This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fannie Reports Record Earnings; Plays It Safe On Taxes (Update 1)

Fannie Mae earnings story updated with changes throughout.

NEW YORK ( TheStreet) -- Fannie Mae (FNMA) reported record earnings Tuesday, even as it chose not to recognize any of its $58.9 billion deferred tax asset (DTA) as net income.

Fannie Mae earned $17.2 billion for 2012 and $7.6 billion for the fourth quarter of 2012, the largest quarterly and annual profits in the company's history. Strong earnings had already been widely expected, since Fannie announced last month it had delayed its earnings release in order to evaluate whether to release any of its DTA.

The deferred tax asset reflects potential tax credits from past losses. However, unless a company determines it has a better than 50% chance of realizing enough earnings to make use of the loss, it is required to take what is known as a valuation allowance, which means the DTA can't be reflected as income for accounting purposes. Since all of Fannie's profits go to the Treasury until the company has repaid its debts to the government, capturing a tax credit effectively means taking money from one part of the Treasury (the Internal Revenue Service) to pay another.

"In evaluating the recoverability of Fannie Mae's deferred tax assets, as of December 31, 2012, the company again determined that the factors in favor of maintaining the allowance outweighed the factors in favor of releasing it," Fannie Mae stated in a press release accompanying the earnings.

"Our financial results improved significantly in 2012 and we expect our earnings to remain strong over the next few years," said Timothy J. Mayopoulos, president and CEO.

Common shares of Fannie Mae were up 20% to nearly $1 in early trading Tuesday, though many hedge funds believe it makes more sense to gamble on preferred shares , such as the Fannie Mae "S" shares ( FNMAS ), which were up more than 16% to $3.90. Other commentators, however, believe investors speculating on a payoff in the preferred shares are ignoring political reality. Indeed, in a recent interview, former House Financial Services Chairman Barney Frank " said he had little sympathy with vultures, "looking to find value in beaten down shares" of Fannie Mae or Freddie Mac (FMCC). Freddie Mac securities were showing similar gains to those of Fannie Mae early Tuesday.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FNMA $1.74 0.00%
FMCC $1.61 0.00%
AAPL $94.98 -0.21%
FB $116.77 -0.56%
GOOG $692.36 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs