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Freddie Mac's solid business strength grows from its company-wide commitment to shareholders, customers and homebuyers. |
In 2005, we buttressed a rock-solid capital position and balance sheet. Throughout the year, we exceeded all regulatory capital requirements. In fact, by year end, Freddie Mac’s regulatory core capital grew to more than $35 billion — well above the capital requirements set by our safety and soundness regulator. And we expect to be able to maintain our strong position across a wide range of market conditions.
Our credit risks remained low, as measured both by single-family delinquency rates and total credit losses. Indeed, despite the effects of the Gulf Coast hurricanes, 90-day delinquencies at the end of 2005 were lower than they were on December 31, 2004.
Prudent and consistent risk management amid a changing interest-rate environment kept our interest-rate risks low as well. Portfolio Market Value Sensitivity Level (PMVS-L), which measures our sensitivity to a 50-basis point parallel shift in the level of interest rates, averaged 1 percent throughout 2005. Our duration gap also remained steady at near zero months. All of which means that Freddie Mac is well positioned to deal with interest-rate swings that would place great stress on many financial institutions.
To put it simply, Freddie Mac’s financial strength is beyond question.
Reflecting our strong capital position and confidence in Freddie Mac’s long-term business prospects, we raised the amount of capital returned to shareholders twice in 2005, through dividend increases in March and December. Our senior management is acutely aware that putting shareholder capital to work is a major priority. Since year-end 2003, our quarterly common stock dividend has grown by 81 percent.
Freddie Mac has
benefited shareholders by increasing its common stock dividend significantly over the past three years.
(Dividends per common share)
And our business is growing, too — with 2005 bringing expansion in key areas. Growth in our share of the market. Growth in our mortgage portfolio. Growth in our product line and ability to serve lender needs. Growth in customer satisfaction.
Results like these from across the company reflect Freddie Mac’s business strengths in 2005, as we continued to build long-term shareholder value and deliver on our charter mission as a leader in the secondary mortgage market.
Much of Freddie Mac’s progress is the result of a new, integrated focus on customers. We improved customer service, diversified our lender base and increased our share with key business partners. And we enhanced our value proposition for customers by expanding the types of mortgages we guarantee and launching new products to meet evolving needs.
Abundant capital. Disciplined risk management. Strong customer relationships. An established franchise in a defined and growing market. These are Freddie Mac’s continuing strengths.