The FHLB is a regional wholesale bank that provides financial products and services
to our members. We are part of the FHLBank System (or System). Each FHLBank operates
as a separate entity with its own stockholders, employees, Board of Directors,
and business model. Our region, known as the Fifth District, is comprised of Kentucky,
Ohio and Tennessee.
The U.S. Congress chartered the FHLBank System in the Federal Home Loan Bank
Act of 1932 (the FHLBank Act) to help provide liquidity in the U.S. housing
market. FHLBanks are GSEs of the United States of America. A GSE combines private
sector ownership with public sector sponsorship. In addition to being GSEs,
the FHLBanks are cooperative institutions, privately and wholly owned by their
members, who purchase capital stock and who are the primary customers.
The FHLBanks are not government agencies and the U.S. government does not guarantee,
directly or indirectly, the debt securities or other obligations of the FHLBank
System.
The FHLBank System also includes the Federal Housing Finance Agency (Finance
Agency) and the Office of Finance. The Finance Agency is an independent agency
in the executive branch of the U.S. government that regulates the FHLBanks,
the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan
Mortgage Corporation (Freddie Mac), and the Office of Finance. The Office of
Finance is a joint office of the FHLBanks that facilitates the issuance and
servicing of the FHLBank Systems Consolidated Obligations (or Obligations).
All federally insured depository institutions, certain insurance companies,
and community development financial institutions chartered in the Fifth District
may voluntarily apply for membership in our FHLB. Applicants must satisfy membership
requirements in accordance with statutes and Finance Agency regulations. These
requirements deal primarily with home financing activities, satisfactory financial
condition such that Advances may be made safely, and matters related to the
regulatory, supervisory and management oversight of the applicant. By law, an
institution is permitted to be a member of only one FHLBank, although a holding
company may have memberships in more than one FHLBank through its subsidiaries.
The combination of public sponsorship and private ownership that drives our
business model is reflected in the composition of our 17-member Board of Directors,
all of whom members elect. Ten directors are officers and/or directors of our
member institutions, while the remaining directors are independent directors
who represent the public interest.
We achieve our mission through a cooperative business model. We raise private-sector
capital from member stockholders and issue high-quality debt securities in the
capital markets (along with other FHLBanks) in order to provide products and services
(called Mission Asset Activity) to members and generate a competitive return on
their capital investment in our company.
The primary products we offer are readily available low-cost loans called Advances,
purchases of certain whole mortgage loans sold by qualifying members through
the Mortgage Purchase Program (MPP), and Letters of Credit. We also offer affordable
housing programs and related activities to support members in their efforts
to assist low- and moderate-income households and their local communities. To
a more limited extent, we also have several correspondent services that assist
members in operational administration.
The primary way we obtain funding is through participation in the issuance
of the FHLBank Systems unsecured debt securities, called Consolidated Obligations,
in the global capital markets. Secondary sources of funding are capital and
deposits we accept from our members. A critical component of the success of
the FHLBank System is its ability to maintain a comparative advantage in funding,
which is due largely to its GSE status and low risk operations. We regularly
issue Obligations under a wide range of maturities, structures, and amounts,
and at relatively favorable spreads to benchmark market interest rates (represented
by U.S. Treasury securities and the London InterBank Offered Rate (LIBOR)) compared
with many other financial institutions.
We achieve our mission through a cooperative business model. We raise private-sector
capital from member stockholders and issue high-quality debt securities in the
capital markets (along with other FHLBanks) in order to provide products and
services (called Mission Asset Activity) to members and generate a competitive
return on their capital investment in our company.
The primary products we offer are readily available low-cost loans called Advances,
purchases of certain whole mortgage loans sold by qualifying members through
the Mortgage Purchase Program (MPP), and Letters of Credit. We also offer affordable
housing programs and related activities to support members in their efforts
to assist low- and moderate-income households and their local communities. To
a more limited extent, we also have several correspondent services that assist
members in operational administration.
The primary way we obtain funding is through participation in the issuance
of the FHLBank Systems unsecured debt securities, called Consolidated Obligations,
in the global capital markets. Secondary sources of funding are capital and
deposits we accept from our members. A critical component of the success of
the FHLBank System is its ability to maintain a comparative advantage in funding,
which is due largely to its GSE status and low risk operations. We regularly
issue Obligations under a wide range of maturities, structures, and amounts,
and at relatively favorable spreads to benchmark market interest rates (represented
by U.S. Treasury securities and the London InterBank Offered Rate (LIBOR)) compared
with many other financial institutions.
Our corporate objectives, listed below, are to promote housing finance among
members and ensure our operations and governance are effective and efficient.
The first three objectives drive how members derive value from being in the
cooperative.
Mission Asset Activity: Implement strategies and tactics to effectively manage
ongoing operations and promote members’ usage of our products and services.
Stock Return: Earn adequate profitability so that members receive a competitive
long-term dividend rate on their capital stock investment.
Housing and Community Investment Programs: Maintain effective housing and community
investment programs that maximize mandatory programs and offer additional voluntary
contributions.
Safe and Sound Operations: Optimize the FHLB’s counterparty and deposit
ratings, achieve an acceptable rating on annual regulatory examinations, and
maintain an adequate amount and composition of capital.
Risk Management: Employ effective risk management practices and maintain risk
exposures at low to moderate levels.
Governance: Operate in accordance with effective corporate governance processes
%