By Godson Umejiego, Senior Correspondent USA

The Federal Reserve Board on Friday announced preliminary financial information indicating that the Reserve Banks had estimated net income of US$107.8 billion during 2021, of which US$107.4 billion was remitted to the US Treasury as required under the Federal Reserve Act. The Federal Reserve Act requires the Reserve Banks to remit excess earnings to the US Treasury after providing for operating expenses, payment of dividends, and the amount necessary to maintain surplus. The 2021 audited Reserve Bank financial statements are expected to be published later this year and may include adjustments to these preliminary unaudited results.

The Federal Reserve Banks’ 2021 estimated net income of US$107.8 billion is an increase of US$19.3 billion from 2020. The increase is primarily from a US$25.1 billion increase in interest income associated with US Treasury securities, offset by decreases in interest income on federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS) of US$2.7 billion, and a decrease of US$3.4 billion in the annual amount of net gain or loss that results from the daily revaluation of foreign currency denominated asset holdings at current exchange rates.

Net income for 2021 was derived primarily from interest income on securities acquired through open market operations—US Treasury securities, federal agency and GSE MBS, and GSE debt securities of US$122.4 billion. It was offset by interest expense associated with reserve balances held by depository institutions of US$5.3 billion, foreign currency revaluation losses of US$1.9 billion, and interest expense of US$414 million on securities sold under agreement to repurchase. The Federal Reserve Banks realized net income of US$275 million from facilities established in response to the COVID-19 pandemic.

Operating expenses of the Reserve Banks, excluding amounts reimbursed by the US Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled US$5.3 billion in 2021. In addition, the Reserve Banks were assessed US$1.0 billion for the costs related to producing, issuing, and retiring currency, US$970 million for Board expenditures, and $628 million to fund the operations of the Consumer Financial Protection Bureau.

Additional earnings were derived from income from services of US$457 million. Statutory dividends totaled US$583 million in 2021.