Freddie Mac Reports Net Income of $2.9 Billion and

Comprehensive Income of $2.2 Billion for First Quarter 2018

The Company Continues To Effectively Execute Its Mission While Protecting Taxpayers And Building A Better Housing Finance System

First Quarter 2018 Financial Results

• Comprehensive income of $2.2 billion was driven by the company's strong competitive fundamentals, a $0.4 billion

benefit from the reduced corporate tax rate and continued guarantee book growth. Market-related impacts and gains 

from legacy asset dispositions were modest at $0.2 billion, after-tax, in the first quarter.

Comprehensive income, excluding significant items,(1) has remained reasonably stable quarter over quarter, despite 

market volatility. 

• No dividend payment to the U.S. Treasury is required as the company rebuilds its $3.0 billion capital buffer.

Comprehensive income ($B) 1Q 2018 4Q 2017 Change 1Q 2017 Change

Total comprehensive income $2.2 $(3.3) $5.5 $2.2 —

Excluding the write-down of net deferred tax asset (1) — 5.4 (5.4) — —

Comprehensive income, excluding significant items(1) $2.2 $2.1 $0.1 $2.2 —

CEO Commentary

"Freddie Mac delivered $2.2 billion of comprehensive income this quarter, despite a major change in interest rates. In a 

period with no significant items and little impact from legacy asset dispositions, this demonstrated the increased stability of 

our earnings. We also continued our impressive record of innovation-through a steady stream of real improvements by all 

three business lines. In short, our results this quarter provide a particularly clear view of our earnings capacity and the 

progress we’ve made in fulfilling our mission by creating a better housing finance system for lenders, investors, families and 

taxpayers."

Donald H. Layton Chief Executive Officer

First Quarter 2018 Business Highlights

Fundamentals Remained Strong; Continued Growth in Guarantee Businesses

• Total guarantee portfolio grew 5 percent from the prior year to nearly $2.05 trillion.

• Total mortgage-related investments portfolio was $241 billion; below the 2018 year-end Purchase Agreement cap of

$250 billion.

Delivering on the Company's Mission

• Provided approximately $80 billion in liquidity to the mortgage market – funded 282,000 single-family homes and

152,000 multifamily rental units. 

Single-family: Providing Liquidity to the Market while Transforming U.S. Housing Finance

• Guarantee portfolio grew 3 percent from the prior year to $1.84 trillion.

• Serious delinquency rate was 0.97 percent; excluding areas affected by the 2017 hurricanes, it was 0.75 percent.

• The company has transferred a significant portion of credit risk on 39 percent(2) of the single-family credit guarantee

portfolio, up from nearly 30 percent a year ago; it expects to reduce by approximately 60 percent the modeled capital

required for credit risk(2)(3) on the quarter's $66 billion of new originations.

Multifamily: Leading through Innovation

• Guarantee portfolio grew 30 percent from the prior year to $213 billion.

• Delinquency rate at historical lows, continuing near zero at 0.02 percent.

• The company has transferred a large majority of credit risk on 90 percent(2) of the multifamily guarantee portfolio; it

expects to reduce by approximately 90 percent the modeled capital required for credit risk(2)(3) on the quarter's $13

billion of new originations.

Portfolio Balances ($B) 1Q 2018 4Q 2017 % Chg. 1Q 2017 % Chg.

Single-family credit guarantee portfolio $1,836 $1,829 — % $1,779 3 %

Multifamily guarantee portfolio 213 203 5 % 164 30 %

Total guarantee portfolio $2,049 $2,032 1 % $1,943 5 %

Mortgage-related investments portfolio 241 253 (5)% 291 (17)%

Total investments portfolio $311 $342 (9)% $383 (19)%

(1) See Non-GAAP Financial Measure Highlights on pages 4-6 and 15-16 of this press release for additional details and reconciliations to the comparable amounts under GAAP.

(2) See footnotes on pages 7-9 for calculations.

(3) Modeled capital requirement as per the FHFA's Conservatorship Capital Framework and internal methods that use stress scenarios which are generally consistent with the 2017 Dodd-Frank Act Stress 

Test (DFAST) "severely adverse" scenario.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 2

McLean, VA — Freddie Mac (OTCQB: FMCC) today reported net income of $2.9 billion for the first quarter of 2018, 

compared to a net loss of $2.9 billion for the fourth quarter of 2017. The company also reported comprehensive 

income of $2.2 billion for the first quarter of 2018, compared to a comprehensive loss of $3.3 billion for the fourth 

quarter of 2017.

Summary Condensed Consolidated Statements of Comprehensive Income

(Dollars in millions) 1Q 2018 4Q 2017 Change 1Q 2017 Change

Net interest income $3,018 $3,501 $(483) $3,795 $(777)

Benefit (provision) for credit losses (63) 262 (325) 116 (179)

Derivative gains (losses) 1,830 88 1,742 (302) 2,132

 Other non-interest income (loss)(1) (1) 1,227 (1,228) 676 (677)

Non-interest income (loss) 1,829 1,315 514 374 1,455

Administrative expense (520) (558) 38 (511) (9)

 Other non-interest expense (590) (698) 108 (453) (137)

Non-interest expense (1,110) (1,256) 146 (964) (146)

Income before income tax expense 3,674 3,822 (148) 3,321 353

Income tax expense (748) (6,743) 5,995 (1,110) 362

Net income (loss) $2,926 $(2,921) $5,847 $2,211 $715

Total other comprehensive income (loss) (776) (391) (385) 23 (799)

Comprehensive income (loss) $2,150 $(3,312) $5,462 $2,234 $(84)

Guarantee fee income(1) $194 $186 $8 $149 $45

(1) Guarantee fee income on a GAAP basis is primarily from the company’s multifamily business and is included in Other income (loss) on Freddie Mac’s condensed 

consolidated statements of comprehensive income.

Financial Results Discussion

Freddie Mac’s first quarter 2018 net income and comprehensive income both increased from the fourth quarter of 

2017 primarily driven by the write-down of the company's net deferred tax asset in the fourth quarter of 2017. 

First quarter 2018 results also reflected: 

• Benefit of $0.4 billion from the reduced corporate tax rate which decreased from 35 percent to 21 percent 

at the beginning of the first quarter of 2018.

• Market-related impacts and gains from legacy asset dispositions were modest at $0.2 billion in the first 

quarter of 2018. The company experienced gains of $0.2 billion from market spreads tightening and $0.2 

billion from legacy asset dispositions, partially offset by a $0.2 billion loss from interest rate impacts, all 

after-tax. 

The small loss from interest rate impacts in the first quarter of 2018 reflected the effect of the 

company's implementation of fair value hedge accounting beginning in the first quarter of 2017 which 

significantly reduced the company's GAAP earnings sensitivity to changes in interest rates. 
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 3

Selected Financial Measures

 

• Net interest income decreased from the prior quarter primarily due to a $0.4 billion decrease related to 

hedge accounting in the first quarter of 2018 compared to a $0.1 billion increase in the fourth quarter of 

2017. 

 

(1) Guarantee fee income on a GAAP basis is primarily from the company’s multifamily business and is included in Other income (loss) on Freddie Mac’s 

condensed consolidated statements of comprehensive income.

• Guarantee fee income, primarily from the company’s multifamily business, increased from the prior quarter 

primarily driven by larger average multifamily guarantee portfolio balances due to issuances of K 

Certificates and SB Certificates.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 4

 

• The shift from a benefit for credit losses in the fourth quarter of 2017 to a provision for credit losses in the 

first quarter of 2018 was primarily driven by reclassifications of single-family legacy assets between heldfor-investment and held-for sale.

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 condensed consolidated statements of comprehensive income. Management believes 

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

revenue.

• 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. GAAP guarantee fees are primarily those generated by 

its multifamily business.

Adjusted net interest income is the net spread earned on the company’s investments activities, 

including the cost of funds associated with using derivatives.

Adjusted guarantee fee income consists of the revenues from guarantee fees from both the singlefamily 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. 

In 2017, the company added a new non-GAAP financial measure calculated by adjusting comprehensive income 

for certain significant items. This non-GAAP financial measure is calculated by excluding significant items from the 

company’s GAAP comprehensive income that are not indicative of its on-going operations. Management believes 

that this non-GAAP financial measure is useful because it allows users to better understand the drivers of the 

company's on-going financial results. 

The graphs that follow show the non-GAAP financial measures for adjusted net interest income and adjusted 

guarantee fee income.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 5

(1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see pages 15-16 of this press release.

Note: Amounts may not add due to rounding.

• Adjusted net interest income was relatively unchanged from the prior quarter.

• The mortgage-related investments portfolio declined $12 billion, or 5 percent, from the prior quarter, 

ending the first quarter of 2018 at $241 billion, below the 2018 year-end Purchase Agreement cap of $250 

billion.

The company remained focused on reducing the balance of less liquid assets in this portfolio. The 

balance of less liquid assets declined $5 billion, or 6 percent, from the prior quarter to $83 billion at 

March 31, 2018 due primarily to sales of non-agency mortgage-related securities and single-family 

legacy assets. 

Less liquid assets include single-family reperforming loans, single-family seriously delinquent 

loans, multifamily unsecuritized mortgage loans not in the securitization pipeline, and mortgagerelated securities not guaranteed by a GSE or the U.S. government.

The balance of liquid assets and securitization pipeline assets was $132 billion and $26 billion, 

respectively, at March 31, 2018, representing approximately 66 percent of the mortgage-related 

investments portfolio.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 6

 

(1) Non-GAAP financial measure. For reconciliations to the comparable amounts under GAAP, see pages 15-16 of this press release.

Note: Amounts may not add due to rounding.

• Adjusted guarantee fee income decreased from the prior quarter primarily driven by lower amortization of 

single-family upfront fees resulting from a decrease in loan prepayments. 

Changes in the rates of amortization of single-family upfront fees into income are driven by fluctuating 

levels of loan prepayments, which primarily reflect changes in interest rates.

Adjusted single-family guarantee fee income from contractual guarantee fees is expected to increase 

over the long-term as guarantee fees on new single-family business are generally higher than the fees 

received on older vintages that continue to run off.

• The total guarantee portfolio grew $17 billion, or 1 percent, from the prior quarter.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 7

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 condensed 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 condensed 

consolidated financial statements included in the company’s Quarterly Report on Form 10-Q for the quarter ended 

March 31, 2018 and page 16 of this press release.

Single-family Guarantee Segment

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

Financial Results(1)

(Dollars in millions) 1Q 2018 4Q 2017 Change 1Q 2017 Change

Guarantee fee income $1,513 $1,589 $(76) $1,418 $95

Benefit (provision) for credit losses 28 (41) 69 39 (11)

Other non-interest income 94 424 (330) 319 (225)

Administrative expense (336) (363) 27 (333) (3)

REO operations expense (39) (65) 26 (59) 20

Other non-interest expense (379) (381) 2 (318) (61)

Segment earnings before income tax expense 881 1,163 (282) 1,066 (185)

Income tax expense (179) (405) 226 (356) 177

Segment earnings, net of taxes 702 758 (56) 710 (8)

Total other comprehensive income (loss), net of tax (4) 42 (46) (2) (2)

Total comprehensive income $698 $800 $(102) $708 $(10)

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

• Segment earnings decreased from the prior quarter primarily driven by lower benefit from single-family 

legacy asset reclassifications and dispositions, partially offset by lower income tax expense resulting from 

the decrease in the corporate tax rate in 2018.

Business Highlights

• Core loan portfolio (after 2008), which excludes HARP and other relief refinance loans, continued to grow 

and was 79 percent of the single-family credit guarantee portfolio at March 31, 2018.

• Single-family credit guarantee portfolio increased from the prior quarter to $1.84 trillion at March 31, 2018.

• Average guarantee fees charged on new acquisitions were 40 basis points (net of the legislated 10 basis 

point guarantee fee remitted to Treasury as part of the Temporary Payroll Tax Cut Continuation Act of 2011) 

for the first quarter of 2018, up from 36 basis points in the prior quarter.

Average guarantee fees on the single-family credit guarantee portfolio were 33 basis points, down 

from 35 basis points in the prior quarter, primarily due to lower amortization of upfront fees driven by a 

decrease in loan prepayments during the first quarter of 2018.

• The company has transferred a significant portion of credit risk on 39 percent(1) of the single-family credit 

guarantee portfolio and expects to reduce by approximately 60 percent the modeled capital required for 

credit risk(2)(3) on the quarter's $66 billion of new originations.

• Provided funding for more than 282,000 single-family homes, approximately 124,000 of which were 

refinance loans in the first quarter of 2018.

(1) Calculated as the current balance of single-family credit risk transfer transaction reference pool UPB divided by the single-family credit guarantee portfolio 

UPB.

(2) Modeled capital requirement as per the FHFA's Conservatorship Capital Framework and internal methods that use stress scenarios which are generally 

consistent with the 2017 Dodd-Frank Act Stress Test (DFAST) "severely adverse" scenario.

(3) Calculated as modeled credit capital expected to be released from the underlying single-family credit risk transfer transaction reference pool divided by total 

modeled credit capital on quarterly new originations.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 8

Multifamily Segment

Leading through Innovation

Financial Results(1)

(Dollars in millions) 1Q 2018 4Q 2017 Change 1Q 2017 Change

Net interest income $271 $301 $(30) $271 $0

Guarantee fee income 195 193 2 151 44

Benefit (provision) for credit losses 16 (3) 19 6 10

Gains (losses) on loans and other non-interest income (430) 654 (1,084) 236 (666)

Derivative gains (losses) 655 212 443 127 528

Administrative expense (100) (107) 7 (95) (5)

Other non-interest expense (14) (22) 8 (21) 7

Segment earnings before income tax expense 593 1,228 (635) 675 (82)

Income tax expense (121) (426) 305 (226) 105

Segment earnings, net of taxes 472 802 (330) 449 23

Total other comprehensive income (loss), net of tax (68) (142) 74 (4) (64)

Total comprehensive income $404 $660 $(256) $445 $(41)

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

• The decrease in comprehensive income from the prior quarter was primarily driven by lower fair value 

gains due to less tightening on K Certificate benchmark spreads combined with lower new commitment 

volume and the effects of strategic pricing, partially offset by lower income tax expense resulting from the 

decrease in the corporate tax rate in 2018.

Derivative gains (losses) for the Multifamily segment are largely offset by interest rate-related fair value 

changes on the loans and investment securities being economically hedged. As a result, there is 

minimal net impact on total comprehensive income for the Multifamily segment from interest raterelated derivatives.

Business Highlights

• New purchase volume was $13 billion for the first quarter of 2018, a decrease of 53 percent from the prior 

quarter's record volume, while outstanding loan purchase commitments increased 21 percent to $18 

billion, primarily reflecting a strong pipeline of expected future fundings.

• Multifamily guarantee portfolio increased 5 percent from the prior quarter to $213 billion at March 31, 2018 

due to ongoing credit risk transfer securitizations. 

Capped multifamily new business activity was $6 billion for the first quarter of 2018, while uncapped 

new business activity was $7 billion. 

The 2018 FHFA Scorecard goal is to maintain the dollar volume of annual capped multifamily new 

business activity at or below a production cap of $35 billion.

• The company has transferred a large majority of credit risk on 90 percent(1) of the multifamily guarantee 

portfolio and expects to reduce by approximately 90 percent the modeled capital required for credit risk(2)(3)

on the quarter's $13 billion of new originations.

The company executed $16 billion in UPB of credit risk transfer transactions, primarily via K 

Certificates and SB Certificates, during the first quarter of 2018, and $265 billion in UPB since 2009.

In addition to transferring a large majority of expected and stress credit risk, nearly all of the 

company's credit risk transfer transactions also shifted non-credit risks, such as interest-rate risk 

and liquidity risk, away from Freddie Mac to third-party investors. 

• Provided financing for approximately 152,000 rental units in the first quarter of 2018.

83 percent of the eligible units financed were affordable to families earning at or below area median 

incomes.

(1) Calculated as the current balance of multifamily credit risk transfer transactions (primarily K Certificates and SB Certificates) divided by the multifamily 

guarantee portfolio UPB.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 9

(2) Modeled capital requirement as per the FHFA's Conservatorship Capital Framework and internal methods that use stress scenarios which are generally 

consistent with the 2017 Dodd-Frank Act Stress Test (DFAST) "severely adverse" scenario.

(3) Calculated as modeled credit capital expected to be released from credit risk transfer transactions (primarily through K Certificates and SB Certificates) 

divided by total modeled credit capital on quarterly new originations. 

Capital Markets Segment

Enhancing the liquidity of the company’s securities in the secondary mortgage market while reducing less liquid 

assets using economically sensible transactions and responding to market opportunities in funding the company's 

business activities

Financial Results(1)

(Dollars in millions) 1Q 2018 4Q 2017 Change 1Q 2017 Change

Net interest income $817 $773 $44 $929 $(112)

Net impairment of available-for-sale securities

recognized in earnings

111 42 69 73 38

Derivative gains (losses) 1,302 170 1,132 52 1,250

Gains (losses) on trading securities (471) (363) (108) (135) (336)

Other non-interest income 525 897 (372) 744 (219)

Administrative expense (84) (88) 4 (83) (1)

Segment earnings before income tax expense 2,200 1,431 769 1,580 620

Income tax expense (448) (507) 59 (528) 80

Segment earnings, net of taxes 1,752 924 828 1,052 700

Total other comprehensive income (loss), net of tax (704) (291) (413) 29 (733)

Total comprehensive income $1,048 $633 $415 $1,081 $(33)

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

• The increase in comprehensive income from the prior quarter was primarily driven by higher fair value 

gains due to spread tightening combined with lower income tax expense resulting from the decrease in the 

corporate tax rate in 2018.

Business Highlights

• Continued to responsibly reduce the balance of the mortgage-related investments portfolio with a focus on 

reducing less liquid assets. Less liquid assets were $53 billion at March 31, 2018, down $3 billion, or 5 

percent, from the prior quarter, due primarily to sales of $2 billion of single-family legacy assets, sales of 

$2 billion of non-agency mortgage-related securities and ongoing portfolio liquidations.

• Continued to maintain a presence in the agency mortgage-related securities market to strategically 

support the guarantee business.

Liquid assets held by the Capital Markets segment were 66 percent of the portfolio, or $126 billion, at 

March 31, 2018, relatively unchanged from 66 percent of the portfolio, or $130 billion, at December 31, 

2017.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 10

Housing Market Support

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

and refinanced mortgages as well as rental housing while also helping struggling homeowners avoid foreclosure.

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

avoid foreclosure, completing approximately 26,000 single-family loan workouts in the three months ended 

March 31, 2018. 

Mortgage Funding – Freddie Mac provided approximately $80 billion in liquidity to the market in the three months 

ended March 31, 2018, funding: 

• More than 282,000 single-family homes, approximately 124,000 of which were refinance loans; and

• Approximately 152,000 multifamily rental units.

(1) As of March 31, 2018.

Note: Amounts may not add due to rounding.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 11

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.

(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 and the $3 billion increase in the aggregate liquidation preference of the senior preferred stock pursuant to the December 21, 2017 Letter 

Agreement. The company received no cash proceeds as a result of issuing the initial $1 billion liquidation preference of senior preferred stock or the $3.0 

billion increase on December 31, 2017.

(2) As of March 31, 2018.

Note: Amounts may not add due to rounding.

• No dividend payment required to U.S. Treasury as the company rebuilds its allowed $3 billion capital 

buffer.

The applicable Capital Reserve Amount is $3.0 billion from January 1, 2018 and thereafter, pursuant to 

the December 21, 2017 Letter Agreement.

• The amount of funding available to Freddie Mac under the Purchase Agreement was reduced to $140.2 

billion after the funding of the draw request related to the company's $312 million negative net worth at 

December 31, 2017.

• Through March 31, 2018, aggregate cash dividends paid to Treasury were $40.8 billion more than 

cumulative cash draws received from Treasury.

The payment of dividends does not reduce the outstanding liquidation preference under the Purchase 

Agreement.

• The aggregate liquidation preference of the senior preferred stock increased to $75.6 billion after the 

funding of the $0.3 billion draw request.
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 12

Additional Information

For more information, including that 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 March 31, 2018 and the company’s 

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

Web site at www.FreddieMac.com/investors.

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

which are available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors 

and the SEC’s Web site 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 May 1, 2018 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/m6/p/26rkii5o. The replay will be available on the company’s Web 

site 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 Web site at www.FreddieMac.com/investors.

Media Contact: Christopher Spina (703) 388-7031 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 Annual Report on Form 10-K for 

the year ended December 31, 2017, Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 and 

Current Reports on Form 8-K, which are available on the Investor Relations page of the company’s Web site at 

www.FreddieMac.com/investors and the SEC’s Web site 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 First Quarter 2018 Financial Results

May 1, 2018

Page 13

FREDDIE MAC

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

(in millions, except share-related amounts) 1Q 2018 4Q 2017 1Q 2017

Interest income

Mortgage loans $15,951 $16,055 $15,965

Investments in securities 810 778 914

Other 214 221 101

Total interest income 16,975 17,054 16,980

Interest expense (13,957) (13,553) (13,185)

Net interest income 3,018 3,501 3,795

Benefit (provision) for credit losses (63) 262 116

Net interest income after benefit (provision) for credit losses 2,955 3,763 3,911

Non-interest income (loss)

Gains (losses) on extinguishment of debt 110 46 218

Derivative gains (losses) 1,830 88 (302)

 Net impairment of available-for-sale securities recognized in earnings — (1) (13)

Other gains (losses) on investment securities recognized in earnings (232) 214 56

Other income (loss) 121 968 415

Non-interest income (loss) 1,829 1,315 374

Non-interest expense

Salaries and employee benefits (286) (285) (275)

Professional services (102) (112) (112)

Other administrative expense (132) (161) (124)

Total administrative expense (520) (558) (511)

Real estate owned operations expense (34) (61) (56)

Temporary Payroll Tax Cut Continuation Act of 2011 expense (359) (350) (321)

Other expense (197) (287) (76)

Non-interest expense (1,110) (1,256) (964)

Income (loss) before income tax expense 3,674 3,822 3,321

Income tax (expense) benefit (748) (6,743) (1,110)

Net income (loss) 2,926 (2,921) 2,211

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

 Changes in unrealized gains (losses) related to available-for-sale securities (800) (499) (2)

Changes in unrealized gains (losses) related to cash flow hedge relationships 30 43 28

Changes in defined benefit plans (6) 65 (3)

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

adjustments

(776) (391) 23

Comprehensive income (loss) $2,150 $(3,312) $2,234

Net income (loss) $2,926 $(2,921) $2,211

Undistributed net worth sweep and senior preferred stock dividends — — (2,234)

Net income (loss) attributable to common stockholders $2,926 $(2,921) $(23)

Net income (loss) per common share — basic and diluted $0.90 $(0.90) $(0.01)

Weighted average common shares outstanding (in millions) — basic and diluted 3,234 3,234 3,234
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 14

FREDDIE MAC

Condensed Consolidated Balance Sheets (Unaudited) 

(in millions, except share-related amounts) March 31,

2018

December 31,

2017

Assets

Cash and cash equivalents (includes $3,398 and $2,963 of restricted cash and cash equivalents) $8,617 $9,811

Securities purchased under agreements to resell 41,828 55,903

Investments in securities, at fair value 75,501 84,318

Mortgage loans held-for-sale (includes $15,832 and $20,054 at fair value) 27,615 34,763

Mortgage loans held-for-investment (net of allowance for loan losses of $8,848 and $8,966) 1,840,736 1,836,454

Accrued interest receivable 6,381 6,355

Derivative assets, net 454 375

Deferred tax assets, net 8,313 8,107

Other assets (includes $3,502 and $3,353 at fair value) 13,038 13,690

Total assets $2,022,483 $2,049,776

Liabilities and equity

Liabilities

Accrued interest payable $6,058 $6,221

Debt, net (includes $5,617 and $5,799 at fair value) 2,004,807 2,034,630

Derivative liabilities, net 345 269

Other liabilities 9,123 8,968

Total liabilities 2,020,333 2,050,088

Commitments and contingencies

Equity

Senior preferred stock (redemption value of $75,648 and $75,336) 72,648 72,336

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 650,054,986 shares and 650,054,731 shares outstanding — —

Additional paid-in capital — —

Retained earnings (accumulated deficit) (80,424) (83,261)

AOCI, net of taxes, related to:

Available-for-sale securities (includes $363 and $593, related to net unrealized gains on 

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

5 662

Cash flow hedge relationships (399) (356)

Defined benefit plans 96 83

Total AOCI, net of taxes (298) 389

Treasury stock, at cost, 75,808,900 shares and 75,809,155 shares (3,885) (3,885)

Total equity 2,150 (312)

Total liabilities and equity $2,022,483 $2,049,776

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

company's condensed consolidated balance sheets.

(in millions) March 31,

2018

December 31,

2017

Consolidated Balance Sheet Line Item

Assets:

Mortgage loans held-for-sale — —

Mortgage loans held-for-investment 1,778,010 1,774,286

All other assets 23,488 25,753

Total assets of consolidated VIEs $1,801,498 $1,800,039

Liabilities:

Debt, net $1,726,969 $1,720,996

All other liabilities 5,045 5,030

Total liabilities of consolidated VIEs $1,732,014 $1,726,026
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 15

FREDDIE MAC

Non-GAAP Reconciliations

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

(Dollars in millions) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

GAAP net interest income $3,795 $3,379 $3,489 $3,501 $3,018

Reclassifications:

Guarantee fee income reclassified to adjusted guarantee fee 

income (1)(2)

(1,741) (1,840) (1,921) (1,946) (1,873)

Accrual of periodic cash settlements reclassified from derivative 

gain (loss) (3)

(467) (429) (398) (296) (145)

Hedge accounting impact (4) 43 42 40 (132) 373

Other reclassifications (5) (430) 15 (64) (53) (285)

Total reclassifications (2,595) (2,212) (2,343) (2,427) (1,930)

Adjusted net interest income $1,200 $1,167 $1,146 $1,074 $1,088

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

(Dollars in millions) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

GAAP guarantee fee income* $149 $158 $169 $186 $194

Reclassifications:

Guarantee fee income reclassified from net interest income (1)(2) 1,741 1,840 1,921 1,946 1,873

Temporary Payroll Tax Cut Continuation Act of 2011 expense 

reclassified from other non-interest expense (6)

(321) (330) (339) (350) (359)

Total reclassifications 1,420 1,510 1,582 1,596 1,514

Adjusted guarantee fee income $1,569 $1,668 $1,751 $1,782 $1,708

Reconciliation of GAAP Comprehensive Income to Comprehensive Income, excluding Significant Items

(Dollars in billions) 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

GAAP comprehensive income $2.2 $2.0 $4.7 $(3.3) $2.2

Exclusions:

Non-agency mortgage-related securities litigation settlement (7) — — (4.5) — —

Tax effect related to litigation settlement — — 1.6 — —

Write-down of net deferred tax asset (8) — — — 5.4 —

Total exclusions — — (2.9) 5.4 —

Comprehensive income, excluding significant items $2.2 $2.0 $1.8 $2.1 $2.2

* Guarantee fee income on a GAAP basis is included in Other income (loss) on Freddie Mac’s condensed consolidated statements of comprehensive income. 

Note: Columns may not add due to rounding. 

For notes on reclassifications, see page 16 of this press release. 
Freddie Mac First Quarter 2018 Financial Results

May 1, 2018

Page 16

Notes on Significant Reclassifications

(1) Net guarantee fees are reclassified from GAAP net interest income to adjusted guarantee fee income.

(2) Implied guarantee fee income related to unsecuritized loans held in the mortgage investments portfolio is 

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) into 

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 of premiums and discounts associated with the company’s PCs and the loans underlying those 

PCs, amortization of non-cash premiums on single-family loans in trusts and on consolidated PCs, amortization 

of discounts on loans purchased with deteriorated credit quality that are on accrual status, the accretion of 

other-than-temporary impairments on available-for-sale securities, STACR debt note expense and net float 

income or expense.

(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.

(7) The third quarter 2017 GAAP results included a benefit of $4.5 billion (pre-tax) from a settlement with the Royal 

Bank of Scotland plc related to non-agency mortgage-related securities. The tax effect related to this settlement 

was $(1.6) billion. 

(8) The Tax Cuts and Jobs Act enacted in December 2017 reduced the statutory corporate income tax rate from 

35% to 21%. Although not effective until January 1, 2018, accounting rules require that the company measure 

its net deferred tax asset using the reduced rate in the period in which the legislation was enacted. Therefore, the 

company reduced its net deferred tax asset by $5.4 billion, with a corresponding charge to deferred income tax 

expense. This resulted in a decrease in both net income and comprehensive income.