FHLB's outstanding bonds fall to $980 billion during third quarter

By Angela McDaniels

Tacoma, Wash., Oct. 30 - The Federal Home Loan Banks had $980 billion of consolidated obligations outstanding as of Sept. 30, according to preliminary third-quarter results.

The total is 22% less than the $1.26 trillion of obligations outstanding at the end of 2008, FHLB said in a news release.

The total consolidated obligations outstanding at Sept. 30 consisted of $275 billion of discount notes and $705 billion of bonds. These figures represent decreases of 38% and 14% from the end of 2008, respectively.

Consolidated obligations are the principal source of funds used by FHLB to make advances to members and to purchase investments and mortgages.

Advances fell to $678 billion at Sept. 30, a 27% decline compared to the end of 2008. FHLB said that generally, the growth or decline in advances reflects demand by members for liquidity and funding, driven by economic factors such as the availability to members of alternative funding, the interest-rate environment and the outlook for the economy.

The release stated that members generally decreased their use of FHLB advances during the first nine months of 2009 for a variety of reasons, including increases in their level of deposits and reduced lending activity due to the economic recession as well as the availability of federal government programs that provided members with more attractively priced sources of funding and liquidity and/or lower collateral requirements than were available earlier in the credit crisis.

FHLB said the combined net loss for the third quarter was $165 million, compared with combined net income of $506 million for the same period in the 2008.

This preliminary combined result was reduced by other-than-temporary impairment credit-related charges of $1.04 billion on some private-label residential mortgage-backed securities and home equity loan investments for the third quarter, according to the release.

For the nine months ended Sept. 30, FHLB had combined net income of $1.30 billion, a 32% decrease from the $1.92 billion recorded for the same period of the previous year.

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