MSBI Repurchase

Securities Repurchase From The Minnesota State Board of Investment

The Minnesota State Board of Investment (MSBI) has offered a Certificate of Deposit Program to financial institutions throughout the state of Minnesota since 1980. The program is on-going, offered quarterly, with the amount of funds committed depending upon the State's cash position and the relative attractiveness of CD's to other investment alternatives. UBB Securities has been a clearinghouse bank for this program since its inception. Since 1996, UBB Securities has also been a custodial bank for the MSBI Securities Repurchase Program.

• Who may participate?
• What are the terms and conditions?
• What are the collateral requirements?
• What is the necessary paperwork?
• How will funds be transferred?
• Defaults

Who may participate?
Any financial institution chartered in the State of Minnesota and covered by FDIC insurance is eligible. The subscribing institution must be "well capitalized" as defined under FDIC regulation: (1) has a Total Risk-Based Capital Ratio of at least 10%; (2) has a Tier 1 Risk-Based Capital Ratio of at least 6%; (3) has a Tier 1 Leverage Ratio of at least 5%; and (4) is not subject to any agreement to meet and maintain a specific capital level for any capital measure. No FDIC waivers will be accepted.

The subscribing institution must also hold $1,150,000 in MSBI CD funds on deposit to participate in the Securities Repurchase Program. The subscribing institution may enter into a securities repurchase transaction in an amount ranging from $100,000 to $2 million depending on availability of funds and the appropriate collateral.

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What are the terms and conditions?
The subscription period of MSBI Securities Repurchase Program will occur quarterly in conjunction with the CD Program. Settlement dates, maturity dates, terms and interest rates will be the same as the Certificate of Deposit Program for ease of administration. Click here for historical rates.

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What are the collateral requirements?
All securities used by the subscribing institution under the repurchase agreement must be in book entry form in safekeeping at UBB Securities. All securities sold under agreement to repurchase will be segregated from the community bank's safekeeping account at UBB Securities and placed in a separate Federal Reserve account for the benefit of the MSBI.

The following list of securities constitutes the only eligible securities for sale under agreement to repurchase:

• Direct obligations of the United States, i.e., Treasury Bills, Treasury Notes and Treasury Bonds
• Federal Agency debentures, i.e., Federal National Mortgage Association (FNMA), Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), or Federal Home Loan Mortgage Corporation (FHLMC)

In addition, the securities used by the financial institution must show a maturity date beyond the term of the repurchase agreement. The securities used may not have a call feature prior to the maturity of the repurchase agreement. The securities used cannot be in the form of a security that might realize a factor change prior to the term of the repurchase agreement; therefore no amortizing assets will be permitted. Security substitution prior to the maturity of the repurchase agreement will not be permitted.

The market value of securities presented as collateral must be at least 110 percent of the Repurchase Agreement amount on subscription day. In the event the market value falls below 105 percent of Repurchase Agreement amount, the MSBI may require the financial institution to transfer additional securities in an amount to eliminate the deficit.

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What is the necessary paperwork?
A bank desiring to participate in the Securities Repurchase Program is required to enter into a "Master Repurchase Agreement" with the Minnesota State Board of Investment as well as a "Custodial Undertaking ..." by and among the Minnesota State Board of Investment and United Bankers' Bank. The bank is also required to submit a current corporate resolution.

UBB Securities will make the subscription order to the MSBI on subscription day on behalf of the subscribing institution. The MSBI will send all required paperwork to the subscribing institution along with a letter of instruction. UBB Securities will send a confirmation of the subscription outlining the settlement and collateral details to the subscribing institution.

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How will funds be transferred?
As the custodial bank, UBB Securities will deposit funds in the financial institution's DDA account at UBB on settlement day for the repurchase agreement and will charge the financial institution's DDA account at UBB on settlement day for the maturity of the repurchase agreement.

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Defaults
A default will occur if the community bank fails to repurchase securities or MSBI fails to transfer purchased securities on the repurchase date. A default will also occur when additional collateral is demanded to meet margin requirements and the bank fails to deliver. If the defaulting party is the community bank the MSBI may sell all purchased securities immediately and apply the proceeds to the aggregate unpaid purchase price. If the defaulting party is the MSBI, the community bank may require the MSBI to provide the community bank with "replacement securities" of the same class and amount as any of the purchased securities that are not delivered.

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Please Note: Portions of the above program description were provided by the Minnesota State Board of Investments and may change with or without notice. UBB Securities deems that all statements contained herein, while not guaranteed, are based upon information we believe to be accurate and reliable.