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Comment

Thank you for the opportunity to share some thoughts on the Federal Home Loan Bank System. I am Jason Meyerhoeffer, President and CEO of First Federal Savings Bank. Our institution is a 106-year-old mutual, savings bank headquarted in Twin Falls, Idaho--an area referred to as the Magic Valley. We have been a member of the FHLB system for over 87 of its 90-year history.
As part of this review of the FHLB system, I think it is important for you to hear a community bank perspective on the vital role the FHLBs play in our business.
As you can imagine, over the past 106 years, our institution has gone through many economic cycles. Having a reliable source of liquidity is crucial to our ability to manage through those cycles. We don’t have direct access to the capital markets, so the FHLB is our main source of secondary liquidity. If we didn’t have access to FHLB advances, we would have to hold much more liquidity on our balance sheet and significantly reduce our lending in our communities.
The early 2000’s offers a good example of the FHLB’s value through different economic cycles. During that time, the housing market and economy were strong, and our deposit gathering could not keep pace with the loan demand. FHLB advances allowed us to continue to lend to creditworthy homebuyers and businesses. Without that access to liquidity, many of those loans would not have been made. Now I realize that time was the run up to the Financial Crisis of 2008, and you may be wondering if continuing to lend during that time was prudent. I can answer with a resounding “yes”. Like most community banks, we know our customers and communities. We continued to make good loans to creditworthy borrowers that performed well, even throughout the Financial Crisis.
The past few years provide another good example. As the monetary and fiscal responses to the pandemic flooded the banking system with excess deposits, we struggled to deploy this new liquidity into creditworthy loans and had to significantly grow our investment portfolio. Now, as interest rates have moved up and that liquidity has begun to leave the banking system, the FHLB has once again allowed us to manage through this policy-induced swing in liquidity without creating undue stress on our operations.
As I mentioned earlier, our institution is a long-time, active member of the FHLB system. In just the past few years, we have helped 41 first-time homebuyers obtain HomeStart grants to help them purchase homes. We have also sold over 400 mortgage loans into the MPF program, using that liquidity to support further home lending. Without the ability to sell conforming mortgage loans, we would be able to originate far fewer loans.
I know I have used the term reliable source of liquidity a few times, but I cannot emphasize enough the importance that plays for community banks. As I mentioned earlier, without that reliable source of liquidity provided by the FHLB’s, we would have to change the way we do business. We would lend less; fewer homebuyers and small businesses would have access to credit; and our communities would not be as vibrant.
So, as you conduct this review of the FHLB system, I think it is important to understand the crucial role the FHLBs play to community banks―the economic life blood of rural America. As a community bank president, I can tell you the FHLB system is essential to our business.
Thank you.