CHICAGO - (02/14/05) -- The Federal Home Loan Bank ofChicago said last week it will buy back as much as $1.5 billion ofits voluntary stock over the next three years as part of a newcapital plan agreed to with its federal regulator, the FederalHousing Finance Board. The capital plan is aimed at finding a newsource of funding for the Chicago's bank's Mortgage PartnershipFinance program, growing into a major source of funding for thesecondary mortgage market. The Chicago bank has used excess, orvoluntary, stock to capitalize its MPF portfolio and has agreed toreduce its reliance on voluntary stock as part of the capital plan.The plan will draw down the voluntary stock from the current 55% to43% of the bank's capital, according to David Feldhaus, spokesmanfor the bank. "We rely more on voluntary stock than most home loanbanks," Feldhaus told The Credit Union Journal. The stock has a parvalue of $100 a share, the same as when it was introduced in 1932.The Chicago bank has 880 members, including 80 creditunions.
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The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
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The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
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The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
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The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
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Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
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Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
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