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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
Product Overview
(pdf)
FIXED-RATE ADVANCES
Cash Management Advance (CMA)
For short-term needs, members use our CMA for immediate access to overnight funds.
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.
Short-Term, Fixed-Rate Advance / Auction Advance
One of our most requested advances, the short-term, fixed-rate advance is frequently
used to supplement retail deposits and manage risk that comes with shorter-term,
rate-sensitive investment and lending activities. Members get same-day access to
funds with terms from seven days to one year. Auction rates are also typically available
for up to 182 days.
Intermediate/Long-Term, Fixed-Rate Advance (Bullets)
Tailored to meet a wide range of asset/liability management needs, our intermediate
and long-term, fixed rate advance help you more effectively manage intermediate
and 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.
For more information about this advance product, read "Amortizing Advances" in the September 2005 issue of What Counts.
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.
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, read "Timely Wholesale Funding Strategies: Using Capped, Floating-Rate
Advances in a Flat Yield Curve Environment" in the February 2006 issue of
What Counts.
Floating-to-Fixed Convertible (FFC/"Flipper") 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 flipper 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, read "Timely Wholesale Funding Strategies 3: Using Returnable Advances
to Mitigate Prepayment Risk" and "Fighting Fire With Fire: Using "Returnable" Advances"
in the July 2006 issue of What Counts.
FUNDING GUARANTEES
Forward Commitment Letter
The Seattle Bank offers members the opportunity to lock in a specified rate on an
advance to be drawn down at a future date. Forward commitment letters are particularly
useful for the funding of construction loans and other forward-settlement assets.
Contact a member of the Seattle Bank's business
development team to find out how we can help to meet your funding needs.
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