Shareholder Profile: Florida First Credit Union

Q&A with Brad Long, Executive Vice President of Finance, First Florida Credit Union

First Florida Credit Union is headquartered in Jacksonville and operates 13 branches throughout the state, serving more than 52,000 members. The organization’s guiding mission is to support its members’ financial aspirations by providing affordable financial products and services with outstanding member service.

Brad Long, Executive Vice President of Finance with First Florida Credit Union recently shared his insights on the credit union’s relationship with FHLBank Atlanta and how the Bank’s products are supporting profitability.

Describe how an FHLBank Atlanta product has helped generate growth for your institution.

At First Florida Credit Union, we have been using fixed-rate FHLBank Atlanta advances to leverage our high net worth to provide incremental revenue in the purchasing of participation loans. We have purchased both real estate and consumer loans from other credit unions as well as some bank loans. Our state charter in the state of Florida permits purchasing the bank loans on a limited basis. We have grown this strategy to approximately $85 million as of September 30, 2017, and it is generating more than $80,000 per month in incremental revenue.

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.

At First Florida, our historically lower loan-to-share ratio and strong net worth provided the opportunity to manage our liquidity in a manner which allowed maximizing investment earnings. The relationship with the Bank has helped us to leverage our capital, improve our loan-to-share ratio, and to improve our revenue.

As short-term interest rates reached historically low levels, we did not see the need to keep our liquidity balances excessively high and to be subject to such low yields on investable funds. We have used prefunding strategies to match borrowings to short-term investment maturities as one means of generating additional revenues, keeping bonds that had yields exceeding the cost of short-term borrowings and enabling us to buy bonds in markets where yields had improved without having to liquidate portfolio assets.

We also monitored our cash flows throughout the month and would strategically borrow short-term at points throughout the cash cycle rather than maintain excess balances.

I have also worked on projects to restructure advances in circumstances where the rate environment had changed and left the credit union with high-rate advances in a falling rate environment where the cost to prepay was exceedingly high. Working together with the Bank’s team, we were able to convert to floating-rate advances and capitalize the prepayment penalty as a spread to the floating-rate index. This particular circumstance does have some pretty significant accounting tests that must be met before it can be executed, but again, the Bank’s staff was very helpful in working through the analysis and strategy execution.

What other products and services do you use and how are they helping your business succeed?

Our most significant product use outside of advances is securities safekeeping. We had previously used another entity for this service, but we migrated to FHLBank Atlanta for two primary purposes: it was economically beneficial to First Florida compared to the other providers pricing, and it allowed us to efficiently pledge our securities portfolio to access advances.

What is an important or memorable experience in your relationship with FHLBank Atlanta?

FHLBank Atlanta provides accessible resources to discuss strategies and market opportunities and to share insight into what other institutions may be doing from a balance sheet strategy or risk management perspective. The meetings and roundtables that I have participated in have been well planned and have provided thought-provoking takeaways that have assisted my institutions in meeting their objectives.

A good example of this is when we were working on a risk management strategy and wanted to use an amortizing advance structure, but didn’t really need the cash flows over the first five years. Working with the team at FHLBank Atlanta allowed us to structure a 15-year amortizing advance that didn’t begin amortizing until after the fifth year. Additionally, the ability to structure advances with built-in interest rate caps and other derivative products provides the opportunity to gain the pricing advantages available to FHLBank Atlanta while avoiding the accounting challenges associated with use of derivatives.