Federal Home Loan Bank earnings fell 16.2% in the first quarter, compared with those of a year earlier, as low interest rates continued to undercut profits and mortgage purchases fell dramatically.Net income fell to $382.0 million in the first quarter from $456.0 million in the first quarter of 2003. "The decrease in Q1 relates primarily to a $75 million decline in combined net income due to lower interest rates," according to the Office of Finance, which consolidates the financial reports of the 12 FHLBanks. In the first quarter, the mortgage purchases by the FHLBanks totaled $6.7 billion, while runoff totaled $4.9 billion. The banks attribute the slowdown in mortgage purchase activity to a shift by consumers to adjustable-rate mortgages. The FHLBanks generally purchase fixed-rate product. The first-quarter financial reports also show that the FHLBanks held $115.5 billion in mortgage loans as of March 30, and the loans have average credit scores of 737 and a weighted average loan-to-value ratio of 70% at origination.

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