Advance Products
The Seattle Bank offers advance products in terms from overnight to 30 years and
in fixed or variable rates, allowing you to choose the amount, structure, and terms
to fit your institution’s needs. Our advance products represent a wide range of
solutions, including: liquidity management, competitive marginal costs of funding,
and matched funding of specific asset classes.
In addition to the advance products listed below, the Seattle Bank offers reduced-rate
advances through its
Community
Investment Program (CIP) and Economic Development Fund (EDF) CIP/EDF.
Advance Products Overview
(pdf)
Fixed-Rate Advances
Short-Term, Fixed-Rate/Cash Management Advance (CMA)
For short-term needs, members use our CMA and short-term fixed rate advances for
immediate access to short-term funds. Our CMA is structured as a revolving, open-note
program, the CMA is fast and reliable, and there are no commitment fees or line
charges. With our CMA, you can obtain funding from your cooperative, rather than
your competition. Our 7-day and 14-day advances allow members to quickly access
their credit facility for very short-term needs.
Intermediate-Term, Fixed-Rate Advance / Auction Advance
Some of our most requested advances, intermediate-term, fixed-rate advances are
frequently used to supplement retail deposits and manage risk that comes with rate-sensitive
investment and lending activities. Members get same-day access to funds with terms
from 28 days to one year. Auction rates are available for 28, 63, 91, and 182 days.
Long-Term, Fixed-Rate Advance (Bullets)
Tailored to meet a wide range of asset/liability management needs, our long-term,
fixed rate advance help you more effectively manage long-term portfolio risks and
obtain funding for your fixed-rate loans and investments. Funds are available the
same day with terms from one to 30 years.
Amortizing Advance
With the amortizing advance, you can reduce the principal level of your liabilities
in tandem with your funded assets. Available the same day, this flexible advance
offers straight-line or customized amortization schedules with terms from two to
30 years. The amortizing advance is particularly useful for match funding principal
reductions of funded assets, including mortgages and mortgage-backed securities.
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For more information about this advance product, read "Amortizing Advances" in the September 2005 issue of What Counts.
Symmetrical Prepayment Advance
The Symmetrical Prepayment Advance allows a borrower
to prepay the advance—and realize a gain—if interest rates rise to levels greater
than those that existed when the advance was originated.
This advance allows the borrower to monetize the value
of a market movement in rates in exchange for a slightly higher advance rate.
Funds are available same day, with
terms ranging from one to 30 years. The minimum advance balance is $5.0
million (per note), and prepayment is available daily, subject to advance notice.
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For more information about this advance product, read the associated funding strategy.
Forward Settling Advance
Forward Settling Advances are advances in which a member hedges future rate volatility by
locking in current interest rates, without taking settlement of the advance until some
designated point in the future. Funds are available same day, with terms ranging from one to 30 years, or longer. The minimum advance balance is $1.0 million (per note), and prepayment is available daily, one business day after settlement of funds, subject to advance notice.
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For more information about this advance product, read the associated funding strategy.
Adjustable-Rate Advances
A reliable way to manage interest rate risk, this advance offers favorable pricing
that can be used for adjustable-rate loans, lines of credit, or investments. Members
receive same-day access with terms generally ranging from one to five years. Adjustable-rate
advances allow you to fund an asset with a long-term liability, while obtaining
repayment flexibility and preserving rate sensitivity.
Choice Advances
A Choice Advance is a floating-rate, fixed-term advance, competitively priced based on the Seattle Bank’s short-term cost of
funds. A Choice Advance has the added benefit of being prepayable without fee prior to the contractual maturity of the
advance, subject to several requirements.
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For more information about this advance product, read the associated
funding strategy.
Structured Advances
Putable Advance
This fixed-rate advance offers a lower rate in exchange for selling the option to
terminate on a designated date and after a specified lockout period. Funds are available
the next day, and lockout periods vary from three months to five years. Putable
advances are offered regularly and are posted on the
Rates page.
Knockout Advance
This type of putable advance is canceled immediately in the event LIBOR exceeds
a pre-specified strike price on set future dates. The knockout advance pre-determines
the assignment of a specific underlying option (LIBOR) to the Seattle Bank’s option
to cancel the loan.
Capped Floater Advance
A Capped Floater Advance is an adjustable-rate advance that is capped at a pre-determined
strike price. The funding structure plays a useful role in the management of interest
rate risk and match funding of capped, variable rate loans held in portfolio. The
Capped Floater Advance allows you to benefit from lower borrowing costs should interest
rates decline, while offering protection against a significant increase in interest
rates.
To learn more about this advance structure:
Floating-to-Fixed Convertible (FFC) Advance
A blend of an adjustable-rate advance and a putable advance, the FFC Advance starts
out with a floating rate, which “flips” to a fixed rate of interest, unless the
Seattle Bank exercises its option to cancel the facility. As a balance sheet management
tool, the FFC Advance offers sub-LIBOR, floating-rate funding in exchange for selling
the Seattle Bank the right to convert the facility to a fixed rate on a pre-determined
date.
To learn more about this advance structure:
Floored Floater Advance
The Floored Floater Advance is an adjustable rate source of funding that contains
a contractual feature that allows the borrower to purchase an interest rate floor
that is based on a benchmark index such as three-month LIBOR. If rates decline below
a pre-specified strike date, the borrower will benefit via i) a lower funding index,
and ii) monetization of the interest rate floor as it moves further into an "in-the-money"
position. This advance can provide interest rate risk protection for asset-sensitive
balance sheets and also contain exposure to falling rates.
To learn more about this advance structure:
Returnable or "Prepayable Loan" Advance
This fixed-rate bullet advance gives the borrower the right to "return" or "prepay"
the advance to the Seattle Bank on pre-determined dates without a prepayment penalty.
The cost of purchasing the option is reflected in a coupon rate of interest that
is higher than that of a standard fixed-rate advance. Use this structure to fund
specific assets not subject to prepayment penalty, as well as for loan and investment
portfolio management and for liquidity and balance sheet management.
To learn more about this advance structure:
Contact a member of the Seattle Bank's business
development team to find out how we can help to meet your funding needs.