,058,775 shares outstanding — —

Additional paid-in capital — —

Retained earnings (accumulated deficit) (76,780) (78,260)

AOCI, net of taxes, related to:

Available-for-sale securities (includes $243 and $221, related to net unrealized gains on 

securities for which other-than-temporary impairment has been recognized in earnings) 757 83

Cash flow hedge relationships (258) (315)

Defined benefit plans 83 97

Total AOCI, net of taxes 582 (135)

Treasury stock, at cost, 75,804,853 shares and 75,805,111 shares (3,885) (3,885)

Total equity 6,674 4,477

Total liabilities and equity $2,170,246 $2,063,060

The table below presents the carrying value and classification of the assets and liabilities of consolidated variable interest entities (VIEs) on the

company's condensed consolidated balance sheets.

September 30, December 31,

(In millions) 2019 2018

Consolidated Balance Sheet Line Item

Assets:

Mortgage loans held-for-investment $1,905,633 $1,842,850

All other assets 43,863 20,237

Total assets of consolidated VIEs $1,949,496 $1,863,087

Liabilities:

Debt, net $1,869,308 $1,792,677

All other liabilities 5,519 5,335

Total liabilities of consolidated VIEs $1,874,827 $1,798,012
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 14

FREDDIE MAC

Non-GAAP Reconciliations 

The company’s GAAP net interest income includes the spread earned on its investments activities plus the

guarantee fees earned by its single-family business. Adjusted net interest income is the net spread earned on the

company’s investment activities, including the cost of funds associated with using derivatives. Net interest yield,

GAAP and adjusted, is calculated as annualized quarterly GAAP or adjusted net interest income divided by the

average balance of the underlying assets and liabilities.

Reconciliation of GAAP Net Interest Income to Adjusted Net Interest Income (pre-tax)

(Dollars in millions) 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019

GAAP net interest income $3,257 $2,743 $3,153 $2,927 $2,410

Reclassifications:

Guarantee fee income reclassified to adjusted guarantee fee 

income (1)(2)

(2,052) (2,022) (2,022) (2,288) (2,485)

Accrual of periodic cash settlements reclassified from 

derivative gain (loss) (3)

27 20 (54) (42) (47)

Hedge accounting impact (4) 34 310 (267) 13 517

Other reclassifications (5) (141) 6 195 403 394

Total reclassifications (2,132) (1,686) (2,148) (1,914) (1,621)

Adjusted net interest income $1,125 $1,057 $1,005 $1,013 $789

Average balance of assets and liabilities, GAAP (in billions) $2,034 $2,042 $2,062 $2,089 $2,120

Average balance of assets and liabilities, adjusted (in billions) $314 $294 $293 $303 $311

GAAP guarantee fees are primarily those generated by the company's multifamily business. Adjusted guarantee

fee income consists of the revenues from guarantee fees from both the single-family and multifamily businesses,

net of the 10 basis point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation

Act of 2011. Guarantee fee rate, GAAP and adjusted, is calculated as annualized quarterly GAAP or adjusted

guarantee fee income divided by the average underlying guarantee portfolio.

Reconciliation of GAAP Guarantee Fee Income to Adjusted Guarantee Fee Income (pre-tax)

(Dollars in millions) 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019

GAAP guarantee fee income $209 $208 $217 $222 $231

Reclassifications:

Guarantee fee income reclassified from net interest income (1)(2) 2,052 2,022 2,022 2,288 2,485

Temporary Payroll Tax Cut Continuation Act of 2011 expense 

reclassified from other non-interest expense (6)

(375) (384) (390) (399) (408)

Total reclassifications 1,677 1,638 1,632 1,889 2,077

Adjusted guarantee fee income $1,886 $1,846 $1,849 $2,111 $2,308

Average guarantee portfolio balance, GAAP (in billions) $223 $232 $240 $246 $255

Average guarantee portfolio balance, adjusted (in billions) $2,088 $2,117 $2,145 $2,171 $2,203

Columns may not add due to rounding. 

For notes on reclassifications, see page 15 of this press release. 
Freddie Mac Third Quarter 2019 Financial Results 

October 30, 2019

Page 15

Notes on Significant Reclassifications

(1) Net guarantee fees, including upfront fee amortization and implied guarantee fee income related to unsecuritized 

loans held in the mortgage-related investments portfolio, are reclassified from GAAP net interest income to 

adjusted guarantee fee income.

(2) Short-term returns on cash received related to certain upfront fees on single-family loans are reclassified from 

GAAP net interest income to adjusted guarantee fee income. 

(3) The accrual of periodic cash settlements of derivatives is reclassified from GAAP derivative gains (losses) to 

adjusted net interest income to fully reflect the periodic cost associated with the protection provided by these 

contracts.

(4) Hedge accounting impact consists of removing the effects of hedge accounting including deferred gains and 

losses on closed cash flow hedges related to forecasted debt issuances. 

(5) Other reclassifications primarily relate to items reclassified out of GAAP net interest income, including the 

amortization related to derivative commitment basis adjustments associated with mortgage-related and nonmortgage-related securities, amortization related to accretion of other-than-temporary impairments on availablefor-sale securities, amortization of discounts on loans purchased with deteriorated credit quality that are on 

accrual status, amortization related to premiums and discounts, including non-cash premiums and discounts, on 

single-family loans in trusts and on the associated consolidated PCs, amortization related to premiums and 

discounts associated with PCs issued by consolidated trusts that were previously held and subsequently 

transferred to third parties, costs associated with STACR debt note expenses, and internally allocated costs 

associated with the refinancing of debt related to Multifamily segment held-for-investment loans which were 

securitized.

(6) The expense related to the Temporary Payroll Tax Cut Continuation Act of 2011 is reclassified from GAAP other 

non-interest expense to adjusted guarantee fee income. As a result of the reclassification, the revenue and 

expense related to the legislated 10 basis point increase are netted within adjusted guarantee fee income.