Members of the Federal Home Loan banks increased borrowings in 2013 by 16% over the previous year to $498.6 million, according to a new report by the FHLB system's Office of Finance.
The elevated borrowings are a sign that member banks, credit unions and life insurance companies which use FHLB advances to fund their own operations are significantly increasing their lending operations. In 2012, advances rose only 2% from the previous year.
Advances primarily collateralized by mortgages are the main business for the 12 district Federal Home Loan banks, and served as a major source of liquidity for member institutions during the financial crisis. Yet growth in the borrowings had waned since outstanding advances totaled $631.2 billion at yearend 2009.
The Office of Finance report also showed a continued increase in the FHLBs' retained earnings, and indicated that the billions of dollars in FHLB losses due to bad investments in private-label mortgage-backed securities have run their course.
The FHLBs ended 2013 with $12.2 billion in retained earnings, compared to $6 billion in 2009. They also reported just $14 million in credit losses in 2013 due to PLS investments. That was compared to $112 million in losses in 2012 and $856 million in losses in 2011.
Yet other indicators showed continued challenges for the system. Net income totaled $2.5 billion in 2013, down slightly from $2.6 billion in the prior year. Net interest income fell 16% year-over-year.
JPMorgan Chase remained the largest borrower of advances in 2013. Bank of America jumped to second from number five, replacing Capital One Financial in the number two spot.
The other institutions among the top 10 FHLB borrowers were: Citigroup, Wells Fargo, Capital One, MetLife, PNC Financial Services Group, New York Community Bancorp, Banco Santander and BB&T.