Q&A with Will Bermudez, Senior Vice President and Chief Financial Officer of Pacific National Bank
Pacific National Bank is a $450 million community bank serving the South Florida tri-county region. The institution focuses on commercial real estate lending and has leveraged its relationship with FHLBank Atlanta to manage its balance sheet and liquidity while minimizing the cost of wholesale funds.
Will Bermudez, senior vice president and chief financial officer, recently shared his insights into Pacific National Bank’s use of FHLBank Atlanta’s products and how those products are helping fuel its growth.
Describe how an FHLBank Atlanta product has helped generate growth for your institution.
Several years ago, a customer was seeking a 15-year fully amortizing fixed-rate commercial real estate loan. Having access to interest rate swaps with FHLBank Atlanta created the opportunity for us to pursue this deal, which we otherwise might have lost to fixed-rate offerings from a competitor. Pacific National originated the loan for this customer and entered into an interest rate swap with FHLBank Atlanta where we pay a fixed interest rate and receive a variable rate. The swap essentially converted the loan to variable rate. We setup the swap as forward starting to move up the exchange of payments. The structure has benefited Pacific National in the rising-rate environment.
We are exploring additional opportunities with interest rate swaps, including using a non-allocated swap to hedge a portfolio of loans.
Advances are the foundation of how FHLBank Atlanta meets shareholders’ liquidity and risk management needs. Please describe how you use the Bank’s advances to address specific balance sheet management challenges.
We see ourselves as heavy users of advances not only to fund growth but also to manage liquidity and interest-rate risk. The Fixed Rate Credit hybrid advance gives us added flexibility in managing the size of the balance sheet, either up, and if and need be, down. The long-term hybrid advance minimizes interest-rate risk in a rising-rate environment and can cover funding gaps until retail deposit rates stabilize. At that time, we can monetize gains and normalize non-core funding ratios.
What other products and services do you use and how are they helping your business?
Pacific National also uses FHLBank Atlanta’s safekeeping services for the securities portfolio. The settlement process is seamless and does not interrupt our flow of operations.
What is an important or memorable experience in your relationship with FHLBank Atlanta?
Reporting loan collateral to grow our borrowing capacity at FHLBank Atlanta was an important change for Pacific National. When I first joined Pacific National, the bank was only relying on its securities portfolio as collateral and there was not much usage of advances. As we transitioned out of the financial crisis, our loan portfolio improved and began to grow again, so we were able to start reporting mortgages as collateral. This provided much more borrowing capacity, and we ramped up advance levels, which was important during this transition period. Today, we continue to leverage residential, commercial real estate, and multifamily loans to support our borrowing with FHLBank Atlanta.