First Quarter 2014 Results 1

Resource Center: 1-800-732-6643 

Contact: Pete Bakel

202-752-2034

Date: May 8, 2014

Fannie Mae Reports Net Income of $5.3 Billion and 

Comprehensive Income of $5.7 Billion for First Quarter 2014

• Fannie Mae reported net income of $5.3 billion, the company’s ninth consecutive quarterly profit, 

and comprehensive income of $5.7 billion for the first quarter of 2014.

• Fannie Mae’s financial results for the first quarter of 2014 included $4.1 billion in revenue from 

legal settlements relating to private-label securities lawsuits.

• Fannie Mae expects to pay Treasury $5.7 billion in dividends in June 2014. With the expected June 

dividend payment, Fannie Mae will have paid a total of $126.8 billion in dividends to Treasury in 

comparison to $116.1 billion in draw requests since 2008. Dividend payments do not offset prior 

Treasury draws.

• Fannie Mae has funded the mortgage market with more than $4.1 trillion in liquidity since 2009, 

enabling families to buy, refinance, or rent a home.

• Fannie Mae is supporting the housing recovery by providing access to affordable mortgages and by 

helping to build a safer, transparent, and sustainable housing finance system.

WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported net income of $5.3 billion for the first 

quarter of 2014 and comprehensive income of $5.7 billion. The company reported a positive net worth of 

$8.1 billion as of March 31, 2014 and expects to pay $5.7 billion to Treasury in June as a dividend on the 

senior preferred stock in the second quarter of 2014.

Fannie Mae reported the company’s ninth consecutive quarterly profit for the first quarter of 2014. Key 

financial drivers included stable revenues attributable to guaranty fees and declining revenues attributable 

to the company’s retained mortgage portfolio. Net revenues included $4.1 billion in revenue from 

settlement agreements in the first quarter of 2014 relating to private-label mortgage-related securities sold 

to Fannie Mae. In addition, the company benefited from $1.0 billion in credit-related income, offset by fair 

value losses of $1.2 billion as a result of a decrease in longer-term interest rates during the first quarter of 

2014.

Fannie Mae’s net income of $5.3 billion and comprehensive income of $5.7 billion for the first quarter of 

2014 compares to net income of $58.7 billion and comprehensive income of $59.3 billion for the first 

quarter of 2013, which reflected Fannie Mae’s release of a majority of the valuation allowance on its 

deferred tax assets. Fannie Mae’s first quarter 2014 comprehensive income includes a provision for federal 

income taxes of $2.6 billion resulting from the company’s estimated federal income tax expense for the 

first quarter 2014.

Fannie Mae expects to remain profitable for the foreseeable future. While the company expects its annual 

net income to remain strong over the next few years, the company expects its annual net income to be 

substantially lower than its net income for 2013. Net income may vary significantly from period to period.
First Quarter 2014 Results 2

ABOUT FANNIE MAE’S CONSERVATORSHIP

Fannie Mae has operated under the conservatorship of the Federal Housing Finance Agency (“FHFA”) 

since September 6, 2008. Fannie Mae has not received funds from Treasury since the first quarter of 2012. 

The funding the company has received under its senior preferred stock purchase agreement with Treasury 

has provided the company with the capital and liquidity needed to fulfill its mission of providing liquidity 

and support to the nation’s housing finance markets and to avoid a trigger of mandatory receivership under 

the Federal Housing Finance Regulatory Reform Act of 2008. For periods through March 31, 2014, 

Fannie Mae has requested cumulative draws totaling $116.1 billion and paid $121.1 billion in dividends to 

Treasury. Under the senior preferred stock purchase agreement, the payment of dividends cannot be used 

to offset prior draws. As a result, Treasury maintains a liquidation preference of $117.1 billion on the 

company’s senior preferred stock. 

Treasury Draws and Dividend Payments

(1) Treasury draw requests are shown in the period for which requested and do not include the initial $1.0 billion liquidation preference 

of Fannie Mae’s senior preferred stock, for which Fannie Mae did not receive any cash proceeds. The payment of dividends cannot 

be used to offset prior Treasury draws.

(2) Fannie Mae expects to pay a dividend for the second quarter of 2014 calculated based on the company’s net worth of $8.1 billion as 

of March 31, 2014 less a capital reserve amount of $2.4 billion.

(3) Amounts may not sum due to rounding.

In August 2012, the terms governing the company’s dividend obligations on the senior preferred stock 

were amended. The amended senior preferred stock purchase agreement does not allow the company to 

build a capital reserve. Beginning in 2013, the required senior preferred stock dividends each quarter equal 

the amount, if any, by which the company’s net worth as of the end of the immediately preceding fiscal 

quarter exceeds an applicable capital reserve amount. The capital reserve amount is $2.4 billion for each 

quarter of 2014 and will be reduced by $600 million each year until it reaches zero in 2018. 

The amount of remaining funding available to Fannie Mae under the senior preferred stock purchase 

agreement with Treasury is currently $117.6 billion.

Fannie Mae is not permitted to redeem the senior preferred stock prior to the termination of Treasury’s 

funding commitment under the senior preferred stock purchase agreement. The limited circumstances 

under which Treasury’s funding commitment will terminate are described in “Business—Conservatorship 

and Treasury Agreements” in the company’s annual report on Form 10-K for the year ended December 31, 

2013.
First Quarter 2014 Results 3

PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET

Fannie Mae provided more than $4.1 trillion in liquidity to the mortgage market from January 1, 2009 

through March 31, 2014 through its purchases and guarantees of loans, which enabled borrowers to 

complete 12.5 million mortgage refinancings and 3.9 million home purchases, and provided financing for 

2.3 million units of multifamily housing. 

The company remained the largest single issuer of single-family mortgage-related securities in the 

secondary market in the first quarter of 2014, with an estimated market share of new single-family 

mortgage-related securities issuances of 41 percent in the first quarter of 2014, compared with 46 percent 

in the fourth quarter of 2013 and 48 percent in the first quarter of 2013.

Fannie Mae also remained a constant source of liquidity in the multifamily market. As of December 31, 

2013 (the latest date for which information is available), the company owned or guaranteed approximately 

20 percent of the outstanding debt on multifamily properties. 
First Quarter 2014 Results 4

HELPING TO BUILD A SUSTAINABLE HOUSING FINANCE SYSTEM

In addition to continuing to provide liquidity and support to the mortgage market, Fannie Mae has devoted 

significant resources toward helping to build a sustainable housing finance system for the future, including 

pursuing the strategic goals identified by its conservator, FHFA. These strategic goals are: build a new 

infrastructure for the secondary mortgage market; gradually contract the company’s dominant presence in 

the marketplace while simplifying and shrinking its operations; and maintain foreclosure prevention 

activities and credit availability for new and refinanced mortgages.

CREDIT QUALITY

New Single-Family Book of Business: While continuing to make it possible for families to purchase, 

refinance, or rent a home, Fannie Mae has established responsible credit standards. Since 2009, Fannie 

Mae has seen the effect of actions it took, beginning in 2008, to significantly strengthen its underwriting 

and eligibility standards and change its pricing to promote sustainable homeownership and stability in the 

housing market. Single-family conventional loans acquired by Fannie Mae in the first three months of 

2014 had a weighted average borrower FICO credit score at origination of 741 and a weighted average 

original loan-to-value (“LTV”) ratio of 77 percent.

As of March 31, 2014, 78 percent of Fannie Mae’s single-family conventional guaranty book of business 

consisted of loans it had purchased or guaranteed since the beginning of 2009. Given their strong credit 

risk profile and based on their performance so far, the company expects that in the aggregate these loans 

will be profitable over their lifetime, meaning the company’s guaranty fee income on these loans will 

exceed the company’s credit losses and administrative costs for them.

As of March 31, 2014, Fannie Mae’s new book of business (loans purchased or guaranteed since 2009) 

was comprised of 25 percent of home purchase mortgages and 75 percent of loan refinancings. 

Refinancings included 14 percent of loans acquired through the Home Affordable Refinance Program 

(“HARP”), 11 percent of loans through Fannie Mae’s Refi PlusTM initiative (excluding HARP), and 50 

percent other refinancings (excluding Refi Plus refinancing). Our Refi Plus initiative, which started in 

April 2009 and includes HARP, provides expanded refinance opportunities for eligible Fannie Mae 

borrowers, and may involve the refinance of existing Fannie Mae loans with high loan-to-value ratios, 

including loans with loan-to-value ratios in excess of 100 percent.
First Quarter 2014 Results 5

REFINANCING INITIATIVES

Through the company’s Refi Plus initiative, which offers refinancing flexibility to eligible Fannie Mae 

borrowers and includes HARP, the company acquired approximately 97,000 loans in the first quarter of 

2014. Some borrowers’ monthly payments increased as they took advantage of the ability to refinance 

through Refi Plus to reduce the term of their loan, to switch from an adjustable-rate mortgage to a fixedrate mortgage, or to switch from an interest-only mortgage to a fully amortizing mortgage. Even taking 

these into account, refinancings delivered to Fannie Mae through Refi Plus in the first quarter of 2014

reduced borrowers’ monthly mortgage payments by an average of $157.

Fannie Mae’s single-family serious delinquency rate has declined each quarter since the first quarter of 

2010, and was 2.19 percent as of March 31, 2014, compared with 5.47 percent as of March 31, 2010. This 

decrease is the result of home retention solutions, foreclosure alternatives, and completed foreclosures, as 

well as the company’s acquisition of loans with stronger credit profiles since the beginning of 2009. 
First Quarter 2014 Results 6

HOME RETENTION SOLUTIONS AND FORECLOSURE ALTERNATIVES

To reduce the credit losses Fannie Mae ultimately incurs on its legacy book of business, the company has 

been focusing its efforts on several strategies, including reducing defaults by offering home retention 

solutions, such as loan modifications. Fannie Mae completed more than 36,000 loan modifications during 

the first quarter of 2014, bringing the total number of loan modifications the company has completed since 

January 1, 2009 to approximately 1.1 million.

Fannie Mae views foreclosure as a last resort. For homeowners and communities in need, the company 

offers alternatives to foreclosure. We provided approximately 1.6 million loan workouts from the 

beginning of 2009 through March 31, 2014, enabling borrowers to avoid foreclosure. In dealing with 

homeowners in distress, the company first seeks home retention solutions, which enable borrowers to stay 

in their homes, before turning to foreclosure alternatives. When there is no viable home retention solution 

or foreclosure alternative that can be applied, the company seeks to move to foreclosure expeditiously in 

an effort to minimize prolonged delinquencies that can hurt local home values and destabilize 

communities.

For the Three Months Ended For the Year Ended December 31,

March 31, 2014 2013 2012 2011

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

(Dollars in millions)

Home retention strategies:

Modifications $ 6,191 36,044 $ 28,801 160,007 $ 30,640 163,412 $ 42,793 213,340

Repayment plans and

forbearances completed 296 2,255 1,594 12,022 3,298 23,329 5,042 35,318

Total home retention

strategies 6,487 38,299 30,395 172,029 33,938 186,741 47,835 248,658

Foreclosure alternatives:

Short sales 1,374 6,804 9,786 46,570 15,916 73,528 15,412 70,275

Deeds-in-lieu of foreclosure 528 3,323 2,504 15,379 2,590 15,204 1,679 9,558

Total foreclosure alternatives 1,902 10,127 12,290 61,949 18,506 88,732 17,091 79,833

Total loan workouts $ 8,389 48,426 $ 42,685 233,978 $ 52,444 275,473 $ 64,926 328,491

Loan workouts as a percentage of

single-family guaranty book of

business 1.17% 1.10% 1.48% 1.33% 1.85% 1.57% 2.29% 1.85%
First Quarter 2014 Results 7

FORECLOSURES AND REO

Fannie Mae acquired 31,896 single-family REO properties, primarily through foreclosure, in the first 

quarter of 2014, compared with 32,208 in the fourth quarter of 2013. As of March 31, 2014, the 

company’s inventory of single-family REO properties was 102,398, compared with 103,229 as of 

December 31, 2013. The carrying value of the company’s single-family REO was $10.5 billion as of 

March 31, 2014.

The company’s single-family foreclosure rate was 0.73 percent for the first three months of 2014. This 

reflects the annualized total number of single-family properties acquired through foreclosure or deeds-inlieu of foreclosure as a percentage of the total number of loans in Fannie Mae’s single-family guaranty 

book of business.

For the Three Months Ended March 31,

2014 2013

Single-family foreclosed properties (number of properties):

Beginning of period inventory of single-family foreclosed properties (REO) 103,229 105,666

Total properties acquired through foreclosure 31,896 38,717

Dispositions of REO (32,727) (42,934)

End of period inventory of single-family foreclosed properties (REO) 102,398 101,449

Carrying value of single-family foreclosed properties (dollars in millions) $ 10,492 $ 9,263

Single-family foreclosure rate 0.73 % 0.89 %

Fannie Mae’s financial data for the first quarter of 2014 are available in the accompanying Appendix; 

however, investors and interested parties should read the company’s First Quarter 2014 Form 10-Q, which 

was filed today with the Securities and Exchange Commission and is available on Fannie Mae’s Web site, 

www.fanniemae.com. The company provides further discussion of its financial results and condition, 

credit performance, fair value balance sheets, and other matters in its First Quarter 2014 Form 10-Q. 

Additional information about the company’s credit performance, the characteristics of its guaranty book of 

business, its foreclosure-prevention efforts, and other measures is contained in the “2014 First Quarter 

Credit Supplement” at www.fanniemae.com.

# # #

In this release and the accompanying Appendix, the company has presented a number of estimates, forecasts, expectations, and other forward-looking 

statements regarding the company’s future income and other financial results, including its profitability; the company’s future revenues; the profitability of its 

loans; its future dividend payments to Treasury; the impact of the company’s actions to reduce credit losses; and the future fair value of the company’s trading 

securities and derivatives. These estimates, forecasts, expectations, and statements are forward looking statements based on the company’s current assumptions 

regarding numerous factors, including future home prices and the future performance of its loans. Actual results and future projections, could be materially 

different from what is set forth in the forward-looking statements as a result of home price changes, interest rate changes, unemployment rates, other 

macroeconomic and housing market variables, the company’s future serious delinquency rates, government policy, credit availability, borrower behavior, 

including increases in the number of underwater borrowers who strategically default on their mortgage loan, the volume of loans it modifies, the nature, 

volume and effectiveness of its loss mitigation strategies and activities, significant changes in modification and foreclosure activity, management of its real 

estate owned inventory and pursuit of contractual remedies, changes in the fair value of its assets and liabilities, impairments of its assets, future legislative or 

regulatory requirements that have a significant impact on the company’s business such as a requirement that the company implement a principal forgiveness 

program or the enactment of housing finance reform legislation, future updates to the company’s models relating to loss reserves, including the assumptions 

used by these models, changes in generally accepted accounting principles, changes to the company’s accounting policies, failures by its mortgage sellerservicers to fulfill their repurchase obligations to it, effects from activities the company takes to support the mortgage market and help borrowers, the 

conservatorship and its effect on the company’s business, the investment by Treasury and its effect on the company’s business, the uncertainty of the company’s 

future, the company’s future guaranty fee pricing and the impact of that pricing on the company’s competitive environment, challenges the company faces in 

retaining and hiring qualified employees, the deteriorated credit performance of many loans in the company’s guaranty book of business, a decrease in the 

company’s credit ratings, defaults by one or more institutional counterparties, resolution or settlement agreements the company may enter into with its 

counterparties, operational control weaknesses, changes in the fiscal and monetary policies of the Federal Reserve, including the effect of the tapering of its 
First Quarter 2014 Results 8

program of purchasing mortgage-related securities and any future sales of such securities, changes in the structure and regulation of the financial services 

industry, the company’s ability to access the debt markets, disruptions in the housing, credit, and stock markets, government investigations and litigation, the 

performance of the company’s servicers, conditions in the foreclosure environment, natural or other disasters, and many other factors, including those 

discussed in the “Risk Factors” section of and elsewhere in the company’s annual report on Form 10-K for the year ended December 31, 2013 and the 

company’s quarterly report on Form 10-Q for the quarter ended March 31, 2014, and elsewhere in this release. 

Fannie Mae provides Web site addresses in its news releases solely for readers’ information. Other content or information appearing on these Web sites is not 

part of this release. 

Fannie Mae enables people to buy, refinance, or rent a home.

Visit us at www.fanniemae.com/progress

Follow us on Twitter: http://twitter.com/FannieMae
First Quarter 2014 Results 9

APPENDIX

SUMMARY OF FIRST QUARTER 2014 RESULTS

Fannie Mae reported net income of $5.3 billion for the first quarter of 2014, compared with net income of 

$58.7 billion for the first quarter of 2013. Fannie Mae reported comprehensive income of $5.7 billion for 

the first quarter of 2014, compared with comprehensive income of $59.3 billion for the first quarter of 

2013.

(Dollars in millions) 1Q14 4Q13 Variance 1Q14 1Q13 Variance

Net interest income $ 4,738 $ 4,851 $ (113) $ 4,738 $ 6,304 $ (1,566)

Fee and other income 4,355 2,136 2,219 4,355 568 3,787

Net revenues 9,093 6,987 2,106 9,093 6,872 2,221

Investment gains, net 146 135 11 146 118 28

Net other-than-temporary impairments (51) (22) (29) (51) (9) (42)

Fair value (losses) gains, net (1,190) 961 (2,151) (1,190) 834 (2,024)

Administrative expenses (672) (632) (40) (672) (641) (31)

Credit-related income

Benefit for credit losses 774 — 774 774 957 (183)

Foreclosed property income 262 1,082 (820) 262 260 2

Total credit-related income 1,036 1,082 (46) 1,036 1,217 (181)

Other non-interest expenses(1) (453) (237) (216) (453) (277) (176)

Net (losses) gains and (expenses) income (1,184) 1,287 (2,471) (1,184) 1,242 (2,426)

Income before federal income taxes 7,909 8,274 (365) 7,909 8,114 (205)

(Provision) benefit for federal income taxes (2,584) (1,816) (768) (2,584) 50,571 (53,155)

Net income 5,325 6,458 (1,133) 5,325 58,685 (53,360)

Less: Net income attributable to noncontrolling interest — (1) 1 — — —

Net income attributable to Fannie Mae $ 5,325 $ 6,457 $ (1,132) $ 5,325 $ 58,685 $ (53,360)

Total comprehensive income attributable to Fannie Mae $ 5,697 $ 6,590 $ (893) $ 5,697 $ 59,339 $ (53,642)

Dividends available for distribution to senior preferred

stockholder $ (5,692) $ (7,191) $ 1,499 $ (5,692) $ (59,368) $ 53,676

(1) Consists of debt extinguishments (losses) gains, net, TCCA fees and other expenses, net.

Net Revenues were $9.1 billion for the first quarter of 2014, compared with $7.0 billion for the fourth 

quarter of 2013. Net interest income, which includes guaranty fee revenue, was $4.7 billion for the first 

quarter of 2014, compared with $4.9 billion for the fourth quarter of 2013. The increase in net revenues 

compared with the fourth quarter of 2013 was driven primarily by an increase in income from settlement 

agreements resolving certain lawsuits relating to private-label mortgage-related securities sold to Fannie 

Mae. The decrease in net interest income compared with the fourth quarter of 2013 was due to lower 

interest income from portfolio assets due to a decline in the company’s retained portfolio, partially offset 

by lower interest expense on funding debt and higher guaranty fees. As Fannie Mae reduces the size of its 

retained mortgage portfolio in compliance with the terms of the senior preferred stock purchase 

agreement, revenues generated by its retained mortgage portfolio assets also will decrease. As a result of 

both the shrinking of the company’s retained mortgage portfolio and the impact of guaranty fee increases, 

Fannie Mae expects that, in the near future, guaranty fees will become the primary source of the 

company’s revenues.
First Quarter 2014 Results 10

Credit-Related Income, which consists of recognition of a benefit for credit losses and foreclosed 

property income, was $1.0 billion in the first quarter of 2014, compared with $1.1 billion in the fourth 

quarter of 2013. 

Total Loss Reserves, which reflect the company’s estimate of the probable losses the company has 

incurred in its guaranty book of business, including concessions it granted borrowers upon modification of 

their loans, were $45.3 billion as of March 31, 2014, compared with $47.3 billion as of December 31, 

2013. The total loss reserve coverage to total nonaccrual loans was 60 percent as of March 31, 2014, 

compared with 57 percent as of December 31, 2013.
First Quarter 2014 Results 11

Net Fair Value Losses were $1.2 billion in the first quarter of 2014, compared with gains of $1.0 billion

in the fourth quarter of 2013. First quarter 2014 fair value losses were driven primarily by losses on risk 

management derivatives as a result of a decrease in longer-term interest rates compared with fair value 

gains in the fourth quarter of 2013, which were driven by gains on risk management derivatives as a result 

of an increase in longer-term interest rates. The estimated fair value of the company’s trading securities 

and derivatives may fluctuate substantially from period to period because of changes in interest rates, 

credit spreads, and interest rate volatility, as well as activity related to these financial instruments.

BUSINESS SEGMENT RESULTS

The business groups running Fannie Mae’s three reporting segments – its Single-Family business, its 

Multifamily business, and its Capital Markets group – engage in complementary business activities in 

pursuing the company’s mission of providing liquidity, stability, and affordability to the U.S. housing 

market. The company’s Single-Family and Multifamily businesses work with Fannie Mae’s lender 

customers, who deliver mortgage loans that the company acquires and securitizes into Fannie Mae MBS. 

The Capital Markets group manages the company’s investment activity in mortgage-related assets and 

other interest-earning non-mortgage investments, funding investments in mortgage-related assets 

primarily with proceeds received from the issuance of Fannie Mae debt securities in the domestic and 

international capital markets. The Capital Markets group also provides liquidity to the mortgage market 

through short-term financing and other activities.

Single-Family business had net income of $2.1 billion in the first quarter of 2014, similar to $2.1 billion

in net income reported in the fourth quarter of 2013. Single-Family net income for the first quarter of 2014 

was driven primarily by guaranty fee income. The Single-Family guaranty book of business was $2.88 

trillion as of March 31, 2014 and $2.89 trillion as of December 31, 2013. Single-Family guaranty fee 

income was $2.9 billion in the first quarter of 2014 and $2.8 billion in the fourth quarter of 2013.

Multifamily business had net income of $330 million in the first quarter of 2014, compared with $706 

million in the fourth quarter of 2013. The decrease in net income in the first quarter of 2014 compared 

with the fourth quarter of 2013 was due primarily to a decrease in credit-related income and a decrease in 

gains on the sale of partnership investments. Multifamily recorded credit-related income of $34 million in 

the first quarter of 2014, compared with credit-related income of $234 million in the fourth quarter of 
First Quarter 2014 Results 12

2013. This decline was driven by greater improvement in property valuations in the fourth quarter of 2013 

compared with the first quarter of 2014. The Multifamily guaranty book of business was $199.0 billion as 

of March 31, 2014, compared with $200.6 billion as of December 31, 2013. Multifamily guaranty fee 

income was $311 million for the first quarter of 2014 and $315 million for the fourth quarter of 2013.

Capital Markets group had net income of $3.8 billion in the first quarter of 2014, compared with $4.5 

billion in the fourth quarter of 2013. The decrease in net income in the first quarter of 2014 compared with 

the fourth quarter of 2013 was due primarily to fair value losses, offset by an increase in fee and other 

income as a result of settlement agreements related to private-label mortgage-related securities. Fair value 

losses for the first quarter of 2014 were $1.3 billion, compared with gains of $1.1 billion in the fourth 

quarter of 2013. Capital Markets’ net interest income for the first quarter of 2014 was $1.8 billion, 

compared with $2.0 billion in the fourth quarter of 2013. The Capital Markets retained mortgage portfolio 

balance decreased to $467.7 billion as of March 31, 2014, compared with $490.7 billion as of 

December 31, 2013, resulting from purchases of $34.4 billion and liquidations and sales of $57.4 billion

during the quarter.

(Dollars in millions) 1Q14 4Q13 Variance 1Q14 1Q13 Variance

Single-Family Segment:

Guaranty fee income $ 2,870 $ 2,830 $ 40 $ 2,870 $ 2,375 $ 495

Credit-related income 1,002 848 154 1,002 1,034 (32)

Other (836) (877) 41 (836) (88) (748)

Income before federal income taxes 3,036 2,801 235 3,036 3,321 (285)

(Provision) benefit for federal income taxes (927) (667) (260) (927) 31,578 (32,505)

Net income $ 2,109 $ 2,134 $ (25) $ 2,109 $ 34,899 $ (32,790)

Multifamily Segment:

Guaranty fee income $ 311 $ 315 $ (4) $ 311 $ 291 $ 20

Credit-related income 34 234 (200) 34 183 (149)

Other (24) 203 (227) (24) 37 (61)

Income before federal income taxes 321 752 (431) 321 511 (190)

Benefit (provision) for federal income taxes 9 (46) 55 9 7,988 (7,979)

Net income $ 330 $ 706 $ (376) $ 330 $ 8,499 $ (8,169)

Capital Markets Segment:

Net interest income $ 1,830 $ 2,031 $ (201) $ 1,830 $ 2,742 $ (912)

Investment gains, net 1,336 1,074 262 1,336 1,349 (13)

Fair value (losses) gains, net (1,337) 1,061 (2,398) (1,337) 875 (2,212)

Other 3,672 1,461 2,211 3,672 (86) 3,758

Income before federal income taxes 5,501 5,627 (126) 5,501 4,880 621

(Provision) benefit for federal income taxes (1,666) (1,103) (563) (1,666) 11,005 (12,671)

Net income $ 3,835 $ 4,524 $ (689) $ 3,835 $ 15,885 $ (12,050)
First Quarter 2014 Results 13

ANNEX I

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions, except share amounts)

As of

March 31,

2014

December 31,

2013

ASSETS

Cash and cash equivalents $ 14,056 $ 19,228

Restricted cash (includes $20,550 and $23,982, respectively, related to consolidated trusts) 24,583 28,995

Federal funds sold and securities purchased under agreements to resell or similar arrangements 12,750 38,975

Investments in securities:

Trading, at fair value 31,795 30,768

Available-for-sale, at fair value (includes $949 and $998, respectively, related to consolidated trusts) 37,128 38,171

Total investments in securities 68,923 68,939

Mortgage loans:

Loans held for sale, at lower of cost or fair value (includes $201 and $31, respectively, related to consolidated trusts) 1,494 380

Loans held for investment, at amortized cost:

Of Fannie Mae 290,903 300,159

Of consolidated trusts (includes $14,637 and $14,268 respectively, at fair value and loans pledged as collateral that may

be sold or repledged of $415 and $442, respectively) 2,767,530 2,769,547

Total loans held for investment 3,058,433 3,069,706

Allowance for loan losses (41,911) (43,846)

Total loans held for investment, net of allowance 3,016,522 3,025,860

Total mortgage loans 3,018,016 3,026,240

Accrued interest receivable, net (includes $7,463 and $7,271, respectively, related to consolidated trusts) 8,459 8,319

Acquired property, net 11,960 11,621

Deferred tax assets, net 45,366 47,560

Other assets (includes cash pledged as collateral of $1,291 and $1,590, respectively) 22,392 20,231

Total assets $ 3,226,505 $ 3,270,108

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,262 and $8,276, respectively, related to consolidated trusts) $ 10,681 $ 10,553

Federal funds purchased and securities sold under agreements to repurchase 25 —

Debt:

Of Fannie Mae (includes $1,775 and $1,308, respectively, at fair value) 481,853 529,434

Of consolidated trusts (includes $15,373 and $14,976, respectively, at fair value) 2,712,842 2,705,089

Other liabilities (includes $444 and $488, respectively, related to consolidated trusts) 13,012 15,441

Total liabilities 3,218,413 3,260,517

Commitments and contingencies — —

Fannie Mae stockholders’ equity:

Senior preferred stock, 1,000,000 shares issued and outstanding 117,149 117,149

Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding 19,130 19,130

Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 1,158,080,657 shares

outstanding 687 687

Accumulated deficit (123,098) (121,227)

Accumulated other comprehensive income 1,575 1,203

Treasury stock, at cost, 150,682,046 shares (7,401) (7,401)

Total Fannie Mae stockholders’ equity 8,042 9,541

Noncontrolling interest 50 50

Total equity 8,092 9,591

Total liabilities and equity $ 3,226,505 $ 3,270,108

See Notes to Condensed Consolidated Financial Statements in the First Quarter 2014 Form 10-Q
First Quarter 2014 Results 14

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and Comprehensive Income — (Unaudited)

(Dollars and shares in millions, except per share amounts)

For the Three Months

Ended March 31,

2014 2013

Interest income:

Trading securities $ 127 $ 226

Available-for-sale securities 440 673

Mortgage loans (includes $25,954 and $25,394, respectively, related to consolidated trusts) 28,588 29,224

Other 24 57

Total interest income 29,179 30,180

Interest expense:

Short-term debt 20 43

Long-term debt (includes $22,076 and $21,158, respectively, related to consolidated trusts) 24,421 23,833

Total interest expense 24,441 23,876

Net interest income 4,738 6,304

Benefit for credit losses 774 957

Net interest income after benefit for credit losses 5,512 7,261

Investment gains, net 146 118

Net other-than-temporary impairments (51) (9)

Fair value (losses) gains, net (1,190) 834

Debt extinguishment losses, net — (23)

Fee and other income 4,355 568

Non-interest income 3,260 1,488

Administrative expenses:

Salaries and employee benefits 325 317

Professional services 242 223

Occupancy expenses 50 46

Other administrative expenses 55 55

Total administrative expenses 672 641

Foreclosed property income (262) (260)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees 322 186

Other expenses, net 131 68

Total expenses 863 635

Income before federal income taxes 7,909 8,114

(Provision) benefit for federal income taxes (2,584) 50,571

Net income 5,325 58,685

Other comprehensive income:

Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes 372 648

Other — 6

Total other comprehensive income 372 654

Total comprehensive income attributable to Fannie Mae $ 5,697 $ 59,339

Net income attributable to Fannie Mae 5,325 58,685

Dividends available for distribution to senior preferred stockholder (5,692) (59,368)

Net loss attributable to common stockholders $ (367) $ (683)

Loss per share: basic and diluted $ (0.06) $ (0.12)

Weighted-average common shares outstanding: basic and diluted 5,762 5,762

See Notes to Condensed Consolidated Financial Statements in the First Quarter 2014 Form 10-Q
First Quarter 2014 Results 15

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows— (Unaudited)

(Dollars in millions)

For the Three Months

Ended March 31,

2014 2013

Net cash used in operating activities $ (1,321) $ (6,420)

Cash flows provided by investing activities:

Purchases of trading securities held for investment — (2,021)

Proceeds from maturities and paydowns of trading securities held for investment 333 659

Proceeds from sales of trading securities held for investment 486 781

Proceeds from maturities and paydowns of available-for-sale securities 1,446 2,689

Proceeds from sales of available-for-sale securities 35 270

Purchases of loans held for investment (24,486) (60,504)

Proceeds from repayments and sales of loans acquired as held for investment of Fannie Mae 6,217 18,470

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 80,610 201,345

Net change in restricted cash 4,412 10,688

Advances to lenders (20,501) (38,471)

Proceeds from disposition of acquired property and preforeclosure sales 6,329 13,057

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements 26,225 (46,850)

Other, net (385) 7

Net cash provided by investing activities 80,721 100,120

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae 69,086 155,561

Payments to redeem debt of Fannie Mae (117,058) (141,422)

Proceeds from issuance of debt of consolidated trusts 58,216 122,408

Payments to redeem debt of consolidated trusts (87,643) (223,943)

Payments of cash dividends on senior preferred stock to Treasury (7,191) (4,224)

Other, net 18 216

Net cash used in financing activities (84,572) (91,404)

Net (decrease) increase in cash and cash equivalents (5,172) 2,296

Cash and cash equivalents at beginning of period 19,228 21,117

Cash and cash equivalents at end of period $ 14,056 $ 23,413

Cash paid during the period for:

Interest $ 26,567 $ 27,824

Income taxes 425 —

See Notes to Condensed Consolidated Financial Statements in the First Quarter 2014 Form 10-Q