Standby Letter of Credit

Standby Letter of Credit

Request a Federal Home Loan Bank of Des Moines Standby Letter of Credit (LOC) to give a municipality or state that is depositing funds with your institution peace of mind that their deposits are protected in excess of the maximum FDIC-insured amount.

Standby Letters of Credit Have Multiple Uses:
  • Collateralize state, city or municipal deposits
  • Facilitate residential housing finance
  • Support construction lending
  • Facilitate community lending
  • Confirm non-housing, taxable and tax-exempt housing bond issuances
Standby Letters of Credit

Standby Letters of Credit

Did you know Standby Letters of Credit from Federal Home Loan Bank of Des Moines may provide an alternative source of collateral for securing Public Unit Deposits, thus improving your liquidity, income and efficiency?

Benefits

  • Improved on-balance sheet liquidity by keeping your Treasury and Agency securities unencumbered
  • Eliminate the need to match securities and monitor margin calls 
  • Reduce operational expenses associated with monitoring deposits 
  • Keep your regulator satisfied with your liquidity position and ratios

Features:

  • AAA-rated
  • Competitive pricing
  • No stock requirement
  • Easy application process

Requesting Standby Letters of Credit

To get started, member institutions must submit a Letter of Credit application. 

Complete an LOC Application 

Educational Resources

Standby Letters of Credit – A Low-Cost, High-Reward Solution for Procuring Public Deposits Article Standby Letters of Credit – A Low-Cost, High-Reward Solution for Procuring Public Deposits It's no secret that the Federal Home Loan Bank of Des Moines is best known for its Advance products, but did you know we have a lesser known product that is helping our members lower on-balance sheet liquidity costs and attract public funds? We're talking about Standby Letters of Credit (SBLOCs). Expanding Markets, Expanding Letter of Credit Uses Whitepaper Expanding Markets, Expanding Letter of Credit Uses Whether it's an opportunity to drive fee income and enhance ROE by backing a bond, supporting a self-insurance program, or covering a customer's performance obligation; it may be worth your while to explore some of these expanded uses of letters of credit. Public Unit Deposit Collateralization: Multiple Benefits to The FHLB Des Moines Member and to the Public Unit Depositor Whitepaper Public Unit Deposit Collateralization: Multiple Benefits to The FHLB Des Moines Member and to the Public Unit Depositor An FHLB Des Moines member institution requests a letter of credit via an application. Next, a letter of credit is generated in favor of a public unit. Once the letter of credit is in place, the member financial institution is set to generate funding from the public unit. Learn more in this article. The Impact of the Collateralization Method for Public Unit Deposit Letters of Credit on Liquidity Ratios and Income Whitepaper The Impact of the Collateralization Method for Public Unit Deposit Letters of Credit on Liquidity Ratios and Income It is valuable for public unit depositories to consider the benefits of diversifying their methods of collateralization. Customized sensitivity analysis involving direction of collateralization away from securities and pledging in favor of letters of credit can yield positive results.

See all educational resources regarding this topic.

Aaron Kness
Retaining public unit deposits is a major part of our bank’s business model. Letters of credit have helped us continue to grow into profitable business lines. The tool has helped us convert our earning assets mix away from Treasuries and Agency securities into building our loan portfolio. The beauty of the letter of credit product is the ability to create more collateral to pledge to FHLB Des Moines. It’s a no-brainer if you are growing your bank.
Aaron Kness
President and CEO of Iowa State Bank & Co.