Regional home loan bank for Iowa reports lower returns in 2011

The Federal Home Loan Bank of Des Moines reported sharply lower net income and a decline in assets for 2011.

Net income declined 41.5 percent, to $77.8 million, from $133 million in 2010.

The decline was influenced by losses on derivatives and hedging activities and a decline in advance interest income, in part.

The wholesale cooperative bank provides low-cost funding and community lending to more than 1,200 commercial banks, savings institutions, credit unions and community development institutions.

When a member decides to prepay an advance, the bank is required to charge a prepayment fee to offset the financial impact. Advance payment fee income decreased $163.3 million from 2010 to 2011 as a result of fewer advance prepayments.

As a result of market volatility, the bank recorded net losses of $110.8 million on its derivatives and hedging activities compared to net losses of $52.6 million in 2010.

Bank assets decreased to $48.7 million as of Dec. 31, 2011, from $55.6 billion on Dec. 31, 2010., due mainly to principal paydowns on mortgage-backed securities and a reduction in short-term investments.

The Federal Home Loan Bank of Des Moines serves Iowa, Minnesota, Missouri and the Dakotas.