FHLB Cincinnati Announces First Quarter 2016 Results

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Federal Home Loan Bank of Cincinnati

Apr 26, 2016, 09:54 ET

CINCINNATI, April 26, 2016 /PRNewswire/ -- The Federal Home Loan Bank of Cincinnati (the FHLB) today released unaudited financial results for the first quarter ended March 31, 2016. The FHLB expects to file its first quarter 2016 Form 10-Q with the Securities and Exchange Commission on or about May 5, 2016.

Operating Results and Profitability

For the first quarter, net income was $48 million and return on average equity (ROE) was 3.83 percent. This compares to net income of $61 million and ROE of 4.97 percent for the same period of 2015.
The lower net income and ROE resulted primarily from non-interest losses of $4 million in the first three months of 2016 compared with non-interest income of $8 million in the same period of 2015. The $12 million reduction in non-interest income was primarily caused by unrealized fair value adjustments on derivatives, hedged items and other financial instruments carried at fair value.
The FHLB's profitability in the first quarter of 2016 supported its commitment to affordable housing.

Dividend

The FHLB paid its stockholders a cash dividend on March 17, 2016 at a 4.00 percent annualized rate, which was 3.38 percentage points above the first quarter average 3-month LIBOR.

Housing and Community Investment

The FHLB's net income in the first quarter of 2016 results in a set aside of $6 million to the Affordable Housing Program (AHP) pool of funds to be awarded to members in 2017. Since the AHP's inception, the FHLB has awarded nearly $588 million in subsidies towards the creation of over 75,000 units of affordable housing.
The FHLB continued its two voluntary housing programs in 2016. These programs provide grants to cover accessibility rehabilitation and emergency repairs for special needs and elderly homeowners, and for the replacement or repair of homes damaged or destroyed by natural disasters within the Fifth District. The FHLB's Board of Directors re-authorized its accessibility rehabilitation and emergency repairs program in the amount of $1.5 million for use in 2016, an increase from $1.0 million in 2015.

Balance Sheet Highlights

Mission Asset Activity – comprising major activities with members including Advances, Letters of Credit, and the Mortgage Purchase Program – was $93.9 billion at March 31, 2016, a decrease of $7.1 billion (seven percent) from year-end 2015. During the first three months of 2016, the FHLB fulfilled its mission by providing readily available and competitively priced wholesale funding to its member financial institutions as well as providing access to the secondary mortgage market through the Mortgage Purchase Program.
The balance of investments at March 31, 2016 was $26.7 billion, a decrease of $10.7 billion (29 percent) from year-end 2015. The decrease was primarily driven by a decline in short-term investments used for liquidity, which had larger than normal balances at the end of 2015. The investment balance at the end of the first quarter included $15.4 billion of mortgage-backed securities and $11.3 billion of other investments, which were mostly short-term instruments held for liquidity.
The FHLB substantially exceeded all minimum regulatory capital and liquidity requirements. On March 31, 2016, GAAP capital was $5.0 billion, a decrease of $0.2 billion (four percent) from year-end 2015. The GAAP and regulatory capital-to-assets ratios were 4.78 percent and 4.89 percent, respectively, at March 31, 2016. Retained earnings grew $5 million in the first three months of 2016 to end the quarter at $770 million.

About the FHLB
The FHLB is a AA+ rated regional wholesale cooperative bank. The FHLB provides members with valuable products and services (primarily Advances, which are a readily available, low-cost source of funds, purchases of certain mortgage loans from members, and issuance of Letters of Credit to members) and a competitive return through quarterly dividends on their capital investment in the FHLB. The FHLB funds these products and services by raising private-sector capital from member-stockholders and, with the other Federal Home Loan Banks (FHLBanks) in the FHLBank System, issuing high-quality debt in the worldwide capital markets. The FHLB also funds community investment programs that help its members create affordable housing and promote community economic development. The FHLB has 699 member-stockholders located in the Fifth FHLBank District of Kentucky, Ohio and Tennessee. The FHLBank System was chartered in 1932 by the U.S. Congress to promote housing finance. Each FHLBank is wholly owned by its member institution stockholders.

This news release may contain forward-looking statements that are subject to risks and uncertainties that could affect the FHLB's financial condition and results of operations. These include, but are not limited to, the effects of economic and financial conditions, legislative or regulatory developments concerning the FHLBank System, financial pressures affecting other FHLBanks, competitive forces, and other risks detailed from time to time in the FHLB's annual report on Form 10-K and other filings with the Securities and Exchange Commission. The forward-looking statements speak as of the date made and are not guarantees of future performance. Actual results or developments could differ materially from the expectations expressed or implied in the forward-looking statements, and the FHLB undertakes no obligation to update any such statements.

The Federal Home Loan Bank of Cincinnati
Financial Highlights (unaudited)
Dollars in millions

SELECTED BALANCE SHEET ITEMS

	March 31, 2016	December 31, 2015	Percent Change ⁽²⁾
Total assets	$103,888	$118,784	(13)%
Advances (principal)	68,627	73,242	(6)
Mortgage loans held for portfolio (principal)	8,038	7,758	4
Total investments	26,705	37,356	(29)
Consolidated Obligations	97,628	112,291	(13)
Mandatorily redeemable capital stock	103	38	NM
Capital stock	4,210	4,429	(5)
Total retained earnings	770	765	1
Total capital	4,967	5,181	(4)
Regulatory capital ⁽¹⁾	5,083	5,232	(3)

Capital-to-assets ratio (GAAP)	4.78%	4.36%
Capital-to-assets ratio (Regulatory) ⁽¹⁾	4.89	4.40

OPERATING RESULTS

	Three Months Ended March 31,
	2016	2015	Percent Change ⁽²⁾
Total interest income	$293	$226	30%
Total interest expense	213	148	44
Net interest income	80	78	3
Non-interest (loss) income	(4)	8	NM
Non-interest expense	22	18	23
Affordable Housing Program assessments	6	7	(20)
Net income	$48	$61	(21)

Return on average equity	3.83%	4.97%
Return on average assets	0.17	0.24
Net interest margin	0.29	0.31
Annualized dividend rate	4.00	4.00
Average 3-month LIBOR	0.62	0.26

(1) Regulatory capital includes capital stock, mandatorily redeemable capital stock (classified as a liability) and retained earnings.

(2) Amounts used to calculate the change column are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts (millions) may not produce the same results. Changes of 100% or greater are shown as "NM" (not meaningful).

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SOURCE Federal Home Loan Bank of Cincinnati