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By David Birkins
As asset/liability managers are increasingly realizing, effective
management of the liability side of the balance sheet is a
critical component to the overall profitability of community
financial institutions. As such, it is vital to plan and analyze
funding liabilities with the same focus and discipline as
is typically applied to earning assets.
Today, community bankers have more alternatives for efficiently
funding a balance sheet than ever before. While some of these
alternatives require substantial time and effort to analyze
and evaluate, others do not. As a colleague of mine was fond
of saying, "For starters, it's always preferable to cherry-pick
and focus on the low-hanging fruit." With that idea in
mind, in the guise of their regularly scheduled markdowns
and specials, members can easily and significantly prune the
cost of their borrowings by simply utilizing our regularly
scheduled markdowns and participating in our periodic specials.
Tuesday Markdowns Every
Tuesday, from 9:30 a.m. to 11:00 a.m., the Bank offers discounted
rates on short-term advances with one-, three-, six-, and
12-month terms, giving members a regular opportunity to book
short-term funding at discounted levels. Discounts are up
to five basis points off Classic credit rates.
Long-Term and Amortizer Specials
On the first and third Wednesdays of each month, the Bank
offers discounts on long-term bullet advances; on the second
and fourth Wednesdays, it offers discounts on amortizing advances.
From 10:00 a.m. to noon, members can take down funding at
discounts typically up to 10 basis points off our regular
posted rates.
Other Markdowns/Specials
From time to time a lower-than-posted
rate may be available on advances of $25 million or more for
the Bank's Daily Cash Manager product and $10 million or more
for all other advances products. Money Desk staff are always
prepared to work one-on-one with members to meet specific
funding objectives. (Note: discounts applied to these advances
apply only to Classic credit rates; there is no additional
discount to CDA levels.) The Bank periodically runs specials
outside of the scheduled markdowns.
Beyond these easy techniques of utilizing markdowns and specials,
the Bank has two other programs that can also help members
reduce the cost of their advances.
Percentage of Assets Incentive Discount
(PAID) Under the PAID program, the Bank automatically
provides discounts on the rollover cash manager account and
on advance products with at least one year to maturity based
on the member's percentage of advances to assets. The discounts
under this program are one, two, and three basis points for
members with advances to asset ratios of 10 percent, 15 percent,
and 20 percent, respectively.
Community Development Advance (CDA)
Through the Bank's Housing and Community Investment Department,
members can apply for subsidized advances that support a wide
variety of lending initiatives. Depending on structure and
term, members can take down funding at discounts of up to
25± basis points. After completing a simple application,
a "shelf offering" of approved CDA funds will be
created from which the member can draw as funding is required.
Please contact the Money Desk at 1-800-357-3452 or moneydesk@fhlbboston.com
to let them know your funding requirements.
David Birkins is vice president /relationship manager
for Connecticut, Rhode Island, and western Massachusetts at
the Federal Home Loan Bank of Boston.
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