By Daniel Williams, Vice President and Senior Relationship Manager
At FHLBank Atlanta, we are proud to offer a range of advances tailored to fit the needs of our members. However, we’re even prouder of the way our members are able to adapt those products to meet their unique needs. The best example of this would be the Adjustable Rate Credit (ARC). To me, the ARC is already the “Swiss army knife” of our offerings, and it is probably the most adaptable product in our portfolio. No matter what your goal is, an ARC can probably help you achieve it.
At its most basic, an ARC is a great way to secure an efficient funding rate for durations between three months and a year. But, depending on your needs and assets, it can do much more. For example, if your institution holds long-term assets, like mortgages, that need matching liability duration, pairing an ARC with a swap can create a synthetic long-term fixed rate advance that meets the needs of your balance sheet.
The options for personalization go far beyond just pairing an ARC with a swap. When executing that swap you can choose to utilize assets, like mortgages, or liabilities like short-term advances. Should you choose to use an ARC as the hedging instrument, then you benefit from that ARC having the same SOFR basis as the swap – even having the option to choose between simple or compounding SOFR to better align with swap methodology. This combination reduces the term premium we charge for the funding duration, and as such, we see members use this strategy to reduce funding costs in comparison to a long-term fixed rate advance. While there is some refinancing risk assumed by going this route, many of our members have determined that the benefits to this approach outweigh any potential negatives.
Utilizing an ARC in this format is a great example of the benefits that FHLBank Atlanta membership provides. We don’t offer cookie-cutter products and services; we can customize to consider your actual application. We’re proud to offer flexible products that can be adjusted to work with your strategy to help you achieve your specific goals, whether big or small. That’s the benefit of having a trusted advisor in your corner.