Sources and uses of funds in the fourth quarter 1983

Federal Home Loan Bank Board Journal, April, 1984 by Virginia K. Olin

Additionally, net acquisitions of mortgage-backed securities by associations continued to slow during the final three months of 1983. Associations increased holdings by $3.3 billion during the fourth quarter, down from $8.4 billion during the prior three months and the smallest quarterly increase in two years. The slowdown occurred as a result of sizable tax-motivated sales during December. At year-end, holdings totaled $83.7 billion. Nonmortgage Lending Activity

The $1.8 billion increase in nonmortgage consumer loans during the fourth quarter matched the July-september increase. As a result, outstanding nonmortgage consumer loans totaled $20.9 billion at the end of December and represented 2.8 percent of assets. At September 30, the proportion had been 2.6 percent and, at year-end 1982, 2.3 percent. Liquidity

Associations reduced holdings of liquid assets for the second consecutive quarter during October-December 1983. (See Chart 2.) This provided funds to support near-record lending activity despite reduced deposit inflow. The $1.5 billion decline in holdings was larger than the third quarter decrease and resulted in a further drop in the liquidity ratio--to 11.46 percent at year-end. Still, this ratio was 6.46 percent above the 5.00 percent required by Bank board regulation. At year-end, holdings of liquid assets totaled $76.6 billion (10.2 percent of assets), compared with $68.9 billion (9.9 percent) on December 31, 1982. Borrowings

Associations also supplemented funds from deposit inflow by increasing borrowings during the final quarter of 1983 to $91 billion. The $5.9 billion net increase was the largest quarterly rise during 1983 and resulted in a ratio of total borrowing to deposits of 14.73 percent at year-end. (See Chart 3.) This was the highest borrowing ratio in ten months.

Associations, which had increased outside borrowing $4.5 billion in the third quarter, added an additional $5.2 billion of such borrowing during late 1983. As a result, outside borrowings totaled $38.4 billion at year-end, a record amount.

Associations were net borrowers from the Federal Home Loan Banks for the first time since the second quarter of 1982. The net increase in FHLE advances during the fourth quarter equalled $0.7 billion; advances totaled $52.6 billion at year-end 1983 or 8.52 percent of deposits.