NEW YORK (Reuters) - The Federal Home Loan Banks said on Monday the amount of loans made to its member banks rose to a record high in the first quarter as a credit crunch crimped other funding sources for banks.

The system of 12 regional FHLB banks, the largest collective source of U.S. home funding, has increased in importance to the housing market since the credit crunch shriveled up other sources of funds for mortgage lenders.

The group makes low-cost loans to its members, which it funds by selling debt in the capital markets.

Advances, or secured loans, rose 4.3 percent to $913 billion in the first quarter, representing 69.0 percent of total assets, FHLBanks said in a statement.

The volume of loans the FHLB provides to members belonging to the network has soared since last summer as lenders such as Countrywide Financial Corp CFC.N boosted requests for the funding.

FHLBanks on Monday also preliminarily reported a 12.2 percent rise in first-quarter net income to $697 million, from a year earlier.

"The overall profitability of the FHLBanks is going to make people, for now, rest easy," said Jim Vogel, agencies analyst, at FTN Financial Capital Markets in Memphis, Tennessee.

"If you have a check list of the things you are watching out for, you can check off the FHLBanks and move on to the next item on your list after today's report," he said.

FHLBanks, Fannie Mae (FNM.N: Quote, Profile, Research), Freddie Mac (FRE.N: Quote, Profile, Research), and the Federal Housing Administration have become favored vehicles of the Bush administration as it makes efforts to stem surging mortgage defaults, falling home prices and rising foreclosures.