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Federal Home Loan Banks see combined net income drop 19% YOY in Q1'16

Federal HomeLoan Banks Office of Finance reported first-quarter net income of$825 million for the Federal Home Loan Banks, down 19% compared to for the sameperiod in 2015.

The decrease was due primarily to lower gains on litigationsettlements and higher losses on derivatives and hedging activities, partiallyoffset by higher gains on trading securities, according to an April 29 newsrelease.

Net gains on litigation settlements were $348 million forthe quarter ended March 31, resulting from the 's $211 million settlementand the Federal Home Loan Bank ofDes Moines' $137 million settlement, both of which were regarding investments inprivate-label mortgage-backed securities. For the same period last year, netgains on litigation settlements amounted to $480 million.

Net losses on derivatives and hedging activities amounted to$237 million for the three months ended March 31, due largely to changes in thefair value of derivatives not designated as qualifying accounting hedges underGAAP. For the first quarter of 2015, net losses on derivatives and hedgingactivities were $41 million.

Net gains on investment securities classified as tradingwere $102 million for the first quarter of 2016, resulting from changes in fairvalues of these securities due primarily to a decrease in interest rates duringthe quarter. Net gains on trading securities for the same period in 2015amounted to $9 million.

Net interest margin, meanwhile, was 0.38% for the threemonths ended March 31, 3 basis points lower than the year-ago period.

Mandatorily redeemable capital stock was $1.9 billion atMarch 31, an increase of $1.2 billion from $745 million at the end of 2015. Theincrease 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 themembership of captive insurance companies by specified dates.

First-quarter net income for the Federal Home Loan Banksstood at $30 million for the Federal Home Loan Bank of Boston, $83 million for theFederal Home Loan Bank of NewYork, $57 million for the Federal Home Loan Bank of Pittsburgh, $50 million forthe Federal Home Loan Bank ofAtlanta, $48 million for the Federal Home Loan Bank of Cincinnati, $27 million forthe Federal Home Loan Bank ofIndianapolis, $69 million for the , $187million for the Federal Home Loan Bank of Des Moines, $8 million for theFederal Home Loan Bank ofDallas, $40 million for the Federal Home Loan Bank of Topeka and $231 million forthe Federal Home Loan Bank of San Francisco.