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Advances
The Seattle Bank offers a wide variety of advances with pricing, terms and structures to meet distinct funding needs. Available in terms from overnight to 30 years, and in fixed and variable rates, advances are designed to accommodate the full range of a financial institutions liquidity, lending and interest rate risk management needs. Seattle Bank staff can assist customers in determining which advance or blend of advances is appropriate for them and will customize funding terms and structures to provide maximum benefit.
The CMA is a floating-rate advance designed to provide immediate and flexible funding to meet customers daily liquidity needs. Similar to a revolving line of credit, customers can increase or decrease CMA balances daily. Rates are based on overnight Fed funds rates.
Short-Term, Fixed-Rate Advance
With maturities of 7 days to 1 year, Short-Term Advances are an excellent way to supplement retail deposits and assist with cash flow needs. The fixed rate also provides an effective tool to manage interest rate risk associated with shorter-term, rate-sensitive investment and lending activities.
The Auction-Based Advance is a short-term funding alternative that allows customers to request funding through the Federal Home Loan Bank Systems weekly auction of short-term debt. This process can result in advance rates four to six basis points lower than our posted pricing for advances of the same maturities. Advances are available with terms of 28, 63, 91 and 182 days. Pricing of the Auction-Based Advance is determined after a customers order has been placed. The rate on the advance will be the rate we receive in the auction plus a small mark-up. Auctions are held twice a week on Tuesday and Thursday with settlement on Wednesday and Friday. Orders must be placed by 8:00 a.m. Pacific Time the day of the auction and may be made the day before.
Long-Term, Fixed-Rate Advances include maturities from 1 to 30 years, making them an ideal resource for residential housing finance. Long-Term Advances can also be used to fund investments such as loan purchases and mortgage-backed securities. The ability to lock-in low rates with extended maturities can reduce an institutions overall cost of funds and help manage interest rate risk. Interest is payable monthly with principal due at maturity.
The principal amount of this fixed-rate, fixed-term advance amortizes on a straight-line basis over the life of the advance with the combined interest and principal payable on a monthly basis. Amortizing Advances are available in monthly increments in maturities from 2 to 30 years, which makes them an ideal funding source for residential mortgages and other real estate-related assets. Amortizing Advances are usually less expensive than Fixed-Rate Advances of the same maturity. Seattle Bank staff can customize amortization schedules to help customers match the cash flows of the assets being funded.
The rate of this fixed-term advance is tied to common financial indices. With Guaranteed Spread Advances, customers can lock-in a spread on the precise index used to reprice an asset, making them an excellent source of funding for adjustable-rate assets with minimal basis risk. Available indices include (but are not limited to) LIBOR, Treasury Bills, CMT, Prime and Fed Funds.
Callable Advances provide protection against declining interest rates and prepayment risk by allowing customers to repay, in part or in full, on specific call dates for a small fee. Call dates usually fall on the first anniversary of the advance and semi-annually thereafter. Callable Advances are fixed-rate and fixed-term and are generally issued in maturities of 2, 3, 5, 7 and 10 years.
Putable Advances are fixed-rate funding in which the Seattle Bank purchases from the customer the option to terminate the loan on specific dates through its term. In exchange for selling us the option to terminate, the customer receives a sub-Treasury rate on the advance. Final maturities run from 1 to 7 years, with lock-out periods of 3 months to 3 years. At the end of the lock-out period, and on a quarterly basis thereafter, the Seattle Bank may terminate the advance at its discretion. Customers have the option of converting the advance to a Guaranteed Spread Advance for the remaining term at the then current rate. Putable Advances are available once a month on the second Thursday. Customers can choose from two structures which vary each month based on market conditions and customer demand.
Community Investment Program (CIP) Advance
Through the CIP, the Seattle Bank provides advances at our cost of funds to enable financial institutions to fund low- to moderate-income housing as well as community or economic development projects. CIP rates are available on all advances with terms greater than one year and usually are 15 to 25 basis points below the regular advance rate. Rates are determined daily based on the Seattle Banks cost of funds and must be obtained by contacting the Seattle Bank. Details on the Community Investment Program are available in the Community Lending Services section of this site.