Third Quarter 2014 Results 1

Resource Center: 1-800-732-6643 

Contact: Pete Bakel

202-752-2034

Date: November 6, 2014

Fannie Mae Reports Net Income of $3.9 Billion and 

Comprehensive Income of $4.0 Billion for Third Quarter 2014

• Fannie Mae reported net income of $3.9 billion and comprehensive income of $4.0 billion for the 

third quarter of 2014. 

• Fannie Mae expects to pay $4.0 billion in dividends to Treasury in December 2014. With the 

December dividend payment, Fannie Mae will have paid a total of $134.5 billion in dividends to 

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

reduce prior Treasury draws.

• Fannie Mae has provided more than $4.3 trillion in liquidity to the mortgage market since 2009, 

including approximately $123 billion in liquidity in the third quarter of 2014, enabling families to 

buy, refinance, or rent homes.

• Fannie Mae has helped distressed families retain their homes or avoid foreclosure through more 

than 1.6 million workout solutions since 2009, including approximately 39,000 in the third quarter 

of 2014.

WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported net income of $3.9 billion for the third 

quarter of 2014 and comprehensive income of $4.0 billion. The company reported a positive net worth of 

$6.4 billion as of September 30, 2014 resulting in a dividend obligation to Treasury of $4.0 billion, which 

the company expects to pay in December 2014.

Fannie Mae’s net income of $3.9 billion and comprehensive income of $4.0 billion for the third quarter of 

2014 compares to net income of $3.7 billion and comprehensive income of $3.7 billion for the second 

quarter of 2014. Net income in the third quarter of 2014 increased compared with the second quarter of 

2014 due primarily to lower fair value losses and an increase in revenues. This increase was partially 

offset by a decline in credit-related income.

Fannie Mae recognized a provision for federal income taxes of $1.8 billion for the third quarter of 2014, 

which resulted in an effective tax rate of 31.4 percent.

“This was another solid quarter, with the company reporting strong financial results and continuing to 

provide much needed liquidity to the market,” said Timothy J. Mayopoulos, president and chief executive 

officer. “We continue to build a strong book of business based on appropriate standards. We are committed 

to being our customers’ most valued business partner and delivering the products, services, and tools our 

customers need to serve the entire market confidently, efficiently, and profitably.”
Third Quarter 2014 Results 2

SUMMARY OF THIRD QUARTER 2014 RESULTS

(Dollars in millions) 3Q14 2Q14 Variance 3Q14 3Q13 Variance

Net interest income $ 5,184 $ 4,904 $ 280 $ 5,184 $ 5,582 $ (398)

Fee and other income 826 383 443 826 741 85

Net revenues 6,010 5,287 723 6,010 6,323 (313)

Investment gains, net 177 506 (329) 177 648 (471)

Fair value (losses) gains, net (207) (934) 727 (207) 335 (542)

Administrative expenses (706) (697) (9) (706) (646) (60)

Credit-related income

Benefit for credit losses 1,085 1,639 (554) 1,085 2,609 (1,524)

Foreclosed property (expense) income (249) 214 (463) (249) 1,165 (1,414)

Total credit-related income 836 1,853 (1,017) 836 3,774 (2,938)

Other non-interest expenses(1) (418) (596) 178 (418) (335) (83)

Net (losses) gains and (expenses) income (318) 132 (450) (318) 3,776 (4,094)

Income before federal income taxes 5,692 5,419 273 5,692 10,099 (4,407)

Provision for federal income taxes (1,787) (1,752) (35) (1,787) (1,355) (432)

Net income 3,905 3,667 238 3,905 8,744 (4,839)

Less: Net income attributable to noncontrolling interest — (1) 1 — (7) 7

Net income attributable to Fannie Mae $ 3,905 $ 3,666 $ 239 $ 3,905 $ 8,737 $ (4,832)

Total comprehensive income attributable to Fannie Mae $ 4,000 $ 3,711 $ 289 $ 4,000 $ 8,603 $ (4,603)

Dividends distributed or available for distribution to

senior preferred stockholder $ (3,999) $ (3,712) $ (287) $ (3,999) $ (8,617) $ 4,618

(1) Consists of net other-than-temporary impairments, debt extinguishments gains, net, TCCA fees and other expenses, net.

Net Revenues, which consists of net interest income and fee and other income, were $6.0 billion for the 

third quarter of 2014, compared with $5.3 billion for the second quarter of 2014. Higher net revenues were 

driven primarily by an increase in income from settlement agreements related to Fannie Mae’s 

investments in private-label mortgage-related securities and an increase in net interest income.

Net interest income, which includes guaranty fee revenue, was $5.2 billion for the third quarter of 2014, 

compared with $4.9 billion for the second quarter of 2014. The increase in net interest income compared 

with the second quarter of 2014 was due primarily to higher amortization income from an increase in 

prepayments. 

An increasing portion of Fannie Mae’s revenues in recent years has been derived from guaranty fees rather 

than from interest income earned on the company’s retained mortgage portfolio assets. This is a result of 

both the shrinking of the retained mortgage portfolio and the impact of guaranty fee increases. The 

company recognizes almost all of its guaranty fee revenue in net interest income and the percentage of net 

interest income derived from guaranty fees on loans underlying Fannie Mae MBS increased to 

approximately half in the first nine months of 2014, compared with approximately one-third in the first 

nine months of 2013. The company expects that guaranty fees will continue to account for an increasing 

portion of its revenues.
Third Quarter 2014 Results 3

 

Credit-Related Income, which consists of a benefit for credit losses and foreclosed property expense or 

income, was $836 million in the third quarter of 2014, compared with $1.9 billion in the second quarter of 

2014. The decrease in credit-related income was driven primarily by a decline in the company’s benefit for 

credit losses due primarily to a slower rate of home price appreciation compared with the second quarter 

of 2014, partially offset by an incremental benefit for credit losses for the third quarter due to updates 

made in the quarter to the company’s model and assumptions used to estimate its allowance for loan 

losses. Also contributing to the decrease in credit-related income was foreclosed property expense in the 

third quarter of 2014, compared with foreclosed property income in the second quarter of 2014.

Net Fair Value Losses were $207 million in the third quarter of 2014, compared with $934 million in the 

second quarter of 2014. Fair value losses in the third quarter of 2014 were due primarily to increases in 

shorter-term interest rates impacting the value of the company’s risk management derivatives. The 

estimated fair value of the company’s derivatives and securities may fluctuate substantially from period to 

period because of changes in interest rates, the yield curve, mortgage spreads, implied volatility, and 

activity related to these financial instruments.
Third Quarter 2014 Results 4

VARIABILITY OF FINANCIAL RESULTS 

Fannie Mae expects to remain profitable for the foreseeable future. The company’s financial results will be 

affected by a number of factors, including: changes in interest rates and home prices, the company’s 

guaranty fee rates, the volume of single-family mortgage originations in the future, the size, composition, 

and quality of the company’s retained mortgage portfolio and guaranty book of business, and economic 

and housing market conditions. Some of these factors could result in significant variability in the 

company’s financial results from quarter to quarter or year to year. For additional information on factors 

that affect the company’s financial results, please refer to “Executive Summary” in the company’s 

quarterly report on Form 10-Q for the quarter ended September 30, 2014 (the “Third Quarter 2014 Form 

10-Q”).

SUMMARY OF THIRD QUARTER 2014 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 goals of providing liquidity to the market, expanding access to credit, and helping 

the U.S. housing market recover.

(Dollars in millions) 3Q14 2Q14 Variance 3Q14 3Q13 Variance

Single-Family Segment:

Guaranty fee income $ 2,945 $ 2,893 $ 52 $ 2,945 $ 2,719 $ 226

Credit-related income 748 1,781 (1,033) 748 3,642 (2,894)

Other (794) (847) 53 (794) (865) 71

Income before federal income taxes 2,899 3,827 (928) 2,899 5,496 (2,597)

Provision for federal income taxes (837) (1,133) 296 (837) (751) (86)

Net income $ 2,062 $ 2,694 $ (632) $ 2,062 $ 4,745 $ (2,683)

Multifamily Segment:

Guaranty fee income $ 332 $ 317 $ 15 $ 332 $ 311 $ 21

Credit-related income 88 72 16 88 132 (44)

Other 1 (4) 5 1 43 (42)

Income before federal income taxes 421 385 36 421 486 (65)

Provision for federal income taxes (37) (9) (28) (37) (8) (29)

Net income $ 384 $ 376 $ 8 $ 384 $ 478 $ (94)

Capital Markets Segment:

Net interest income $ 1,845 $ 1,917 $ (72) $ 1,845 $ 2,311 $ (466)

Investment gains, net 1,516 1,648 (132) 1,516 1,590 (74)

Fair value (losses) gains, net (335) (1,098) 763 (335) 371 (706)

Other 169 (308) 477 169 123 46

Income before federal income taxes 3,195 2,159 1,036 3,195 4,395 (1,200)

Provision for federal income taxes (913) (610) (303) (913) (596) (317)

Net income $ 2,282 $ 1,549 $ 733 $ 2,282 $ 3,799 $ (1,517)
Third Quarter 2014 Results 5

Single-Family Business

• Single-Family net income was $2.1 billion in the third quarter of 2014, compared with $2.7 billion

in the second quarter of 2014. Net income in the third quarter of 2014 was driven primarily by 

guaranty fee income and credit-related income.

• Single-Family guaranty fee income was $2.9 billion for both the third quarter of 2014 and the 

second quarter of 2014. The Single-Family guaranty book of business was $2.85 trillion as of 

September 30, 2014, compared with $2.86 trillion as of June 30, 2014. 

• Single-Family credit-related income was $748 million in the third quarter of 2014, compared with 

$1.8 billion in the second quarter of 2014. 

Multifamily Business

• Multifamily net income was $384 million in the third quarter of 2014, compared with $376 million

in the second quarter of 2014. Net income in the third quarter of 2014 was driven primarily by 

guaranty fee income. 

• Multifamily guaranty fee income was $332 million for the third quarter of 2014, compared with 

$317 million for the second quarter of 2014. The Multifamily guaranty book of business was 

$200.2 billion as of September 30, 2014, compared with $197.6 billion as of June 30, 2014.

• Multifamily credit-related income was $88 million for the third quarter of 2014, compared with 

$72 million for the second quarter of 2014. 

Capital Markets

• Capital Markets net income was $2.3 billion in the third quarter of 2014, compared with $1.5 

billion in the second quarter of 2014. Net income in the third quarter of 2014 was driven primarily 

by net interest income and net investment gains, partially offset by net fair value losses.

• Capital Markets net interest income was $1.8 billion for the third quarter of 2014, compared with 

$1.9 billion for the second quarter of 2014. 

• Capital Markets net investment gains were $1.5 billion in the third quarter of 2014, compared with 

$1.6 billion in the second quarter of 2014.

• Capital Markets net fair value losses were $335 million in the third quarter of 2014, compared 

with $1.1 billion in the second quarter of 2014. 

• Capital Markets retained mortgage portfolio balance decreased to $438.1 billion as of 

September 30, 2014, compared with $452.8 billion as of June 30, 2014, resulting from purchases 

of $50.8 billion and sales and liquidations of $65.5 billion during the third quarter of 2014.

BUILDING 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. The 

company is pursuing the strategic goals identified by its conservator, the Federal Housing Finance Agency 

(“FHFA”). These strategic goals are: maintain in a safe and sound manner foreclosure prevention activities 

and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive, and 

resilient national housing finance markets; reduce taxpayer risk through increasing the role of private 

capital in the mortgage market; and build a new single-family securitization infrastructure for use by the 

Enterprises and adaptable for use by other participants in the secondary market in the future. 
Third Quarter 2014 Results 6

ABOUT FANNIE MAE’S CONSERVATORSHIP

Fannie Mae has operated under the conservatorship of 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 September 30, 2014, Fannie Mae has requested 

cumulative draws totaling $116.1 billion and paid $130.5 billion in dividends to Treasury. Under the 

senior preferred stock purchase agreement, the payment of dividends does not 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 does 

not offset prior Treasury draws.

(2) Fannie Mae expects to pay a dividend for the fourth quarter of 2014 calculated based on the company’s net worth of $6.4 billion as 

of September 30, 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.
Third Quarter 2014 Results 7

CREDIT QUALITY

While continuing to make it possible for families to purchase, refinance, or rent a home, Fannie Mae has 

maintained responsible credit standards. Since 2009, Fannie Mae has seen the effect of the 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 nine months of 2014 had a weighted average 

borrower FICO credit score at origination of 743 and a weighted average original loan-to-value ratio of 77

percent.

As of September 30, 2014, 80 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. 

Fannie Mae’s new book of business (loans purchased or guaranteed since 2009) was comprised of 28 

percent of home purchase mortgages and 72 percent of loan refinancings as of September 30, 2014. 

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

(“HARP®”), 10 percent of loans through Fannie Mae’s Refi PlusTM initiative (excluding HARP), and 48 

percent other refinancings (excluding Refi Plus refinancings). 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.
Third Quarter 2014 Results 8

The single-family serious delinquency rate for Fannie Mae’s book of business has declined each 

quarter since the first quarter of 2010, and was 1.96 percent as of September 30, 2014, compared with 5.47 

percent as of March 31, 2010. This decline 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. Although Fannie Mae’s single-family serious delinquency rate has 

declined, the pace of declines has slowed in recent months and the company expects this trend to continue. 

The company’s single-family serious delinquency rate and the period of time that loans remain seriously 

delinquent continue to be negatively impacted by the length of time required to complete a foreclosure. 

Other factors such as the pace of loan modifications, changes in home prices, unemployment levels, and 

other macroeconomic conditions also influence serious delinquency rates. 

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 $39.7 billion as of September 30, 2014, compared with $42.1 billion as of June 30, 2014. 

The total loss reserve coverage to total nonaccrual loans was 58 percent as of September 30, 2014, 

compared with 59 percent as of June 30, 2014.
Third Quarter 2014 Results 9

PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET

Liquidity

Fannie Mae has provided more than $4.3 trillion in liquidity to the mortgage market since January 1, 

2009, including approximately $123 billion in liquidity in the third quarter of 2014, through its purchases 

and guarantees of loans, which resulted in:

• 13.0 million mortgage refinancings, including approximately 228,000 in the third quarter of 2014

• 4.3 million home purchases, including approximately 265,000 in the third quarter of 2014

• 2.5 million units of multifamily housing, including approximately 124,000 in the third quarter of 

2014

The company expects that refinancings will constitute a smaller portion of its single-family business 

volume in 2014 than in 2013.

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

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

mortgage-related securities issuances of 38 percent in the third quarter of 2014, compared with 39 percent 

in the second quarter of 2014 and 48 percent in the third quarter of 2013.

Fannie Mae also remained a continuous source of liquidity in the multifamily market. As of June 30, 2014 

(the latest date for which information is available), the company owned or guaranteed approximately 19

percent of the outstanding debt on multifamily properties.

Refinancing Initiatives

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

borrowers and includes HARP, the company acquired over 68,000 loans in the third 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 fixed-rate mortgage, 
Third Quarter 2014 Results 10

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 2014 reduced 

borrowers’ monthly mortgage payments by an average of $159. The company expects the volume of 

refinancings under HARP to continue to decline, due to the increase in interest rates since the first half of 

2013 and a decrease in the population of borrowers with loans that have high LTV ratios who are willing 

to refinance and would benefit from refinancing.

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. 

For the Nine Months Ended September 30,

2014 2013

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

(Dollars in millions)

Home retention strategies:

Modifications $16,425 96,915 $ 21,822 120,848

Repayment plans and forbearances completed 752 5,607 1,331 10,128

Total home retention strategies 17,177 102,522 23,153 130,976

Foreclosure alternatives:

Short sales 3,866 18,691 7,860 37,247

Deeds-in-lieu of foreclosure 1,414 8,944 1,917 11,681

Total foreclosure alternatives 5,280 27,635 9,777 48,928

Total loan workouts $22,457 130,157 $ 32,930 179,904

Loan workouts as a percentage of single-family guaranty book of business 1.05% 0.99% 1.53% 1.36%
Third Quarter 2014 Results 11

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

offers alternatives to 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.

• Fannie Mae provided approximately 39,000 loan workouts during the third quarter of 2014

enabling borrowers to avoid foreclosure and contributing to the more than 1.6 million loan 

workouts completed from the beginning of 2009 through September 30, 2014. 

• Fannie Mae completed approximately 29,000 loan modifications during the third quarter of 2014, 

bringing the total number of loan modifications the company has completed since January 1, 2009 

to more than 1.1 million.

FORECLOSURES AND REO

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 September 30,

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 91,372 112,176

Dispositions of REO (102,215) (116,901)

End of period inventory of single-family foreclosed properties (REO) 92,386 100,941

Carrying value of single-family foreclosed properties (dollars in millions) $ 10,209 $ 10,036

Single-family foreclosure rate 0.70 % 0.85 %

• Fannie Mae acquired 27,798 single-family REO properties, primarily through foreclosure, in the 

third quarter of 2014, compared with 31,678 in the second quarter of 2014. 

• As of September 30, 2014, the company’s inventory of single-family REO properties was 92,386, 

compared with 96,796 as of June 30, 2014. The carrying value of the company’s single-family 

REO was $10.2 billion as of September 30, 2014.

• The company’s single-family foreclosure rate was 0.70 percent for the first nine months of 2014. 

This reflects the annualized total number of single-family properties acquired through foreclosure 

or deeds-in-lieu of foreclosure as a percentage of the total number of loans in Fannie Mae’s singlefamily guaranty book of business.

Fannie Mae’s financial statements for the third quarter of 2014 are available in the accompanying Annex; 

however, investors and interested parties should read the company’s Third 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 Third 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 Third 

Quarter Credit Supplement” at www.fanniemae.com.
Third Quarter 2014 Results 12

# # #

In this release, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements, including statements regarding 

the company’s future dividend payments to Treasury; the future sources of its revenues; the company’s future profitability; the company’s future single-family 

serious delinquency rates; the portion of its future business volume that will consist of refinancings; the future volume of its HARP refinancings; the impact of 

the company’s actions to reduce credit losses; and the future fair value of the company’s 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 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, the company’s reliance on 

and 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, whether the company’s counterparties meet their obligations in full, effects from activities 

the company takes to support the mortgage market and help borrowers, the company’s future objectives and activities in support of those objectives, including 

actions the company may take to reach additional underserved creditworthy borrowers, actions the company may be required to take by FHFA, as its 

conservator or as its regulator, such as changes in the types of business the company does, 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 any change in the Federal Reserve’s policy toward the reinvestment of principal payments of 

mortgage-backed securities or 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, the company’s reliance on and the performance of the company’s 

servicers, global political risk, natural disasters, terrorist attacks, pandemics or other major disruptive events, information security breaches, 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 September 30, 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
Third Quarter 2014 Results 13

ANNEX

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions, except share amounts)

As of

September 30, December 31,

2014 2013

ASSETS

Cash and cash equivalents $ 16,329 $ 19,228

Restricted cash (includes $24,106 and $23,982, respectively, related to consolidated trusts) 28,518 28,995

Federal funds sold and securities purchased under agreements to resell or similar arrangements 29,450 38,975

Investments in securities:

Trading, at fair value 30,844 30,768

Available-for-sale, at fair value (includes $699 and $998, respectively, related to consolidated trusts) 32,099 38,171

Total investments in securities 62,943 68,939

Mortgage loans:

Loans held for sale, at lower of cost or fair value 368 380

Loans held for investment, at amortized cost:

Of Fannie Mae 278,961 300,159

Of consolidated trusts (includes $15,262 and $14,268, respectively, at fair value and loans pledged as collateral that may

be sold or repledged of $0 and $442, respectively) 2,767,805 2,769,547

Total loans held for investment 3,046,766 3,069,706

Allowance for loan losses (36,931) (43,846)

Total loans held for investment, net of allowance 3,009,835 3,025,860

Total mortgage loans 3,010,203 3,026,240

Accrued interest receivable, net (includes $7,506 and $7,271, respectively, related to consolidated trusts) 8,566 8,319

Acquired property, net 11,339 11,621

Deferred tax assets, net 42,757 47,560

Other assets (includes cash pledged as collateral of $1,677 and $1,590, respectively) 20,211 20,231

Total assets $ 3,230,316 $ 3,270,108

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,215 and $8,276, respectively, related to consolidated trusts) $ 10,492 $ 10,553

Debt:

Of Fannie Mae (includes $5,204 and $1,308, respectively, at fair value) 474,952 529,434

Of consolidated trusts (includes $16,598 and $14,976, respectively, at fair value) 2,726,528 2,705,089

Other liabilities (includes $466 and $488, respectively, related to consolidated trusts) 11,945 15,441

Total liabilities 3,223,917 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 1,158,082,750 and

1,158,080,657 shares outstanding, respectively 687 687

Accumulated deficit (124,931) (121,227)

Accumulated other comprehensive income 1,715 1,203

Treasury stock, at cost, 150,679,953 and 150,682,046 shares, respectively (7,401) (7,401)

Total Fannie Mae stockholders’ equity 6,349 9,541

Noncontrolling interest 50 50

Total equity 6,399 9,591

Total liabilities and equity $ 3,230,316 $ 3,270,108

See Notes to Condensed Consolidated Financial Statements in the Third Quarter 2014 Form 10-Q
Third 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 For the Nine Months

Ended September 30, Ended September 30,

2014 2013 2014 2013

Interest income:

Trading securities $ 151 $ 185 $ 421 $ 633

Available-for-sale securities 395 546 1,249 1,870

Mortgage loans (includes $25,217 and $25,351, respectively, for the three months ended and

$76,704 and $75,592, respectively, for the nine months ended related to consolidated

trusts) 27,779 28,299 84,532 85,579

Other 29 37 77 143

Total interest income 28,354 29,067 86,279 88,225

Interest expense:

Short-term debt 26 29 67 109

Long-term debt (includes $21,094 and $20,905, respectively, for the three months ended and

$64,862 and $62,785, respectively, for the nine months ended related to consolidated

trusts) 23,144 23,456 71,386 70,563

Total interest expense 23,170 23,485 71,453 70,672

Net interest income 5,184 5,582 14,826 17,553

Benefit for credit losses 1,085 2,609 3,498 8,949

Net interest income after benefit for credit losses 6,269 8,191 18,324 26,502

Investment gains, net 177 648 829 1,056

Net other-than-temporary impairments (6) (27) (80) (42)

Fair value (losses) gains, net (207) 335 (2,331) 1,998

Debt extinguishment gains, net 11 92 49 96

Fee and other income 826 741 5,564 1,794

Non-interest income 801 1,789 4,031 4,902

Administrative expenses:

Salaries and employee benefits 337 307 981 928

Professional services 263 236 780 678

Occupancy expenses 47 48 144 141

Other administrative expenses 59 55 170 166

Total administrative expenses 706 646 2,075 1,913

Foreclosed property expense (income) 249 (1,165) (227) (1,757)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees 351 276 1,008 695

Other expenses, net 72 124 479 260

Total expenses (income) 1,378 (119) 3,335 1,111

Income before federal income taxes 5,692 10,099 19,020 30,293

(Provision) benefit for federal income taxes (1,787) (1,355) (6,123) 47,231

Net income 3,905 8,744 12,897 77,524

Other comprehensive income:

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

adjustments and taxes 63 (133) 480 532

Other 32 (1) 32 154

Total other comprehensive income (loss) 95 (134) 512 686

Total comprehensive income 4,000 8,610 13,409 78,210

Less: Comprehensive income attributable to noncontrolling interest — (7) (1) (18)

Total comprehensive income attributable to Fannie Mae $ 4,000 $ 8,603 $ 13,408 $ 78,192

Net income $ 3,905 $ 8,744 $ 12,897 $ 77,524

Less: Net income attributable to noncontrolling interest — (7) (1) (18)

Net income attributable to Fannie Mae 3,905 8,737 12,896 77,506

Dividends distributed or available for distribution to senior preferred stockholder (3,999) (8,617) (13,403) (78,228)

Net (loss) income attributable to common stockholders $ (94) $ 120 $ (507) $ (722)

(Loss) earnings per share: basic and diluted $ (0.02) $ 0.02 $ (0.09) $ (0.13)

Weighted-average common shares outstanding:

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

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

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

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows— (Unaudited)

(Dollars in millions)

For the Nine Months

Ended September 30,

2014 2013

Net cash provided by operating activities $ 960 $ 11,518

Cash flows provided by investing activities:

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

Proceeds from maturities and paydowns of trading securities held for investment 1,046 2,036

Proceeds from sales of trading securities held for investment 1,241 11,118

Proceeds from maturities and paydowns of available-for-sale securities 4,505 8,265

Proceeds from sales of available-for-sale securities 2,461 14,312

Purchases of loans held for investment (93,029) (161,737)

Proceeds from repayments and sales of loans acquired as held for investment of Fannie Mae 19,765 38,427

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 281,787 532,411

Net change in restricted cash 477 36,394

Advances to lenders (71,268) (114,584)

Proceeds from disposition of acquired property and preforeclosure sales 19,533 29,688

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements 9,525 (7,800)

Other, net (178) 619

Net cash provided by investing activities 175,865 383,294

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae 284,266 326,036

Payments to redeem debt of Fannie Mae (339,528) (377,514)

Proceeds from issuance of debt of consolidated trusts 188,719 339,687

Payments to redeem debt of consolidated trusts (296,612) (599,519)

Payments of cash dividends on senior preferred stock to Treasury (16,594) (73,835)

Other, net 25 —

Net cash used in financing activities (179,724) (385,145)

Net (decrease) increase in cash and cash equivalents (2,899) 9,667

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

Cash and cash equivalents at end of period $ 16,329 $ 30,784

Cash paid during the period for:

Interest $ 81,947 $ 82,086

Income taxes 2,475 1,876

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