Federal Home Loan Bank profitable again

BOSTON – The Federal Home Loan Bank of Boston, a critical source of mortgage funding for many banks and credit unions in the region, posted its second consecutive quarterly profit in the first three months of 2010 after grappling much of last year with losses and a troubled investment portfolio.
The FHLB of Boston said its first-quarter profit was $22.9 million, compared with a loss of $83.4 million in the year-ago period. The improved performance was due primarily to a much smaller credit-related “other than temporary” impairment charge on certain mortgage-backed securities. Those charges totaled $126.9 million in the 2009 first quarter, but amounted to $22.8 million in the quarter just completed.
Local bankers tend to keep close tabs on the FHLB, because its financial fortunes can have a wide-ranging impact. The bank’s investment portfolio has been ravaged by turbulence in the financial market in recent years.
Last year, the FHLB of Boston, a wholesale bank that lends to other banks at discount interest rates, suspended dividends usually paid quarterly to its member institutions, a move that lowered the profits of those institutions.
The FHLB has also stopped repurchasing “excess” stock and held off making a contribution to its affordable housing program to preserve its capital.
Edward A. Hjerpe II, bank president and CEO, said he was pleased with the apparent turnaround.
“Though market uncertainties may continue to impact our investment portfolio, our core business remains strong as our balance sheet returns to pre-credit-crisis levels,” he said in a statement recently. “We remain committed to preserving capital, building retained earnings and achieving consistent profitability so that we may return to paying dividends, repurchasing excess stock and more fully funding the Affordable Housing Program.”