Fannie 2Q Earnings Up, Outlook Down

Fannie Mae has reported net income of $1.11 billion ($1.10 per share) for the second quarter, up 0.9% from $1.10 billion ($1.09 per share) a year earlier, while revising downward its performance outlook for the year.Net income is reported under generally accepted accounting principles, but Fannie Mae also uses a non-GAAP measure called core business earnings. Fannie reported $1.90 billion ($1.91 per share) in core earnings for the quarter, up 1.9% from $1.86 billion ($1.86 per share) for the same period in 2003. Concerning the revised outlook, chief financial officer Tim Howard pointed to a $278.2 million impairment on debt securities, including manufactured housing securities, "virtually all of which related to the implementation of a new estimation process for the recognition of impairment as defined by our regulator." That, as well as lower purchase volumes and narrower initial purchase spreads, has caused the company to reduce its expectations for growth in core earnings per share from nearly 10% to "the mid-single-digit range," he said. Fannie Mae can be found online at http://www.fanniemae.com.