“FHLBank Atlanta’s letters of credit are administratively easier to use for public deposit collateral than securities. Furthermore, the letter of credit enables us to respond quickly to new deposit opportunities.”
Danny Kelly, Chief Executive Officer, HomeTown Bank Alabama
September 2018 - Founded in 2003, HomeTown Bank Alabama serves the residents of Blount County, Alabama with a mission of delivering an exceptional personal banking experience and being an active partner to the communities it serves. The $350 million bank focuses its lending on individuals and small businesses, with the majority of its loan book in residential mortgages.
Approximately six years ago, HomeTown Bank made a strategic shift to begin originating more 1-4 family first mortgage loans. HomeTown Bank holds all of its loans in portfolio and, according to Chief Executive Officer Danny Kelly, the management team saw an opportunity when secondary market mortgages became more complex and time consuming to originate following the financial crisis.
During this challenging time in the banking industry, Kelly says that having FHLBank Atlanta’s support as a partner and funding source was important as the community bank weathered the crisis and continued to grow.
“The ability to access FHLBank Atlanta advances to fund assets when needed is a great benefit,” said Kelly.
Kelly notes that one of the most valuable aspects of the relationship with FHLBank Atlanta is access to strategic guidance. Several years ago, Kelly participated in a strategy workshop with a small group of industry peers hosted by FHLBank Atlanta and led by a leading financial services consultant.
“We gained ideas and strategies from this workshop that we were able to apply to our business in real time,” said Kelly. “Given the size of our institution, it is unlikely that we would have had a similar opportunity to exchange ideas and get this kind of guidance outside of our relationship with FHLBank Atlanta.”
One idea the HomeTown Bank team implemented from this workshop was to originate longer term loans at lower rates, including 10- and 15-year mortgages. This strategy meshed well with HomeTown Bank’s focus on building sustainable, steady income for the long term and delivering an exceptional customer experience through their mortgage operations. The bank closes residential mortgages in 23 days on average, which Kelly says serves as a competitive differentiator in their market. Providing a high level of customer service in mortgages has driven business in other areas, including a dramatic increase in the bank’s lower cost deposit base.
HomeTown Bank uses this same market savvy to take advantage of opportunities in other areas of its business. One such opportunity is public unit deposits from municipal entities in Blount County. Kelly says that being the only independent bank based in the county seat gives them an advantage in establishing relationships with local municipalities, which are generally small in size but have significant deposits. Originally HomeTown Bank used securities to collateralize public deposits but has transitioned to using FHLBank Atlanta’s letters of credit to serve as collateral.
“FHLBank Atlanta’s letters of credit are administratively easier to use for public deposit collateral than securities,” said Kelly. “Furthermore, the letter of credit enables us to respond quickly to new deposit opportunities.”
Responsiveness, reliability, and ease of working together are the characteristics that Kelly says are most important and define the overall experience of working with FHLBank Atlanta.
“We view FHLBank Atlanta as a member of our team,” said Kelly. “The people are approachable and available and it’s great to be able to reach out to them when you need to get things done.”