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Comment

I am writing this comment paper from two different perspectives, first as the former president of the Bank of North Dakota, (BND) and secondly as a director of Cornerstone bank. BND is the nation's only state-owned bank. Today it is a $10 billion bank with a two fold mission, to provide financing for economic development efforts in North Dakota and to act as a bankers bank to ND financial institutuions. Cornerstone Bank is a $1.2 billion bank, closely held serving is customers across ND and with offices in SD.

First let me comment on the importance of FHLB to BND. BND became of member of the FHLB Des Moines in the late 1990's. Because of its' unique ownership, deposits primarily came from state tax collections and fees. At that time the only other options for additional deposits and liquidity came from institutional sales of CD's to foreign buyers and the issuances of bonds. Both of these options provided limited ability to increase liquidity. In fact they were insufficient.

The membership to the FHLB became a game-changer for BND, providing instant access for funding its lending programs, but also an ability to structure the advances that reduced interest rate risk by matching long term mortgages with long term advances from the FHLB. This allowed BND growth opportunities and to better serve ND financial institutions. This additional access to liquidity also provided the opportunity to fund more economic development projects across the state of ND.

Let me now address the importance of FHLB from the community bank perspective as a member of the board of directors for Conerstone Bank. As with most banks the last several years, with all the liquidity in the economy, deposits have grown. However with the recent events including several bank failures, there is the concern of deposit loss due to an irrational withdrawl of cash by depositors. Having the FHLB as a liquidity backstop becomes vital as we work through our liquidity plan.

Eric Hardmeyer