For 2010, the Bank recorded net income of $278 million, a decrease of $5 million from net income of $283 million for 2009. The Bank's return on equity (ROE) was 3.42 percent for 2010, compared to 3.58 percent for 2009. ROE decreased between the periods primarily as a result of decreased net income and an increase in average capital.
As of December 31, 2010, total assets were $131.8 billion, a decrease of $19.5 billion, or 12.9 percent, from December 31, 2009. This decrease was due primarily to a $25.3 billion, or 22.1 percent, decrease in advances. Advances – the largest asset on our balance sheet – decreased during the year due to maturing advances, prepayments as a result of member failures, and decreased demand for new advances resulting from members' significant deposit balances and slow loan growth. However, we continued to experience strong demand for our letters of credit (LOCs) product, as new LOCs issued to members grew by 18 percent in 2010. Letters of credit have increased in recent years due to increased acceptance of LOCs by public unit depositors as collateral for public deposits and provisions of the Housing and Economic Recovery Act, which permitted the use of FHLBank LOCs as credit enhancement for a wider range of tax-exempt bonds.
Retained earnings were $1.1 billion as of December 31, 2010, compared to $873 million at December 31, 2009, an increase of 26 percent. The Bank paid quarterly dividends and resumed repurchases of excess capital stock during 2010 and is focused on continuing consistent dividend payments and excess stock repurchases.
As part of ongoing risk management efforts, the Bank in 2010 implemented further enhancements to its credit and collateral operations, with a focus on increasing responsiveness to mortgage market volatility. The Bank revised its method of calculating lendable collateral value to a market-based valuation methodology for residential first mortgage loans and home equity loans and lines of credit. This change enables the Bank to manage risk associated with these types of collateral more effectively by valuing loans based on current market conditions, rather than discounted unpaid principal balance. In some cases, this revised methodology has resulted in greater borrowing capacity for members' pledged collateral.
The Bank also made significant investments in technology throughout 2010 to increase internal efficiencies and enhance service delivery to members. The Bank implemented new collateral systems, which support the new collateral valuation methodology and streamline the collateral review process. Additionally, the Bank installed new systems to manage our securities safekeeping operations in conjunction with a new custodian service arrangement with JPMorgan Chase. Most recently, we completed a major upgrade of FHLBAccess, our online member banking system. While this multi-year project was primarily focused on increasing efficiency of our enterprise systems, it also provided a number of helpful new features to members and will allow us to introduce new products more rapidly.Page: 1, 2, 3, 4