FHLBanks Report Higher 2Q Earnings

The 12 Federal Home Loan Banks have reported combined earnings of $718 million for the second quarter, up 14.3% from the level recorded a year earlier despite the Chicago FHLBank's posting of a $74 million loss. The FHLBanks exhibited no growth in advances or assets from the levels of the first quarter, and the 12 banks ended the second quarter with $913.9 billion in total advances and $1.3 trillion in total assets. However, the second-quarter report shows a 15% increase in investments of mortgage-backed securities issued by the government-sponsored enterprises Fannie Mae and Freddie Mac. As of June 30, FHLBank investments in GSE MBS totaled $86.6 billion, up 15% from the level of the first quarter and 57% from that of Dec. 30. Back in March, the FHLBank regulator lifted a cap on GSE MBS investments to provide additional liquidity for the MBS market. The FHLBanks also held $76.8 billion in private-label MBS as of June 30, and some banks recorded losses on those investments. Meanwhile, the Atlanta FHLBank said it has suspended its Mortgage Purchase Program, and the Chicago FHLBank stopped buying single-family mortgages from its members Aug. 1 in an effort to conserve capital. The Des Moines FHLBank has temporarily stepped in and agreed to buy up to $150 million single-family mortgages from Chicago members.