CINCINNATI, Oct. 29, 2019 /PRNewswire/ -- The Federal Home Loan Bank of Cincinnati (the FHLB) today released unaudited financial results for the third quarter ended September 30, 2019.
For the third quarter, net income was $63 million and return on average equity (ROE) was 5.36 percent. This compares to net income of $92 million and ROE of 6.87 percent for the same period of 2018. For the first nine months of 2019, net income was $200 million and ROE was 5.35 percent, compared to net income of $259 million and ROE of 6.41 percent for the same period of 2018.
Net interest income decreased in both comparison periods primarily due to lower Advance balances and lower spreads earned on Advances. However, these decreases were partially offset by higher non-interest income (loss) in both comparison periods primarily due to net gains realized on certain derivatives.
Balance Sheet Highlights
Total assets at September 30, 2019 were $100.2 billion, an increase of $1.0 billion (one percent) from year-end 2018.
Mission Asset Activity – comprising major activities with members including Advances, Letters of Credit (off-balance sheet), and the Mortgage Purchase Program – was $73.7 billion at September 30, 2019, a decrease of $6.5 billion (eight percent) from year-end 2018. The decline in Mission Asset Activity was driven by lower Advance balances.
Total investments at September 30, 2019 were $42.4 billion, an increase of $8.8 billion (26 percent) from year-end 2018. The increase in investments was driven by the purchase of $9.3 billion of U.S. Treasury obligations as part of the FHLB's plan to manage a new liquidity requirement that became effective on March 31, 2019. Total investments included $14.0 billion of mortgage-backed securities and $28.4 billion of other investments, which were mostly held for liquidity. The FHLB continued to maintain a robust amount of liquidity in order to meet the borrowing needs of members and to meet all current and anticipated financial commitments.
The FHLB exceeded all minimum regulatory capital and liquidity requirements. On September 30, 2019, GAAP capital was $4.6 billion, a decrease of 13 percent from year-end 2018, which primarily resulted from the repurchase of excess capital stock. The GAAP and regulatory capital-to-assets ratios were 4.63 percent and 4.67 percent, respectively, at September 30, 2019. Retained earnings grew three percent in the first nine months of 2019 to end the quarter at $1.1 billion.
The FHLB paid its stockholders a cash dividend on September 19, 2019 at a 4.50 percent annualized rate, which is 2.30 percentage points above the third quarter average 3-month LIBOR.
Housing and Community Investment
The FHLB annually sets aside a portion of its profits for grants supporting affordable housing. These funds assist members in serving very low-, low-, and moderate-income households and community economic development. The FHLB's net income for the first nine months of 2019 resulted in an accrual of $22 million to the Affordable Housing Program (AHP) pool of funds available to members. Since the inception of the AHP in 1990, the FHLB has awarded more than $718 million in subsidies towards the creation of approximately 91,000 units of affordable housing.
In addition to the required AHP assessment, the FHLB awarded nearly $2.5 million in the first nine months of 2019 through its 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 within the Fifth District.
The FHLB expects to file its third quarter 2019 Form 10-Q with the Securities and Exchange Commission on or about November 7, 2019.
About the FHLB
The FHLB is a AA+ rated wholesale cooperative bank owned by 639 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 access to 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 global capital markets. The FHLB also funds community investment programs that help its members create affordable housing and promote community economic development.
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, financial, and market conditions, including the discontinuation of the London InterBank Offered Rate; 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
September 30, 2019
December 31, 2018
Percent Change (2)
Mortgage loans held for portfolio (principal)
Mandatorily redeemable capital stock
Total retained earnings
Regulatory capital (1)
Capital-to-assets ratio (GAAP)
Capital-to-assets ratio (Regulatory) (1)
Three Months Ended September 30,
Nine Months Ended September 30,
Percent Change (2)
Percent Change (2)
Total interest income
Total interest expense
Net interest income
Non-interest income (loss)
Affordable Housing Program assessments
Return on average equity
Return on average assets
Net interest margin
Annualized dividend rate
Average 3-month LIBOR
Regulatory capital includes capital stock, mandatorily redeemable capital stock (classified as a liability) and retained earnings.
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).