SEC Ruling Forces FHLBank Restatements

A Securities and Exchange Commission ruling has forced two Federal Home Loan Banks to restate their earnings and miss a regulatory deadline for filing their first quarterly financial statements with the SEC.Other FHLBanks could be similarly affected. The Atlanta and Dallas FHLBanks announced Aug. 22 that they plan to restate their financial results for 2001 through the first quarter of 2005. The Atlanta bank attributed the restatement to its use of a "short-cut" accounting methodology in hedging advances and consolidated obligations. The FHLBanks' primary supervisor, the Federal Housing Finance Board, accepted this accounting methodology under Financial Accounting Standard 133, but the SEC raised objections. "It could affect other banks as well," said John von Seggern, president of the Council of FHLBanks. Like the Atlanta bank, the Dallas bank said it has to correct errors relating to its use of short-cut accounting provisions under FAS 133 for "certain highly effective hedging relationships." But it did not mention advances in its release and could not be reached for comment. Both banks stressed that the restatements should not have a material impact on earnings. There are 12 FHLBanks, and three other banks (Des Moines, Indianapolis, and Topeka) have already announced for various reasons that they will miss the Finance Board's Aug. 29 deadline for filing a quarterly financial report with the SEC.