The 12 Federal Home Loan Banks reported combined earnings of $732 million in the third quarter, an impressive 343% jump from the same period a year ago.
The turnaround came mostly from a huge reduction in losses due to bad investments in private-label mortgage-backed securities.
Credit losses on private-label MBS fell to $178 million in the third quarter from $1.04 billion in the same quarter of 2009.
Meanwhile, the FHLBs' wholesale lending business continued to suffer from low demand for advances.
The 12 banks had outstanding advances of $500 billion at September 30, a 22% decline over the past three quarters.
The Des Moines FHLB cited a "high level of liquidity in the market and low loan demand experienced by the bank's members" for its 10% decline in advances over the past few quarters.
The Dallas FHLB reported that two of its largest borrowers reduced their advances by $13.8 billion, including $12.3 billion of prepaid advances. The Dallas bank ended the third quarter with $27.3 billion in advances, down 34% from the prior quarter.
In its second quarter securities filing, the Dallas FHLB listed Wells Fargo Bank and Comerica Bank as its two largest borrowers.
