FEDERAL HOME LOAN BANKS

 

The FHLBank system is comprised of eleven (11) independent cooperatives. Each FHLBank is privately owned by their member financial institutions - large and small - from across all 50 states, U.S. possessions and territories. The FHLBank system’s +6,800 members include ~5,000 banks and thrifts, >1,400 credit unions and >400 insurance companies. Each FHLBank is privately capitalized by its member-shareholders.

The FHLBanks' mission is to provide reliable liquidity to member institutions to support housing finance and community investment.

The FHLBanks provide long-term and short-term secured loans, called “advances,” to their members. For collateral, FHLBank members primarily use residential mortgage loans, as well as government and agency securities.

The FHLBanks play an essential role by helping member institutions meet the credit needs of communities everywhere in all economic cycles. Without the FHLBanks, it would be more difficult for local lending institutions to provide credit and financial services for families, farms and businesses in every U.S. state and territory. Credit would be tighter and more expensive.

(Source: Council of FHLBanks; FHFA).

ATLANTA

  • Alabama

  • Florida

  • Georgia

  • Maryland

  • North Carolina

  • South Carolina

  • Virginia

  • Washington, D.C.

BOSTON

  • Connecticut

  • Maine

  • Massachusetts

  • New Hampshire

  • Rhode Island

  • Vermont

CHICAGO

  • Illinois

  • Wisconsin

INDIANAPOLIS

  • Indiana

  • Michigan

CINCINNATI

  • Kentucky

  • Ohio

  • Tennessee

DALLAS

  • Arkansas

  • Louisiana

  • Mississippi

  • New Mexico

  • Texas

NEW YORK

  • New Jersey

  • New York

  • Puerto Rico

  • Virgin Islands

PITTSBURGH

  • Delaware

  • Pennsylvania

  • West Virginia

SAN FRANCISCO

  • Arizona

  • California

  • Nevada

TOPEKA

  • Colorado

  • Kansas

  • Nebraska

  • Oklahoma

DES MOINES

  • Alaska

  • America Samoa

  • Arizona

  • California

  • Guam

  • Hawaii

  • Idaho

  • Iowa

  • Mariana Islands

  • Minnesota

  • Missouri

  • Montana

  • Nevada

  • North Dakota

  • Oregon

  • South Dakota

  • Utah

  • Washington

  • Wyoming

The FHLBank Office of Finance serves as the fiscal agent for the FHLBanks issuing and servicing its debt securities (discount notes and bonds).

The Council of FHLBanks serves as the public voice and trade association for the FHLBanks.

The Federal Housing Finance Agency, or FHFA, is the primary regulatory agency for the FHLBanks. The FHFA also serves as the primary regulator for Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

The FHLBanks, Fannie Mae and Freddie Mac are “government-sponsored enterprises” or “GSEs”. GSEs are privately-held corporations created by Congress with a public purpose to support certain sectors of the economy by being a reliable provider of liquidity and to reduce the cost of credit for those sectors.


HISTORICAL PERSPECTIVE ON FHLBANKS


FHLBANKS & MEMBERSHIP

# of Members by FHLBank

# of Members by FHLBank

Advances Outstanding by FHLBank

Advances Outstanding by FHLBank

FHLBank Membership by Type of Financial Institution

FHLBank Membership by Type of Financial Institution

Change in FHLBank Membership by Type of Financial Institution

Change in FHLBank Membership by Type of Financial Institution

Change in FHLBank Membership by FHLBank

Change in FHLBank Membership by FHLBank

Change in $ Advances Outstanding Since 2009 by FHLBank

Change in $ Advances Outstanding Since 2009 by FHLBank

 
Change in Membership by Type and by FHLBank Since 2009

Change in Membership by Type and by FHLBank Since 2009

 

BALANCE SHEET COMPOSITION OF FHLBANKS

TOTAL ASSETS:  The asset side of the FHLBank balance sheet is comprised of its primary mission assets: (1) Advances and (2) Mortgages and investments: (1) S-T investments (predominantly fed funds and repurchase agreements) and (2) Investment Securities (predominantly single-family and multifamily residential mortgage backed securities).

TOTAL ASSETS: The asset side of the FHLBank balance sheet is comprised of its primary mission assets: (1) Advances and (2) Mortgages and investments: (1) S-T investments (predominantly fed funds and repurchase agreements) and (2) Investment Securities (predominantly single-family and multifamily residential mortgage backed securities).

TOTAL LIABILITIES AND CAPITAL : The liabilities and capital components are primarily: (1) consolidated obligations comprised of Discount Notes and Bonds and (2) Capital.

TOTAL LIABILITIES AND CAPITAL: The liabilities and capital components are primarily: (1) consolidated obligations comprised of Discount Notes and Bonds and (2) Capital.

 
As a wholesale bank and liquidity provider, the FHLBanks are actively making loans or Advances and sourcing funds in the capital markets. On average, the FHLBanks fund approximately $184 billion in Advances on a weekly basis. To fund these loans, the FHLBanks borrow on average $140 billion in Discount Notes and $10 billion in long term Bonds. The FHLBanks also keep sizeable amounts of liquid assets which total nearly 13% of total assets. And the investment securities portfolio provides an additional source of liquidity.

As a wholesale bank and liquidity provider, the FHLBanks are actively making loans or Advances and sourcing funds in the capital markets. On average, the FHLBanks fund approximately $184 billion in Advances on a weekly basis. To fund these loans, the FHLBanks borrow on average $140 billion in Discount Notes and $10 billion in long term Bonds. The FHLBanks also keep sizeable amounts of liquid assets which total nearly 13% of total assets. And the investment securities portfolio provides an additional source of liquidity.

 

FUNDING: DISCOUNT NOTES AND BONDS

CONSOLIDATED OBLIGATIONS - FUNDING:  The FHLBanks fund themselves by issuing “consolidated obligations” of the System. These COs are issued through the FHLBanks' Office of Finance acting as agent. Although each FHLBank is an independent entity, the FHLBanks are jointly and severally liable for all System COs. COs of bonds (original maturity > 1 year) and discount notes (original maturity < 1 year and sold at a discount). COs are not guaranteed or insured by the federal government. However, the FHLBanks’ status as a government-sponsored enterprise, or GSE, accords certain privileges that enables the FHLBanks to raise funds at rates slightly above comparable obligations issued by the U.S. Department of the Treasury. (Source: FHFA).

CONSOLIDATED OBLIGATIONS - FUNDING: The FHLBanks fund themselves by issuing “consolidated obligations” of the System. These COs are issued through the FHLBanks' Office of Finance acting as agent. Although each FHLBank is an independent entity, the FHLBanks are jointly and severally liable for all System COs. COs of bonds (original maturity > 1 year) and discount notes (original maturity < 1 year and sold at a discount). COs are not guaranteed or insured by the federal government. However, the FHLBanks’ status as a government-sponsored enterprise, or GSE, accords certain privileges that enables the FHLBanks to raise funds at rates slightly above comparable obligations issued by the U.S. Department of the Treasury. (Source: FHFA).

MIX OF FUNDING AND MATURITY TRANSFORMATION:  The FHLBanks use a mix of funding: short-term funding in the form of Discount Notes and long term funding in the form of Bonds. Over the years, the ratio of Discount Note funding as a percentage of total Consolidated Obligations has varied. This variation, in part, depends upon the borrowing needs of its members (short-term or long-term). With the banking system crisis during the Great Recession, this question of mix - as a liquidity risk rather than as an interest rate risk - has been elevated by the FHLBank regulatory, FHFA and has been raised in  Federal Reserve speeches , by the  Office of Financial Research  and the  Federal Reserve staff . While the issue raised must be assessed, it is complex and not subject to formulation of a bright red-line. The FHFA issued an  advisory bulletin  on liquidity management.

MIX OF FUNDING AND MATURITY TRANSFORMATION: The FHLBanks use a mix of funding: short-term funding in the form of Discount Notes and long term funding in the form of Bonds. Over the years, the ratio of Discount Note funding as a percentage of total Consolidated Obligations has varied. This variation, in part, depends upon the borrowing needs of its members (short-term or long-term). With the banking system crisis during the Great Recession, this question of mix - as a liquidity risk rather than as an interest rate risk - has been elevated by the FHLBank regulatory, FHFA and has been raised in Federal Reserve speeches, by the Office of Financial Research and the Federal Reserve staff. While the issue raised must be assessed, it is complex and not subject to formulation of a bright red-line. The FHFA issued an advisory bulletin on liquidity management.


primary mission assets

ADVANCES:  FHLBanks provide funding to members through secured or collateralized loans known as advances. Collateral may include residential mortgage loans, MBS and other types of eligible collateral pledged by the borrowing institution. Advances are offered in a wide range of fixed-rate and variable-rate products with various maturities, interest rates and payment structures and optionality. Maturities range from one day to up to 30 years. The FHLBanks have never suffered a loss on any advance.

ADVANCES: FHLBanks provide funding to members through secured or collateralized loans known as advances. Collateral may include residential mortgage loans, MBS and other types of eligible collateral pledged by the borrowing institution. Advances are offered in a wide range of fixed-rate and variable-rate products with various maturities, interest rates and payment structures and optionality. Maturities range from one day to up to 30 years. The FHLBanks have never suffered a loss on any advance.

MORTGAGES (AMA):  Under the Acquired Member Asset (AMA) regulation, FHLBanks are permitted to acquire mortgage loans from members. There is a three-part test: (1) typically whole conforming mortgage loans, (2) must be acquired directly from a member and (3) credit risk-sharing required such that a substantial portion of the credit risk is borne by the selling member. (Source: FHFA). This “skin-in-the-game” risk-sharing approach has been employed by the FHLBanks since the start of these AMA programs in 1999. These programs provide members with a competitive secondary market outlet for high-quality, conforming, fixed-rate mortgages.  The total mortgage loans and single-family residential mortgage-backed securities held by the FHLBanks represent approximately one (1) percent of total U.S. single-family residential mortgage assets.

MORTGAGES (AMA): Under the Acquired Member Asset (AMA) regulation, FHLBanks are permitted to acquire mortgage loans from members. There is a three-part test: (1) typically whole conforming mortgage loans, (2) must be acquired directly from a member and (3) credit risk-sharing required such that a substantial portion of the credit risk is borne by the selling member. (Source: FHFA). This “skin-in-the-game” risk-sharing approach has been employed by the FHLBanks since the start of these AMA programs in 1999. These programs provide members with a competitive secondary market outlet for high-quality, conforming, fixed-rate mortgages.

The total mortgage loans and single-family residential mortgage-backed securities held by the FHLBanks represent approximately one (1) percent of total U.S. single-family residential mortgage assets.

 
CORE MISSION ACHIEVEMENT:  In 2015, the FHFA issued an  advisory bulletin  that provides guidance relating to how the FHFA will assess each FHLBank's core mission achievement. The FHFA identified primary mission assets as (1) advances and (2) mortgage (AMA) loans. The FHFA will measure core mission achievement by using a ratio of primary mission assets to consolidated obligations using average balances. Core mission achievement is presumed if this ratio exceeds 70 percent.

CORE MISSION ACHIEVEMENT: In 2015, the FHFA issued an advisory bulletin that provides guidance relating to how the FHFA will assess each FHLBank's core mission achievement. The FHFA identified primary mission assets as (1) advances and (2) mortgage (AMA) loans. The FHFA will measure core mission achievement by using a ratio of primary mission assets to consolidated obligations using average balances. Core mission achievement is presumed if this ratio exceeds 70 percent.

SECONDARY MORTGAGE MARKET ACTIVITY:  The FHLBanks provide important and competitive programs for members to sell their mortgages into the secondary mortgage market. There are two programs where the FHLBanks retain these mortgage loans on their balance sheets: Mortgage Partnership Finance, or MPF and Mortgage Purchase Program, or MPP. In addition, the FHLBanks offer conduit programs where these mortgages are aggregated and delivered to Fannie Mae or Ginnie Mae or other third-party investors.  The total mortgage purchases and aggregation by the FHLBanks represents approximately one (1) percent of U.S. mortgage originations.

SECONDARY MORTGAGE MARKET ACTIVITY: The FHLBanks provide important and competitive programs for members to sell their mortgages into the secondary mortgage market. There are two programs where the FHLBanks retain these mortgage loans on their balance sheets: Mortgage Partnership Finance, or MPF and Mortgage Purchase Program, or MPP. In addition, the FHLBanks offer conduit programs where these mortgages are aggregated and delivered to Fannie Mae or Ginnie Mae or other third-party investors.

The total mortgage purchases and aggregation by the FHLBanks represents approximately one (1) percent of U.S. mortgage originations.


Affordable Housing Assessments

Capital

CAPITAL:  The capital foundation of a FHLBank is unique. It is distinguished by the fact that the capital stock is redeemable. The capital base is dynamic - not static. Members of a FHLBank must purchase capital stock as a condition of membership. Members are also required to purchase capital stock whey they borrow or engage in other activities with the FHLBank. For an advance borrowing, this capital requirement is typically in the 4 - 5% range. And when the advance is paid off, the FHLBank redeems this capital stock. This member-provided capital is designed to expand and contract in response to member borrowing needs. It is “self-capitalizing”. The total capital base of a FHLBank is comprised of this capital stock plus retained earnings. The FHFA establishes a minimum capital ratio of 4.0% - total capital divided by total assets.

CAPITAL: The capital foundation of a FHLBank is unique. It is distinguished by the fact that the capital stock is redeemable. The capital base is dynamic - not static. Members of a FHLBank must purchase capital stock as a condition of membership. Members are also required to purchase capital stock whey they borrow or engage in other activities with the FHLBank. For an advance borrowing, this capital requirement is typically in the 4 - 5% range. And when the advance is paid off, the FHLBank redeems this capital stock. This member-provided capital is designed to expand and contract in response to member borrowing needs. It is “self-capitalizing”. The total capital base of a FHLBank is comprised of this capital stock plus retained earnings. The FHFA establishes a minimum capital ratio of 4.0% - total capital divided by total assets.

AFFORDABLE HOUSING PROGRAM : The FHLBanks' Affordable Housing Program (AHP) is the largest private source of grant funds for affordable housing in the United States. It is funded with 10 percent of the FHLBanks' net income each year. (Source: Council of FHLBanks).  The Federal Home Loan Bank Act (Bank Act) requires each FHLBank to establish an AHP. Under the program, members of the FHLBank apply to the Bank for AHP funds. The member provides the funds to approved projects and households to be used for the purchase, construction, or rehabilitation of affordable housing. AHP funds may be in the form of grants or a subsidized interest rate on advances from a FHLBank to its member. For AHP-assisted owner-occupied housing, the eligible household income must be at or below 80 percent of AMI. For AHP-assisted rental housing, at least 20 percent of a project’s units must be affordable for and occupied by households with incomes at or below 50 percent of AMI. (Source: FHFA).  From 1990 to 2017, the FHLBanks contributed a total of approximately $5.6 billion to AHP. (Source: FHFA).  In 2017, the FHLBanks awarded a total of $399 million through AHP; This funding supported 40,858 housing units. (Source: FHFA).  In 2018, the FHLBanks set aside $404 million in AHP Assessments.

AFFORDABLE HOUSING PROGRAM: The FHLBanks' Affordable Housing Program (AHP) is the largest private source of grant funds for affordable housing in the United States. It is funded with 10 percent of the FHLBanks' net income each year. (Source: Council of FHLBanks).

The Federal Home Loan Bank Act (Bank Act) requires each FHLBank to establish an AHP. Under the program, members of the FHLBank apply to the Bank for AHP funds. The member provides the funds to approved projects and households to be used for the purchase, construction, or rehabilitation of affordable housing. AHP funds may be in the form of grants or a subsidized interest rate on advances from a FHLBank to its member. For AHP-assisted owner-occupied housing, the eligible household income must be at or below 80 percent of AMI. For AHP-assisted rental housing, at least 20 percent of a project’s units must be affordable for and occupied by households with incomes at or below 50 percent of AMI. (Source: FHFA).

From 1990 to 2017, the FHLBanks contributed a total of approximately $5.6 billion to AHP. (Source: FHFA).

In 2017, the FHLBanks awarded a total of $399 million through AHP; This funding supported 40,858 housing units. (Source: FHFA).

In 2018, the FHLBanks set aside $404 million in AHP Assessments.


IMPACT OF BANK & THRIFT INDUSTRY CONSOLIDATION ON FHLBANKS

Data estimated using FDIC Call Reports and state headquarters as proxy for membership at FHLBank.

Data estimated using FDIC Call Reports and state headquarters as proxy for membership at FHLBank.

Data estimated using FDIC Call Reports and state headquarters as proxy for membership at FHLBank.

Data estimated using FDIC Call Reports and state headquarters as proxy for membership at FHLBank.

With the enactment of the Riegle-Neal interstate banking bill in 1994, banks began the consolidation of the various banking charters that existed within their bank holding company across the U.S. Most bank holding companies moved toward a single banking charter to house all of their branches and bank activities.

As the bank & thrift industry consolidation occurred, each FHLBank suffered a decline in the number of banks & thrifts - industry consolidation occurred both within each FHLBank district and across districts.

However, depending upon where the headquarters (or charter) of the acquiring institution resided, the change in market share of banking and thrift industry assets had differing impacts on each FHLBank. Consolidation of banks across various FHLBank districts had a significant impact on the market share of bank and thrift industry assets held by any FHLBank. And this continues as the banking industry consolidation continues.

FHLBank of Des Moines gained market share as a result of the acquisition activity of Wells Fargo (and predecessor firms) and having its banking charter located in South Dakota. FHLBank of Des Moines went from a district with bank and thrifts holding approximately 9% of industry assets to just under 25% - a market share gain of 16 points.

FHLBank of Atlanta gained market share as a result of the acquisition activity of the former NationsBank - now BankAmerica - and predecessor firms and having its banking charter located in North Carolina. FHLBank of Atlanta went from a district with bank and thrifts holding approximately 14% of industry assets to just under 21% - a market share gain of 7 points.

FHLBank of Cincinnati gained market share as a result of the acquisition activity of the former Bank One / Chase Manhattan - now JPMorgan Chase (and predecessor firms) and having its banking charter located in Ohio. FHLBank of Cincinnati went from a district with bank and thrifts holding approximately 6% of industry assets to just under 19% - a market share gain of 13 points.

For those FHLBanks with decline market share of banking industry assets, this results primarily from banks and thrifts headquartered in their districts being acquired by institutions headquartered in another FHLBank district. Two FHLBanks showed significant market share changes. FHLBank of New York’s market share declined by nearly 15 points from 22% in 1992 to 7% in 2018 primarily relating to mergers of Chase Manhattan, JP Morgan and several regional banks. FHLBank of San Francisco’s market share dropped 9 points from approximately 15% to 6% as banks and thrifts across its district were merged into other banks.