Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Federally chartered corporation (State or other jurisdiction of incorporation or organization) | 42-6000149 (I.R.S. employer identification number) |
907 Walnut Street Des Moines, IA (Address of principal executive offices) | 50309 (Zip code) |
(515) 281-1000
None
Class B Common stock, par value $100
Item 1 | 2 | |||||
Item 1A | 44 | |||||
Item 2 | 55 | |||||
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Item 3 | 158 | |||||
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Item 9 | 179 | |||||
Item 10 | 180 | |||||
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Item 12 | 190 | |||||
Item 13 | 191 | |||||
Item 14 | 199 | |||||
Item 15 | 200 | |||||
Signature | 201 |
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1. | provide a readily available source of funds that allows our members to offer credit in their local markets to support housing, small business, and community development. | ||
2. | support residential mortgage lending by purchasing member housing mortgages through the Mortgage Partnership Finance (register mark) (MPF (register mark)) program(Mortgage Partnership Finance and MPF are registered trademarks of the Federal Home Loan Bank of Chicago). | ||
3. | meet housing needs through community investment and affordable housing programs. |
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• | Loss of hedge accounting for certain hedging relationships involving mortgage loans, advances, consolidated obligations, and mortgage delivery commitments. We previously designated and accounted for these hedging relationships as fair value or cash flow hedges in accordance with SFAS 133, but have since determined that they do not meet the criteria for hedge accounting. | ||
• | Change in the manner in which we assess effectiveness for certain consolidated obligation hedging relationships. Under our prior approach, we improperly assumed no ineffectiveness for these hedging transactions. We determined that we should change our approach to assess effectiveness and measure ineffectiveness for such transactions. | ||
• | Corrections of other errors related to the application of SFAS 133, including accounting for certain advance firm commitments, SFAS 133 transition accounting, the timing for recognition of derivatives, and changes in values on certain derivative instruments. | ||
• | Corrections of other errors identified during the restatement process, including a change from the straight line method to the level yield method, a change in the allowance for credit losses on mortgage loans, and other minor corrections. |
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• | achieve our mission to promote housing, home ownership, and community development by delivering attractively priced products to help members meet the credit needs of their communities. | ||
• | provide reasonable returns on the capital provided by our members. | ||
• | maintain adequate retained earnings to support safe and sound business operations. |
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• | To join the Bank, each member is required to buy membership capital stock based on the amount of the member’s total assets. This amount is adjusted annually with changes in the member’s total assets. Each member is also required to purchase activity-based capital stock as it engages in certain business activities with the Bank. The amount of activity-based capital stock required generally fluctuates with the member’s use of advances and standby letters of credit and its sale of mortgage loans to the Bank. | ||
• | To support business operations, additional funds are raised through the issuance of FHLBank consolidated obligations. | ||
• | Proceeds from the sale of capital stock and the funds raised through the issuance of consolidated obligations are |
— lent to members and eligible housing associates in the form of advances. | |||
— used to purchase mortgage loans from our members through the MPF program. | |||
— invested in high quality, short- and intermediate-term financial instruments as well as mortgage-backed securities. These investments provide liquidity, financial flexibility, and income. |
• | Net interest income from earnings on capital and the spreads on advances, mortgage loans, and investments is used to pay operating expenses, dividends, and other costs. |
• | members purchase activity-based stock to support their advance borrowings, standby letters of credit, and mortgage loans they have sold to the Bank. | ||
• | members’ activity-based stock is repurchased or redeemed by the Bank in connection with reductions in their transactions with the Bank. | ||
• | members purchase membership stock because of asset growth. | ||
• | members’ membership stock is repurchased or redeemed by the Bank because of asset shrinkage. | ||
• | new members purchase membership stock upon joining the Bank. | ||
• | the Bank redeems members’ stock upon termination of Bank membership. |
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• | Fixed rate advances that are available over a variety of terms to meet borrower needs. Short-term fixed rate advances are used primarily to fund the short-term liquidity needs of our borrowers. Long-term fixed rate advances are an effective tool to help manage long-term lending and investment risks of our borrowers. | ||
• | Variable rate advances that provide a source of short-term and long-term financing where the interest rate changes in relation to a specified interest rate index such as LIBOR. | ||
• | Callable advances that may be prepaid by the borrower on pertinent dates (call dates). Mortgage matched advances are a type of callable advance with fixed rates and amortizing balances. Using a mortgage matched advance, a borrower may make predetermined principal payments at scheduled intervals throughout the term of the loan to manage the interest rate risk associated with long-term fixed rate assets. | ||
• | Putable advances that we may, at our discretion, terminate and require the borrower to repay at predetermined dates prior to the stated maturity dates of the advances. Should an advance be terminated, the Bank will offer to provide replacement funding based on the Bank’s available advance products, subject to the Bank’s normal credit and collateral requirements. A putable advance carries an interest rate lower than a comparable maturity advance that does not have the putable feature. |
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• | Community investment advances are below-market rate funds used by borrowers in both affordable housing projects and community development. These types of advances are discussed in “Community Investment Programs” on page 14. |
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• | $9.3 million was awarded to members through the competitive grant process to help build, revitalize, or purchase 48 projects consisting of more than 1,600 housing units. | ||
• | $1.5 million was awarded to 62 members through our Rural Homeownership Fund to help qualified homebuyers with closing costs, down payments, and rehabilitation costs. | ||
• | $0.3 million was awarded through our Native American Homeownership Initiative to help qualified homebuyers with closing costs, down payments, and rehabilitation costs. |
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• | Instruments such as common stock that represent an ownership interest in an entity other than stock in small business investment companies and certain investments targeted to low income persons or communities. | ||
• | Instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks. | ||
• | Noninvestment-grade debt instruments other than certain investments targeted to low income persons or communities and instruments that were downgraded after purchase by the Bank. | ||
• | Non-U.S. dollar securities. |
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• | maintenance of loan funding and reporting systems. | ||
• | transaction processing services. | ||
• | operation and staffing of the MPF program service center. | ||
• | operational training. |
• | custodial services. | ||
• | master loan servicing. | ||
• | quality assurance services. | ||
• | allocation of losses and credit enhancement. |
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• | Obligations, participations, or other instruments of or issued by Fannie Mae or Ginnie Mae. | ||
• | Mortgages, obligations, or other securities that are or ever have been, sold by Freddie Mac pursuant to 12 U.S.C. 1454 or 1455. | ||
• | Instruments that the Bank has determined are permissible investments for fiduciary or trust funds under the laws of the state of Iowa. |
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• | those acquired under the Bank’s mortgage finance program. | ||
• | certain investments targeted to low income persons or communities. | ||
• | certain marketable direct obligations of state, local, or tribal government units or agencies having at least the second highest credit rating from an NRSRO. | ||
• | mortgage-backed securities or asset-backed securities backed by manufactured housing loans or home equity loans. | ||
• | certain foreign housing loans authorized under section 12(b) of the FHLBank Act. |
• | Interest-only or principal-only stripped mortgage-backed securities. |
• | Residual interest or interest accrual classes of collateralized mortgage obligations and real estate mortgage investment conduits. |
• | Fixed rate or variable rate mortgage-backed securities, collateralized mortgage obligations, and real estate mortgage investment conduits that on the trade date are at rates equal to their contractual caps and that have average lives that vary by more than six years under an assumed instantaneous interest rate change of 300 basis points. |
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• | Cash. | ||
• | Obligations of or fully guaranteed by the U.S. | ||
• | Secured advances. |
• | Mortgages that have any guarantee, insurance, or commitment from the U.S. or any agency of the U.S. |
• | Investments described in section 16(a) of the FHLBank Act, which, among other items, include investments that a fiduciary or trust fund may purchase under the laws of the state of Iowa. |
• | Other securities that are rated Aaa by Moody’s, AAA by Standard & Poor’s, or AAA by Fitch, Inc. (Fitch). |
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• | Membership stock-Each member must purchase and hold membership stock equal to a percentage of its total assets as of the preceding December 31st. We use membership stock to provide capital for our financial operations, including maintenance of our liquidity and investment portfolios. |
• | Activity-based stock-Each member is required to purchase activity-based stock equal to a percentage of its outstanding transactions and commitments and to hold that stock as long as the transactions and commitments remain outstanding. |
Capital Stock | Range Established | |||||||
Requirements | by Capital Plan | |||||||
Membership stock requirement: | ||||||||
Member’s total assets as of the preceding December 311 | 0.12 | % | 0.10% to 0.25% | |||||
Activity-based stock requirement: | ||||||||
Outstanding principal balance of advances | 4.45 | % | 3.00% to 5.00% | |||||
Outstanding acquired member assets2 | 4.45 | % | 3.00% to 5.00% | |||||
Outstanding standby letters of credit | 0.15 | % | 0.00% to 0.175% | |||||
Commitments for advances | 0.00 | % | 0.00% to 0.35% | |||||
Commitments for acquired member assets | 0.00 | % | 0.00% to 0.60% |
1 | The membership stock requirement calculated using the required percentage is currently subject to a cap of $10 million and a floor of $10,000. Under the capital plan, the cap may be adjusted between $10 million and $30 million and the floor may be adjusted between $10,000 and $30,000 by the Board of Directors. | |
2 | Percent required is for acquired member assets purchased by the Bank on or after July 1, 2003. Acquired member assets purchased by the Bank before the July 1, 2003 conversion are subject to the capital requirements specified in the contracts in effect at the time the assets were purchased. |
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Amount of | Interest Rate Used | Present | ||||||||||
Benchmark | to Discount the | Value of the | ||||||||||
Payment | Future Benchmark | Benchmark | ||||||||||
Payment Due Date | Defeased | Payment | Payment Defeased | |||||||||
April 15, 2018 | $ | 14.4 | 4.50 | % | $ | 8.3 | ||||||
January 15, 2018 | 75.0 | 4.52 | % | 43.7 | ||||||||
October 15, 2017 | 44.7 | 4.52 | % | 26.4 | ||||||||
Total | $ | 134.1 | $ | 78.4 | ||||||||
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• | prescribing conditions upon which FHLBanks may advance funds to their members and housing associates. |
• | prescribing rules and conditions under which an FHLBank may borrow funds, pay interest on those funds, or issue obligations. |
• | requiring examinations of the FHLBanks. | ||
• | appointing the public interest members of the boards of directors of the FHLBanks. |
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• | an unsafe or unsound practice in conducting the business of the FHLBank. | ||
• | any conduct that violates any provision of the FHLBank Act or any applicable law, order, rule, or regulation. |
• | any conduct that violates conditions imposed in writing by the Finance Board in connection with the granting of any application or other request by the FHLBank, or any written agreement between the FHLBank and the Finance Board. |
• | violates any provision of the FHLBank Act, or any order, rule, or regulation issued under the FHLBank Act. |
• | violates any final or temporary cease and desist order issued by the Finance Board pursuant to the FHLBank Act. |
• | violates any written agreement between an FHLBank and the Finance Board. | ||
• | engages in any conduct that causes or is likely to cause a loss to an FHLBank. |
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December 31, | ||||||||||||||||||||
Statements of Condition | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||
(Dollars in millions) | (as restated)10 | (as restated)10 | (as restated)10 | (as restated)10 | ||||||||||||||||
Short-term investments1 | $ | 5,287 | $ | 2,599 | $ | 1,936 | $ | 7,569 | $ | 5,684 | ||||||||||
Mortgage-backed securities | 4,925 | 3,702 | 2,494 | 4,104 | 3,840 | |||||||||||||||
Other investments | 15 | 164 | 1,094 | 670 | 465 | |||||||||||||||
Advances | 22,283 | 27,175 | 23,272 | 23,971 | 20,745 | |||||||||||||||
Mortgage loans, net | 13,018 | 15,193 | 16,052 | 5,661 | 3,742 | |||||||||||||||
Total assets | 45,722 | 49,048 | 45,073 | 42,217 | 34,810 | |||||||||||||||
Securities sold under agreements to repurchase | 500 | 500 | 500 | 300 | — | |||||||||||||||
Consolidated obligations2 | 41,197 | 44,493 | 40,349 | 37,323 | 30,762 | |||||||||||||||
Mandatorily redeemable capital stock7 | 85 | 59 | — | — | — | |||||||||||||||
Affordable Housing Program | 47 | 29 | 26 | 18 | 26 | |||||||||||||||
Payable to REFCORP | 51 | 14 | 10 | (1 | ) | 4 | ||||||||||||||
Total liabilities | 43,462 | 46,654 | 42,848 | 40,332 | 33,237 | |||||||||||||||
Capital stock — Class B putable3 | 1,932 | 2,232 | 2,117 | — | — | |||||||||||||||
Capital stock — putable3 | — | — | — | 1,858 | 1,539 | |||||||||||||||
Retained earnings | 329 | 163 | 109 | 31 | 34 | |||||||||||||||
Capital-to-asset ratio4 | 4.94 | % | 4.88 | % | 4.94 | % | 4.46 | % | 4.52 | % |
Years Ended December 31, | ||||||||||||||||||||
Operating Results and Performance | ||||||||||||||||||||
Ratios | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||
(Dollars in millions) | (as restated)10 | (as restated)10 | (as restated)10 | (as restated)10 | ||||||||||||||||
Interest income5 | $ | 1,878.0 | $ | 1,428.4 | $ | 1,155.3 | $ | 1,154.6 | $ | 1,732.8 | ||||||||||
Interest expense | 1,584.4 | 929.8 | 852.1 | 1,016.2 | 1,588.9 | |||||||||||||||
Net interest income5 | 293.6 | 498.6 | 303.2 | 138.4 | 143.9 | |||||||||||||||
Reversal of (provision for) credit losses on mortgage loans | — | 5.0 | (2.7 | ) | (0.2 | ) | (1.1 | ) | ||||||||||||
Net interest income after mortgage loan credit loss provision5 | 293.6 | 503.6 | 300.5 | 138.2 | 142.8 | |||||||||||||||
Other income5 | 46.8 | (336.8 | ) | (90.3 | ) | (51.0 | ) | 3.0 | ||||||||||||
Other expense | 39.0 | 31.1 | 25.8 | 25.1 | 24.8 | |||||||||||||||
Total assessments6 | 82.5 | 36.1 | 48.9 | 16.4 | 26.5 | |||||||||||||||
Cumulative effect of change in accounting principle7 8 9 | 8.8 | (0.1 | ) | — | — | (21.0 | ) | |||||||||||||
Net income | 227.7 | 99.5 | 135.5 | 45.7 | 73.5 | |||||||||||||||
Return on average assets | 0.48 | % | 0.21 | % | 0.32 | % | 0.12 | % | 0.21 | % | ||||||||||
Return on average capital | 9.57 | 4.30 | 6.80 | 2.69 | 4.33 | |||||||||||||||
Net interest margin | 0.62 | 1.03 | 0.72 | 0.37 | 0.42 | |||||||||||||||
Operating expenses to average assets | 0.08 | 0.06 | 0.06 | 0.06 | 0.07 | |||||||||||||||
Annualized dividend rate | 2.82 | 2.13 | 3.00 | 3.00 | 4.45 | |||||||||||||||
Dividend rate spread (under) over average three-month LIBOR | (0.62 | ) | 0.60 | 1.75 | 1.14 | 0.47 | ||||||||||||||
Cash dividends declared and paid | $ | 61.2 | $ | 46.1 | $ | 56.8 | $ | 49.3 | $ | 68.2 |
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1 | Short-term investments include: interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, commercial paper, and government-sponsored enterprise obligations. Short-term investments have terms less than one year. | |
2 | The par amount of the outstanding consolidated obligations for all 12 FHLBanks was $937.4 billion, $869.2 billion, $759.5 billion, $680.7 billion, and $637.3 billion at December 31, 2005, 2004, 2003, 2002, and 2001, respectively. | |
3 | On July 1, 2003, the Bank replaced its subscription-based capital stock structure as mandated by Gramm-Leach-Bliley Act of 1999. | |
4 | Capital-to-asset ratio is capital stock plus retained earnings and accumulated other comprehensive income (loss) as a percentage of total assets at the end of the period. | |
5 | For the years ended December 31, 2003, 2002, and 2001, the Bank reclassified prepayment fee income from other income to interest income. | |
6 | Total assessments include: Affordable Housing Program and REFCORP | |
7 | The Bank adopted Statement of Financial Accounting Standards 133,Accounting for Derivative Instruments and Hedging Activitieson January 1, 2001, and recorded a net gain of $3.6 million related to the one-time transfer of certain held-to-maturity securities into trading securities and a $24.6 million net loss on derivatives and hedging activities. | |
8 | The Bank adopted Statement of Financial Accounting Standards 150,Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,on January 1, 2004, and recorded a $47.2 million reclassification from capital stock to mandatorily redeemable capital stock and $0.1 million loss related to the fair value adjustment on the stock reclassified to mandatorily redeemable capital stock. | |
9 | Effective January 1, 2005, the Bank changed its method of accounting for premiums and discounts related to and received on mortgage loans and mortgage-backed securities under Statement of Financial Accounting Standards 91,Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases. The Bank recorded an $8.8 million gain to change the amortization period from estimated lives to contractual maturities. | |
10 | See “Restatement of Financial Statements” and Note 2 to the accompanying financial statements. |
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Retained earnings, December 31, 2002, as previously reported | $ | 50.1 | ||
Restatement adjustments: | ||||
Loss of hedge accounting | (31.9 | ) | ||
Short cut method to long haul method | 1.5 | |||
Other SFAS 133 | 4.2 | |||
Other non-SFAS 133 | (0.3 | ) | ||
Assessments on restatement adjustments: | ||||
AHP | 2.2 | |||
REFCORP | 4.9 | |||
Total restatement adjustments | (19.4 | ) | ||
Retained earnings, December 31, 2002, as restated | $ | 30.7 | ||
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December 31, 2004 | ||||||||||||
As Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
ASSETS | ||||||||||||
Held-to-maturity securities | $ | 4,724.1 | $ | — | $ | 4,724.1 | ||||||
Advances | 27,194.4 | (19.8 | ) | 27,174.6 | ||||||||
Mortgage loans held for portfolio, net | 15,127.6 | 65.8 | 15,193.4 | |||||||||
Other assets | 22.3 | — | 22.3 | |||||||||
All other assets | 1,933.3 | — | 1,933.3 | |||||||||
Total assets | $ | 49,001.7 | $ | 46.0 | $ | 49,047.7 | ||||||
LIABILITIES AND CAPITAL | ||||||||||||
LIABILITIES | ||||||||||||
Deposits — Noninterest bearing demand | $ | 17.0 | $ | 8.2 | $ | 25.2 | ||||||
Consolidated obligations, net | ||||||||||||
Discount notes | 5,008.3 | (0.1 | ) | 5,008.2 | ||||||||
Bonds | 39,480.0 | 4.6 | 39,484.6 | |||||||||
Total consolidated obligations, net | 44,488.3 | 4.5 | 44,492.8 | |||||||||
Affordable Housing Program | 26.2 | 3.3 | 29.5 | |||||||||
Payable to REFCORP | 6.2 | 7.5 | 13.7 | |||||||||
Other liabilities | 28.6 | (7.8 | ) | 20.8 | ||||||||
All other liabilities | 2,071.8 | — | 2,071.8 | |||||||||
Total liabilities | 46,638.1 | 15.7 | 46,653.8 | |||||||||
CAPITAL | ||||||||||||
Capital stock | 2,231.7 | — | 2,231.7 | |||||||||
Retained earnings | 132.9 | 29.9 | 162.8 | |||||||||
Accumulated other comprehensive loss | ||||||||||||
Net unrealized loss on available-for-sale securities | (0.2 | ) | — | (0.2 | ) | |||||||
Net unrealized loss relating to hedging activities | (0.4 | ) | 0.4 | — | ||||||||
All other accumulated other comprehensive loss | (0.4 | ) | — | (0.4 | ) | |||||||
Total capital | 2,363.6 | 30.3 | 2,393.9 | |||||||||
Total liabilities and capital | $ | 49,001.7 | $ | 46.0 | $ | 49,047.7 | ||||||
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For the Year Ended December 31, 2004 | For the Year Ended December 31, 2003 | |||||||||||||||||||||||
As Previously | As | As Previously | As | |||||||||||||||||||||
Reported | Adjustments | Restated | Reported | Adjustments | Restated | |||||||||||||||||||
INTEREST INCOME | ||||||||||||||||||||||||
Advances | $ | 497.6 | $ | 15.2 | $ | 512.8 | $ | 460.8 | $ | 16.4 | $ | 477.2 | ||||||||||||
Available-for-sale securities | 18.4 | (0.9 | ) | 17.5 | 12.9 | 0.2 | 13.1 | |||||||||||||||||
Held-to-maturity securities | 102.7 | — | 102.7 | 107.9 | — | 107.9 | ||||||||||||||||||
Mortgage loans held for portfolio | 392.9 | 366.2 | 759.1 | 346.8 | 142.9 | 489.7 | ||||||||||||||||||
All other interest income | 36.3 | — | 36.3 | 67.4 | — | 67.4 | ||||||||||||||||||
Total interest income | 1,047.9 | 380.5 | 1,428.4 | 995.8 | 159.5 | 1,155.3 | ||||||||||||||||||
INTEREST EXPENSE | ||||||||||||||||||||||||
Consolidated obligations | ||||||||||||||||||||||||
Discount notes | 78.4 | — | 78.4 | 77.8 | — | 77.8 | ||||||||||||||||||
Bonds | 823.3 | 4.3 | 827.6 | 739.5 | 9.2 | 748.7 | ||||||||||||||||||
All other interest expense | 23.8 | — | 23.8 | 25.6 | — | 25.6 | ||||||||||||||||||
Total interest expense | 925.5 | 4.3 | 929.8 | 842.9 | 9.2 | 852.1 | ||||||||||||||||||
NET INTEREST INCOME | 122.4 | 376.2 | 498.6 | 152.9 | 150.3 | 303.2 | ||||||||||||||||||
Reversal of (provision for) credit losses on mortgage loans | 3.9 | 1.1 | 5.0 | (2.7 | ) | — | (2.7 | ) | ||||||||||||||||
NET INTEREST INCOME AFTER MORTGAGE LOAN CREDIT LOSS PROVISION | 126.3 | 377.3 | 503.6 | 150.2 | 150.3 | 300.5 | ||||||||||||||||||
OTHER INCOME | ||||||||||||||||||||||||
Net gain (loss) on derivatives and hedging activities | 9.3 | (361.7 | ) | (352.4 | ) | 4.2 | (98.8 | ) | (94.6 | ) | ||||||||||||||
Other, net | 4.5 | 0.1 | 4.6 | 3.0 | — | 3.0 | ||||||||||||||||||
All other income | 11.0 | — | 11.0 | 1.3 | — | 1.3 | ||||||||||||||||||
Total other income | 24.8 | (361.6 | ) | (336.8 | ) | 8.5 | (98.8 | ) | (90.3 | ) | ||||||||||||||
TOTAL OTHER EXPENSE | 31.1 | — | 31.1 | 25.8 | — | 25.8 | ||||||||||||||||||
INCOME BEFORE ASSESSMENTS | 120.0 | 15.7 | 135.7 | 132.9 | 51.5 | 184.4 | ||||||||||||||||||
Affordable Housing Program | 9.9 | 1.3 | 11.2 | 10.9 | 4.1 | 15.0 | ||||||||||||||||||
REFCORP | 22.0 | 2.9 | 24.9 | 24.4 | 9.5 | 33.9 | ||||||||||||||||||
Total assessments | 31.9 | 4.2 | 36.1 | 35.3 | 13.6 | 48.9 | ||||||||||||||||||
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE | 88.1 | 11.5 | 99.6 | 97.6 | 37.9 | 135.5 | ||||||||||||||||||
Cumulative effect of change in accounting principle | (0.1 | ) | — | (0.1 | ) | — | — | — | ||||||||||||||||
NET INCOME | $ | 88.0 | $ | 11.5 | $ | 99.5 | $ | 97.6 | $ | 37.9 | $ | 135.5 | ||||||||||||
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For the Year Ended December 31, 2004 | For the Year Ended December 31, 2003 | |||||||||||||||||||||||
As Previously | As | As Previously | As | |||||||||||||||||||||
Reported | Adjustments | Restated | Reported | Adjustments | Restated | |||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||
Net income | $ | 88.0 | $ | 11.5 | $ | 99.5 | $ | 97.6 | $ | 37.9 | $ | 135.5 | ||||||||||||
Cumulative effect of change in accounting principle | 0.1 | — | 0.1 | — | — | — | ||||||||||||||||||
Income before cumulative effect of change in accounting principle | 88.1 | 11.5 | 99.6 | 97.6 | 37.9 | 135.5 | ||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||||||
Net premiums, discounts, and basis adjustments on investments, advances, mortgage loans, and consolidated obligations | (4.6 | ) | 11.0 | 6.4 | (132.7 | ) | 12.4 | (120.3 | ) | |||||||||||||||
Concessions on consolidated obligation bonds | 19.6 | (0.9 | ) | 18.7 | 31.0 | (4.5 | ) | 26.5 | ||||||||||||||||
(Reversal of) provision for credit losses on mortgage loans held for portfolio | (3.9 | ) | (1.1 | ) | (5.0 | ) | 2.7 | — | 2.7 | |||||||||||||||
Net change in fair value adjustment on derivatives and hedging activities | (57.1 | ) | (25.7 | ) | (82.8 | ) | (10.6 | ) | (63.9 | ) | (74.5 | ) | ||||||||||||
Net change in: | ||||||||||||||||||||||||
Other assets | (15.9 | ) | 14.5 | (1.4 | ) | (37.7 | ) | 34.7 | (3.0 | ) | ||||||||||||||
AHP liability and discount on AHP advances | 1.7 | 1.3 | 3.0 | 4.5 | 4.2 | 8.7 | ||||||||||||||||||
Payable to REFCORP | 1.1 | 2.9 | 4.0 | 1.1 | 9.4 | 10.5 | ||||||||||||||||||
Other liabilities | 8.5 | (5.7 | ) | 2.8 | 12.0 | (1.5 | ) | 10.5 | ||||||||||||||||
All other adjustments | (15.1 | ) | — | (15.1 | ) | 66.5 | — | 66.5 | ||||||||||||||||
Total adjustments | (65.7 | ) | (3.7 | ) | (69.4 | ) | (63.2 | ) | (9.2 | ) | (72.4 | ) | ||||||||||||
Net cash provided by operating activities | 22.4 | 7.8 | 30.2 | 34.4 | 28.7 | 63.1 | ||||||||||||||||||
66
For the Year Ended December 31, 2004 | For the Year Ended December 31, 2003 | |||||||||||||||||||||||
As Previously | As | As Previously | As | |||||||||||||||||||||
�� | Reported | Adjustments | Restated | Reported | Adjustments | Restated | ||||||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||||
Held-to-maturity securities — Proceeds from maturities | 791.6 | 0.7 | 792.3 | 2,533.0 | (0.9 | ) | 2,532.1 | |||||||||||||||||
Advances to members — Originated | (78,633.2 | ) | — | (78,633.2 | ) | (49,329.6 | ) | — | (49,329.6 | ) | ||||||||||||||
Mortgage loans held for portfolio Principal collected | 2,684.7 | (0.1 | ) | 2,684.6 | 3,531.4 | — | 3,531.4 | |||||||||||||||||
All other cash provided by investing activities | 70,861.8 | — | 70,861.8 | 39,990.8 | — | 39,990.8 | ||||||||||||||||||
Net cash used in investing activities | (4,295.1 | ) | 0.6 | (4,294.5 | ) | (3,274.4 | ) | (0.9 | ) | (3,275.3 | ) | |||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||||||
Net change in deposits | (204.9 | ) | 5.9 | (199.0 | ) | (632.1 | ) | 1.5 | (630.6 | ) | ||||||||||||||
Net proceeds from the issuance of consolidated obligations | ||||||||||||||||||||||||
Discount notes | 293,730.1 | (1.1 | ) | 293,729.0 | 389,216.6 | (0.9 | ) | 389,215.7 | ||||||||||||||||
Bonds | 20,803.5 | (14.1 | ) | 20,789.4 | 40,578.4 | (33.0 | ) | 40,545.4 | ||||||||||||||||
Payments for maturing and retiring consolidated obligations | ||||||||||||||||||||||||
Discount notes | (294,199.0 | ) | 0.9 | (294,198.1 | ) | (391,484.5 | ) | 1.1 | (391,483.4 | ) | ||||||||||||||
Bonds | (15,999.1 | ) | — | (15,999.1 | ) | (34,835.4 | ) | 3.5 | (34,831.9 | ) | ||||||||||||||
All other cash provided by financing activities | 128.0 | — | 128.0 | 351.4 | — | 351.4 | ||||||||||||||||||
Net cash provided by financing activities | 4,258.6 | (8.4 | ) | 4,250.2 | 3,194.4 | (27.8 | ) | 3,166.6 | ||||||||||||||||
Net decrease in cash and due from banks | (14.1 | ) | — | (14.1 | ) | (45.6 | ) | — | (45.6 | ) | ||||||||||||||
Cash and due from banks at beginning of the year | 57.1 | — | 57.1 | 102.7 | — | 102.7 | ||||||||||||||||||
Cash and due from banks at end of the year | $ | 43.0 | $ | — | $ | 43.0 | $ | 57.1 | $ | — | $ | 57.1 | ||||||||||||
67
December 31, | December 31, | |||||||||||||||
2005 | 2004 | December 31, | December 31, | |||||||||||||
12-Month | 12-Month | 2005 | 2004 | |||||||||||||
Average | Average | Ending Rate | Ending Rate | |||||||||||||
Fed effective1 | 3.21 | % | 1.35 | % | 4.09 | % | 1.97 | % | ||||||||
Three-month LIBOR1 | 3.57 | 1.62 | 4.54 | 2.56 | ||||||||||||
10-year U.S. Treasury1 | 4.28 | 4.26 | 4.39 | 4.22 | ||||||||||||
30-year residential mortgage note2 | 5.85 | 5.78 | 6.15 | 5.67 |
1 | Source is Bloomberg. | |
2 | Average calculated usingThe Mortgage Bankers Association Weekly Application Survey and December 31, 2005 and 2004 ending rates are from the respective last weeks in 2005 and 2004. |
68
69
70
71
72
73
Mortgage | Consolidated | |||||||||||||||||||
Advances | Assets | Investments | Obligations | Total | ||||||||||||||||
2005 | ||||||||||||||||||||
Economic Hedges: | ||||||||||||||||||||
Realized and unrealized gain | $ | 15.5 | $ | 152.8 | $ | 0.1 | $ | — | $ | 168.4 | ||||||||||
Interest component | (7.0 | ) | (128.4 | ) | (0.1 | ) | — | (135.5 | ) | |||||||||||
Total Economic Hedges | 8.5 | 24.4 | — | — | 32.9 | |||||||||||||||
Other Hedge Ineffectiveness | 1.8 | — | — | 4.2 | 6.0 | |||||||||||||||
Total Net Gains on Derivatives and Hedging Activities | $ | 10.3 | $ | 24.4 | $ | — | $ | 4.2 | $ | 38.9 | ||||||||||
2004 | ||||||||||||||||||||
Economic Hedges: | ||||||||||||||||||||
Realized and unrealized gain (loss) | $ | 11.5 | $ | 23.3 | $ | 0.3 | $ | (2.4 | ) | $ | 32.7 | |||||||||
Interest component | (15.3 | ) | (373.2 | ) | (1.0 | ) | 1.2 | (388.3 | ) | |||||||||||
Total Economic Hedges | (3.8 | ) | (349.9 | ) | (0.7 | ) | (1.2 | ) | (355.6 | ) | ||||||||||
Other Hedge Ineffectiveness | 2.0 | — | — | 1.2 | 3.2 | |||||||||||||||
Total Net Losses on Derivatives and Hedging Activities | $ | (1.8 | ) | $ | (349.9 | ) | $ | (0.7 | ) | $ | — | $ | (352.4 | ) | ||||||
2003 | ||||||||||||||||||||
Economic Hedges: | ||||||||||||||||||||
Realized and unrealized gain (loss) | $ | 9.9 | $ | 69.2 | $ | 1.3 | $ | (9.9 | ) | $ | 70.5 | |||||||||
Interest component | (15.9 | ) | (157.5 | ) | (2.5 | ) | 19.9 | (156.0 | ) | |||||||||||
Total Economic Hedges | (6.0 | ) | (88.3 | ) | (1.2 | ) | 10.0 | (85.5 | ) | |||||||||||
Other Hedge Ineffectiveness | 1.8 | — | — | (10.9 | ) | (9.1 | ) | |||||||||||||
Total Net Losses on Derivatives and Hedging Activities | $ | (4.2 | ) | $ | (88.3 | ) | $ | (1.2 | ) | $ | (0.9 | ) | $ | (94.6 | ) | |||||
74
75
2005 | 2004 | 2003 | ||||||||||
Total interest income | $ | 1,878.0 | $ | 1,428.4 | $ | 1,155.3 | ||||||
Total interest expense | 1,584.4 | 929.8 | 852.1 | |||||||||
Net interest income before mortgage loan credit loss provision | 293.6 | 498.6 | 303.2 | |||||||||
(Reversal of) provision for credit losses on mortgage loans | — | (5.0 | ) | 2.7 | ||||||||
Net interest income after mortgage loan credit loss provision | $ | 293.6 | $ | 503.6 | $ | 300.5 | ||||||
Advance prepayment fees included in total interest income | $ | 0.3 | $ | 0.9 | $ | 19.4 | ||||||
76
77
2005 | 2004 | 2003 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
Average | Yield/ | Income/ | Average | Yield/ | Income/ | Average | Yield/ | Income/ | ||||||||||||||||||||||||||||
Balance | Cost | Expense | Balance | Cost | Expense | Balance | Cost | Expense | ||||||||||||||||||||||||||||
Interest-earning assets — Interest-bearing deposits | $ | 356 | 3.48 | % | $ | 12.4 | $ | 290 | 1.36 | % | $ | 3.9 | $ | 426 | 1.19 | % | $ | 5.1 | ||||||||||||||||||
Securities purchased under agreements to resell | 305 | 3.29 | % | 10.0 | 305 | 1.40 | % | 4.3 | 278 | 1.15 | % | 3.2 | ||||||||||||||||||||||||
Federal funds sold | 1,574 | 3.39 | % | 53.4 | 1,898 | 1.35 | % | 25.7 | 3,092 | 1.17 | % | 36.1 | ||||||||||||||||||||||||
Short-term investments1 | 1,171 | 3.23 | % | 37.8 | 1,036 | 1.43 | % | 14.8 | 713 | 1.21 | % | 8.6 | ||||||||||||||||||||||||
Mortgage-backed securities1 | 3,599 | 4.69 | % | 168.7 | 2,832 | 3.39 | % | 95.9 | 3,250 | 3.05 | % | 99.2 | ||||||||||||||||||||||||
Other investments1 | 156 | 3.63 | % | 5.6 | 757 | 1.44 | % | 10.9 | 673 | 2.46 | % | 16.6 | ||||||||||||||||||||||||
Advances2 | 25,651 | 3.51 | % | 901.6 | 25,299 | 2.03 | % | 513.8 | 23,134 | 2.15 | % | 496.5 | ||||||||||||||||||||||||
Mortgage loans3 | 14,130 | 4.87 | % | 688.5 | 15,660 | 4.85 | % | 759.1 | 10,133 | 4.83 | % | 489.7 | ||||||||||||||||||||||||
Other interest-earning assets | — | 0.00 | % | — | 3 | 1.31 | % | — | 24 | 1.25 | % | 0.3 | ||||||||||||||||||||||||
Total interest-earning assets | 46,942 | 4.00 | % | 1,878.0 | 48,080 | 2.97 | % | 1,428.4 | 41,723 | 2.77 | % | 1,155.3 | ||||||||||||||||||||||||
Noninterest-earning assets | 276 | — | — | 343 | — | — | 348 | — | — | |||||||||||||||||||||||||||
Total assets | $ | 47,218 | 3.98 | % | $ | 1,878.0 | $ | 48,423 | 2.95 | % | $ | 1,428.4 | $ | 42,071 | 2.75 | % | $ | 1,155.3 | ||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 806 | 3.02 | % | $ | 24.3 | $ | 1,202 | 1.04 | % | $ | 12.5 | $ | 1,747 | 0.86 | % | $ | 15.0 | ||||||||||||||||||
Consolidated obligations | ||||||||||||||||||||||||||||||||||||
Discount notes | 5,268 | 3.04 | % | 160.2 | 5,780 | 1.36 | % | 78.4 | 6,754 | 1.15 | % | 77.8 | ||||||||||||||||||||||||
Bonds | 37,399 | 3.69 | % | 1,378.2 | 37,655 | 2.20 | % | 827.5 | 29,975 | 2.50 | % | 748.7 | ||||||||||||||||||||||||
Other interest-bearing liabilities | 580 | 3.72 | % | 21.7 | 554 | 2.05 | % | 11.4 | 507 | 2.08 | % | 10.6 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 44,053 | 3.60 | % | 1,584.4 | 45,191 | 2.06 | % | 929.8 | 38,983 | 2.19 | % | 852.1 | ||||||||||||||||||||||||
Noninterest-bearing liabilities | 786 | — | — | 920 | — | — | 1,094 | — | — | |||||||||||||||||||||||||||
Total liabilities | 44,839 | 3.53 | % | 1,584.4 | 46,111 | 2.02 | % | 929.8 | 40,077 | 2.13 | % | 852.1 | ||||||||||||||||||||||||
Capital | 2,379 | — | — | 2,312 | — | — | 1,994 | — | — | |||||||||||||||||||||||||||
Total liabilities and capital | $ | 47,218 | 3.36 | % | $ | 1,584.4 | $ | 48,423 | 1.92 | % | $ | 929.8 | $ | 42,071 | 2.03 | % | $ | 852.1 | ||||||||||||||||||
Net interest income and spread | 0.40 | % | $ | 293.6 | 0.91 | % | $ | 498.6 | 0.58 | % | $ | 303.2 | ||||||||||||||||||||||||
Net interest margin | 0.62 | % | 1.03 | % | 0.72 | % | ||||||||||||||||||||||||||||||
Average interest-earning assets to interest-bearing liabilities | 106.56 | % | 106.39 | % | 107.03 | % | ||||||||||||||||||||||||||||||
Composition of net interest income | ||||||||||||||||||||||||||||||||||||
Asset-liability spread | 0.45 | % | $ | 209.6 | 0.93 | % | $ | 451.9 | 0.62 | % | $ | 260.8 | ||||||||||||||||||||||||
Earnings on capital | 3.53 | % | 84.0 | 2.02 | % | 46.7 | 2.13 | % | 42.4 | |||||||||||||||||||||||||||
Net interest income | $ | 293.6 | $ | 498.6 | $ | 303.2 | ||||||||||||||||||||||||||||||
1 | The average balances of available-for-sale securities are reflected at amortized cost; therefore the resulting yields do not give effect to changes in fair value. | |
2 | Advance interest income includes advance prepayment fee income of $0.3 million, $0.9 million, and $19.4 million for the years ended December 31, 2005, 2004, and 2003. | |
3 | Nonperforming loans are included in average balances used to determine average rate. |
78
Variance — 2005 vs. 2004 | Variance — 2004 vs. 2003 | |||||||||||||||||||||||
Total Increase | Total | Total Increase | Total | |||||||||||||||||||||
(Decrease) Due to | (Decrease) | (Decrease) Due to | (Decrease) | |||||||||||||||||||||
Volume | Rate | Increase | Volume | Rate | Increase | |||||||||||||||||||
Interest income | ||||||||||||||||||||||||
Interest-bearing deposits | $ | 1.1 | $ | 7.4 | $ | 8.5 | $ | (1.8 | ) | $ | 0.6 | $ | (1.2 | ) | ||||||||||
Securities purchased under agreements to resell | — | 5.7 | 5.7 | 0.3 | 0.8 | 1.1 | ||||||||||||||||||
Federal funds sold | (5.1 | ) | 32.8 | 27.7 | (15.5 | ) | 5.1 | (10.4 | ) | |||||||||||||||
Short-term investments | 2.2 | 20.8 | 23.0 | 4.4 | 1.8 | 6.2 | ||||||||||||||||||
Mortgage-backed securities | 30.1 | 42.7 | 72.8 | (13.6 | ) | 10.3 | (3.3 | ) | ||||||||||||||||
Other investments | (13.1 | ) | 7.8 | (5.3 | ) | 1.9 | (7.6 | ) | (5.7 | ) | ||||||||||||||
Advances | 7.3 | 380.5 | 387.8 | 45.6 | (28.3 | ) | 17.3 | |||||||||||||||||
Mortgage loans | (73.8 | ) | 3.2 | (70.6 | ) | 267.4 | 2.0 | 269.4 | ||||||||||||||||
Other interest-earning assets | — | — | — | (0.1 | ) | (0.2 | ) | (0.3 | ) | |||||||||||||||
Total interest income | (51.3 | ) | 500.9 | 449.6 | 288.6 | (15.5 | ) | 273.1 | ||||||||||||||||
Interest expense | ||||||||||||||||||||||||
Deposits | (5.3 | ) | 17.1 | 11.8 | (5.3 | ) | 2.8 | (2.5 | ) | |||||||||||||||
Consolidated obligations | ||||||||||||||||||||||||
Discount notes | (7.5 | ) | 89.3 | 81.8 | (12.1 | ) | 12.7 | 0.6 | ||||||||||||||||
Bonds | (5.7 | ) | 556.4 | 550.7 | 176.2 | (97.4 | ) | 78.8 | ||||||||||||||||
Other interest-bearing liabilities | 0.6 | 9.7 | 10.3 | 1.0 | (0.2 | ) | 0.8 | |||||||||||||||||
Total interest expense | (17.9 | ) | 672.5 | 654.6 | 159.8 | (82.1 | ) | 77.7 | ||||||||||||||||
Net interest income | $ | (33.4 | ) | $ | (171.6 | ) | $ | (205.0 | ) | $ | 128.8 | $ | 66.6 | $ | 195.4 | |||||||||
79
2005 | 2004 | 2003 | ||||||||||
Adjusted net interest income by operating segment | ||||||||||||
Member Finance | $ | 111.2 | $ | 72.1 | $ | 103.9 | ||||||
Mortgage Finance | $ | 46.9 | $ | 43.2 | $ | 40.6 | ||||||
Total | $ | 158.1 | $ | 115.3 | $ | 144.5 | ||||||
Adjusted net interest income | $ | 158.1 | $ | 115.3 | $ | 144.5 | ||||||
Net interest expense on economic hedges | 135.5 | 388.3 | 156.0 | |||||||||
Net interest income | $ | 293.6 | $ | 503.6 | $ | 300.5 | ||||||
80
81
2005 | 2004 | 2003 | ||||||||||
Service fees | $ | 2.5 | $ | 2.3 | $ | 2.1 | ||||||
Net loss on trading securities | — | (0.8 | ) | (1.5 | ) | |||||||
Net realized gain on available-for-sale securities | 2.7 | 5.5 | 0.7 | |||||||||
Net realized gain (loss) on held-to-maturity securities | — | 4.0 | — | |||||||||
Net gain (loss) on derivatives and hedging activities | 38.9 | (352.4 | ) | (94.6 | ) | |||||||
Other, net | 2.7 | 4.6 | 3.0 | |||||||||
Total other income | $ | 46.8 | $ | (336.8 | ) | $ | (90.3 | ) | ||||
82
Twelve months ended | Mortgage | Consolidated | ||||||||||||||||||
December 31, 2005 | Advances | Assets | Investments | Obligations | Total | |||||||||||||||
Net Interest Income | ||||||||||||||||||||
Interest component | $ | (100.3 | ) | $ | (4.6 | ) | $ | (1.1 | ) | $ | (12.0 | ) | $ | (118.0 | ) | |||||
Amortization/accretion | (1.7 | ) | (2.9 | ) | — | (25.9 | ) | (30.5 | ) | |||||||||||
�� | ||||||||||||||||||||
Total net interest income | (102.0 | ) | (7.5 | ) | (1.1 | ) | (37.9 | ) | (148.5 | ) | ||||||||||
Other Income – Net gains on derivatives and hedging activities | ||||||||||||||||||||
Hedge ineffectiveness | 1.8 | — | — | 4.2 | 6.0 | |||||||||||||||
Economic hedges | 8.5 | 24.4 | — | — | 32.9 | |||||||||||||||
Total net gain on derivatives and hedging activities | 10.3 | 24.4 | — | 4.2 | 38.9 | |||||||||||||||
Total Earnings Impact | $ | (91.7 | ) | $ | 16.9 | $ | (1.1 | ) | $ | (33.7 | ) | $ | (109.6 | ) | ||||||
83
Twelve months ended | Mortgage | Consolidated | ||||||||||||||||||
December 31, 2004 | Advances | Assets | Investments | Obligations | Total | |||||||||||||||
Net Interest Income | ||||||||||||||||||||
Interest component | $ | (271.0 | ) | $ | (15.8 | ) | $ | (25.8 | ) | $ | 371.6 | $ | 59.0 | |||||||
Amortization/accretion | (2.1 | ) | (3.9 | ) | — | 10.1 | 4.1 | |||||||||||||
Total net interest income | (273.1 | ) | (19.7 | ) | (25.8 | ) | 381.7 | 63.1 | ||||||||||||
Other Income — Net realized and unrealized gains (losses) on derivatives and hedging activities | ||||||||||||||||||||
Hedge ineffectiveness | 2.0 | — | — | 1.2 | 3.2 | |||||||||||||||
Economic hedges | (3.8 | ) | (349.9 | ) | (0.7 | ) | (1.2 | ) | (355.6 | ) | ||||||||||
Total net gain (loss) on derivatives and hedging activities | (1.8 | ) | (349.9 | ) | (0.7 | ) | — | (352.4 | ) | |||||||||||
Total Earnings Impact | $ | (274.9 | ) | $ | (369.6 | ) | $ | (26.5 | ) | $ | 381.7 | $ | (289.3 | ) | ||||||
Twelve months ended | Mortgage | Consolidated | ||||||||||||||||||
December 31, 2003 | Advances | Assets | Investments | Obligations | Total | |||||||||||||||
Net Interest Income | ||||||||||||||||||||
Interest component | $ | (316.8 | ) | $ | (12.2 | ) | $ | (22.0 | ) | $ | 389.1 | $ | 38.1 | |||||||
Amortization/accretion | (2.2 | ) | (0.8 | ) | — | 46.9 | 43.9 | |||||||||||||
�� | ||||||||||||||||||||
Total net interest income | (319.0 | ) | (13.0 | ) | (22.0 | ) | 436.0 | 82.0 | ||||||||||||
Other Income — Net realized and unrealized gains (losses) on derivatives and hedging activities | ||||||||||||||||||||
Hedge ineffectiveness | 1.8 | — | — | (10.9 | ) | (9.1 | ) | |||||||||||||
Economic hedges | (6.0 | ) | (88.3 | ) | (1.2 | ) | 10.0 | (85.5 | ) | |||||||||||
Total net loss on derivatives and hedging activities | (4.2 | ) | (88.3 | ) | (1.2 | ) | (0.9 | ) | (94.6 | ) | ||||||||||
Total Earnings Impact | $ | (323.2 | ) | $ | (101.3 | ) | $ | (23.2 | ) | $ | 435.1 | $ | (12.6 | ) | ||||||
84
2005 | 2004 | 2003 | ||||||||||
Salaries and employee benefits | $ | 20.3 | $ | 17.3 | $ | 14.7 | ||||||
Occupancy cost | 0.7 | 0.8 | 0.9 | |||||||||
Other operating expenses | 15.3 | 10.7 | 8.0 | |||||||||
Total operating expenses | 36.3 | 28.8 | 23.6 | |||||||||
Finance Board | 1.7 | 1.3 | 1.2 | |||||||||
Office of Finance | 1.0 | 1.0 | 1.0 | |||||||||
Total other expense | $ | 39.0 | $ | 31.1 | $ | 25.8 | ||||||
• | making staff additions. | ||
• | funding our portion of the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra Defined Benefit Plan). | ||
• | increasing market costs associated with salaries and employee benefits. |
85
86
2005 | 2004 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
Simple fixed rate advances | ||||||||||||||||
Overdrawn demand deposit accounts | $ | — | — | % | $ | — | — | % | ||||||||
One month or less | 2,882 | 12.9 | 3,249 | 12.1 | ||||||||||||
Over one month through one year | 2,262 | 10.2 | 2,638 | 9.9 | ||||||||||||
Greater than one year | 5,663 | 25.5 | 5,290 | 19.7 | ||||||||||||
10,807 | 48.6 | 11,177 | 41.7 | |||||||||||||
Simple variable rate advances | ||||||||||||||||
One month or less | 19 | 0.1 | 25 | 0.1 | ||||||||||||
Over one month through one year | 513 | 2.3 | 355 | 1.3 | ||||||||||||
Greater than one year | 3,576 | 16.1 | 3,405 | 12.7 | ||||||||||||
4,108 | 18.5 | 3,785 | 14.1 | |||||||||||||
Callable advances – fixed rate | 318 | 1.4 | 299 | 1.1 | ||||||||||||
Putable advances | ||||||||||||||||
Fixed rate | 5,627 | 25.3 | 5,498 | 20.5 | ||||||||||||
Variable rate | — | — | 4,800 | 17.9 | ||||||||||||
Community investment advances | ||||||||||||||||
Fixed rate | 1,083 | 4.9 | 947 | 3.5 | ||||||||||||
Variable rate | 48 | 0.2 | 37 | 0.1 | ||||||||||||
Callable – fixed rate | 96 | 0.4 | 94 | 0.4 | ||||||||||||
Putable – fixed rate | 143 | 0.7 | 191 | 0.7 | ||||||||||||
Total par value | 22,230 | 100.0 | % | 26,828 | 100.0 | % | ||||||||||
Premiums | — | 1 | ||||||||||||||
Hedging fair value adjustments | ||||||||||||||||
Cumulative fair value gain | 44 | 334 | ||||||||||||||
Basis adjustments from terminated hedges | 9 | 12 | ||||||||||||||
Total advances | $ | 22,283 | $ | 27,175 | ||||||||||||
87
Percent of | ||||||||||||
2005 | Total | |||||||||||
Name | City | State | Advances1 | Advances | ||||||||
Transamerica Occidental Life Insurance Company2 | Cedar Rapids | IA | $ | 1,600 | 7.2 | % | ||||||
Transamerica Life Insurance Company2 | Cedar Rapids | IA | 1,300 | 5.8 | ||||||||
AmerUs Life Insurance Company | Des Moines | IA | 998 | 4.5 | ||||||||
TCF National Bank | Minneapolis | MN | 981 | 4.4 | ||||||||
Bank Midwest, N.A. | Kansas City | MO | 702 | 3.2 | ||||||||
5,581 | 25.1 | |||||||||||
Housing associates | 5 | — | ||||||||||
All others | 16,644 | 74.9 | ||||||||||
Total advances (at par value) | $ | 22,230 | 100.0 | % | ||||||||
1 | Amounts represent par value before considering unamortized commitment fees, premiums and discounts, and hedging fair value adjustments. | |
2 | Transamerica Life Insurance Company and Transamerica Occidental Life Insurance Company are affiliates. |
Percent of | ||||||||||||
2004 | Total | |||||||||||
Name | City | State | Advances1 | Advances | ||||||||
Wells Fargo Bank, N.A. | Sioux Falls | SD | $ | 5,000 | 18.6 | % | ||||||
TCF National Bank | Minneapolis | MN | 1,472 | 5.5 | ||||||||
Transamerica Life Insurance Company2 | Cedar Rapids | IA | 1,300 | 4.9 | ||||||||
Transamerica Occidental Life Insurance Company2 | Cedar Rapids | IA | 1,100 | 4.1 | ||||||||
AmerUs Life Insurance Company | Des Moines | IA | 973 | 3.6 | ||||||||
9,845 | 36.7 | |||||||||||
Housing associates | 6 | — | ||||||||||
All others | 16,977 | 63.3 | ||||||||||
Total advances (at par value) | $ | 26,828 | 100.0 | % | ||||||||
1 | Amounts represent par value before considering unamortized commitment fees, premiums and discounts, and hedging fair value adjustments. | |
2 | Transamerica Life Insurance Company and Transamerica Occidental Life Insurance Company are affiliates. |
88
2005 | 2004 | |||||||
Single family mortgages | ||||||||
Fixed rate conventional loans | ||||||||
Contractual maturity less than or equal to 15 years | $ | 3,350 | $ | 3,868 | ||||
Contractual maturity greater than 15 years | 9,025 | 10,419 | ||||||
Subtotal | 12,375 | 14,287 | ||||||
Fixed rate government-insured loans | ||||||||
Contractual maturity less than or equal to 15 years | 4 | 5 | ||||||
Contractual maturity greater than 15 years | 619 | 876 | ||||||
Subtotal | 623 | 881 | ||||||
Total par value | 12,998 | 15,168 | ||||||
Premiums | 133 | 146 | ||||||
Discounts | (124 | ) | (134 | ) | ||||
Hedging fair value adjustments — basis adjustments from terminated hedges | 12 | 14 | ||||||
Allowance for credit losses | (1 | ) | (1 | ) | ||||
Total mortgage loans held for portfolio, net | $ | 13,018 | $ | 15,193 | ||||
89
2005 | 2004 | 2003 | ||||||||||
Superior | $ | — | $ | 1,266 | $ | 13,205 | ||||||
All other members | 466 | 583 | 750 | |||||||||
Total | $ | 466 | $ | 1,849 | $ | 13,955 | ||||||
Superior purchases as a percent of the total | 0 | % | 68 | % | 95 | % | ||||||
2005 | 2004 | 2003 | ||||||||||
Des Moines purchases | $ | 466 | $ | 1,849 | $ | 13,955 | ||||||
Chicago participations | 5 | 72 | 3,596 | |||||||||
Total | $ | 471 | $ | 1,921 | $ | 17,551 | ||||||
Chicago participations as a percent of the total | 1 | % | 4 | % | 20 | % | ||||||
90
2005 | 2004 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
Short-term investments | ||||||||||||||||
Interest-bearing deposits | $ | 700 | 6.8 | % | $ | 219 | 3.4 | % | ||||||||
Securities purchased under agreements to resell | 305 | 3.0 | 305 | 4.7 | ||||||||||||
Federal funds sold | 2,985 | 29.2 | 575 | 8.9 | ||||||||||||
Commercial paper | 747 | 7.3 | 480 | 7.4 | ||||||||||||
Government-sponsored enterprise obligations | 550 | 5.4 | 1,020 | 15.8 | ||||||||||||
5,287 | 51.7 | 2,599 | 40.2 | |||||||||||||
Mortgage-backed securities | ||||||||||||||||
Government-sponsored enterprises | 4,562 | 44.6 | 3,098 | 47.9 | ||||||||||||
U.S. government agency-guaranteed | 116 | 1.1 | 163 | 2.5 | ||||||||||||
MPF shared funding | 69 | 0.7 | 91 | 1.4 | ||||||||||||
Other | 178 | 1.7 | 350 | 5.4 | ||||||||||||
4,925 | 48.1 | 3,702 | 57.2 | |||||||||||||
Government-sponsored enterprise obligations | — | — | — | — | ||||||||||||
Other FHLBank consolidated obligations | — | — | 146 | 2.3 | ||||||||||||
State or local housing agency obligations | 7 | 0.1 | 10 | 0.2 | ||||||||||||
Other | 8 | 0.1 | 8 | 0.1 | ||||||||||||
Total investments | $ | 10,227 | 100.0 | % | $ | 6,465 | 100.0 | % | ||||||||
Investments as a percent of total assets | 22.4 | % | 13.2 | % | ||||||||||||
91
2005 | 2004 | |||||||
Par value | $ | 4,074 | $ | 5,027 | ||||
Discounts | (7 | ) | (18 | ) | ||||
Hedging cumulative fair value gain | — | (1 | ) | |||||
Total discount notes | $ | 4,067 | $ | 5,008 | ||||
92
Year of Maturity | 2005 | 2004 | ||||||
2005 | $ | — | $ | 11,445 | ||||
2006 | 9,615 | 9,508 | ||||||
2007 | 5,961 | 5,420 | ||||||
2008 | 4,905 | 3,090 | ||||||
2009 | 3,222 | 2,947 | ||||||
2010 | 2,254 | 2,096 | ||||||
Thereafter | 8,317 | 5,263 | ||||||
Index amortizing notes | 3,379 | — | ||||||
Total par value | 37,653 | 39,769 | ||||||
Premiums | 31 | 40 | ||||||
Discounts | (22 | ) | (17 | ) | ||||
Hedging fair value adjustments | ||||||||
Cumulative fair value gain | (350 | ) | (219 | ) | ||||
Basis adjustments from terminated hedges | (182 | ) | (88 | ) | ||||
Total bonds | $ | 37,130 | $ | 39,485 | ||||
2005 | 2004 | |||||||
Par amount of bonds | ||||||||
Noncallable or nonputable | $ | 23,380 | $ | 22,202 | ||||
Callable | 14,273 | 17,567 | ||||||
Total par value | $ | 37,653 | $ | 39,769 | ||||
93
2005 | 2004 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
Interest-bearing | ||||||||||||||||
Overnight | $ | 662 | 76.5 | % | $ | 512 | 63.6 | % | ||||||||
Demand | 154 | 17.8 | 194 | 24.1 | ||||||||||||
Term | 11 | 1.3 | 74 | 9.2 | ||||||||||||
Total interest-bearing | 827 | 95.6 | 780 | 96.9 | ||||||||||||
Noninterest bearing | 38 | 4.4 | 25 | 3.1 | ||||||||||||
Total deposits | $ | 865 | 100.0 | % | $ | 805 | 100.0 | % | ||||||||
94
95
• | In July 2004, Standard & Poor’s downgraded the long-term counterparty credit rating of the FHLBank of Chicago from AAA to AA+, and reaffirmed the FHLBank of Chicago’s negative individual counterparty credit rating outlook. In December 2004, Standard & Poor’s downgraded the long-term counterparty credit rating of the FHLBank of Seattle from AAA to AA+ and revised the FHLBank of Seattle’s individual counterparty credit rating outlook to stable from negative. | ||
• | In April 2005, Standard & Poor’s revised the individual counterparty credit rating of the FHLBank of Atlanta back to stable from negative. Also in April 2005, Standard & Poor’s revised the individual counterparty credit rating outlook of the FHLBank of Seattle to negative from stable. |
96
• | In August 2005, Standard & Poor’s revised the individual counterparty credit rating outlook of the Federal Home Loan Bank of Dallas (FHLBank Dallas) from stable to negative. |
97
98
2005 | 2004 | |||||||
Unencumbered marketable assets maturing within one year | $ | 4.7 | $ | 2.1 | ||||
Advances maturing in seven days or less | 1.1 | 1.4 | ||||||
Unencumbered assets available for repurchase agreement borrowings | 4.9 | 3.7 | ||||||
Total | $ | 10.7 | $ | 7.2 | ||||
Liquidity needs for five business days | $ | 3.5 | $ | 2.4 | ||||
• | Liquidation of available-for-sale securities not used to secure repurchase agreements. | |
• | Unsecured borrowings through the Federal funds market. | |
• | Unsecured borrowings from other FHLBanks. | |
• | The Secretary of Treasury is authorized to purchase up to $4.0 billion of consolidated obligations from all FHLBanks. |
2005 | 2004 | |||||||
Advances with maturities not exceeding five years | $ | 15.6 | $ | 19.5 | ||||
Deposits in banks or trust companies | 0.6 | 0.1 | ||||||
Total | $ | 16.2 | $ | 19.6 | ||||
Deposits | $ | 0.9 | $ | 0.8 | ||||
99
2005 | 2004 | |||||||
Total qualifying assets | $ | 45.7 | $ | 49.0 | ||||
Less: pledged assets | 0.6 | 0.7 | ||||||
Total qualifying assets free of lien or pledge | $ | 45.1 | $ | 48.3 | ||||
Consolidated obligations outstanding | $ | 41.2 | $ | 44.5 | ||||
Percent of | Percent of | ||||||||||||||||
December 31, | Regulatory | December 31, | Regulatory | ||||||||||||||
2005 | Capital | 2004 | Capital | ||||||||||||||
Unencumbered mortgage-backed securities | $ | 4.7 | 204 | % | $ | 3.3 | 132 | % | |||||||||
Unencumbered obligations | — | — | % | 0.6 | 24 | % | |||||||||||
Total | $ | 4.7 | 204 | % | $ | 3.9 | 156 | % | |||||||||
Total regulatory capital | $ | 2.3 | $ | 2.5 | |||||||||||||
100
2005 | 2004 | |||||||
Unencumbered marketable assets maturing within 90 days | $ | 4.6 | $ | 1.5 | ||||
Unencumbered assets available for repurchase agreement borrowings | 4.2 | 3.6 | ||||||
Advances maturing in 90 days or less | 3.0 | 3.0 | ||||||
Other | 0.3 | 0.4 | ||||||
Total | $ | 12.1 | $ | 8.5 | ||||
Liquidity needs for 90 days | $ | 6.7 | $ | 7.0 | ||||
101
Percent of | ||||||||||||
Total | ||||||||||||
Name | City | State | 2005 | Capital Stock | ||||||||
Superior Guaranty Insurance Company1 | Minneapolis | MN | $ | 525 | 26.0 | % | ||||||
Transamerica Occidental Life Insurance Company2 | Cedar Rapids | IA | 81 | 4.0 | ||||||||
Transamerica Life Insurance Company2 | Cedar Rapids | IA | 68 | 3.4 | ||||||||
AmerUs Life Insurance Company | Des Moines | IA | 55 | 2.7 | ||||||||
TCF National Bank | Minneapolis | MN | 54 | 2.7 | ||||||||
Total | $ | 783 | 38.8 | % | ||||||||
Total regulatory capital stock | $ | 2,017 | ||||||||||
1 | Excludes 1.0 percent owned by Wells Fargo Bank, N.A., an affiliate of Superior Guaranty Insurance Company. | |
2 | Transamerica Life Insurance Company and Transamerica Occidental Life Insurance Company are affiliates. |
Percent of | ||||||||||||
Total | ||||||||||||
Name | City | State | 2004 | Capital Stock | ||||||||
Superior Guaranty Insurance Company1 | Minneapolis | MN | $ | 628 | 27.4 | % | ||||||
Wells Fargo Bank, N.A.1 | Sioux Falls | SD | 233 | 10.2 | ||||||||
TCF National Bank | Minneapolis | MN | 76 | 3.3 | ||||||||
Transamerica Life Insurance Company2 | Cedar Rapids | IA | 68 | 3.0 | ||||||||
Transamerica Occidental Life Insurance Company2 | Cedar Rapids | IA | 59 | 2.5 | ||||||||
Total | $ | 1,064 | 46.4 | % | ||||||||
Total regulatory capital stock | $ | 2,291 | ||||||||||
1 | Superior Guaranty Insurance Company and Wells Fargo Bank, N.A. are affiliates. Both entities are referred to as Wells Fargo. | |
2 | Transamerica Life Insurance Company and Transamerica Occidental Life Insurance Company are affiliates. |
102
Institutional Entity | 2005 | 2004 | ||||||
Commercial Banks | $ | 941 | $ | 1,152 | ||||
Insurance Companies | 804 | 892 | ||||||
Savings and Loan Associations and Savings Banks | 137 | 132 | ||||||
Credit Unions | 71 | 56 | ||||||
Former Members | 64 | 59 | ||||||
Total | $ | 2,017 | $ | 2,291 | ||||
103
(1) | Submits a written notice to the Bank to redeem all or part of the member’s capital stock. | ||
(2) | Submits a written notice to the Bank of the member’s intent to withdraw from membership, which automatically commences a five-year redemption period. | ||
(3) | Terminates its membership voluntarily as a result of a merger or consolidation into a nonmember or into a member of another FHLBank, or involuntarily as a result of action by the Bank’s Board of Directors. |
104
Year of Redemption | 2005 | 2004 | ||||||
2005 | $ | — | $ | 6 | ||||
2006 | 12 | 1 | ||||||
2007 | 6 | — | ||||||
2008 | 26 | 26 | ||||||
2009 | 18 | 18 | ||||||
2010 | 19 | 6 | ||||||
Thereafter | 4 | 2 | ||||||
Total | $ | 85 | $ | 59 | ||||
105
106
December 31, 2005 | December 31, 2004 | |||||||||||||||
Required | Actual | Required | Actual | |||||||||||||
Regulatory capital requirements: | ||||||||||||||||
Risk based capital | $ | 520 | $ | 2,346 | $ | 473 | $ | 2,453 | ||||||||
Total capital-to-asset ratio | 4.00 | % | 5.13 | % | 4.00 | % | 5.00 | % | ||||||||
Total regulatory capital | $ | 1,829 | $ | 2,346 | $ | 1,962 | $ | 2,453 | ||||||||
Leverage ratio | 5.00 | % | 7.70 | % | 5.00 | % | 7.50 | % | ||||||||
Leverage capital | $ | 2,286 | $ | 3,520 | $ | 2,452 | $ | 3,680 |
107
108
109
110
• | they are likely to change from period to period due to significant management judgments and assumptions about highly complex and uncertain matters. | ||
• | they use a different estimate or a change in estimate that could have a material impact on our reported results of operations or financial condition. |
• | the use of fair value estimates. | ||
• | allowance for credit losses on advances and mortgage loans. |
111
112
(1) | a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a fair value hedge). | ||
(2) | a nonqualifying hedge of an asset, liability, or firm commitment (an economic hedge) for asset-liability management purposes. |
113
114
115
116
117
118
Payments Due by Period | ||||||||||||||||||||
Over one | Over three | |||||||||||||||||||
One year | through | through | Over | |||||||||||||||||
Contractual Obligations | Total | or less | three years | five years | five years | |||||||||||||||
Long-term debt1, 2 | $ | 37,653 | $ | 9,615 | $ | 10,866 | $ | 5,476 | $ | 11,696 | ||||||||||
Operating lease obligations | 19 | 1 | 2 | 2 | 14 | |||||||||||||||
Purchase obligations3 | 1,182 | 1,142 | 22 | 6 | 12 | |||||||||||||||
Mandatorily redeemable capital stock4 | 85 | 12 | 32 | 37 | 4 | |||||||||||||||
Securities sold under agreements to repurchase | 500 | — | 500 | — | — | |||||||||||||||
Total | $ | 39,439 | $ | 10,770 | $ | 11,422 | $ | 5,521 | $ | 11,726 | ||||||||||
1 | Long-term debt includes consolidated obligation bonds. Long-term debt does not include discount notes and is based on contractual maturities. Actual distributions could be impacted by factors affecting early redemptions. | |
2 | Index amortizing notes are included in the table based on contractual maturities. The amortizing feature of these notes based on underlying indices could cause redemption at different times than contractual maturities. | |
3 | Purchase obligations include standby letters of credit, commitments to fund mortgage loans, and consolidated obligation bonds traded but not settled (see additional discussion of these items Note 21 to the financial statements and notes for the year ended December 31, 2005). | |
4 | Mandatorily redeemable capital stock payment periods are based on how we anticipate redeeming the capital stock based on our practices. |
119
Type of Risk | Methods Used to Manage Risk | |
Market Risk | We use analysis of net market value of capital stock, value at risk, duration gap, repricing gaps, and earnings projections. | |
Liquidity Risk | We measure various day-to-day and contingent liquidity objectives to ensure adequate funding for our operations. | |
Credit Risk | We require collateralization of advances, retain only minimal credit risk exposure in the mortgage loan portfolio, and limit unsecured investments and derivative exposures to highly rated counterparties. We also invest in obligations of government-sponsored enterprises, securities guaranteed by U.S. government agencies, and other highly rated mortgage-backed securities. | |
Operational Risk | We design internal controls and business continuity procedures and evaluate these controls and procedures on an ongoing basis through management risk assessments and internal audit reviews. | |
Business Risk | We perform long-term strategic planning and monitor economic indicators and the external environment in which we operate. |
120
121
• | understanding the contractual and behavioral features of each instrument. | ||
• | estimating appropriate market data, such as yield curves and implied volatilities. | ||
• | using appropriate option execution models and prepayment functions to describe reasonably the potential evolution of interest rates over time and the expected behavior of financial instruments in response. |
• | Option-free instruments, such as basic interest rate swaps, bonds, and advances require an assessment of the future course of interest rates. Once the course of interest rates has been specified and the expected cash flows determined, the appropriate forward rates are used to discount the future cash flows to a fair value. | ||
• | Option-embedded instruments, such as interest rate swaps and caps, callable bonds, and mortgage-related instruments, are typically evaluated using option tree (or lattice) or Monte Carlo simulations that generate a large number of possible interest rate scenarios. |
122
Net Market Value of Capital Stock | ||||||||||||||||||||
Down 100 | Down 50 | Base Case | Up 50 | Up 100 | ||||||||||||||||
2005 | ||||||||||||||||||||
December | $ | 1,999 | $ | 2,045 | $ | 2,051 | $ | 2,032 | $ | 1,996 | ||||||||||
September | 2,109 | 2,131 | 2,124 | 2,096 | 2,054 | |||||||||||||||
June | 2,303 | 2,356 | 2,388 | 2,388 | 2,363 | |||||||||||||||
March | 2,281 | 2,329 | 2,347 | 2,343 | 2,326 | |||||||||||||||
2004 | ||||||||||||||||||||
December | 2,311 | 2,375 | 2,407 | 2,413 | 2,402 | |||||||||||||||
September | 2,206 | 2,255 | 2,274 | 2,276 | 2,268 | |||||||||||||||
June | 2,117 | 2,130 | 2,131 | 2,125 | 2,114 | |||||||||||||||
March | 2,217 | 2,212 | 2,211 | 2,203 | 2,182 |
123
Percentage Change from Base Case | ||||||||||||||||||||
Down 100 | Down 50 | Base Case | Up 50 | Up 100 | ||||||||||||||||
2005 | ||||||||||||||||||||
December | (2.5 | )% | (0.3 | )% | — | (0.9 | )% | (2.7 | )% | |||||||||||
September | (0.7 | )% | 0.3 | % | — | (1.3 | )% | (3.3 | )% | |||||||||||
June | (3.6 | )% | (1.3 | )% | — | 0.0 | % | (1.0 | )% | |||||||||||
March | (2.8 | )% | (0.8 | )% | — | (0.2 | )% | (0.9 | )% | |||||||||||
2004 | ||||||||||||||||||||
December | (4.0 | )% | (1.3 | )% | — | 0.2 | % | (0.2 | )% | |||||||||||
September | (3.0 | )% | (0.8 | )% | — | 0.1 | % | (0.3 | )% | |||||||||||
June | (0.7 | )% | 0.0 | % | — | (0.3 | )% | (0.8 | )% | |||||||||||
March | 0.3 | % | 0.0 | % | — | (0.4 | )% | (1.3 | )% |
124
125
Market Value of | ||||||||
Equity at Risk | ||||||||
(% of Total Equity) | Policy Limit | |||||||
2005 | ||||||||
High (December) | (5.1 | )% | (8.5 | )% | ||||
Average | (2.6 | )% | (8.8 | )% | ||||
Low (February) | (1.1 | )% | (9.0 | )% | ||||
December | (5.1 | )% | (8.5 | )% | ||||
2004 | ||||||||
High (October) | (2.1 | )% | (9.4 | )% | ||||
Average | (1.4 | )% | (9.6 | )% | ||||
Low (January) | (0.4 | )% | (10.0 | )% | ||||
December | (1.7 | )% | (9.3 | )% |
126
Down 100 | Down 50 | Base Case | Up 50 | Up 100 | ||||||||||||||||
2005 | ||||||||||||||||||||
December | (4.5 | ) | (2.2 | ) | (0.5 | ) | 0.6 | 1.3 | ||||||||||||
September | (2.4 | ) | (0.9 | ) | 0.3 | 1.2 | 1.8 | |||||||||||||
June | (3.3 | ) | (2.4 | ) | (1.2 | ) | 0.2 | 1.2 | ||||||||||||
March | (3.3 | ) | (2.0 | ) | (0.8 | ) | 0.1 | 0.7 | ||||||||||||
2004 | ||||||||||||||||||||
December | (3.9 | ) | (2.7 | ) | (1.3 | ) | (0.3 | ) | 0.4 | |||||||||||
September | (3.2 | ) | (1.9 | ) | (0.8 | ) | (0.2 | ) | 0.1 | |||||||||||
June | (1.6 | ) | (0.7 | ) | (0.2 | ) | 0.1 | 0.3 | ||||||||||||
March | 0.1 | (0.1 | ) | (0.1 | ) | 0.4 | 0.9 |
127
128
Down 100 | Down 50 | Base Case | Up 50 | Up 100 | ||||||||||||||||
2005 | ||||||||||||||||||||
December | (11.0 | ) | (4.5 | ) | (0.4 | ) | 2.2 | 4.0 | ||||||||||||
September | (3.4 | ) | (1.4 | ) | 1.9 | 4.1 | 5.2 | |||||||||||||
June | (8.6 | ) | (7.0 | ) | (3.3 | ) | 0.6 | 3.0 | ||||||||||||
March | (6.3 | ) | (4.6 | ) | (1.7 | ) | 0.5 | 1.7 | ||||||||||||
2004 | ||||||||||||||||||||
December | (9.1 | ) | (7.2 | ) | (3.7 | ) | (1.0 | ) | 0.6 | |||||||||||
September | (0.5 | ) | (0.4 | ) | (0.1 | ) | 0.0 | 0.1 | ||||||||||||
June | (2.6 | ) | (1.4 | ) | (0.4 | ) | 0.2 | 1.2 | ||||||||||||
March | (0.1 | ) | (0.2 | ) | 0.0 | 1.2 | 2.5 |
129
130
Projected Remaining Balances as a Percent | ||||||||||||||||||||||||
of December 31, 2005 Balances | ||||||||||||||||||||||||
1 year | 3 years | 5 years | 10 years | 13 years | 15 years | |||||||||||||||||||
Mortgage assets (base case) | 83 | % | 58 | % | 40 | % | 15 | % | 8 | % | 5 | % | ||||||||||||
Mortgage liabilities1 | ||||||||||||||||||||||||
Assuming payoff at maturity (slowest) | 93 | % | 70 | % | 51 | % | 18 | % | 13 | % | 8 | % | ||||||||||||
Assuming payoff on earliest call date (fastest) | 59 | % | 35 | % | 25 | % | 8 | % | 8 | % | 4 | % |
Projected Remaining Balances as a Percent | ||||||||||||||||||||||||
of December 31, 2004 Balances | ||||||||||||||||||||||||
1 year | 3 years | 5 years | 10 years | 13 years | 15 years | |||||||||||||||||||
Mortgage assets (base case) | 83 | % | 58 | % | 40 | % | 15 | % | 8 | % | 5 | % | ||||||||||||
Mortgage liabilities1 | ||||||||||||||||||||||||
Assuming payoff at maturity (slowest) | 91 | % | 74 | % | 62 | % | 25 | % | 12 | % | 1 | % | ||||||||||||
Assuming payoff on earliest call date (fastest) | 40 | % | 24 | % | 15 | % | 3 | % | 2 | % | 1 | % |
1 | Mortgage liabilities consist of callable and noncallable fixed rate debt and hedges of the mortgage assets, with the hedges consisting of callable and amortized interest rate swaps funded with a variable rate debt pool. |
• | Callable and noncallable fixed rate debt and hedges are assumed to pay off based on the earliest call date, if applicable, in the fastest scenario and on the final maturity date in the slowest scenario. | ||
• | The hedged mortgage assets are funded with a variable rate debt pool. For this analysis, we assume the debt pool will change based on the amount of the hedged mortgage assets being funded. |
131
Hedging | Derivative Hedging | |||||
Hedged Item | Classification | Instrument | Purpose of Hedge Transaction | |||
Advances: | ||||||
Fixed rate advances | Fair value | Payment of fixed, receipt of variable interest rate swap | To protect against changes in interest rates by converting the asset’s fixed rate to the same variable rate index as the funding source. | |||
Putable fixed rate advances | Fair value | Payment of fixed, receipt of variable interest rate swap with put option | To protect against changes in interest rates including option risk by converting the asset’s fixed rate to the same variable rate index as the funding source. | |||
Variable rate advances | Economic | Payment of variable (e.g. six-month LIBOR), receipt of variable (e.g. three-month LIBOR) interest rate swap | To protect against repricing risk by converting the asset’s variable rate to the same index variable rate as the funding source. |
132
Hedging | Derivative Hedging | |||||
Hedged Item | Classification | Instrument | Purpose of Hedge Transaction | |||
Mortgage Assets: | ||||||
Mortgage loans and mortgage-backed securities | Economic | Interest rate caps | To manage the extension risk of our fixed rate mortgage-related investments and the interest rate caps embedded in our adjustable rate mortgage-backed securities portfolio. | |||
Variable rate mortgage-backed securities | Economic | Payment of variable, receipt of variable interest rate swap | To protect against repricing risk by converting the asset’s variable rate to the same index as the funding source. | |||
Mortgage delivery commitments | Economic | Forward settlement agreements | To protect against changes in market value resulting from changes in interest rates. |
Hedging | Derivative Hedging | |||||
Hedged Item | Classification | Instrument | Purpose of Hedge Transaction | |||
Investments: | ||||||
Fixed rate investments | Fair value | Payment of fixed, receipt of variable interest rate swap | To protect against changes in interest rates by converting the asset’s fixed rate to the same variable rate index as the funding source. |
133
Hedging | Derivative Hedging | Purpose of Hedge | ||||
Hedged Item | Classification | Instrument | Transaction | |||
Consolidated Obligations: | ||||||
Fixed rate consolidated obligations | Fair value | Payment of variable, receipt of fixed interest rate swap | To protect against changes in interest rates by converting the debt’s fixed rate to the same variable rate index as the asset being funded. | |||
Callable fixed rate consolidated obligations1 | Fair value or Economic2 | Payment of variable, receipt of fixed interest rate swap with call option | To protect against changes in interest rates including option risk by converting the debt’s fixed rate to the same variable rate index as the asset being funded. | |||
Callable variable rate consolidated obligations1 | Fair value or Economic2 | Payment of variable, receipt of variable interest rate swap with call option | To protect against changes in interest rates including option risk by converting the debt’s variable rate to the same variable rate index as the asset being funded. | |||
Variable rate consolidated obligations | Economic | Payment of variable (e.g. one-month LIBOR), receipt of variable (e.g. three-month LIBOR) interest rate swap | To protect against repricing risk by converting the variable rate funding source to the same variable rate index as the asset being funded. |
1 | When the hedged item has payment features related to interest payments such as step up bonds, range bonds, or caps on variable rate bonds, the receive leg of the interest rate swap has the same features as the hedged item. | |
2 | When the hedged item is a hybrid instrument with an embedded derivative that must be bifurcated, the derivative on the hybrid instrument is classified as an economic hedge. |
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2005 | 2004 | |||||||
Notional amount of derivatives | ||||||||
Interest rate swaps | ||||||||
Noncancelable | $ | 14,727 | $ | 21,013 | ||||
Cancelable by counterparty | 16,231 | 20,745 | ||||||
Cancelable by the Bank | — | 12,124 | ||||||
30,958 | 53,882 | |||||||
Interest rate caps | 100 | 625 | ||||||
Mortgage delivery commitments | 36 | 23 | ||||||
Forward settlement agreements | 37 | — | ||||||
Total notional amount | $ | 31,131 | $ | 54,530 | ||||
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2005 | 2004 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
Advances | ||||||||||||||||
Fair value | $ | 10,736 | $ | (52 | ) | $ | 10,152 | $ | (345 | ) | ||||||
Economic | 907 | (6 | ) | 914 | (21 | ) | ||||||||||
Mortgage Assets | ||||||||||||||||
Mortgage loans — Economic | — | — | 12,424 | 123 | ||||||||||||
Mortgage-backed securities — Economic | 109 | — | 342 | — | ||||||||||||
Mortgage delivery commitment derivatives | ||||||||||||||||
Economic (including forward settlement agreements) | 73 | — | 23 | — | ||||||||||||
Investments | ||||||||||||||||
Fair value | 250 | — | 614 | (16 | ) | |||||||||||
Consolidated obligations Bonds | ||||||||||||||||
Fair value | 19,041 | (386 | ) | 28,259 | (258 | ) | ||||||||||
Economic | 15 | (1 | ) | 1,265 | — | |||||||||||
Discount notes | ||||||||||||||||
Fair value | — | — | 537 | (1 | ) | |||||||||||
Total notional and fair value | $ | 31,131 | $ | (445 | ) | $ | 54,530 | $ | (518 | ) | ||||||
Total derivatives, excluding accrued interest | (445 | ) | (518 | ) | ||||||||||||
Accrued interest | 84 | 127 | ||||||||||||||
Net derivative balance | $ | (361 | ) | $ | (391 | ) | ||||||||||
Net derivative assets | 18 | 51 | ||||||||||||||
Net derivative liabilities | (379 | ) | (442 | ) | ||||||||||||
Net derivative balance | $ | (361 | ) | $ | (391 | ) | ||||||||||
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2005 | 2004 | |||||||||||||||
Collateral Type | Dollars | Percent | Dollars | Percent | ||||||||||||
Residential mortgage loans | $ | 35.1 | 62.5 | % | $ | 28.0 | 58.9 | % | ||||||||
Other real estate related collateral | 13.5 | 24.0 | 12.1 | 25.5 | ||||||||||||
Investment securities/insured loans | 6.9 | 12.3 | 6.9 | 14.5 | ||||||||||||
Secured small business, small farm, and small agribusiness loans | 0.7 | 1.2 | 0.5 | 1.1 | ||||||||||||
Total collateral | $ | 56.2 | 100.0 | % | $ | 47.5 | 100.0 | % | ||||||||
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• | using agreements to establish credit risk sharing responsibilities between the Bank and participating members. The credit risk sharing includes payment of monthly credit enhancement fees by the Bank to our members. | ||
• | monitoring the performance of the mortgage loan portfolio and creditworthiness of participating members. | ||
• | establishing prudent credit loss reserves to reflect management estimates of probable credit losses inherent in the portfolio. | ||
• | establishing retained earnings to absorb unexpected losses that are in excess of credit loss reserves resulting from stress conditions. |
• | Homeowner equity. | ||
• | Primary Mortgage Insurance (PMI) for all loans with home owner equity of less than 20 percent of the original purchase price or appraised value. | ||
• | FLA established by the Bank. FLA is a memorandum account for tracking losses. Such losses are either recoverable from future payments of monthly base and performance based credit enhancement fees to the member or absorbed by the Bank, depending on the MPF product. | ||
• | Credit enhancements (including any supplemental mortgage insurance (SMI)) provided by participating members. The size of the participating member’s credit enhancement is calculated so that any losses in excess of the FLA are limited to those of an investor in a mortgage-backed security that is rated the equivalent of AA by a nationally recognized statistical rating organization. To cover losses equal to all or a portion of the credit enhancement amount, participating members are required to either collateralize their credit enhancement obligations or to purchase SMI from a highly rated mortgage insurer for the benefit of the Bank (except that losses generally classified as special hazard losses are not covered by SMI). | ||
• | Losses greater than credit enhancements provided by members are the responsibility of the Bank. |
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(1) | Original MPF. Members sell closed loans to the Bank under Original MPF. Original MPF’s first layer of losses is applied to an FLA and absorbed by the Bank. The member then provides a second loss credit enhancement up to AA rating equivalent and loan losses beyond the first two layers are absorbed by the Bank. | ||
(2) | MPF 100. Members originate MPF 100 loans as agent for the Bank and the loans are funded and owned by the Bank. This process is commonly known as table funding. This is the only product that requires or allows the member to originate loans as agent for the Bank. MPF 100’s first layer of losses is applied to an FLA and is recoverable from the performance based credit enhancement fee payable to the member after three years. The member then provides a second loss credit enhancement up to AA rating equivalent and loan losses beyond the first two layers are absorbed by the Bank. | ||
(3) | MPF 125. Members sell closed loans to the Bank under MPF 125. MPF 125’s first layer of losses is applied to an FLA and is recoverable from the performance based credit enhancement fee payable to the member. The member then provides a second loss credit enhancement up to AA rating equivalent and loan losses beyond the first two layers are absorbed by the Bank. | ||
(4) | MPF Plus. Members sell closed loans in bulk to the Bank under MPF Plus. MPF Plus’ first layer of losses is applied to an FLA equal to a specified percentage of loans in the pool at the sale date and is recoverable from the performance based credit enhancement fee payable to the member. The member acquires a SMI policy to cover second layer losses that exceed the deductible (FLA) of the SMI policy. Additional losses beyond the FLA and SMI coverage and up to AA rating equivalent will be paid by the member’s credit enhancement amount, if any. Any losses that exceed the credit enhancement amount will be absorbed by the Bank. The amount of credit enhancement provided by supplemental mortgage insurers was $257.0 million at December 31, 2005. | ||
(5) | Original MPF FHA/VA. Members sell closed loans to the Bank under Original MPF FHA/VA. Original MPF FHA/VA’s mortgage loans are guaranteed by the U.S. government, while the member is responsible for all unreimbursed servicing expenses. |
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Average PFI | ||||||||||||||||
Credit | ||||||||||||||||
Enhancement | Base and | Additional | ||||||||||||||
PFI Credit | Amount as | Performance | Credit | |||||||||||||
Enhancement | Percent of | Based Credit | Credit | Enhancement | ||||||||||||
Product | MPF Bank | Size | Master | Enhancement | Enhancement | Fee to | Servicing | |||||||||
Name | FLA Size | Description | Commitment1 | Fee to PFI | Fee Offset2 | PFI3 | Fee to PFI | |||||||||
(1) Original MPF | 3 to 6 basis points per year based on the remaining unpaid principal balance | Equivalent to AA | 3.05 | % | 8 to 11 basis points per year paid monthly | No | 0 to 5.0 basis points per year paid monthly | 25 basis points per year | ||||||||
(2) MPF 100 | 100 basis points fixed based on the size of the loan pool at closing | After FLA to AA | 0.78 | % | 7 to 11 basis points per year paid monthly | Yes–after 3 years | 0 to 5.0 basis points per year paid monthly | 25 basis points per year | ||||||||
(3) MPF 125 | 100 basis points fixed based on the size of the loan pool at closing | After FLA to AA | 1.44 | % | 7 to 10 basis points per year paid monthly | Yes | 0 to 5.0 basis points per year paid monthly | 25 basis points per year | ||||||||
(4) MPF Plus4 | Sized to equal expected losses | 0 to 20 basis points after FLA and supplemental mortgage insurance | 1.82 | % | 6.5 to 8.5 basis points per year fixed plus 8.0 to 10.0 basis points per year performance based (delayed for 1 year); all paid monthly | Yes – performance based only | 0 to 5.15 basis points per year paid monthly | 25 basis points per year | ||||||||
(5) Original MPF FHA/VA | NA | Unreimbursed servicing expenses | NA | 2 basis points per year paid monthly | No | 0 to 5.0 basis points per year paid monthly | 44 basis points per year |
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1 | MPF Program Master Commitments participated in or held by the Bank as of December 31, 2005. | |
2 | Future payouts of performance based credit enhancement fees are reduced when losses are allocated to the FLA. | |
3 | Additional credit enhancement fee is fixed and cannot be reduced when losses are allocated to FLA. The additional credit enhancement fee does not relate to any residual credit risk in the underlying mortgages in the MPF program. For a discussion of the additional credit enhancement fee, see “Item 7 – Certain Relationships and Related Party Transactions” at page 175. | |
4 | PFI credit enhancement amount includes SMI policy coverage. |
2005 | 2004 | |||||||
Balance, beginning of period | $ | 88 | $ | 74 | ||||
Additions due to loan purchases | 3 | 14 | ||||||
Deductions due to loss on sale of property | — | — | ||||||
Balance, end of period | $ | 91 | $ | 88 | ||||
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2005 | 2004 | |||||||||||||||
Product Type | Dollars | Percent | Dollars | Percent | ||||||||||||
Original MPF | $ | 0.1 | 0.8 | % | $ | — | — | % | ||||||||
MPF 100 | 0.2 | 1.5 | 0.2 | 1.3 | ||||||||||||
MPF 125 | 0.9 | 6.9 | 0.6 | 3.9 | ||||||||||||
MPF Plus | 11.2 | 85.5 | 13.5 | 88.2 | ||||||||||||
Total conventional loans | 12.4 | 94.7 | 14.3 | 93.4 | ||||||||||||
Government-insured loans | 0.6 | 4.5 | 0.9 | 5.9 | ||||||||||||
Total mortgage loans | 13.0 | 99.2 | 15.2 | 99.3 | ||||||||||||
MPF shared funding recorded in investments | 0.1 | 0.8 | 0.1 | 0.7 | ||||||||||||
Total MPF related assets | $ | 13.1 | 100.0 | % | $ | 15.3 | 100.0 | % | ||||||||
Credit Rating | 2005 | 2004 | ||||||
AAA | $ | 67 | $ | 88 | ||||
AA | 2 | 3 | ||||||
Total Shared Funding Certificates | $ | 69 | $ | 91 | ||||
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• | Loans must be conforming loan size which is established annually as required by the AMA regulation and may not exceed the loan limits permitted to be set by the Office of Federal Housing Enterprise Oversight each year. For most properties, this limit was $359,650 in 2005 and $333,700 in 2004 for a single family home. For properties in Alaska, Guam, Hawaii, or the Virgin Islands the limit was $539,475 in 2005 and $500,500 in 2004. | ||
• | Loans must be fixed-rate, fully-amortizing loans with terms from five to 30 years. | ||
• | Loans must be secured by first liens on residential owner-occupied primary residences and second homes. Primary residences may be up to four units. | ||
• | Condominium, planned-unit development, and manufactured homes are acceptable property types as are mortgages on leasehold estates. Manufactured homes must be on land owned in fee simple by the borrower. | ||
• | Loans may have a maximum 95 percent loan-to-value ratio (LTV) except for government MPF loans which may not exceed the LTV limits set by FHA and VA. | ||
• | MPF loans with LTVs greater than 80 percent require certain amounts of PMI from an approved PMI company with a claims paying ability of least AA by Standard & Poor’s. | ||
• | Loans must be recently originated with no more than five scheduled payments made by the borrowers (unseasoned loans). | ||
• | The PFI obtains credit reports and credit scores for each borrower. For borrowers with no credit score, alternative verification of credit is permitted. | ||
• | The PFI analyzes the borrower’s debt ratios and verifies income and source of funds, unless otherwise allowed by the MPF guides. |
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• | The PFI obtains a property appraisal. | ||
• | The borrower must have customary property or hazard insurance and flood insurance, if applicable, from insurers acceptably rated as detailed in the MPF guides. | ||
• | The PFI obtains title insurance or, in those areas where title insurance is not customary, an attorney’s opinion of title. | ||
• | The mortgage documents, mortgage transaction, and mortgaged property must comply with all applicable laws and loans must be documented using standard Fannie Mae or Freddie Mac uniform instruments. | ||
• | Loans that are not ratable by a rating agency are not eligible for delivery under the MPF program. | ||
• | Loans that are classified as high cost, high rate, high risk, Home Ownership and Equity Protection Act (HOEPA) loans, or loans in similar categories defined under predatory-lending or abusive-lending laws are not eligible for delivery under the MPF program. |
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December 31, | ||||||||
2005 | 2004 | |||||||
Portfolio Characteristics | ||||||||
Regional concentration1 | ||||||||
Midwest | 33.9 | % | 32.0 | % | ||||
West | 20.8 | % | 22.4 | % | ||||
Southeast | 16.4 | % | 17.0 | % | ||||
Southwest | 16.1 | % | 15.5 | % | ||||
Northeast | 12.8 | % | 13.1 | % | ||||
State concentration | ||||||||
Minnesota | 12.8 | % | 12.0 | % | ||||
California | 10.8 | % | 11.8 | % | ||||
Illinois | 5.9 | % | 6.1 | % | ||||
Iowa | 4.8 | % | 3.5 | % | ||||
Texas | 4.1 | % | 4.0 | % | ||||
Florida | 3.9 | % | 4.1 | % | ||||
Washington | 3.8 | % | 4.0 | % | ||||
Weighted average FICO (register mark) score at origination2 | 733 | 731 | ||||||
Weighted average loan-to-value at origination | 69 | % | 69 | % | ||||
Average loan amount at origination | $ | 159,778 | $ | 161,979 | ||||
Original loan term | ||||||||
Less than or equal to 15 years | 27 | % | 30 | % | ||||
Greater than 15 years | 73 | % | 70 | % |
1 | Midwest includes IA, IL, IN, MI, MN, ND, NE, OH, SD, and WI. West includes AK, CA, Guam, HI, ID, MT, NV, OR, WA, and WY. Southeast includes AL, District of Columbia, FL, GA, KY, MD, MS, NC, SC, TN, VA, and WV. Southwest includes AR, AZ, CO, KS, LA, MO, NM, OK, TX, and UT. Northeast includes CT, DE, MA, ME, NH, NJ, NY, PA, Puerto Rico, RI, U.S. Virgin Islands, and VT. | |
2 | FICO (register mark) is a widely used credit industry model developed by Fair, Isaac, and Company, Inc. to assess borrower credit quality with scores ranging from a low of 300 to a high of 850. |
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Unpaid Principal Balance | ||||||||||||
Government- | ||||||||||||
Conventional | Insured | Total | ||||||||||
30 days | $ | 99 | $ | 28 | $ | 127 | ||||||
60 days | 21 | 7 | 28 | |||||||||
90 days | 7 | 3 | 10 | |||||||||
Greater than 90 days | 4 | 3 | 7 | |||||||||
Foreclosures and bankruptcies | 62 | 8 | 70 | |||||||||
Total delinquencies | $ | 193 | $ | 49 | $ | 242 | ||||||
Total mortgage loans outstanding | $ | 12,375 | $ | 623 | $ | 12,998 | ||||||
Delinquencies as a percent of total mortgage loans | 1.6 | % | 7.9 | % | 1.9 | % | ||||||
Delinquencies 90 days and greater plus foreclosures and bankruptcies as a percent of total mortgage loans | 0.6 | % | 2.2 | % | 0.7 | % | ||||||
Unpaid Principal Balance | ||||||||||||
Government- | ||||||||||||
Conventional | Insured | Total | ||||||||||
30 days | $ | 108 | $ | 35 | $ | 143 | ||||||
60 days | 17 | 9 | 26 | |||||||||
90 days | 7 | 2 | 9 | |||||||||
Greater than 90 days | 3 | 1 | 4 | |||||||||
Foreclosures and bankruptcies | 40 | 9 | 49 | |||||||||
Total delinquencies | $ | 175 | $ | 56 | $ | 231 | ||||||
Total mortgage loans outstanding | $ | 14,287 | $ | 881 | $ | 15,168 | ||||||
Delinquencies as a percent of total mortgage loans | 1.2 | % | 6.4 | % | 1.5 | % | ||||||
Delinquencies 90 days and greater plus foreclosures and bankruptcies as a percent of total mortgage loans | 0.3 | % | 1.4 | % | 0.4 | % | ||||||
149
2005 | 2004 | 2003 | ||||||||||
Balance, beginning of year | $ | 760 | $ | 5,906 | $ | 3,255 | ||||||
Charge-offs | — | (111 | ) | (53 | ) | |||||||
Recoveries | 3 | 13 | — | |||||||||
Net recoveries (charge-offs) | 3 | (98 | ) | (53 | ) | |||||||
(Reversal of) provision for credit losses | — | (5,048 | ) | 2,704 | ||||||||
Balance, end of year | $ | 763 | $ | 760 | $ | 5,906 | ||||||
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151
December 31, 2005 | ||||||||||||||||||||||||
Certificates of | Commercial | Overnight | Term | Other | ||||||||||||||||||||
Credit Rating1 | Deposit | Paper | Fed Funds | Fed Funds | Obligations2 | Total | ||||||||||||||||||
AAA | $ | — | $ | 299 | $ | — | $ | — | $ | 555 | $ | 854 | ||||||||||||
AA | — | 299 | 1,130 | — | — | 1,429 | ||||||||||||||||||
A | 638 | 149 | 1,761 | 95 | — | 2,643 | ||||||||||||||||||
Total | $ | 638 | $ | 747 | $ | 2,891 | $ | 95 | $ | 555 | $ | 4,926 | ||||||||||||
December 31, 2004 | ||||||||||||||||||||||||
Certificates of | Commercial | Overnight | Term | Other | ||||||||||||||||||||
Credit Rating1 | Deposit | Paper | Fed Funds | Fed Funds | Obligations2 | Total | ||||||||||||||||||
AAA | $ | — | $ | 210 | $ | — | $ | — | $ | 1,169 | $ | 1,379 | ||||||||||||
AA | 75 | 170 | 270 | — | — | 515 | ||||||||||||||||||
A | — | 100 | 305 | — | — | 405 | ||||||||||||||||||
Total | $ | 75 | $ | 480 | $ | 575 | $ | — | $ | 1,169 | $ | 2,299 | ||||||||||||
1 | Credit rating is the lowest of Standard & Poor’s, Moody’s, and Fitch ratings stated in terms of the Standard & Poor’s equivalent. | |
2 | Other obligations represent obligations in government-sponsored enterprises and other FHLBanks. |
152
• | Transacting with highly rated derivative counterparties according to Board-approved credit standards. | ||
• | Using master netting and bilateral collateral agreements. | ||
• | Monitoring counterparty creditworthiness through internal and external analysis. | ||
• | Managing credit exposures through collateral delivery. | ||
• | Calculating market values for all derivative contracts at least monthly and verifying reasonableness by checking those values against independent sources. | ||
• | Establishing retained earnings to absorb unexpected losses resulting from stress conditions. |
153
December 31, 2005 | ||||||||||||||||||||
Total | Value | Exposure | ||||||||||||||||||
Active | Notional | Exposure at | of Collateral | Net of | ||||||||||||||||
Credit Rating1 | Counterparties | Amount2 | Fair Value3 | Pledged | Collateral4 | |||||||||||||||
AAA | 3 | $ | 2,723 | $ | — | $ | — | $ | — | |||||||||||
AA | 14 | 15,099 | 18 | — | 18 | |||||||||||||||
A | 8 | 13,273 | — | — | — | |||||||||||||||
Total | 25 | $ | 31,095 | $ | 18 | $ | — | $ | 18 | |||||||||||
December 31, 2004 | ||||||||||||||||||||
Total | Value | Exposure | ||||||||||||||||||
Active | Notional | Exposure at | of Collateral | Net of | ||||||||||||||||
Credit Rating1 | Counterparties | Amount2 | Fair Value3 | Pledged | Collateral4 | |||||||||||||||
AAA | 3 | $ | 2,905 | $ | — | $ | — | $ | — | |||||||||||
AA | 12 | 25,132 | 39 | 39 | — | |||||||||||||||
A | 7 | 26,470 | 12 | 8 | 4 | |||||||||||||||
Total | 22 | $ | 54,507 | �� | $ | 51 | $ | 47 | $ | 4 | ||||||||||
1 | Credit rating is the lower of the Standard & Poor’s, Moody’s, and Fitch ratings stated in terms of a Standard & Poor’s equivalent. | |
2 | Notional amounts serve as a factor in determining periodic interest amounts to be received and paid and generally do not represent actual amounts to be exchanged or directly reflect our exposure to counterparty credit risk. | |
3 | For each counterparty, this amount includes derivatives with a net positive market value including the related accrued interest receivable/payable (net). | |
4 | Amount equals total exposure at fair value less value of collateral pledged as determined at the counterparty level. |
154
155
• | Our intention to establish a retained earnings and dividend policy to address expected future decreases in earnings related to the restatement. | ||
• | Our expectation that the volume of purchases for the MPF program will continue to be at or below the relatively low level that was experienced during 2005. | ||
• | Our belief that additional changes in the operations, policies, and strategies will result from the review by our Board of Directors that began in the summer of 2005. | ||
• | Our ability to prevent additional control deficiencies related to SFAS 133 and our intention to implement measures to prevent such deficiencies. | ||
• | Our ability to obtain new business opportunities from life insurance companies. | ||
• | Our expectation that our advance portfolio will increase slightly in 2006. | ||
• | Our expectation that Superior will not deliver additional whole mortgages to us in the near future, our belief that Superior’s actions will not have a material impact on our results of operations in the near future, and the expected consequences to our loan balances and net interest income arising from Superior’s decision. | ||
• | Our ability to fund future liquidity and capital resource requirements. | ||
• | Our ability to manage the risks associated with the mortgage loan program. | ||
• | Our belief that our ability to raise funds in the capital markets will not be impaired by the recent adverse publicity surrounding certain individual FHLBanks, Freddie Mac, and Fannie Mae. | ||
• | Our estimated capital expenditures in conjunction with the occupancy of our new headquarters and our ability to fund such expenditures with cash flows from operations. | ||
• | Our belief that our policies and practices are sufficient to manage the mortgage asset credit risk. | ||
• | Our expectation for increased charge-off activity in our mortgage loan portfolio. |
156
157
158
Shares of | ||||||||||||
Capital Stock | ||||||||||||
Owned at | Percent of | |||||||||||
December | Total | |||||||||||
Name | City | State | 31,2005 | Capital Stock | ||||||||
Wells Fargo1 | Minneapolis | MN | 5,441 | 27.0 | % | |||||||
Transamerica2 | Cedar Rapids | IA | 1,491 | 7.4 | % | |||||||
6,932 | 34.4 | % | ||||||||||
All others | 13,239 | 65.6 | % | |||||||||
Total capital stock | 20,171 | 100.0 | % | |||||||||
1 | Includes Superior Guaranty Insurance Company (5,252,000 shares) and Wells Fargo Bank, N.A. (189,000 shares). | |
2 | Includes Transamerica Life Insurance Company (679,000 shares) and Transamerica Occidental Life Insurance Company (812,000 shares). |
Shares of | ||||||||||||
Capital Stock | ||||||||||||
Owned at | Percent of | |||||||||||
December | Total | |||||||||||
Name | City | State | 31,2004 | Capital Stock | ||||||||
Wells Fargo1 | Minneapolis | MN | 8,604 | 37.6 | % | |||||||
Transamerica2 | Cedar Rapids | IA | 1,268 | 5.5 | ||||||||
9,872 | 43.1 | |||||||||||
All others | 13,033 | 56.9 | ||||||||||
Total capital stock | 22,905 | 100.0 | % | |||||||||
1 | Includes Superior Guaranty Insurance Company (6,278,000 shares) and Wells Fargo Bank, N.A. (2,326,000 shares). | |
2 | Includes Transamerica Life Insurance Company (679,000 shares) and Transamerica Occidental Life Insurance Company (589,000 shares). |
159
Name | City | State | 2005 | |||||
Central Bancompany1 | Jefferson City | MO | 94 | |||||
Voyager Bank | Eden Prairie | MN | 47 | |||||
Alerus Financial | Grand Forks | ND | 24 | |||||
Excel Bank (formerly Community Bank of Pettis County) | Sedalia | MO | 14 | |||||
American Bank and Trust | Wessington Springs | SD | 11 | |||||
Security State Bank | Waverly | IA | 4 | |||||
Treynor State Bank | Treynor | IA | 3 | |||||
Janesville State Bank | Janesville | MN | 3 | |||||
Queen City Federal Savings Bank | Virginia | MN | 3 | |||||
Community Bank of Missouri | Richmond | MO | 2 | |||||
Maynard Savings Bank | Maynard | IA | 2 | |||||
Citizens Savings Bank | Hawkeye | IA | 1 | |||||
208 | ||||||||
Percent of total capital stock | 1.0 | % | ||||||
1 | Twelve of our members are affiliate institutions under the common control of a single, non-member holding company, Central Bancompany. In the aggregate, the 12 member banks hold 94,000 shares of the Bank’s capital stock. One of the Bank’s directors, S. Bryan Cook, is an officer of both Central Bancompany and one of its affiliates, The First National Bank of St. Louis. |
160
Name | City | State | 2004 | |||||
Voyager Bank | Eden Prairie | MN | 52 | |||||
Alerus Financial | Grand Forks | ND | 38 | |||||
Roundbank | Waseca | MN | 26 | |||||
Community Bank of Pettis County | Sedalia | MO | 10 | |||||
American Bank and Trust | Wessington Springs | SD | 8 | |||||
United Community Bank | Perham | MN | 7 | |||||
The Paris National Bank | Paris | MO | 5 | |||||
Security State Bank | Waverly | IA | 4 | |||||
American Savings, Inc. | Farmington | MN | 3 | |||||
Treynor State Bank | Treynor | IA | 3 | |||||
Maynard Savings Bank | Maynard | IA | 2 | |||||
Citizens Savings Bank | Hawkeye | IA | 1 | |||||
Community Bank of Missouri | Richmond | MO | 1 | |||||
160 | ||||||||
Percent of total capital stock | 0.7 | % | ||||||
161
162
Elected or | Expiration of Current | |||||||||
Director | Age | Appointed | Director Since | Term As Director | ||||||
Randy L. Newman (chair) | 52 | Elected | January 1, 1999 | December 31, 2007 | ||||||
Michael K. Guttau (vice chair) | 59 | Elected | January 1, 2003 | December 31, 2008 | ||||||
Louis K. Ahlemeyer | 69 | Elected | January 1, 1998 | December 31, 2006 | ||||||
S. Bryan Cook | 54 | Elected | January 1, 2005 | December 31, 2007 | ||||||
Gerald D. Eid | 65 | Appointed | January 23, 2004 | December 31, 2006 | ||||||
Michael J. Finley | 50 | Elected | January 1, 2005 | December 31, 2007 | ||||||
David R. Frauenshuh | 62 | Appointed | January 23, 2004 | December 31, 2006 | ||||||
D.R. Landwehr | 59 | Elected | January 1, 2004 | December 31, 2006 | ||||||
Clair J. Lensing | 71 | Elected | January 1, 2004 | December 31, 2006 | ||||||
Dennis A. Lind | 55 | Elected | January 1, 2006 | December 31, 2008 | ||||||
Kevin E. Pietrini1 | 56 | Elected | January 12, 2006 | December 31, 2008 | ||||||
Lynn V. Schneider | 58 | Elected | January 1, 2004 | December 31, 2006 |
1 | Elected by the Bank’s Board of Directors on January 12, 2006 to fill the elected director seat vacated by Neil N. Fruechte. Prior to his election on January 12, 2006, Mr. Pietrini served on the Board from January 1, 2005 until the expiration of his term on December 31, 2005. Mr. Pietrini’s term was shortened by virtue of Finance Board action to eliminate the discretionary stock seat in Minnesota held by Mr. Pietrini, which reduced the number of elected directors from eleven in 2005 to ten in 2006. |
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Employee of the | ||||||||
Executive Officer | Age | Position Held | Bank Since | |||||
Neil N. Fruechte | 67 | Acting President and Chief Executive Officer | December 22, 2005 | |||||
Edward McGreen | 38 | Chief Capital Markets Officer | November 8, 2004 | |||||
Allyn Dixon | 45 | General Counsel and Corporate Secretary | April 1, 2003 | |||||
James E. Huston | 44 | Interim Chief Financial Officer | February 10, 2006 |
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All Other | ||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Compensation ($)1 | ||||||||||||
Neil N. Fruechte2 | 2005 | 9,000 | 3 | — | — | |||||||||||
ActingPresident and Chief Executive Officer | ||||||||||||||||
Patrick J. Conway4 | 2005 | 545,695 | — | 32,742 | ||||||||||||
FormerPresident and | 2004 | 494,167 | 116,394 | 148,920 | 5 | |||||||||||
Chief Executive Officer | 2003 | 461,167 | 103,463 | 33,878 | ||||||||||||
Amy E. Angle6 | 2005 | 280,333 | — | 19,859 | ||||||||||||
FormerChief Operating Officer | 2004 | 247,333 | 53,179 | 16,416 | ||||||||||||
2003 | 233,400 | 49,625 | 16,982 | |||||||||||||
Edward McGreen | 2005 | 240,100 | 41,863 | 663 | ||||||||||||
Chief Capital Markets Officer | ||||||||||||||||
F. James Bishop7 | 2005 | 198,083 | — | 14,040 | ||||||||||||
FormerChief Risk Officer | 2004 | 175,000 | 36,832 | 10,500 | ||||||||||||
2003 | 167,050 | 31,086 | 11,888 | |||||||||||||
Ronald L. Greeson8 | 2005 | 191,300 | — | 13,566 | ||||||||||||
Chief Accounting Officer | 2004 | 171,300 | 35,757 | 11,338 | ||||||||||||
2003 | 148,967 | 32,517 | 9,059 |
1 | Represents contributions or other allocations made by the Bank to qualified and/or nonqualified vested and unvested defined contribution plans. | |
2 | Mr. Fruechte was appointed Acting President and Chief Executive Officer on December 22, 2005 by the Bank’s Board of Directors. Prior to his appointment, Mr. Fruechte had served on the Board since January 2001. | |
3 | Represents a prorated amount paid pursuant to an employment agreement between the Bank and Mr. Fruechte for his services as Acting President and Chief Executive Officer from December 22, 2005 to March 31, 2006. See “Agreements with Management” at page 173 for a description of the employment agreement. | |
4 Mr. Conway resigned from his positions as President and Chief Executive Officer on December 22, 2005 and retired from the Bank effective December 31, 2005. | ||
5 | Of this amount, only $33,100 of contributions or other allocations made by the Bank to qualified and/or nonqualified vested and unvested defined contribution plans was paid to Mr. Conway. The remaining $115,820 covered retiree medical insurance coverage for Mr. Conway and his spouse. However, pursuant to his resignation agreement, Mr. Conway is no longer entitled to any retiree medical coverage exclusively for his benefit or the benefit of his spouse. See “Agreements with Management” at page 173 for a description of the resignation agreement. | |
6 | Ms. Angle resigned from her position as Chief Operating Officer effective March 31, 2006. |
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7 | Mr. Bishop resigned from his position as Chief Risk Officer effective March 31, 2006. | |
8 | Mr. Greeson has notified us of his intention to resign his position as Chief Accounting Officer effective July 15, 2006. |
Credited Years of Benefit Service | ||||||||||||||||||||||||
Remuneration | 5 | 10 | 20 | 30 | 40 | |||||||||||||||||||
$100,000 | $ | 11,250 | $ | 22,500 | $ | 45,000 | $ | 67,500 | $ | 90,000 | ||||||||||||||
$200,000 | $ | 22,500 | $ | 45,000 | $ | 90,000 | $ | 135,000 | $ | 180,000 | ||||||||||||||
$300,000 | $ | 33,750 | $ | 67,500 | $ | 135,000 | $ | 202,500 | $ | 270,000 | ||||||||||||||
$400,000 | $ | 45,000 | $ | 90,000 | $ | 180,000 | $ | 270,000 | $ | 360,000 |
• | Formula | ||
— Regular retirement benefits under the Pentegra Defined Benefit Plan and BEP equal the product of 2.25 percent multiplied by years of benefit service multiplied by the highest three-year average compensation. | |||
• | The compensation covered by each plan is base salary plus annual incentive compensation bonus (as paid in a calendar year) without regard to Internal Revenue Service limitations. | ||
• | Credited years of benefit service at December 31, 2005 were |
Amy E. Angle | 19 years and 8 months | |
F. James Bishop | 10 years and 5 months | |
Ronald L. Greeson | 6 years and 1 month | |
Edward McGreen | 1 month |
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• | Benefits are computed on the basis of a modified cash refund form of annuity with a death benefit equal to 12 times the annual retirement allowance less the sum of such allowance payments made before death. |
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2005 | 2006 | |||||||
Chair | $ | 28,364 | $ | 29,357 | ||||
Vice Chair | 22,692 | 23,486 | ||||||
Directors | 17,019 | 17,614 |
2005 | 2006 | |||||||||||||||
Committee | Committee | |||||||||||||||
Board Meetings | Meetings | Board Meetings | Meetings | |||||||||||||
Chair | $ | 2,100.00 | $ | 1,708.00 | $ | 2,100.00 | $ | 1,569.62 | ||||||||
Vice Chair | 1,700.00 | 1,349.00 | 1,700.00 | 1,235.75 | ||||||||||||
Directors | 1,300.00 | 989.87 | 1,300.00 | 907.75 |
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2005 | 2004 | 2003 | ||||||||||||||||||||||
Annual | Annual | Annual | ||||||||||||||||||||||
Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||
First quarter | $ | 18.3 | 3.30 | % | $ | 9.0 | 1.76 | % | $ | 13.6 | 3.00 | % | ||||||||||||
Second quarter | 21.4 | 3.80 | 9.6 | 1.79 | 14.0 | 3.00 | ||||||||||||||||||
Third quarter | 7.6 | 1.40 | 12.4 | 2.25 | 14.4 | 3.00 | ||||||||||||||||||
Fourth quarter | 13.9 | 2.80 | 15.1 | 2.73 | 14.8 | 3.00 |
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• | Membership stock–Each member must purchase and hold membership stock equal to a percentage of its total assets at the preceding December 31st. We calculate this requirement at least annually. We will notify each member of its membership stock requirement at least 15 days prior to the effective date of any adjustment that we make to the member’s membership stock balance as a result of such annual calculation. | ||
While we will recalculate each member’s membership stock requirement on at least an annual basis, we may recalculate any member’s membership stock requirement more often than annually if we deem appropriate. A member may also request a recalculation of its membership stock requirement. In each of these cases, the Bank will recalculate the membership stock requirement based upon the member’s total assets at the end of the most recent calendar quarter for which financial information is available. | |||
• | Activity-based stock–Each member is required to purchase activity-based stock equal to a percentage of its outstanding transactions and commitments and to hold that stock as long as the transactions and commitments remain outstanding. On a daily basis, we will calculate each member’s activity-based stock requirement, notify the member of any change in its activity-based stock requirement, and, if required, issue additional activity-based stock to the member. |
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Range Allowed | ||||
Percent Required | by Capital Plan | |||
Membership stock requirement: | ||||
Member’s total assets as of the preceding December 31st1 | 0.12% | 0.10% to 0.25% | ||
Activity-based stock requirement: | ||||
Outstanding principal balance of advances | 4.45% | 3.00% to 5.00% | ||
Outstanding acquired member assets2 | 4.45% | 3.00% to 5.00% | ||
Outstanding standby letters of credit | 0.15% | 0.00% to 0.175% | ||
Commitments for advances | 0.00% | 0.00% to 0.35% | ||
Commitments for acquired member assets | 0.00% | 0.00% to 0.60% |
1 | The membership stock requirement calculated using the required percentage is currently subject to a cap of $10 million and a floor of $10,000. Under the capital plan, the cap may be adjusted between $10 million and $30 million and the floor may be adjusted between $10,000 and $30,000 by the Board of Directors. | |
2 | Percent required is for acquired member assets purchased by the Bank on or after July 1, 2003. Acquired member assets purchased by the Bank before the July 1, 2003 conversion are subject to the capital requirements specified in the contracts in effect at the time the assets were purchased. |
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• | 1 percent of the par value of the shares of capital stock subject to the notice of redemption if the Bank receives the cancellation of notice of redemption within one year of the day the Bank received the notice of redemption. | ||
• | 2 percent of the par value of the shares of capital stock subject to the notice of redemption if the Bank receives the cancellation of notice of redemption within two years of the day the Bank received the notice of redemption. |
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• | 3 percent of the par value of the shares of capital stock subject to the notice of redemption if the Bank receives the cancellation of notice of redemption within three years of the day the Bank received the notice of redemption. | ||
• | 4 percent of the par value of the shares of capital stock subject to the notice of redemption if the Bank receives the cancellation of notice of redemption within four years of the day the Bank received the notice of redemption. | ||
• | 5 percent of the par value of the shares of capital stock subject to the notice of redemption if the Bank receives the cancellation of notice of redemption within five years of the day the Bank received the notice of redemption. |
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• | without the prior written approval of the Finance Board, if the Finance Board or the Board of Directors has determined that the Bank has incurred, or is likely to incur, losses that result in or are likely to result in charges against the capital of the Bank. This prohibition shall apply even if the Bank is in compliance with its capital requirements, and shall remain in effect for however long the Bank continues to incur such charges or until the Finance Board determines that such charges are not expected to continue. | ||
• | if the redemption or repurchase would cause the Bank to fail to meet any minimum regulatory capital requirement. | ||
• | if the redemption or repurchase would cause a member to fail to maintain its minimum investment in capital stock. | ||
• | if the sum of all requested capital stock redemptions that the Bank is scheduled to make on any date equals or exceeds the amount that would cause the Bank to fall below its minimum regulatory capital requirements, in which case the Bank will process redemptions in the order in which notification was received, but in no case will the Bank redeem capital stock to the point that it would fail to meet its minimum regulatory capital requirements. |
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• | we fail to certify in writing to the Finance Board that we will remain in compliance with our liquidity requirements and will remain capable of making full and timely payment of all of our current obligations. | ||
• | we project, at any time, we will fail to comply with statutory or regulatory liquidity requirements, or will be unable to timely and fully meet all of our current obligations. | ||
• | we actually fail to comply with statutory or regulatory liquidity requirements or to timely and fully meet all of our current obligations, or enter or negotiate to enter into an agreement with one or more other FHLBanks to obtain financial assistance to meet our current obligations. | ||
• | the Finance Board determines that the Bank will cease to be in compliance with statutory or regulatory liquidity requirements, or will lack the capacity to timely or fully meet all of our current obligations. |
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• | fails to comply with any requirement of the FHLBank Act, Finance Board regulations, or the capital plan. | ||
• | becomes insolvent or otherwise is subject to the appointment of a conservator, receiver, or other legal custodian under federal or state law. | ||
• | would jeopardize the safety and soundness of the Bank if it were to remain a member. |
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• | the Bank’s capital position is below its minimum regulatory capital requirements. | ||
• | the Bank’s capital position will be below its minimum regulatory capital requirements after paying the dividend. | ||
• | the principal or interest on any consolidated obligation of the FHLBank system is not paid in full when due. |
• | we fail to certify in writing to the Finance Board that we will remain in compliance with our liquidity requirements and will remain capable of making full and timely payment of all of its current obligations. | ||
• | we notify the Finance Board that we cannot provide the foregoing certification, project at any time we will fail to comply with statutory or regulatory liquidity requirements, or will be unable to timely and fully meet all of our current obligations. |
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• | we actually fail to comply with statutory or regulatory liquidity requirements or to timely and fully meet all of our current obligations, or enter or negotiate to enter into an agreement with one or more other FHLBanks to obtain financial assistance to meet our current obligations. | ||
• | the Finance Board determines that the Bank will cease to be in compliance with statutory or regulatory liquidity requirements, or will lack the capacity to timely or fully meet all of our current obligations. |
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Statements of Condition at December 31, 2005 and 2004 (restated)
Statements of Income for the Years Ended December 31, 2005, 2004 (restated), and 2003 (restated)
Statements of Changes in Capital for the Years Ended December 31, 2005, 2004 (restated), and 2003 (restated)
Statements of Cash Flows for the Years Ended December 31, 2005, 2004 (restated), and 2003 (restated)
Notes to Financial Statements
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Total | ||||||||
Total | Market | |||||||
Book Value | Value | |||||||
GE Capital Corporation | $ | 298 | $ | 298 | ||||
Citigroup Funding | 299 | 299 | ||||||
State Street Bank and Trust Co. | 300 | 300 | ||||||
Fifth Third Bank | 300 | 300 | ||||||
US Bank, N.A. | 300 | 300 | ||||||
Lehman Brothers Inc. | 305 | 305 | ||||||
Total | $ | 1,802 | $ | 1,802 | ||||
2005 | 2004 | 2003 | ||||||||||
U.S. government agency-guaranteed | $ | 9 | $ | 12 | $ | 18 | ||||||
Other bonds, notes, and debentures | — | 5 | 18 | |||||||||
Total trading securities | $ | 9 | $ | 17 | $ | 36 | ||||||
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Book Value | Yield | |||||||
U.S. government agency-guaranteed After 10 years | $ | 9 | 4.45 | % | ||||
2005 | 2004 | 2003 | ||||||||||
Government-sponsored enterprises | $ | 250 | $ | 479 | $ | 1,450 | ||||||
Other FHLBank consolidated obligations | — | 146 | 96 | |||||||||
Total available-for-sale securities | $ | 250 | $ | 625 | $ | 1,546 | ||||||
Book Value | Yield | |||||||
Government-sponsored enterprises — Within one year | $ | 250 | 3.67 | % | ||||
2005 | 2004 | 2003 | ||||||||||
Government-sponsored enterprises | $ | 4,861 | $ | 3,639 | $ | 1,223 | ||||||
U.S. government agency-guaranteed | 107 | 152 | 254 | |||||||||
States and political subdivisions | 7 | 10 | 19 | |||||||||
Other bonds, notes, and debentures | 1,003 | 923 | 659 | |||||||||
Total held-to-maturity securities | $ | 5,978 | $ | 4,724 | $ | 2,155 | ||||||
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Book Value | Yield | |||||||
Government-sponsored enterprises | ||||||||
Within one year | $ | 299 | 4.24 | % | ||||
After one but within five years | 18 | 5.42 | % | |||||
After five but within 10 years | 16 | 6.21 | % | |||||
After 10 years | 4,528 | 4.91 | % | |||||
U.S. government agency-guaranteed | ||||||||
After five but within 10 years | 1 | 4.32 | % | |||||
After 10 years | 106 | 4.65 | % | |||||
States and political subdivisions | ||||||||
After 10 years | 7 | 5.68 | % | |||||
Other bonds, notes, and debentures | ||||||||
Within one year | 747 | 4.31 | % | |||||
After one but within five years | 5 | 6.55 | % | |||||
After 10 years | 251 | 4.89 | % | |||||
Total held-to-maturity securities | $ | 5,978 | 4.80 | % | ||||
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2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Domestic | ||||||||||||||||||||
Advances | $ | 22,283 | $ | 27,175 | $ | 23,272 | $ | 23,971 | $ | 20,745 | ||||||||||
Real estate mortgages | $ | 13,018 | $ | 15,193 | $ | 16,052 | $ | 5,661 | $ | 3,742 | ||||||||||
Nonperforming real estate mortgages1 | $ | 33 | $ | 23 | $ | 10 | $ | 3 | $ | 3 | ||||||||||
�� | ||||||||||||||||||||
Real estate mortgages past due 90 days or more and still accruing interest2 | $ | 6 | $ | 3 | $ | 5 | $ | 10 | $ | 11 | ||||||||||
Nonperforming real estate mortgages | ||||||||||||||||||||
Interest contractually due during the year | $ | 1.8 | ||||||||||||||||||
Interest actually received during the year | 0.9 | |||||||||||||||||||
Shortfall | $ | 0.9 | ||||||||||||||||||
1 | Nonperforming real estate mortgages represent conventional mortgage loans that are 90 days or more past due and have been placed on nonaccrual status. | |
2 | Only government-insured loans (e.g., FHA, VA) continue to accrue after 90 days or more delinquent, because of the (1) U.S. government guarantee of the loans and (2) contractual obligation of the loan servicer. |
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2005 | ||||
Maturity | ||||
Overdrawn demand deposit accounts | $ | — | ||
Within one year | 6,042 | |||
After one but within five years | 9,516 | |||
After five years | 6,672 | |||
Total par value | 22,230 | |||
Premiums | — | |||
Hedging fair value adjustments Cumulative fair value gain | 44 | |||
Basis adjustments from terminated hedges | 9 | |||
Total advances | $ | 22,283 | ||
2005 | ||||
Par amount of advances | ||||
Fixed rate maturity | ||||
Overdrawn demand deposit accounts | $ | — | ||
Within one year | 5,499 | |||
After one year | 12,575 | |||
Variable rate maturity | ||||
Within one year | 543 | |||
After one year | 3,613 | |||
Total | $ | 22,230 | ||
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2005 | ||||
Regional Concentration1 | ||||
Midwest | 34.0 | % | ||
West | 20.2 | % | ||
Southwest | 16.7 | % | ||
Southeast | 16.7 | % | ||
Northeast | 12.4 | % | ||
Total | 100.0 | % | ||
1 | Midwest includes IA, IL, IN, MI, MN, ND, NE, OH, SD, and WI. | |
West includes AK, CA, Guam, HI, ID, MT, NV, OR, WA, and WY. | ||
Southeast includes AL, District of Columbia, FL, GA, KY, MD, MS, NC, SC, TN, VA, and WV. | ||
Southwest includes AR, AZ, CO, KS, LA, MO, NM, OK, TX, and UT. | ||
Northeast includes CT, DE, MA, ME, NH, NJ, NY, PA, Puerto Rico, RI, Virgin Islands, and VT. |
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||
Balance, beginning of year | $ | 0.76 | $ | 5.91 | $ | 3.26 | $ | 3.10 | $ | 2.04 | ||||||||||
Charge-offs | — | (0.11 | ) | (0.05 | ) | (0.02 | ) | (0.03 | ) | |||||||||||
Recoveries | — | 0.01 | — | 0.02 | — | |||||||||||||||
Net charge-offs | — | (0.10 | ) | (0.05 | ) | — | (0.03 | ) | ||||||||||||
(Reversal of) provision for credit losses | — | (5.05 | ) | 2.70 | 0.16 | 1.09 | ||||||||||||||
Balance, end of year | $ | 0.76 | $ | 0.76 | $ | 5.91 | $ | 3.26 | $ | 3.10 | ||||||||||
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Over three | Over six | |||||||||||||||
Three | months but | months but | ||||||||||||||
months | within six | within 12 | ||||||||||||||
or less | months | months | Total | |||||||||||||
Time certificates of deposit ($100,000 or more) — December 31, 2005 | $ | 9 | $ | 2 | $ | — | $ | 11 | ||||||||
2005 | 2004 | 2003 | ||||||||||
Discount notes | ||||||||||||
Outstanding at period-end | $ | 4,067 | $ | 5,008 | $ | 5,472 | ||||||
Weighted average rate at period-end | 3.57 | % | 1.93 | % | 1.03 | % | ||||||
Daily average outstanding for the period | $ | 5,268 | $ | 5,780 | $ | 6,754 | ||||||
Weighted average rate for the period | 3.04 | % | 1.36 | % | 1.15 | % | ||||||
Highest outstanding at any month-end | $ | 7,805 | $ | 8,071 | $ | 8,241 |
2005 | 2004 | 2003 | ||||||||||
Return on average assets | 0.48 | % | 0.21 | % | 0.32 | % | ||||||
Return on average capital | 9.57 | % | 4.30 | % | 6.80 | % | ||||||
Total average capital to average assets | 5.04 | % | 4.77 | % | 4.74 | % | ||||||
Dividends declared per share as a percentage of net income per share | 29.49 | % | 49.54 | % | 44.14 | % |
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Years Ended December 31, | ||||||||||||||||||||
(Dollars in millions) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||
Earnings | ||||||||||||||||||||
Income before assessments | $ | 301.4 | $ | 135.7 | $ | 184.4 | $ | 62.2 | $ | 121.0 | ||||||||||
Fixed charges | 1,584.7 | 930.1 | 852.4 | 1,016.3 | 1,589.0 | |||||||||||||||
Total earnings | $ | 1,886.1 | $ | 1,065.8 | $ | 1,036.8 | $ | 1,078.5 | $ | 1,710.0 | ||||||||||
Fixed charges | ||||||||||||||||||||
Interest expense | $ | 1,584.4 | $ | 929.8 | $ | 852.1 | $ | 1,016.2 | $ | 1,588.9 | ||||||||||
Estimated interest component of net rental expense1 | 0.3 | 0.3 | 0.3 | 0.1 | 0.1 | |||||||||||||||
Total fixed charges | $ | 1,584.7 | $ | 930.1 | $ | 852.4 | $ | 1,016.3 | $ | 1,589.0 | ||||||||||
Ratio of earnings to fixed charges | 1.19 | 1.15 | 1.22 | 1.06 | 1.08 | |||||||||||||||
1 | Represents an estimated interest factor. |
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3.1 | Organization Certificate of the Federal Home Loan Bank of Des Moines dated October 13, 1932. | |
3.2 | Bylaws of the Federal Home Loan Bank of Des Moines effective January 12, 2006. | |
4.1 | Federal Home Loan Bank of Des Moines Capital Plan dated July 8, 2002, approved Federal Housing Finance Board July 10, 2002. | |
10.1 | Federal Home Loan Bank of Des Moines Second Amended and Restated Benefit Equalization Plan effective December 11, 2003. | |
10.2 | Federal Home Loan Bank of Des Moines Directors Deferred Compensation Plan effective November 1, 2004. | |
10.3 | Federal Home Loan Bank of Des Moines Long-Term Incentive Compensation Plan effective January 1, 2005. | |
10.4 | Employment Agreement with Neil N. Fruechte dated January 12, 2006. | |
10.4.1 | First Amendment to Employment Agreement with Neil N. Fruechte dated April 6, 2006. | |
10.5 | Employment Agreement with James E. Huston effective February 10, 2006. | |
10.6 | Consulting Agreement with Dan J. Williams dated January 12, 2006. | |
10.6.1 | First Amendment to Consulting Agreement with Dan J. Williams dated April 6, 2006. | |
10.7 | Retirement, Resignation, and Release Agreement with Patrick J. Conway effective December 31, 2005. | |
10.8 | Resignation and Release Agreement with Amy E. Angle effective March 31, 2006. | |
10.9 | Resignation and Release Agreement with F. James Bishop effective March 31, 2006. | |
12.1 | Computation of Ratio of Earnings to Fixed Charges. |
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FEDERAL HOME LOAN BANK OF DES MOINES | ||||
(Registrant) | ||||
Date: | May 12, 2006 | |||
By: | /s/ Neil N. Fruechte | |||
Acting President and Chief Executive Officer |
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S-2 | |||
S-3 | |||
S-4 | |||
S-5 | |||
S-8 | |||
S-10 |
S-1
The Federal Home Loan Bank of Des Moines:
May 12, 2006
S-2
December 31, | ||||||||
2005 | 2004 | |||||||
(as restated) | ||||||||
ASSETS | ||||||||
Cash and due from banks (Note 4) | $ | 42,366 | $ | 43,026 | ||||
Interest-bearing deposits | 700,025 | 218,800 | ||||||
Securities purchased under agreements to resell (Note 5) | 305,000 | 305,000 | ||||||
Federal funds sold | 2,985,000 | 575,000 | ||||||
Investments | ||||||||
Trading securities (Note 6) | 8,693 | 16,618 | ||||||
Available-for-sale securities include $222,709 and $106,590 pledged as collateral in 2005 and 2004 that may be repledged (Note 7) | 250,235 | 625,227 | ||||||
Held-to-maturity securities include $297,314 and $414,218 pledged as collateral in 2005 and 2004 that may be repledged (estimated fair value of $5,961,810 and $4,771,183 in 2005 and 2004) (Note 8) | 5,978,199 | 4,724,061 | ||||||
Advances (Note 9) | 22,283,315 | 27,174,636 | ||||||
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans of $763 and $760 in 2005 and 2004 (Note 12) | 13,018,030 | 15,193,351 | ||||||
Accrued interest receivable | 99,732 | 97,644 | ||||||
Premises and equipment, net | 1,057 | 1,065 | ||||||
Derivative assets (Note 19) | 18,440 | 50,936 | ||||||
Other assets | 32,387 | 22,346 | ||||||
Total assets | $ | 45,722,479 | $ | 49,047,710 | ||||
LIABILITIES AND CAPITAL | ||||||||
LIABILITIES | ||||||||
Deposits (Note 13) | ||||||||
Interest-bearing | $ | 827,068 | $ | 780,138 | ||||
Noninterest bearing demand | 37,640 | 25,193 | ||||||
Total deposits | 864,708 | 805,331 | ||||||
Securities sold under agreements to repurchase (Note 14) | 500,000 | 500,000 | ||||||
Consolidated obligations, net (Note 15) | ||||||||
Discount notes | 4,066,732 | 5,008,143 | ||||||
Bonds | 37,129,784 | 39,484,650 | ||||||
Total consolidated obligations, net | 41,196,516 | 44,492,793 | ||||||
Mandatorily redeemable capital stock (Note 16) | 85,084 | 58,862 | ||||||
Accrued interest payable | 315,657 | 290,525 | ||||||
Affordable Housing Program (Note 10) | 46,654 | 29,471 | ||||||
Payable to REFCORP (Note 11) | 50,944 | 13,732 | ||||||
Derivative liabilities (Note 19) | 379,524 | 442,280 | ||||||
Other liabilities | 22,924 | 20,853 | ||||||
Total liabilities | 43,462,011 | 46,653,847 | ||||||
Commitments and contingencies (Note 21) | ||||||||
CAPITAL (Note 16) | ||||||||
Capital stock – Class B putable ($100 par value) issued and outstanding 19,320,536 and 22,316,738 shares in 2005 and 2004 | 1,932,054 | 2,231,674 | ||||||
Retained earnings | 329,241 | 162,783 | ||||||
Accumulated other comprehensive loss | ||||||||
Net unrealized loss on available-for-sale securities | (58 | ) | (172 | ) | ||||
Other (Note 17) | (769 | ) | (422 | ) | ||||
Total capital | 2,260,468 | 2,393,863 | ||||||
Total liabilities and capital | $ | 45,722,479 | $ | 49,047,710 | ||||
S-3
For the Years Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(as restated) | (as restated) | |||||||||||
INTEREST INCOME | ||||||||||||
Advances | $ | 901,248 | $ | 512,741 | $ | 477,134 | ||||||
Advance prepayment fees, net (Note 9) | 294 | 945 | 19,450 | |||||||||
Interest-bearing deposits | 12,415 | 3,935 | 5,076 | |||||||||
Securities purchased under agreements to resell | 10,030 | 4,275 | 3,225 | |||||||||
Federal funds sold | 53,357 | 25,685 | 36,088 | |||||||||
Investments | ||||||||||||
Trading securities | 481 | 1,482 | 3,237 | |||||||||
Available-for-sale securities | 17,877 | 17,477 | 13,148 | |||||||||
Held-to-maturity securities | 193,800 | 102,659 | 107,970 | |||||||||
Mortgage loans held for portfolio | 688,474 | 759,097 | 489,667 | |||||||||
Loans to other FHLBanks | — | 38 | 297 | |||||||||
Total interest income | 1,877,976 | 1,428,334 | 1,155,292 | |||||||||
INTEREST EXPENSE | ||||||||||||
Consolidated obligations | ||||||||||||
Discount notes | 160,223 | 78,392 | 77,806 | |||||||||
Bonds | 1,378,239 | 827,588 | 748,661 | |||||||||
Deposits | 24,338 | 12,449 | 15,039 | |||||||||
Borrowings from other FHLBanks | 132 | 15 | 2,176 | |||||||||
Securities sold under agreements to repurchase | 19,393 | 10,156 | 8,309 | |||||||||
Mandatorily redeemable capital stock | 2,029 | 1,133 | — | |||||||||
Other borrowings | 4 | 58 | 48 | |||||||||
Total interest expense | 1,584,358 | 929,791 | 852,039 | |||||||||
NET INTEREST INCOME | 293,618 | 498,543 | 303,253 | |||||||||
Reversal of (provision for) credit losses on mortgage loans (Note 12) | — | 5,048 | (2,704 | ) | ||||||||
NET INTEREST INCOME AFTER MORTGAGE LOAN CREDIT LOSS PROVISION | 293,618 | 503,591 | 300,549 | |||||||||
OTHER INCOME | ||||||||||||
Service fees | 2,500 | 2,286 | 2,134 | |||||||||
Net gain (loss) on trading securities (Note 6) | 14 | (841 | ) | (1,513 | ) | |||||||
Net realized gain on available-for-sale securities (Note 7) | 2,683 | 5,518 | 688 | |||||||||
Net realized (loss) gain on held-to-maturity securities (Note 8) | (7 | ) | 4,039 | — | ||||||||
Net gain (loss) on derivatives and hedging activities (Note 19) | 38,947 | (352,382 | ) | (94,675 | ) | |||||||
Other, net | 2,677 | 4,574 | 3,011 | |||||||||
Total other income | 46,814 | (336,806 | ) | (90,355 | ) | |||||||
OTHER EXPENSE (Note 24) | ||||||||||||
Operating | 36,251 | 28,818 | 23,626 | |||||||||
Finance Board | 1,733 | 1,331 | 1,155 | |||||||||
Office of Finance | 1,021 | 972 | 993 | |||||||||
Total other expense | 39,005 | 31,121 | 25,774 | |||||||||
INCOME BEFORE ASSESSMENTS | 301,427 | 135,664 | 184,420 | |||||||||
Affordable Housing Program | 24,905 | 11,197 | 15,055 | |||||||||
REFCORP | 55,304 | 24,894 | 33,873 | |||||||||
Total assessments | 80,209 | 36,091 | 48,928 | |||||||||
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE | 221,218 | 99,573 | 135,492 | |||||||||
Cumulative effect of change in accounting principle (Note 3) | 6,444 | (53 | ) | — | ||||||||
NET INCOME | $ | 227,662 | $ | 99,520 | $ | 135,492 | ||||||
Pro forma amounts assuming retroactive application of change in accounting principle for amortization and accretion of premiums, discounts and other nonrefundable fees on mortgage loans and mortgage-backed securities: | ||||||||||||
NET INCOME | $ | 221,218 | 102,939 | $ | 138,840 | |||||||
S-4
Accumulated | ||||||||||||||||||||||||||||
Capital Stock | Other | |||||||||||||||||||||||||||
Class B (putable) | Capital Stock (putable) | Retained | Comprehensive | Total | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Earnings | Income (Loss) | Capital | ||||||||||||||||||||||
BALANCE DECEMBER 31, 2004 (as restated) | 22,317 | $ | 2,231,674 | — | $ | — | $ | 162,783 | $ | (594 | ) | $ | 2,393,863 | |||||||||||||||
Proceeds from issuance of capital stock | 8,585 | 858,477 | — | — | — | — | 858,477 | |||||||||||||||||||||
Repurchase/redemption of capital stock | (11,201 | ) | (1,120,102 | ) | — | — | — | — | (1,120,102 | ) | ||||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | (380 | ) | (37,995 | ) | — | — | — | — | (37,995 | ) | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 227,662 | — | 227,662 | |||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||
Net unrealized gain on available-for-sale securities | — | — | — | — | — | 2,797 | 2,797 | |||||||||||||||||||||
Reclassification adjustment for gain included in net income relating to available-for-sale securities | — | — | — | — | — | (2,683 | ) | (2,683 | ) | |||||||||||||||||||
Other | — | — | — | — | — | (347 | ) | (347 | ) | |||||||||||||||||||
Total comprehensive income (loss) | — | — | — | — | 227,662 | (233 | ) | 227,429 | ||||||||||||||||||||
Cash dividends on capital stock (2.82% annualized) | — | — | — | — | (61,204 | ) | — | (61,204 | ) | |||||||||||||||||||
BALANCE DECEMBER 31, 2005 | 19,321 | $ | 1,932,054 | — | $ | — | $ | 329,241 | $ | (827 | ) | $ | 2,260,468 | |||||||||||||||
S-5
STATEMENT OF CHANGES IN CAPITAL
(In thousands)
(as restated)
Accumulated | ||||||||||||||||||||||||||||
Capital Stock | Other | |||||||||||||||||||||||||||
Class B (putable) | Capital Stock (putable) | Retained | Comprehensive | Total | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Earnings | Income (Loss) | Capital | ||||||||||||||||||||||
BALANCE DECEMBER 31, 2003 | 21,165 | $ | 2,116,500 | — | $ | — | $ | 109,325 | $ | (826 | ) | $ | 2,224,999 | |||||||||||||||
Proceeds from issuance of capital stock | 7,609 | 760,924 | — | — | — | — | 760,924 | |||||||||||||||||||||
Repurchase/redemption of capital stock | (5,842 | ) | (584,215 | ) | — | — | — | — | (584,215 | ) | ||||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | (615 | ) | (61,535 | ) | — | — | — | — | (61,535 | ) | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 99,520 | — | 99,520 | |||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||
Net unrealized gain on available-for-sale securities | — | — | — | — | — | 6,172 | 6,172 | |||||||||||||||||||||
Reclassification adjustment for gain included in net income relating to available-for-sale securities | — | — | — | — | — | (5,518 | ) | (5,518 | ) | |||||||||||||||||||
Other | — | — | — | — | — | (422 | ) | (422 | ) | |||||||||||||||||||
Total comprehensive income (loss) | — | — | — | — | 99,520 | 232 | 99,752 | |||||||||||||||||||||
Cash dividends on capital stock (2.13% annualized) | — | — | — | — | (46,062 | ) | — | (46,062 | ) | |||||||||||||||||||
BALANCE DECEMBER 31, 2004 | 22,317 | $ | 2,231,674 | — | $ | — | $ | 162,783 | $ | (594 | ) | $ | 2,393,863 | |||||||||||||||
S-6
STATEMENT OF CHANGES IN CAPITAL
(In thousands)
(as restated)
Accumulated | ||||||||||||||||||||||||||||
Capital Stock | Other | |||||||||||||||||||||||||||
Class B (putable) | Capital Stock (putable) | Retained | Comprehensive | Total | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Earnings | Income (Loss) | Capital | ||||||||||||||||||||||
BALANCE DECEMBER 31, 2002 | — | $ | — | 18,582 | $ | 1,858,180 | $ | 50,130 | $ | (3,370 | ) | $ | 1,904,940 | |||||||||||||||
(as previously reported) | ||||||||||||||||||||||||||||
Restatements | — | — | — | — | (19,468 | ) | (605 | ) | (20,073 | ) | ||||||||||||||||||
BALANCE DECEMBER 31, 2002 (restated) | — | — | 18,582 | 1,858,180 | 30,662 | (3,975 | ) | 1,884,867 | ||||||||||||||||||||
Proceeds from issuance of capital stock | 6,336 | 633,555 | 4,086 | 408,637 | — | — | 1,042,192 | |||||||||||||||||||||
Repurchase/redemption of capital stock | (3,644 | ) | (364,393 | ) | (4,195 | ) | (419,479 | ) | — | — | (783,872 | ) | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||
Net income | — | — | — | — | 135,492 | — | 135,492 | |||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||||
Net unrealized gain on available-for-sale securities | — | — | — | — | — | 3,837 | 3,837 | |||||||||||||||||||||
Reclassification adjustment for gain included in net income relating to available-for-sale securities | — | — | — | — | — | (688 | ) | (688 | ) | |||||||||||||||||||
Total comprehensive income | — | — | — | — | 135,492 | 3,149 | 138,641 | |||||||||||||||||||||
Conversion to Class B shares | 18,473 | 1,847,338 | (18,473 | ) | (1,847,338 | ) | — | — | — | |||||||||||||||||||
Cash dividends on capital stock (3.00% annualized) | — | — | — | — | (56,829 | ) | — | (56,829 | ) | |||||||||||||||||||
BALANCE DECEMBER 31, 2003 | 21,165 | $ | 2,116,500 | — | $ | — | $ | 109,325 | $ | (826 | ) | $ | 2,224,999 | |||||||||||||||
S-7
(In thousands)
For the Years Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(as restated) | (as restated) | |||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 227,662 | $ | 99,520 | $ | 135,492 | ||||||
Cumulative effect of change in accounting principle | (6,444 | ) | 53 | — | ||||||||
Income before cumulative effect of change in accounting principle | 221,218 | 99,573 | 135,492 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation and amortization | ||||||||||||
Net premiums, discounts, and basis adjustments on investments advances, mortgage loans, and consolidated obligations | 15,922 | 6,362 | (120,336 | ) | ||||||||
Concessions on consolidated obligation bonds | 2,108 | 18,662 | 26,531 | |||||||||
Premises and equipment | 406 | 367 | 521 | |||||||||
Other | (118 | ) | (621 | ) | (511 | ) | ||||||
(Reversal of) provision for credit losses on mortgage loans held for portfolio | — | (5,048 | ) | 2,704 | ||||||||
Net realized gain from sale of available-for-sale securities | (2,683 | ) | (5,518 | ) | (688 | ) | ||||||
Net realized loss (gain) from sale of held-to-maturity securities | 7 | (4,039 | ) | — | ||||||||
Net change in fair value adjustment on derivatives and hedging activities | (15,988 | ) | (82,733 | ) | (74,544 | ) | ||||||
Net realized loss (gain) on disposal of premises and equipment | 6 | (1,173 | ) | (219 | ) | |||||||
Net change in: | ||||||||||||
Trading securities | 7,925 | 19,430 | 29,702 | |||||||||
Accrued interest receivable | (2,088 | ) | (175 | ) | (31,789 | ) | ||||||
Accrued interest on derivatives | 43,343 | (65,413 | ) | 113,069 | ||||||||
Other assets | (4,953 | ) | (1,384 | ) | (3,033 | ) | ||||||
Accrued interest payable | 25,132 | 42,018 | (43,605 | ) | ||||||||
Affordable Housing Program (AHP) liability and discount on AHP advances | 17,150 | 3,020 | 8,765 | |||||||||
Payable to REFCORP | 37,212 | 3,954 | 10,551 | |||||||||
Other liabilities | 1,725 | 2,864 | 10,495 | |||||||||
Total adjustments | 125,106 | (69,427 | ) | (72,387 | ) | |||||||
Net cash provided by operating activities | 346,324 | 30,146 | 63,105 | |||||||||
S-8
STATEMENTS OF CASH FLOWS (continued from previous page)
(In thousands)
For the Years Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(as restated) | (as restated) | |||||||||||
INVESTING ACTIVITIES | ||||||||||||
Net change in: | ||||||||||||
Interest-bearing deposits | (481,225 | ) | 62,428 | 212,772 | ||||||||
Securities purchased under agreements to resell | — | — | (305,000 | ) | ||||||||
Federal funds sold | (2,410,000 | ) | 625,000 | 4,551,000 | ||||||||
Short-term held-to-maturity securities | 456,292 | (1,348,033 | ) | 1,172,795 | ||||||||
Available-for-sale securities: | ||||||||||||
Proceeds from sales | 612,541 | 942,877 | 50,688 | |||||||||
Purchases | (253,004 | ) | (48,701 | ) | (832,328 | ) | ||||||
Held-to-maturity securities: | ||||||||||||
Proceeds from sales | 5,169 | 109,795 | — | |||||||||
Proceeds from maturities | 952,286 | 792,355 | 2,532,090 | |||||||||
Purchases | (2,656,980 | ) | (2,114,063 | ) | (607,256 | ) | ||||||
Advances to members: | ||||||||||||
Principal collected | 107,756,385 | 74,479,076 | 49,698,793 | |||||||||
Originated | (103,157,391 | ) | (78,633,166 | ) | (49,329,717 | ) | ||||||
Mortgage loans held for portfolio: | ||||||||||||
Principal collected | 2,633,736 | 2,684,550 | 3,531,410 | |||||||||
Originated or purchased | (465,950 | ) | (1,848,553 | ) | (13,954,591 | ) | ||||||
Additions to premises and equipment | (407 | ) | (237 | ) | (514 | ) | ||||||
Proceeds from sale of premises and equipment | 3 | 2,211 | 4,486 | |||||||||
Net cash provided by (used in) investing activities | 2,991,455 | (4,294,461 | ) | (3,275,372 | ) | |||||||
FINANCING ACTIVITIES | ||||||||||||
Net change in: | ||||||||||||
Deposits | 59,377 | (198,940 | ) | (630,589 | ) | |||||||
Securities sold under agreements to repurchase | — | — | 200,000 | |||||||||
Loans from other FHLBanks | — | — | (50,000 | ) | ||||||||
Net proceeds from issuance of consolidated obligations | ||||||||||||
Discount notes | 532,070,260 | 293,728,950 | 389,215,728 | |||||||||
Bonds | 10,572,824 | 20,789,367 | 40,545,388 | |||||||||
Payments for maturing and retiring consolidated obligations | ||||||||||||
Discount notes | (533,005,775 | ) | (294,198,058 | ) | (391,483,448 | ) | ||||||
Bonds | (12,700,523 | ) | (15,999,070 | ) | (34,831,926 | ) | ||||||
Proceeds from issuance of capital stock | 858,477 | 760,924 | 1,042,192 | |||||||||
Payments for repurchase/redemption of mandatorily redeemable capital stock | (11,773 | ) | (2,673 | ) | — | |||||||
Payments for repurchase/redemption of capital stock | (1,120,102 | ) | (584,215 | ) | (783,872 | ) | ||||||
Cash dividends paid | (61,204 | ) | (46,062 | ) | (56,829 | ) | ||||||
Net cash (used in) provided by financing activities | (3,338,439 | ) | 4,250,223 | 3,166,644 | ||||||||
Net decrease in cash and due from banks | (660 | ) | (14,092 | ) | (45,623 | ) | ||||||
Cash and due from banks at beginning of the year | 43,026 | 57,118 | 102,741 | |||||||||
Cash and due from banks at end of the year | $ | 42,366 | $ | 43,026 | $ | 57,118 | ||||||
Supplemental disclosures | ||||||||||||
Cash paid during the period for | ||||||||||||
Interest | $ | 1,477,343 | $ | 929,767 | $ | 915,583 | ||||||
AHP | 8,438 | 8,105 | 6,169 | |||||||||
REFCORP | 19,703 | 20,927 | 23,322 |
S-9
S-10
S-11
S-12
S-13
(1) | Homeowner equity. | ||
(2) | Primary Mortgage Insurance for all loans with homeowner equity of less than 20 percent of the original purchase price or appraised value. | ||
(3) | First Loss Account (FLA) established by the Bank. | ||
(4) | Credit enhancements (including any supplemental mortgage insurance (SMI)) provided by participating members. The size of the participating member’s credit enhancement is calculated so that any losses in excess of the FLA are limited to those of an investor in a mortgage-backed security that is rated the equivalent of AA by a nationally recognized statistical rating organization. To cover losses equal to all or a portion of the credit enhancement amount, participating members are required to either collateralize their credit enhancement obligations or to purchase SMI from a highly rated mortgage insurer for the benefit of the Bank (except that losses generally classified as special hazard losses are not covered by SMI). | ||
(5) | Losses greater than credit enhancements provided by participating members are the responsibility of the Bank. |
S-14
S-15
S-16
S-17
(1) | a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a fair value hedge). | ||
(2) | a nonqualifying hedge of an asset, liability, or firm commitment (an economic hedge) for asset-liability management purposes. |
S-18
S-19
(1) | Submits a written notice to the Bank to redeem all or part of the member’s capital stock. | ||
(2) | Submits a written notice to the Bank of the member’s intent to withdraw from membership, which automatically commences the five-year redemption period. | ||
(3) | Terminates its membership voluntarily as a result of a merger or consolidation into a nonmember or into a member of another FHLBank, involuntarily as a result of action by the Bank’s Board of Directors, or a relocation to another FHLBank district. |
S-20
S-21
S-22
S-23
S-24
S-25
S-26
S-27
S-28
Retained earnings, December 31, 2002, as previously reported | $ | 50,130 | ||
Restatement adjustments: | ||||
Loss of hedge accounting | (31,893 | ) | ||
Change in method of hedge accounting | 1,466 | |||
Other errors related to the application of SFAS 133 | 4,240 | |||
Other errors corrected during the restatement process | (311 | ) | ||
Assessments on restatement adjustments: | ||||
AHP | 2,163 | |||
REFCORP | 4,867 | |||
Total restatement adjustments | (19,468 | ) | ||
Retained earnings, December 31, 2002, as restated | $ | 30,662 | ||
S-29
December 31, 2004 | ||||||||||||
As Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
ASSETS | ||||||||||||
Held-to-maturity securities | $ | 4,724,071 | $ | (10 | ) | $ | 4,724,061 | |||||
Advances | 27,194,429 | (19,793 | ) | 27,174,636 | ||||||||
Mortgage loans held for portfolio, net | 15,127,596 | 65,755 | 15,193,351 | |||||||||
Other assets | 22,324 | 22 | 22,346 | |||||||||
All other assets | 1,933,316 | — | 1,933,316 | |||||||||
Total assets | $ | 49,001,736 | $ | 45,974 | $ | 49,047,710 | ||||||
LIABILITIES AND CAPITAL | ||||||||||||
LIABILITIES | ||||||||||||
Deposits – Noninterest bearing demand | $ | 17,044 | $ | 8,149 | $ | 25,193 | ||||||
Consolidated obligations, net | ||||||||||||
Discount notes | 5,008,257 | (114 | ) | 5,008,143 | ||||||||
Bonds | 39,480,044 | 4,606 | 39,484,650 | |||||||||
Total consolidated obligations, net | 44,488,301 | 4,492 | 44,492,793 | |||||||||
Affordable Housing Program | 26,151 | 3,320 | 29,471 | |||||||||
Payable to REFCORP | 6,262 | 7,470 | 13,732 | |||||||||
Other liabilities | 28,624 | (7,771 | ) | 20,853 | ||||||||
All other liabilities | 2,071,805 | — | 2,071,805 | |||||||||
Total liabilities | 46,638,187 | 15,660 | 46,653,847 | |||||||||
CAPITAL | ||||||||||||
Capital stock | 2,231,674 | — | 2,231,674 | |||||||||
Retained earnings | 132,906 | 29,877 | 162,783 | |||||||||
Accumulated other comprehensive loss | ||||||||||||
Net unrealized loss on available-for-sale securities | (243 | ) | 71 | (172 | ) | |||||||
Net unrealized loss relating to hedging activities | (366 | ) | 366 | — | ||||||||
Other | (422 | ) | — | (422 | ) | |||||||
Total capital | 2,363,549 | 30,314 | 2,393,863 | |||||||||
Total liabilities and capital | $ | 49,001,736 | $ | 45,974 | $ | 49,047,710 | ||||||
S-30
For the Year Ended December 31, 2004 | For the Year Ended December 31, 2003 | |||||||||||||||||||||||
As Previously | As | As Previously | As | |||||||||||||||||||||
Reported | Adjustments | Restated | Reported | Adjustments | Restated | |||||||||||||||||||
INTEREST INCOME | ||||||||||||||||||||||||
Advances | $ | 497,620 | $ | 15,121 | $ | 512,741 | $ | 460,779 | $ | 16,355 | $ | 477,134 | ||||||||||||
Available-for-sale securities | 18,405 | (928 | ) | 17,477 | 12,896 | 252 | 13,148 | |||||||||||||||||
Held-to-maturity securities | 102,669 | (10 | ) | 102,659 | 107,948 | 22 | 107,970 | |||||||||||||||||
Mortgage loans held for portfolio | 392,934 | 366,163 | 759,097 | 346,813 | 142,854 | 489,667 | ||||||||||||||||||
All other interest income | 36,360 | — | 36,360 | 67,373 | — | 67,373 | ||||||||||||||||||
Total interest income | 1,047,988 | 380,346 | 1,428,334 | 995,809 | 159,483 | 1,155,292 | ||||||||||||||||||
INTEREST EXPENSE | ||||||||||||||||||||||||
Consolidated obligations | ||||||||||||||||||||||||
Discount notes | 78,415 | (23 | ) | 78,392 | 77,777 | 29 | 77,806 | |||||||||||||||||
Bonds | 823,336 | 4,252 | 827,588 | 739,511 | 9,150 | 748,661 | ||||||||||||||||||
All other interest expense | 23,811 | — | 23,811 | 25,572 | — | 25,572 | ||||||||||||||||||
Total interest expense | 925,562 | 4,229 | 929,791 | 842,860 | 9,179 | 852,039 | ||||||||||||||||||
NET INTEREST INCOME | 122,426 | 376,117 | 498,543 | 152,949 | 150,304 | 303,253 | ||||||||||||||||||
Reversal of (provision for) credit losses on mortgage loans | 3,908 | 1,140 | 5,048 | (2,704 | ) | — | (2,704 | ) | ||||||||||||||||
NET INTEREST INCOME AFTER MORTGAGE LOAN CREDIT LOSS PROVISION | 126,334 | 377,257 | 503,591 | 150,245 | 150,304 | 300,549 | ||||||||||||||||||
OTHER INCOME | ||||||||||||||||||||||||
Net gain (loss) on derivatives and hedging activities | 9,288 | (361,670 | ) | (352,382 | ) | 4,124 | (98,799 | ) | (94,675 | ) | ||||||||||||||
Other, net | 4,514 | 60 | 4,574 | 2,998 | 13 | 3,011 | ||||||||||||||||||
All other income | 11,002 | — | 11,002 | 1,309 | — | 1,309 | ||||||||||||||||||
Total other income | 24,804 | (361,610 | ) | (336,806 | ) | 8,431 | (98,786 | ) | (90,355 | ) | ||||||||||||||
TOTAL OTHER EXPENSE | 31,121 | — | 31,121 | 25,774 | — | 25,774 | ||||||||||||||||||
INCOME BEFORE ASSESSMENTS | 120,017 | 15,647 | 135,664 | 132,902 | 51,518 | 184,420 | ||||||||||||||||||
Affordable Housing Program | 9,914 | 1,283 | 11,197 | 10,849 | 4,206 | 15,055 | ||||||||||||||||||
REFCORP | 22,006 | 2,888 | 24,894 | 24,411 | 9,462 | 33,873 | ||||||||||||||||||
Total assessments | 31,920 | 4,171 | 36,091 | 35,260 | 13,668 | 48,928 | ||||||||||||||||||
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE | 88,097 | 11,476 | 99,573 | 97,642 | 37,850 | 135,492 | ||||||||||||||||||
Cumulative effect of change in accounting principle | (72 | ) | 19 | (53 | ) | — | — | — | ||||||||||||||||
NET INCOME | $ | 88,025 | $ | 11,495 | $ | 99,520 | $ | 97,642 | $ | 37,850 | $ | 135,492 | ||||||||||||
S-31
For the Year Ended December 31, 2004 | For the Year Ended December 31, 2003 | |||||||||||||||||||||||
As Previously | As | As Previously | As | |||||||||||||||||||||
Reported | Adjustments | Restated | Reported | Adjustments | Restated | |||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||||
Net income | $ | 88,025 | $ | 11,495 | $ | 99,520 | $ | 97,642 | $ | 37,850 | $ | 135,492 | ||||||||||||
Cumulative effect of change in accounting principle | 72 | (19 | ) | 53 | — | — | — | |||||||||||||||||
Income before cumulative effect of change in accounting principle | 88,097 | 11,476 | 99,573 | 97,642 | 37,850 | 135,492 | ||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||||||
Net premiums, discounts, and basis adjustments on investments, advances, mortgage loans, and consolidated obligations | (4,573 | ) | 10,935 | 6,362 | (132,725 | ) | 12,389 | (120,336 | ) | |||||||||||||||
Concessions on consolidated obligation bonds | 19,611 | (949 | ) | 18,662 | 31,052 | (4,521 | ) | 26,531 | ||||||||||||||||
(Reversal of) provision for credit losses on mortgage loans held for portfolio | (3,908 | ) | (1,140 | ) | (5,048 | ) | 2,704 | — | 2,704 | |||||||||||||||
Net change in fair value adjustment on derivatives and hedging activities | (57,106 | ) | (25,627 | ) | (82,733 | ) | (10,600 | ) | (63,944 | ) | (74,544 | ) | ||||||||||||
Net change in: | ||||||||||||||||||||||||
Other assets | (15,934 | ) | 14,550 | (1,384 | ) | (37,723 | ) | 34,690 | (3,033 | ) | ||||||||||||||
AHP liability and discount on AHP advances | 1,742 | 1,278 | 3,020 | 4,559 | 4,206 | 8,765 | ||||||||||||||||||
Payable to REFCORP | 1,080 | 2,874 | 3,954 | 1,088 | 9,463 | 10,551 | ||||||||||||||||||
Other liabilities | 8,535 | (5,671 | ) | 2,864 | 11,963 | (1,468 | ) | 10,495 | ||||||||||||||||
All other adjustments | (15,124 | ) | — | (15,124 | ) | 66,480 | — | 66,480 | ||||||||||||||||
Total adjustments | (65,677 | ) | (3,750 | ) | (69,427 | ) | (63,202 | ) | (9,185 | ) | (72,387 | ) | ||||||||||||
Net cash provided by operating activities | 22,420 | 7,726 | 30,146 | 34,440 | 28,665 | 63,105 | ||||||||||||||||||
S-32
For the Year Ended December 31, 2004 | For the Year Ended December 31, 2003 | |||||||||||||||||||||||
As Previously | As | As Previously | As | |||||||||||||||||||||
Reported | Adjustments | Restated | Reported | Adjustments | Restated | |||||||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||||
Held-to-maturity securities — Proceeds from maturities | 791,622 | 733 | 792,355 | 2,532,966 | (876 | ) | 2,532,090 | |||||||||||||||||
Advances to members — Originated | (78,633,166 | ) | — | (78,633,166 | ) | (49,329,660 | ) | (57 | ) | (49,329,717 | ) | |||||||||||||
Mortgage loans held for portfolio Principal collected | 2,684,606 | (56 | ) | 2,684,550 | 3,531,412 | (2 | ) | 3,531,410 | ||||||||||||||||
All other cash provided by investing Activities | 70,861,800 | — | 70,861,800 | 39,990,845 | — | 39,990,845 | ||||||||||||||||||
Net cash used in investing activities | (4,295,138 | ) | 677 | (4,294,461 | ) | (3,274,437 | ) | (935 | ) | (3,275,372 | ) | |||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||||||
Net change in deposits | (204,870 | ) | 5,930 | (198,940 | ) | (632,148 | ) | 1,559 | (630,589 | ) | ||||||||||||||
Net proceeds from the issuance of consolidated obligations | ||||||||||||||||||||||||
Discount notes | 293,730,081 | (1,131 | ) | 293,728,950 | 389,216,598 | (870 | ) | 389,215,728 | ||||||||||||||||
Bonds | 20,803,520 | (14,153 | ) | 20,789,367 | 40,578,332 | (32,944 | ) | 40,545,388 | ||||||||||||||||
Payments for maturing and retiring consolidated obligations | ||||||||||||||||||||||||
Discount notes | (294,199,009 | ) | 951 | (294,198,058 | ) | (391,484,523 | ) | 1,075 | (391,483,448 | ) | ||||||||||||||
Bonds | (15,999,070 | ) | — | (15,999,070 | ) | (34,835,376 | ) | 3,450 | (34,831,926 | ) | ||||||||||||||
All other cash used in financing activities | 127,974 | — | 127,974 | 351,491 | — | 351,491 | ||||||||||||||||||
Net cash provided by financing activities | 4,258,626 | (8,403 | ) | 4,250,223 | 3,194,374 | (27,730 | ) | 3,166,644 | ||||||||||||||||
Net decrease in cash and due from banks | (14,092 | ) | — | (14,092 | ) | (45,623 | ) | — | (45,623 | ) | ||||||||||||||
Cash and due from banks at beginning of the year | 57,118 | — | 57,118 | 102,741 | — | 102,741 | ||||||||||||||||||
Cash and due from banks at end of the year | $ | 43,026 | $ | — | $ | 43,026 | $ | 57,118 | $ | — | $ | 57,118 | ||||||||||||
S-33
Cumulative effect of a change in accounting principle | ||||
Mortgage-backed securities | $ | (626 | ) | |
Mortgage loans | 9,397 | |||
Increase to income before assessments | 8,771 | |||
AHP and REFCORP assessments | (2,327 | ) | ||
Increase in net income due to cumulative effect of change in accounting principle | $ | 6,444 | ||
2005 | 2004 | 2003 | ||||||||||
Net income as reported | $ | 227,662 | $ | 99,520 | $ | 135,492 | ||||||
Less: cumulative effect of change in accounting Principle | (6,444 | ) | — | — | ||||||||
Pro forma amounts assuming the contractual method had been applied retroactively | — | 3,419 | 3,348 | |||||||||
Pro forma net income | $ | 221,218 | $ | 102,939 | $ | 138,840 | ||||||
S-34
S-35
S-36
2005 | 2004 | |||||||
Mortgage-backed securities | ||||||||
U.S. government agency-guaranteed | $ | 8,693 | $ | 11,756 | ||||
Other | — | 4,862 | ||||||
Total | $ | 8,693 | $ | 16,618 | ||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
Government-sponsored enterprise obligations | $ | 250,540 | $ | — | $ | 305 | $ | 250,235 | ||||||||
S-37
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
Other FHLBank consolidated obligations | $ | 145,908 | $ | 897 | $ | 958 | $ | 145,847 | ||||||||
Mortgage-backed securities Government-sponsored enterprises | 463,334 | 16,046 | — | 479,380 | ||||||||||||
Total | $ | 609,242 | $ | 16,943 | $ | 958 | $ | 625,227 | ||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
Government-sponsored enterprise obligations | $ | 250,235 | $ | 305 | $ | — | $ | — | $ | 250,235 | $ | 305 | ||||||||||||
S-38
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
Other FHLBank consolidated obligations | $ | 96,195 | $ | 958 | $ | — | $ | — | $ | 96,195 | $ | 958 | ||||||||||||
2005 | 2004 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Year of Maturity | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Government-sponsored enterprise obligations | ||||||||||||||||
Due in one year or less | $ | 250,540 | $ | 250,235 | $ | — | $ | — | ||||||||
Other FHLBank consolidated obligations | ||||||||||||||||
Due after one year through five years | — | — | 48,755 | 49,652 | ||||||||||||
Due after five years through ten years | — | — | 97,153 | 96,195 | ||||||||||||
— | — | 145,908 | 145,847 | |||||||||||||
Mortgage-backed securities | ||||||||||||||||
Government-sponsored enterprises | — | — | 463,334 | 479,380 | ||||||||||||
Total | $ | 250,540 | $ | 250,235 | $ | 609,242 | $ | 625,227 | ||||||||
S-39
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
Commercial paper | $ | 746,795 | $ | — | $ | — | $ | 746,795 | ||||||||
Government-sponsored enterprise obligations | 299,310 | — | — | 299,310 | ||||||||||||
State or local housing agency obligations | 6,870 | 48 | 21 | 6,897 | ||||||||||||
Other | 8,341 | 257 | — | 8,598 | ||||||||||||
1,061,316 | 305 | 21 | 1,061,600 | |||||||||||||
Mortgage-backed securities | ||||||||||||||||
Government-sponsored enterprises | 4,562,034 | 14,757 | 31,217 | 4,545,574 | ||||||||||||
U.S. government agency- guaranteed | 107,007 | 1,295 | 424 | 107,878 | ||||||||||||
MPF shared funding | 69,370 | — | 1,913 | 67,457 | ||||||||||||
Other | 178,472 | 830 | 1 | 179,301 | ||||||||||||
4,916,883 | 16,882 | 33,555 | 4,900,210 | |||||||||||||
Total | $ | 5,978,199 | $ | 17,187 | $ | 33,576 | $ | 5,961,810 | ||||||||
S-40
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
Commercial paper | $ | 479,481 | $ | — | $ | 103 | $ | 479,378 | ||||||||
Government-sponsored enterprise obligations | 1,020,015 | 36 | 438 | 1,019,613 | ||||||||||||
State or local housing agency obligations | 9,970 | 68 | 4 | 10,034 | ||||||||||||
Other | 8,223 | 486 | — | 8,709 | ||||||||||||
1,517,689 | 590 | 545 | 1,517,734 | |||||||||||||
Mortgage-backed securities | ||||||||||||||||
Government-sponsored enterprises | 2,618,809 | 46,901 | 47 | 2,665,663 | ||||||||||||
U.S. government agency- guaranteed | 151,664 | 641 | 150 | 152,155 | ||||||||||||
MPF shared funding | 91,245 | — | 1,360 | 89,885 | ||||||||||||
Other | 344,654 | 1,210 | 118 | 345,746 | ||||||||||||
3,206,372 | 48,752 | 1,675 | 3,253,449 | |||||||||||||
Total | $ | 4,724,061 | $ | 49,342 | $ | 2,220 | $ | 4,771,183 | ||||||||
S-41
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
State or local housing agency obligations | $ | — | $ | — | $ | 3,854 | $ | 21 | $ | 3,854 | $ | 21 | ||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||
Government-sponsored enterprises | 2,464,280 | 25,742 | 192,856 | 5,475 | 2,657,136 | 31,217 | ||||||||||||||||||
U.S. government agency-guaranteed | 1,709 | 5 | 12,063 | 419 | 13,772 | 424 | ||||||||||||||||||
MPF shared funding | — | — | 67,457 | 1,913 | 67,457 | 1,913 | ||||||||||||||||||
Other | — | — | 27 | 1 | 27 | 1 | ||||||||||||||||||
2,465,989 | 25,747 | 272,403 | 7,808 | 2,738,392 | 33,555 | |||||||||||||||||||
Total | $ | 2,465,989 | $ | 25,747 | $ | 276,257 | $ | 7,829 | $ | 2,742,246 | $ | 33,576 | ||||||||||||
S-42
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
Commercial paper | $ | 479,378 | $ | 103 | $ | — | $ | — | $ | 479,378 | $ | 103 | ||||||||||||
Government-sponsored enterprise obligations | 919,624 | 438 | — | — | 919,624 | 438 | ||||||||||||||||||
State or local housing agency obligations | — | — | 4,526 | 4 | 4,526 | 4 | ||||||||||||||||||
1,399,002 | 541 | 4,526 | 4 | 1,403,528 | 545 | |||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||
Government-sponsored enterprises | 244,708 | 47 | — | — | 244,708 | 47 | ||||||||||||||||||
U.S. government agency-guaranteed | 16,044 | 23 | 18,005 | 127 | 34,049 | 150 | ||||||||||||||||||
MPF shared funding | 87,326 | 1,316 | 2,559 | 44 | 89,885 | 1,360 | ||||||||||||||||||
Other | 12,375 | 75 | 1,545 | 43 | 13,920 | 118 | ||||||||||||||||||
360,453 | 1,461 | 22,109 | 214 | 382,562 | 1,675 | |||||||||||||||||||
Total | $ | 1,759,455 | $ | 2,002 | $ | 26,635 | $ | 218 | $ | 1,786,090 | $ | 2,220 | ||||||||||||
S-43
2005 | 2004 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Year of Maturity | Cost | Fair Value | Cost | Fair Value | ||||||||||||
Due in one year or less | $ | 1,046,105 | $ | 1,046,105 | $ | 1,499,496 | $ | 1,498,990 | ||||||||
Due after one year through five years | 4,620 | 4,877 | 1,634 | 1,777 | ||||||||||||
Due after five years through ten years | — | — | 2,986 | 3,330 | ||||||||||||
Due after ten years | 10,591 | 10,618 | 13,573 | 13,637 | ||||||||||||
1,061,316 | 1,061,600 | 1,517,689 | 1,517,734 | |||||||||||||
Mortgage-backed securities | 4,916,883 | 4,900,210 | 3,206,372 | 3,253,449 | ||||||||||||
Total | $ | 5,978,199 | $ | 5,961,810 | $ | 4,724,061 | $ | 4,771,183 | ||||||||
2005 | 2004 | |||||||
Amortized cost of held-to-maturity securities other than mortgage-backed securities | ||||||||
Fixed rate | $ | 1,061,316 | $ | 902,257 | ||||
Variable rate | — | 615,432 | ||||||
1,061,316 | 1,517,689 | |||||||
Amortized cost of held-to-maturity mortgage-backed securities | ||||||||
Pass-through securities | ||||||||
Fixed rate | 704,438 | 903,319 | ||||||
Variable rate | 18,429 | 24,616 | ||||||
Collateralized mortgage obligations | ||||||||
Fixed rate | 2,440,866 | 1,467,251 | ||||||
Variable rate | 1,753,150 | 811,186 | ||||||
4,916,883 | 3,206,372 | |||||||
Total | $ | 5,978,199 | $ | 4,724,061 | ||||
S-44
S-45
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Year of Maturity | Amount | Rate % | Amount | Rate % | ||||||||||||
Overdrawn demand deposit accounts | $ | 95 | — | $ | — | — | ||||||||||
2005 | — | — | 11,009,036 | 2.49 | ||||||||||||
2006 | 6,041,823 | 4.05 | 2,209,431 | 3.44 | ||||||||||||
2007 | 2,338,819 | 3.86 | 1,507,072 | 3.60 | ||||||||||||
2008 | 3,636,656 | 4.74 | 3,188,165 | 4.63 | ||||||||||||
2009 | 1,547,071 | 4.82 | 1,417,112 | 4.47 | ||||||||||||
2010 | 1,993,210 | 5.33 | 1,742,629 | 5.12 | ||||||||||||
Thereafter | 6,671,861 | 4.56 | 5,755,084 | 3.72 | ||||||||||||
Total par value | 22,229,535 | 4.47 | 26,828,529 | 3.42 | ||||||||||||
Commitment fees | (5 | ) | (6 | ) | ||||||||||||
Discounts on AHP advances | (154 | ) | (186 | ) | ||||||||||||
Premiums on advances | 659 | 810 | ||||||||||||||
Discounts on advances | (181 | ) | (252 | ) | ||||||||||||
Hedging fair value adjustments | ||||||||||||||||
Cumulative fair value gain | 43,890 | 334,048 | ||||||||||||||
Basis adjustments from terminated hedges | 9,571 | 11,693 | ||||||||||||||
Total | $ | 22,283,315 | $ | 27,174,636 | ||||||||||||
S-46
Year of Maturity or Next Call Date | 2005 | 2004 | ||||||
Overdrawn demand deposit accounts | $ | 95 | $ | — | ||||
2005 | — | 11,033,769 | ||||||
2006 | 6,153,652 | 2,321,691 | ||||||
2007 | 2,429,934 | 1,603,705 | ||||||
2008 | 3,738,629 | 3,297,868 | ||||||
2009 | 1,594,938 | 1,467,424 | ||||||
2010 | 2,054,367 | 1,742,629 | ||||||
Thereafter | 6,257,920 | 5,361,443 | ||||||
Total par value | $ | 22,229,535 | $ | 26,828,529 | ||||
Year of Maturity or Next Put Date | 2005 | 2004 | ||||||
Overdrawn demand deposit accounts | $ | 95 | $ | — | ||||
2005 | — | 16,546,586 | ||||||
2006 | 11,371,273 | 2,373,131 | ||||||
2007 | 2,581,319 | 1,695,572 | ||||||
2008 | 1,699,056 | 1,189,765 | ||||||
2009 | 918,871 | 776,912 | ||||||
2010 | 824,760 | 271,179 | ||||||
Thereafter | 4,834,161 | 3,975,384 | ||||||
Total par value | $ | 22,229,535 | $ | 26,828,529 | ||||
S-47
(1) | The borrower may retain possession of the collateral assigned to the Bank if the borrower executes a written security agreement and agrees to hold such collateral for the benefit of the Bank. | ||
(2) | The borrower must specifically assign or place physical possession of such collateral with the Bank or a third-party custodian approved by the Bank. |
2005 | 2004 | |||||||
Par amount of advances | ||||||||
Fixed rate | $ | 18,073,684 | $ | 18,206,711 | ||||
Variable rate | 4,155,851 | 8,621,818 | ||||||
Total | $ | 22,229,535 | $ | 26,828,529 | ||||
S-48
S-49
2005 | 2004 | 2003 | ||||||||||
Balance, beginning of year | $ | 29,471 | $ | 26,385 | $ | 17,499 | ||||||
Assessments | 25,521 | 11,191 | 15,055 | |||||||||
Additional Contribution | 100 | — | — | |||||||||
Disbursements | (8,438 | ) | (8,105 | ) | (6,169 | ) | ||||||
Balance, end of year | $ | 46,654 | $ | 29,471 | $ | 26,385 | ||||||
S-50
Interest Rate | ||||||||||||
Used to | Present | |||||||||||
Amount of | Discount the | Value of the | ||||||||||
Benchmark | Future | Benchmark | ||||||||||
Payment | Benchmark | Payment | ||||||||||
Payment Due Date | Defeased | Payment | Defeased | |||||||||
April 15, 2018 | $ | 14,406 | 4.50 | % | $ | 8,326 | ||||||
January 15, 2018 | 75,000 | 4.52 | % | 43,742 | ||||||||
October 15, 2017 | 44,698 | 4.52 | % | 26,370 | ||||||||
Total | $ | 134,104 | $ | 78,438 | ||||||||
S-51
2005 | 2004 | |||||||
Real Estate: | ||||||||
Fixed medium-term single family mortgages | $ | 3,354,060 | $ | 3,873,362 | ||||
Fixed long-term single family mortgages | 9,644,030 | 11,294,437 | ||||||
Total par value | 12,998,090 | 15,167,799 | ||||||
Premiums | 133,496 | 146,499 | ||||||
Discounts | (124,417 | ) | (133,788 | ) | ||||
Basis adjustments from mortgage loan commitments | 11,624 | 13,601 | ||||||
Allowance for credit losses | (763 | ) | (760 | ) | ||||
Total mortgage loans held for portfolio | $ | 13,018,030 | $ | 15,193,351 | ||||
S-52
2005 | 2004 | 2003 | ||||||||||
Balance, beginning of year | $ | 760 | $ | 5,906 | $ | 3,255 | ||||||
Charge-offs | — | (111 | ) | (53 | ) | |||||||
Recoveries | 3 | 13 | — | |||||||||
Net recoveries (charge-offs) | 3 | (98 | ) | (53 | ) | |||||||
(Reversal of) provision for credit losses | — | (5,048 | ) | 2,704 | ||||||||
Balance, end of year | $ | 763 | $ | 760 | $ | 5,906 | ||||||
S-53
2005 | 2004 | |||||||
Interest bearing: | ||||||||
Demand and overnight | $ | 816,382 | $ | 705,998 | ||||
Term | 10,686 | 74,140 | ||||||
Non-interest bearing: | ||||||||
Demand | 37,640 | 25,193 | ||||||
Total deposits | $ | 864,708 | $ | 805,331 | ||||
S-54
S-55
S-56
S-57
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Year of Maturity | Amount | Rate % | Amount | Rate % | ||||||||||||
2005 | $ | — | — | $ | 11,444,805 | 2.23 | ||||||||||
2006 | 9,614,600 | 2.68 | 9,507,600 | 2.66 | ||||||||||||
2007 | 5,961,100 | 3.35 | 5,420,200 | 3.26 | ||||||||||||
2008 | 4,905,000 | 3.92 | 3,090,400 | 3.92 | ||||||||||||
2009 | 3,222,600 | 4.26 | 2,947,100 | 4.31 | ||||||||||||
2010 | 2,253,700 | 4.80 | 2,095,600 | 5.34 | ||||||||||||
Thereafter | 8,317,300 | 4.99 | 5,263,200 | 5.10 | ||||||||||||
Index amortizing notes | 3,378,682 | 5.13 | — | — | ||||||||||||
Total par value | 37,652,982 | 3.94 | 39,768,905 | 3.30 | ||||||||||||
Premiums | 31,429 | 40,164 | ||||||||||||||
Discounts | (22,382 | ) | (16,891 | ) | ||||||||||||
Hedging fair value adjustments Cumulative fair value gain | (350,081 | ) | (218,970 | ) | ||||||||||||
Basis adjustments from terminated hedges | (182,164 | ) | (88,558 | ) | ||||||||||||
Total | $ | 37,129,784 | $ | 39,484,650 | ||||||||||||
2005 | 2004 | |||||||
Par amount of consolidated bonds | ||||||||
Noncallable or nonputable | $ | 23,380,382 | $ | 22,201,905 | ||||
Callable | 14,272,600 | 17,567,000 | ||||||
Total par value | $ | 37,652,982 | $ | 39,768,905 | ||||
S-58
Year of Maturity or Next Call Date | 2005 | 2004 | ||||||
2005 | $ | — | $ | 25,046,805 | ||||
2006 | 20,967,200 | 6,872,600 | ||||||
2007 | 4,833,300 | 3,337,400 | ||||||
2008 | 2,396,000 | 1,558,700 | ||||||
2009 | 1,202,600 | 902,100 | ||||||
2010 | 906,700 | 787,700 | ||||||
Thereafter | 3,968,500 | 1,263,600 | ||||||
Index amortizing notes | 3,378,682 | — | ||||||
Total par value | $ | 37,652,982 | $ | 39,768,905 | ||||
2005 | 2004 | |||||||
Par amount of consolidated bonds: | ||||||||
Fixed rate | $ | 36,748,682 | $ | 35,556,005 | ||||
Simple variable rate | 90,000 | 3,273,000 | ||||||
Variable rate with cap | 100,000 | 150,000 | ||||||
Step-up | 437,500 | 432,500 | ||||||
Range bonds | 276,800 | 357,400 | ||||||
Total par value | $ | 37,652,982 | $ | 39,768,905 | ||||
S-59
2005 | 2004 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Amount | Rate % | Amount | Rate % | |||||||||||||
Par value | $ | 4,073,594 | 3.57 | $ | 5,026,831 | 1.93 | ||||||||||
Discounts | (6,862 | ) | (17,796 | ) | ||||||||||||
Hedging cumulative fair value gain | — | (892 | ) | |||||||||||||
Total | $ | 4,066,732 | $ | 5,008,143 | ||||||||||||
S-60
December 31, 2005 | December 31, 2004 | |||||||||||||||
Required | Actual | Required | Actual | |||||||||||||
Regulatory capital requirements: | ||||||||||||||||
Risk based capital | $ | 520,327 | $ | 2,346,379 | $ | 472,935 | $ | 2,453,319 | ||||||||
Total capital-to-asset ratio | 4.00 | % | 5.13 | % | 4.00 | % | 5.00 | % | ||||||||
Total regulatory capital | $ | 1,828,899 | $ | 2,346,379 | $ | 1,961,908 | $ | 2,453,319 | ||||||||
Leverage ratio | 5.00 | % | 7.70 | % | 5.00 | % | 7.50 | % | ||||||||
Leverage capital | $ | 2,286,124 | $ | 3,519,566 | $ | 2,452,386 | $ | 3,679,978 |
(1) | A specified percentage of its outstanding advances. As of December 31, 2005 the percentage was 4.45 percent. | ||
(2) | A specified percentage of its acquired member assets; however, acquired member assets purchased by the Bank before the July 1, 2003, conversion date are subject to the capital requirements specified in the contracts in effect at the time the assets were purchased in lieu of the initial activity-based stock requirement. As of December 31, 2005, the percentage was 4.45 percent. | ||
(3) | A specified percentage of its standby letters of credit. As of December 31, 2005, the percentage was 0.15 percent. | ||
(4) | A specified percentage of its advance commitments. As of December 31, 2005, the percentage was 0.00 percent. | ||
(5) | A specified percentage of its acquired member assets commitments. As of December 31, 2005, the percentage was 0.00 percent. |
S-61
S-62
S-63
S-64
2005 | 2004 | |||||||||||||||
Number of | Number of | |||||||||||||||
Members | Amount | Members | Amount | |||||||||||||
Voluntary termination of membership as a result of a merger or consolidation into a nonmember or into a member of another FHLBank | 23 | $ | 63,701 | 21 | $ | 58,676 | ||||||||||
Member withdrawal | 1 | 21,125 | — | — | ||||||||||||
Member requests for partial redemptions of excess stock | 5 | 258 | 3 | 186 | ||||||||||||
Total | 29 | $ | 85,084 | 24 | $ | 58,862 | ||||||||||
S-65
Year of Redemption or Repurchase | 2005 | 2004 | ||||||
2005 | $ | — | $ | 6,101 | ||||
2006 | 12,399 | 521 | ||||||
2007 | 5,814 | 484 | ||||||
2008 | 25,769 | 25,961 | ||||||
2009 | 17,633 | 17,621 | ||||||
2010 | 19,614 | 6,397 | ||||||
Thereafter | 3,855 | 1,777 | ||||||
Total | $ | 85,084 | $ | 58,862 | ||||
2005 | 2004 | |||||||
Balance, beginning of year | $ | 58,862 | $ | — | ||||
Capital stock subject to mandatory redemption reclassified from equity on adoption of SFAS 150 | — | 47,196 | ||||||
Capital stock subject to mandatory redemption reclassified from equity | 37,995 | 27,805 | ||||||
Capital stock previously subject to mandatory redemption reclassified to equity | — | (13,466 | ) | |||||
Redemption of mandatorily redeemable capital stock | (11,773 | ) | (2,673 | ) | ||||
Balance, end of year | $ | 85,084 | $ | 58,862 | ||||
S-66
S-67
2005 | 2004 | |||||||
Change in benefit obligation | ||||||||
Projected benefit obligation at beginning of year | $ | 4,139 | $ | 3,701 | ||||
Service cost | 219 | 216 | ||||||
Interest cost | 245 | 222 | ||||||
Actuarial gain | (67 | ) | — | |||||
Change due to decrease in discount rate | 352 | — | ||||||
Projected benefit obligation at end of year | $ | 4,888 | $ | 4,139 | ||||
S-68
2005 | 2004 | |||||||
Accumulated benefit obligation at end of year | $ | 3,719 | $ | 2,777 | ||||
Effect of future salary increases | 1,169 | 1,362 | ||||||
Projected benefit obligation at end of year | 4,888 | 4,139 | ||||||
Unrecognized net actuarial loss | (1,938 | ) | (1,784 | ) | ||||
Unrecognized prior service cost | (349 | ) | (422 | ) | ||||
Net recorded liability | $ | 2,601 | $ | 1,933 | ||||
2005 | 2004 | |||||||
Accrued benefit liability | $ | 3,719 | $ | 2,777 | ||||
Intangible asset | (349 | ) | (422 | ) | ||||
Accumulated other comprehensive loss | (769 | ) | (422 | ) | ||||
Net recorded liability | $ | 2,601 | $ | 1,933 | ||||
2005 | 2004 | 2003 | ||||||||||
Service cost | $ | 219 | $ | 216 | $ | 193 | ||||||
Interest cost | 245 | 222 | 200 | |||||||||
Amortization of unrecognized prior service cost | 73 | 74 | 51 | |||||||||
Amortization of unrecognized net loss | 131 | 141 | 207 | |||||||||
Net periodic benefit cost | $ | 668 | $ | 653 | $ | 651 | ||||||
S-69
2005 | 2004 | 2003 | ||||||||||
Discount rate – benefit obligations | 5.5 | % | 6.0 | % | 6.0 | % | ||||||
Discount rate – net periodic benefit cost | 6.0 | % | 6.0 | % | 6.0 | % | ||||||
Salary increases | 5.5 | % | 5.5 | % | 5.5 | % | ||||||
Amortization period (years) | 10 | 10 | 10 |
Year | Amount | |||
2006 | $ | 271 | ||
2007 | 217 | |||
2008 | 220 | |||
2009 | 228 | |||
2010 | 234 | |||
2011 through 2015 | 1,277 |
S-70
Member | Mortgage | |||||||||||
Finance | Finance | Total | ||||||||||
2005 | ||||||||||||
Adjusted net interest income | $ | 111,209 | $ | 46,887 | $ | 158,096 | ||||||
Provision for credit losses on mortgage loans | — | — | — | |||||||||
Adjusted net interest income after mortgage loan credit loss provision | $ | 111,209 | $ | 46,887 | $ | 158,096 | ||||||
Average assets for the year | $ | 29,498,835 | $ | 17,719,076 | $ | 47,217,911 | ||||||
Total assets at year end | $ | 27,794,045 | $ | 17,928,434 | $ | 45,722,479 | ||||||
2004 | ||||||||||||
Adjusted net interest income | $ | 72,119 | $ | 38,096 | $ | 110,215 | ||||||
Reversal of credit losses on mortgage loans | — | 5,048 | 5,048 | |||||||||
Adjusted net interest income after mortgage loan credit loss provision | $ | 72,119 | $ | 43,144 | $ | 115,263 | ||||||
Average assets for the year | $ | 29,940,272 | $ | 18,483,211 | $ | 48,423,483 | ||||||
Total assets at year end | $ | 30,172,389 | $ | 18,875,321 | $ | 49,047,710 | ||||||
2003 | ||||||||||||
Adjusted net interest income | $ | 103,860 | $ | 43,339 | $ | 147,199 | ||||||
Provision for credit losses on mortgage loans | — | (2,704 | ) | (2,704 | ) | |||||||
Adjusted net interest income after mortgage loan credit loss provision | $ | 103,860 | $ | 40,635 | $ | 144,495 | ||||||
Average assets for the year | $ | 28,697,414 | $ | 13,373,365 | $ | 42,070,779 | ||||||
Total assets at year end | $ | 26,552,618 | $ | 18,520,307 | $ | 45,072,925 |
S-71
2005 | 2004 | 2003 | ||||||||||
Adjusted net interest income after mortgage loan credit loss provision | $ | 158,096 | $ | 115,263 | $ | 144,495 | ||||||
Net interest expense on economic hedges | 135,522 | 388,328 | 156,054 | |||||||||
Net interest income after mortgage loan credit loss provision | 293,618 | 503,591 | 300,549 | |||||||||
Other income | 46,814 | (336,806 | ) | (90,355 | ) | |||||||
Other expenses | 39,005 | 31,121 | 25,774 | |||||||||
Income before assessments | $ | 301,427 | $ | 135,664 | $ | 184,420 | ||||||
S-72
2005 | 2004 | 2003 | ||||||||||
Net gains (losses) related to fair value hedge ineffectiveness | $ | 5,949 | $ | 3,221 | $ | (9,105 | ) | |||||
Net gains (losses) related to economic hedges and embedded derivatives | 32,998 | (355,603 | ) | (85,570 | ) | |||||||
Net gain (loss) on derivatives and hedging activities | $ | 38,947 | $ | (352,382 | ) | $ | (94,675 | ) | ||||
S-73
2005 | 2004 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
Interest rate swaps | ||||||||||||||||
Fair value | $ | 30,027,232 | $ | (438,604 | ) | $ | 39,563,001 | $ | (619,421 | ) | ||||||
Economic | 930,935 | (6,356 | ) | 14,319,580 | 100,769 | |||||||||||
Interest rate caps | ||||||||||||||||
Economic | 100,000 | 1 | 625,000 | 16 | ||||||||||||
Forward settlement agreements | ||||||||||||||||
Economic | 36,500 | (154 | ) | — | — | |||||||||||
Mortgage delivery commitments | ||||||||||||||||
Economic | 36,077 | 89 | 23,304 | 9 | ||||||||||||
Total notional and fair value | $ | 31,130,744 | $ | (445,024 | ) | $ | 54,530,885 | $ | (518,627 | ) | ||||||
Total derivatives, excluding accrued interest | (445,024 | ) | (518,627 | ) | ||||||||||||
Accrued interest | 83,940 | 127,283 | ||||||||||||||
Net derivative balance | $ | (361,084 | ) | $ | (391,344 | ) | ||||||||||
Net derivative assets | 18,440 | 50,936 | ||||||||||||||
Net derivative liabilities | (379,524 | ) | (442,280 | ) | ||||||||||||
Net derivative balance | $ | (361,084 | ) | $ | (391,344 | ) | ||||||||||
S-74
(1) | Management determines the derivative is no longer effective in offsetting changes in the fair value of a hedged item (including hedged items such as firm commitments or forecasted transactions). | |
(2) | The derivative and/or the hedged item expires or is sold, terminated, or exercised. | |
(3) | A hedged firm commitment no longer meets the definition of a firm commitment. | |
(4) | Management determines that the hedge designation is no longer appropriate. |
S-75
S-76
S-77
S-78
S-79
Net | ||||||||||||
Carrying | Unrealized | Estimated | ||||||||||
Financial Instruments | Value | Gains (Losses) | Fair Value | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 42,366 | $ | — | $ | 42,366 | ||||||
Interest-bearing deposits | 700,025 | — | 700,025 | |||||||||
Securities purchased under agreements to resell | 305,000 | — | 305,000 | |||||||||
Federal funds sold | 2,985,000 | — | 2,985,000 | |||||||||
Trading securities | 8,693 | — | 8,693 | |||||||||
Available-for-sale securities | 250,235 | — | 250,235 | |||||||||
Held-to-maturity securities | 5,978,199 | (16,389 | ) | 5,961,810 | ||||||||
Advances | 22,283,315 | (16,473 | ) | 22,266,842 | ||||||||
Mortgage loans held for portfolio, net | 13,018,030 | (249,256 | ) | 12,768,774 | ||||||||
Accrued interest receivable | 99,732 | — | 99,732 | |||||||||
Derivative assets | 18,440 | — | 18,440 | |||||||||
Liabilities | ||||||||||||
Deposits | (864,708 | ) | 3 | (864,705 | ) | |||||||
Securities sold under agreements to repurchase | (500,000 | ) | (3,829 | ) | (503,829 | ) | ||||||
Consolidated obligations | ||||||||||||
Discount notes | (4,066,732 | ) | 1,349 | (4,065,383 | ) | |||||||
Bonds | (37,129,784 | ) | (29,542 | ) | (37,159,326 | ) | ||||||
Consolidated obligations, net | (41,196,516 | ) | (28,193 | ) | (41,224,709 | ) | ||||||
Mandatorily redeemable capital stock | (85,084 | ) | — | (85,084 | ) | |||||||
Accrued interest payable | (315,657 | ) | — | (315,657 | ) | |||||||
Derivative liabilities | (379,524 | ) | — | (379,524 | ) | |||||||
Other | ||||||||||||
Commitments to extend credit for mortgage loans | — | (1 | ) | (1 | ) | |||||||
Standby letters of credit | (545 | ) | — | (545 | ) |
S-80
Net | ||||||||||||
Carrying | Unrealized | Estimated | ||||||||||
Financial Instruments | Value | Gains (Losses) | Fair Value | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 43,026 | $ | — | $ | 43,026 | ||||||
Interest-bearing deposits | 218,800 | — | 218,800 | |||||||||
Securities purchased under agreements to resell | 305,000 | — | 305,000 | |||||||||
Federal funds sold | 575,000 | — | 575,000 | |||||||||
Trading securities | 16,618 | — | 16,618 | |||||||||
Available-for-sale securities | 625,227 | — | 625,227 | |||||||||
Held-to-maturity securities | 4,724,061 | 47,122 | 4,771,183 | |||||||||
Advances | 27,174,636 | 88,014 | 27,262,650 | |||||||||
Mortgage loans held for portfolio, net | 15,193,351 | 81,587 | 15,274,938 | |||||||||
Accrued interest receivable | 97,644 | — | 97,644 | |||||||||
Derivative assets | 50,936 | — | 50,936 | |||||||||
Liabilities | ||||||||||||
Deposits | (805,331 | ) | — | (805,331 | ) | |||||||
Securities sold under agreements to repurchase | (500,000 | ) | (3,661 | ) | (503,661 | ) | ||||||
Consolidated obligations | ||||||||||||
Discount notes | (5,008,143 | ) | 2,540 | (5,005,603 | ) | |||||||
Bonds | (39,484,650 | ) | (254,310 | ) | (39,738,960 | ) | ||||||
Consolidated obligations, net | (44,492,793 | ) | (251,770 | ) | (44,744,563 | ) | ||||||
Mandatorily redeemable capital stock | (58,862 | ) | — | (58,862 | ) | |||||||
Accrued interest payable | (290,525 | ) | — | (290,525 | ) | |||||||
Derivative liabilities | (442,280 | ) | — | (442,280 | ) | |||||||
Other | ||||||||||||
Commitments to extend credit for mortgage loans | — | 3 | 3 | |||||||||
Standby letters of credit | (460 | ) | — | (460 | ) |
S-81
S-82
Year | Amount | |||
2006 | $ | 1,136 | ||
2007 | 1,005 | |||
2008 | 838 | |||
2009 | 834 | |||
2010 | 834 | |||
Thereafter | 13,962 | |||
Total | $ | 18,609 | ||
S-83
S-84
2005 | 2004 | |||||||
Assets: | ||||||||
Interest-bearing deposits | $ | 2,600 | $ | 119,900 | ||||
Federal funds sold | 510,000 | 180,000 | ||||||
Investments | 299,214 | — | ||||||
Advances | 22,283,315 | 27,174,636 | ||||||
Accrued interest receivable | 14,744 | 13,580 | ||||||
Derivative assets | 3,343 | — | ||||||
Other assets | 102 | 142 | ||||||
Total | $ | 23,113,318 | $ | 27,488,258 | ||||
Liabilities: | ||||||||
Deposits | $ | 849,103 | $ | 733,257 | ||||
Mandatorily redeemable capital stock | 85,084 | 58,862 | ||||||
Accrued interest payable | 199 | 44 | ||||||
Derivative liabilities | 27,042 | 101,882 | ||||||
Other liabilities | 102 | 142 | ||||||
Total | $ | 961,530 | $ | 894,187 | ||||
Notional amount of derivatives | $ | 2,502,463 | $ | 2,388,241 | ||||
Standby letters of credit | 1,144,877 | 1,102,460 |
S-85
Shares at | Percent of | |||||||||||||||
December | Total Capital | |||||||||||||||
Name | City | State | 31, 2005 | Stock | ||||||||||||
Superior | Minneapolis | MN | 5,252 | 26.0 | % | |||||||||||
Wells Fargo Bank, N.A. | Sioux Falls | SD | 189 | 1.0 | ||||||||||||
5,441 | 27.0 | % | ||||||||||||||
Shares at | Percent of | |||||||||||||||
December | Total Capital | |||||||||||||||
Name | City | State | 31, 2004 | Stock | ||||||||||||
Superior | Minneapolis | MN | 6,278 | 27.4 | % | |||||||||||
Wells Fargo Bank, N.A. | Sioux Falls | SD | 2,326 | 10.2 | ||||||||||||
8,604 | 37.6 | % | ||||||||||||||
S-86
Percent of | ||||||||
Total | ||||||||
Par Value | Par Value | |||||||
Balance, December 31, 2004 | $ | 5,500,000 | 20.5 | % | ||||
Advances made | 4,500,000 | |||||||
Principal collected | (9,300,000 | ) | ||||||
Balance, December 31, 2005 | $ | 700,000 | 3.1 | % | ||||
S-87
S-88
S-89
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Other FHLBank | Cost | Gains | Losses | Fair Value | ||||||||||||
San Francisco | $ | 97,153 | $ | — | $ | 958 | $ | 96,195 | ||||||||
Indianapolis | 48,755 | 897 | — | 49,652 | ||||||||||||
Total | $ | 145,908 | $ | 897 | $ | 958 | $ | 145,847 | ||||||||
S-90
2005 | 2004 | 2003 | ||||||||||
Des Moines purchases | $ | 466,137 | $ | 1,848,633 | $ | 13,954,370 | ||||||
Chicago participations | 4,607 | 72,239 | 3,596,370 | |||||||||
Total | $ | 470,744 | $ | 1,920,872 | $ | 17,550,740 | ||||||
Total Chicago participations as a percent of the total | 1.0 | % | 3.8 | % | 20.5 | % | ||||||
S-91
Principal | ||||||||||||||||
Beginning | Payment | Ending | ||||||||||||||
Other FHLBank | Balance | Advance | Received | Balance | ||||||||||||
2004 | ||||||||||||||||
New York | $ | — | $ | (195,000 | ) | $ | 195,000 | $ | — | |||||||
Pittsburgh | — | (605,000 | ) | 605,000 | — | |||||||||||
Topeka | — | (80,000 | ) | 80,000 | — | |||||||||||
Total | $ | — | $ | (880,000 | ) | $ | 880,000 | $ | — | |||||||
2003 | ||||||||||||||||
Boston | $ | — | $ | (305,000 | ) | $ | 305,000 | $ | — | |||||||
Cincinnati | — | (70,000 | ) | 70,000 | — | |||||||||||
New York | — | (130,000 | ) | 130,000 | — | |||||||||||
Pittsburgh | — | (7,043,000 | ) | 7,043,000 | — | |||||||||||
Total | $ | — | $ | (7,548,000 | ) | $ | 7,548,000 | $ | — | |||||||
S-92
Beginning | Principal | Ending | ||||||||||||||
Other FHLBank | Balance | Borrowings | Payment | Balance | ||||||||||||
2005 | ||||||||||||||||
Chicago | $ | — | $ | 25,000 | $ | (25,000 | ) | $ | — | |||||||
Cincinnati | — | 593,000 | (593,000 | ) | — | |||||||||||
Indianapolis | — | 15,000 | (15,000 | ) | — | |||||||||||
San Francisco | — | 535,000 | (535,000 | ) | — | |||||||||||
Total | $ | — | $ | 1,168,000 | $ | (1,168,000 | ) | $ | — | |||||||
2004 | ||||||||||||||||
Atlanta | $ | — | $ | 45,000 | $ | (45,000 | ) | $ | — | |||||||
Cincinnati | — | 205,000 | (205,000 | ) | — | |||||||||||
San Francisco | — | 60,000 | (60,000 | ) | — | |||||||||||
Total | $ | — | $ | 310,000 | $ | (310,000 | ) | $ | — | |||||||
2003 | ||||||||||||||||
Atlanta | $ | — | $ | 100,000 | $ | (100,000 | ) | $ | — | |||||||
New York | 50,000 | — | (50,000 | ) | — | |||||||||||
Seattle | — | 35,000 | (35,000 | ) | — | |||||||||||
Topeka | — | 125,000 | (125,000 | ) | — | |||||||||||
Total | $ | 50,000 | $ | 260,000 | $ | (310,000 | ) | $ | — | |||||||
S-93
2005 | 2004 | 2003 | ||||||||||
Salaries and employee benefits | $ | 20,259 | $ | 17,310 | $ | 14,699 | ||||||
Occupancy cost | 726 | 763 | 886 | |||||||||
Other operating expenses | 15,266 | 10,745 | 8,041 | |||||||||
Total operating expenses | 36,251 | 28,818 | 23,626 | |||||||||
Finance Board | 1,733 | 1,331 | 1,155 | |||||||||
Office of Finance | 1,021 | 972 | 993 | |||||||||
Total other expense | $ | 39,005 | $ | 31,121 | $ | 25,774 | ||||||
S-94