Publications:
Quarterly Derivatives Fact Sheet -- Fourth Quarter 1996

The number of banks reporting either structured notes or high-risk mortgage securities remain largely confined to banks with total assets less than $1 billion. The number of banks reporting high-risk mortgage securities decreased by 16 to 489 in the fourth quarter. The fourth quarter aggregated numbers indicate that book values exceeded market values (fair values) by $24 million for high risk mortgage securities, a $37 million improvement from the third quarter, stemming from the decline in market interest rates in the fourth quarter. The average book value of holdings for these banks relative to total assets for the fourth quarter of 1996 remained at 1.2 percent. Average depreciation to capital was 0.52 percent, an improvement over third quarter's 0.76 percent. Overall, banks continue to reduce the amount of holdings in high risk mortgage securities; the total aggregate book value of holdings decreased roughly 44 percent from fourth quarter 1996 relative to the fourth quarter of 1995.

The number of banks reporting structured notes on their books decreased in the fourth quarter by 235, to 3,457. Book values exceeded market values by $94 million for structured notes, a $111 million improvement from the third quarter, due to the decline in interest rates over the fourth quarter. For banks with structured notes, the average book value of holdings to total assets declined slightly to 2.0 percent, compared to 2.2 percent in the third quarter, while average depreciation to capital declined to 0.39 percent, compared to 0.58 percent in the third quarter. Banks have reduced the book value of holdings of structured notes by more than 34 percent, relative to year-end 1995. [See tables 8 and 9.]

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