Chicago FHLBank's '07 Profits Sink

The Federal Home Loan Bank of Chicago posted earnings of $98 million for 2007, down 50% from the level of the previous year, and the troubled bank expects to report a loss in the first quarter, according to its 2007 annual financial report. "We expect to incur losses beginning in the first quarter of 2008 and that those losses will continue for some period of time," the Chicago FHLBank says in its 10-K filing with the Securities and Exchange Commission. Net interest income fell 37%, or $155 million, due to several factors, including the higher cost of financing its Mortgage Partnership Finance portfolio. As a business segment, the $34.6 billion mortgage portfolio recorded a $29 million loss for the year after posting a $121 million profit for 2006. The Chicago FHLBank indicated that merger talks with the Dallas FHLBank are continuing. But after seven months, it says the "banks have not reached an agreement." The Dallas bank has said that it incurred $2.5 million in expenses related to the "potential merger."