New York Community's FHLB advances rose while industry total dropped in Q4 2023

New York Community Bancorp Inc. grew its Federal Home Loan Bank borrowings in the fourth quarter of 2023 as the industry's overall exposure shrank.

The US banking industry's Federal Home Loan Bank (FHLB) advances fell 3% quarter over quarter to $584.29 billion at the end of the year. As such, FHLB advances also shrank as a percentage of total liabilities to 2.7% in the 2023 fourth quarter, down from 2.9% in the 2023 third quarter.

Flagstar reports jump in FHLB advances

Of the 20 banks with the most total FHLB advances, Flagstar Bank NA, the banking subsidiary of New York Community Bancorp, grew these advances the most, at 55.5% to a total of $20.25 billion.

New York Community Bancorp faced weeks of turmoil following its unexpected 2023 fourth-quarter earnings results, stock price pressure and disclosures about internal control weaknesses. Part of its 2023 fourth-quarter results included a large liquidity build to meet liquidity standards for large banks after its acquisitions of Flagstar and most of the failed Signature Bank pushed it above $100 billion in assets faster than expected.

In its recent Form 10-K, the bank disclosed that it had $19.25 billion in FHLB advances from the New York and Indianapolis home loan banks at Dec. 31, 2023. The company further shored up its balance sheet with a capital raise for a combined investment of more than $1 billion that closed March 12.

New York Community will continue to build liquidity in the first quarter, CFO John Pinto said on the company's 2023 fourth-quarter earnings call in January.

BOK Financial Corp. unit BOKF NA, posted the second-largest increase, with advances rising 24.3% to $7.68 billion.

Conversely, FHLB advances dropped the most quarter over quarter at Bank of America NA, by 23.8% to $17.58 billion, and the second-most at Comerica Bank, where they fell by 13.4% to $7.54 billion.

As the company's securities mature and run off, it plans to fund loan growth and reduce its wholesale borrowings, such as FHLB advances, Comerica CFO James Herzog said during the company's 2023 fourth-quarter earnings call in January.

FHLB advances made up the largest proportion of total liabilities at MidFirst Bank, where they made up 29.1% or $9.59 billion; the second most at Flagstar Bank, 19.3%; and the third most at BOKF, 17.1%.

FHLB borrowing continued to diminish overall in the fourth quarter of 2023 following a spike during the turmoil in the first quarter of that year, and subsequent pushback from regulators over the use of the system as a "lender of last resort."

The system continues to be a basic source of funding for the industry — the majority of individual banks have no brokered deposits at all, while FHLB borrowing accounts for 1.2% of liabilities at the median bank — including banks with pressing liquidity needs.