(EDGAR Online via COMTEX) -- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read this MD&A together with our consolidated financial statements as of December 31, 2020 and the accompanying notes. This MD&A does not discuss 2018 performance or a comparison of 2018 versus 2019 performance for select areas where we have determined the omitted information is not necessary to understand our current-period financial condition, changes in our financial condition, or our results. The omitted information may be found in our 2019 Form 10-K, filed with the SEC on February 13, 2020, in MD&A sections titled "Consolidated Results of Operations," "Single-Family Business," "Multifamily Business," and "Liquidity and Capital Management." Key Market Economic Indicators
The COVID-19 pandemic has had a significant adverse effect on both the U.S. and global economies. Below we discuss how varying macroeconomic conditions can influence our financial results across different business and economic environments. See "Executive Summary-COVID-19 Impact" for additional information on the effects of the pandemic on the economy and the uncertainty associated with its ultimate impact on our business and financial results.
MD&A | Key Market Economic Indicators
typically resulting in higher net amortization income from cost basis adjustments on mortgage loans and related debt.
MD&A | Key Market Economic Indicators
expect. For further discussion on housing activity, see "Single-Family Business-Single-Family Mortgage Market" and "Multifamily Business-Multifamily Mortgage Market."
MD&A | Key Market Economic Indicators
We expect multifamily starts to remain mostly flat in 2021 compared with the levels seen at the end of 2020; however, due primarily to the high level of multifamily starts at the beginning of 2020, multifamily starts are projected to fall by 13.0% on an annual basis in 2021.
MD&A | Key Market Economic Indicators
The impact of COVID-19 resulted in a significant decline in GDP and a significant rise in the unemployment rate in the first half of 2020, with partial recovery in the second half of 2020 resulting in estimated negative GDP of 3.5% for the full year compared to the 2019 annual level. We expect economic recovery to continue into 2021, as we expect the positive impacts of further stimulus, increased vaccinations and reduction of lockdown measures should help spur economic growth, particularly beginning in the spring. We expect positive GDP growth of 6.1% for 2021. See "Risk Factors-Market and Industry Risk" for further discussion of risks to our business and financial results associated with interest rates, home prices, housing activity and economic conditions. Consolidated Results of Operations
This section discusses our consolidated results of operations and should be read together with our consolidated financial statements and the accompanying notes.
Summary of Consolidated Results of Operations
For the Year Ended December 31, Variance
2020 2019 2018 2020 vs. 2019 2019 vs. 2018
(Dollars in millions)
Net interest income(1) $ 24,866 $ 21,293 $ 21,273 $ 3,573 $ 20
Fee and other income 462 566 555 (104) 11
Net revenues 25,328 21,859 21,828 3,469 31
Investment gains, net 907 1,770 952 (863) 818
Fair value gains (losses), net (2,501) (2,214) 1,121 (287) (3,335)
Administrative expenses (3,068) (3,023) (3,059) (45) 36
Credit-related income:
Benefit (provision) for credit losses (678) 4,011 3,309 (4,689) 702
Foreclosed property expense (177) (515) (617) 338 102
Total credit-related income (expense) (855) 3,496 2,692 (4,351) 804
TCCA fees (2,673) (2,432) (2,284) (241) (148)
Credit enhancement expense(2) (1,361) (1,134) (679) (227) (455)
Change in expected credit
enhancement recoveries(3) 233 - - 233 -
Other expenses, net(4) (1,131) (745) (472) (386) (273)
Income before federal income taxes 14,879 17,577 20,099 (2,698) (2,522)
Provision for federal income taxes (3,074) (3,417) (4,140) 343 723
Net income $ 11,805 $ 14,160 $ 15,959 $ (2,355) $ (1,799)
Total comprehensive income $ 11,790 $ 13,969 $ 15,611 $ (2,179) $ (1,642)
(1)Prior-period amounts have been adjusted to reflect the current-year change in presentation related to our yield maintenance fees. See "Note 1, Summary of Significant Accounting Policies" for more information about our change in presentation.
MD&A | Consolidated Results of Operations
Net Interest Income
Components of Net Interest Income
For the Year Ended December 31, Variance
2020 2019 2018 2020 vs. 2019 2019 vs. 2018
(Dollars in millions)
Net interest income from guaranty book of
business:
Base guaranty fee income(1) $ 11,157 $ 9,711 $ 8,908 $ 1,446 $ 803
Base guaranty fee income related to TCCA(2) 2,673 2,432 2,284 241 148
Net amortization income 9,121 5,866 5,655 3,255 211
Total net interest income from guaranty book
of business 22,951 18,009 16,847 4,942 1,162
Net interest income from portfolios(3) 1,915 3,284 4,426 (1,369) (1,142)
Total net interest income $ 24,866 $ 21,293 $ 21,273 $ 3,573 $ 20
(1)Excludes revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA which is remitted to Treasury and not retained by us.
MD&A | Consolidated Results of Operations
Higher base guaranty fee income. An increase in the size of our guaranty book of business combined with loans with higher average base guaranty fees comprising a greater portion of our book contributed to the increase in base guaranty fee income in 2020 and 2019.
MD&A | Consolidated Results of Operations
Analysis of Net Interest Income
The table below displays an analysis of our net interest income, average
balances and related yields earned on assets and incurred on liabilities. For
most components of the average balances, we use a daily weighted average of
unpaid principal balance net of unamortized cost basis adjustments. When daily
average balance information is not available, such as for mortgage loans, we use
monthly averages. Prior-period amounts have been adjusted to reflect the
current-year change in presentation related to our yield maintenance fees.
Analysis of Net Interest Income and Yield(1)
For the Year Ended December 31,
. . .
Feb 12, 2021
COMTEX_380742853/2041/2021-02-12T07:22:25
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