Bank Directors Seminar, Coeur d'Alene, ID, September 15-17, 2019

FHLB DES MOINES MEMBER BORROWING

Executive Summary of borrowing trends

Members utilizing symmetrical prepayment advances and longer- term funding to hedge unwanted interest rate risk Callable, short-term floating rate advances hedge Liquidity Coverage Ratio (LCR) exposure

Member borrowing concentrated on short-end of curve, and many members “were” positioned for slight-asset sensitivity

Short Term Focus

Insurance inexpensive

Fixed-rate bullet advances most popular

Libor transition a topic of interest, exposure concentrated.

Price Sensitivity

Libor Transition

Funding/hedging pipeline activities a common driver of short term needs and price sensitivity with alternatives

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FHLB DES MOINES MEMBER BORROWING

Many Funding Applications Blended Funding • Best strategies involve blend of retail deposits and duration certain advances • Determine mix by quantifying risk/return threshold

Marginal Cost of Funds • Ideas to contemplate when employing MCOF: • Match competition • Risks of cannibalization • Stand Pat may make sense

Leverage Ideas • Originate to Hold vs Sell • Non-conforming mortgages • Consumer lending • Auto loans • Investment portfolio

Hedge & Fund • Hedge unwanted Interest Rate Risk • Profitably fund business lines with duration certain advances • Manage risk/return mandates

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