Pub. 7 2012-2013 Issue 4

November | December 2012 7 Extraordinary Service for Extraordinary Members. Consider the FHLB to HelpWith Loan Demand Mike Jacobson , President & CEO, NebraskaLand National Bank A S THE BANKING INDUSTRY AS A WHOLE RECOVERS FROM one of the worst economic climates since the Great Depression, many Nebraska community banks were able to avoid the effects because of the strong agricultural base here in Nebraska. Unlike the agricultural and energy recession of the 1980s, where the coastal regions remained strong, Nebraska andother Midwestern ag states have prospered over the past several years. The greatest challenge today for many Nebraska com- munity banks is the lack of loan volume. Loan volume has been declining in recent years andmargins have been compressed as farmers and ranchers pay off existing loans from their strong earnings. At the same time, competition for loans has increased as equipment manufacturers, input providers, and non-bank competitors become more aggressive. As farmlandprices continue higher, theFarmCredit System (FCS) has beenone of themajor sources of long-termfixed-rate credit. This has been due in large part to FCS’ ability to match- fund its term loans and not have its earnings, on the Federal LandBank side of the business, subject to federal income taxes. As FCS attracts new customers on the long-term side, it is also in a great position to cross-sell the short-term operating need of ag customers. Community banks, however, generally fund their balance sheet with short-term liabilities and are less able to match-fund longer-term assets. Of course, there is also that issue of paying federal income taxes on the profits. Meanwhile, other investment opportunities available to community banks provide very little if any spread compared to the cost of core funding. This in many ways has forced many community banks to either push their credit risk toler- ances, push their interest rate risk tolerances, or enter new lines of business that they may be ill-equipped to understand and manage. The Federal Home LoanBank (FHLB)may have a solution. The FHLB system is a private company owned by its members 233 South 13th Street, Suite 700 Lincoln, NE 68508 Phone: (402) 474-1555 • Fax: (402) 474-2946 NBA Board of Directors NBA Editorial Staff George Beattie NBA President & CEO george.beattie@nebankers.org Joni Sundquist Vice President of Communications joni.sundquist@nebankers.org Clark D. Lehr NBA Chairman (2012-2013) (402) 563-3656 First Nebraska Bank, Columbus John P. Stinner NBA Chairman-Elect (2012-2013) (308) 436-2300 Valley Bank & Trust Co., Gering Steven L. Anderson (402) 845-6565 Bank of Doniphan, Doniphan Kelley Ayres (308) 832-2030 First Bank & Trust Co., Minden Bob Balfany (402)434-1035 U.S. Bank, N.A., Lincoln Nicholas W. Baxter (402) 602-1839 First National Bank of Omaha, Omaha Cory A. Bergt (402) 434-4122 Wells Fargo Bank, N.A., Lincoln John E. Bothof (402) 334-0300 Northwest Bank, Omaha David P. Dannehl (308) 876-2451 First State Bank of Loomis, Loomis Alan L. Fosler (402) 323-1272 Union Bank & Trust Co., Lincoln Mark W. Hansen (402) 434-3462 West Gate Bank, Lincoln Stephen J. Hatz (402) 918-1567 Bank of the West, Omaha Michael J. Homa (402) 351-4248 Mutual of Omaha Bank, Omaha Douglas G. Johnson (402) 329-6221 Midwest Bank, N.A., Pierce Jeffrey C. Johnson (402) 562-2108 Columbus Bank & Trust Co., Columbus Timothy E. Keller (402) 375-2043 F&M Bank, Wayne John F. Kotouc (402) 399-5088 American National Bank, Omaha Clarence L. Landen III (402) 449-0919 Security National Bank of Omaha, Omaha Kevin J. Larson (402) 372-5147 CharterWest National Bank, West Point Garold G. Leggott (402) 363-6688 York State Bank, York Brian Lierman (402) 475-0521 Great Western Bank, Lincoln Barry J. Lockard (402) 434-2225 Cornhusker Bank, Lincoln Dudley C. Oltmans (308) 532-5936 Adams Bank & Trust, North Platte Kimberly A. Schroll (308) 534-2861 NebraskaLand National Bank, North Platte Ryne D. Seaman (402) 643-3636 The Cattle National Bank & Trust Co., Seward James H. Varney (877) 860-2266 Custer Federal Savings & Loan Assn., Broken Bow Kendell G. Holthus NBA Past Chairman (402) 363-7414 Cornerstone Bank, York Larry D. Marik NBA Past Chairman (402) 910-1387 First National Bank of Columbus, Columbus GUEST EDITORIAL Q FHLB — continued on page 8