The Federal Home Loan Bank (FHLBank) System is one of the nation’s largest government-sponsored enterprises, providing liquidity to 6,500 member banks, credit unions, insurance companies, and community development financial institutions. This report examines how advances and FHLBank membership affect total lending and lending for housing, small businesses, agriculture, and community development, using more than two decades of data to assess how the FHLBanks support lending. The report analyzes bank members, both commercial and savings, and credit union members, which account for more than 80 percent of all members during the 2002–24 sample period.
Why This Matters
The FHLBank System was created in 1932 to support mortgage lending and community credit, but only a few studies have quantified the system’s impacts on member lending activity. As policymakers and regulators reassess the system’s mission and structure, understanding how advances—the collateralized loans FHLBanks provide to members—affect real-world lending is essential. This report provides comprehensive national evidence on the relationship between advances and lending across commercial banks, savings institutions, and credit unions.
What We Found
- FHLBank advances are strongly associated with higher lending across banks and credit unions.
From 2002 to 2024, increases in advances correspond to higher levels of lending, with larger effects after the 2008 financial crisis. A $100 increase in advances relative to assets is associated with $38 more in bank loans, rising to $48 after 2008. These results, together with observed quarterly changes in advances, suggest that bank advance use expands total lending by between $75.6 billion and $97.3 billion per year.
- Lending responses are strongest in residential real estate.
Housing-related lending—central to the system’s mission—shows the clearest response. A $100 increase in advances relative to assets is associated with an $18 increase in residential real estate loans over assets and $22 after 2008. This translates to a $35.2 billion and a $45.6 billion annual overall residential real estate lending increase.
Banks also expand mortgage-backed securities holdings and warehouse lending, demonstrating that advances support mortgage activity through multiple channels. Analysis of Home Mortgage Disclosure Act data also shows that a $100 increase in advances over assets is associated with $22 more in mortgage originations over assets, which rises to $38 in the post-2008 period. Smaller banks show particularly strong responses, with a $51 increase in mortgage origination over assets post-2008. Lending to low- and moderate-income households also increases, indicating that advances can help expand access to mortgage credit for underserved borrowers.
- Advances support small business, small farm, and community development lending.
Although the effects are smaller than for residential real estate, advances are consistently linked to higher levels of small business, small farm, and community development lending. For every $100 in additional advances over assets, banks increase small business lending over assets by $2.40 and small farm lending over assets by $1.20, with the latter showing stronger effects after 2008. Small and midsize banks appear to rely more heavily on advances to support small business lending. Community development lending shows a weaker and less consistent association with advances, but the relationship is positive when the pandemic period (post-2019) is excluded.
- Credit unions increase lending when they use advances and after becoming FHLBank members.
Credit unions that use advances tend to increase lending meaningfully. A $100 increase in advances over assets is associated with $27 more in total loans over assets and $13 more in real estate loans over assets, both with larger effects after 2008 ($36 for total lending and $17 for real estate lending). This translates to an annual increase of $3.6 billion to $5.1 billion in overall lending from the advance increase and a $1.7 billion to $2.4 billion increase in real estate lending. Additionally, difference-in-differences analyses showed that credit union lending expanded after joining the FHLBank System, particularly for mortgage and consumer loans.
- FHLBank advances contribute to substantial cumulative growth in members’ lending.
The regression estimates suggest that from 2002 to 2024, increases in advances led to increased lending of $1.74 trillion by bank members and $82 billion by credit union members, for a total increase of up to $1.82 trillion. Residential real estate lending, correspondingly, increased by $811 billion from banks and $39 billion from credit unions, for a total of $850 billion. These findings underscore the importance of the FHLBanks’ role as a reliable liquidity provider, which enables bank and credit union members to increase credit access and better serve their communities.
How We Did It
The report draws on national datasets that cover the full universe of regulated financial institutions and mortgage lending. Bank and credit union call reports provide quarterly balance sheet and lending information from 2002 through 2024. Home Mortgage Disclosure Act data, spanning 2002 to 2023, offer detailed loan-level information on mortgage originations, while Community Reinvestment Act data from 2002 to 2023 provided details on community development and small business lending activity.
The analyses primarily use first-difference regression models that link changes in advances to changes in lending. The study also incorporates fixed-effects models and instrumental variables techniques to address potential selection issues and endogeneity concerns. The report uses a difference-in-differences framework to evaluate the impact of FHLBank membership on credit union lending volumes. Additional subgroup analyses examine how effects vary by institution size, loan type, and time period, particularly before and after the 2008 financial crisis.
Across all datasets and methodological approaches, the results consistently indicate that FHLBank advances expand total lending by commercial banks, savings institutions, and credit unions and expand extension of credit for housing, consumer lending, small businesses, and community investment.
