Founded in 2006, Reston, Virginia-based John Marshall Bank has grown organically to reach $1.2 billion in assets, with a primary focus on commercial lending in the thriving Washington, D.C. area. The lender has experienced significant loan growth and has benefited from its relationship with FHLBank Atlanta to help fuel this growth.
“We’ve had periods where loan demand exceeded our ability to generate core deposits,” said Kent Carstater, executive vice president and chief financial officer for John Marshall Bank. “Our relationship with FHLBank Atlanta enables us to access wholesale funds quickly and grow the bank profitably.”
The institution’s funding strategy with FHLBank Atlanta has included laddered term funding, in which they borrow multiple Fixed Rate Credit (FRC) advances at different maturities. Laddered FRCs provide protection against rising interest rates while offering increased balance sheet flexibility, compared to borrowing a single FRC advance at a higher notional amount. As each advance in the ladder matures, John Marshall Bank can let the funds roll off the balance sheet or replace the funds with a new advance based on loan demand and payoff behavior.
“The beauty of laddering is that it is reasonably easy to get effective maturities to manage asset and liability positions,” said Carstater. “This approach allows us to balance interest expense, interest-rate risk, and the time and effort required to raise funding.”
Carstater also points to the efficiency of borrowing from FHLBank Atlanta as a key benefit. Funds can be secured comparatively faster than brokered certificates of deposit or other funding sources, which is particularly important when the bank experiences a surge in loan demand.
In addition to advances, John Marshall Bank leverages FHLBank Atlanta’s letter of credit (LOC) to collateralize deposits from public entities, supplementing its securities portfolio. In the Commonwealth of Virginia, the market value of certain categories of bonds is discounted when pledged to collateralize public unit deposits. Carstater says that a key benefit of the FHLBank Atlanta LOC is that collateral value equals face value, and the value does not fluctuate with the market.
Finally, Carstater points to their interactions with the collateral department as an important part of their overall relationship with the Bank. They have worked closely with their collateral relationship manager to determine loan eligibility and gain more value from their commercial real estate mortgage portfolio.
“It’s valuable to be able to maximize our collateral value for greater contingent funding capacity,” said Carstater.
Carstater notes that the service level they received from collateral is indicative of service levels he’s experienced in all areas of the Bank.
“Service levels are excellent – timely, courteous, and helpful,” said Carstater. “FHLBank Atlanta is a good partner for us.”