FEDERAL

Figure 12. Enterprises’ Annual Net Income (Loss)
2006 Through Second Quarter 2013 ($ billions)
$100
$80
$60
$40
$20
$0
($20)
($40)
($60)
($80)
($100)
($120)
2006
2007
2008
Fannie Mae
2009
Figure 12. Enterprises’ Annual Net Income (Loss) 2006 Through Second Quarter 2013 ($ billions)
2010
Freddie Mac
2011
2012
Q2 2013
income of $7.8 billion for the same period in 2012. 18
Freddie Mac reported net income of $9.5 billion for
the six months ended June 30, 2013, compared with
net income of $3.6 billion for the same period in
2012. 19
A key factor in Fannie Mae’s net income for this
period is the release of a substantial portion of its
valuation allowance against its deferred tax assets.
The enterprises are required to maintain a valuation
allowance for deferred tax assets that they determine
will not be realized. This caused them to establish
substantial allowances to balance deferred tax assets
during the years that they experienced net losses. As
of March 31, 2013, however, Fannie Mae determined
that the factors in favor of releasing the allowance
outweighed the factors in favor of maintaining
it. Therefore, Fannie Mae released a substantial
portion of its valuation allowance during the first
quarter of 2013, which resulted in the recognition of
Freddie Mac
$50.6 billion as a federal income tax benefit. 20
Fannie Mae
The release of the valuation allowance on Fannie Mae’s
deferred tax assets does not include $491 million of
the valuation allowance that pertains to capital loss
carryforwards. Additionally, Fannie Mae expects that
any remaining valuation allowance not related to capital
loss carryforwards will be reduced against income
before federal income taxes throughout the remaining
quarters of 2013 until that amount is reduced to zero
by December 31, 2013. 21
Freddie Mac, on the other hand, continues to evaluate
the pros and cons (on a quarterly basis) regarding
whether a valuation allowance is necessary for their
deferred tax assets. As of June 30, 2013, Freddie Mac
determined that the cons continue to outweigh the
pros in supporting a release of the valuation allowance;
and, therefore, it will not be able to realize deferred tax
assets. However, with recent continued improvements
in earnings, the evidence for releasing the valuation
allowance (i.e., positive evidence) has been improving
and additional evidence could become positive as early
as the third quarter of 2013. 22
Other key factors in the enterprises’ continued
profitability are discussed below. These factors include:
(1) continued improvements in the single-family
Figure 13. Enterprises’ Summary of Net Income for the Six Months Ended June 30, 2013 and 2012
($ billions)
Fannie Mae
Freddie Mac
2013 2012 2013 2012
Net Interest Income $12.0 $10.6 $8.4 $8.9
Credit-related Income (Expenses) 6.9 0.8 1.2 (2.1)
Gain (Loss) on Derivative Agreements 1.8 (2.4) a 1.7 (1.9)
Impairment of Securities Considered Other
than Temporary
(0.0) (0.7) (0.1) (0.7)
Other Income (Expense) 48.1 (0.5) (1.7) (0.6)
Net Income $68.8 $7.8 $9.5 $3.6
a
Loss on derivatives referenced to Table 8, p. 21, in the Fannie Mae 2013 Second Quarter 10-Q Report.
Semiannual Report to the Congress • April 1, 2013–September 30, 2013 41