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Credit Products – Expander Advance

The Expander advance offers the borrower a one-time opportunity to increase the principal amount at the original interest rate. It provides protection against rising interest rates and flexibility in asset/liability management.


 Key Features
  • Fixed-term, fixed-rate, non-amortizing advance.

  • One-time opportunity to increase the principal amount of the advance by 100 percent of the original amount at the original interest rate.

  • Member chooses the one-time expansion date and the term to final maturity.

  • The premium cost of the embedded expansion option is included in the advance rate on an annualized basis.

  • Interest payable monthly; principal due at maturity.

  • $2 million minimum per individual advance.

  • FHLB Boston will offer occasional specials to all members with no per advance minimum.
How It Works
  • Assume that the member executes a 10 year/two-year Expander advance for $2 million at 5.00 percent. The advance includes an ‘embedded option' that allows the member, in its sole discretion, to increase the balance of the advance on the second anniversary date by $2 million (all or nothing) at 5.00 percent for the remaining eight-year term.
Common Uses
  • Limit Exposure to rising interest rates.

  • Fund short- or long-term assets.
Maturities
  • Out to 20 years.
Expansion Date
  • One to 10 years from the disbursement date.
Expansion Exercise
  • Notice to FHLB Boston by noon on third Boston banking day prior to expansion date.
Expansion Obligation
  • FHLB Boston's obligation to fund the Expansion Amount on the Expansion Date is subject to compliance by the member with the Bank's Products and Solutions Guide and the Bank's compliance with Federal Housing Finance Agency rules and regulations.
Forward-Rate Commitment
  • Not available.
Basic Prepayment Terms
  • Pre-payable with prior notice in whole prior to the expansion date.

  • On or after the expansion date, the advance may be prepaid in whole or in part subject to prior notice to FHLB Boston. Partial prepayments may be in amounts as small as $100,000 and in intervals of $100,000 thereafter.
Other Prepayment Terms A prepayment fee will be assessed equal to:
  • 100 percent of the present value of the lost cash flow based upon an annual rate of prepayment fee differential times the principal amount of the advance paid on a monthly basis for the remaining life of the advance, discounted at the current yield on Federal Home Loan Bank securities of the same maturity as the scheduled final maturity of the advance, plus any additional costs FHLB Boston may incur including, but not limited to, the cost of terminating interest rate swaps, futures and options contracts, and extraordinary operational or legal costs.
Risks
  • Before using an Expander advance, members should carefully evaluate the unique features of this advance and understand the advance's potential performance relative to their balance sheet and income statement profile. We encourage members to consult with their financial advisors and accountants to determine whether an advance with an embedded option that allows the member a one-time opportunity to increase the outstanding principal balance at the original fixed rate of interest and for the remaining term to maturity is an appropriate strategy for them.

  • The Federal Home Loan Bank of Boston does not act as a financial adviser, and members should independently evaluate the suitability and risks of the Expander advance. Please see the Expander Advance Primer Adobe PDF icon for a discussion of the risks and other considerations associated with FHLB Boston advances.
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