An economist finds that, when community banks gain access to FHLB advances, competition in local markets increases significantly, with mortgage rates in the market falling by an average of 8 bps.

As funding sources dried up late in the first quarter, members sharply increased their FHLB advances. But when financial markets stabilized in the second quarter, these short-term loans weren’t replaced. (Includes two data charts.)

The bright spot in the FHLBanks’ earnings report was net interest income, which climbed to $1.25 billion 2Q20, a 36.4% sequential increase, despite the fact that advances declined by almost 31%. (Includes data chart.)