Third Quarter 2013 Results 1

Resource Center: 1-800-732-6643 

Contact: Pete Bakel

202-752-2034

Date: November 7, 2013

Fannie Mae Reports Net Income of $8.7 Billion and 

Comprehensive Income of $8.6 Billion for Third Quarter 2013

• Fannie Mae reported net income of $8.7 billion, the company’s seventh consecutive quarterly 

profit, and comprehensive income of $8.6 billion for the third quarter of 2013. 

• Fannie Mae will pay taxpayers $8.6 billion in dividends in December 2013. After the December 

dividend payment, Fannie Mae will have paid an aggregate of approximately $114 billion in 

dividends to Treasury. Senior preferred stock outstanding and held by Treasury remained at $117.1 

billion at September 30, 2013, as dividend payments do not offset Treasury draws. 

• Fannie Mae has funded the mortgage market with approximately $3.9 trillion in liquidity since 

2009, enabling families to buy, refinance, or rent a home.

• Fannie Mae continues to support the housing recovery and contribute to building a sustainable 

housing finance system for the future.

WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported net income of $8.7 billion for the third 

quarter of 2013, compared with net income of $1.8 billion for the third quarter of 2012. Fannie Mae’s net 

income for the third quarter of 2013 was the company’s seventh consecutive quarterly profit. Fannie Mae 

reported comprehensive income of $8.6 billion for the third quarter of 2013, compared with 

comprehensive income of $2.6 billion for the third quarter of 2012. Fannie Mae reported a positive net 

worth of $11.6 billion as of September 30, 2013 and will pay $8.6 billion to taxpayers as a dividend on the 

senior preferred stock. 

Fannie Mae’s strong third quarter results were driven primarily by continued stable revenues and creditrelated income. Credit-related income was positively affected by an increase in home prices in the quarter, 

which resulted in a reduction in the company’s loss reserves; the recognition of compensatory fees 

received in connection with the Bank of America compensatory fee agreement; and a decline in the 

number of delinquent loans in the company’s single-family guaranty book of business. Year-over-year 

improvement in net income was due primarily to credit-related income in the third quarter of 2013 

compared with credit-related expense in the third quarter of 2012, and fair value gains in the third quarter 

of 2013 compared with fair value losses in the third quarter of 2012.

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

earnings to remain strong over the next few years, its earnings may vary significantly from quarter to 

quarter and year to year due to many different factors, such as changes in interest rates or home prices. 
Third Quarter 2013 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 the U.S. 

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 

September 30, 2013, Fannie Mae has requested cumulative draws totaling $116.1 billion and paid $105.3 

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) The company’s dividend for the fourth quarter of 2013 is calculated based on the company’s net worth of $11.6 billion as of 

September 30, 2013 less the applicable capital reserve amount of $3.0 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 preceding quarter exceeds an 

applicable capital reserve amount. The applicable capital reserve amount is $3.0 billion for each quarter of 

2013 and will be reduced by $600 million annually 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, 

2012.
Third Quarter 2013 Results 3

PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET

Fannie Mae provided approximately $3.9 trillion in liquidity to the mortgage market from January 1, 2009 

through September 30, 2013 through its purchases and guarantees of loans, which enabled borrowers to 

complete 12.0 million mortgage refinancings and 3.4 million home purchases, and provided financing for 

2.0 million units of multifamily housing.

Fannie Mae’s market share remained large in the first nine months of 2013 as the company has continued 

to meet the needs of the single-family mortgage market in the absence of substantial private capital. The 

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

market in the third quarter of 2013, with an estimated market share of new single-family mortgage-related 

securities issuances of 48 percent, compared with 45 percent in the second quarter of 2013 and 52 percent 

in the third quarter of 2012.

Fannie Mae also remained a constant source of liquidity in the multifamily market. As of June 30, 2013 

(the latest date for which information is available), the company owned or guaranteed approximately 21

percent of the outstanding debt on multifamily properties. 
Third Quarter 2013 Results 4

HELPING TO BUILD A NEW 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 new 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 making it possible for families to purchase, refinance, or 

rent a home, Fannie Mae has established responsible credit standards to protect homeowners as well as 

taxpayers. 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. As of September 30, 2013, 75 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. While Fannie Mae does not yet know how the single-family loans 

the company has acquired since January 1, 2009 will ultimately perform, 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 fee income on these loans will exceed the 

company’s credit losses and administrative costs for them.

Single-family conventional loans acquired by Fannie Mae in the first nine months of 2013 had a weighted 

average borrower FICO credit score at origination of 754 and a weighted average original loan-to-value 

(“LTV”) ratio of 75 percent.
Third Quarter 2013 Results 5

Loss Reserves: The company’s total loss reserves decreased to $48.4 billion as of September 30, 2013 

from $53.1 billion as of June 30, 2013 and $62.6 billion as of December 31, 2012. The company’s total 

loss reserves peaked at $76.9 billion as of December 31, 2011.

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

2010, and was 2.55 percent as of September 30, 2013, compared with 5.47 percent as of March 31, 2010. 

This decrease is primarily 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.
Third Quarter 2013 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 37,000 loan modifications during 

the third quarter of 2013, bringing the total number of loan modifications the company has completed 

since January 1, 2009 to approximately 1 million.

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

offers alternatives to foreclosure. These solutions have enabled 1.3 million borrowers to avoid foreclosure 

since 2009. 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 Nine Months Ended For the Year Ended December 31

September 30, 2013 2012 2011 2010

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 $ 21,822 120,848 $ 30,640 163,412 $ 42,793 213,340 $ 82,826 403,506

Repayment plans and

forbearances completed 1,331 10,128 3,298 23,329 5,042 35,318 4,385 31,579

HomeSaver Advance first-lien

loans — — — — — — 688 5,191

Total home retention

strategies 23,153 130,976 33,938 186,741 47,835 248,658 87,899 440,276

Foreclosure alternatives:

Short sales 7,860 37,247 15,916 73,528 15,412 70,275 15,899 69,634

Deeds-in-lieu of foreclosure 1,917 11,681 2,590 15,204 1,679 9,558 1,053 5,757

Total foreclosure alternatives 9,777 48,928 18,506 88,732 17,091 79,833 16,952 75,391

Total loan workouts $ 32,930 179,904 $ 52,444 275,473 $ 64,926 328,491 $ 104,851 515,667

Loan workouts as a percentage of

single-family guaranty book of

business 1.53% 1.36% 1.85% 1.57% 2.29% 1.85% 3.66% 2.87%

REFINANCING INITIATIVES

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

borrowers and includes HARP, the company acquired approximately 236,000 loans in the third quarter of 

2013. 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 third quarter of 2013 

reduced borrowers’ monthly mortgage payments by an average of $210.
Third Quarter 2013 Results 7

FORECLOSURES AND REO

Fannie Mae acquired 37,353 single-family REO properties, primarily through foreclosure, in the third 

quarter of 2013, compared with 36,106 in the second quarter of 2013. During the third quarter of 2013, 

REO dispositions slowed due to overall market conditions, resulting in an increase in inventory of singlefamily foreclosed properties as compared with the second quarter of 2013. As of September 30, 2013, the 

company’s inventory of single-family REO properties was 100,941, compared with 96,920 as of June 30, 

2013. The carrying value of the company’s single-family REO was $10.0 billion as of September 30, 

2013.

The company’s single-family foreclosure rate was 0.85 percent for the first nine months of 2013. 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 Nine Months Ended September 30,

2013 2012

Single-family foreclosed properties (number of properties):

Beginning of period inventory of single-family foreclosed properties (REO) 105,666 118,528

Total properties acquired through foreclosure 112,176 133,367

Dispositions of REO (116,901) (144,670)

End of period inventory of single-family foreclosed properties (REO) 100,941 107,225

Carrying value of single-family foreclosed properties (dollars in millions) $ 10,036 $ 9,302

Single-family foreclosure rate 0.85 % 1.01 %

Fannie Mae’s financial data for the third quarter of 2013 are available in the accompanying Appendix; 

however, investors and interested parties should read the company’s Third Quarter 2013 Form 10-Q, 

which was filed today with the Securities and Exchange Commission and is available on Fannie Mae’s 
Third Quarter 2013 Results 8

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 Third Quarter 2013 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 “2013 Third 

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 financial results, including its profitability; the company’s future loss reserves; 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, 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 seller-servicers 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 

structure and regulation of the financial services industry, limitations on 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, 2012 and the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2013, 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
Third Quarter 2013 Results 9

APPENDIX

SUMMARY OF THIRD QUARTER 2013 RESULTS

Fannie Mae reported net income of $8.7 billion for the third quarter of 2013, compared with net income of 

$1.8 billion for the third quarter of 2012. Fannie Mae reported comprehensive income of $8.6 billion for 

the third quarter of 2013, compared with comprehensive income of $2.6 billion for the third quarter of 

2012.

(Dollars in millions) 3Q13 2Q13 Variance 3Q13 3Q12 Variance

Net interest income $ 5,582 $ 5,667 $ (85) $ 5,582 $ 5,317 $ 265

Fee and other income 741 485 256 741 378 363

Net revenues 6,323 6,152 171 6,323 5,695 628

Investment gains, net 648 290 358 648 134 514

Net other-than-temporary impairments (27) (6) (21) (27) (38) 11

Fair value gains (losses), net 335 829 (494) 335 (1,020) 1,355

Administrative expenses (646) (626) (20) (646) (588) (58)

Credit-related income (expense)

Benefit (provision) for credit losses 2,609 5,383 (2,774) 2,609 (2,079) 4,688

Foreclosed property income 1,165 332 833 1,165 48 1,117

Total credit-related income (expense) 3,774 5,715 (1,941) 3,774 (2,031) 5,805

Other non-interest expenses (308) (274) (34) (308) (339) 31

Net gains (losses) and income (expenses) 3,776 5,928 (2,152) 3,776 (3,882) 7,658

Income before federal income taxes 10,099 12,080 (1,981) 10,099 1,813 8,286

Provision for federal income taxes (1,355) (1,985) 630 (1,355) — (1,355)

Net income 8,744 10,095 (1,351) 8,744 1,813 6,931

Less: Net (income) loss attributable to noncontrolling

interest (7) (11) 4 (7) 8 (15)

Net income attributable to Fannie Mae $ 8,737 $ 10,084 $ (1,347) $ 8,737 $ 1,821 $ 6,916

Total comprehensive income attributable to Fannie Mae $ 8,603 $ 10,250 $ (1,647) $ 8,603 $ 2,567 $ 6,036

Preferred stock dividends $ (8,617) $ (10,243) $ 1,626 $ (8,617) $ (2,929) $ (5,688)

Net revenues were $6.3 billion for the third quarter of 2013, compared with $6.2 billion for the second 

quarter of 2013. Net interest income was $5.6 billion, compared with $5.7 billion for the second quarter of 

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

interest income from portfolio assets due to a decline in the company’s retained portfolio. 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 a number of years, guaranty fees will become its primary source 

of revenues.
Third Quarter 2013 Results 10

Credit-related income, which consists of recognition of a benefit for credit losses and foreclosed 

property income, was $3.8 billion in the third quarter of 2013, compared with $5.7 billion in the second 

quarter of 2013. Credit-related income in both the second and third quarters of 2013 was positively 

affected by an increase in home prices and a decline in the number of delinquent loans in the company’s 

single-family guaranty book of business during the quarters. Credit-related income in the third quarter of 

2013 also benefited from the recognition of compensatory fees received in connection with the 

compensatory fee agreement with Bank of America entered into in January 2013. Credit-related income 

was higher in the second quarter of 2013 than in the third quarter of 2013 primarily due to updates made 

during the second quarter to the assumptions and data used to estimate the company’s allowance for loan 

losses for individually-impaired single-family loans to reflect faster prepayment and lower default 

expectations for those loans, which resulted in an incremental benefit for credit losses of $2.2 billion for 

the second quarter. 

Credit losses, which the company defines as net charge-offs plus foreclosed property expense, excluding 

the effect of certain fair-value losses, were $1.1 billion in the third quarter of 2013, compared with $1.6 

billion in the second quarter of 2013. The decrease was due primarily to an increase in foreclosed property 

income as a result of the recognition of compensatory fees received in connection with the compensatory 

fee agreement with Bank of America entered into in January 2013. Fannie Mae had previously deferred 

this income until the company substantially completed the loan review process related to the agreement. 
Third Quarter 2013 Results 11

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 $48.4 billion as of September 30, 2013, compared with $53.1 billion as of June 30, 2013. The 

total loss reserves coverage to total nonperforming loans was 21 percent as of September 30, 2013, 

compared with 23 percent as of June 30, 2013. 

Net fair value gains were $335 million in the third quarter of 2013, compared with $829 million in the 

second quarter of 2013. Third quarter fair value gains were driven primarily by gains on risk management 

derivatives as a result of an increase in longer-term interest rates. These gains were partially offset by fair 

value losses on commitments to sell mortgage-related securities. 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. 
Third Quarter 2013 Results 12

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 $4.7 billion in the third quarter of 2013, compared with $6.5 

billion in the second quarter of 2013. The decrease in net income in the third quarter of 2013 compared 

with the second quarter of 2013 was due primarily to decreased credit-related income in the third quarter 

of 2013. The Single-Family guaranty book of business was $2.88 trillion as of September 30, 2013 and 

$2.84 trillion as of June 30, 2013. Single-Family guaranty fee income was $2.7 billion in the third quarter 

of 2013 and $2.5 billion in the second quarter of 2013. 

Multifamily had net income of $478 million in the third quarter of 2013, compared with $386 million in 

the second quarter of 2013. The increase in net income in the third quarter of 2013 compared with the 

second quarter of 2013 was due primarily to increased credit-related income in the third quarter of 2013. 

Multifamily recorded credit-related income of $132 million in the third quarter of 2013, compared with 

credit-related income of $34 million in the second quarter of 2013 due primarily to improvements in 

default and loss severity trends, and improvements in property valuations. The Multifamily guaranty book 

of business was $203.7 billion as of September 30, 2013, compared with $205.5 billion as of June 30, 

2013. Multifamily guaranty fee income was $311 million for the third quarter of 2013 and $300 million

for the second quarter of 2013. 
Third Quarter 2013 Results 13

Capital Markets group had net income of $3.8 billion in the third quarter of 2013, compared with $3.3 

billion in the second quarter of 2013. The increase in net income in the third quarter of 2013 compared 

with the second quarter of 2013 was due primarily to increased investment gains partially offset by a 

decrease in fair value gains and net interest income in the third quarter of 2013. Investment gains for the 

third quarter of 2013 were $1.6 billion, compared with $898 million in the second quarter of 2013. Fair 

value gains for the third quarter of 2013 were $371 million, compared with $841 million in the second 

quarter of 2013. Capital Markets’ net interest income for the third quarter of 2013 was $2.3 billion, 

compared with $2.7 billion in the second quarter of 2013. The Capital Markets retained mortgage portfolio 

balance decreased to $516.3 billion as of September 30, 2013, compared with $565.2 billion as of June 30, 

2013, resulting from purchases of $60.1 billion, liquidations of $30.1 billion, and sales of $79.0 billion

during the quarter.

(Dollars in millions) 3Q13 2Q13 Variance 3Q13 3Q12 Variance

Single-Family Segment:

Guaranty fee income $ 2,719 $ 2,544 $ 175 $ 2,719 $ 2,014 $ 705

Credit-related income (expense) 3,642 5,681 (2,039) 3,642 (2,130) 5,772

Other (865) (677) (188) (865) (694) (171)

Income (loss) before federal income taxes 5,496 7,548 (2,052) 5,496 (810) 6,306

Provision for federal income taxes (751) (1,050) 299 (751) (12) (739)

Net income (loss) $ 4,745 $ 6,498 $ (1,753) $ 4,745 $ (822) $ 5,567

Multifamily Segment:

Guaranty fee income $ 311 $ 300 $ 11 $ 311 $ 265 $ 46

Credit-related income 132 34 98 132 99 33

Other 43 62 (19) 43 31 12

Income before federal income taxes 486 396 90 486 395 91

(Provision) benefit for federal income taxes (8) (10) 2 (8) 32 (40)

Net income $ 478 $ 386 $ 92 $ 478 $ 427 $ 51

Capital Markets Segment:

Net interest income $ 2,311 $ 2,680 $ (369) $ 2,311 $ 3,247 $ (936)

Investment gains, net 1,590 898 692 1,590 2,201 (611)

Fair value gains (losses), net 371 841 (470) 371 (961) 1,332

Other 123 (179) 302 123 (345) 468

Income before federal income taxes 4,395 4,240 155 4,395 4,142 253

Provision for federal income taxes (596) (925) 329 (596) (20) (576)

Net income $ 3,799 $ 3,315 $ 484 $ 3,799 $ 4,122 $ (323)
Third Quarter 2013 Results 14

ANNEX I

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions, except share amounts)

As of

September 30,

2013

December 31,

2012

ASSETS

Cash and cash equivalents $ 30,784 $ 21,117

Restricted cash (includes $26,804 and $61,976, respectively, related to consolidated trusts) 31,525 67,919

Federal funds sold and securities purchased under agreements to resell or similar arrangements 40,300 32,500

Investments in securities:

Trading, at fair value 32,860 40,695

Available-for-sale, at fair value (includes $911 and $935, respectively, related to consolidated trusts) 41,000 63,181

Total investments in securities 73,860 103,876

Mortgage loans:

Loans held for sale, at lower of cost or fair value (includes $41 and $72, respectively, related to consolidated trusts) 998 464

Loans held for investment, at amortized cost:

Of Fannie Mae 313,267 355,544

Of consolidated trusts (includes $13,877 and $10,800, respectively, at fair value and loans pledged as collateral that

may be sold or repledged of $477 and $943, respectively) 2,744,084 2,652,193

Total loans held for investment 3,057,351 3,007,737

Allowance for loan losses (45,169) (58,795)

Total loans held for investment, net of allowance 3,012,182 2,948,942

Total mortgage loans 3,013,180 2,949,406

Accrued interest receivable, net (includes $7,568 and $7,567, respectively, related to consolidated trusts) 8,696 9,176

Acquired property, net 11,380 10,489

Deferred tax asset, net 48,256 —

Other assets (includes cash pledged as collateral of $2,635 and $1,222, respectively) 23,241 27,939

Total assets $ 3,281,222 $ 3,222,422

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,234 and $8,645, respectively, related to consolidated trusts) $ 10,769 $ 11,303

Debt:

Of Fannie Mae (includes $684 and $793, respectively, at fair value) 565,110 615,864

Of consolidated trusts (includes $14,414 and $11,647, respectively, at fair value) 2,675,011 2,573,653

Other liabilities (includes $501 and $1,059, respectively, related to consolidated trusts) 18,715 14,378

Total liabilities $ 3,269,605 $ 3,215,198

Commitments and contingencies (Note 17) — —

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, respectively 19,130 19,130

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

and 1,158,077,970 shares outstanding, respectively 687 687

Accumulated deficit (119,067) (122,766)

Accumulated other comprehensive income 1,070 384

Treasury stock, at cost, 150,682,046 and 150,684,733 shares, respectively (7,401) (7,401)

Total Fannie Mae stockholders’ equity 11,568 7,183

Noncontrolling interest 49 41

Total equity (See Note 1: Impact of U.S. Government Support and Earnings (Loss) per Share for information on our

dividend obligation to Treasury) 11,617 7,224

Total liabilities and equity $ 3,281,222 $ 3,222,422

See Notes to Condensed Consolidated Financial Statements
Third Quarter 2013 Results 15

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 For the Nine

Months Ended Months Ended

September 30, September 30,

2013 2012 2013 2012

Interest income:

Trading securities $ 185 $ 234 $ 633 $ 756

Available-for-sale securities 546 789 1,870 2,551

Mortgage loans (includes $25,351 and $27,057, respectively, for the three months ended and

$75,592 and $84,482, respectively, for the nine months ended related to consolidated trusts) 28,299 30,593 85,579 95,186

Other 37 53 143 131

Total interest income 29,067 31,669 88,225 98,624

Interest expense:

Short-term debt 29 38 109 112

Long-term debt (includes $20,905 and $23,395, respectively, for the three months ended and

$62,785 and $73,469, respectively, for the nine months ended related to consolidated

trusts) 23,456 26,314 70,563 82,570

Total interest expense 23,485 26,352 70,672 82,682

Net interest income 5,582 5,317 17,553 15,942

Benefit (provision) for credit losses 2,609 (2,079) 8,949 (1,038)

Net interest income after benefit (provision) for credit losses 8,191 3,238 26,502 14,904

Investment gains, net 648 134 1,056 381

Net other-than-temporary impairments (27) (38) (42) (701)

Fair value gains (losses), net 335 (1,020) 1,998 (3,186)

Debt extinguishment gains (losses), net 92 (54) 96 (181)

Fee and other income 741 378 1,794 1,148

Non-interest income (loss) 1,789 (600) 4,902 (2,539)

Administrative expenses:

Salaries and employee benefits 307 294 928 892

Professional services 236 195 678 542

Occupancy expenses 48 48 141 139

Other administrative expenses 55 51 166 146

Total administrative expenses 646 588 1,913 1,719

Foreclosed property (income) expense (1,165) (48) (1,757) 221

Other expenses 400 285 955 775

Total other (income) expenses (119) 825 1,111 2,715

Income before federal income taxes 10,099 1,813 30,293 9,650

(Provision) benefit for federal income taxes (1,355) — 47,231 —

Net income 8,744 1,813 77,524 9,650

Other comprehensive (loss) income:

Changes in unrealized gains on available-for-sale securities, net of reclassification

adjustments and taxes (133) 741 532 1,416

Other (1) 5 154 20

Total other comprehensive (loss) income (134) 746 686 1,436

Total comprehensive income 8,610 2,559 78,210 11,086

Less: Comprehensive (income) loss attributable to noncontrolling interest (7) 8 (18) 4

Total comprehensive income attributable to Fannie Mae $ 8,603 $ 2,567 $ 78,192 $ 11,090

Net income 8,744 1,813 77,524 9,650

Less: Net (income) loss attributable to noncontrolling interest (7) 8 (18) 4

Net income attributable to Fannie Mae 8,737 1,821 77,506 9,654

Dividends distributed or available for distribution to senior preferred stockholder (8,617) (2,929) (78,228) (8,675)

Net income (loss) attributable to common stockholders (Note 11) $ 120 $ (1,108) $ (722) $ 979

Earnings (loss) per share:

Basic $ 0.02 $ (0.19) $ (0.13) $ 0.17

Diluted 0.02 (0.19) (0.13) 0.17

Weighted-average common shares outstanding:

Basic 5,762 5,762 5,762 5,762

Diluted 5,893 5,762 5,762 5,893

See Notes to Condensed Consolidated Financial Statements
Third Quarter 2013 Results 16

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows— (Unaudited)

(Dollars in millions)

For the Nine Months

Ended September 30,

2013 2012

Net cash provided by operating activities $ 11,518 $ 32,279

Cash flows provided by investing activities:

Purchases of trading securities held for investment (5,855) (1,542)

Proceeds from maturities and paydowns of trading securities held for investment 2,036 2,671

Proceeds from sales of trading securities held for investment 11,118 1,357

Purchases of available-for-sale securities — (34)

Proceeds from maturities and paydowns of available-for-sale securities 8,265 9,423

Proceeds from sales of available-for-sale securities 14,312 923

Purchases of loans held for investment (161,737) (141,539)

Proceeds from repayments and sales of loans acquired as held for investment of Fannie Mae 38,427 22,540

Proceeds from repayments of loans acquired as held for investment of consolidated trusts 532,411 568,881

Net change in restricted cash 36,394 (9,147)

Advances to lenders (114,584) (97,508)

Proceeds from disposition of acquired property and preforeclosure sales 29,688 29,822

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements (7,800) 500

Other, net 619 56

Net cash provided by investing activities 383,294 386,403

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae 326,036 550,087

Payments to redeem debt of Fannie Mae (377,514) (630,546)

Proceeds from issuance of debt of consolidated trusts 339,687 270,552

Payments to redeem debt of consolidated trusts (599,519) (601,523)

Payments of cash dividends on senior preferred stock to Treasury (73,835) (8,679)

Proceeds from senior preferred stock purchase agreement with Treasury — 4,571

Other, net — (9)

Net cash used in financing activities (385,145) (415,547)

Net increase in cash and cash equivalents 9,667 3,135

Cash and cash equivalents at beginning of period 21,117 17,539

Cash and cash equivalents at end of period $ 30,784 $ 20,674

Cash paid during the period for:

Interest $ 82,086 $ 90,338

Income Taxes $ 1,876 $ —

See Notes to Condensed Consolidated Financial Statements