FHLBNY Advantage

September/October 2011

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Discounted Advance Rates Help to Remedy Hurricane Irene’s Devastation

In response to the damage done to many local communities by Hurricane Irene, the HLB recently announced that it would be committing up to $500 million in disaster relief funding to begin the process of rebuilding communities designated by the Federal Emergency Management Agency (FEMA) as disaster areas. The funds are being made available through our Community Lending Program (CLP).

Local member-lenders can tap these low-cost funds to meet the short-, medium-, and long-term funding needs of FEMA-designated communities. These discounted advances can be used for small business lending, commercial/economic development activities, and gap financing while your customers’ insurance settlements are worked out.

Al DelliBovi, President and CEO of the HLB, recently described our commitment to helping those affected by the hurricane:

“Communities across New Jersey, New York, and the Caribbean region have been severely affected by Hurricane Irene…we now begin the long process of digging out, cleaning up, and rebuilding. The funds we are making available today will allow our member lenders to make an immediate, positive impact on recovery, relief, and rebuilding efforts, while providing the flexibility these members need to suit these efforts to the individual communities they serve. Our members remain fully committed to serving their customers and neighbors during these difficult times.”

CLP advances are the lowest priced funds offered by the HLB. These advances are typically targeted towards lending activities which support affordable economic development for low- and moderate-income communities. However, once FEMA declares a community a disaster area, CLP advances can also be used to support disaster relief financing activities, regardless of the income status of the affected communities. Disaster relief funding can be used to fund any project within a community that FEMA has declared as a disaster area. Although we expect most of the funds to be used to restore and rebuild infrastructure and businesses, CLP advances can also be used to fund loans in designated disaster areas that were not damaged by Hurricane Irene.

CLP advances are generally done as Fixed-Rate or Amortizing advances. Amortizing advances give members the ability to match the cash flow characteristics of the funded asset, customizing the amortization to match a set repayment schedule. Usually, CLP advances are limited to terms of one year or greater. However, we have reduced the minimum term requirement to 30 days in anticipation of the need for short-term financing during the initial stages of disaster recovery prior to the payout of insurance settlements. Members can apply for disaster relief funding up to the greater of 5% of their advances outstanding (as of 12/31/10) or $100 million.

This discounted advance program is especially compelling because it comes at a time of historically low borrowing rates. Individual depositors are electing to stay short in savings and money market accounts because they are hesitant to commit to long-term CDs at such low rates. Using CLP advances, your institution can accomplish through the HLB what it can’t do over the teller line: lock in long-term funding at advantageous rates. With 5-year community investment funding at approximately 1.40%, participating in this $500 million pool may help you to meet your long-term interest rate risk management objectives.

Members can utilize CLP advances to provide financing for the purchase, construction, refinancing, and rehabilitation of office buildings, industrial/manufacturing facilities, shopping centers, hotels, and retail stores. These funds are not limited to residential and commercial lending — they can also be used to provide financing not only for hospitals, nursing homes, schools, and day-care-centers, but for infrastructure projects such as roads, sidewalks, utilities, and sewers. Members may also use the funding for the renovation or repair of their branches and facilities.

In an effort to speed the recovery process, we have streamlined the CLP application. This program will be of interest to many of our members, since the designated disaster areas cover virtually all of New Jersey and Puerto Rico and a substantial portion of New York.

For an application, additional information, and a complete listing of FEMA-designated disaster areas, visit www.fhlbny.com/drf. To discuss the CLP disaster relief commitment, contact your Calling Officer at (212) 441-6700 or Joseph Gallo, Community Investment Officer, at (212) 441-6851.