FHLB Cincinnati Announces First Quarter 2021 Results | Ohio

Cincinnati, Ohio, April 27, 2021 / PRNewswire / – The Federal Home Loan Bank of Cincinnati (the FHLB) today released unaudited financial results for the first quarter ending March 31, 2021.

Operating results

• In the first quarter the net result was $ 19 million The average return on equity (ROE) was 1.96 percent. This compares to the net income of $ 80 million and a ROE of 6.94 percent for the same period of 2020. The decline in profitability in the first three months of 2021 compared to the same period of 2020 was mainly due to:
• Derivatives and Hedging Transactions. The FHLB sold interest rate changes in response to interest rate changes that benefited Q1 2020. The FHLB did not sell any interest rate changes in the first quarter of 2021. FHLB uses swaptions to hedge the market risk associated with holding fixed income mortgage investments and can sell them when interest rates change to offset actual and expected risks. The sale of swaptions in the first quarter of 2020 resulted in net realized profits of around $ 69 million before reviews. The gains on swaptions were partially offset by unrealized losses on other derivatives and instruments held at fair value in response to changes in interest rates.
• Interest. Lower short-term interest rates reduced the return on investment of the FHLB’s capital. In the past, the FHLB derived a significant part of its net interest income from financing short-term assets with interest-free capital.
• Mortgage refinancing. A higher volume of mortgage refinancing activities resulted in higher premium amortization in light of the historically low interest rate environment in the past 12 months.
• Prepayment. The average prepayments decreased by 43 percent. Although advances increased significantly at the beginning of the COVID-19 pandemic as members sought additional liquidity, the balances subsequently fell and remained low due to increased liquidity in the financial markets and increased deposits at member institutions.

Balance highlights

• The balance sheet total as of March 31, 2021 was $ 60.6 billiona decrease of $ 4.7 billion (seven percent) from the end of 2020.
• Mission Asset Activity – includes key activities with members such as advances, letters of credit (off balance sheet), and the mortgage purchase program $ 66.3 billion on March 31, 2021 an increase of $ 3.0 billion (five percent) as of year-end 2020. The increase in Mission Asset activity was mainly due to a $ 4.8 billion Increase in letters of credit. The increase in letters of credit was partly due to members using them to secure an increased level of deposits for public entities.
• The total investments as of March 31, 2021 were $ 24.2 billiona decrease of $ 2.8 billion from the end of 2020. Total investments included $ 9.0 billion of mortgage-backed securities and $ 15.2 billion of liquidity investments. The FHLB continued to have solid liquidity to meet member loan needs and meet all current and anticipated financial commitments.
• The FHLB exceeded all regulatory minimum capital and liquidity requirements. As of March 31, 2021, the GAAP capital was $ 4.0 billionThis represents an increase of three percent compared to year-end 2020. The GAAP and regulatory capital-to-asset ratios were 6.67 percent and 6.72 percent, respectively, as of March 31, 2021 $ 1.3 billion as of March 31, 2021, an increase of less than one percent compared to the end of 2020.

dividend

• The FHLB paid its shareholders a cash dividend March 18, 2021 with an annualized interest rate of 2.00 percent, which is 1.86 percentage points above the average short-term interest rates for the first quarter. The FHLB calculates the average short-term interest rates as a mixture of the 3-month LIBOR and the effective interest rate of the federal funds.

Housing construction and community investment

• The FHLB annually makes part of its profit available for grants to support affordable housing. These funds support members in providing for very low, low and middle income households and in the economic development of the community. The FHLB result for the first quarter of 2021 resulted in a provision of $ 2 million to the AHP (Affordable Housing Program) pool, which is available to members. Since the AHP was founded in 1990, the FHLB has almost awarded $ 795 million in subsidies for the creation of around 99,000 units of affordable housing.

The FHLB is expected to file its Form 10-Q with the Securities and Exchange Commission for the first quarter of 2021 on or about May 6, 2021.

About the FHLB

FHLB is an AA + rated wholesale credit union owned by 625 member financial institutions including commercial banks, thrifts, credit unions, insurance companies and community development financial institutions in Kentucky, Ohio and Tennessee. The FHLB provides members with access to products and services (primarily advances, which are an easily available, low-cost source of funding, purchasing certain mortgage loans from members, and issuing letters of credit to members) and a competitive rate of return through quarterly dividends on their capital investment in the FHLB. The FHLB funds these products and services by raising private capital from member shareholders and by issuing high quality debt in global capital markets with the other Federal Home Loan Banks (FHLBanks) in the FHLBank system. The FHLB also funds community investment programs that help its members create affordable housing and promote the community’s economic development.

This press release may contain forward-looking statements that are subject to risks and uncertainties that could affect the financial condition and results of operations of FHLB. These include, but are not limited to: the impact of economic, financial and market conditions, including the suspension of the London InterBank offer rate; legislative or regulatory developments relating to the FHLBank system; financial pressure on other FHL banks; the current global COVID-19 pandemic; Competitive forces; and other risks listed from time to time in the FHLB’s Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission. Forward-looking statements are made as of the date of publication 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 FHLB assumes no obligation to update such statements.

Federal Home Loan Bank of Cincinnati
Financial highlights (unaudited)
Dollars in millions
SELECTED COMPENSATION ITEMS
	March 31, 2021				December 31, 2020				Percentage change (2)
Total assets	$	60.634			$	65.296			(7)	%.
Advances (capital)	24,157				25.007				(3)
Mortgage loan held for portfolio (principal)	8,391				9.316				(10)
Total investment	24.209				27,041				(10)
Consolidated Commitments	54,671				59,497				(8th)
Mandatory repayable share capital	fifteen				19th				(21)
Share capital	2.748				2.641				4th
Total retained earnings	1.309				1.304				– –
Total capital	4.045				3,930				3
Regulatory Capital (1)	4.072				3,964				3
Capital-asset ratio (GAAP)	6.67		%.		6.02		%.
Ratio of capital to assets (regulatory) (1)	6.72				6.07

OPERATING RESULTS
	Three months to March 31
	2021				2020				Percentage change (2)
Total interest income	$	178			$	447			(60)		%.
Total interest expense	102				365				(72)
Net interest income	76				82				(8th)
Non-interest income (losses)	(32)				31				NM
Interest-independent expense	23				24				(3)
Reviews of the Affordable Housing Program	2				9				(76)
Net income	$	19th			$	80			(76)
Return on equity	1.96		%.		6.94		%.
Return on average wealth	0.12				0.34
Annualized dividend rate	2.00				2.50

(1)	The regulatory capital comprises the share capital, the mandatory repayable share capital (classified as a liability) and the retained earnings.
(2)	The amounts used to calculate the change column are based on thousands of dollars. Accordingly, recalculations based on the stated amounts (millions) may not produce the same results. Changes of 100% or more are displayed as “NM” (not meaningful).

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SOURCE Federal Home Loan Bank of Cincinnati