Freddie Mac (FMCC.OB) on Wednesday reported a profit of $4.58 billion for the first quarter, reflecting a recovery in the housing market. The profit is the second largest in the mortgage finance company's history.
McLean, Virginia-based Freddie Mac's net income for the first quarter surged to $4.58 billion from $577 million in the prior-year quarter. The latest quarter's results reflect a benefit for credit losses and derivative gains, compared to a provision for credit losses and derivative losses in the prior-year period.
During the quarter, Freddie Mac's dividend payment to the U.S. Treasury totaled $5.8 billion. The company said it did not receive further federal aid in the quarter due to a positive net worth.
Including the payment to the U.S. Treasury, Freddie Mac's net loss attributable to common stockholders widened to $2.39 billion or $0.74 per share from $1.23 billion or $0.38 per share in the previous-year quarter.
Net interest income for the quarter declined 5 percent to $4.27 billion from $4.50 billion in the year-ago period, primarily due to the reduction in the balance of higher-yielding mortgage-related assets due to continued liquidations. This was partially offset by lower funding costs from the replacement of debt at lower rates.
Benefit for credit losses totaled $503 million in the quarter, compared to a provision of $1.83 billion in the same period last year. The benefit was driven by continued improvement in national home prices combined with a further decrease in the volume of newly delinquent single-family loans.
Non-interest income for the quarter was $402 million, compared to non-interest loss of $1.52 billion in the prior-year quarter. The results reflect derivative gains of $375 million during the latest quarter compared to derivative losses of $1.06 billion during the prior-year period.
Freddie Mac noted that through March 31, 2013, it has paid $29.6 billion in cash dividends to the Treasury on the company's senior preferred stock since conservatorship began in September 2008. This represents an amount equal to 41 percent of the company's aggregate draws received under the purchase agreement.
Based on net worth of $10 billion at March 31, 2013, the company's dividend obligation to the Treasury will be $7 billion in June 2013.
Freddie Mac said it is required to pay dividends to the extent that its net worth amount, as defined in the purchase agreement, exceeds the permitted capital reserve. The amount of the permitted capital reserve is $3 billion for 2013 and will be reduced by $600 million each year thereafter until it reaches zero in 2018.
Freddie Mac and its sister company Fannie Mae (FNMA.OB) went bankrupt after the 2008 crisis and had to bank on federal aid aggregating about $190 billion. Both have regained ground on the back of better home prices and lower delinquencies.
In Wednesday's regular session, FMCC.OB is trading at $0.89, up $0.08 or 9.79 percent on a volume of 6.34 million shares.
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