Pub. 7 2012-2013 Issue 4

www.nebankers.org 8 Extraordinary Service for Extraordinary Members. and regulated by the Federal Housing Finance Agency (FHFA). Themembers hold stock in the individual Home Loan Banks in proportion to their business activities. The members also vote for the board members who represent their interests. The primary mission of the FHLB is to provide liquidity to its members. This liquidity source includes access to long-term and intermediate-termadvances that canbeused tomatch-fund longer-term assets on their members’ balance sheets. As banks struggle to keep their core customers’ credit relationships, one solution might be to consider using FHLB long-termadvances in combination with their own core depos- its to match-fund long-term agricultural real estate loans. By keeping these loans on the bank’s books, community banks are better-equipped to hold loan volume thatmight otherwise go to another lending source. Although it might seem inappropriate to borrow from the FHLB when you are swimming in liquidity, the key question you must ask is: Would I otherwise lose the loan if I do nothing? If you fundamentally are opposed to keeping long-term fixed-rate real estate loans on your balance sheet (due to legal lending limit concerns), you may want to consider using FHLB intermediate-termadvances tomatch-fund longer-terminvest- ments suchas longer-termmunicipal bonds. This strategy could helpyou tomatch-fund some of the interest rate riskby reaching out longer on the investment curve, and allow you to reallocate any existing extension risk to your loan portfolio. It is unlikely that interest rateswill stay at their current levels forever. It is just as unlikely that borrowers will have a better opportunity to lock in long-term fixed rates. With this in mind, it might be very difficult to attract back any borrowers youmay lose if they move business today to another lending institution that offers them a long-term fixed rate. Every community bank should evaluate its own risk toler- ances andmake every effort tomaximize earningswhile staying focused on the risks associated with any strategy. If you are struggling to find a way to limit interest rate risk, but have a need to extend asset maturities beyond the term of traditional funding sources, the FHLB may have a solution. Z For more information, contact Mike Jacobson at (308) 534-2100 or mjacobson@nebraskalandbank.com . Jacobson is president and CEO of NebraskaLand National Bank in North Platte, Neb., and currently serves on the board of directors for FHLBank Topeka. He is a past chairman of the Nebraska Bankers Association. 1125 South 103rd Street Omaha, NE 68124 402.390.9500 koleyjessen .com COMMERCIAL LOANS - TIF/BOND FINANCING DIP FINANCING - BANKRUPTCY/CREDITORS’ RIGHTS REGULATORY COMPLIANCE - GENERAL CORPORATE Max Burbach & Tom Ackley Q FHLB — continued