Innovative Ways to Fund Branches
in League Initiatives
By: David Frankil, NJCUL President/CEO

For those of you who may not be familiar, the Federal Home Loan Bank of NY (FHLBNY) is a Government-Sponsored Enterprise (GSE) chartered by Congress in 1932, with a cooperative member-owned structure. They are a low-cost provider of liquidity for their members to lend into their communities. Among their programs to help credit unions achieve their goals is an innovative branch pre-funding program, which turned out to be a great fit as we were thinking through the content for our Sept 13th "Drive Profit and Improve Engagement at the Branch" workshop. 

Our FHLBNY speaker is Adam Goldstein, Senior Vice President/Chief Business Officer, with over 20 years of experience there helping financial institutions accomplish their goals. We caught up with Adam to get a preview of his presentation.

Frankil: As we have talked about your pre-funding program, you’ve started nearly every conversation with an overview of trends in the deposit environment. So let’s start with that here – what is FHLBNY seeing in terms of deposit trends at financial institutions?

Goldstein: We have the largest generation in history now entering the workforce, and these digital natives have an affinity for technology that shapes how they respond to the financial environment. In particular, the key issues we see are -

Technology, in particular accessibility to various online/mobile platforms and apps are leading to a shift towards new financial institutions such as NeoBanks.

Financial institutions working with FinTech through acquisitions, strategic partnerships with peer-to-peer lenders, digital money transfer platforms, and other firms are reshaping the business of money.

Non-traditional competitors entering the playing field, in part to combat low-interest rates and post-financial-crisis regulations that limit trading activity, large investment banks have started competing in the deposit gathering space. This includes the potential for Special Purpose Charters being granted to FinTech companies.

New Liquidity Regulations for large banking institutions incentivizes them to compete for retail deposits like never before.

Frankil: Help us understand what that means for credit unions.

Goldstein: The deposit gathering environment is evolving, and rather rapidly in some areas. But the basics still hold – focus on evolutionary changes such as multi-channel distribution and other ideas, which I will cover at the workshop. We also surveyed our FHLBNY members to get their perspective on the changing deposit environment, and they outlined a series of strategic initiatives that they’re deploying to compete for core deposits. I’ll be presenting more detailed findings as well.

Frankil: I assume at least some of those strategies involve online and/or direct banking channels?

Goldstein: That’s correct, but it’s really only part of the story. Credit unions focused on their members have significant competitive advantages – if they are leveraged effectively.

Frankil: So what does this evolution mean for branches?

Goldstein: Credit unions should consider viewing their branches through the lens of their primary target audiences. We all know that younger generations prefer technology-based branches – so not just deploying innovative technologies, but partnering with market-leading technology companies to heavily innovate their branches. We’re also seeing the rate of innovation at the ATM proceed at a rapid pace – these innovations will continue to evolve and become a channel in their own right. Technology-based branches also allow credit unions to decrease staff and have a smaller footprint per location, which leads to lower overhead costs over the course of time – this is an important consideration when embarking on technological infrastructure investment.

Frankil: All these innovations sound expensive – let me circle back to the where we started, the FHLBNY branch pre-funding program. How does that work?

Goldstein: FHLBNY member institutions can take advantage of a low-cost advance program that, in essence allows members to obtain wholesale funding at desired deposit projections rather than waiting for the deposits to materialize. By borrowing from the FHLBNY, credit unions can immediately begin investing the money that they plan to acquire with expected new branch deposits. In essence, we are providing liquidity based on a pro forma of expected revenues and return, which reduces the time to break-even versus other more traditional approaches.

We work with members on the process, which includes background research, looking at the historical growth of deposits, and forecasting existing branch deposit growth using a compounded annual growth rate. It is a collaborative process, we even do a “Reality Check” to determine if the new branch growth is obtainable. It is really quite similar to the process any credit union would be walking through to assess potential for a new branch, and we’ll spend some time on how best to do this analysis.


To learn more about how branches are evolving, the strategies your peers are using to capture core deposits, what this means for your branches, and the innovative FHLBNY branch pre-funding program, join us on Wednesday, September 13th at the Renaissance Woodbridge, in Iselin, New Jersey. As always, cost is just $75 per person.

Register for the "Drive Profit and Improve Engagement at the Branch" workshop here.