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Bulletins

Bulletin No.: 2014-29
December 3, 2014

TO: MEMBERS

SUBJECT: Bank Offers Forward-Starting Advances

The Federal Home Loan Bank of Dallas (Bank) is pleased to announce the availability of forward-starting advances. A forward-starting advance enables a member to take advantage of the current low- interest rate environment by locking in a rate today for an advance that settles at a future date.

A forward-starting advance could be beneficial for members that currently have sufficient liquidity, but would like to take advantage of historically low rates. In addition, members that believe the economy will continue to strengthen and rates will rise rapidly could benefit from a forward-starting advance.

Fixed-rate, fixed-term and principal-amortizing advances, including Community Investment Program and Economic Development Program advances, can be forward-starting. Additionally, certain forward-starting advances are available with the Bank’s symmetrical prepayment feature.

Forward-Starting Advance Benefits

If additional liquidity is not an immediate need, locking in future funds availability at today’s rates can be an effective interest rate risk management strategy. Members can use a forward-starting advance to support a wide range of near- and long-term objectives, including:

• Preparing for deposit outflows due to increasing rates

• Replacing brokered CD funds with more competitively priced Bank funds

• Preparing for loan growth

• Match-funding and hedging against future rate increases

• Managing the impact of rising rate scenarios on net interest margin

• Unlocking value in a historically low-rate, flat-yield curve environment

• Locking in rates today to renew future maturing advances 

Forward-Starting Advance Structure

The forward-starting advance is subject to the Bank’s standard credit and collateral policies as defined in the Bank’s Member Products and Credit Policy.

  • Maturity Terms: Maximum allowable terms for fixed-rate, fixed-term and principal-amortizing advances
  • Minimum Transaction Size:

o No minimum up to 10 years

o $5 million minimum when:

  1. Terms are beyond 10 years
  2. Includes a symmetrical prepayment feature
  • Settlement: Available for up to three years. Longer periods may be available upon request by contacting Member Sales.
  • Capital Stock: Capital Stock is not required until the settlement date
  • Prepayment Fees: If the borrower cancels the advance commitment in whole or in part, the Bank will charge the borrower a cancellation fee equal to any prepayment fee that would have applied had the Bank funded the advance and the borrower had then immediately prepaid the advance plus 25 basis points for each year of the advance term multiplied by the balance of the advance

For additional information on the forward-starting feature, please see the enclosed white paper or contact your Member Sales Officer at 800.442.9841. Please also make plans to attend our product webinar on December 11, 2014 during which detailed information about the symmetrical prepayment and forward-starting advances will be presented. Invitations have been emailed to members, please contact Member Sales if you have not received an invitation.

 

Sincerely,

Sanjay K. Bhasin
President and Chief Executive Officer