Citizens Bank of West Virginia

News: Current

July 16, 2004

FHLBank of Pittsburgh Welcome First WV Bank - CNB of Elkins - to Mortgage Program

For more than 80 years, Citizens National Bank of Elkins has been serving the communities of Randolph County, West Virginia. Citizens National also has a long history of using credit products from the Federal Home Loan Bank of Pittsburgh and has been an active user of Bank4Banks®, the FHLBank’s Web-based transactional site.

Now, Citizens National has gone one step further to take advantage of a new FHLBank opportunity: The Mortgage Partnership Finance® Program (MPF®). In July, Citizens National became the first West Virginia financial institution to participate in the MPF Program through the FHLBank of Pittsburgh.

The MPF Program provides an alternative for originating and selling mortgages in the secondary markets. The program funds conforming fixed-rate mortgages with terms up to 30 years. The resulting benefits are a big boost to community banks – helping to keep them strong and giving them the chance to offer competitive interest rates within their service areas.

“The MPF Program offers Citizens National Bank of Elkins a number of competitive advantages over selling mortgages in the secondary markets,” said CNB of Elkins CEO Robert Schoonover. “Principal among these advantages is the ability to retain our customer relationships, which in turn will likely generate additional loan business and deposits for our bank.”

Clearly, it’s the partnership aspect of the MPF Program that makes it work so well. The FHLBank and local banks are partners, each doing what it does best. The FHLBank manages the interest rate risk, while the community bank manages the credit risk. By sharing risks, efficiencies go up and costs go down.

With the interest rate risk aside, community banks often find themselves able to offer a wider base of mortgage products. This ability to diversify gives them a competitive advantage over banks who can’t. Also, because community banks can retain the servicing through the life of the mortgage loan, the homeowner is able to maintain an ongoing relationship with the originator. That’s good for business, and good for local communities too.

“Of course, fee income and profitability are unmistakable pluses of the MPF Program,” said Renee Pfender, Mortgage Acquisition product manager for the FHLBank. “The MPF Program’s competitive up-front price provides community banks with opportunities for more business and more fee income.” Additionally, because the FHLBank actually pays an ongoing credit enhancement fee to participating financial institutions, banks earn even more fee income over time.

Some mortgage programs are designed to benefit only large financial institutions or those with lots of mortgage experience. Not so with the MPF Program. With low minimum commitment amounts, and with easy mortgage terms, even smaller banks or those with limited experience in the secondary market can take advantage of the program.

In the three years the FHLBank of Pittsburgh has offered the MPF Program, the customer base – and the volumes – have grown each year. Pittsburgh volume in 1999 was $4.2 million, compared with $38 billion today. The numbers prove that, more and more every day, local banks are finding the MPF Program to be a better secondary-market alternative. It’s a partnership that works, one that’s helping to keep banks strong within the communities they serve.

With 48 members enrolled through July 2004 – and now the very first one from West Virginia – the MPF Program continues to be an attractive business opportunity that offers many benefits over other mortgage scenarios. For more information on the MPF Program, contact your relationship manager, or call the Mortgage Acquisition Department at 1-800-288-3400.

“Mortgage Partnership Finance” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.

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