Chicago FHLBank Reports Lower Profits

The Federal Home Loan Bank of Chicago has reported a 23% drop in profits for 2006, and the bank says it expects "significantly lower net income" this year as it continues to operate under a supervisory agreement.The $86.7 billion-asset FHLBank reported annual earnings of $188 million in 2006, down from $244 million in 2005 and $365 million in 2004. "The current interest rate environment and planned declines in capital stock and Mortgage Partnership Finance program asset balances will continue to present significant earnings challenges," said Mike Thomas, Chicago FHLBank president and chief executive officer. The Chicago bank redeemed $1.2 billion in capital stock last year, and its MPF holdings of single-family loans declined by 9.8%, to $37.9 billion as of Dec. 31. In a filing with the Securities and Exchange Committee, the bank says it has implemented most of the requirements of a June 2004 supervisory agreement. "We still need to implement certain recommendations related to our market risk modeling," the 10-K filing says.