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Report of Annual Examinations of Federal Home Loan Banks Financial Overview The FHLBanks saw substantial asset growth in 2015 driven by increases in advances to members. Net income was strong at $2.9 billion. Total assets increased by $56.0 billion, or 6.1 percent, in 2015 to $969.6 billion. At the end of 2015, aggregate assets reached their highest quarter-end level since December 31, 2009 (Figure 4). Advances increased by 11.1 percent, cash and investments decreased by 2.9 percent, and mortgages increased by 2.3 percent. At year-end 2015, the FHLBanks held 65.4 percent of total assets in advances, 29.7 percent in cash and investments, and 4.6 percent in mortgages. FHLBank holdings of private-label MBS continued to run off, while their holdings of MBS issued by Fannie Mae and Freddie Mac and liquidity investments decreased slightly. The aggregate investment portfolio of the FHLBanks consists of 37.0 percent cash and liquidity, 41.6 percent MBS issued by the Enterprises, 4.8 percent private-label MBS, and 16.5 percent other investments (principally agency debt securities and federally-backed student loan assetbacked securities). 2015 Historical Portfolio of the FHLBanks Figure 4 • Historical Portfolio of the Federal Home Loan Bank System $1,600 $1,400 $1,200 $ Billions $1,000 $800 $600 $400 $200 $0 Q1 2001 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Advances Mortgages MBS Non-MBS Investments Other Source: Federal Housing Finance Agency 20 FEDERAL HOUSING FINANCE AGENCY
SUPERVISION AND OVERSIGHT 2015 Quarterly Net Interest Income and Net Income of the Federal Home Loan Banks Figure 5 • FHLBanks’ Aggregate Net Interest Income and Net Income $1,600 $1,400 $1,200 $1,000 $ Millions $800 $600 $400 $200 $0 Q1 2010 Q2 2010 Source: Federal Housing Finance Agency Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Net Income Mortgages grew 2.3 percent during 2015 to $44.6 billion at year-end. Nine FHLBanks actively purchase mortgages from their members. The FHLBanks reported aggregate net income of $2.9 billion in 2015, up from $2.3 billion in 2014, with 2015 marking the most profitable year in the history of the Federal Home Loan Bank System. All FHLBanks were profitable with the exception of the FHLBank of Seattle, which reported a loss due to high expenses incurred in preparation for its May 31 merger with the FHLBank of Des Moines. Earnings were elevated despite net interest income decreasing $16 million and operating expenses increasing $111 million from 2014. The FHLBank System realized $688 million in gains from private-label MBS settlements and $182 million in gains on derivatives in 2015. 12 These two items were primarily responsible for the Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Net Interest Income elevated 2015 earnings (Figure 5). Q1 2015 Q2 2015 Q3 2015 Q4 2015 Poor performance of private-label MBS had a much smaller effect on the FHLBanks in 2015 than it had from 2009-2012. In 2015, the FHLBanks recorded impairment charges on these securities of only $79 million, higher than the $15 million reported in 2014 but substantially lower than the high of $2.4 billion in 2009. In fact, in 2015 the FHLBanks actually accumulated $253 million of previous losses into income from improvements in modeled cash flows. Though subject to risks, legacy privatelabel MBS assets generally produce premium yields and positively contribute to net interest income. Strong profitability allowed the FHLBanks to continue to build their retained earnings in 2015. Aggregate retained earnings totaled $14.3 billion, or 1.5 percent of assets, at the end of 2015. This includes $2.2 billion in restricted 12 Most notably, the FHLBank of San Francisco received $459 million and the FHLBank of Boston received $185 million in settlements. REPORT TO <strong>CONGRESS</strong> • 2015 21
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F E D E R A L H O U S I N G F I N A
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A P P E N D I X : H I S T O R I C A
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Table 1b. Fannie Mae Purchases of M
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Table 3. Fannie Mae Earnings A P P
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Table 4a. Fannie Mae Total MBS Outs
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Table 5a. Fannie Mae Mortgage Asset
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End of Period Manufactured Housing
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Table 6. Fannie Mae Financial Deriv
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Table 8. Fannie Mae Mortgage Asset
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Table 10. Freddie Mac Mortgage Purc
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Table 13. Freddie Mac Balance Sheet
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Table 16. Freddie Mac Nonmortgage I
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Table 18. Freddie Mac Capital a A P
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Table 22. Federal Home Loan Banks A
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Table 24. Loan Limits A P P E N D I
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Federal Housing Finance Agency KEY
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