FHLB Cincinnati Reports Third Quarter 2021 Results | New

0

CINCINNATI, 28 October 2021 / PRNewswire / – The Federal Home Loan Bank of Cincinnati (the FHLB) today released its unaudited financial results for the third quarter ended September 30, 2021.

Operating results

  • Three-month comparison: For the three months ended September 30, 2021, the net result was $ 6 million and the return on average equity (ROE) was 0.60%. This compares to the net income of $ 57 million and an ROE of 4.70% for the same period of 2020. The decline in profitability in the third quarter of 2021 compared to the same period of 2020 was mainly the result of low interest rates and an unprecedented amount of liquidity in the financial markets due to the stimulus measures, which had an impact on the following:
    • Advances. Average advance balances fell by 46%. Although advances increased significantly at the onset of the COVID-19 pandemic as members sought additional cash, balances subsequently fell in 2020 and remained below pre-pandemic levels due to the increase in liquidity in financial markets and increased deposit levels at member institutions. Additionally, the prepayment charge was lower due to a higher amount of prepayments by members in the third quarter of 2020 as interest rates declined.
    • Mortgage assets. Spreads earned on mortgage assets have narrowed due to the accelerated repayment of higher yielding mortgages at a faster rate than the associated debt that finances them. Historically low long-term interest rates have led to faster prepayments than purchases of new mortgage assets, which has also resulted in a 28% drop in average mortgage asset balances.
    • Fair value adjustments. Unrealized losses on derivatives and instruments held at fair value in response to changes in interest rates.
  • Nine month comparison: For the first nine months of 2021, the net result amounts to $ 25 million and the ROE was 0.85%, compared to a net profit of $ 236 million and an ROE of 6.28% for the same period of 2020. The decline in profitability in the first nine months of 2021 compared to the same period of 2020 is mainly due to the factors Mortgage Advances and Assets noted for comparison on three months as well as the following:
    • Trade sales. The FHLB sold interest rate swaptions in the first quarter of 2020 in response to changes in interest rates, resulting in net realized gains of approximately $ 69 million before evaluations. The FHLB did not sell any interest rate swaptions during the first nine months of 2021. The FHLB uses swaptions to hedge the exposure to market risk associated with holding fixed rate mortgage assets and may sell to offset the risk incurred due to changes in interest rates.

Highlights of the balance sheet

  • Total assets at September 30, 2021 were $ 58.2 billion, a decrease in $ 7.1 billion (11%) from the end of 2020.
  • Mission asset activity – comprising major activities with members, including advances, letters of credit (off-balance sheet) and the mortgage purchase program – has been $ 63.8 billion To September 30, 2021, an augmentation of $ 0.6 billion (one percent) from the end of 2020. The growth in mission asset activity was mainly driven by a 4.6 billion dollars increase in letter of credit balances. The increase in letters of credit is mainly due to the fact that members use them to secure high levels of deposits from public units.
  • Total investments at September 30, 2021 were $ 27.3 billion, an augmentation of $ 0.3 billion from the end of 2020. Total investments included $ 10.2 billion mortgage-backed securities and $ 17.1 billion liquidity investments. The FHLB continued to maintain a high level of liquidity in order to meet the borrowing needs of members and to meet all current and planned financial commitments.
  • The FHLB has exceeded all minimum regulatory capital and liquidity requirements. At September 30, 2021, the GAAP capital was $ 3.7 billion, a decrease of 5% compared to the end of 2020. GAAP and regulatory ratios were 6.41% September 30, 2021. Retained earnings were $ 1.3 billion To September 30, 2021, a decrease of one percent from the end of 2020.

Dividend

  • The FHLB paid its shareholders a cash dividend on September 16, 2021 at an annualized rate of 2.00%, or 1.89 percentage points above the average short-term interest rates for the third quarter. The FHLB calculates average short-term interest rates by combining 3-month LIBOR and the effective federal funds rate.

Housing and community investment

  • The FHLB sets aside a portion of its profits each year for grants to support affordable housing. These funds help members serve very low, low and moderate income households and community economic development. The net result of the FHLB for the first nine months of 2021 gave rise to an adjustment of $ 3 million the Affordable Housing Program (PAH) pool of funds available to members. Since the creation of the AHP in 1990, the FHLB has awarded nearly $ 802 million in grants for the creation of more than 100,000 affordable housing units.
  • In addition to the required AHP assessment, the FHLB has awarded more than $ 2.2 million in the first nine months of 2021 through two voluntary housing programs. 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 in the Fifth District.

The FHLB expects to file its Q3 2021 Form 10-Q with the Securities and Exchange Commission on or around November 10, 2021.

About the FHLB

The FHLB is an AA + rated wholesale cooperative bank owned by 625 member financial institutions, including commercial banks, savings banks, credit unions, insurance companies and community development financial institutions in Kentucky, Ohio and Tennessee. The FHLB provides members with access to products and services (mainly advances, which are a readily available and low-cost source of funds, the purchase of certain mortgages from members, and the issuance of letters of credit to members. ) and a competitive return through quarterly dividends on their capital investment in the FHLB. The FHLB finances these products and services by raising private sector capital from its member shareholders and, together with the other Federal Mortgage Banks (FHLBanks) in the FHLBank system, by issuing high quality debt securities in the global financial markets. . The FHLB also funds community investment programs that help its members create affordable housing and promote community economic development.

This press release may contain forward-looking statements subject to risks and uncertainties which could affect the financial condition and results of operations of the FHLB. These include, but are not limited to: the effects of economic, financial and market conditions, including the interruption of the London Interbank Offered Rate; legislative or regulatory changes concerning the FHLBank system; financial pressures affecting other FHLBanks; the current global COVID-19 pandemic; competitive forces; and other risks detailed from time to time in the FHLB’s annual report on Form 10-K and other documents filed with the Securities and Exchange Commission. Forward-looking statements are valid as of the date of their publication and are not guarantees of future performance. The actual results or developments could differ materially from the expectations expressed or implied in the forward-looking statements, and the FHLB does not undertake to update these statements.

Federal Mortgage Bank of Cincinnati

Financial Highlights (unaudited)

Millions of dollars

SELECTED BALANCE SHEET ITEMS

September 30

2021

The 31st of December,

2020

Percent

Switch (2)

Total assets

$

58,182

$

65,296

(11)

%

Advances (principal)

22,617

25,007

(ten)

Mortgages held for the portfolio (principal)

7,496

9,316

(20)

Total investments

27,306

27,041

1

Consolidated bonds

51,295

59,497

(14)

Mandatory redeemable share capital

13

19

(34)

Share capital

2 429

2,641

(8)

Total retained earnings

1,288

1,304

(1)

Total capital

3,728

3 930

(5)

Regulatory capital (1)

3,730

3 964

(6)

Capital / asset ratio (GAAP)

6.41

%

6.02

%

Capital / asset ratio (regulatory) (1)

6.41

6.07

OPERATING RESULTS

Three months ended September 30

Nine months ended September 30

2021

2020

Percent

Switch (2)

2021

2020

Percent

Switch (2)

Total interest income

$

150

$

239

(37)

%

$

483

$

1,051

(54)

%

Total interest charges

86

146

(41)

277

726

(62)

Net interest income

64

93

(31)

206

325

(37)

Income (loss) other than interest

(36)

(7)

NM

(110)

8

NM

Non-interest charges

21

22

(4)

68

70

(2)

Affordable Housing Program Evaluations

1

7

(90)

3

27

(89)

Net revenue

$

6

$

57

(90)

$

25

$

236

(89)

Return on average equity

0.60

%

4.70

%

0.85

%

6.28

%

Return on average assets

0.04

0.26

0.05

0.33

Annualized dividend rate

2.00

2.00

2.00

2.30

(1)

Regulatory capital includes share capital, mandatory redeemable share capital (classified as a liability) and retained earnings.

(2)

The amounts used to calculate the change column are based on thousands of dollars. Therefore, recalculations based on disclosed amounts (millions) may not produce the same results. Changes greater than 100% are indicated as “NM” (not significant).

View original content to download multimedia: https://www.prnewswire.com/news-releases/fhlb-cincinnati-announces-third-quarter-2021-results-301411112.html

SOURCE Federal Home Loan Bank of Cincinnati


Source link

Leave A Reply

Your email address will not be published.