Putable Fixed Rate (PFR) Advance
Putable Strike Fixed Rate (PSFR) Advance

The PFR Advance is effectively the sale of one or more put options by the member to the FHLB allowing the FHLB, solely at its discretion following the intial "lockout" period, to "put" the advance, requiring the member to prepay the advance prior to the stated maturity. If the Advance is terminated prior to maturity, the FHLB will offer replacement funding to the member at the then prevailing rate of interest for an advance product then-offered by the FHLB, subject to normal credit and collateral requirements.

THE PSFR Advance is structured similar to the PFR Advance, with the additional element permitting the member to choose a threshold level (strike rate) on a reference interest rate index (typically 3-month LIBOR). After the initial "lockout" period and the first occurrence at which the reference interest rate index is at or above the strike rate (as chosen by the member) on a review date, the advance will automatically terminate.

  • Provide members with the opportunity to fund the balance sheet at rates significantly lower than those of traditional long-term, fixed rate funding vehicles.
  • PSFR Advance enables the borrower to better analyze and track the probability of any future termination.
  • Because the PFR or PSFR Advance has the potential to be terminated prior to the original stated maturity, potentially increasing interest rate risk and liquidity risk for the member, use of a PFR of PSFR Advance requires careful risk analysis and active liability management.
Term to Maturity
The PFR and PSFR Advance Maturity terms are subject to the availability of comparable term financing to the FHLB.
Remains fixed for the duration of the loan (to maturity or until "put" option is exercised).
Accrual Basis
Interest is accrued on an actual/actual day basis.
Terminate/"Put" Option
FHLB has the option solely at its discretion to terminate/put only the entire PFR advance on a one time or periodic basis at the end of or following the initial "lock-out" period prior to the stated maturity (for the PSFR, dependent upon the strike rate being attained on a scheduled review date).
Replacement Offering
If the PFR or PSFR is terminated requiring repayment prior to stated maturity, the FHLB will offer replacement funding to the member at the then-prevailing rate of interest for an advance product then offered by the FHLB, subject to normal FHLB credit and collateral requirements.
Offering Size
Minimum transaction size of $5 million, with $500,000 increments, due to limitations on hedge funding availability. Actual advance amount is subject to the FHLB's ability to execute a corresponding trade of equal size in the capital markets, which may also have an impact on pricing.
Prepayable in full only, subject to the termination fee that would make the FHLB economically indifferent to prepayment (i.e. FHLB's hedge-unwind cost plus the present value of foregone profit on the advance).

To learn more about our Advance products, contact Jeff Berryman or Lisa Wishart at 800-828-4191.

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