FHLBank earnings are fairly volatile – should I be concerned?
No – FHLBank earnings are cyclical and are influenced by economic conditions. In 2002, FHLBank earnings totaled $1.5 billion, rising to $2.8 billion in 2007, but then falling to $1.2 billion in 2008 due primarily to OTTI charges. For 2009 through September, earnings exceed $1.3 billion. Keep in mind that when considering the FHLBanks’ principal line of business (wholesale lending to banks), it is not unusual that earnings would contract somewhat in a low interest rate environment, just as they would tend to increase as interest rates rise. Also, increased demand for lending has offset some of the effects of a low interest rates. It is also important to note that as a cooperative, the FHLBanks are not focused solely on growing earnings quarter to quarter; a balance must be maintained between our public policy mission (providing low-cost loans) and the obligation to provide an adequate return to our 8,100 owners. By passing along the benefits of our GSE status in this fashion, we can str
