It has been said by The Federal Home Loan Bank system, the 12 government-chartered cooperatives that is owned by U.S. financial companies, that there has been a rise of 56% in second-quarter earnings and that is due to $979 million gains related to higher interest rates.

The system’s Reston, Virginia-based finance office said in an statement today that there has been a jump in the combined net income. The combined net income has been increased from $718 million a year earlier to $1.1 billion in the current year, largely from gains on derivatives and hedging activities. Moreover there has been a drop of 20% to $739 billion in the lending to members.

Low-cost financing has been provided by The regional Federal Home Loan Banks, or FHLBs, to more than 8,000 member savings and loans, credit unions, insurers and commercial banks at below-market rates, mainly to finance mortgage holdings. Mortgage-related assets have also been bought and sold by the 12 banks, whose biggest customers include JPMorgan Chase & Co. and Bank of America Corp.

According to the statement, The FHLBs of Boston and Seattle have been the only banks to post second-quarter losses.

According to the finance office, which issues the system’s joint debt,  an increase in long-term interest rates during the second quarter, has allowed the system to book $979 million of net gains on derivatives and other hedges. $437 million has been taken by the system in write downs on mortgage assets.

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