Second Quarter 2018 Results 1

Resource Center: 1-800-732-6643

Contact: Pete Bakel

202-752-2034

Date: August 2, 2018

Fannie Mae Reports Net Income of $4.5 Billion and

Comprehensive Income of $4.5 Billion for Second Quarter 2018

Second Quarter 2018 Results “Our strong quarterly 

results reflect solid 

fundamentals in our 

Single-Family and 

Multifamily businesses. 

“Both segments are 

managing and distributing 

risk in sustainable, 

efficient, and innovative 

ways, and our guaranty 

book remains robust and 

stable. 

“Our results reflect our 

customer-focused strategy 

and a decade of hard work 

with our industry partners 

to strengthen Fannie Mae 

and the housing finance 

system we serve.

“We will continue to build 

on our progress of the past 

ten years, anchored in the 

needs of customers and 

the responsibilities of our 

charter.”

Timothy J. Mayopoulos, 

President and Chief 

Executive Officer

• Fannie Mae reported net income of $4.5 billion and comprehensive income of

$4.5 billion for the second quarter of 2018. This compares to net income of $4.3

billion and comprehensive income of $3.9 billion for the first quarter of 2018.

• Fannie Mae expects to pay a $4.5 billion dividend to Treasury by September 30,

2018. Through the second quarter of 2018, the company has paid $167.3 billion

in dividends to Treasury.

• Fannie Mae’s pre-tax income was $5.6 billion for the second quarter of 2018

and $5.4 billion for the first quarter of 2018, reflecting the strength of the

company’s underlying business fundamentals.

Business Highlights

• Fannie Mae provided $111 billion in liquidity to the single-family mortgage

market in the second quarter of 2018 while serving as the largest issuer of

single-family mortgage-related securities in the secondary market. The

company’s estimated market share of new single-family mortgage-related

securities issuances was 36% for the second quarter of 2018.

• Fannie Mae has transferred a portion of the mortgage credit risk on singlefamily mortgages with an unpaid principal balance of nearly $1.4 trillion at the

time of the transactions since 2013. As of June 30, 2018, $1.0 trillion in singlefamily mortgages, or approximately 35% of the loans in the company’s singlefamily conventional guaranty book of business, measured by unpaid principal

balance, were covered by a credit risk transfer transaction.

• Fannie Mae provided $14.5 billion in multifamily financing in the second quarter

of 2018, which enabled the financing of 188,000 units of multifamily housing.

More than 90% of the multifamily units the company financed were affordable to

families earning at or below 120% of the area median income, providing support

for both affordable and workforce housing. 

• Fannie Mae continued to transfer a portion of the credit risk on multifamily

mortgages. In the second quarter of 2018, nearly 100% of the company’s new

multifamily business volume had lender risk-sharing.
Second Quarter 2018 Results 2

WASHINGTON, DC — Fannie Mae (FNMA/OTC) reported net income of $4.5 billion (after-tax), pre-tax income of 

$5.6 billion, and comprehensive income of $4.5 billion for the second quarter of 2018. The company reported a net 

worth of $7.5 billion as of June 30, 2018. As a result, Fannie Mae expects to pay a $4.5 billion dividend to Treasury 

in September 2018.

SUMMARY OF FANNIE MAE’S FINANCIAL PERFORMANCE

Fannie Mae’s net income of $4.5 billion for the second quarter of 2018 compares to net income of $4.3 billion for the 

first quarter of 2018. The increase in net income was driven primarily by an increase in credit-related income due to 

the redesignation of loans from held-for-investment to held-for-sale, as well as other factors, including an 

improvement in home prices during the quarter. The increase in net income was partially offset by lower fair value 

gains in the second quarter of 2018 compared with the first quarter of 2018. 
Second Quarter 2018 Results 3

Summary of Financial Results

(Dollars in millions) 2Q18 1Q18 Variance 2Q18 2Q17 Variance

Net interest income $ 5,377 $ 5,232 $ 145 $ 5,377 $ 5,002 $ 375

Fee and other income 239 320 (81) 239 353 (114)

Net revenues 5,616 5,552 64 5,616 5,355 261

Investment gains, net 277 250 27 277 385 (108)

Fair value gains (losses), net 229 1,045 (816) 229 (691) 920

Administrative expenses (755) (750) (5) (755) (686) (69)

Credit-related income

Benefit for credit losses 1,296 217 1,079 1,296 1,267 29

Foreclosed property expense (139) (162) 23 (139) (34) (105)

Total credit-related income 1,157 55 1,102 1,157 1,233 (76)

Temporary Payroll Tax Cut Continuation Act of

2011 (TCCA) fees (565) (557) (8) (565) (518) (47)

Other expenses, net (366) (203) (163) (366) (291) (75)

Income before federal income taxes 5,593 5,392 201 5,593 4,787 806

Provision for federal income taxes (1,136) (1,131) (5) (1,136) (1,587) 451

Net income $ 4,457 $ 4,261 $ 196 $ 4,457 $ 3,200 $ 1,257

Other comprehensive income (loss) 2 (323) 325 2 (83) 85

Total comprehensive income $ 4,459 $ 3,938 $ 521 $ 4,459 $ 3,117 $ 1,342

Net revenues, which consist of net interest income and fee and other income, were $5.6 billion for both the second

and first quarter of 2018. 

Net interest income was $5.4 billion for the second quarter of 2018, compared with $5.2 billion for the first quarter of 

2018. The company’s net interest income in the second quarter of 2018 was derived primarily from guaranty fees on 

its $3.2 trillion guaranty book of business. 

More than 75 percent of Fannie Mae’s net interest income in the second quarter of 2018 was derived from the loans 

underlying Fannie Mae MBS in consolidated trusts, which primarily generate income through guaranty fees. Over 

the past several years, the portion of Fannie Mae’s net interest income derived from guaranty fees has increased 

compared with the portion derived from its retained mortgage portfolio assets. This shift has been driven by both 

guaranty fee increases the company implemented in 2012 and the reduction of its retained mortgage portfolio.
Second Quarter 2018 Results 4

Net fair value gains were $229 million in the second quarter of 2018, compared with $1.0 billion in the first quarter

of 2018. Net fair value gains in the second quarter of 2018 were driven primarily by price decreases during the 

quarter on long-term debt of consolidated trusts held at fair value. Net fair value gains in the first quarter of 2018

were driven primarily by increases in the fair value of the company’s mortgage commitment derivatives due to rising 

interest rates and increases in the fair value of the company’s risk management derivatives due to an increase in 

longer-term swap rates. 

The estimated fair value of the company’s derivatives, trading securities, and other financial instruments carried at 

fair value may fluctuate substantially from period to period because of changes in interest rates, the yield curve, 

mortgage and credit spreads, implied volatility, and activity related to these financial instruments.

Credit-related income (expense) consists of a benefit (provision) for credit losses and foreclosed property 

expense. Credit-related income was $1.2 billion in the second quarter of 2018, compared with $55 million in the first 

quarter of 2018. The increase in credit-related income in the second quarter of 2018 was due to the redesignation of 

loans from held-for-investment to held-for-sale, as well as other factors, including an improvement in home prices 

during the quarter.
Second Quarter 2018 Results 5

PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET

Through Fannie Mae’s single-family and multifamily business segments, the company provided $125 billion in 

liquidity to the mortgage market in the second quarter of 2018, which enabled the financing of 665,000 home 

purchases, refinancings, or rental units.

Fannie Mae Provided $125 Billion in Liquidity in the Second Quarter of 2018

SUMMARY OF SECOND QUARTER 2018 BUSINESS SEGMENT RESULTS

Fannie Mae’s two reportable business segments—Single-Family and Multifamily—engage in complementary 

business activities in pursuit of Fannie Mae’s vision to be America’s most valued housing partner and to provide 

liquidity, access to credit, and affordability in all U.S. housing markets at all times. Fannie Mae does this while 

effectively managing and reducing risk to its business, taxpayers, and the housing finance system. Fannie Mae is 

advancing this vision by pursuing four strategic objectives: advancing a sustainable and reliable business model 

that reduces risk to the housing finance system and taxpayers; providing great service to its customers and 

partners, enabling them to serve the needs of American households more effectively; supporting and sustainably 

increasing access to credit and affordable housing; and building a simple, efficient, innovative, and continuously 

improving company. 
Second Quarter 2018 Results 6

Business Segments

Single-Family Business

Single-Family Segment Financial Results 2Q18 1Q18 Variance 2Q18 2Q17 Variance

(Dollars in millions)

Net interest income $ 4,723 $ 4,561 $ 162 $ 4,723 $ 4,366 $ 357

Fee and other income 69 158 (89) 69 111 (42)

Net revenues 4,792 4,719 73 4,792 4,477 315

Investment gains, net 252 242 10 252 321 (69)

Fair value gains (losses), net 278 1,034 (756) 278 (685) 963

Administrative expenses (649) (643) (6) (649) (600) (49)

Credit-related income 1,159 34 1,125 1,159 1,223 (64)

TCCA fees (565) (557) (8) (565) (518) (47)

Other expenses, net (270) (132) (138) (270) (155) (115)

Income before federal income taxes 4,997 4,697 300 4,997 4,063 934

Provision for federal income taxes (1,044) (1,016) (28) (1,044) (1,401) 357

Net income $ 3,953 $ 3,681 $ 272 $ 3,953 $ 2,662 $ 1,291

Financial Results

• Single-Family net income was $4.0 billion in the second quarter of 2018, compared with $3.7 billion in the 

first quarter of 2018. The increase in net income in the second quarter of 2018 was driven primarily by an 

increase in credit-related income due to the redesignation of loans from held-for-investment to held-for-sale, 

as well as other factors, including an improvement in home prices during the quarter. The increase was 

partially offset by lower fair value gains in the second quarter of 2018 compared with the first quarter of 

2018. 

Business Highlights 

• The single-family guaranty book of business continued to grow in the second quarter of 2018, while the 

average charged guaranty fee (net of TCCA fees) on the single-family guaranty book remained relatively flat 

in the second quarter compared to the prior quarter at 43 basis points.

• Fannie Mae’s Single-Family business provided $111 billion in liquidity to the mortgage market in the second 

quarter of 2018, which enabled 298,000 home purchases and 179,000 refinancings.

• The single-family serious delinquency rate decreased to 0.97% as of June 30, 2018 from 1.24% as of 

December 31, 2017. The company’s serious delinquency rate declined in the first half of 2018 primarily 

because many delinquent borrowers, including those in areas affected by Hurricanes Harvey, Irma, and 

Maria (collectively, the hurricanes), have resolved their loan delinquencies by obtaining loan modifications 

or through resuming payments and becoming current on their loans.
Second Quarter 2018 Results 7

Multifamily Business

Multifamily Segment Financial Results 2Q18 1Q18 Variance 2Q18 2Q17 Variance

(Dollars in millions)

Net interest income $ 654 $ 671 $ (17) $ 654 $ 636 $ 18

Fee and other income 170 162 8 170 242 (72)

Net revenues 824 833 (9) 824 878 (54)

Fair value gains (losses), net (49) 11 (60) (49) (6) (43)

Administrative expenses (106) (107) 1 (106) (86) (20)

Credit-related income (expense) (2) 21 (23) (2) 10 (12)

Other expenses, net (71) (63) (8) (71) (72) 1

Income before federal income taxes 596 695 (99) 596 724 (128)

Provision for federal income taxes (92) (115) 23 (92) (186) 94

Net income $ 504 $ 580 $ (76) $ 504 $ 538 $ (34)

Financial Results

• Multifamily net income was $504 million in the second quarter of 2018, compared with $580 million in the 

first quarter of 2018. The decrease in net income in the second quarter of 2018 was driven primarily by a 

shift to fair value losses in the second quarter from fair value gains in the first quarter. The fair value losses 

in the second quarter were primarily the result of losses on commitments as a result of increasing interest 

rates during the commitment periods. 

Business Highlights 

• The multifamily guaranty book of business continued to grow in the second quarter of 2018, while the 

average charged guaranty fee on the multifamily guaranty book remained relatively flat as of June 30, 2018

compared to the prior quarter end at 79 basis points.

• New multifamily business volume was $14.5 billion in the second quarter of 2018, an increase from $11.3 

billion in the first quarter of 2018. Multifamily new business volume totaled $25.8 billion for the first half of 

2018, of which approximately 36% counted toward the Federal Housing Finance Agency’s (FHFA) 2018 

multifamily volume cap.

• Fannie Mae supported 188,000 units of multifamily housing in the second quarter of 2018. More than 90% 

of the multifamily units the company financed were affordable to families earning at or below 120% of the 

area median income, providing support for both affordable and workforce housing. 

• The multifamily serious delinquency rate decreased to 0.10% as of June 30, 2018 from 0.11% as of 

December 31, 2017.
Second Quarter 2018 Results 8

CREDIT RISK TRANSFER TRANSACTIONS

In late 2013, Fannie Mae began entering into credit risk transfer transactions with the goal of transferring, to the 

extent economically sensible, a portion of the mortgage credit risk on some of the recently acquired loans in its 

single-family book of business in order to reduce the economic risk to the company and taxpayers of future 

borrower defaults. Fannie Mae’s primary method of achieving this goal has been through the issuance of its 

Connecticut Avenue Securities® (CAS) and its Credit Insurance Risk TransferTM (CIRTTM) transactions. In these 

transactions, the company transfers to investors a portion of the credit risk associated with losses on a reference 

pool of mortgage loans and in exchange pays investors a premium that effectively reduces the guaranty fee income 

the company retains on the loans.

As a part of Fannie Mae’s continued effort to innovate and improve the company’s credit risk transfer programs, the 

company is in the process of executing an enhancement to its credit risk transfer securities that will enable the 

company to structure future CAS offerings as notes issued by a trust that qualifies as a Real Estate Mortgage 

Investment Conduit (REMIC). In order to facilitate this change, the company began making a REMIC tax election on 

a majority of single-family loans it acquires and guarantees, beginning with loans in MBS pools issued on and after 

May 1, 2018. This proposed REMIC structure differs from the current CAS notes that are issued as Fannie Mae 

corporate debt. Under the current CAS structure, there can be a significant lag between the time when Fannie Mae 

recognizes a provision for credit losses and when the company recognizes the related recovery from the CAS 

transaction. Under current accounting rules, while a credit expense on a loan in a reference pool for a CAS 

transaction is recorded when it is probable that Fannie Mae has incurred a loss, for the company’s CAS issued 

beginning in 2016, a recovery is recorded only when an actual loss event occurs, which is typically several months 

after the collateral has been liquidated. The proposed new CAS structure will eliminate this timing mismatch, 

allowing Fannie Mae to recognize the credit loss protection benefit at the same time the credit loss is recognized in 

the company’s condensed consolidated financial statements. 

The proposed enhancements to the company’s CAS program are designed to promote the continued growth of the 

market by expanding the potential investor base for these securities, and limiting investor exposure to Fannie Mae 

counterparty risk, without disrupting the To-Be-Announced (TBA) MBS market. Fannie Mae may issue a CAS under 

the new REMIC structure later this year, subject to FHFA approval, market conditions, and other factors.

CREDIT QUALITY

While continuing to make it possible for families to buy, refinance, or rent homes, Fannie Mae has maintained 

responsible credit standards. Fannie Mae monitors various loan attributes, in conjunction with housing market and 

economic conditions, to determine if its pricing, eligibility, and underwriting criteria accurately reflect the risks 

associated with loans the company acquires or guarantees. Single-family conventional loans acquired by Fannie 

Mae in the second quarter of 2018 had a weighted average borrower FICO credit score at origination of 743 and a 

weighted average original loan-to-value ratio of 77%.
Second Quarter 2018 Results 9

__________

(1) Calculated as of the date indicated based on the number of single-family conventional loans that were 90 days or more past 

due and loans that had been referred to foreclosure but not yet foreclosed upon, divided by the number of loans in Fannie 

Mae’s single-family conventional guaranty book of business. 

Fannie Mae’s single-family serious delinquency rate was 0.97% as of June 30, 2018, compared with 1.24% as of 

December 31, 2017 and 1.01% as of June 30, 2017. The company’s serious delinquency rate increased in the latter 

part of 2017 due to the impact of the hurricanes, but has since resumed its prior downward trend because many 

delinquent borrowers, including those in areas affected by the hurricanes, have resolved their loan delinquencies by 

obtaining loan modifications or through resuming payments and becoming current on their loans. The company 

expects modification activity in areas affected by the hurricanes to slow down in the second half of the year as 

delinquency rates in the affected areas continue to fall. The company expects its single-family serious delinquency 

rate to continue to decline, but at a more modest pace than in the past several years, and to experience period-toperiod fluctuations.

FINANCIAL PERFORMANCE OUTLOOK

Fannie Mae expects to remain profitable on an annual basis for the foreseeable future; however, certain factors 

could result in significant volatility in the company’s financial results from quarter to quarter or year to year. Fannie 

Mae expects volatility from quarter to quarter in its financial results due to a number of factors, particularly changes 

in market conditions that result in fluctuations in the estimated fair value of the financial instruments that it marks to 

market through its earnings. Other factors that may result in volatility in the company’s quarterly financial results 

include developments that affect its loss reserves, such as changes in interest rates, home prices or accounting 

standards, or events such as natural disasters.

The potential for significant volatility in the company’s financial results could result in a net loss in a future quarter. 

The company is permitted to retain up to $3.0 billion in capital reserves as a buffer in the event of a net loss in a 

future quarter. However, any net loss the company experiences in the future could be greater than the amount of its 

capital reserves, resulting in a net worth deficit for that quarter. See “Risk Factors” in the company’s Form 10-K for 

the year ended December 31, 2017 (2017 Form 10-K) for a discussion of the risks associated with the limitations on 

the company’s ability to rebuild its capital reserves, including factors that could result in a net loss or net worth 

deficit in a future quarter. 
Second Quarter 2018 Results 10

ABOUT FANNIE MAE’S CONSERVATORSHIP AND AGREEMENTS WITH TREASURY

Fannie Mae has operated under the conservatorship of FHFA since September 6, 2008. Treasury has made a 

commitment under a senior preferred stock purchase agreement to provide funding to Fannie Mae under certain 

circumstances if the company has a net worth deficit. Pursuant to this agreement and the senior preferred stock the 

company issued to Treasury in 2008, the conservator has declared and directed Fannie Mae to pay dividends to 

Treasury on a quarterly basis for every dividend period for which dividends were payable since the company 

entered into conservatorship in 2008.

The chart below shows the funds Fannie Mae has drawn from Treasury pursuant to the senior preferred stock 

purchase agreement, as well as the dividend payments the company has made to Treasury on the senior preferred 

stock, since entering into conservatorship. 

__________

(1) Under the terms of the senior preferred stock purchase agreement, dividend payments the company makes to Treasury do 

not offset prior draws of funds from Treasury, and the company is not permitted to pay down draws it has made under the 

agreement except in limited circumstances. Amounts may not sum due to rounding.

(2) Treasury draws are shown in the period for which requested, not when the funds were received by the company. Draw 

requests have been funded in the quarter following a net worth deficit.

Fannie Mae expects to pay Treasury a third quarter 2018 dividend of $4.5 billion by September 30, 2018. The 

current dividend provisions of the senior preferred stock provide for quarterly dividends consisting of the amount, if 

any, by which the company’s net worth as of the end of the immediately preceding fiscal quarter exceeds a $3.0 

billion capital reserve amount. The company refers to this as a “net worth sweep” dividend. The company’s net 

worth was $7.5 billion as of June 30, 2018.

If Fannie Mae experiences a net worth deficit in a future quarter, the company will be required to draw additional 

funds from Treasury under the senior preferred stock purchase agreement to avoid being placed into receivership. 

As of the date of this release, the maximum amount of remaining funding under the agreement is $113.9 billion. If 

the company were to draw additional funds from Treasury under the agreement in respect of a future period, the 

amount of remaining funding under the agreement would be reduced by the amount of its draw. Dividend payments 

Fannie Mae makes to Treasury do not restore or increase the amount of funding available to the company under the 
Second Quarter 2018 Results 11

agreement. For a description of the terms of the senior preferred stock purchase agreement and the senior 

preferred stock, see “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in the 

company’s 2017 Form 10-K. 

Fannie Mae’s financial statements for the second quarter of 2018 are available in the accompanying Annex; 

however, investors and interested parties should read the company’s quarterly report on Form 10-Q for the quarter 

ended June 30, 2018 (Second Quarter 2018 Form 10-Q), which was filed today with the Securities and Exchange 

Commission and is available on Fannie Mae’s website, www.fanniemae.com. The company provides further 

discussion of its financial results and condition, credit performance, and other matters in its Second Quarter 2018

Form 10-Q. Additional information about the company’s financial and credit performance is contained in the “Fannie 

Mae Quarterly Financial Supplement” for the second quarter of 2018 at www.fanniemae.com.

# # #

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

statements regarding: future dividend payments on the senior preferred stock; the company’s profitability, financial condition and results of 

operations, and the factors that will affect the company’s profitability, financial condition and results of operations; the company’s future credit risk 

transfer activity and the impact of such activity; and the company’s future serious delinquency rates and the factors that will affect the company’s 

single-family serious delinquency rates. These estimates, forecasts, expectations, and statements are forward-looking statements based on the 

company’s current assumptions regarding numerous factors. 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; the company’s future guaranty fee pricing and the impact of that 

pricing on the company’s guaranty fee revenues and competitive environment; government policy; credit availability; changes in borrower 

behavior; the volume of loans it modifies; the effectiveness of its loss mitigation strategies; significant changes in modification and foreclosure 

activity; the volume and pace of future nonperforming and reperforming loan sales and their impact on the company’s results and serious 

delinquency rates; the effectiveness of its management of its real estate owned inventory and pursuit of contractual remedies; changes in the fair 

value of its assets and liabilities; future legislative or regulatory requirements or changes that have a significant impact on the company’s 

business, such as the enactment of housing finance reform legislation; actions by FHFA, Treasury, the Department of Housing and Urban 

Development or other regulators that affect the company’s business; the size, composition and quality of the company’s guaranty book of 

business and retained mortgage portfolio; the company’s market share; the life of the loans in the company’s guaranty book of business; 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, in its role as the company’s conservator or as its regulator, such as changes in the type of business the company 

does or the implementation of the Single Security Initiative; limitations on the company’s business imposed by FHFA, in its role as the company’s 

conservator or as its regulator; 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; challenges the company faces in retaining and hiring qualified executives and other 

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 implementation of 

the Federal Reserve’s balance sheet normalization program; 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 

company’s reliance on and the performance of the company’s servicers; conditions in the foreclosure environment; global political risks; natural 

disasters, environmental disasters, terrorist attacks, pandemics, or other major disruptive events; cyber attacks or other information security 

breaches or threats; and many other factors, including those discussed in the “Risk Factors” and “Forward-Looking Statements” sections of and 

elsewhere in the company’s 2017 Form 10-K, Second Quarter 2018 Form 10-Q, and elsewhere in this release.

Fannie Mae provides website addresses in its news releases solely for readers’ information. Other content or information appearing on these 

websites is not part of this release. 

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with 

lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home 

buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.
Second Quarter 2018 Results 12

ANNEX

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions, except share amounts)

As of

June 30, December 31,

2018 2017

ASSETS

Cash and cash equivalents $ 20,853 $ 32,110

Restricted cash (includes $22,774 and $22,132, respectively, related to consolidated trusts) 27,876 28,150

Federal funds sold and securities purchased under agreements to resell or similar arrangements 16,300 19,470

Investments in securities:

Trading, at fair value (includes $3,363 and $747, respectively, pledged as collateral) 42,381 34,679

Available-for-sale, at fair value 3,723 4,843

Total investments in securities 46,104 39,522

Mortgage loans:

Loans held for sale, at lower of cost or fair value 14,323 4,988

Loans held for investment, at amortized cost:

Of Fannie Mae 140,154 162,809

Of consolidated trusts 3,070,959 3,029,812

Total loans held for investment (includes $9,628 and $10,596, respectively, at fair value) 3,211,113 3,192,621

Allowance for loan losses (16,812) (19,084)

Total loans held for investment, net of allowance 3,194,301 3,173,537

Total mortgage loans 3,208,624 3,178,525

Deferred tax assets, net 15,375 17,350

Accrued interest receivable, net (includes $7,702 and $7,560, respectively, related to consolidated trusts) 8,256 8,133

Acquired property, net 2,816 3,220

Other assets 17,160 19,049

Total assets $ 3,363,364 $ 3,345,529

LIABILITIES AND EQUITY (DEFICIT)

Liabilities:

Accrued interest payable (includes $8,751 and $8,598, respectively, related to consolidated trusts) $ 9,825 $ 9,682

Debt:

Of Fannie Mae (includes $7,558 and $8,186, respectively, at fair value) 250,690 276,752

Of consolidated trusts (includes $26,675 and $30,493, respectively, at fair value) 3,086,799 3,053,302

Other liabilities (includes $353 and $492, respectively, related to consolidated trusts) 8,591 9,479

Total liabilities 3,355,905 3,349,215

Commitments and contingencies (Note 14) — —

Fannie Mae stockholders’ equity (deficit):

Senior preferred stock, 1,000,000 shares issued and outstanding 120,836 117,149

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

1,158,087,567 shares outstanding 687 687

Accumulated deficit (126,143) (133,805)

Accumulated other comprehensive income 349 553

Treasury stock, at cost, 150,675,136 shares (7,400) (7,400)

Total stockholders’ equity (deficit) (See Note 1: Senior Preferred Stock Purchase Agreement and

Senior Preferred Stock for information on our dividend obligation to Treasury) 7,459 (3,686)

Total liabilities and equity (deficit) $ 3,363,364 $ 3,345,529

See Notes to Condensed Consolidated Financial Statements in the Second Quarter 2018 Form 10-Q
Second Quarter 2018 Results 13

FANNIE MAE

(In conservatorship)

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

(Dollars in millions, except share amounts)

For the Three Months For the Six Months

Ended June 30, Ended June 30,

2018 2017 2018 2017

Interest income:

Trading securities $ 318 $ 176 $ 554 $ 318

Available-for-sale securities 50 91 121 192

Mortgage loans (includes $26,521 and $25,033, respectively, for the three months

ended and $52,819 and $49,987, respectively, for the six months ended related to

consolidated trusts) 28,307 27,011 56,341 54,058

Other 182 115 355 209

Total interest income 28,857 27,393 57,371 54,777

Interest expense:

Short-term debt (110) (57) (217) (101)

Long-term debt (includes $21,896 and $20,705, respectively, for the three months

ended and $43,611 and $41,013, respectively, for the six months ended related to

consolidated trusts) (23,370) (22,334) (46,545) (44,328)

Total interest expense (23,480) (22,391) (46,762) (44,429)

Net interest income 5,377 5,002 10,609 10,348

Benefit for credit losses 1,296 1,267 1,513 1,663

Net interest income after benefit for credit losses 6,673 6,269 12,122 12,011

Investment gains, net 277 385 527 376

Fair value gains (losses), net 229 (691) 1,274 (731)

Fee and other income 239 353 559 602

Non-interest income 745 47 2,360 247

Administrative expenses:

Salaries and employee benefits (365) (332) (746) (676)

Professional services (254) (234) (497) (463)

Other administrative expenses (136) (120) (262) (231)

Total administrative expenses (755) (686) (1,505) (1,370)

Foreclosed property expense (139) (34) (301) (251)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (565) (518) (1,122) (1,021)

Other expenses, net (366) (291) (569) (673)

Total expenses (1,825) (1,529) (3,497) (3,315)

Income before federal income taxes 5,593 4,787 10,985 8,943

Provision for federal income taxes (1,136) (1,587) (2,267) (2,970)

Net income 4,457 3,200 8,718 5,973

Other comprehensive income (loss):

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

adjustments and taxes 4 (81) (316) (73)

Other (2) (2) (5) (4)

Total other comprehensive income (loss) 2 (83) (321) (77)

Total comprehensive income $ 4,459 $ 3,117 $ 8,397 $ 5,896

Net income $ 4,457 $ 3,200 $ 8,718 $ 5,973

Dividends distributed or available for distribution to senior preferred stockholder (4,459) (3,117) (5,397) (5,896)

Net income (loss) attributable to common stockholders $ (2) $ 83 $ 3,321 $ 77

Earnings (loss) per share:

Basic $ 0.00 $ 0.01 $ 0.58 $ 0.01

Diluted 0.00 0.01 0.56 0.01

Weighted-average common shares outstanding:

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

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

See Notes to Condensed Consolidated Financial Statements in the Second Quarter 2018 Form 10-Q
Second Quarter 2018 Results 14

FANNIE MAE

(In conservatorship)

 Condensed Consolidated Statements of Cash Flows — (Unaudited)

(Dollars in millions)

For the Six Months

Ended June 30,

2018 2017

Net cash provided by (used in) operating activities $ (1,675) $ (3,626)

Cash flows provided by investing activities:

Proceeds from maturities and paydowns of trading securities held for investment 141 937

Proceeds from sales of trading securities held for investment 96 124

Proceeds from maturities and paydowns of available-for-sale securities 417 1,214

Proceeds from sales of available-for-sale securities 672 922

Purchases of loans held for investment (86,615) (90,180)

Proceeds from repayments of loans acquired as held for investment of Fannie Mae 7,945 12,835

Proceeds from sales of loans acquired as held for investment of Fannie Mae 2,555 2,361

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 202,923 208,576

Advances to lenders (55,151) (57,533)

Proceeds from disposition of acquired property and preforeclosure sales 4,848 6,874

Net change in federal funds sold and securities purchased under agreements to resell or similar

arrangements 3,170 1,195

Other, net (495) (208)

Net cash provided by investing activities 80,506 87,117

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae 473,373 489,301

Payments to redeem debt of Fannie Mae (499,674) (510,340)

Proceeds from issuance of debt of consolidated trusts 172,507 181,764

Payments to redeem debt of consolidated trusts (239,297) (250,251)

Payments of cash dividends on senior preferred stock to Treasury (938) (8,250)

Proceeds from senior preferred stock purchase agreement with Treasury 3,687 —

Other, net (20) 11

Net cash used in financing activities (90,362) (97,765)

Net decrease in cash, cash equivalents and restricted cash (11,531) (14,274)

Cash, cash equivalents and restricted cash at beginning of period 60,260 62,177

Cash, cash equivalents and restricted cash at end of period $ 48,729 $ 47,903

Cash paid during the period for:

Interest $ 54,408 $ 56,207

Income taxes 460 1,070

See Notes to Condensed Consolidated Financial Statements in the Second Quarter 2018 Form 10-Q