Three Federal Home Loan Banks released their unaudited first-quarter earnings showing double and — even triple digit — increases in net income even though advance demands from member banks remained subdued.

The Federal Home Loan Bank of Pittsburgh reported $21.8 million of net income in the first quarter, a dramatic rise from $2.5 million for first quarter 2011.

Lower other-than-temporary impairment, or OTTI, credit losses on the bank’s private-label mortgage-backed securities investment portfolio, higher net interest income and a lower provision for credit losses drove the unusual 772% increase in net income.

The Pittsburgh bank is one of four Federal Home Loan Banks classified by the Federal Housing Finance Agency, their regulator, as troubled, meaning they experienced significant losses and financial difficulties during at least the 2009 through 2010 examination cycles. The other banks are Seattle, Boston and Chicago.

First quarter net OTTI credit losses totaled $7.2 million, contracting from $20.5 million in the first quarter of 2011. Net interest income for the quarter came in at $42.2 million, up from $39.2 million a year earlier, because of lower interest expense related to FHLBank of Pittsburgh’s consolidated obligations and increased interest income related to advance prepayment fees. The bank reported $100,000 provision for credit losses in the period, compared to $2.8 million in the year-ago quarter, a result of an increase in credit enhancement coverage in the bank’s MPF portfolio.

Advances totaled $31.4 billion in the first quarter, slightly up from $30.6 billion at the end of 2011 because of a rise in member liquidity needs and attractive advance rates relative to other wholesale funding sources. Total assets grew to $53.3 billion from $52 billion at year-end 2011.

About 300 miles west of Pittsburgh, the Federal Home Loan Bank of Cincinnati reported $58 million of net income, elevating 38% from year-ago earnings of $42 million. The bank said its most significant contributor to the increase was satisfying its Resolution Funding Corp. obligation last June.

Total assets at March 31 were $62 billion, increasing $1.6 billion from year-end 2011. Total assets in the first three months of 2012 averaged $62.8 billion, a decrease of $7.9 billion from a year earlier.

A modest to moderately growing economy continued to generate slow growth in new consumer, mortgage and commercial loans, which resulted in subdued demand for advances from FHLBank of Cincinnati’s members. The principal balance of advances fell $1.2 billion from year-end 2011 to $26.7 billion in the first quarter. Average advance principal balances in that period totaled $27.8 billion.

The Federal Reserve and its quantitative easing programs resulted in the banking system holding an extremely large amount of excess reserves, the Cincinnati bank noted. It expects to see an increase in advance demand across its membership when one or more of the following occur: the economy experiences a sustained improvement; the Fed’s monetary policy tightens; or the government's liquidity programs wind down.

Moving down I-75 into Georgia, the Federal Home Loan Bank of Atlanta also released earnings showing it earned $70 million in the first quarter, rising from $51 million a year earlier. As of March 31, the bank had total assets of $109.1 billion, down from $125.3 billion at the end of 2011.

The Atlanta bank’s advance principal balance declined to $72.4 billion from $87 billion in Dec. 31.

jhilley@housingwire.com

@JustinHilley