The Federal Home Loan Bank of Des Moines opened its doors — along with the other 11 Home Loan Banks — on October 15, 1932. The core mission of the FHLB System was the same then as it is now: To provide readily available, low-cost liquidity to local lenders in all economic cycles.
The impact of FHLB Des Moines funding is critical for small banks trying to make an impact on communities that already struggle for resources.
“Like many places in Iowa, Fairfield struggles to provide enough options for parents needing childcare,” reports Aaron Kness, president and CEO of Iowa State Bank and Trust. “Current facilities are full, forcing parents to make a decision about working, staying home or driving a distance to find care. “
Bankers recognized a critical need and took the lead in financing the construction of a childcare facility, Jefferson County Kids, Inc.- Cambridge Little Achievers Childcare Center. The facility provides space for 185 children. “Using an FHLB Des Moines Community Investment Advance, we were able to price the construction loan 2.25 percent below our stated rate, saving the facility about $45,000 in interest costs annually,” Kness reported. “In an environment where small businesses are battling inflation, rising costs and employee shortages, every dollar saved in interest has an impact on the families who will utilize the new facility.”
The Federal Home Loan Banks are not frequently recognized, but are a critical element of the nation’s financial infrastructure. “Their ability to remain viable in all economic cycles is imperative to our organization’s ability to take care of our community,” Kness said. His bank relies on the FHLB Des Moines, and he said the bank’s business model would be radically different if it didn’t have access to their products and services.
North Shore Bank of Commerce in Duluth, Minn., has partnered with One Roof Community Housing and the Community Land Trust program. Counselors with that program help individuals who struggle with housing; they learn about the importance of credit and job history, and home affordability. That work, reports Ken Johnson, president and CEO, helps individuals fulfill their dreams of home ownership.
“Lenders such as North Shore Bank know that they have a reliable, trusted and proven partner in the FHLBank,” Johnson reported. “North Shore Bank would have fewer stories of helping make the dreams of first-time homebuyers come true without FHLB Des Moines. For that, the Twin Ports community is grateful.”
At the onset of the Covid-19 pandemic, the 12 Federal Home Loan Banks poured liquidity into its member banks. Systemwide advances increased 25 percent over a brief period bridging March and April in 2020. The FHLBanks contributed nearly $400 million during 2020 toward affordable housing needs. This funding supported 41,511 housing units across more than $6.5 billion of project development costs. Beyond the settlement of the sale of mortgage loans through the System’s MPF Program, members have received an additional $1 billion of revenue in exchange for $40 million of actual realized credit losses.
In 2020-21, New Market Bank in Elko New Market, Minn., saw its highest mortgage loan origination volumes by two-, maybe three-fold, reported Anita Drentlaw, president and CEO.
“We could not have taken care of as many customers as we did without the FHLBank’s Mortgage Partnership Finance Program,” reported Tom Hazlett, New Market Bank’s SVP Mortgage. “The MPF Program offers a streamlined process that allows us to retain control over the underwriting, closing and funding processes, giving us the ability to close significantly more loans than we would have if we were using other investors.
“The MPF team has really become part of our team and I value the partnership and customer service … being on a first name basis with the folks at FHLB puts my mind at ease because I can walk away from a conversation with a definitive answer and reassurance that I have a good loan.”