Federal Home Loan Bank of Des Moines

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1 Federal Home Loan Bank of Des Moines 1

2 AGENDA FHLB System FHLB Des Moines Overview How Members Utilize FHLB Des Moines 2

3 FHLB System Overview POWER OF PARTNERSHIP 3

4 FHLB SYSTEM OVERVIEW FHLB STRUCTURE 4

5 FHLB SYSTEM OVERVIEW STRUCTURE 12 District Banks created by Congress in 1932, now 11 District Banks Each Bank is a wholesale cooperative that serves member financial institutions chartered in designated states that comprise its District FHLBanks collectively serve approximately 7,500 members and non-member housing associates Members are credit unions, banks, savings institutions, insurance companies & CDFIs 5

6 FHLB SYSTEM OVERVIEW GOVERNMENT-SPONSORED ENTERPRISES FHLBanks Fannie Mae Freddie Mac GSE Regulator: FHFA Brings capital to the housing markets GSE Regulator: FHFA Brings capital to the housing markets & provides advances and other financial products to support their members affordable housing activities GSE Regulator: FHFA Brings capital to the housing markets 6

7 FHLB SYSTEM OVERVIEW PRODUCTS 7

8 FHLB SYSTEM OVERVIEW PRODUCTS ADVANCES SECURED LENDING DEPOSITS Offer many different advance products tailored to meet specific member needs ADVANCES DEPOSITS High-quality, interest bearing deposit vehicles MORTGAGE PURCHASE PROGRAMS MORTGAGE PURCHASE PROGRAMS COMMUNITY INVESTMENT COMMUNITY INVESTMENT Grants access to secondary markets and offers a variety of products that can increase competitive advantage One of the nation's largest sources of grants for affordable housing projects. In 2018, FHLB Des Moines will make grant awards of up to $750,000 for qualifying projects. 8

9 FHLB SYSTEM OVERVIEW BENEFITS 5 KEYS TO SUCCESS AS A COOPERATIVE Members benefit from access to a variety of products and services designed to help lower their funding costs, mitigate risk, improve asset and liability management and meet community credit needs. Products Pricing Returns on Invested Capital Safety & Soundness Supporting Communities 9

10 FHLB Des Moines Overview POWER OF PARTNERSHIP 10

11 FHLB DES MOINES OVERVIEW Headquartered in Des Moines, Iowa Western Office in Seattle, Washington District includes 13 states and three U.S. Pacific Territories Over 1,400 members Supports mortgage lending, economic development and affordable housing Represented by 74 Members of Congress and 26 Senators $117.5 billion in Advances $7.0 billion in Mortgages $7.8 billion in Regulatory Capital Data as of September 30, 2017, unless noted differently 11

12 Rate % FHLB DES MOINES STABLE DIVEDEND HISTORY FHLB Des Moines Dividend Rate 4.50% Activity Stock Dividend, 3Q 2017, 4.00% 4.00% Activity Stock Dividend, 1Q 2012, 4.00% Activity Stock Dividend, 2Q 2017, 3.50% 3.50% 3.00% 2.50% 2.00% Membership Stock Dividend, 3Q 2017, 1.50% 1.50% Membership Stock Dividend, 2Q 2017, 1.00% 1.00% Membership Stock Dividend, 1Q 2012, 0.50% 0.50% 0.00% Activity Stock Dividend Membership Stock Dividend 3ML Data as of September 30, 2017, unless noted differently 12

13 FHLB DES MOINES POWER OF PARTNERSHIP 13

14 FHLB DES MOINES MEMBER DEMOGRAPHICS DEPOSITORY MEMBERS* # MEMBERS # ACTIVE % ACTIVE ASSETS ($MM) ADV./ASSETS % IA % $93, % MN % $83, % MO % $179, % WA % $114, % ND % $36, % SD % $57, % MT % $32, % OR % $52, % UT % $278, % WY % $6, % HI % $60, % ID % $11, % AK % $15, % Total 1, % $1,022, % *As of 06/30/2017. Excludes Wells Fargo Bank, N.A. 14

15 FHLB DES MOINES POWER OF PARTNERSHIP 2017 was an excellent year for the FHLB Des Moines driven by record advances and broad utilization of our products and services Nearly 66% of our members utilized at least one product from the Bank Member penetration rate of 2.87% suggests FHLB Des Moines is funding almost 3.0% of depository balance sheets Record advances of $131.6 billion and a growing mortgage footprint 27 new members and $75 million contributed to our Affordable Housing Program Bank is scaled to contemplate increases and decreases in member demand for advances 15

16 FHLB DES MOINES OVERVIEW HOW MEMBERS UTILIZE FHLB LIQUIDITY MANAGEMENT Just-in-time funding Re-allocate lower yielding assets INTEREST RATE RISK MANAGEMENT Control asset/liability mismatches Balance sheet (macro) funding Transaction (match) funding Maintains Profitability & Safety CAPITAL MANAGEMENT Increase capital efficiency Allow capital to determine assets size, not deposits Increase net income/return to ownership (dividends) 16

17 FHLB DES MOINES OVERVIEW HOW MEMBERS UTILIZE FHLB Deposits are a Key Component of Funding Strategy Deposits represent the primary source of low-cost funding and franchise value. Deposits are inherently duration-uncertain. Can deposits be run-off and transferred into durationcertain, long-term funding in the form of advances? Advances are Complementary to Deposit Funding Advances add duration certainty to the right-hand side of the balance sheet. Diversification of funding sources can help reduce overall volatility of balance sheet. Advances are capital-efficient, customizable, simple and backed by a strong counterparty. Advances can Enhance Value as Rates Rise As rates rise, the value of an advance can increase. Offsets losses to fixed-rate assets in rising rate scenario. 17

18 FHLB DES MOINES OVERVIEW MORTGAGE PROGRAMS Mortgage Partnership Finance (MPF ) Program Began in 1997 Offered by 9 FHLBanks Mortgage Purchase Program (MPP) Offered by the FHLBanks of Cincinnati and Indianapolis Over 2,000 members approved to participate in these programs, members are called Participating Financial Institutions (PFIs) The MPF Program offers several products with various credit risksharing structures Mortgage Partnership Finance and MPF are registered trademarks of the Federal Home Loan Bank of Chicago. The MPF Mortgage Partnership Finance logo is a trademark of the Federal Home Loan Bank of Chicago 18

19 FHLB DES MOINES OVERVIEW MORTGAGE PRODUCTS MPF Risk Sharing Products Require Risk Sharing with the PFI MPF Original MPF 125 The MPF Program uses a credit model to credit enhance each loan to an investment grade level The Credit Enhancement Obligation created under each product structure must be collateralized by the PFI Secondary Market Products MPF Government (FHA, VA, RHS, HUD 184 Loans) MPF Xtra MPF Government MBS MPF Direct Jumbo product 19

20 FHLB DES MOINES OVERVIEW MORTGAGE PROGRAM IMPORTANCE TO COMMUNITY LENDERS Typical PFI sells $11 million annually (67 loans) Supports the FHLBs housing finance, community and economic development mission Provides liquidity and reliable access to the secondary mortgage market Allows community lenders to offer competitive mortgage products within their communities Allows PFIs to manage risk by selling fixed rate loans off their balance sheets MPF Products allow PFIs to be rewarded for good credit decisions through credit enhancement fees Maintain customer relationships through retained loan servicing 20

21 FHLB DES MOINES OVERVIEW DOWNPAYMENT ASSISTANCE PROGRAMS HOME$TART Up to $250,000 annually to provide down payment and closing cost assistance for eligible homeowners. Funds are made available on a first-come, firstserved basis, subject to availability. HOME$TART PLUS Up to $100,000 to provide down payment and closing cost assistance for eligible homeowners. Funds are made available on a firstcome, first-served basis, subject to availability. Members provide these funds to eligible households in amounts up to $10,000. NATIVE AMERICAN HOMEOWNERSHIP INITIATIVE Up to $100,000 through the NAHI to provide down payment and closing cost assistance for eligible homeowners. Funds are made available to members on a first-come, first-served basis, subject to availability. Members provide these funds to eligible households in amounts up to $10,

22 FHLB DES MOINES OVERVIEW DOWNPAYMENT ASSISTANCE PROGRAMS MPF XTRA 3D Affordable Housing Programs (AHP), available to PFIs under the MPF Program MPF Xtra 3D is a down payment assistance product option outside of the FHLBanks What features set the 3D product apart? No Mortgage Insurance (MI) Required No Loan Level Price Adjustments (LLPAs) apply After loan purchase, 3% of the unpaid principal balance is added to the funded amount for down payment assistance and closing costs Other advantages include: Delegated underwriting Down payment assistance funds are received immediately and included in the Loan Funding Confirmation Report Recapture of the 3% down payment assistance is not required when a borrower refinances or sells the property May be used in conjunction with other Down Payment Assistance Programs (DAP), Community Seconds programs or the Fannie Mae HomeReady product A retention agreement to ensure that the property is retained as affordable housing is not required 22

23 FHLB DES MOINES OVERVIEW AFFORDABLE HOUSING PRODUCTS Competitive Affordable Housing Program $416 million in grants 76,440 units of affordable housing Down Payment Products $83 million in grants 20,528 units of affordable housing Community Investment Advances $11.3 billion in reduced rate advances for affordable housing and economic development Data as of June 30, 2017, unless noted differently 23

24 FHLB DES MOINES OVERVIEW COMPETITIVE AFFORDABLE HOUSING PROGRAM Forgivable Grants For purchase, construction, or rehabilitation of affordable housing units Eligible Projects Owner-occupied housing (household income 80% of AMI Rental housing (at least 20% of households must have incomes 50% of AMI) Member partners with community organizations, developers, or public entities to submit an application Data as of June 30, 2017, unless noted differently 24

25 FHLB DES MOINES OVERVIEW COMPETITIVE AFFORDABLE HOUSING PROGRAM 25

26 FHLB DES MOINES OVERVIEW DIVERSITY & INCLUSION Commitment to Diversity & Inclusion At FHLB Des Moines, our diversity & inclusion journey reaches beyond the walls of our organization. Led and supported by our Board of Directors, our diversity practices apply to every aspect of our business with the needs of our members and the diverse business communities they serve, our central focus. 26

27 VISIT OUR WEBSITE MPF.FHLBDM.COM PRODUCT INFORMATION Learn more about MPF products based on your servicing needs, risk preferences and borrower profile. RESOURCES Browse through helpful MPF resources, including forms, ondemand webinars, links and more! CUSTOMIZED TRAINING Get step-by-step instructions for selling your loans into the Mortgage Partnership Finance Program. CONTACT INFORMATION Do you have more questions about how MPF could be right for you? Contact your local Mortgage Relationship Manager today. 27

28 STAY IN TOUCH WITH US Ed Barker VP, Mortgage Relationship Manager Office 801 Walnut Street Suite 200 Des Moines, IA Phone Office: Mobile: / Website ebarker@fhlbdm.com 28