Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States of America (“GAAP”). To conform to our current-period presentation, we have

reclassified certain amounts reported in our prior period consolidated financial statements.

Principles of Consolidation

Our consolidated financial statements include our accounts as well as the accounts of the other entities in which we

have a controlling financial interest. All intercompany balances and transactions have been eliminated. The typical

condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. A controlling

financial interest may also exist in an entity such as a variable interest entity (“VIE”) through arrangements that do not

involve voting interests, such as control over the servicing of the collateral held by the VIE. Fannie Mae’s controlling

interest generally arises from arrangements with VIEs.

We consolidate VIEs when we have a controlling financial interest in the VIE and are therefore considered the primary

beneficiary of the VIE. We are the primary beneficiary of a VIE when we have both the power to direct the activities of

the VIE that most significantly impact its economic performance and exposure to losses or benefits of the VIE that could

potentially be significant to the VIE. The primary beneficiary determination may change over time as our interest in the

VIE changes. Therefore, we evaluate whether we are the primary beneficiary of VIEs in which we have variable

interests at both inception and on an ongoing basis. Generally, the assets of our consolidated VIEs can be used only to

settle obligations of the VIE, and the creditors of our consolidated VIEs do not have recourse to Fannie Mae, except

when we provide a guarantee to the VIE.

The measurement of assets and liabilities of VIEs that we consolidate depends on whether we are the transferor of

assets into a VIE. When we are the transferor of assets into a VIE that we consolidate at the time of the transfer, we

continue to recognize the assets and liabilities of the VIE at the amounts that they would have been recognized if we

had not transferred the assets and no gain or loss is recognized. We are the transferor to the VIEs created during our

portfolio securitizations; this execution occurs when we purchase loans from third-party sellers for cash and later deposit

these loans into an MBS trust. The securities issued through a portfolio securitization are then sold to investors for cash.

When we are not the transferor of assets into a VIE that we consolidate, we recognize the assets and liabilities of the

VIE in our consolidated financial statements at fair value and a gain or loss for the difference between (1) the fair value

of the consideration paid, fair value of noncontrolling interests and the reported amount of any previously held interests,

and (2) the net amount of the fair value of the assets and liabilities recognized upon consolidation. However, for the

VIEs established under our lender swap program, we do not recognize a gain or loss if the VIEs are consolidated at

formation as there is no difference in the respective fair value of (1) and (2) above. We record gains or losses that are

associated with the consolidation of VIEs as a component of “Investment gains (losses), net” in our consolidated

statements of operations and comprehensive income. A lender swap transaction occurs when a mortgage lender

delivers a pool of loans to us, which we immediately deposit into an MBS trust.

If we cease to be deemed the primary beneficiary of a VIE, we deconsolidate the VIE. We use fair value to measure the

initial cost basis for any retained interests that are recorded upon the deconsolidation of a VIE. Any difference between

the fair value and the previous carrying amount of our investment in the VIE is recorded in “Investment gains (losses),

net” in our consolidated statements of operations and comprehensive income.

We do not consolidate VIEs when we are not deemed to be the primary beneficiary.

Cash Equivalents and Restricted Cash

Short-term investments that have a maturity at the date of acquisition of three months or less and are readily convertible

to known amounts of cash are generally considered cash equivalents. We also include securities purchased under

agreements to resell on an overnight basis in “Cash and cash equivalents” in our consolidated balance sheets. We may

pledge as collateral certain short-term investments classified as cash equivalents.

“Restricted cash and cash equivalents” in our consolidated balance sheets primarily represents cash held in accounts

that are for the benefit of MBS certificateholders (inclusive of amounts that have been advanced by us under the terms

of our guaranty) that will be distributed to the MBS certificateholders on a future date in accordance with the terms of the

MBS trust agreements. Fannie Mae, in its role as trustee, invests funds held by consolidated trusts directly in eligible

short-term third-party investments, which may include investments in cash equivalents that are composed of overnight

repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less. The

funds underlying these short-term investments are restricted per the MBS trust agreements. Cash may also be

recognized as restricted cash for certain collateral arrangements for which we do not have the right to use the cash.

Investments in Securities

We classify and account for our investments in securities as either trading or available-for-sale (“AFS”).

Both trading and AFS securities are measured at fair value in our consolidated balance sheets and the related purchase

discounts or premiums are amortized into interest income on a level-yield basis over the contractual term of the security.

When securities are sold, we recognize realized gains (losses) on AFS securities using the specific identification

method.

Gains (losses) are classified in the consolidated statements of operations and comprehensive income as follows.


	Classification
	Trading	AFS
Unrealized gains (losses)	Fair value gains (losses), net	Other comprehensive income (loss)
Realized gains (losses)	Fair value gains (losses), net	Investment gains (losses), net

An AFS security is impaired if the fair value of the security is less than its amortized cost. The amount of impairment that

represents credit loss is recorded in “Benefit (provision) for credit losses” in our consolidated statements of operations

and comprehensive income.

When we own Fannie Mae MBS issued by unconsolidated trusts, the asset is recorded in “Investments in securities, at

fair value” in our consolidated balance sheets. We determine the fair value of Fannie Mae MBS based on observable

market prices because most Fannie Mae MBS are actively traded. For any subsequent purchase or sale of Fannie Mae

MBS issued by unconsolidated trusts, we continue to account for any outstanding recorded amounts associated with the

guaranty transaction on the same basis of accounting. We do not derecognize any components of the guaranty assets,

guaranty obligations, or any other outstanding recorded amounts associated with the guaranty transaction for the

Fannie Mae MBS because our contractual obligation to the MBS trust remains in force until the trust is liquidated.

Loans Held for Investment

When we acquire loans that we have the ability and the intent to hold for the foreseeable future or until maturity, we

classify the loans as HFI. When we consolidate a securitization trust, we recognize the loans underlying the trust in our

consolidated balance sheets. The trusts do not have the ability to sell loans and the use of such loans is limited

exclusively to the settlement of obligations of the trusts. Therefore, loans acquired when we have the intent to securitize

via consolidated trusts are generally classified as HFI in our consolidated balance sheets both prior to and subsequent

to their securitization.

In the presentation of our consolidated statements of cash flows, we present principal cash flows from loans classified

as HFI as investing activities and interest cash flows as operating activities.

We report the carrying value of HFI loans at the unpaid principal balance (“UPB”), net of unamortized premiums and

discounts, other cost basis adjustments, and allowance for loan losses. We define the amortized cost of HFI loans as

UPB and accrued interest receivable, net, including any unamortized premiums, discounts, and other cost basis

adjustments. We present accrued interest receivable separately from the amortized cost of our HFI loans in our

consolidated balance sheets. We recognize interest income on HFI loans on an accrual basis using the effective yield

method over the contractual life of the loan, including the amortization of any deferred cost basis adjustments, such as

the premium or discount at acquisition, unless we determine that the ultimate collection of contractual principal or

interest payments in full is not reasonably assured.

we report the amortized cost of HFI loans for which we

have not elected the fair value option at the unpaid principal balance, net of unamortized premiums and discounts,

hedge-related basis adjustments, other cost basis adjustments, and accrued interest receivable. Within our consolidated

balance sheets, we present accrued interest receivable, net separately from the amortized cost of our loans held for

investment.

Advances to Lenders

Advances to lenders represent our payments of cash in exchange for the receipt of loans from lenders in a transfer that

is accounted for as a secured lending arrangement. These transfers primarily occur when we provide early funding to

lenders for loans that they will subsequently either sell to us or securitize into a Fannie Mae MBS that they will deliver to

us. We individually negotiate early lender funding advances with our lenders. Early lender funding advances have terms

up to 60 days and earn a short-term market rate of interest.

We report cash outflows from advances to lenders as an investing activity in our consolidated statements of cash flows.

Settlements of the advances to lenders, other than through lender repurchases of loans, are not collected in cash, but

rather in the receipt of either loans or Fannie Mae MBS. Accordingly, this activity is reflected as non-cash supplemental

information, which is disclosed in the “Non-Cash Activities Related to Mortgage Loans” table of “Note 4, Mortgage

Loans” in the line item entitled “Mortgage loans received by consolidated trusts to satisfy advances to lenders.”

Derivative Instruments

We recognize derivatives in a gain position in “Other assets” and derivatives in a loss position in “Other liabilities” in our

consolidated balance sheets at their fair value on a trade date basis. Changes in fair value and interest accruals on

derivatives not in qualifying fair value hedging relationships are recorded as “Fair value gains (losses), net” in our

consolidated statements of operations and comprehensive income. We offset the carrying amounts of certain

derivatives that are in gain positions and loss positions as well as cash collateral receivables and payables associated

with derivative positions pursuant to the terms of enforceable master netting arrangements. We offset these amounts

only when we have the legal right to offset under the contract and we have met all the offsetting conditions. For our

over-the-counter (“OTC”) derivative positions, our master netting arrangements allow us to net derivative assets and

liabilities with the same counterparty. For our cleared derivative contracts, our master netting arrangements allow us to

net our exposure by clearing organization and by clearing member.

We present cash flows from derivatives that do not contain financing elements and their related gains and losses as

operating activities in our consolidated statements of cash flows.

We evaluate financial instruments that we purchase or issue and other financial and non-financial contracts for

embedded derivatives. To identify embedded derivatives that we must account for separately, we determine whether: (1)

the economic characteristics of the embedded derivative are not clearly and closely related to the economic

characteristics of the financial instrument or other contract (i.e., the host contract); (2) the financial instrument or other

contract itself is not already measured at fair value with changes in fair value included in earnings; and (3) a separate

instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the embedded

derivative meets all three of these conditions, we elect to carry the hybrid contract in its entirety at fair value with

changes in fair value recorded in earnings.

Fair Value Hedge Accounting

To reduce earnings volatility related to changes in benchmark interest rates, we apply fair value hedge accounting to

certain pools of single-family loans and certain issuances of our funding debt by designating such instruments as the

hedged item in hedging relationships with interest-rate swaps. In these relationships, we have designated the change in

the benchmark interest rate, the Secured Overnight Financing Rate (“SOFR”), as the risk being hedged. We have

elected to use the portfolio layer method to hedge certain pools of single-family loans. This election involves

establishing fair value hedging relationships on the portion of each loan pool that is not expected to be affected by

prepayments, defaults and other events that affect the timing and amount of cash flows. The term of each hedging

relationship is generally one business day and we establish hedging relationships each business day to align our hedge

accounting with our risk management practices.

We apply hedge accounting to qualifying hedging relationships. A qualifying hedging relationship exists when changes

in the fair value of a derivative hedging instrument are expected to be highly effective in offsetting changes in the fair

value of the hedged item attributable to the risk being hedged during the term of the hedging relationship. We assess

hedge effectiveness using statistical regression analysis. A hedging relationship is considered highly effective if the total

change in fair value of the hedging instrument and the change in the fair value of the hedged item due to changes in the

benchmark interest rate offset each other within a range of 80% to 125% and certain other statistical tests are met.

If a hedging relationship qualifies for hedge accounting, the change in the fair value of the interest-rate swap and the

change in the fair value of the hedged item for the risk being hedged are recorded through net interest income. A

corresponding basis adjustment is recorded against the hedged item, either the pool of loans or the debt, for the

changes in the fair value attributable to the risk being hedged. For hedging relationships that hedge pools of single-

family loans, basis adjustments are allocated to individual single-family loans based on the relative UPB of each loan at

the termination of the hedging relationship. The cumulative basis adjustments on the hedged item are amortized into

earnings using the effective interest method over the contractual life of the hedged item, with amortization beginning

upon termination of the hedging relationship.

All changes in fair value of the designated portion of the derivative hedging instrument (i.e., interest-rate swap),

including interest accruals, are recorded in the same line item in the consolidated statements of operations and

comprehensive income used to record the earnings effect of the hedged item. Therefore, changes in the fair value of the

hedged loans and debt attributable to the risk being hedged are recognized in “Interest income” or “Interest expense,”

respectively, along with the changes in the fair value of the respective derivative hedging instruments.

The recognition of basis adjustments on the hedged item and the subsequent amortization are noncash activities and

are removed from net income to derive the “Net cash provided by (used in) operating activities” in our consolidated

statements of cash flows. Cash paid or received on designated derivative instruments during a hedging relationship is

reported as “Net cash provided by (used in) operating activities” in the consolidated statements of cash flows.

Commitments to Purchase and Sell Loans and Securities

We enter into commitments to purchase and sell mortgage-backed securities and to purchase single-family and

multifamily loans. Certain of these commitments to purchase or sell mortgage-backed securities and to purchase single-

family loans are accounted for as derivatives, while other commitments are not within the scope of the derivative

accounting criteria or do not meet the definition of a derivative.

Our commitments for the purchase and sale of regular way securities trades are exempt from derivative accounting and

are recorded on their trade date.

When derivative purchase commitments settle, we include the fair value on the settlement date in the cost basis of the

loan or unconsolidated security we purchase. When derivative commitments to sell securities settle, we include the fair

value of the commitment on the settlement date in the cost basis of the security we sell. Purchases and sales of

securities issued by our consolidated single-class securitization trusts and certain resecuritization trusts where the

security that has been issued by the trust is substantially the same as the underlying collateral are treated as

extinguishments or issuances of the underlying MBS debt, respectively. For commitments to purchase and sell

securities issued by these trusts, we recognize the fair value of the commitment on the settlement date as a component

of debt extinguishment gains and losses or in the cost basis of the debt issued, respectively.

We recognize all derivatives as either assets or liabilities in our consolidated balance sheets at their fair value on a trade-date basis. We record all gains and losses, including accrued interest, on derivatives while they are not in a qualifying hedging relationship in “Fair value gains (losses), net” in our consolidated statements of operations and comprehensive income.

Debt

Our consolidated balance sheets contain debt of Fannie Mae as well as debt of consolidated trusts. We report debt

issued by us as “Debt of Fannie Mae” and by consolidated trusts as “Debt of consolidated trusts.” Debt issued by us

represents debt that we issue to third parties to fund our general business activities and certain credit risk-sharing

securities. The debt of consolidated trusts represents the amount of Fannie Mae MBS issued from such trusts that is

held by third-party certificateholders and prepayable without penalty at any time. We report deferred items, including

premiums, discounts and other cost basis adjustments, as adjustments to the related debt balances in our consolidated

balance sheets. Our liability to third-party holders of Fannie Mae MBS that arises as the result of a consolidation of a

securitization trust is collateralized by the underlying loans and/or mortgage-related securities.

We classify interest expense as either short-term or long-term based on the contractual maturity of the related debt. We

recognize the amortization of premiums, discounts and other cost basis adjustments through interest expense using the

effective interest method over the contractual term of the debt. Amortization of premiums, discounts and other cost basis

adjustments begins at the time of debt issuance.

We purchase and sell guaranteed MBS that have been issued through lender swap and portfolio securitization

transactions. When we purchase or sell a Fannie Mae MBS issued from a consolidated single-class securitization trust

and certain resecuritization trusts where the security that has been issued by the trust is substantially the same as the

underlying collateral, we extinguish or issue, respectively, the related debt of the consolidated trust to reflect the debt

that is owed to a third-party. For the extinguishment of debt, we record debt extinguishment gains or losses related to

debt of consolidated trusts for any difference between the purchase price of the MBS and the carrying value of the

related consolidated MBS debt reported in our consolidated balance sheets (including unamortized premiums, discounts

and other cost basis adjustments) at the time of purchase as a component of “Other expenses, net” in our consolidated

statements of operations and comprehensive income. When we issue consolidated debt, the debt is recorded at its fair

value with any premiums or discounts amortized over the securities’ contractual life.

Conservatorship

In September 2008, FHFA was appointed as our conservator pursuant to authority provided by the Federal Housing

Enterprises Financial Safety and Soundness Act of 1992, as amended (the “GSE Act”). Conservatorship is a statutory

process designed to preserve and conserve our assets and property and put the company in a sound and solvent

condition. Our conservatorship has no specified termination date.

FHFA, as conservator, succeeded to:

•all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae

with respect to Fannie Mae and its assets; and

•title to the books, records and assets of any other legal custodian of Fannie Mae.

As conservator, FHFA has broad authority over our business and operations, including the authority to:

•direct us to enter into contracts or enter into contracts on our behalf; and

•transfer or sell our assets or liabilities.

The GSE Act provides special protections for mortgage loans and mortgage-related assets we hold in trust. Specifically,

mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the

conservator for the beneficial owners of such MBS and cannot be used to satisfy the company’s general creditors.

While we are operating in conservatorship, our directors:

•serve on behalf of the conservator;

•exercise their authority as directed by and with the approval (where required) of the conservator;

•owe their fiduciary duties of care and loyalty solely to the conservator, and not to either the company or the

stockholders; and

•are elected by the conservator, not by our stockholders.

FHFA, as conservator, has issued an order authorizing our Board of Directors to exercise specified functions and

authorities, and instructions regarding matters for which conservator decision or notification is required. The conservator

retains the authority to amend or withdraw its order and instructions at any time.

The conservator has suspended stockholder meetings since conservatorship, and our common stockholders are not

empowered to vote on directors or any other matters. The conservator also eliminated dividends on our common and

preferred stock (other than dividends on the senior preferred stock issued to the U.S. Department of Treasury described

below) during the conservatorship.

Receivership

Under the GSE Act, the FHFA Director must place us into receivership if they determine that our assets are less than

our obligations (that is, we have a net worth deficit) or if we have not been paying our debts as they become due, in

either case, for a period of 60 days. FHFA has clarified that the 60-day measurement period will commence no earlier

than the SEC filing deadline for our Form 10-K or Form 10-Q for the relevant period. In addition, the FHFA Director may,

with the prior consent of Treasury, place us into receivership at the Director’s discretion at any time for other reasons set

forth in the GSE Act, including if we are critically undercapitalized or if we are undercapitalized and have no reasonable

prospect of becoming adequately capitalized. Should we be placed into receivership, different assumptions would be

required to determine the carrying value of our assets, which would likely lead to substantially different financial results.

We are not aware of any plans of FHFA: (1) to fundamentally change our business model, or (2) to reduce the

aggregate amount available under the senior preferred stock purchase agreement or held by the company under our

equity structure.

Financing Receivable, Loss Mitigation

As part of our loss mitigation activities, we may agree to modify the contractual terms of a loan to a borrower

experiencing financial difficulty. In addition to loan modifications, we also provide other loss mitigation options to assist

borrowers who experience financial difficulties.

Below we provide disclosures relating to loan restructurings where borrowers were experiencing financial difficulty,

including restructurings that resulted in an insignificant payment delay. The disclosures exclude loans classified as held

for sale and those for which we have elected the fair value option.Single-Family Loan Restructurings

We offer several types of restructurings to single-family borrowers that may result in a payment delay, interest rate

reduction, term extension, or combination thereof. We do not typically offer principal forgiveness.

We offer the following types of restructurings to single-family borrowers that only result in a payment delay:

•a forbearance plan is a short-term loss mitigation option which grants a period of time (typically in 6-month

increments and generally do not exceed a total of 12 months) during which the borrower’s monthly payment

obligations are reduced or suspended. A forbearance plan does not impact our reporting of when a loan is

considered past due, which remains based on the contractual terms of the loan. Borrowers may exit a

forbearance plan by repaying all past due amounts to fully reinstate the loan, paying off the loan in full, or

entering into another loss mitigation option, such as a repayment plan, a payment deferral, or a loan

modification.

•a repayment plan is a short-term loss mitigation option that allows borrowers a specific period of time to return

the loan to current status by paying the regular monthly payment plus additional agreed-upon delinquent

amounts (generally for a period up to 12 months and the monthly repayment plan amount must not exceed

150% of the contractual mortgage payment). A repayment plan does not impact our reporting of when a loan is

considered past due, which remains based on the contractual terms of the loan. At the end of the repayment

plan, the borrower resumes making the regular monthly payment; and

•a payment deferral is a loss mitigation option which defers the repayment of the delinquent principal and

interest payments and other eligible default-related amounts that were advanced on behalf of the borrower by

converting them into a non-interest-bearing balance due at the earlier of the payoff date, the maturity date, or

sale or transfer of the property. The remaining mortgage terms, interest rate, payment schedule, and maturity

date remain unchanged, and no trial period is required. The number of months of payments deferred varies

based on the types of hardships the borrower is facing.

We also offer single-family borrowers loan modifications, which contractually change the terms of the loan. Our loan

modification programs generally require completion of a trial period of three to four months where the borrower makes

reduced monthly payments prior to receiving the modification. During the trial period, the mortgage loan is not

contractually modified and continues to be reported as past due according to its contractual terms. The reduced

payments that are made by the borrower during the trial period will result in a payment delay with respect to the original

contractual terms of the loan. After successful completion of the trial period, and the borrower’s execution of a

modification agreement, the mortgage loan is contractually modified.

Loan modifications include the following concessions as necessary to achieve a targeted payment reduction as outlined

by our Servicing Guide:

•capitalization of past due amounts, a form of payment delay, which capitalizes interest and other eligible default

related amounts that were advanced on behalf of the borrower that are past due into the unpaid principal

balance; and

•a term extension, which may extend the contractual maturity date of the loan up to 40 years from the effective

date of the modification.

In addition to these concessions, loan modifications may also include an interest rate reduction, which reduces the

contractual interest rate of the loan, or a principal forbearance, which is another form of payment delay that includes

forbearing repayment of a portion of the principal balance as a non-interest bearing amount that is due at the earlier of

the payoff date, the maturity date, or sale or transfer of the property.

Multifamily Loan Restructurings

For multifamily borrowers, loan restructurings include short-term forbearance plans and loan modification programs,

which primarily result in term extensions of up to one year with no change to the loan’s interest rate. In certain cases,

we may make more significant modifications of terms for borrowers experiencing financial difficulty, such as reducing the

interest rate, converting to interest-only payments, extending the maturity for longer than one year, providing principal

forbearance, or some combination of these terms. In some instances when a loan is restructured, we may require

additional collateral, which may take the form of a guaranty from another entity, to further mitigate the risk of

nonperformance.

Our estimate of future credit losses uses a lifetime methodology, derived from modeled loan performance based on

extensive historical experience of loans with similar risk characteristics, adjusted to reflect current conditions and

reasonable and supportable forecasts. The historical loss experience used in our single-family and multifamily credit

loss models includes the impact of the loss mitigation options provided to borrowers experiencing financial difficulty, and

also includes the impact of projected loss severities as a result of a loan default

Earnings per Share

Earnings per share (“EPS”) is presented for basic and diluted EPS. However, as a result of our conservatorship status

and the terms of the senior preferred stock, no amounts would be available to distribute as dividends to common or

preferred stockholders (other than to Treasury as the holder of the senior preferred stock).

We compute basic EPS by dividing net income attributable to common stockholders by the weighted-average number of

shares of common stock outstanding during the period. Net income attributable to common stockholders excludes

amounts attributable to the senior preferred stock because such amounts increase the liquidation preference of the

senior preferred stock and therefore are required to be excluded from basic EPS. See further information on the senior

preferred stock above in “Senior Preferred Stock.”

Acquired Property, Net

When an insured loan held in our retained mortgage portfolio subsequently goes into foreclosure, we charge off the

loan, eliminating any previously-recorded loss reserves, and record REO and a mortgage insurance receivable for the

claim proceeds deemed probable of recovery, as appropriate. However, if a mortgage insurer rescinds, cancels or

denies insurance coverage, the initial receivable becomes due from the mortgage seller or servicer.

Derivatives, Offsetting

Derivative instruments are recorded at fair value and securities purchased under agreements to resell are recorded at

amortized cost in our consolidated balance sheets.

We determine our rights to offset the assets and liabilities presented above with the same counterparty, including

collateral posted or received, based on the contractual arrangements entered into with our individual counterparties and

various rules and regulations that would govern the insolvency of a derivative counterparty.

Fair Value of Financial Instruments

The fair value of

financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that

we do not record in our consolidated balance sheets. The fair values of these commitments are included as “Mortgage

loans held for investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments;

therefore, the fair value of our financial assets and liabilities does not represent the underlying fair value of our total

consolidated assets and liabilities.

Commitments to Purchase and Sell Mortgage Loans and Securities

We have unconditional commitments related to the purchase of loans and mortgage-related securities. These are

primarily mortgage commitment derivatives and include both on- and off-balance sheet commitments. A portion of these

have been recorded as derivatives in our consolidated balance sheets.