WASHINGTON — The 12 Federal Home Loan Banks earned a combined $552 million in the second quarter, more than double their quarterly income a year earlier, the system's Office of Finance said Monday in a consolidated financial report.
Although advances at the end of the quarter were basically flat compared to yearend 2011, the banks were buoyed by lower other-than-temporary-impairment charges, as well as the end of their obligations to a special fund from the savings and loan crisis.
The report, which takes unaudited financial results from all 12 banks, said net income for the first six months of the year totaled $1.285 billion, an increase of $676 million compared with the first two quarters of 2011.
While the banks suffered a $113 million loss in noninterest income for the quarter, that was still an improvement compared with a year earlier. Net OTTI losses in the second quarter totaled $55 million, which was 84% lower than in the second quarter of 2011. The banks also enjoyed lower net losses on derivatives and hedging activities.
The banks' overall income was also helped by their having satisfied obligations last year to the Resolution Funding Corp., an entity formed in the eighties to aid struggling thrifts in the savings and loan crisis. Whereas the banks' paid $69 million in assessments to the program in the second quarter of 2011, and $160 million total in the first half of last year, they have had no such obligations this year.
But despite the earnings improvement, the combined report from the 12 banks says the system still faces headwinds from an uncertain credit picture.
"A number of negative factors remained in place during the quarter ended June 30, 2012, including the large inventory of homes in the foreclosure pipeline and significant levels of negative equity. The FHLBanks also continued to face uncertainty with respect to certain private-label mortgage-backed securities as a result of actual and projected performance of the loan collateral underlying those securities," the report said.
"However, compared to the same periods in 2011, credit-related OTTI charges were lower during the three and six months ended June 30, 2012. Current period credit-related OTTI charges reflected a modest increase in projected losses on loan collateral underlying certain private-label mortgage-backed securities."
The value of outstanding advances at the end of the quarter was nearly identical to that at the end of 2011, "as declines in the first quarter of 2012 were offset by increases during the second quarter," the report said. Advances on June 30 totaled nearly $418.4 billion, compared with $418.1 billion six months earlier.
Even though originations and repayments of advances both increased in the second quarter compared with a year earlier, the report said that was due to member institutions restructuring their debt obligations to tap into lower interest rates. Originations grew $528 billion to $889 billion, and repayments increased $486 billion to $865 billion.
"The demand for advances has shown some signs of regional stabilization and certain FHLBank members increased their use of advances. However, the percentage of members with outstanding advances decreased to 58.9% at June 30, 2012 compared to 60.7% at December 31, 2011," the report said.
