A fast, flexible and friendly assist to keep you on top of your game
By Suzan Saville, AVP, Marketing Manager, FHLBank Topeka
If you’re like most of our members, you’ve had some experience with our line of credit advance. It is one of the most convenient, straightforward advance products that FHLBank offers.
The line of credit is often the first one used by members. It is also our most frequently used advance product with about 75% of our members tapping into it each year. Since January 2017, FHLBank members have executed more than 8,300 transactions on the line of credit, which comprises more than half of our advance balances.
A revolving short-term liquidity source, the line of credit can be drawn upon and paid down daily (draws must remain outstanding at least one business day). Members use the line of credit to meet day-to-day liquidity needs as well as to fund mortgage banking operations and seasonal liquidity crunches. The line of credit rate is adjustable daily and is priced competitively with other types of short-term funds.
Line of Credit Benefits:
– Fast – Funds are placed in your account in a matter of minutes.
– Convenient paydown options – Call Lending or paydown online.
– Small minimum draw size – $100,000 is all you need to draw.
– Low cost –When you factor in your 6.50% dividend, the rate is especially low.
– Minimum term of 1 day – Brokered deposits don’t offer terms this short. Why take a longer, more expensive liability when you can keep the lower costing line of credit as long as you need it?
– Help increase your yield on investments – Hold less emergency liquidity in low-yielding investments and increase your yield by deploying those funds into higher yielding instruments.
– No layout periods – Draw on the line as often as you need.
Two simple steps can help ensure access to this important source of liquidity:
1. Make sure your collateral is up to date by filing your quarterly Qualifying Collateral Determination (QCD) form by the deadline. The QCD form is due 45 days following the end of each quarter.
2. Update your FHLBank authorization forms when personnel or staff duty changes occur.
In addition to these steps, it’s a good idea to test your line at least once a year. The Test Your Line program was designed to allow you to perform a test draw on your line of credit to verify that you have everything in place to draw for a real liquidity need.
A lending officer will step you through the very simple transaction. A test draw of $100,000 is made on your line of credit and the drawn funds are invested in the overnight deposit program. The following day, the lending officer pays off the draw from your invested funds and sends you documentation of the successful test. The test costs less than $1 and takes just a few minutes to complete.
This simple, inexpensive test has great advantages for your institution. You’ll be able to demonstrate to regulators that you have a source of contingent liquidity. The test also confirms that you have access to this liquidity source, which takes away stress during a liquidity emergency. Plus, you’ll receive documentation of the successful test right away and an analysis showing potential untapped sources of collateral on your balance sheet.
Let our friendly lending officers walk you through accessing your line of credit, for a real or test borrowing need. Either way, you’ll quickly see why FHLBank’s line of credit is the go-to for member liquidity needs. Visit www.fhlbtopeka.com/lineofcredit to learn more and request a Test Your Line transaction.
Suzan grew up in a small community bank, joining FHLBank Topeka 25 years ago. She worked as a regional account manager and in the lending area for several years, and now is the marketing manager.