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FHLBanks Office of Finance: Q4'16 net income up 35% YOY

The FHLBanks Office of Finance reported fourth-quarter 2016 net income of $913 million for the Federal Home Loan Banks, up 35% compared to $674 million for the same period in 2015.

Net income for 2016 was approximately $3.41 billion, compared to net income of approximately $2.86 billion for 2015.

The increase was due primarily to higher net interest income, gains on litigation settlements and lower losses on trading securities, partially offset by lower gains on derivatives and hedging activities, according to an earnings release.

Net gains on litigation settlements were $111 million for the quarter ended Dec. 31, 2016, including the Federal Home Loan Bank of San Francisco's settlements of $58 million and Federal Home Loan Bank of Des Moines' settlements of $39 million, during the fourth quarter of 2016. For the same period last year, net gains on litigation settlements amounted to $51 million.

Net gains on derivatives and hedging activities were $334 million for the fourth quarter of 2016, compared to $55 million for the fourth quarter of 2015. Net losses on trading securities were $170 million for the quarter ending Dec. 31, 2016, compared to $92 million for the same period a year ago.

Non-interest income was $351 million for the fourth quarter of 2016, significantly up from $51 million in the same period in 2015, primarily because of higher gains on derivatives and hedging activities, and litigation settlements, partially offset by higher losses on trading securities.

Net interest margin was 0.39% for the three months ended Dec. 31, 2016, 4 basis points less than 0.43% for the year-ago period.

Mandatorily redeemable capital stock was $1.7 billion at Dec. 31, 2016, an increase of $1.0 billion from $745 million at the end of 2015. The increase is due primarily to the recent FHFA rule on Federal Home Loan Bank membership that, among other things, requires the Federal Home Loan Banks to terminate the membership of captive insurance companies by specified dates.

Fourth-quarter 2016 net income for the Federal Home Loan Banks was $59 million for the Federal Home Loan Bank of Boston, $123 million for the Federal Home Loan Bank of New York, $82 million for the Federal Home Loan Bank of Pittsburgh, $89 million for the Federal Home Loan Bank of Atlanta, $89 million for the Federal Home Loan Bank of Cincinnati, $40 million for the Federal Home Loan Bank of Indianapolis, $78 million for the Federal Home Loan Bank of Chicago, $156 million for the Federal Home Loan Bank of Des Moines, $28 million for the Federal Home Loan Bank of Dallas, $42 million for the Federal Home Loan Bank of Topeka and $127 million for the Federal Home Loan Bank of San Francisco.