"The floods of 2008 devastated our community with some parts of Cedar Rapids considered unrecoverable. Our bank is only as strong as the community it serves and that makes us committed to rebuilding the community and getting businesses thriving again."
Gary M. Becker, Senior Vice President,
Cedar Rapids Bank and Trust
Cedar Rapids Bank and Trust
Cedar Rapids, Iowa, was among the locations most significantly impacted by the catastrophic floods along the Cedar River in the summer of 2008. Since the flood, Federal Home Loan Bank of Des Moines (FHLB) member, Cedar Rapids Bank & Trust, is helping many flood-affected individuals and businesses recover by providing financing for repair or reconstruction.
To support this effort, Cedar Rapids Bank & Trust secured $3.2 million through FHLB’s Investment Advance Program. These funds have been used to provide low rate loans, which have been primarily used by downtown businesses and building owners as they work to reopen their doors. Together, banks and communities are showing that dedication and solidarity can help overcome any disaster.
Liquidity
The primary purpose of the Federal Home Loan Banks is to provide their members with sure and steady funding. This addresses a key risk of bank management: unexpected funding needs of new assets or deposit withdrawals. There are a limited number of ways in which financial institutions can increase liquidity: attracting deposits, cutting expenses and accessing capital markets. It takes time to attract deposits, and smaller institutions, especially, are dependent on their local markets. There are only so many expenses that may be decreased while still providing quality service to customers. The Federal Home Loan Bank System is the only source of capital market access for the majority of their members—most community banks do not have the ability to access the debt markets on their own.
Advances—loans to members—are a nearly instantaneous way for members to get the liquidity they need. The Federal Home Loan Banks go to the debt markets several times a day to provide their members with the funding that they need. The size of the Federal Home Loan Bank System allows for these advances to be structured in any number of ways, allowing each member to find a funding strategy that is tailored to their specific needs.
In order to access advances, a member must pledge high-quality collateral, in the form of mortgages, small business, agriculture or community development loans. The member must also purchase additional, activity-based stock in proportion to their borrowing. Once the Federal Home Loan Bank approves the loan request, it advances those funds to the member institution. Federal Home Loan Banks had provided nearly $930 billion in advances by December 31, 2008 (unaudited).
© , Council of Federal Home Loan Banks