Pub. 8 2020 Issue 3

5 The Community Banker Associate Member COMMUNITY INVESTMENT ADVANCES: A PERFECT FIT WITH YOUR FUNDING STRATEGY By Eric Jensen, VP/Senior Relationship Manager T he needs of your borrowers and com- munities have certainly changed over the past year. As you take a closer look at your funding strategy to ensure your institu- tion is set up for success through this econom- ic cycle, remember to consider the benefits available to you as a member of the Federal Home Loan Bank of Des Moines. Your current business strategies may al- ready lend themselves to a beneficial solution: • Does your institution lend on terms of more than a year and need solutions to manage interest rate risk? • Does your lending portfolio include residential loans, small business loans or agriculture business loans? • Does your institution analyze ways to reduce the cost of funds to provide competitive rates in your communities? If your funding strategy includes any of these three elements, aCommunity Investment Ad- vance (CIA)may fit perfectlywith your *long-term liquidity andbalance sheetmanagement needs. Managing Interest Rate Risk With market interest rates at historic lows, a CIA provides an opportunity to protect interest rate spread for the portion of your loan portfolio with fixed interest rates and longer terms by using dura- tion-certain funding at highly competitive levels. The CIA is one of the lowest-cost forms of interest rate insurance. Another benefit of FHLB Des Moines membership is the activity stock dividend. The cash dividend feature is unique compared with other sources of wholesale funding. When combined with the low posted CIA rate, the dividend impact further decreases an already low level of funding on a net basis. Visit www.fhlbdm.com/dividend-calculator to evaluate the impact of the dividend on your funding using a CIA. A Fit with Your Lending Portfolio Many residential and commercial loans qualify for the use of CIA funding. Re- cent examples of loans and investments members have used to be eligible for CIA funds include: PPP-eligible loans, SBA-el- igible loans, Fannie Mae Delegated and Underwriting and Servicing (DUS) bonds for eligible multifamily census tracts, and residential loans made in Area Median Income-designated target income areas. Members are often surprised to learn that they can easily apply for these low- cost funds. Over the past year, the CIA application has become more streamlined to make it easier for members. Qualifying loans within the application is also easy as members can consider both anticipatory loans and use existing loans (within 90- days from the request of the advance) to meet the loan qualifications. At the Federal Home Loan Bank of Des Moines, our mission is to help members meet their communities’ housing, business, and economic needs. Helping your community thrive will pay back dividends by strengthen- ing individuals’ and families’ well-being while growing future economic opportunities. Visit our website: www.fhlbdm.com/CIA for current rates and information on Commu- nity Investment Advances. Your relationship manager is available to answer any questions. Eric Jensen, VP/Senior Relationship Manager, ejensen@ fhlbdm.com , 206.434.0581 *Long-term advances are terms greater than one year.