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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Federally chartered corporation | 31-6000228 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1000 Atrium Two, P.O. Box 598, | ||
Cincinnati, Ohio | 45201-0598 | |
(Address of principal executive offices) | (Zip Code) |
(513) 852-7500
Class B Stock, par value $100 per share
(Title of class)
Large accelerated filero | Accelerated filero | Non-accelerated filerþ | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
PART I | ||||||||
Item 1. | 3 | |||||||
Item 1A. | 19 | |||||||
Item 1B. | 23 | |||||||
Item 2. | 23 | |||||||
Item 3. | 23 | |||||||
Item 4. | [Reserved] | |||||||
PART II | ||||||||
Item 5. | 24 | |||||||
Item 6. | 25 | |||||||
Item 7. | 26 | |||||||
Item 7A. | 93 | |||||||
Item 8. | ||||||||
94 | ||||||||
100 | ||||||||
151 | ||||||||
Item 9. | 151 | |||||||
Item 9A. | 152 | |||||||
Item 9B. | 153 | |||||||
PART III | ||||||||
Item 10. | 155 | |||||||
Item 11. | 160 | |||||||
Item 12. | 177 | |||||||
Item 13. | 177 | |||||||
Item 14. | 179 | |||||||
PART IV | ||||||||
Item 15. | 180 | |||||||
Signatures | 181 | |||||||
EX-3.2 | ||||||||
EX-4 | ||||||||
EX-10.7 | ||||||||
EX-10.8 | ||||||||
EX-12 | ||||||||
EX-24 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
ex-99.1 | ||||||||
EX-99.2 |
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§ | the effects of economic, financial, credit, market, and member conditions on our financial condition and results of operations, including changes in economic growth, general liquidity conditions, inflation and deflation, interest rates, interest rate spreads, interest rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, and members’ mergers and consolidations, deposit flows, liquidity needs, and loan demand; |
§ | political events, including legislative, regulatory, federal government, judicial or other developments that could affect us, our members, our counterparties, other FHLBanks and other government-sponsored enterprises, and/or investors in the Federal Home Loan Bank System’s (FHLBank System) debt securities, which are called Consolidated Obligations or Obligations; |
§ | competitive forces, including those related to other sources of funding available to members, to purchases of mortgage loans, and to our issuance of Consolidated Obligations; |
§ | the financial results and actions of other FHLBanks that could affect our ability, in relation to the System’s joint and several liability for Consolidated Obligations, to access the capital markets on favorable terms or preserve our profitability, or could alter the regulations and legislation to which we are subject; |
§ | changes in investor demand for Consolidated Obligations; |
§ | the volatility of market prices, interest rates, credit quality, and other indices that could affect the value of investments and collateral we hold as security for member obligations and/or for counterparty obligations; |
§ | the ability to attract and retain skilled individuals; |
§ | the ability to develop and support technology and information systems that effectively manage the risks we face; |
§ | the ability to successfully manage new products and services; and |
§ | the risk of loss arising from litigation filed against us or one or more other FHLBanks. |
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§ | operate safely and soundly, remain able to raise funds in the capital markets, and optimize our counterparty and deposit ratings; |
§ | expand business activity with members; |
§ | earn and pay a stable long-term competitive return on members’ capital stock; |
§ | maximize the effectiveness of contributions to Housing and Community Investment programs; and |
§ | maintain effective corporate governance processes. |
§ | the competitive prices, terms, and characteristics of our products; and |
§ | a competitive dividend return on their capital investment. |
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§ | the FHLBank System’s status as a GSE; |
§ | the joint and several liability for Obligations; |
§ | excellent overall asset quality; |
§ | strong liquidity; |
§ | conservative use of derivatives; |
§ | adequate capitalization relative to our risk profile; and |
§ | a permanent capital structure. |
§ | interest paid on Consolidated Obligations and deposits to fund assets; |
§ | the requirement to pay 20 percent of annual net earnings to the Resolution Funding Corporation (REFCORP) fund; |
§ | costs of providing below-market-cost Advances and direct grants and subsidies under the Affordable Housing Program; and |
§ | non-interest expenses (i.e., other expenses on the Statements of Income). |
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§ | the interest rate spread, being the difference between the interest we earn on assets and the interest we pay on liabilities; |
§ | funding a portion of interest-earning assets with capital on which we do not pay interest; and |
§ | leverage of capital with interest-earning assets. |
§ | carries out its housing and community development finance mission; |
§ | remains adequately capitalized; |
§ | operates in a safe and sound manner; and |
§ | complies with Finance Agency Regulations. |
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§ | size: from $1 to a maximum amount limited by a member’s collateral requirements and borrowing capacity, by our capital leverage requirements, and by our available liquidity; |
§ | final maturity: from overnight to 30 years; |
§ | interest rate: fixed-rate or adjustable-rate coupons; |
§ | coupon payment frequency; |
§ | interest rate index on adjustable-rate coupons; |
§ | rate reset for adjustable-rate Advances: monthly, quarterly, or other; |
§ | prepayment ability: no, partial, or full prepayment options, some of which involve a fee; |
§ | principal paydown: with no, partial, or full amortization of principal; and |
§ | interest rate options, or other options, embedded in Advances. |
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§ | Liquidity management. Investments, especially money market investments, help us manage liquidity. We can structure our short-term debt issuances so that money market investments mature sooner than this debt, providing a source of contingent liquidity when Advance demand spikes or in periods of market stresses when it may not be advantageous or possible to participate in new debt issuance. We also may be able to transform certain investments to cash without a significant loss of value. Money market investments also support our ability to issue most Advances on the same day members request them. |
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§ | Earnings enhancement. The investments portfolio assists with earning a competitive return on capital, which enhances the value of membership, members’ preferences to hold excess capital stock to support Mission Asset Activity, and our commitment to Housing and Community Investment programs. |
§ | Market risk management. Short-term money market investments help stabilize earnings because they typically earn a “locked in” match-funded spread with little market risk. |
§ | Debt issuance management. Maintaining a money market investment portfolio can help us participate in attractively priced debt issuance, on an opportunistic basis. We can temporarily invest proceeds from debt issuances in short-term liquid assets and quickly access them to fund demand for Mission Asset Activity, rather than having debt issuances dictated solely by the timing of member demand. |
§ | Support of housing market. Investment in mortgage-backed securities and state housing finance agency bonds directly supports the residential mortgage market by providing capital and financing for mortgages. |
§ | debt securities issued by the U.S. government or its agencies; |
§ | mortgage-backed securities and collateralized mortgage obligations supported by mortgage securities (together, mortgage-backed securities) and issued by GSEs or private issuers; |
§ | asset-backed securities collateralized by manufactured housing loans or home equity loans and issued by government-sponsored enterprises or private issuers; and |
§ | marketable direct obligations of certain government units or agencies (such as state housing finance agencies) that supply needed funding for housing or community lending and that do not exceed 20 percent of our regulatory capital. |
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§ | minus servicing costs (0.25 percent for conventional loans and 0.44 percent for FHA loans); |
§ | minus the cost of Supplemental Mortgage Insurance (required for conventional loans only); |
§ | adjusted for the amortization of purchase premiums or the accretion of purchase discounts; and |
§ | adjusted for the amortization or the accretion of fair value adjustments on commitments. |
§ | to finance and hedge intermediate- and long-term fixed-rate Advances and mortgage assets; |
§ | to finance and hedge short-term, LIBOR-indexed adjustable-rate Advances, and swapped Advances, typically by synthetically transforming fixed-rate Bonds to adjustable-rate LIBOR funding through the execution of interest rate swaps; and |
§ | to acquire liquidity. |
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§ | overall economic and credit conditions; |
§ | credit ratings of the FHLBank System; |
§ | investor demand and preferences for our debt securities; |
§ | the level of interest rates and the shape of the U.S. Treasury curve and the LIBOR swap curve; |
§ | the supply, volume, timing, and characteristics of debt issuances by the FHLBanks, other GSEs, and other highly rated issuers; |
§ | actions by the federal government, including the Federal Reserve Board, U.S. Treasury Department, Federal Deposit Insurance Corporation (FDIC), and legislative and executive branches to affect the economy, financial system, and/or debt or mortgage markets; |
§ | political events, including legislation and regulatory actions; |
§ | the volatility of market prices and interest rates; |
§ | interpretations of market events and issuer news; |
§ | the presence of inflation or deflation; and |
§ | currency exchange rates. |
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§ | as required for an institution to become a member or maintain membership; |
§ | as required for a member to capitalize Mission Asset Activity; and |
§ | to pay stock dividends. |
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Mission Asset Activity | Minimum Activity Percentage | Maximum Activity Percentage | ||||||
Advances | 2 | % | 4 | % | ||||
Advance Commitments | 2 | 4 | ||||||
Mortgage Purchase Program | 0 | 4 |
§ | The member must maintain a ratio of activity stock to Mission Asset Activity at least equal to the minimum allocation percentage identified in the table above. |
§ | It cannot use more than $100 million of cooperative capital. |
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§ | by anticipating potential business risks and appropriate responses; |
§ | by defining permissible lines of business; |
§ | by limiting the kinds of assets we are permitted to hold and the kinds of hedging and financing arrangements we are permitted to use; |
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§ | by limiting the amount of market risk to which we are permitted to be exposed; and |
§ | by requiring strict adherence to internal controls, adequate insurance coverage, and comprehensive Human Resources policies, procedures, and strategies. |
§ | below-market rates and/or the market risk exposure on Putable and Convertible Advances for which members have sold us options embedded within the Advances; |
§ | the market risk exposure of options we have sold that are embedded with Advances; or |
§ | Regular Fixed Rate Advances when it may not be as advantageous to issue Obligations or when it may improve our market risk management. |
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§ | interest rates offered; |
§ | the amount of debt offered; |
§ | the market’s perception of the credit quality of the issuing institutions and the liquidity of the debt; |
§ | the types of debt structures offered; and |
§ | the effectiveness of marketing. |
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Member demand for Mission Asset Activity depends in part on the general health of the economy and business conditions. A recessionary economy, or an economy characterized by stagflation in which growth is weak but inflation high, normally lowers the amount of Mission Asset Activity, could decrease profitability and could cause stockholders to request redemption of a portion of their capital or request withdrawal from membership (both referred to here as “request withdrawal of capital”). These unfavorable effects are more likely to occur and be more severe if a weak economy is accompanied by significant changes in interest rates, stresses in the housing market, elevated competitive forces, or changes in the legislative and regulatory environment relative to the FHLBank System. All of these changes occurred in 2009. The recession in 2008 and 2009 substantially decreased our Advances and Letters of Credit activity. Although our profitability relative to short-term interest rates increased and there was no unfavorable impact on our capitalization, we are concerned that another recession or a weak recovery from the recent recession could further decrease Advance balances and ultimately erode profitability. As discussed in another risk factor, an extremely severe economic downturn, especially if combined with significant disruptions in housing conditions or other external events, could result in credit losses on our assets. |
We operate in a highly competitive environment for our Mission Asset Activity and debt issuance. Increased competition can decrease the amount of Mission Asset Activity and narrow net spreads on that activity, both of which can reduce profitability and cause stockholders to request withdrawal of capital. Historically, our chief competition has been from other wholesale lenders and debt issuers, including other GSEs. A new and intense source of competition arose in the fourth quarter of 2008 and in 2009 from the federal government’s actions to stimulate the economy. These actions significantly expanded funding and liquidity available to members and provided various forms of additional government guarantees of financial institution liabilities, which lowered our Advance demand. We cannot predict how long these negative effects will continue or how much more severe the effects could be. However, we expect overall Advance demand will remain weak until the government reduces these initiatives, in particular the liquidity stimulus, by tightening monetary policy and winding down its purchases of mortgage-backed securities. |
The federal government put Fannie Mae and Freddie Mac into conservatorship in September 2008, after their financial condition, capital position, and actual and expected earnings losses worsened dramatically due to the financial crisis. These two GSEs and the FHLBank System have the same regulator, the Finance Agency, which is charged with helping resolve the current housing finance crisis and with addressing reform of Fannie Mae and Freddie Mac. While there is agreement that a permanent financial and political solution for Fannie Mae and Freddie Mac must be implemented, no consensus has evolved around any of the various options proposed to date and no legislation has been proposed. Fannie Mae and Freddie Mac, which are publicly traded, stockholder-owned companies, have a different business model than the FHLBanks, which are cooperatives owned by their member financial institutions and which have no publicly traded stock. However, because all these GSEs share a common regulator and housing mission, the FHLBanks could be subject to legislation related to the ultimate disposition of Fannie Mae and Freddie Mac. Such legislation could inadequately account for the significant differences between |
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those GSEs and the FHLBanks and, therefore, could imperil the ability of the FHLBanks to continue operating effectively within their current business model or could change the business model. Also, because of the financial crisis and financial challenges at Fannie Mae, Freddie Mac, and some FHLBanks discussed below, the FHLBanks have faced heightened regulatory scrutiny in the last several years, thereby imparting additional uncertainty regarding the political and regulatory environment in which the FHLBanks will ultimately operate in the future. |
We believe the legislative and regulatory uncertainty has negatively impacted Mission Asset Activity and made some members less willing to hold a capital investment in our company. At this time, we are unable to predict what effects GSE reform and the related heightened regulatory environment will have on the FHLBanks’ business model, financial condition, or results of operations, or whether the effects will be positive or negative. |
In addition, related to the housing crisis, in early February 2010, Fannie Mae and Freddie Mac announced plans to purchase loans that are 120 days or more delinquent out of mortgage pools. The initial purchases were slated to occur from February 2010 through May 2010, with additional delinquency purchases as needed thereafter. As Fannie Mae and Freddie Mac may need to raise additional funds for these loan purchases, funding costs in the short-end of the agency debt market may be affected. At this time, we cannot predict what effect this event will have on our financial condition or results of operation. |
Our principal long-term source of funding, liquidity, and market risk management is through access to the capital markets for participation in the issuance of debt securities and for execution of derivative transactions at attractive prices and yields. This is the fundamental source of the FHLBank System’s business franchise. The System’s triple-A debt ratings, the implicit U.S. government backing of our debt, and our effective funding management are instrumental in ensuring satisfactory access to the capital markets. However, our ability to access the capital markets could be affected by external events (such as general economic and financial instabilities, political instability, wars, and natural disasters) and by our joint and several liability along with other FHLBanks for Consolidated Obligations (which exposes us to events at other FHLBanks).If our access were to be impaired for any extended period, the effect on our financial condition and results of operations could be material. At the extreme, the System’s ability to achieve its mission and satisfy its financial obligations could be threatened. |
During 2008 and the early part of 2009, the financial crisis and economic recession, and the federal government’s significant measures enacted to mitigate their effects, changed the traditional bases on which market participants valued GSE debt securities and consequently affected our funding costs and practices. Particularly in 2008, funding costs associated with issuing long-term Consolidated Obligations rose sharply and were more volatile compared to LIBOR and U.S. Treasury securities. We believe this reflected dealers’ reluctance to sponsor, and investors’ reluctance to buy, as much long-term GSE debt as they previously did, coupled with strong investor demand for short-term, high-quality assets. At various times in 2008 and early 2009 the System had a reduced ability to issue long-term noncallable debt Obligations at acceptable rates. As 2009 progressed, funding costs began to return to more normal levels relative to other market rates. |
Although we believe that events to date have not materially or permanently raised debt costs or impeded access to the capital markets, and that the chance of a liquidity or funding crisis in the FHLBank System or external event that would impair access to the capital markets currently is remote, we can provide no assurance that this will remain true. |
Each FHLBank has a joint and several liability for principal and interest payments on Consolidated Obligations, which are backed only the financial resources of the FHLBanks. Although, no FHLBank has ever defaulted on its principal or interest share of an Obligation and the Finance Agency has never required an FHLBank to make principal or interest payments based on another FHLBank’s Consolidated Obligation liability, there can be no |
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assurance that this will continue to be the case. In 2009, as in 2008, several FHLBanks reported, and are expected to continue reporting, issues with capital adequacy and profitability. These issues could require our FHLBank to provide financial assistance to one or more other FHLBanks, for example, by making a payment on an Obligation on behalf of another FHLBank. Such assistance could, at the extreme, adversely affect our financial condition, earnings, ability to pay dividends, or redeem or repurchase capital stock. |
Capital and earnings at other FHLBanks have been pressured due primarily to impairment charges taken on private-label mortgage-backed securities. These issues could raise investors’ and rating agencies’ concern regarding the credit risk of FHLBank System debt securities, which could result in higher and more volatile debt costs, lower debt ratings, and impaired ability to issue debt. As a result, our financial condition and results of operations could be adversely affected. |
We believe that residual credit risk exposure to Advance collateral, loans in the Mortgage Purchase Program, investments, and derivatives, including exposure to loans that may have “subprime” and “alternative/nontraditional” characteristics, continues to be minimal. In general, however, and especially given the residual effects of the recent financial crisis and recession, we cannot make any assurances that credit losses will continue to be minimal. Most members are on a blanket lien status for Advances which, because it does not require specific loan collateral to be delivered, imparts a degree of uncertainty as to what types of loans members have pledged to collateralize their Advances. Also, in 2009, as in 2008, there was a significant downward trend in the internal credit ratings assigned to members. During the year, for certain members, it became necessary for us to reduce their borrowing capacity, increase their collateral requirements and/or require them to deliver collateral or provide greater detail on pledged assets. Regarding the Mortgage Purchase Program, although loans have strong credit enhancements, continuing substantial reductions in home prices could increase delinquencies and foreclosures sufficiently to result in credit losses. Money market investments and the uncollateralized portion of interest rate swaps are unsecured; we collateralize most credit risk exposure of swaps by exchanging cash or high-grade securities (daily, if necessary) with the counterparties based on the net market value positions of the swaps. Although we make investments in the securities of, and execute derivatives with, highly rated institutions, failure of a counterparty with which we have a large unsecured position could have a material adverse affect on our financial conditions and results of operations. |
An extremely severe and prolonged economic downturn, especially if combined with significant disruptions in housing conditions, could result in credit losses on our assets that could materially impair our financial condition or results of operations. |
Sharp increases in interest rates, especially short-term rates, or sharp decreases in long-term interest rates could threaten the competitiveness of dividend rates relative to member stockholders’ alternative investment choices. A major way that interest rate movements could lower profitability is by changes in mortgage prepayment speeds that we have not hedged appropriately with Consolidated Obligations. Exposure to unhedged changes in mortgage prepayment speeds is one of our largest ongoing risks. In some extremely stressful scenarios, changes in interest rates and prepayment speeds could result in dividends being below stockholders’ expectations for an extended period of time. In such a situation, members could engage in less Mission Asset Activity and could request withdrawal of capital. |
Spreads on many of our assets tend to be narrow compared to those of many other financial institutions due to our cooperative business model, resulting in relatively lower profitability. Market conditions could cause asset spreads, and therefore our profitability, to decrease substantially. This could result in lower dividends, reductions in Mission Asset Activity, and members’ requests to withdraw their capital. |
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In response to the financial crisis and ongoing elevations in financial institution failures, members’ regulators have appeared to heighten regulatory requirements and scrutiny, especially in the areas of capitalization, assessments of asset classifications, reliance on Advances for funding and interest rate risk management. We believe these activities have resulted in members’ decreased use of Advances. The Federal Deposit Insurance Corporation (FDIC) has made changes, or has proposed to make changes, in several of its practices that has reduced or could reduce members’ ability or preferences to engage in Mission Asset Activity. These practices include raising deposit insurance coverage levels; providing guarantees to unsecured debt issuance of insured depository institutions; and requiring certain depository institutions to include Advances when calculating their deposit insurance premiums. |
A relatively small number of members provide the bulk of our Mission Asset Activity and capital. These members could decrease their Mission Asset Activity and the amount of their FHLBank capital stock as a result of merger and acquisition activity or their reduced demand for our products. Our business model is structured to be able to absorb sharp changes in our Mission Asset Activity because we can undertake commensurate reductions in our liability balances and capital and because of our low operating expenses. Therefore, although possible, we believe the chance is small that a significant membership withdrawal of large members or a significant reduction in their Mission Asset Activity could negatively affect profitability sufficiently to threaten our ability to satisfy principal and interest payments on Consolidated Obligations or ability to pay competitive dividends to remaining members. |
If dividend rates paid to stockholders become uncompetitive because of an insufficient amount of current earnings, and/or because of an inability to distribute retained earnings, stockholders may request withdrawal of their capital. At the extreme, if the amount of retained earnings were insufficient to protect stockholders’ capital investment against losses, the value of our capital stock on their books could be written down below its par value and be designated as an impaired asset. Although we believe that we have a sufficient amount of retained earnings to protect against dividend volatility and impairment risk, we can provide no assurance that this will continue to be the case. |
To date, we believe there have been no material effects on our Mission Asset Activity, capitalization, or earnings because of our application of accounting standards, especially those related to accounting for derivatives and hedging activities and accounting for premiums and discounts. Although unlikely to occur, changes in certain accounting standards could increase earnings volatility, causing less demand for Mission Asset Activity and stockholders to request withdrawal of capital. Earnings volatility could also increase if we began to execute more derivatives involving economic or macro hedges or if we significantly increased the amount of mortgage assets with premiums or discounts. |
The success of our business mission depends, in large part, on the ability to attract and retain key personnel. Competition for qualified people can be intense. Should we be unable to hire or retain effective key personnel, our financial condition and results of operations could be harmed. |
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Control failures, including those over financial reporting, or business interruptions with members and counterparties could occur from human error, fraud, breakdowns in computer systems and operating processes, or natural or man-made disasters. We rely heavily on internal and third-party computer systems. Although we believe there are substantial control processes in place, if a significant credit or operational risk event were to occur, it could materially damage our financial condition and results of operations. We may not be able to foresee, prevent, mitigate, reverse or repair the negative effects of any such failure or interruption. |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
2009 | 2008 | |||||||||||||||||||||||
Percent Per | Percent Per | |||||||||||||||||||||||
Quarter | Amount | Annum | Form | Amount | Annum | Form(1) | ||||||||||||||||||
First | $ | 45 | 4.50 | Cash | $ | 47 | 5.25 | Capital Stock | ||||||||||||||||
Second | 44 | 4.50 | Cash | 49 | 5.50 | Capital Stock | ||||||||||||||||||
Third | 50 | 5.00 | Cash | 51 | 5.50 | Capital Stock | ||||||||||||||||||
Fourth | 44 | 4.50 | Cash | 49 | 5.00 | Cash | ||||||||||||||||||
Total | $ | 183 | 4.63 | $ | 196 | 5.31 | ||||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||
(Dollars in millions) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
STATEMENT OF CONDITION DATA: | ||||||||||||||||||||
Total assets | $ | 71,387 | $ | 98,206 | $ | 87,335 | $ | 81,381 | $ | 77,074 | ||||||||||
Advances | 35,818 | 53,916 | 53,310 | 41,956 | 40,262 | |||||||||||||||
Mortgage loans held for portfolio, net | 9,366 | 8,632 | 8,928 | 8,461 | 8,418 | |||||||||||||||
Investments(1) | 24,193 | 35,325 | 24,678 | 30,614 | 28,114 | |||||||||||||||
Consolidated Obligations, net: | ||||||||||||||||||||
Discount Notes | 23,187 | 49,336 | 35,437 | 21,947 | 17,578 | |||||||||||||||
Bonds | 41,222 | 42,393 | 46,179 | 53,239 | 53,520 | |||||||||||||||
Total Consolidated Obligations, net | 64,409 | 91,729 | 81,616 | 75,186 | 71,098 | |||||||||||||||
Mandatorily redeemable capital stock | 676 | 111 | 118 | 137 | 418 | |||||||||||||||
Capital: | ||||||||||||||||||||
Capital stock – putable | 3,063 | 3,962 | 3,473 | 3,658 | 3,504 | |||||||||||||||
Retained earnings | 412 | 326 | 286 | 255 | 208 | |||||||||||||||
Accumulated other comprehensive income | (8 | ) | (6 | ) | (4 | ) | (6 | ) | (3 | ) | ||||||||||
Total capital | 3,467 | 4,282 | 3,755 | 3,907 | 3,709 | |||||||||||||||
STATEMENT OF INCOME DATA: | ||||||||||||||||||||
Net interest income | $ | 387 | $ | 364 | $ | 421 | $ | 386 | $ | 340 | ||||||||||
Provision for credit losses | - | - | - | - | - | |||||||||||||||
Other income (loss) | 38 | 9 | (6 | ) | 6 | 3 | ||||||||||||||
Other expenses | 59 | 51 | 48 | 46 | 42 | |||||||||||||||
Assessments | 98 | 86 | 98 | 93 | 81 | |||||||||||||||
Net income | $ | 268 | $ | 236 | $ | 269 | $ | 253 | $ | 220 | ||||||||||
Dividend payout ratio(2) | 68 | % | 83 | % | 88 | % | 81 | % | 82 | % | ||||||||||
Weighted average dividend rate(3) | 4.63 | % | 5.31 | % | 6.59 | % | 5.81 | % | 5.00 | % | ||||||||||
Return on average equity | 6.38 | 5.73 | 6.87 | 6.70 | 5.79 | |||||||||||||||
Return on average assets | 0.32 | 0.25 | 0.32 | 0.32 | 0.28 | |||||||||||||||
Net interest margin(4) | 0.46 | 0.39 | 0.50 | 0.49 | 0.43 | |||||||||||||||
Average equity to average assets | 4.96 | 4.37 | 4.63 | 4.76 | 4.78 | |||||||||||||||
Regulatory capital ratio(5) | 5.81 | 4.48 | 4.44 | 4.98 | 5.36 | |||||||||||||||
Operating expense to average assets | 0.057 | 0.041 | 0.046 | 0.046 | 0.042 |
(1) | Investments include interest bearing deposits in banks, securities purchased under agreements to resell, Federal funds sold, trading securities, available-for-sale securities, and held-to-maturity securities. | ||
(2) | Dividend payout ratio is dividends declared in the period as a percentage of net income. | ||
(3) | Weighted average dividend rates are dividends paid in stock and cash divided by the average number of shares of capital stock eligible for dividends. | ||
(4) | Net interest margin is net interest income as a percentage of average earning assets. | ||
(5) | Regulatory capital ratio is period end regulatory capital (capital stock, mandatorily redeemable capital stock and retained earnings) as a percentage of period end total assets. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Year Ended December 31, | ||||||||||||||||
Ending Balances | Average Balances | |||||||||||||||
(Dollars in millions) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Advances (principal) | $ | 35,123 | $ | 52,799 | $ | 43,624 | $ | 59,973 | ||||||||
Mortgage Purchase Program: | ||||||||||||||||
Mortgage loans held for portfolio (principal) | 9,280 | 8,590 | 9,498 | 8,621 | ||||||||||||
Mandatory Delivery Contracts (notional) | 79 | 917 | 566 | 182 | ||||||||||||
Total Mortgage Purchase Program | 9,359 | 9,507 | 10,064 | 8,803 | ||||||||||||
Letters of Credit (notional) | 4,415 | 7,917 | 5,917 | 7,894 | ||||||||||||
Total Mission Asset Activity | $ | 48,897 | $ | 70,223 | $ | 59,605 | $ | 76,670 | ||||||||
Retained earnings | $ | 412 | $ | 326 | $ | 405 | $ | 335 | ||||||||
Capital-to-assets ratio | 4.86% | 4.36% | 4.96% | 4.37% | ||||||||||||
Regulatory capital-to-assets ratio(1) | 5.81 | 4.48 | 5.22 | 4.51 |
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§ | The economic recession lowered demand for members’ consumer, mortgage, and commercial loans. Their loans decreased ten percent from the third quarter of 2008 to the end of 2009 (excluding our two largest members, which had acquisitions that would skew results). |
§ | There was a substantial increase in many members’ deposit base. Members’ deposit base expanded four percent from the third quarter of 2008 to the end of 2009 (again, excluding the two largest members). |
§ | The government significantly expanded funding and liquidity stimulus programs made available to members. These activities were implemented to combat the financial crisis and recession and were led by the Federal Reserve System. The most important aspects related to Advance demand were 1) new sources of government-provided liquidity through the Troubled Asset Relief Program (TARP), 2) various forms of additional government guarantees of liabilities of financial institutions, and 3) a dramatic increase in bank reserves created by the Federal Reserve’s expansion of its balance sheet, in particular its quantitative easing programs including massive direct purchases of mortgage-backed securities. |
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Year Ended December 31, | ||||||||||||
(Dollars in millions) | 2009 | 2008 | 2007 | |||||||||
Net income | $ | 268 | $ | 236 | $ | 269 | ||||||
Affordable Housing Program accrual | 31 | 27 | 31 | |||||||||
Return on average equity (ROE) | 6.38 | % | 5.73 | % | 6.87 | % | ||||||
Return on average assets | 0.32 | 0.25 | 0.32 | |||||||||
Weighted average dividend rate | 4.63 | 5.31 | 6.59 | |||||||||
Average 3-month LIBOR | 0.69 | 2.92 | 5.29 | |||||||||
Average overnight Federal Funds effective rate | 0.16 | 1.92 | 5.02 | |||||||||
ROE spread to 3-month LIBOR | 5.69 | 2.81 | 1.58 | |||||||||
Dividend rate spread to 3-month LIBOR | 3.94 | 2.39 | 1.30 | |||||||||
ROE spread to Federal Funds effective rate | 6.22 | 3.81 | 1.85 | |||||||||
Dividend rate spread to Federal Funds effective rate | 4.47 | 3.39 | 1.57 |
The increase in net income for the full year resulted primarily from the following factors: |
§ | Beginning in late 2008 and continuing in 2009, in response to the decline in intermediate- and long-term interest rates, we retired before their final maturities approximately $17 billion of relatively high-cost long-term Consolidated Obligation Bonds and replaced them with new Obligations, much of which was at substantially lower interest costs. |
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§ | Until midyear, we earned wider portfolio spreads on many short-term and adjustable-rate assets indexed to LIBOR relative to short-term funding costs. |
§ | Prepayment speeds of relatively high yielding mortgages did not accelerate sharply despite the lower overall mortgage rates, due to the ongoing difficulties in the housing and mortgage markets. |
§ | Market yield curves were significantly steeper because short-term interest rates fell to historical lows of close to zero while longer-term rates fell less. This benefited earnings due to use of a modest amount of short-term debt to fund long-term assets. |
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§ | a new economic recession, which could further reduce Advance demand; |
§ | a renewal of the financial crisis; |
§ | unfavorable effects on the competitiveness of our business model from the continuation of current or from new federal government actions to mitigate the recession and financial crisis; and |
§ | issues with earnings pressures and capital adequacy at other FHLBanks, primarily resulting from market value losses and expected credit losses on their private-label mortgage-backed securities. |
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§ | continuation of extremely low short-term interest rates, especially if coupled with reductions in mortgage rates and accelerated mortgage prepayment speeds; |
§ | the potential for significantly higher interest rates, especially if coupled with a flatter yield curve; |
§ | replacing expected paydowns of mortgages earning wide net spreads with new mortgages at lower net spreads; and/or |
§ | continued reductions in Advance balances. |
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Year 2009 | Year 2008 | Year 2007 | ||||||||||||||||||
Average | Ending | Average | Ending | Ending | ||||||||||||||||
Federal Funds Target | 0.25 | % | 0.25 | % | 2.09 | % | 0.25 | % | 4.25 | % | ||||||||||
Federal Funds Effective | 0.16 | 0.05 | 1.92 | 0.14 | 3.06 | |||||||||||||||
3-month LIBOR | 0.69 | 0.25 | 2.92 | 1.43 | 4.70 | |||||||||||||||
2-year LIBOR | 1.41 | 1.42 | 2.95 | 1.48 | 3.81 | |||||||||||||||
5-year LIBOR | 2.66 | 2.99 | 3.70 | 2.13 | 4.18 | |||||||||||||||
10-year LIBOR | 3.44 | 3.97 | 4.25 | 2.56 | 4.67 | |||||||||||||||
2-year U.S. Treasury | 0.94 | 1.14 | 2.00 | 0.77 | 3.05 | |||||||||||||||
5-year U.S. Treasury | 2.19 | 2.68 | 2.79 | 1.55 | 3.44 | |||||||||||||||
10-year U.S. Treasury | 3.24 | 3.84 | 3.64 | 2.21 | 4.03 | |||||||||||||||
15-year mortgage current coupon(1) | 3.73 | 3.78 | 4.97 | 3.64 | 4.95 | |||||||||||||||
30-year mortgage current coupon(1) | 4.31 | 4.57 | 5.47 | 3.93 | 5.54 | |||||||||||||||
15-year mortgage note rate(2) | 4.58 | 4.54 | 5.63 | 4.91 | 5.79 | |||||||||||||||
30-year mortgage note rate(2) | 5.04 | 5.14 | 6.05 | 5.14 | 6.17 |
Year 2009 by Quarter - Average | ||||||||||||||||
Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | |||||||||||||
Federal Funds Target | 0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | ||||||||
Federal Funds Effective | 0.18 | 0.18 | 0.15 | 0.12 | ||||||||||||
3-month LIBOR | 1.24 | 0.85 | 0.41 | 0.27 | ||||||||||||
2-year LIBOR | 1.54 | 1.50 | 1.40 | 1.21 | ||||||||||||
5-year LIBOR | 2.38 | 2.74 | 2.86 | 2.64 | ||||||||||||
10-year LIBOR | 2.94 | 3.50 | 3.72 | 3.59 | ||||||||||||
2-year U.S. Treasury | 0.89 | 1.01 | 1.01 | 0.86 | ||||||||||||
5-year U.S. Treasury | 1.75 | 2.23 | 2.45 | 2.29 | ||||||||||||
10-year U.S. Treasury | 2.71 | 3.31 | 3.50 | 3.45 | ||||||||||||
15-year mortgage current coupon(1) | 3.75 | 3.84 | 3.82 | 3.52 | ||||||||||||
30-year mortgage current coupon(1) | 4.13 | 4.31 | 4.50 | 4.28 | ||||||||||||
15-year mortgage note rate(2) | 4.72 | 4.63 | 4.61 | 4.38 | ||||||||||||
30-year mortgage note rate(2) | 5.06 | 5.01 | 5.16 | 4.92 |
(1) | Simple average of current coupon rates of Fannie Mae and Freddie Mac mortgage-backed securities. | |
(2) | Simple weekly average of 125 national lenders’ mortgage rates surveyed and published by Freddie Mac. |
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§ | the principal balance of Advances; |
§ | the notional principal amount of available lines in the Letters of Credit program; |
§ | the principal balance in the Mortgage Purchase Program (Mortgage Loans Held for Portfolio); and |
§ | the notional principal amount of Mandatory Delivery Contracts. |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||
% of | Change From | % of | Change From | % of | Change From | |||||||||||||||||||||||||||||||||||||||||||
Total | Prior Year | Total | Prior Year | Total | Prior Year | |||||||||||||||||||||||||||||||||||||||||||
Balance | Assets | Amount | Pct | Balance | Assets | Amount | Pct | Balance | Assets | Amount | Pct | |||||||||||||||||||||||||||||||||||||
Advances | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | 35,123 | 49 | % | $ | (17,676 | ) | (33 | )% | $ | 52,799 | 54 | % | $ | (154 | ) | -% | $ | 52,953 | 61 | % | $ | 11,011 | 26 | % | |||||||||||||||||||||||
Other items(1) | 695 | 1 | (422 | ) | (38 | ) | 1,117 | 1 | 760 | 213 | 357 | - | 343 | 2,450 | ||||||||||||||||||||||||||||||||||
Total book value | 35,818 | 50 | (18,098 | ) | (34 | ) | 53,916 | 55 | 606 | 1 | 53,310 | 61 | 11,354 | 27 | ||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 9,280 | 13 | 690 | 8 | 8,590 | 9 | (272 | ) | (3 | ) | 8,862 | 10 | 483 | 6 | ||||||||||||||||||||||||||||||||||
Other items | 86 | - | 44 | 105 | 42 | - | (24 | ) | (36 | ) | 66 | - | (16 | ) | (20 | ) | ||||||||||||||||||||||||||||||||
Total book value | 9,366 | 13 | 734 | 9 | 8,632 | 9 | (296 | ) | (3 | ) | 8,928 | 10 | 467 | 6 | ||||||||||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 11,448 | 16 | (1,449 | ) | (11 | ) | 12,897 | 13 | 740 | 6 | 12,157 | 14 | 93 | 1 | ||||||||||||||||||||||||||||||||||
Other items | (11 | ) | - | 17 | 61 | (28 | ) | - | (5 | ) | (22 | ) | (23 | ) | - | (14 | ) | (156 | ) | |||||||||||||||||||||||||||||
Total book value | 11,437 | 16 | (1,432 | ) | (11 | ) | 12,869 | 13 | 735 | 6 | 12,134 | 14 | 79 | 1 | ||||||||||||||||||||||||||||||||||
Short-term money market | 12,746 | 18 | (9,698 | ) | (43 | ) | 22,444 | 23 | 9,917 | 79 | 12,527 | 15 | (6,009 | ) | (32 | ) | ||||||||||||||||||||||||||||||||
Other long-term investments | 10 | - | (2 | ) | (17 | ) | 12 | - | (5 | ) | (29 | ) | 17 | - | (7 | ) | (29 | ) | ||||||||||||||||||||||||||||||
Total investments | 24,193 | 34 | (11,132 | ) | (32 | ) | 35,325 | 36 | 10,647 | 43 | 24,678 | 29 | (5,937 | ) | (19 | ) | ||||||||||||||||||||||||||||||||
Loans to other FHLBanks | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Total earning assets | 69,377 | 97 | (28,496 | ) | (29 | ) | 97,873 | 100 | 10,957 | 13 | 86,916 | 100 | 5,884 | 7 | ||||||||||||||||||||||||||||||||||
Other assets | 2,010 | 3 | 1,677 | 504 | 333 | - | (86 | ) | (21 | ) | 419 | - | 70 | 20 | ||||||||||||||||||||||||||||||||||
Total assets | $ | 71,387 | 100 | % | $ | (26,819 | ) | (27 | ) | $ | 98,206 | 100 | % | $ | 10,871 | 12 | $ | 87,335 | 100 | % | $ | 5,954 | 7 | |||||||||||||||||||||||||
Other Business Activity (Notional) | ||||||||||||||||||||||||||||||||||||||||||||||||
Letters of Credit | $ | 4,415 | $ | (3,502 | ) | (44 | ) | $ | 7,917 | $ | 994 | 14 | $ | 6,923 | $ | 425 | 7 | |||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||||||||||
Mandatory Delivery Contracts | $ | 79 | $ | (838 | ) | (91 | ) | $ | 917 | $ | 869 | 1,810 | $ | 48 | $ | (59 | ) | (55 | ) | |||||||||||||||||||||||||||||
Total Mission Asset Activity (Principal and Notional) | $ | 48,897 | 68 | % | $ | (21,326 | ) | (30 | ) | $ | 70,223 | 72 | % | $ | 1,437 | 2 | $ | 68,786 | 79 | % | $ | 11,860 | 21 | |||||||||||||||||||||||||
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Asset Composition - Average Balances (Dollars in millions) |
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||
% of | Change From | % of | Change From | % of | Change From | |||||||||||||||||||||||||||||||||||||||||||
Total | Prior Year | Total | Prior Year | Total | Prior Year | |||||||||||||||||||||||||||||||||||||||||||
Balance | Assets | Amount | Pct | Balance | Assets | Amount | Pct | Balance | Assets | Amount | Pct | |||||||||||||||||||||||||||||||||||||
Advances | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | $ | 43,624 | 52 | % | $ | (16,349 | ) | (27 | )% | $ | 59,973 | 64 | % | $ | 10,671 | 22 | % | $ | 49,302 | 59 | % | $ | 3,528 | 8 | % | |||||||||||||||||||||||
Other items(1) | 880 | 1 | 354 | 67 | 526 | - | 466 | 777 | 60 | - | 33 | 122 | ||||||||||||||||||||||||||||||||||||
Total book value | 44,504 | 53 | (15,995 | ) | (26 | ) | 60,499 | 64 | 11,137 | 23 | 49,362 | 59 | 3,561 | 8 | ||||||||||||||||||||||||||||||||||
Mortgage Loans Held for Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 9,498 | 11 | 877 | 10 | 8,621 | 9 | (121 | ) | (1 | ) | 8,742 | 10 | 417 | 5 | ||||||||||||||||||||||||||||||||||
Other items | 72 | - | 10 | 16 | 62 | - | (13 | ) | (17 | ) | 75 | - | (13 | ) | (15 | ) | ||||||||||||||||||||||||||||||||
Total book value | 9,570 | 11 | 887 | 10 | 8,683 | 9 | (134 | ) | (2 | ) | 8,817 | 10 | 404 | 5 | ||||||||||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Principal | 12,135 | 14 | (488 | ) | (4 | ) | 12,623 | 14 | 507 | 4 | 12,116 | 15 | 289 | 2 | ||||||||||||||||||||||||||||||||||
Other items | (17 | ) | - | 13 | 43 | (30 | ) | - | (14 | ) | (88 | ) | (16 | ) | - | (18 | ) | (900 | ) | |||||||||||||||||||||||||||||
Total book value | 12,118 | 14 | (475 | ) | (4 | ) | 12,593 | 14 | 493 | 4 | 12,100 | 15 | 271 | 2 | ||||||||||||||||||||||||||||||||||
Short-term money market | 18,166 | 22 | 5,960 | 49 | 12,206 | 13 | (1,381 | ) | (10 | ) | 13,587 | 16 | 545 | 4 | ||||||||||||||||||||||||||||||||||
Other long-term investments | 11 | - | (5 | ) | (31 | ) | 16 | - | (3 | ) | (16 | ) | 19 | - | (7 | ) | (27 | ) | ||||||||||||||||||||||||||||||
Total investments | 30,295 | 36 | 5,480 | 22 | 24,815 | 27 | (891 | ) | (3 | ) | 25,706 | 31 | 809 | 3 | ||||||||||||||||||||||||||||||||||
Loans to other FHLBanks | 19 | - | 1 | 6 | 18 | - | 11 | 157 | 7 | - | (3 | ) | (30 | ) | ||||||||||||||||||||||||||||||||||
Total earning assets | 84,388 | 100 | (9,627 | ) | (10 | ) | 94,015 | 100 | 10,123 | 12 | 83,892 | 100 | 4,771 | 6 | ||||||||||||||||||||||||||||||||||
Other assets | 282 | - | (60 | ) | (18 | ) | 342 | - | (59 | ) | (15 | ) | 401 | - | 121 | 43 | ||||||||||||||||||||||||||||||||
Total assets | $ | 84,670 | 100 | % | $ | (9,687 | ) | (10 | ) | $ | 94,357 | 100 | % | $ | 10,064 | 12 | $ | 84,293 | 100 | % | $ | 4,892 | 6 | |||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||||||||||
Other Business Activity (Notional) | ||||||||||||||||||||||||||||||||||||||||||||||||
Letters of Credit | $ | 5,917 | $ | (1,977 | ) | (25 | ) | $ | 7,894 | $ | 2,343 | 42 | $ | 5,551 | $ | 3,666 | 194 | |||||||||||||||||||||||||||||||
Mandatory Delivery Contracts | $ | 566 | $ | 384 | 211 | $ | 182 | $ | 94 | 107 | $ | 88 | $ | 12 | 16 | |||||||||||||||||||||||||||||||||
Total Mission Asset Activity (Principal and Notional) | $ | 59,605 | 70 | % | $ | (17,065 | ) | (22 | ) | $ | 76,670 | 81 | % | $ | 12,987 | 20 | $ | 63,683 | 76 | % | $ | 7,623 | 14 | |||||||||||||||||||||||||
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2009 | 2008 | |||||||||||||||
Balance | Percent(1) | Balance | Percent(1) | |||||||||||||
Short-Term and Adjustable-Rate | ||||||||||||||||
REPO/Cash Management | $ | 1,605 | 5 | % | $ | 5,886 | 11 | % | ||||||||
LIBOR | 14,077 | 40 | 24,225 | 46 | ||||||||||||
Total | 15,682 | 45 | 30,111 | 57 | ||||||||||||
Long-Term | ||||||||||||||||
Regular Fixed Rate | 7,466 | 21 | 9,722 | 18 | ||||||||||||
Convertible(2) | 2,816 | 8 | 3,479 | 7 | ||||||||||||
Putable(2) | 7,037 | 20 | 6,981 | 13 | ||||||||||||
Mortgage Related | 1,748 | 5 | 1,815 | 4 | ||||||||||||
Total | 19,067 | 54 | 21,997 | 42 | ||||||||||||
Other Advances | 374 | 1 | 691 | 1 | ||||||||||||
Total Advances Principal | 35,123 | 100 | % | 52,799 | 100 | % | ||||||||||
Other Items | 695 | 1,117 | ||||||||||||||
Total Advances Book Value | $ | 35,818 | $ | 53,916 | ||||||||||||
December 31, 2009 | September 30, 2009 | June 30, 2009 | March 31, 2009 | |||||||||||||||||||||||||||||
(Dollars in millions) | Balance | Pct(1) | Balance | Pct(1) | Balance | Pct(1) | Balance | Pct(1) | ||||||||||||||||||||||||
Short-Term and Adjustable-Rate | ||||||||||||||||||||||||||||||||
REPO/Cash Management | $ | 1,605 | 5 | % | $ | 1,770 | 5 | % | $ | 3,616 | 8 | % | $ | 3,257 | 7 | % | ||||||||||||||||
LIBOR | 14,077 | 40 | 15,354 | 41 | 18,142 | 41 | 20,612 | 45 | ||||||||||||||||||||||||
Total | 15,682 | 45 | 17,124 | 46 | 21,758 | 49 | 23,869 | 52 | ||||||||||||||||||||||||
Long-Term | ||||||||||||||||||||||||||||||||
Regular Fixed Rate | 7,466 | 21 | 7,830 | 21 | 9,983 | 23 | 9,818 | 21 | ||||||||||||||||||||||||
Convertible(2) | 2,816 | 8 | 3,231 | 9 | 3,253 | 7 | 3,335 | 7 | ||||||||||||||||||||||||
Putable(2) | 7,037 | 20 | 7,046 | 19 | 7,049 | 16 | 7,054 | 15 | ||||||||||||||||||||||||
Mortgage Related | 1,748 | 5 | 1,740 | 4 | 1,736 | 4 | 1,728 | 4 | ||||||||||||||||||||||||
Total | 19,067 | 54 | 19,847 | 53 | 22,021 | 50 | 21,935 | 47 | ||||||||||||||||||||||||
Other Advances | 374 | 1 | 283 | 1 | 313 | 1 | 307 | 1 | ||||||||||||||||||||||||
Total Advances Principal | 35,123 | 100 | % | 37,254 | 100 | % | 44,092 | 100 | % | 46,111 | 100 | % | ||||||||||||||||||||
Other Items | 695 | 828 | 773 | 1,001 | ||||||||||||||||||||||||||||
Total Advances Book Value | $ | 35,818 | $ | 38,082 | $ | 44,865 | $ | 47,112 | ||||||||||||||||||||||||
(1) | As a percentage of total Advances principal. | |
(2) | Related interest rate swaps executed to hedge these Advances convert them to an adjustable-rate tied to LIBOR. |
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December 31, 2009 | ||||||||
Ending | Weighted Average | |||||||
Name | Balance | Interest Rate | ||||||
U.S. Bank, N.A. | $ | 9,315 | 1.64 | % | ||||
PNC Bank, N.A.(1) | 4,282 | 0.70 | ||||||
Fifth Third Bank | 2,538 | 1.96 | ||||||
New York Community Bank(2) | 1,635 | 3.76 | ||||||
RBS Citizens, N.A. | 1,269 | 0.24 | ||||||
Total of Top 5 | $ | 19,039 | 1.56 | |||||
Total Advances (Principal) | $ | 35,123 | 2.27 | |||||
Top 5 Percent of Total | 54 | % | ||||||
December 31, 2008 | ||||||||
Ending | Weighted Average | |||||||
Name | Balance | Interest Rate | ||||||
U.S. Bank, N.A. | $ | 14,856 | 3.02 | % | ||||
PNC Bank, N.A.(1) | 6,435 | 2.83 | ||||||
Fifth Third Bank | 5,639 | 3.18 | ||||||
The Huntington National Bank | 2,590 | 1.22 | ||||||
AmTrust Bank | 2,338 | 3.75 | ||||||
Total of Top 5 | $ | 31,858 | 2.92 | |||||
Total Advances (Principal) | $ | 52,799 | 3.00 | |||||
Top 5 Percent of Total | 60 | % | ||||||
(1) | Formerly National City Bank. | |
(2) | Assumed Advances of AmTrust Bank during 2009. |
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December 31, 2009 | December 31, 2008 | |||||||
Average Advances-to-Assets for Members | ||||||||
Assets less than $1.0 billion (678 members) | 5.05 | % | 6.11 | % | ||||
Assets over $1.0 billion (57 members) | 4.06 | % | 5.47 | % | ||||
All members | 4.97 | % | 6.06 | % |
December 31, 2009 | December 31, 2008 | |||||||||||||||
(Dollars in millions) | Unpaid Principal | % of Total | Unpaid Principal | % of Total | ||||||||||||
PNC Bank, N.A.(1) | $ 3,608 | 39 | % | $ 4,709 | 55 | % | ||||||||||
Union Savings Bank | 2,726 | 29 | 1,995 | 23 | ||||||||||||
Guardian Savings Bank FSB | 751 | 8 | 544 | 6 | ||||||||||||
Liberty Savings Bank | 488 | 5 | ||||||||||||||
Total | $ 7,573 | 81 | % | $ 7,248 | 84 | % | ||||||||||
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(In millions) | 2009 | 2008 | ||||||
Balance, beginning of year | $ | 8,590 | $ | 8,862 | ||||
Principal purchases | 3,627 | 1,027 | ||||||
Principal paydowns | (2,937 | ) | (1,299 | ) | ||||
Balance, end of year | $ | 9,280 | $ | 8,590 | ||||
December 31, 2009 (Dollars in millions) | ||||||||||||||||||||||||
Conventional | FHA (Gov’t | |||||||||||||||||||||||
30 Year | 20 Year | 15 Year | Total | Guaranteed) | Total | |||||||||||||||||||
Total Unpaid Principal | $ | 6,180 | $ | 245 | $ | 1,320 | $ | 7,745 | $ | 1,535 | $ | 9,280 | ||||||||||||
Percent of Total | 66% | 3% | 14% | 83% | 17% | 100% | ||||||||||||||||||
Weighted Average Mortgage Note Rate | 5.62% | 5.38% | 4.97% | 5.50% | 5.76% | 5.54% | ||||||||||||||||||
Weighted Average Loan Age (in months) | 37 | 46 | 44 | 38 | 52 | 41 | ||||||||||||||||||
December 31, 2008 (Dollars in millions) | ||||||||||||||||||||||||
Conventional | FHA (Gov’t | |||||||||||||||||||||||
30 Year | 20 Year | 15 Year | Total | Guaranteed) | Total | |||||||||||||||||||
Total Unpaid Principal | $ | 5,743 | $ | 282 | $ | 1,169 | $ | 7,194 | $ | 1,396 | $ | 8,590 | ||||||||||||
Percent of Total | 67% | 3% | 14% | 84% | 16% | 100% | ||||||||||||||||||
Weighted Average Mortgage Note Rate | 5.89% | 5.61% | 5.22% | 5.77% | 5.97% | 5.80% | ||||||||||||||||||
Weighted Average Loan Age (in months) | 38 | 56 | 54 | 42 | 55 | 44 |
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(In millions) | 2009 | 2008 | ||||||
Balance, beginning of year | $ | 12,897 | $ | 12,157 | ||||
Principal purchases | 2,690 | 2,862 | ||||||
Principal paydowns | (3,682 | ) | (2,122 | ) | ||||
Principal sales | (457 | ) | - | |||||
Balance, end of year | $ | 11,448 | $ | 12,897 | ||||
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(In millions) | December 31, 2009 | December 31, 2008 | |||||||
Security Type | |||||||||
Collateralized mortgage obligations | $ | 3,268 | $ | 5,433 | |||||
Pass-throughs(1) | 8,180 | 7,464 | |||||||
Total | $ | 11,448 | $ | 12,897 | |||||
Collateral Type | |||||||||
15-year collateral | $ | 5,455 | $ | 5,169 | |||||
20-year collateral | 3,225 | 3,365 | |||||||
30-year collateral | 2,768 | 4,363 | |||||||
Total | $ | 11,448 | $ | 12,897 | |||||
Issuer | |||||||||
GSE residential mortgage-backed securities | $ | 11,258 | $ | 12,581 | |||||
Agency residential mortgage-backed securities | 3 | 12 | |||||||
Private-label residential mortgage-backed securities | 187 | 304 | |||||||
Total | $ | 11,448 | $ | 12,897 | |||||
(1) | At both year-end 2009 and 2008, $3 million of the pass-throughs were 30-year adjustable-rate mortgages. All others were 15-year or 20-year fixed-rate pass-throughs. |
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(In millions) | 2009 | 2008 | ||||||||||||||
Ending | Average | Ending | Average | |||||||||||||
Balance | Balance | Balance | Balance | |||||||||||||
Consolidated Discount Notes: | ||||||||||||||||
Par | $ | 23,189 | $ | 35,286 | $ | 49,389 | $ | 40,450 | ||||||||
Discount | (2 | ) | (14 | ) | (53 | ) | (94 | ) | ||||||||
Total Consolidated Discount Notes | 23,187 | 35,272 | 49,336 | 40,356 | ||||||||||||
Consolidated Bonds: | ||||||||||||||||
Unswapped fixed-rate | 25,090 | 25,528 | 25,650 | 25,468 | ||||||||||||
Unswapped adjustable-rate | 1,000 | 3,623 | 6,424 | 9,638 | ||||||||||||
Swapped fixed-rate | 14,997 | 12,543 | 10,140 | 11,969 | ||||||||||||
Total Par Consolidated Bonds | 41,087 | 41,694 | 42,214 | 47,075 | ||||||||||||
Other items(1) | 135 | 145 | 179 | 62 | ||||||||||||
Total Consolidated Bonds | 41,222 | 41,839 | 42,393 | 47,137 | ||||||||||||
Total Consolidated Obligations (2) | $ | 64,409 | $ | 77,111 | $ | 91,729 | $ | 87,493 | ||||||||
(1) | Includes unamortized premiums/discounts, hedging and other basis adjustments. | ||
(2) | The 12 FHLBanks have joint and several liability for the par amount of all of the Consolidated Obligations issued on their behalves. See Note 13 of the Notes to Financial Statements for additional detail and discussion related to Consolidated Obligations. The par amount of the outstanding Consolidated Obligations of all 12 FHLBanks was (in millions) $930,617 and $1,251,542 at December 31, 2009 and 2008, respectively. |
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(In millions) | Year of Maturity | Year of Next Call | ||||||||||||||||||
Callable | Noncallable | Amortizing | Total | Callable | ||||||||||||||||
Due in 1 year or less | $ | - | $ | 3,686 | $ | 4 | $ | 3,690 | $ | 7,516 | ||||||||||
Due after 1 year through 2 years | 400 | 3,207 | 4 | 3,611 | 1,695 | |||||||||||||||
Due after 2 years through 3 years | 1,245 | 3,089 | 51 | 4,385 | 125 | |||||||||||||||
Due after 3 years through 4 years | 1,500 | 2,162 | 14 | 3,676 | - | |||||||||||||||
Due after 4 years through 5 years | 1,161 | 1,196 | 4 | 2,361 | 25 | |||||||||||||||
Thereafter | 5,055 | 2,182 | 130 | 7,367 | - | |||||||||||||||
Total | $ | 9,361 | $ | 15,522 | $ | 207 | $ | 25,090 | $ | 9,361 | ||||||||||
(In millions) | December 31, 2009 | December 31, 2008 | ||||||
Total Book Value Eligible Assets | $ | 71,786 | $ | 98,922 | ||||
Total Book Value Consolidated Obligations | (64,409 | ) | (91,729 | ) | ||||
Excess Eligible Assets | $ | 7,377 | $ | 7,193 | ||||
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Year Ended December 31, | ||||||||||||||||
(In millions) | 2009 | 2008 | ||||||||||||||
Year End | Average | Year End | Average | |||||||||||||
GAAP Capital Stock | $ | 3,063 | $ | 3,801 | $ | 3,962 | $ | 3,798 | ||||||||
Mandatorily Redeemable Capital Stock | 676 | 211 | 111 | 127 | ||||||||||||
Regulatory Capital Stock | 3,739 | 4,012 | 4,073 | 3,925 | ||||||||||||
Retained Earnings | 412 | 405 | 326 | 335 | ||||||||||||
Regulatory Capital | $ | 4,151 | $ | 4,417 | $ | 4,399 | $ | 4,260 | ||||||||
2009 | 2008 | |||||||||||||||
Year End | Average | Year End | Average | |||||||||||||
GAAP | 4.86 | % | 4.96 | % | 4.36 | % | 4.37 | % | ||||||||
Regulatory | 5.81 | 5.22 | 4.48 | 4.51 |
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(In millions) | 2009 | 2008 | ||||||
Regulatory stock balance at beginning of year | $ | 4,073 | $ | 3,591 | ||||
Stock purchases: | ||||||||
Membership stock | 47 | 72 | ||||||
Activity stock | 45 | 303 | ||||||
Stock dividends | - | 152 | ||||||
Stock repurchases: | ||||||||
Member redemptions | (376 | ) | (23 | ) | ||||
Withdrawals | (50 | ) | (22 | ) | ||||
Regulatory stock balance at the end of the year | $ | 3,739 | $ | 4,073 | ||||
(In millions) | December 31, 2009 | December 31, 2008 | ||||||
Excess capital stock (Capital Plan definition) | $ | 905 | $ | 649 | ||||
Cooperative utilization of capital stock | $ | 216 | $ | 406 | ||||
Mission Asset Activity capitalized with cooperative capital stock | $ | 5,394 | $ | 10,150 | ||||
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December 31, 2009 | December 31, 2008 | |||||||||||||||||
Percent | Percent | |||||||||||||||||
Name | Balance | of Total | Name | Balance | of Total | |||||||||||||
U.S. Bank, N.A. | $ | 591 | 16 | % | U.S. Bank, N.A. | $ | 841 | 21 | % | |||||||||
PNC Bank, N.A.(1) | 404 | 11 | PNC Bank, N.A.(1) | 404 | 10 | |||||||||||||
Fifth Third Bank | 401 | 11 | Fifth Third Bank | 394 | 10 | |||||||||||||
The Huntington National Bank | 241 | 6 | The Huntington National Bank | 241 | 6 | |||||||||||||
AmTrust Bank | 223 | 5 | ||||||||||||||||
Total | $ | 1,637 | 44 | % | ||||||||||||||
Total | $ | 2,103 | 52 | % | ||||||||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Commercial Banks | 473 | 474 | ||||||
Thrifts and Savings Banks | 128 | 130 | ||||||
Credit Unions | 110 | 104 | ||||||
Insurance Companies | 24 | 20 | ||||||
Total Member Stockholders | 735 | 728 | ||||||
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(In millions) | December 31, | ||||||
2009 | 2008 | ||||||
Commercial Banks | $ | 2,422 | $ | 3,053 | |||
Thrifts and Savings Banks | 455 | 667 | |||||
Credit Unions | 98 | 94 | |||||
Insurance Companies | 168 | 149 | |||||
Other(1) | 596 | 110 | |||||
Total | $ | 3,739 | $ | 4,073 | |||
(1) | “Other” includes capital stock of former members that have been, or will be, merged with non-members. This stock is mandatorily redeemable capital stock. |
December 31, | ||||||||
Member Asset Size(1) | 2009 | 2008 | ||||||
Up to $100 million | 226 | 235 | ||||||
> $100 up to $500 million | 395 | 381 | ||||||
> $500 million up to $1 billion | 57 | 58 | ||||||
> $1 billion | 57 | 54 | ||||||
Total Member Stockholders | 735 | 728 | ||||||
(1) | The December 31, 2009 membership composition reflects members’ assets as of September 30, 2009. |
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(Dollars in millions) | 2009 | 2008 | 2007 | ||||||||||||||||||||||||
Amount | ROE | (a) | Amount | ROE | (a) | Amount | ROE | (a) | |||||||||||||||||||
Net interest income | $ | 387 | 6.75 | % | $ | 364 | 6.46 | % | $ | 421 | 7.90 | % | |||||||||||||||
Net gain (loss) on derivatives and hedging activities | 18 | 0.31 | 2 | 0.03 | (12 | ) | (0.22 | ) | |||||||||||||||||||
Other non-interest income | 20 | 0.35 | 7 | 0.13 | 6 | 0.11 | |||||||||||||||||||||
Total non-interest income (loss) | 38 | 0.66 | 9 | 0.16 | (6 | ) | (0.11 | ) | |||||||||||||||||||
Total revenue | 425 | 7.41 | 373 | 6.62 | 415 | 7.79 | |||||||||||||||||||||
Total other expense | (59 | ) | (1.03 | ) | (51 | ) | (0.89 | ) | (48 | ) | (0.92 | ) | |||||||||||||||
Assessments | (98 | ) | (b | ) | (86 | ) | (b | ) | (98 | ) | (b | ) | |||||||||||||||
Net income | $ | 268 | 6.38 | % | $ | 236 | 5.73 | % | $ | 269 | 6.87 | % | |||||||||||||||
(a) | The ROE amounts have been computed using dollars in thousands. Accordingly, recalculations based upon the disclosed amounts (millions) in this table may produce nominally different results. | ||
(b) | The effect on ROE of the REFCORP and Affordable Housing Program assessments ispro-rated within the other categories. |
§ | Net interest rate spread.This component equals the balance of total earning assets multiplied by the difference between the book yield on interest-earning assets and the book cost of interest-bearing liabilities. It is composed of net (amortization)/accretion, prepayment fees on Advances, and all other earnings from interest-earning assets net of funding costs. The latter is the largest component and represents the coupon yields of interest-earning assets net of the coupon costs of Consolidated Obligations and deposits. | ||
§ | Earnings from funding assets with interest-free capital (“earnings from capital”). Because yields on assets funded with capital change when market interest rates move, earnings from capital funding move in the same direction as rates change. We deploy much of our capital in short-term and adjustable-rate assets in order to help ensure that ROE moves in the same direction as short-term interest rates and to help control market risk exposure. Earnings from capital can be computed as the average capital balance multiplied by the average cost of interest-bearing liabilities. |
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2009 | 2008 | 2007 | ||||||||||||||||||||||
(Dollars in millions) | Pct of | Pct of | Pct of | |||||||||||||||||||||
Earning | Earning | Earning | ||||||||||||||||||||||
Amount | Assets | Amount | Assets | Amount | Assets | |||||||||||||||||||
Components of net interest rate spread: | ||||||||||||||||||||||||
Other components of net interest rate spread | $ | 326 | 0.39 | % | $ | 253 | 0.27 | % | $ | 229 | 0.27 | % | ||||||||||||
Net (amortization)/accretion(1) (2) | (34 | ) | (0.04 | ) | (48 | ) | (0.05 | ) | (30 | ) | (0.03 | ) | ||||||||||||
Prepayment fees on Advances, net(2) | 8 | 0.01 | 2 | - | 3 | - | ||||||||||||||||||
Total net interest rate spread | 300 | 0.36 | 207 | 0.22 | 202 | 0.24 | ||||||||||||||||||
Earnings from funding assets with interest-free capital | 87 | 0.10 | 157 | 0.17 | 219 | 0.26 | ||||||||||||||||||
Total net interest income/net interest margin | $ | 387 | 0.46 | % | $ | 364 | 0.39 | % | $ | 421 | 0.50 | % | ||||||||||||
(1) | Includes (amortization)/accretion of premiums/discounts on mortgage assets and Consolidated Obligations and deferred transaction costs (concession fees) for Consolidated Obligations. | ||
(2) | These components of net interest rate spread have been segregated here to display their relative impact. |
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§ | Re-issuing called Consolidated Bonds at lower debt costs—Favorable:Between the fourth quarter of 2008 and the end of 2009, the reductions in intermediate- and long-term interest rates enabled us to retire (call) approximately $17 billion of unswapped Bonds before their final maturities and replace them with new Consolidated Obligations, many at significantly lower interest rates. Most of the called Bonds funded mortgage assets. By contrast, the amount of mortgage paydowns, which we reinvested in assets with lower rates, was substantially less than the amount of Bonds called. In addition, Bond calls and replacements with new debt enabled us to favorably alter the distribution of liability maturities, which raised earnings given the sharply upward sloping yield curve, without materially affecting market risk exposure. | ||
§ | Wider portfolio spreads on LIBOR Advances—Favorable:We use Discount Notes to fund a large amount (normally between $10 billion and $20 billion) of LIBOR-indexed Advances. In the first six months of 2009, average portfolio spreads on LIBOR-indexed Advances relative to their Discount Note funding were substantially wider than the 18 to 20 basis points historical average and wider than the average spreads in 2008. Spreads widened because the financial crisis raised the cost of inter-bank lending (represented by LIBOR) relative to other short-term interest costs such as our Discount Notes. In some months, LIBOR rose as other short-term market rates fell. The spreads were particularly wide in the fourth quarter of 2008 (which benefited 2009’s earnings) and the first quarter of 2009. | ||
Early in the third quarter of 2009, short-term LIBOR decreased and the spread between LIBOR and Discount Notes reverted back to approximately its long-term historical level. The spread reversion, which lowered the cost of inter-bank lending relative to Discount Notes, appears to have been due to the market’s perception that the financial crisis had eased combined with the effects of the massive amounts of government liquidity injected into the financial system. | |||
§ | Increase in benefit from short funding from steeper yield curve—Favorable:Market yield curves became significantly steeper in late 2008 and 2009 as short-term interest rates fell to historical lows of close to zero. This benefited earnings due to our use of a modest amount of short-term debt Obligations to fund long-term assets (short funding). In addition, differences in principal paydowns of long-term assets versus liabilities, including muted acceleration of mortgage prepayments, caused the amount of short funding to increase in the first three quarters of 2009, before we reduced the amount of short funding in the fourth quarter to protect future earnings against the potential for large increases in long-term interest rates. | ||
§ | Decrease in financial leverage due to lower Advance balances—Unfavorable:The average principal balance of Advances was $16.3 billion lower in 2009 compared to 2008, which reduced our financial leverage. Although many Advance programs experienced reductions in balances, much of the decrease occurred from repayment and maturities of LIBOR Advances. Because, as explained above, we had funded many of these LIBOR Advances with Discount Notes at elevated spreads until the third quarter of 2009, the loss of these Advances decreased net interest income even more. We did not replace the lower Advance balances with sufficient increases in other asset balances to fully offset the lost income. |
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§ | Favorable Factors:Annual average spreads between LIBOR Advances and Discount Notes widened in 2008 compared to 2007, as the financial crisis took hold. We called over $7.0 billion of Bonds and replaced them with Consolidated Obligations at lower interest costs. Average total assets expanded by $10.1 billion. The average amount of capital grew by $221 million, which we invested in interest-earnings assets. | ||
§ | Unfavorable Factors:A large amount of low cost debt matured, most of which we replaced with new Bonds at higher interest costs. We carried a large amount of overnight Advances and money market investments funded mostly with longer-term Discount Notes, and the sharp reductions in overnight interest rates decreased earnings by causing the overnight assets to reprice at the lower rates sooner than the funding. Finally, we lowered market risk exposure to protect against the potential for increases in interest rates by issuing more long-term Bonds. This decreased earnings given the steep upward sloping debt curves and the reductions in short-term interest rates. |
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The following table provides yields/rates and average balances for major balance sheet accounts. All data include the impact of interest rate swaps, which we allocate to each asset and liability category according to their designated hedging relationship.
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
(Dollars in millions) | Balance | Interest | Rate(1) | Balance | Interest | Rate(1) | Balance | Interest | Rate(1) | |||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Advances | $ | 44,504 | $ | 578 | 1.30 | % | $ | 60,499 | $ | 1,895 | 3.13 | % | $ | 49,362 | $ | 2,592 | 5.25 | % | ||||||||||||||||||
Mortgage loans held for portfolio(2) | 9,570 | 484 | 5.06 | 8,683 | 437 | 5.03 | 8,817 | 467 | 5.30 | |||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements | 8,382 | 12 | 0.15 | 8,181 | 159 | 1.95 | 6,737 | 346 | 5.14 | |||||||||||||||||||||||||||
Other short-term investments | 1,281 | 3 | 0.19 | 25 | 1 | 2.93 | 693 | 37 | 5.33 | |||||||||||||||||||||||||||
Interest-bearing deposits in banks(3) (4) | 8,503 | 27 | 0.31 | 4,000 | 69 | 1.73 | 6,157 | 325 | 5.28 | |||||||||||||||||||||||||||
Mortgage-backed securities | 12,118 | 578 | 4.77 | 12,593 | 627 | 4.98 | 12,100 | 580 | 4.79 | |||||||||||||||||||||||||||
Other long-term investments | 11 | - | 4.20 | 16 | 1 | 5.01 | 19 | 1 | 5.72 | |||||||||||||||||||||||||||
Loans to other FHLBanks | 19 | - | 0.13 | 18 | - | 1.79 | 7 | - | 4.70 | |||||||||||||||||||||||||||
Total earning assets | 84,388 | 1,682 | 2.00 | 94,015 | 3,189 | 3.39 | 83,892 | 4,348 | 5.18 | |||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Allowance for credit losses on mortgage loans | - | - | - | |||||||||||||||||||||||||||||||||
Other assets | 282 | 342 | 401 | |||||||||||||||||||||||||||||||||
Total assets | $ | 84,670 | $ | 94,357 | $ | 84,293 | ||||||||||||||||||||||||||||||
Liabilities and Capital | ||||||||||||||||||||||||||||||||||||
Term deposits | $ | 123 | 1 | 0.94 | $ | 103 | 3 | 2.87 | $ | 131 | 7 | 5.15 | ||||||||||||||||||||||||
Other interest bearing deposits(4) | 1,613 | 1 | 0.04 | 1,346 | 23 | 1.69 | 932 | 44 | 4.78 | |||||||||||||||||||||||||||
Short-term borrowings | 35,272 | 112 | 0.32 | 40,356 | 947 | 2.35 | 24,763 | 1,235 | 4.99 | |||||||||||||||||||||||||||
Unswapped fixed-rate Consolidated Bonds | 25,539 | 1,059 | 4.15 | 25,469 | 1,175 | 4.62 | 25,875 | 1,178 | 4.55 | |||||||||||||||||||||||||||
Unswapped adjustable-rate Consolidated Bonds | 3,623 | 33 | 0.90 | 9,638 | 301 | 3.12 | 4,670 | 244 | 5.23 | |||||||||||||||||||||||||||
Swapped Consolidated Bonds | 12,677 | 80 | 0.63 | 12,030 | 368 | 3.06 | 22,948 | 1,210 | 5.27 | |||||||||||||||||||||||||||
Mandatorily redeemable capital stock | 211 | 9 | 4.43 | 127 | 8 | 6.45 | 132 | 9 | 6.90 | |||||||||||||||||||||||||||
Other borrowings | 1 | - | 0.07 | 1 | - | 1.64 | - | - | - | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 79,059 | 1,295 | 1.64 | 89,070 | 2,825 | 3.17 | 79,451 | 3,927 | 4.94 | |||||||||||||||||||||||||||
Non-interest bearing deposits | 5 | 4 | 14 | |||||||||||||||||||||||||||||||||
Other liabilities | 1,405 | 1,155 | 921 | |||||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Total capital | 4,201 | 4,128 | 3,907 | |||||||||||||||||||||||||||||||||
Total liabilities and capital | $ | 84,670 | $ | 94,357 | $ | 84,293 | ||||||||||||||||||||||||||||||
Net interest rate spread | 0.36 | % | 0.22 | % | 0.24 | % | ||||||||||||||||||||||||||||||
Net interest income and net interest margin | $ | 387 | 0.46 | % | $ | 364 | 0.39 | % | $ | 421 | 0.50 | % | ||||||||||||||||||||||||
Average interest-earnings assets to interest-bearing liabilities | 106.74 | % | 105.55 | % | 105.59 | % | ||||||||||||||||||||||||||||||
(1) | Amounts used to calculate average rates are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts (millions) may not produce the same results. | ||
(2) | Nonperforming loans are included in average balances used to determine average rate. There were none for the periods displayed. | ||
(3) | Includes securities classified as available-for-sale, based on their amortized costs. The yield information does not give effect to changes in fair value that are reflected as a component of stockholders’ equity for available-for-sale securities. | ||
(4) | Amounts include certificates of deposits and bank notes that are classified as available-for-sale or held-to-maturity securities in the Statements of Condition. Additionally, the average balance amounts include the rights or obligations to cash collateral, which are included in the fair value of derivative assets or derivative liabilities on the Statements of Condition at period end. |
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(In millions) | 2009 over 2008 | 2008 over 2007 | ||||||||||||||||||||||
Volume(1)(3) | Rate (2)(3) | Total | Volume (1)(3) | Rate (2)(3) | Total | |||||||||||||||||||
Increase (decrease) in interest income | ||||||||||||||||||||||||
Advances | $ | (409 | ) | $ | (908 | ) | $ | (1,317 | ) | $ | 500 | $ | (1,197 | ) | $ | (697 | ) | |||||||
Mortgage loans held for portfolio | 45 | 2 | 47 | (7 | ) | (23 | ) | (30 | ) | |||||||||||||||
Federal funds sold and securities purchased under resale agreements | 4 | (151 | ) | (147 | ) | 62 | (249 | ) | (187 | ) | ||||||||||||||
Other short-term investments | 3 | (1 | ) | 2 | (24 | ) | (12 | ) | (36 | ) | ||||||||||||||
Interest-bearing deposits in banks | 41 | (83 | ) | (42 | ) | (88 | ) | (168 | ) | (256 | ) | |||||||||||||
Mortgage-backed securities | (23 | ) | (26 | ) | (49 | ) | 24 | 23 | 47 | |||||||||||||||
Other long-term investments | (1 | ) | - | (1 | ) | - | - | - | ||||||||||||||||
Loans to other FHLBanks | - | - | - | - | - | - | ||||||||||||||||||
Total | (340 | ) | (1,167 | ) | (1,507 | ) | 467 | (1,626 | ) | (1,159 | ) | |||||||||||||
Increase (decrease) in interest expense | ||||||||||||||||||||||||
Term deposits | - | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (4 | ) | |||||||||||||
Other interest-bearing deposits | 4 | (26 | ) | (22 | ) | 15 | (36 | ) | (21 | ) | ||||||||||||||
Short-term borrowings | (106 | ) | (729 | ) | (835 | ) | 554 | (842 | ) | (288 | ) | |||||||||||||
Unswapped fixed-rate Consolidated Bonds | 4 | (120 | ) | (116 | ) | (19 | ) | 16 | (3 | ) | ||||||||||||||
Unswapped adjustable-rate Consolidated Bonds | (125 | ) | (143 | ) | (268 | ) | 184 | (127 | ) | 57 | ||||||||||||||
Swapped Consolidated Bonds | 18 | (306 | ) | (288 | ) | (447 | ) | (395 | ) | (842 | ) | |||||||||||||
Mandatorily redeemable capital stock | 4 | (3 | ) | 1 | - | (1 | ) | (1 | ) | |||||||||||||||
Other borrowings | - | - | - | - | - | - | ||||||||||||||||||
Total | (201 | ) | (1,329 | ) | (1,530 | ) | 285 | (1,387 | ) | (1,102 | ) | |||||||||||||
Increase (decrease) in net interest income | $ | (139 | ) | $ | 162 | $ | 23 | $ | 182 | $ | (239 | ) | $ | (57 | ) | |||||||||
(1) | Volume changes are calculated as the change in volume multiplied by the prior year rate. | |
(2) | Rate changes are calculated as the change in rate multiplied by the prior year average balance. | |
(3) | Changes that are not identifiable as either volume-related or rate-related, but rather are equally attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes. |
(In millions) | 2009 | 2008 | 2007 | |||||||||
Advances(1) | $ | (505 | ) | $ | (189 | ) | $ | 63 | ||||
Mortgage purchase commitments(2) | 3 | - | 2 | |||||||||
Consolidated Obligations(1) | 158 | 69 | (103 | ) | ||||||||
Decrease in net interest income | $ | (344 | ) | $ | (120 | ) | $ | (38 | ) | |||
(1) | Represents interest rate swap interest. | ||
(2) | Represents the amortization of derivative fair value adjustments. |
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§ | the economic cost of hedging purchased options embedded in Advances; | ||
§ | converting fixed-rate Regular Advances and Advances with below-market coupons and purchased options to at-market coupons tied to adjustable-rate LIBOR; and | ||
§ | converting fixed-rate coupons to an adjustable-rate LIBOR coupon on swapped Obligations. |
(Dollars in millions) | 2009 | 2008 | 2007 | |||||||||
Other Income (Loss) | ||||||||||||
Net gains on held-to-maturity securities | $ | 12 | $ | - | $ | - | ||||||
Net gain (loss) on derivatives and hedging activities | 18 | 2 | (12 | ) | ||||||||
Other non-interest income, net | 8 | 7 | 6 | |||||||||
Total other income (loss) | $ | 38 | $ | 9 | $ | (6 | ) | |||||
Other Expense | ||||||||||||
Compensation and benefits | $ | 34 | $ | 26 | $ | 25 | ||||||
Other operating expense | 15 | 13 | 13 | |||||||||
Finance Agency | 3 | 3 | 3 | |||||||||
Office of Finance | 3 | 3 | 3 | |||||||||
Other expenses | 4 | 6 | 4 | |||||||||
Total other expense | $ | 59 | $ | 51 | $ | 48 | ||||||
Average total assets | $ | 84,670 | $ | 94,357 | $ | 84,293 | ||||||
Average regulatory capital | 4,417 | 4,260 | 4,044 | |||||||||
Total other expense to average total assets(1) | 0.07% | 0.05% | 0.06% | |||||||||
Total other expense to average regulatory capital(1) | 1.33% | 1.18% | 1.20% |
(1) | Amounts used to calculate percentages are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts (millions) may not produce the same results. |
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1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Total | ||||||||||||||||
Components of 2009 ROE: | ||||||||||||||||||||
Net interest income: | ||||||||||||||||||||
Other net interest income | 8.37 | % | 7.43 | % | 6.66 | % | 6.24 | % | 7.20 | % | ||||||||||
Net (amortization)/accretion | (0.90 | ) | (0.23 | ) | (0.60 | ) | (0.62 | ) | (0.58 | ) | ||||||||||
Prepayment fees | 0.26 | 0.07 | 0.12 | 0.07 | 0.13 | |||||||||||||||
Total net interest income | 7.73 | % | 7.27 | % | 6.18 | % | 5.69 | % | 6.75 | % | ||||||||||
Net gain on derivatives and hedging activities | 0.31 | 0.23 | 0.33 | 0.36 | 0.31 | |||||||||||||||
Other non-interest income | 0.56 | 0.12 | 0.16 | 0.60 | 0.35 | |||||||||||||||
Total non-interest income | 0.87 | 0.35 | 0.49 | 0.96 | 0.66 | |||||||||||||||
Total revenue | 8.60 | 7.62 | 6.67 | 6.65 | 7.41 | |||||||||||||||
Total other expense | (0.82 | ) | (0.84 | ) | (0.97 | ) | (1.54 | ) | (1.03 | ) | ||||||||||
Assessments | (a | ) | (a | ) | (a | ) | (a | ) | (a | ) | ||||||||||
2009 ROE | 7.78 | % | 6.78 | % | 5.70 | % | 5.11 | % | 6.38 | % | ||||||||||
2008 ROE | 5.06 | % | 6.38 | % | 6.26 | % | 5.19 | % | 5.73 | % | ||||||||||
2007 ROE | 6.63 | % | 7.11 | % | 6.80 | % | 6.96 | % | 6.87 | % | ||||||||||
(a) | The effect on ROE of the REFCORP and Affordable Housing Program assessments is pro-rated within the other categories. |
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Traditional | Mortgage | |||||||||||
Member | Purchase | |||||||||||
Finance | Program | Total | ||||||||||
2009 | ||||||||||||
Net interest income | $ | 276 | $ | 111 | $ | 387 | ||||||
Net income | $ | 193 | $ | 75 | $ | 268 | ||||||
Average assets | $ | 75,054 | $ | 9,616 | $ | 84,670 | ||||||
Assumed average capital allocation | $ | 3,724 | $ | 477 | $ | 4,201 | ||||||
Return on Average Assets (1) | 0.26 | % | 0.78 | % | 0.32 | % | ||||||
Return on Average Equity (1) | 5.19 | % | 15.65 | % | 6.38 | % | ||||||
2008 | ||||||||||||
Net interest income | $ | 305 | $ | 59 | $ | 364 | ||||||
Net income | $ | 196 | $ | 40 | $ | 236 | ||||||
Average assets | $ | 85,593 | $ | 8,764 | $ | 94,357 | ||||||
Assumed average capital allocation | $ | 3,745 | $ | 383 | $ | 4,128 | ||||||
Return on Average Assets (1) | 0.23 | % | 0.46 | % | 0.25 | % | ||||||
Return on Average Equity (1) | 5.24 | % | 10.51 | % | 5.73 | % | ||||||
2007 | ||||||||||||
Net interest income | $ | 331 | $ | 90 | $ | 421 | ||||||
Net income | $ | 208 | $ | 61 | $ | 269 | ||||||
Average assets | $ | 74,226 | $ | 10,067 | $ | 84,293 | ||||||
Assumed average capital allocation | $ | 3,441 | $ | 466 | $ | 3,907 | ||||||
Return on Average Assets (1) | 0.28 | % | 0.61 | % | 0.32 | % | ||||||
Return on Average Equity (1) | 6.03 | % | 13.10 | % | 6.87 | % | ||||||
(1) | Amounts used to calculate returns are based on numbers in thousands. Accordingly, recalculations based upon the disclosed amounts (millions) may not produce the same results. |
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§ | residual effects from the economic recession; | ||
§ | residual effects from the financial crisis; | ||
§ | the various actual and potential actions of the federal government, including the Federal Reserve, Treasury Department and FDIC, to attempt to mitigate the financial crisis and recession; | ||
§ | potentially unfavorable actions regarding the ultimate financial, legislative and regulatory disposition of issues involving the GSEs, especially actions related to Fannie Mae and Freddie Mac with whom the FHLBanks share a common regulator; and | ||
§ | the ongoing concerns about some other FHLBanks’ capital adequacy and profitability. |
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§ | Market Value of Equity Sensitivity.The market value of equity for the entire balance sheet in two hypothetical interest rate scenarios (up 200 basis points and down 200 basis points from the current interest rate environment) must be between positive and negative 15 percent of the current balance sheet’s market value of equity. The interest rate movements are “shocks,” defined as instantaneous, permanent, and parallel changes in interest rates in which every point on the yield curve is changed by the same amount. | ||
§ | Duration of Equity.The duration of equity for the entire balance sheet in the current (“flat rate” or “base case”) interest rate environment must be between positive and negative six years. In addition, the duration of equity in up and down 200 basis points interest rate shocks must be within positive and negative eight years. | ||
§ | Market Capitalization.The market capitalization ratio (defined as the ratio of the market value of equity to the par value of regulatory stock) must be 95 percent in the current rate environment and must be above 85 percent in each of two stressful interest rate shocks. |
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§ | Mortgage Assets Portfolio.The net market value of the mortgage assets portfolio as a percentage of the book value of portfolio assets must be between positive three percent and negative three percent in each of the up and down 200 basis points interest rate shocks. Net market value is defined here as the market value of assets minus the market value of liabilities, with no assumed capital allocation. | ||
§ | Mortgage Assets as a Multiple of Regulatory Capital.The amount of mortgage assets must be less than seven times the amount of regulatory capital. |
(Dollars in millions) | Down 200 | Down 100 | Down 50 | Flat Rates | Up 50 | Up 100 | Up 200 | |||||||||||||||||||||
Average Results | ||||||||||||||||||||||||||||
2009 Full Year | ||||||||||||||||||||||||||||
Market Value of Equity | $ | 4,146 | $ | 4,247 | $ | 4,324 | $ | 4,404 | $ | 4,446 | $ | 4,442 | $ | 4,334 | ||||||||||||||
% Change from Flat Case | (5.9 | )% | (3.6 | )% | (1.8 | )% | - | 1.0 | % | 0.9 | % | (1.6 | )% | |||||||||||||||
2008 Full Year | ||||||||||||||||||||||||||||
Market Value of Equity | $ | 3,698 | $ | 3,907 | $ | 3,979 | $ | 4,010 | $ | 3,998 | $ | 3,956 | $ | 3,840 | ||||||||||||||
% Change from Flat Case | (7.8 | )% | (2.6 | )% | (0.8 | )% | - | (0.3 | )% | (1.3 | )% | (4.2 | )% | |||||||||||||||
Month-End Results | ||||||||||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||
Market Value of Equity | $ | 4,184 | $ | 4,251 | $ | 4,271 | $ | 4,280 | $ | 4,256 | $ | 4,208 | $ | 4,066 | ||||||||||||||
% Change from Flat Case | (2.2 | )% | (0.7 | )% | (0.2 | )% | - | (0.6 | )% | (1.7 | )% | (5.0 | )% | |||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||
Market Value of Equity | $ | 3,831 | $ | 3,965 | $ | 4,060 | $ | 4,153 | $ | 4,180 | $ | 4,136 | $ | 3,924 | ||||||||||||||
% Change from Flat Case | (7.8 | )% | (4.5 | )% | (2.2 | )% | - | 0.7 | % | (0.4 | )% | (5.5 | )% |
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(In years) | Down 200 | Down 100 | Down 50 | Flat Rates | Up 50 | Up 100 | Up 200 | |||||||||||||||||||||
Average Results | ||||||||||||||||||||||||||||
2009 Full Year | (2.3 | ) | (3.3 | ) | (3.8 | ) | (2.9 | ) | (0.7 | ) | 1.3 | 3.5 | ||||||||||||||||
2008 Full Year | (5.7 | ) | (4.3 | ) | (2.4 | ) | (0.2 | ) | 1.6 | 2.6 | 3.1 | |||||||||||||||||
Month-End Results | ||||||||||||||||||||||||||||
December 31, 2009 | (0.8 | ) | (0.7 | ) | (0.6 | ) | 0.6 | 1.8 | 2.8 | 4.1 | ||||||||||||||||||
December 31, 2008 | (4.2 | ) | (4.5 | ) | (4.6 | ) | (3.1 | ) | 0.6 | 3.6 | 6.4 |
Monthly Average | ||||||||||||
Year Ended | ||||||||||||
December 31, 2009 | December 31, 2009 | December 31, 2008 | ||||||||||
Market Value of Equity to Book Value of Regulatory Capital | 103 | % | 100 | % | 94 | % | ||||||
Market Value of Equity to Par Value of Regulatory Capital Stock | 114 | % | 111 | % | 102 | % |
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Down 200 | Down 100 | Down 50 | Flat Rates | Up 50 | Up 100 | Up 200 | ||||||||||||||||||||||
Average Results | ||||||||||||||||||||||||||||
2009 Full Year | (25.0 | )% | (14.8 | )% | (7.5 | )% | - | 4.0 | % | 4.0 | % | (4.7 | )% | |||||||||||||||
2008 Full Year | (47.4 | )% | (16.5 | )% | (5.4 | )% | - | (0.4 | )% | (4.6 | )% | (17.7 | )% | |||||||||||||||
Month-End Results | ||||||||||||||||||||||||||||
December 31, 2009 | (8.0 | )% | (2.4 | )% | (0.7 | )% | - | (1.9 | )% | (5.8 | )% | (17.3 | )% | |||||||||||||||
December 31, 2008 | (49.4 | )% | (27.4 | )% | (13.4 | )% | - | 5.2 | % | 0.8 | % | (25.0 | )% |
§ | the market risk exposure on Putable and Convertible Advances for which members have sold us options embedded within the Advances; | ||
§ | the market risk exposure of options we have sold that are embedded with Advances; and | ||
§ | Regular Fixed Rate Advances when it may not be as advantageous to issue Obligations or when it may improve our market risk management. |
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December 31, | |||||||||||
(In millions) | 2009 | 2008 | |||||||||
Hedged Item | Hedging Instrument | ||||||||||
Consolidated Obligations | Interest rate swap | $ | 15,523 | $ | 10,140 | ||||||
Convertible Advances | Interest rate swap | 2,816 | 3,478 | ||||||||
Putable Advances | Interest rate swap | 7,037 | 6,981 | ||||||||
Advances with purchased caps and/or floors | Interest rate swap | — | 1,400 | ||||||||
Regular Fixed Rate Advances | Interest rate swap | 3,469 | 5,808 | ||||||||
Mandatory Delivery | Commitments to sell to-be-announced | ||||||||||
Contracts | mortgage-backed securities | — | 386 | ||||||||
Total based on Hedged Item(1) | $ | 28,845 | $ | 28,193 | |||||||
(1) | We enter into Mandatory Delivery Contracts (commitments to purchase loans) in the normal course of business and economically hedge them with interest rate forward agreements (commitments to sell to-be-announced mortgage-backed securities). Therefore, the Mandatory Delivery Contracts (which are derivatives) are the objects of the hedge (the Hedged Item) and are not listed as a Hedging Instrument in this table. |
December 31, | |||||||||
(In millions) | 2009 | 2008 | |||||||
Shortcut (Fair Value) Treatment | |||||||||
Advances | $ | 5,733 | $ | 8,246 | |||||
Consolidated Obligations | 450 | 860 | |||||||
Total | 6,183 | 9,106 | |||||||
Long-haul (Fair Value) Treatment | |||||||||
Advances | 7,405 | 7,790 | |||||||
Consolidated Obligations | 14,873 | 8,935 | |||||||
Total | 22,278 | 16,725 | |||||||
Economic Hedges | |||||||||
Advances | 184 | 1,631 | |||||||
Consolidated Obligations | 200 | 345 | |||||||
Mandatory Delivery Contracts | 79 | 918 | |||||||
To-be-announced mortgage-backed securities hedges | — | 386 | |||||||
Total | 463 | 3,280 | |||||||
Total Derivatives | $ | 28,924 | $ | 29,111 | |||||
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§ | We must maintain at least a 4.00 percent minimum regulatory capital-to-assets ratio. | ||
§ | We must maintain at least a 5.00 percent minimum leverage ratio of capital divided by total assets, which includes a 1.5 weighting factor applicable to permanent capital. Because all of our Class B stock is permanent capital, this requirement is met automatically if we satisfy the 4.00 percent unweighted capital requirement. | ||
§ | We are subject to a risk-based capital rule, as discussed below. |
§ | the five-year redemption period for Class B stock; | ||
§ | the option we have to call on members to purchase additional capital if required to preserve safety and soundness; and | ||
§ | the limitations on our ability to honor requested redemptions of capital if we are at risk of not maintaining safe and sound operations. |
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(Dollars in millions) | Year End 2009 | Monthly Average 2009 | Year End 2008 | |||||||||
Market risk-based capital | $ 116 | $ 232 | $ 237 | |||||||||
Credit risk-based capital | 184 | 216 | 181 | |||||||||
Operational risk-based capital | 90 | 134 | 125 | |||||||||
Total risk-based capital requirement | 390 | 582 | 543 | |||||||||
Total permanent capital | 4,151 | 4,417 | 4,399 | |||||||||
Excess permanent capital | $ 3,761 | $ 3,835 | $ 3,856 | |||||||||
Risk-based capital as a percent of permanent capital | 9 | % | 13 | % | 12 | % | ||||||
§ | a conservative approach to collateralizing credit that results in significant over-collateralization. This includes 1) systematically raising collateral margins and collateral status as the financial condition of a member or of the collateral pledged deteriorates, and 2) adjusting collateral margins for subprime and nontraditional mortgage loans that we have identified and determined are not properly underwritten; | ||
§ | close monitoring of members’ financial conditions and repayment capacities; | ||
§ | a risk focused process for reviewing and verifying the quality, documentation, and administration of pledged loan collateral; | ||
§ | our belief that we have a moderate level of exposure to poorly performing subprime and nontraditional mortgages pledged as collateral; and | ||
§ | a history of never experiencing a credit loss or delinquency on any Advance. |
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Percent of Total | Collateral Amount | |||||||
Pledged Collateral | ($ Billions) | |||||||
1-4 Family Residential | 62 | % | $ 94.0 | |||||
Home Equity Loans | 18 | 27.6 | ||||||
Commercial Real Estate | 9 | 14.0 | ||||||
Bond Securities | 9 | 14.0 | ||||||
Multi-Family | 2 | 2.1 | ||||||
Farm Real Estate | (a | ) | 0.5 | |||||
Total | 100 | % | $ 152.2 | |||||
(a) | Less than one percent of total pledged collateral. |
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Discount Range | ||||
1-4 Family Residential | 57-80 | % | ||
Home Equity Loans | 25-67 | % | ||
Commercial Real Estate | 20-67 | % | ||
Bond Securities | 0-49 | % | ||
Multi-Family | 40-80 | % | ||
Farm Real Estate | 29-67 | % |
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All Members and Borrowing | |||||||||||||||||||||
Nonmembers | All Borrowers | ||||||||||||||||||||
Collateral-Based | Credit | Collateral-Based | |||||||||||||||||||
Credit | Borrowing | Services | Borrowing | ||||||||||||||||||
Rating | Number | Capacity | Number | Outstanding | Capacity | ||||||||||||||||
1 | 66 | $ | 2.1 | 37 | $ | 0.3 | $ | 1.1 | |||||||||||||
2 | 129 | 36.6 | 82 | 14.4 | 35.9 | ||||||||||||||||
3 | 155 | 9.8 | 116 | 4.0 | 9.1 | ||||||||||||||||
4 | 202 | 39.7 | 176 | 15.6 | 39.3 | ||||||||||||||||
5 | 71 | 6.5 | 60 | 1.6 | 6.4 | ||||||||||||||||
6 | 80 | 3.3 | 73 | 2.4 | 3.3 | ||||||||||||||||
7 | 45 | 2.0 | 41 | 1.2 | 1.9 | ||||||||||||||||
Total | 748 | $ | 100.0 | 585 | $ | 39.5 | $ | 97.0 | |||||||||||||
December 31, 2008 | |||||||||||||||||||||
(Dollars in billions) | |||||||||||||||||||||
All Members and Borrowing | |||||||||||||||||||||
Nonmembers | All Borrowers | ||||||||||||||||||||
Collateral-Based | Credit | Collateral-Based | |||||||||||||||||||
Credit | Borrowing | Services | Borrowing | ||||||||||||||||||
Rating | Number | Capacity | Number | Outstanding | Capacity | ||||||||||||||||
1 | 103 | $ | 32.7 | 69 | $ | 22.1 | $ | 31.8 | |||||||||||||
2 | 149 | 5.8 | 107 | 2.4 | 5.2 | ||||||||||||||||
3 | 223 | 23.9 | 196 | 15.3 | 23.4 | ||||||||||||||||
4 | 165 | 23.5 | 142 | 9.0 | 23.2 | ||||||||||||||||
5 | 35 | 10.1 | 26 | 7.2 | 10.0 | ||||||||||||||||
6 | 49 | 2.6 | 46 | 1.8 | 2.5 | ||||||||||||||||
7 | 16 | 4.5 | 14 | 2.9 | 4.5 | ||||||||||||||||
Total | 740 | $ | 103.1 | 600 | $ | 60.7 | $ | 100.6 | |||||||||||||
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§ | the strong credit enhancements for conventional loans; | ||
§ | the U.S. government insurance on FHA mortgage loans; | ||
§ | no credit losses experienced on any of the approximately 127,000 loans purchased since inception of the Program other than a de minimis loss expected in early 2010; | ||
§ | minimal delinquencies and defaults experienced in the Program’s loan portfolio; | ||
§ | underwriting and loan characteristics consistent with favorable expected credit performance; and | ||
§ | only de minimis losses experienced by supplemental mortgage insurance providers. |
§ | primary mortgage insurance (when applicable); | ||
§ | the Lender Risk Account; and | ||
§ | supplemental mortgage insurance coverage on a loan-by-loan basis that the participating financial institution (PFI) purchases from one of our approved third-party providers, naming us the beneficiary. |
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(In millions) | 2009 | 2008 | ||||||
Lender Risk Account at beginning of year | $ | 49 | $ | 50 | ||||
Additions | 12 | 3 | ||||||
Claims | (3 | ) | (1 | ) | ||||
Scheduled distributions | (3 | ) | (3 | ) | ||||
Lender Risk Account at end of year | $ | 55 | $ | 49 | ||||
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December 31, | December 31, | |||||||
FICO® Score | 2009 | 2008 | ||||||
< 620 | 0 | % | 0 | % | ||||
620 to < 660 | 4 | 5 | ||||||
660 to < 700 | 11 | 12 | ||||||
700 to < 740 | 19 | 21 | ||||||
>= 740 | 66 | 62 | ||||||
Weighted Average | 751 | 745 |
Based on Origination Dates | Based On Estimated Current Value | |||||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||||
Loan-to-Value | 2009 | 2008 | Loan-to-Value | 2009 | 2008 | |||||||||||||
<= 60% | 21 | % | 21 | % | <= 60% | 31 | % | 34 | % | |||||||||
> 60% to 70% | 19 | 18 | > 60% to 70% | 20 | 19 | |||||||||||||
> 70% to 80% | 52 | 53 | > 70% to 80% | 29 | 21 | |||||||||||||
> 80% to 90% | 5 | 5 | > 80% to 90% | 10 | 16 | |||||||||||||
> 90% | 3 | 3 | > 90% to 100% | 5 | 6 | |||||||||||||
> 100% | 5 | 4 | ||||||||||||||||
Weighted Average | 70 | % | 70 | % | Weighted Average | 68 | % | 67 | % |
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Conventional Loans with FICO®Scores Below 660 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||
Loan-to-Value | Amount | % of Total | Amount | % of Total | ||||||||||||
<= 60% | $ | 62 | 22 | % | $ | 73 | 23 | % | ||||||||
> 60% to 70% | 64 | 23 | 72 | 23 | ||||||||||||
> 70% to 80% | 71 | 26 | 79 | 25 | ||||||||||||
> 80% to 90% | 46 | 16 | 50 | 16 | ||||||||||||
> 90% to 100% | 14 | 5 | 22 | 7 | ||||||||||||
> 100% | 22 | 8 | 21 | 6 | ||||||||||||
Total | $ | 279 | 100 | % | $ | 317 | 100 | % | ||||||||
Weighted Average Loan-to-Value | 73 | % | 72 | % | ||||||||||||
Conventional Loans with Loan-to-Values Above 90% | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||
FICO® Score | Amount | % of Total | Amount | % of Total | ||||||||||||
< 620 | $ | 19 | 3 | % | $ | 23 | 3 | % | ||||||||
620 to < 660 | 17 | 2 | 20 | 3 | ||||||||||||
660 to < 700 | 55 | 7 | 48 | 7 | ||||||||||||
700 to < 740 | 92 | 12 | 88 | 12 | ||||||||||||
>= 740 | 561 | 76 | 552 | 75 | ||||||||||||
Total | $ | 744 | 100 | % | $ | 731 | 100 | % | ||||||||
Weighted Average FICO®Score | 761 | 760 |
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December 31, | ||||||||
2009 | 2008 | |||||||
Midwest | 60 | % | 52 | % | ||||
Southeast | 21 | 24 | ||||||
Southwest | 10 | 11 | ||||||
West | 5 | 7 | ||||||
Northeast | 4 | 6 | ||||||
Total | 100 | % | 100 | % | ||||
Mortgage Purchase Program | National Averages | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 (1) | 2008 | |||||||||||||
Delinquencies past due 90 days or more, or in foreclosure: | ||||||||||||||||
Conventional mortgage loans | 0.9 | % | 0.5 | % | 4.3 | % | 2.3 | % | ||||||||
FHA mortgage loans | 4.1 | 2.9 | 8.4 | 6.6 |
(1) | December 31, 2009 national averages for conventional and FHA mortgage loans are based on the most recent national delinquency data, or September 30, 2009. |
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Percent of | Credit Rating | |||||||||||||||
Portfolio | S&P | Moody’s | Fitch | |||||||||||||
Mortgage Guaranty Insurance Corporation (MGIC) | 54 | % | B+ | Ba2 | BB- | |||||||||||
Genworth Residential Mortgage Insurance Corporation (Genworth) | 46 | % | BBB- | Baa2 | N/A | |||||||||||
Total | 100 | % | ||||||||||||||
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(In millions) | December 31, 2009 | December 31, 2008 | ||||||
Federal Reserve deposits (1) | $ 1,807 | $ 19,906 | ||||||
Aaa/AAA | 3,800 | — | ||||||
Aa/AA | 6,830 | 2,512 | ||||||
A | 1,990 | — | ||||||
Baa/BBB | — | — | ||||||
Total | $ 14,427 | $ 22,418 | ||||||
(1) | The Federal Reserve deposit balance are included in Cash and due from banks on the Statement of Condition. |
§ | Each carries increased credit subordination involving additional tranches that absorb the first credit losses beyond that required to receive the triple-A rating. See the table immediately below for information on credit subordination compared to delinquencies. | ||
§ | Each is collateralized primarily by prime, fixed-rate, first lien mortgages originated in 2003 or earlier, not in more recent years when the largest numbers of the mortgages with current and expected credit issues were issued. |
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§ | Each has loan characteristics consistent with favorable expected credit performance. Only 2.4 percent of original principal balances had original FICO® scores below 650, the average original FICO® score was 740, and the average current estimated loan-to-value ratio at December 31, 2009 was 53 percent. | ||
§ | Each has a strong and seasoned credit performance history. At December 31, 2009, the 60-day or more delinquency rate was only 0.38 percent and a de minimis amount (0.16 percent) of the loans backing the securities were in foreclosure or real-estate owned. | ||
§ | Each continues to receive a triple-A rating. |
Original | Current | Weighted | ||||||||||||||
Weighted- | Weighted | Minimum | Average | |||||||||||||
Average | Average | Current | Collateral | |||||||||||||
Credit Support | Credit Support | Credit Support | Delinquency(1) | |||||||||||||
Private-label mortgage-backed securities | ||||||||||||||||
December 31, 2009 | 4.7 | % | 7.6 | % | 5.4 | % | 0.54 | % | ||||||||
December 31, 2008 | 4.7 | 6.7 | 5.1 | 0.33 |
(1) | Collateral delinquency includes loans 60 days or more past due that underlie the securities, all bankruptcies, foreclosures, and real-estate owned. |
Fair Value as | ||||||||||||
a Percent of | ||||||||||||
Unpaid Principal | Unpaid Principal | |||||||||||
Fair Value | Balance | Balance | ||||||||||
December 31, 2009 | $ | 187 | $ | 187 | 99.9 | % | ||||||
December 31, 2008 | 263 | 304 | 86.6 |
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(Dollars in millions) | ||||||||||||||||||||
Gross | Fair Value | Net | ||||||||||||||||||
Credit Rating | Number of | Notional | Credit | of Collateral | Unsecured | |||||||||||||||
Category(1) | Counterparties | Principal | Exposure | Held | Exposure | |||||||||||||||
Aaa/AAA | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Aa/AA | 7 | 11,986 | 4 | - | 4 | |||||||||||||||
A | 7 | 16,859 | 37 | (32 | ) | 5 | ||||||||||||||
Total | 14 | $ | 28,845 | $ | 41 | $ | (32 | ) | $ | 9 | ||||||||||
(1) | Each category includes the related plus (+) and minus (-) ratings (i.e., “A” includes “A+” and “A-” ratings). |
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Credit | Net | |||||||||||
Rating | Notional | Unsecured | ||||||||||
Counterparty | Category | Principal | Exposure | |||||||||
Barclays Bank PLC | Aa/AA | $ | 5,569 | $ | - | |||||||
Bank of America, N.A. | A | 4,189 | - | |||||||||
Credit Suisse International | A | 3,111 | 3 | |||||||||
All others (11 counterparties) | A to Aa/AA | 15,976 | 6 | |||||||||
Total | $ | 28,845 | $ | 9 | ||||||||
§ | Operational liquidity risk is the potential inability to meet anticipated or unanticipated day-to-day liquidity needs through our normal sources of funding. | ||
§ | Contingency liquidity risk is the potential inability to meet liquidity needs because our access to the capital markets to issue Consolidated Obligations is restricted or suspended for a period of time due to a market disruption, operational failure, or real or perceived credit quality problems. |
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Contingency Liquidity Requirement (In millions) | 2009 | 2008 | ||||||
Total Contingency Liquidity Reserves | $ | 21,199 | $ | 34,566 | ||||
Total Requirement | (6,937 | ) | (15,125 | ) | ||||
Excess Contingency Liquidity Available | $ | 14,262 | $ | 19,441 | ||||
Deposit Reserve Requirement (In millions) | 2009 | 2008 | ||||||
Total Eligible Deposit Reserves | $ | 33,465 | $ | 66,733 | ||||
Total Member Deposits | (2,077 | ) | (1,193 | ) | ||||
Excess Deposit Reserves | $ | 31,388 | $ | 65,540 | ||||
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(In millions) | < 1 year | 1<3 years | 3<5 years | > 5 years | Total | |||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Long-term debt (Consolidated Bonds) – par | $ | 14,319 | $ | 12,765 | $ | 6,380 | $ | 7,623 | $ | 41,087 | ||||||||||
Mandatorily redeemable capital stock | 7 | 56 | 613 | - | 676 | |||||||||||||||
Other long-term obligations (term deposits) – par | 76 | 4 | - | - | 80 | |||||||||||||||
Pension and other postretirement benefit obligations | 1 | 3 | 4 | 17 | 25 | |||||||||||||||
Capital lease obligations | - | - | - | - | - | |||||||||||||||
Operating leases (include premises and equipment) | 1 | 2 | 2 | - | 5 | |||||||||||||||
Total Contractual Obligations before off-balance sheet items | 14,404 | 12,830 | 6,999 | 7,640 | 41,873 | |||||||||||||||
Off-balance sheet items(1) | ||||||||||||||||||||
Commitments to fund additional Advances | - | - | - | - | - | |||||||||||||||
Standby Letters of Credit | 4,254 | 57 | 26 | 78 | 4,415 | |||||||||||||||
Standby bond purchase agreements | 144 | 68 | 200 | - | 412 | |||||||||||||||
Commitments to fund mortgage loans | 79 | - | - | - | 79 | |||||||||||||||
Consolidated Obligations traded, not yet settled | 101 | 500 | 25 | 25 | 651 | |||||||||||||||
Other purchase obligations | - | - | - | - | - | |||||||||||||||
Unused line of credits and other commitments | - | - | - | - | - | |||||||||||||||
Total off-balance sheet items | 4,578 | 625 | 251 | 103 | 5,557 | |||||||||||||||
Total Contractual Obligations and off-balance sheet items | $ | 18,982 | $ | 13,455 | $ | 7,250 | $ | 7,743 | $ | 47,430 | ||||||||||
(1) | Represents notional amount of off-balance sheet obligations. |
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(In millions) | -200 | -100 | -50 | Base | +50 | +100 | +200 | |||||||||||||||||||||
$ | (26 | ) | $ | (13 | ) | $ | (5 | ) | $ | - | $ | 3 | $ | 5 | $ | 7 |
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§ | having the related real estate as collateral, which effectively includes the borrower’s equity, | ||
§ | by credit enhancements including 1) primary mortgage insurance, if applicable, 2) the member’s Lender Risk Account, and 3) Supplemental Mortgage Insurance applied on a loan by loan basis. |
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At December 31, 2009 | ||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||
Available- | ||||||||||||||||||||
Trading | for-sale | Derivative | Derivative | |||||||||||||||||
Securities | Securities | Assets(1) | Total | Liabilities(1) | ||||||||||||||||
Level 1 | - | % | - | % | - | % | - | % | - | % | ||||||||||
Level 2 | 100 | 100 | 100 | 100 | 100 | |||||||||||||||
Level 3 | - | - | - | - | - | |||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
Total GAAP Fair Value | $ | 3,802 | $ | 6,670 | $ | 9 | $ | 10,481 | $ | 228 | ||||||||||
At December 31, 2008 | ||||||||||||||||||||
Assets | Liabilities | |||||||||||||||||||
Available- | ||||||||||||||||||||
Trading | for-sale | Derivative | Derivative | |||||||||||||||||
Securities | Securities | Assets(1) | Total | Liabilities(1) | ||||||||||||||||
Level 1 | - | % | - | % | - | % | - | % | - | % | ||||||||||
Level 2 | 100 | 100 | 100 | 100 | 100 | |||||||||||||||
Level 3 | - | - | - | - | - | |||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
Total GAAP Fair Value | $ | 3 | $ | 2,512 | $ | 17 | $ | 2,532 | $ | 286 | ||||||||||
(1) | Based on total fair value of derivative assets and liabilities after effect of counterparty netting and cash collateral netting. |
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2009 | ||||||||||||||||||||
(In millions) | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Total | |||||||||||||||
Interest income | $ | 515 | $ | 438 | $ | 382 | $ | 347 | $ | 1,682 | ||||||||||
Interest expense | 402 | 329 | 291 | 273 | 1,295 | |||||||||||||||
Net interest income | 113 | 109 | 91 | 74 | 387 | |||||||||||||||
Provision for credit loss | - | - | - | - | - | |||||||||||||||
Non-interest income | 13 | 5 | 7 | 13 | 38 | |||||||||||||||
Non-interest expense | 42 | 40 | 37 | 38 | 157 | |||||||||||||||
Net income | $ | 84 | $ | 74 | $ | 61 | $ | 49 | $ | 268 | ||||||||||
2008 | ||||||||||||||||||||
(In millions) | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Total | |||||||||||||||
Interest income | $ | 925 | $ | 764 | $ | 772 | $ | 728 | $ | 3,189 | ||||||||||
Interest expense | 845 | 668 | 680 | 632 | 2,825 | |||||||||||||||
Net interest income | 80 | 96 | 92 | 96 | 364 | |||||||||||||||
Provision for credit loss | - | - | - | - | - | |||||||||||||||
Non-interest (loss) income | (1 | ) | 4 | 12 | (6 | ) | 9 | |||||||||||||
Non-interest expense | 30 | 35 | 38 | 34 | 137 | |||||||||||||||
Net income | $ | 49 | $ | 65 | $ | 66 | $ | 56 | $ | 236 | ||||||||||
Held-to-maturity securities (book value) | ||||||||||||
(In millions) | 2009 | 2008 | 2007 | |||||||||
Certificates of deposit and bank notes | $ | - | $ | - | $ | 2,065 | ||||||
Government-sponsored enterprises | 27 | 26 | 26 | |||||||||
States and political subdivisions | 10 | 12 | 17 | |||||||||
Mortgage-backed securities: | ||||||||||||
Other U.S. obligations | - | 9 | 16 | |||||||||
Government-sponsored enterprises | 11,247 | 12,553 | 11,759 | |||||||||
Other | 187 | 304 | 355 | |||||||||
Total mortgage-backed securities | 11,434 | 12,866 | 12,130 | |||||||||
Total held-to-maturity securities | $ | 11,471 | $ | 12,904 | $ | 14,238 | ||||||
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(Dollars in millions) | Book Value | Yield | ||||||
Government-sponsored enterprises | ||||||||
Due in one year or less | $ | 27 | 0.30 | % | ||||
$ | 27 | 0.30 | ||||||
States and political subdivisions | ||||||||
After five but within ten years | $ | 7 | 5.55 | |||||
After ten years | 3 | 0.69 | ||||||
$ | 10 | 4.07 | ||||||
Mortgage-backed securities* | ||||||||
After five but within ten years | $ | 2,559 | 4.45 | |||||
After ten years | 8,875 | 4.55 | ||||||
$ | 11,434 | 4.53 | ||||||
* | Mortgage-backed securities allocated based on contractual principal maturities assuming no prepayments. |
Available-for-sale securities (book value) | ||||||||||||
(In millions) | 2009 | 2008 | 2007 | |||||||||
Certificates of deposit and bank notes | $ | 6,670 | $ | 2,512 | $ | - | ||||||
Total available-for-sale securities | $ | 6,670 | $ | 2,512 | $ | - | ||||||
(Dollars in millions) | Book Value | Yield | ||||||
Certificates of deposit | ||||||||
Due in one year or less | $ | 6,670 | 0.19 | % | ||||
Trading securities (book value) | ||||||||||||
(In millions) | 2009 | 2008 | 2007 | |||||||||
Government-sponsored enterprises | $ | 3,799 | $ | - | $ | - | ||||||
Mortgage-backed securities: | ||||||||||||
U.S. agency obligations - guaranteed | 3 | 3 | 4 | |||||||||
Total trading securities | $ | 3,802 | $ | 3 | $ | 4 | ||||||
(Dollars in millions) | Book Value | Yield | ||||||
Government-sponsored enterprises | ||||||||
Due in one year or less | $ | 3,799 | 0.11 | % | ||||
Mortgage-backed securities – Other U.S. obligations* | ||||||||
After ten years | $ | 3 | 5.17 | |||||
* | Mortgage-backed securities allocated based on contractual principal maturities assuming no prepayments. |
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(In millions) | Total | Total | |||||||
Name of Issuer | Book Value | Fair Value | |||||||
Freddie Mac | $ | 7,593 | $ | 7,779 | |||||
Fannie Mae | 7,480 | 7,661 | |||||||
Government National Mortgage Association | 3 | 3 | |||||||
Certificates of deposit (18 issuers) | 6,670 | 6,670 | |||||||
All other investments (6 issuers) | 197 | 196 | |||||||
Total investments | $ | 21,943 | $ | 22,309 | |||||
(In millions) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Domestic: | ||||||||||||||||||||
Advances | $ | 35,818 | $ | 53,916 | $ | 53,310 | $ | 41,956 | $ | 40,262 | ||||||||||
Real estate mortgages | $ | 9,366 | $ | 8,632 | $ | 8,928 | $ | 8,461 | $ | 8,418 | ||||||||||
Nonperforming real estate mortgages | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Real estate mortgages past due 90 days or more and still accruing interest(1) | $ | 73 | $ | 48 | $ | 34 | $ | 51 | $ | 49 | ||||||||||
Interest contractually due during the year | $ | 484 | $ | 437 | $ | 467 | $ | 430 | $ | 428 | ||||||||||
Interest actually received during the year | (484 | ) | (437 | ) | (467 | ) | (430 | ) | (428 | ) | ||||||||||
Shortfall | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
(1) | Government loans (e.g., FHA) continue to accrue after 90 days or more delinquent, as do all loans purchased where the FHLBank’s agreements with the PFIs include monthly settlement on a schedule/scheduled basis and are therefore considered well secured and in the process of collection. Schedule/scheduled means that the PFI is obligated to remit the contractual mortgage payments on loans sold to the FHLBank, regardless of whether or not the PFI received payment from the mortgagee. In 2007, the FHLBank began offering loans with monthly settlement on an actual/actual basis which also continue to accrue after 90 days or more delinquent if they are considered well secured and in the process of collection. There were no net (charge-offs) recoveries to average loans outstanding for the five years ended December 31, 2009. |
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(Dollars in millions) | 2009 | 2008 | 2007 | |||||||||
Federal funds purchased | ||||||||||||
Outstanding at year end | $ | - | $ | - | $ | - | ||||||
Weighted average rate at year end | -% | -% | -% | |||||||||
Daily average outstanding for the year | $ | - | $ | 1 | $ | - | ||||||
Weighted average rate for the year(1) | -% | 1.59% | -% | |||||||||
Highest outstanding at any month end | $ | - | $ | - | $ | - | ||||||
Securities under repurchase agreements | ||||||||||||
Outstanding at year end | $ | - | $ | - | $ | - | ||||||
Weighted average rate at year end | -% | -% | -% | |||||||||
Daily average outstanding for the year | $ | - | $ | - | $ | - | ||||||
Weighted average rate for the year(1) | -% | 2.19% | -% | |||||||||
Highest outstanding at any month end | $ | - | $ | - | $ | - | ||||||
Other FHLBanks | ||||||||||||
Outstanding at year end | $ | - | $ | - | $ | - | ||||||
Weighted average rate at year end | -% | -% | -% | |||||||||
Daily average outstanding for the year | $ | 1 | $ | - | $ | - | ||||||
Weighted average rate for the year(1) | 0.07% | -% | -% | |||||||||
Highest outstanding at any month end | $ | - | $ | - | $ | - | ||||||
Consolidated Discount Notes | ||||||||||||
Outstanding at year end | $ | 23,187 | $ | 49,336 | $ | 35,437 | ||||||
Weighted average rate at year end | 0.08% | 0.79% | 4.20% | |||||||||
Daily average outstanding for the year | $ | 35,272 | $ | 40,356 | $ | 24,763 | ||||||
Weighted average rate for the year(1) | 0.32% | 2.35% | 4.99% | |||||||||
Highest outstanding at any month end | $ | 52,568 | $ | 49,336 | $ | 35,437 |
(1) | Amounts used to calculate weighted average rates for the year are based on dollars in thousands. Accordingly, recalculations based upon amounts in millions may not produce the same results. |
Over 3 | Over 6 | Over 12 | ||||||||||||||||||
months but | months but | months but | ||||||||||||||||||
3 months | within 6 | within 12 | within 24 | |||||||||||||||||
By remaining maturity at December 31, 2009 | or less | months | months | months | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Time certificates of deposit | ||||||||||||||||||||
($1 or more) | $ | 29 | $ | 24 | $ | 23 | $ | 4 | $ | 80 | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Return on average assets | 0.32 | % | 0.25 | % | 0.32 | % | ||||||
Return on average equity | 6.38 | 5.73 | 6.87 | |||||||||
Average equity to average assets | 4.96 | 4.37 | 4.63 | |||||||||
Dividend payout ratio | 68 | % | 83 | % | 88 | % |
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
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Item 8. | Financial Statements and Supplementary Data. |
the Federal Home Loan Bank of Cincinnati:
![](https://capedge.com/proxy/10-K/0000950123-10-025910/l39003l3900301.gif)
Cincinnati, OH
March 18, 2010
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December 31, | ||||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Cash and due from banks (Note 3) | $ | 1,807,343 | $ | 2,867 | ||||
Interest-bearing deposits | 126 | 19,906,234 | ||||||
Securities purchased under agreements to resell (Note 4) | 100,000 | - | ||||||
Federal funds sold | 2,150,000 | - | ||||||
Trading securities (Note 5) | 3,802,013 | 2,985 | ||||||
Available-for-sale securities (Note 6) | 6,669,636 | 2,511,630 | ||||||
Held-to-maturity securities (includes $0 and $0 pledged as collateral in 2009 and 2008 that may be repledged)(a) (Note 7) | 11,471,081 | 12,904,200 | ||||||
Advances (Note 9) | 35,818,425 | 53,915,972 | ||||||
Mortgage loans held for portfolio, net (Note 10) | 9,365,752 | 8,631,873 | ||||||
Accrued interest receivable | 151,690 | 275,560 | ||||||
Premises, software, and equipment, net | 10,368 | 9,611 | ||||||
Derivative assets (Note 11) | 9,065 | 17,310 | ||||||
Other assets | 31,133 | 27,827 | ||||||
TOTAL ASSETS | $ | 71,386,632 | $ | 98,206,069 | ||||
LIABILITIES | ||||||||
Deposits (Note 12): | ||||||||
Interest bearing | $ | 2,076,826 | $ | 1,192,593 | ||||
Non-interest bearing | 7,995 | 868 | ||||||
Total deposits | 2,084,821 | 1,193,461 | ||||||
Consolidated Obligations, net (Note 13): | ||||||||
Discount Notes | 23,186,731 | 49,335,739 | ||||||
Bonds | 41,222,590 | 42,392,785 | ||||||
Total Consolidated Obligations, net | 64,409,321 | 91,728,524 | ||||||
Mandatorily redeemable capital stock (Note 16) | 675,479 | 110,909 | ||||||
Accrued interest payable | 309,007 | 394,346 | ||||||
Affordable Housing Program payable (Note 14) | 98,341 | 102,615 | ||||||
Payable to REFCORP (Note 15) | 12,190 | 14,054 | ||||||
Derivative liabilities (Note 11) | 228,197 | 286,476 | ||||||
Other liabilities | 102,129 | 93,815 | ||||||
Total liabilities | 67,919,485 | 93,924,200 | ||||||
Commitments and contingencies (Note 20) | ||||||||
CAPITAL(Note 16) | ||||||||
Capital stock: Class B putable ($100 par value); 30,635 and 39,617 shares issued and outstanding in 2009 and 2008, respectively | 3,063,473 | 3,961,698 | ||||||
Retained earnings | 411,782 | 326,446 | ||||||
Accumulated other comprehensive loss: | ||||||||
Net unrealized loss on available-for-sale securities (Note 6) | (364 | ) | (458 | ) | ||||
Pension and postretirement benefits (Note 17) | (7,744 | ) | (5,817 | ) | ||||
Total accumulated other comprehensive loss: | (8,108 | ) | (6,275 | ) | ||||
Total capital | 3,467,147 | 4,281,869 | ||||||
TOTAL LIABILITIES AND CAPITAL | $ | 71,386,632 | $ | 98,206,069 | ||||
(a) | Fair values: $11,837,712 and $13,163,337 at December 31, 2009 and 2008, respectively. |
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(In thousands)
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
INTEREST INCOME: | ||||||||||||
Advances | $ | 570,144 | $ | 1,893,346 | $ | 2,589,246 | ||||||
Prepayment fees on Advances, net | 7,523 | 2,018 | 2,631 | |||||||||
Interest-bearing deposits | 8,756 | 14,910 | 1,683 | |||||||||
Securities purchased under agreements to resell | 1,170 | 13,898 | 36,984 | |||||||||
Federal funds sold | 11,238 | 145,375 | 308,999 | |||||||||
Trading securities | 2,511 | 176 | 234 | |||||||||
Available-for-sale securities | 17,822 | 1,163 | 35,690 | |||||||||
Held-to-maturity: | ||||||||||||
Securities | 578,253 | 681,531 | 905,174 | |||||||||
Securities of other FHLBanks | 22 | - | - | |||||||||
Mortgage loans held for portfolio | 484,383 | 436,769 | 467,298 | |||||||||
Loans to other FHLBanks | 25 | 316 | 334 | |||||||||
Total interest income | 1,681,847 | 3,189,502 | 4,348,273 | |||||||||
INTEREST EXPENSE: | ||||||||||||
Consolidated Obligations – Discount Notes | 111,736 | 947,035 | 1,234,743 | |||||||||
Consolidated Obligations – Bonds | 1,171,972 | 1,844,405 | 2,631,881 | |||||||||
Deposits | 1,820 | 25,718 | 51,236 | |||||||||
Loans from other FHLBanks | 1 | - | - | |||||||||
Mandatorily redeemable capital stock | 9,348 | 8,192 | 9,115 | |||||||||
Other borrowings | - | 26 | - | |||||||||
Total interest expense | 1,294,877 | 2,825,376 | 3,926,975 | |||||||||
NET INTEREST INCOME | 386,970 | 364,126 | 421,298 | |||||||||
OTHER INCOME (LOSS): | ||||||||||||
Service fees | 1,725 | 1,237 | 1,280 | |||||||||
Net gains (losses) on trading securities | 308 | (63 | ) | (25 | ) | |||||||
Net gains on held-to-maturity securities | 12,039 | - | - | |||||||||
Net gains (losses) on derivatives and hedging activities | 17,411 | 1,520 | (11,907 | ) | ||||||||
Other, net | 6,098 | 6,053 | 4,528 | |||||||||
Total other income (loss) | 37,581 | 8,747 | (6,124 | ) | ||||||||
OTHER EXPENSE: | ||||||||||||
Compensation and benefits | 33,286 | 25,764 | 25,481 | |||||||||
Other operating | 15,087 | 13,351 | 12,968 | |||||||||
Finance Agency | 3,179 | 3,112 | 2,843 | |||||||||
Office of Finance | 3,106 | 2,573 | 2,923 | |||||||||
Other | 4,048 | 5,481 | 4,435 | |||||||||
Total other expense | 58,706 | 50,281 | 48,650 | |||||||||
INCOME BEFORE ASSESSMENTS | 365,845 | 322,592 | 366,524 | |||||||||
Affordable Housing Program | 30,819 | 27,170 | 30,850 | |||||||||
REFCORP | 67,005 | 59,084 | 67,135 | |||||||||
Total assessments | 97,824 | 86,254 | 97,985 | |||||||||
NET INCOME | $ | 268,021 | $ | 236,338 | $ | 268,539 | ||||||
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(In thousands)
Accumulated | ||||||||||||||||||||
Capital Stock | Other | |||||||||||||||||||
Class B* | Retained | Comprehensive | Total | |||||||||||||||||
Shares | Par Value | Earnings | Loss | Capital | ||||||||||||||||
BALANCE, DECEMBER 31, 2006 | 36,576 | $ | 3,657,645 | $ | 255,529 | $ | (6,325 | ) | $ | 3,906,849 | ||||||||||
Proceeds from sale of capital stock | 3,568 | 356,769 | 356,769 | |||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | (5,410 | ) | (541,053 | ) | (541,053 | ) | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | 268,539 | 268,539 | ||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||
Net unrealized losses on available-for-sale securities | 531 | 531 | ||||||||||||||||||
Pension and postretirement benefits | 591 | 591 | ||||||||||||||||||
Total comprehensive income | 269,661 | |||||||||||||||||||
Dividends on capital stock: | ||||||||||||||||||||
Cash | (237,640 | ) | (237,640 | ) | ||||||||||||||||
BALANCE, DECEMBER 31, 2007 | 34,734 | 3,473,361 | 286,428 | (5,203 | ) | 3,754,586 | ||||||||||||||
Proceeds from sale of capital stock | 3,746 | 374,572 | 374,572 | |||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | (337 | ) | (33,725 | ) | (33,725 | ) | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | 236,338 | 236,338 | ||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||
Net unrealized losses on available-for-sale securities | �� | (458 | ) | (458 | ) | |||||||||||||||
Pension and postretirement benefits | (614 | ) | (614 | ) | ||||||||||||||||
Total comprehensive income | 235,266 | |||||||||||||||||||
Dividends on capital stock: | ||||||||||||||||||||
Cash | (48,689 | ) | (48,689 | ) | ||||||||||||||||
Stock | 1,474 | 147,490 | (147,631 | ) | (141 | ) | ||||||||||||||
BALANCE, DECEMBER 31, 2008 | 39,617 | 3,961,698 | 326,446 | (6,275 | ) | 4,281,869 | ||||||||||||||
Proceeds from sale of capital stock | 924 | 92,353 | 92,353 | |||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | (9,906 | ) | (990,578 | ) | (990,578 | ) | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | 268,021 | 268,021 | ||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||
Net unrealized losses on available-for-sale securities | 94 | 94 | ||||||||||||||||||
Pension and postretirement benefits | (1,927 | ) | (1,927 | ) | ||||||||||||||||
Total comprehensive income | 266,188 | |||||||||||||||||||
Dividends on capital stock: | ||||||||||||||||||||
Cash | (182,685 | ) | (182,685 | ) | ||||||||||||||||
BALANCE, DECEMBER 31, 2009 | 30,635 | $ | 3,063,473 | $ | 411,782 | $ | (8,108 | ) | $ | 3,467,147 | ||||||||||
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(In thousands)
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net income | $ | 268,021 | $ | 236,338 | $ | 268,539 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | (51,799 | ) | 26,425 | 41,811 | ||||||||
Change in net fair value adjustment on derivative and hedging activities | 145,297 | (133,922 | ) | 56,043 | ||||||||
Net change in fair value adjustments on trading securities | (308 | ) | 63 | 25 | ||||||||
Other adjustments | (12,016 | ) | 5,164 | (11 | ) | |||||||
Net change in: | ||||||||||||
Accrued interest receivable | 123,908 | 30,190 | (5,284 | ) | ||||||||
Other assets | (3,481 | ) | 396 | (3,530 | ) | |||||||
Accrued interest payable | (85,343 | ) | (36,520 | ) | (128,485 | ) | ||||||
Other liabilities | 570 | 4,716 | 18,931 | |||||||||
Total adjustments | 116,828 | (103,488 | ) | (20,500 | ) | |||||||
Net cash provided by operating activities | 384,849 | 132,850 | 248,039 | |||||||||
INVESTING ACTIVITIES: | ||||||||||||
Net change in: | ||||||||||||
Interest-bearing deposits | 20,220,290 | (20,490,246 | ) | (182,238 | ) | |||||||
Securities purchased under agreements to resell | (100,000 | ) | 300,000 | 850,000 | ||||||||
Federal funds sold | (2,150,000 | ) | 10,136,000 | (494,300 | ) | |||||||
Premises, software, and equipment | (3,378 | ) | (3,571 | ) | (2,700 | ) | ||||||
Trading securities: | ||||||||||||
Net increase in short-term | (3,796,724 | ) | - | - | ||||||||
Proceeds from long-term | 388 | 539 | 990 | |||||||||
Available-for-sale securities: | ||||||||||||
Net (increase) decrease in short-term | (4,158,220 | ) | (2,512,257 | ) | 1,224,672 | |||||||
Proceeds from long-term | - | 28,755 | - | |||||||||
Purchases of long-term | - | (28,755 | ) | - | ||||||||
Held-to-maturity securities: | ||||||||||||
Net (increase) decrease in short-term | (681 | ) | 2,064,712 | 4,464,046 | ||||||||
Net decrease in other FHLBanks | 6 | - | - | |||||||||
Proceeds from maturities of long-term | 3,683,471 | 2,127,676 | 2,088,521 | |||||||||
Proceeds from sale of long-term | 469,245 | - | - | |||||||||
Purchases of long-term | (2,706,091 | ) | (2,843,871 | ) | (2,527,944 | ) |
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STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Advances: | ||||||||||||
Proceeds | $ | 391,629,721 | $ | 1,576,271,832 | $ | 1,732,023,103 | ||||||
Made | (373,951,474 | ) | (1,576,116,179 | ) | (1,743,032,593 | ) | ||||||
Mortgage loans held for portfolio: | ||||||||||||
Principal collected | 2,937,151 | 1,298,486 | 1,027,343 | |||||||||
Purchases | (3,672,015 | ) | (1,038,392 | ) | (1,505,230 | ) | ||||||
Net cash provided by (used in) investing activities | 28,401,689 | (10,805,271 | ) | (6,066,330 | ) | |||||||
FINANCING ACTIVITIES: | ||||||||||||
Net increase in deposits and pass-through reserves | 879,960 | 182,537 | 126,691 | |||||||||
Net (payments) proceeds on derivative contracts with financing elements | (154,955 | ) | 213,759 | - | ||||||||
Net proceeds from issuance of Consolidated Obligations: | ||||||||||||
Discount Notes | 636,871,617 | 942,960,466 | 625,424,375 | |||||||||
Bonds | 33,069,190 | 31,582,383 | 34,773,537 | |||||||||
Bonds transferred from other FHLBanks | - | 286,860 | 120,000 | |||||||||
Payments for maturing and retiring Consolidated Obligations: | ||||||||||||
Discount Notes | (662,946,366 | ) | (929,052,075 | ) | (611,987,159 | ) | ||||||
Bonds | (34,185,168 | ) | (35,831,698 | ) | (42,149,160 | ) | ||||||
Proceeds from issuance of capital stock | 92,353 | 374,572 | 356,769 | |||||||||
Payments for redemption of mandatorily redeemable capital stock | (426,008 | ) | (45,433 | ) | (560,538 | ) | ||||||
Cash dividends paid | (182,685 | ) | (48,689 | ) | (237,640 | ) | ||||||
Net cash (used in) provided by financing activities | (26,982,062 | ) | 10,622,682 | 5,866,875 | ||||||||
Net increase (decrease) in cash and cash equivalents | 1,804,476 | (49,739 | ) | 48,584 | ||||||||
Cash and cash equivalents at beginning of the year | 2,867 | 52,606 | 4,022 | |||||||||
Cash and cash equivalents at end of the year | $ | 1,807,343 | $ | 2,867 | $ | 52,606 | ||||||
Supplemental Disclosures: | ||||||||||||
Interest paid | $ | 1,458,368 | $ | 2,851,223 | $ | 3,938,336 | ||||||
AHP payments, net | $ | 35,093 | $ | 27,929 | $ | 23,716 | ||||||
REFCORP assessments paid | $ | 68,869 | $ | 61,569 | $ | 67,801 | ||||||
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• | If the FHLBank has an intent to sell the debt security and its fair value is less than its amortized cost; | ||
• | If, based on available evidence, the FHLBank believes it is more likely than not that it will be required to sell the debt security before the recovery of its amortized cost basis; or | ||
• | If the FHLBank does not expect to recover the entire amortized cost basis of the debt security. |
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1. | a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a “fair value” hedge); or |
2. | a non-qualifying hedge of an asset or liability (“economic hedge”) for asset/liability management purposes. |
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2009 | 2008 | |||||||
Fair Value | Fair Value | |||||||
Government-sponsored enterprises* | $ | 3,799,336 | $ | - | ||||
Mortgage-backed securities: | ||||||||
Other U.S. obligation residential mortgage-backed securities ** | 2,677 | 2,985 | ||||||
Total | $ | 3,802,013 | $ | 2,985 | ||||
* | Consists of debt securities issued or guaranteed by Federal Home Loan Mortgage Corporation (Freddie Mac) and/or Federal National Mortgage Association (Fannie Mae), which are not obligations of the U.S. government. | ||
** | Consists of Government National Mortgage Association (Ginnie Mae) securities. |
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December 31, 2009 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | (Losses) | Value | |||||||||||||
Certificates of deposit | $ | 6,670,000 | $ | 40 | $ | (404 | ) | $ | 6,669,636 | |||||||
December 31, 2008 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | (Losses) | Value | |||||||||||||
Certificates of deposit and bank notes | $ | 2,512,088 | $ | 93 | $ | (551 | ) | $ | 2,511,630 | |||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Year of Maturity | Cost | Value | Cost | Value | ||||||||||||
Due in one year or less | $ | 6,670,000 | $ | 6,669,636 | $ | 2,512,088 | $ | 2,511,630 | ||||||||
2009 | 2008 | |||||||
Amortized cost of available-for-sale securities: | ||||||||
Fixed-rate | $ | 6,670,000 | $ | 2,512,088 | ||||
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December 31, 2009 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Unrecognized | Unrecognized | |||||||||||||||
Amortized | Holding | Holding | ||||||||||||||
Cost (1) | Gains | (Losses) | Fair Value | |||||||||||||
Government-sponsored enterprises * | $ | 26,688 | $ | 4 | $ | – | $ | 26,692 | ||||||||
State or local housing agency obligations | 10,375 | – | (510 | ) | 9,865 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Government-sponsored enterprise residential mortgage-backed securities ** | 11,246,925 | 386,591 | (19,217 | ) | 11,614,299 | |||||||||||
Private-label residential mortgage-backed securities | 187,093 | 165 | (402 | ) | 186,856 | |||||||||||
Total mortgage-backed securities | 11,434,018 | 386,756 | (19,619 | ) | 11,801,155 | |||||||||||
Total | $ | 11,471,081 | $ | 386,760 | $ | (20,129 | ) | $ | 11,837,712 | |||||||
December 31, 2008 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Unrecognized | Unrecognized | |||||||||||||||
Amortized | Holding | Holding | ||||||||||||||
Cost (1) | Gains | (Losses) | Fair Value | |||||||||||||
Government-sponsored enterprises * | $ | 26,012 | $ | 38 | $ | – | $ | 26,050 | ||||||||
State or local housing agency obligations | 12,080 | – | (536 | ) | 11,544 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Other U.S. obligation residential mortgage-backed securities *** | 9,103 | – | (3 | ) | 9,100 | |||||||||||
Government-sponsored enterprise residential mortgage-backed securities ** | 12,552,810 | 301,671 | (1,138 | ) | 12,853,343 | |||||||||||
Private-label residential mortgage-backed securities | 304,195 | – | (40,895 | ) | 263,300 | |||||||||||
Total mortgage-backed securities | 12,866,108 | 301,671 | (42,036 | ) | 13,125,743 | |||||||||||
Total | $ | 12,904,200 | $ | 301,709 | $ | (42,572 | ) | $ | 13,163,337 | |||||||
(1) | Carrying value equals amortized cost. | ||
* | Consists of debt securities issued or guaranteed by Freddie Mac and/or Fannie Mae, which are not obligations of the U.S. government. | ||
** | Consists of securities issued or guaranteed by Freddie Mac and/or Fannie Mae, which are not obligations of the U.S. government. | ||
*** | Consists of Ginnie Mae securities. |
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As of December 31, 2009 | ||||||||||||||||||||
Percent | ||||||||||||||||||||
Average | Serious | |||||||||||||||||||
Private-Label | Unrealized | Investment | Credit | Delinquency | ||||||||||||||||
Mortgage-Backed Securities | Par | (Losses) | Rating | Enhancement | Rate(2) | |||||||||||||||
Prime(1) – Year of Securitization | ||||||||||||||||||||
2003 | $ | 186,909 | $ | (402 | ) | AAA | 7.6% | 0.54% | ||||||||||||
Total | $ | 186,909 | $ | (402 | ) | |||||||||||||||
As of December 31, 2008 | ||||||||||||||||||||
Percent | ||||||||||||||||||||
Average | Serious | |||||||||||||||||||
Private-Label | Unrealized | Investment | Credit | Delinquency | ||||||||||||||||
Mortgage-Backed Securities | Par | (Losses) | Rating | Enhancement | Rate(2) | |||||||||||||||
Prime(1) – Year of Securitization | ||||||||||||||||||||
2003 | $ | 304,017 | $ | (40,895 | ) | AAA | 6.7% | 0.33% | ||||||||||||
Total | $ | 304,017 | $ | (40,895 | ) | |||||||||||||||
(1) | As defined by the originator at the time of origination. | ||
(2) | Seriously delinquent is defined as loans 60 days or more past due that underlie the securities, all bankruptcies, foreclosures, and real estate owned. |
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December 31, 2009 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or more | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | (Losses) | Value | (Losses) | Value | (Losses) | |||||||||||||||||||
State or local housing agency obligations | $ | - | $ | - | $ | 9,865 | $ | (510 | ) | $ | 9,865 | $ | (510 | ) | ||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Government-sponsored enterprise residential mortgage-backed securities * | 1,578,801 | (19,217 | ) | - | - | 1,578,801 | (19,217 | ) | ||||||||||||||||
Private-label residential mortgage- backed securities | - | - | 129,046 | (402 | ) | 129,046 | (402 | ) | ||||||||||||||||
Total temporarily impaired | $ | 1,578,801 | $ | (19,217 | ) | $ | 138,911 | $ | (912 | ) | $ | 1,717,712 | $ | (20,129 | ) | |||||||||
December 31, 2008 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or more | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | (Losses) | Value | (Losses) | Value | (Losses) | |||||||||||||||||||
State or local housing agency obligations | $ | 11,544 | $ | (536 | ) | $ | - | $ | - | $ | 11,544 | $ | (536 | ) | ||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
Other U.S. obligation residential mortgage-backed securities ** | 9,100 | (3 | ) | - | - | 9,100 | (3 | ) | ||||||||||||||||
Government-sponsored enterprise residential mortgage-backed securities * | 171,811 | (1,138 | ) | - | - | 171,811 | (1,138 | ) | ||||||||||||||||
Private-label residential mortgage- backed securities | - | - | 263,300 | (40,895 | ) | 263,300 | (40,895 | ) | ||||||||||||||||
Total temporarily impaired | $ | 192,455 | $ | (1,677 | ) | $ | 263,300 | $ | (40,895 | ) | $ | 455,755 | $ | (42,572 | ) | |||||||||
* | Consists of securities issued or guaranteed by Freddie Mac and/or Fannie Mae, which are not obligations of the U.S. government. | ||
** | Consists of Ginnie Mae securities. |
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2009 | 2008 | |||||||||||||||
Amortized | Amortized | |||||||||||||||
Year of Maturity | Cost (1) | Fair Value | Cost (1) | Fair Value | ||||||||||||
Other than mortgage-backed securities: | ||||||||||||||||
Due in 1 year or less | $ | 26,688 | $ | 26,692 | $ | 26,012 | $ | 26,050 | ||||||||
Due after 1 year through 5 years | — | — | — | — | ||||||||||||
Due after 5 years through 10 years | 7,210 | 6,858 | 5 | 5 | ||||||||||||
Due after 10 years | 3,165 | 3,007 | 12,075 | 11,539 | ||||||||||||
Total other | 37,063 | 36,557 | 38,092 | 37,594 | ||||||||||||
Mortgage-backed securities | 11,434,018 | 11,801,155 | 12,866,108 | 13,125,743 | ||||||||||||
Total | $ | 11,471,081 | $ | 11,837,712 | $ | 12,904,200 | $ | 13,163,337 | ||||||||
(1) | Carrying value equals amortized cost. |
2009 | 2008 | |||||||
Amortized cost of held-to-maturity securities other than mortgage-backed securities: | ||||||||
Fixed-rate | $ | 33,898 | $ | 34,722 | ||||
Variable-rate | 3,165 | 3,370 | ||||||
Total other | 37,063 | 38,092 | ||||||
Amortized cost of held-to-maturity mortgage-backed securities: | ||||||||
Pass-through securities: | ||||||||
Fixed-rate | 8,175,384 | 7,443,417 | ||||||
Collateralized mortgage obligations: | ||||||||
Fixed-rate | 3,258,634 | 5,422,691 | ||||||
Total mortgage-backed securities | 11,434,018 | 12,866,108 | ||||||
Total | $ | 11,471,081 | $ | 12,904,200 | ||||
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2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Year of Contractual Maturity | Amount | Rate | Amount | Rate | ||||||||||||
Overdrawn demand deposit accounts | $ | 5,768 | 0.16 | % | $ | 82 | 0.46 | % | ||||||||
Due in 1 year or less | 7,847,507 | 2.21 | 19,453,340 | 2.66 | ||||||||||||
Due after 1 year through 2 years | 3,995,206 | 2.60 | 7,027,588 | 3.29 | ||||||||||||
Due after 2 years through 3 years | 8,453,929 | 2.78 | 5,759,670 | 2.51 | ||||||||||||
Due after 3 years through 4 years | 3,594,664 | 1.30 | 8,022,345 | 3.36 | ||||||||||||
Due after 4 years through 5 years | 2,309,201 | 1.74 | 2,955,172 | 2.95 | ||||||||||||
Thereafter | 8,917,209 | 2.22 | 9,580,509 | 3.50 | ||||||||||||
Total par value | 35,123,484 | 2.27 | 52,798,706 | 3.00 | ||||||||||||
Commitment fees | (1,098 | ) | (1,160 | ) | ||||||||||||
Discount on AHP Advances | (30,062 | ) | (33,316 | ) | ||||||||||||
Premiums | 4,724 | 4,664 | ||||||||||||||
Discounts | (7,871 | ) | (6,689 | ) | ||||||||||||
Hedging adjustments | 729,248 | 1,153,767 | ||||||||||||||
Total | $ | 35,818,425 | $ | 53,915,972 | ||||||||||||
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Year of Contractual Maturity | ||||||||
or Next Call Date | 2009 | 2008 | ||||||
Overdrawn demand deposit accounts | $ | 5,768 | $ | 82 | ||||
Due in 1 year or less | 17,458,003 | 32,026,608 | ||||||
Due after 1 year through 2 years | 3,724,132 | 6,434,692 | ||||||
Due after 2 years through 3 years | 6,500,929 | 2,276,596 | ||||||
Due after 3 years through 4 years | 1,607,613 | 6,019,345 | ||||||
Due after 4 years through 5 years | 1,089,180 | 968,120 | ||||||
Thereafter | 4,737,859 | 5,073,263 | ||||||
Total par value | $ | 35,123,484 | $ | 52,798,706 | ||||
Year of Contractual Maturity | ||||||||
or Next Put/Convert Date | 2009 | 2008 | ||||||
Overdrawn demand deposit accounts | $ | 5,768 | $ | 82 | ||||
Due in 1 year or less | 16,204,957 | 28,142,090 | ||||||
Due after 1 year through 2 years | 3,440,406 | 6,735,288 | ||||||
Due after 2 years through 3 years | 4,805,929 | 5,153,270 | ||||||
Due after 3 years through 4 years | 3,445,264 | 4,341,845 | ||||||
Due after 4 years through 5 years | 1,865,801 | 2,788,772 | ||||||
Thereafter | 5,355,359 | 5,637,359 | ||||||
Total par value | $ | 35,123,484 | $ | 52,798,706 | ||||
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1. | Allow the member (or borrower) to retain possession of the collateral assigned to the FHLBank, with the member (or borrower) agreeing to hold such collateral for the benefit of the FHLBank; or | ||
2. | Require the member (or borrower) specifically to place physical possession of such collateral with the FHLBank or a third-party custodian approved by the FHLBank. |
2009 | 2008 | |||||||||||||||||||||
Principal | % of Total | Principal | % of Total | |||||||||||||||||||
U.S. Bank, N.A. | $ | 9,315 | 27 | % | U.S. Bank, N.A. | $ | 14,856 | 28 | % | |||||||||||||
PNC Bank, N.A. (1) | 4,282 | 12 | PNC Bank, N.A. (1) | 6,435 | 12 | |||||||||||||||||
Fifth Third Bank | 2,538 | 7 | Fifth Third Bank | 5,639 | 11 | |||||||||||||||||
Total | $ | 16,135 | 46 | % | Total | $ | 26,930 | 51 | % | |||||||||||||
(1) | Formerly National City Bank. |
2009 | 2008 | |||||||
Par value of Advances: | ||||||||
Fixed-rate | $ | 17,748,767 | $ | 24,501,522 | ||||
Variable-rate | 17,374,717 | 28,297,184 | ||||||
Total | $ | 35,123,484 | $ | 52,798,706 | ||||
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2009 | 2008 | |||||||
Real Estate: | ||||||||
Fixed rate medium-term single-family mortgages(1) | $ | 1,327,321 | $ | 1,177,689 | ||||
Fixed rate long-term single-family mortgages | 7,952,670 | 7,412,329 | ||||||
Subtotal fixed rate single-family mortgages | 9,279,991 | 8,590,018 | ||||||
Premiums | 96,551 | 61,390 | ||||||
Discounts | (9,590 | ) | (9,934 | ) | ||||
Hedging basis adjustments | (1,200 | ) | (9,601 | ) | ||||
Total | $ | 9,365,752 | $ | 8,631,873 | ||||
(1) | Medium-term is defined as a term of 15 years or less. |
2009 | 2008 | |||||||
Conventional loans | $ | 7,745,396 | $ | 7,193,607 | ||||
Government-guaranteed/insured loans | 1,534,595 | 1,396,411 | ||||||
Total par value | $ | 9,279,991 | $ | 8,590,018 | ||||
2009 | 2008 | |||||||
Lender Risk Account at beginning of year | $ | 48,782 | $ | 49,853 | ||||
Additions | 12,341 | 3,162 | ||||||
Claims | (2,532 | ) | (531 | ) | ||||
Scheduled distributions | (3,521 | ) | (3,702 | ) | ||||
Lender Risk Account at end of year | $ | 55,070 | $ | 48,782 | ||||
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2009 | 2008 | ||||||||||||||||
Principal | % of Total | Principal | % of Total | ||||||||||||||
PNC Bank, N.A. (1) | $ 3,608 | 39 | % | $ 4,709 | 55 | % | |||||||||||
Union Savings Bank | 2,726 | 29 | 1,995 | 23 | |||||||||||||
Guardian Savings Bank FSB | 751 | 8 | 544 | 6 | |||||||||||||
Liberty Savings Bank | 488 | 5 | |||||||||||||||
Total | $ 7,573 | 81 | % | $ 7,248 | 84 | % | |||||||||||
(1) | Formerly National City Bank. |
§ | reduce the interest rate sensitivity and repricing gaps of assets, liabilities, and certain other derivative instruments; | ||
§ | manage embedded options in assets and liabilities; | ||
§ | reduce funding costs by combining a derivative with a Consolidated Obligation, as the cost of a combined funding structure can be lower than the cost of a comparable Consolidated Obligation Bond; | ||
§ | preserve a favorable interest rate spread between the yield of an asset (e.g., an Advance) and the cost of the related liability (e.g., the Consolidated Obligation Bond used to fund the Advance); without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the Advance does not match a change in the interest rate on the Bond; and | ||
§ | protect the value of existing asset or liability positions. |
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December 31, 2009 | ||||||||||||
Notional | ||||||||||||
Amount of | Derivative | Derivative | ||||||||||
Derivatives | Assets | Liabilities | ||||||||||
Derivatives designated as fair value hedging instruments: | ||||||||||||
Interest rate swaps | $ | 28,460,850 | $ | 181,621 | $ | (824,187 | ) | |||||
Derivatives not designated as hedging instruments: | ||||||||||||
Interest rate swaps | 384,000 | 6,206 | (8,053 | ) | ||||||||
Mortgage delivery commitments | 79,391 | 20 | (817 | ) | ||||||||
Total derivatives not designated as hedging instruments | 463,391 | 6,226 | (8,870 | ) | ||||||||
Total derivatives before netting and collateral adjustments | $ | 28,924,241 | 187,847 | (833,057 | ) | |||||||
Netting adjustments | (147,179 | ) | 147,179 | |||||||||
Cash collateral and related accrued interest | (31,603 | ) | 457,681 | |||||||||
Total collateral and netting adjustments(1) | (178,782 | ) | 604,860 | |||||||||
Derivative assets and derivative liabilities as reported on the Statement of Condition | $ | 9,065 | $ | (228,197 | ) | |||||||
December 31, 2008 | ||||||||||||
Notional | ||||||||||||
Amount of | Derivative | Derivative | ||||||||||
Derivatives | Assets | Liabilities | ||||||||||
Derivatives designated as fair value hedging instruments: | ||||||||||||
Interest rate swaps | $ | 25,830,900 | $ | 226,043 | $ | (1,221,004 | ) | |||||
Derivatives not designated as hedging instruments: | ||||||||||||
Interest rate swaps | 1,976,300 | 7,632 | (13,191 | ) | ||||||||
Forward rate agreements | 386,000 | - | (3,670 | ) | ||||||||
Mortgage delivery commitments | 917,435 | 6,282 | (153 | ) | ||||||||
Total derivatives not designated as hedging instruments | 3,279,735 | 13,914 | (17,014 | ) | ||||||||
Total derivatives before netting and collateral adjustments | $ | 29,110,635 | 239,957 | (1,238,018 | ) | |||||||
Netting adjustments | (179,640 | ) | 179,640 | |||||||||
Cash collateral and related accrued interest | (43,007 | ) | 771,902 | |||||||||
Total collateral and netting adjustments(1) | (222,647 | ) | 951,542 | |||||||||
Derivative assets and derivative liabilities as reported on the Statement of Condition | $ | 17,310 | $ | (286,476 | ) | |||||||
(1) | Amounts represent the effects of legally enforceable master netting agreements that allow the FHLBank to settle positive and negative positions and also cash collateral held or placed with the same counterparties. |
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For the Year Ended | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Derivatives and hedged items in fair value hedging relationships: | ||||||||||||
Interest rate swaps | $ | 14,013 | $ | 3,897 | $ | (12,453 | ) | |||||
Derivatives not designated as hedging instruments: | ||||||||||||
Economic Hedges: | ||||||||||||
Interest rate swaps | 2,646 | (3,590 | ) | (1,658 | ) | |||||||
Forward rate agreements | 183 | (2,180 | ) | 1,059 | ||||||||
Net interest settlements | 1,651 | (1,308 | ) | 685 | ||||||||
Mortgage delivery commitments | (1,082 | ) | 4,701 | 460 | ||||||||
Total net gain (loss) related to derivatives not designated as hedging instruments | 3,398 | (2,377 | ) | 546 | ||||||||
Net gains (losses) on derivatives and hedging activities | $ | 17,411 | $ | 1,520 | $ | (11,907 | ) | |||||
For the Year Ended | ||||||||||||||||
Effect of | ||||||||||||||||
Gain/(Loss) | Gain/(Loss) | Net Fair | Derivatives on | |||||||||||||
on | on Hedged | Value Hedge | Net Interest | |||||||||||||
Derivative | Item | Ineffectiveness | Income(1) | |||||||||||||
2009 | ||||||||||||||||
Hedged Item Type: | ||||||||||||||||
Advances | $ | 432,257 | $ | (424,352 | ) | $ | 7,905 | $ | (505,369 | ) | ||||||
Consolidated Bonds | (69,993 | ) | 76,101 | 6,108 | 157,690 | |||||||||||
$ | 362,264 | $ | (348,251 | ) | $ | 14,013 | $ | (347,679 | ) | |||||||
2008 | ||||||||||||||||
Hedged Item Type: | ||||||||||||||||
Advances | $ | (736,379 | ) | $ | 746,574 | $ | 10,195 | $ | (188,642 | ) | ||||||
Consolidated Bonds | 149,177 | (155,475 | ) | (6,298 | ) | 68,364 | ||||||||||
$ | (587,202 | ) | $ | 591,099 | $ | 3,897 | $ | (120,278 | ) | |||||||
2007 | ||||||||||||||||
Hedged Item Type: | ||||||||||||||||
Advances | $ | (352,982 | ) | $ | 342,755 | $ | (10,227 | ) | $ | 63,328 | ||||||
Consolidated Bonds | 178,315 | (180,541 | ) | (2,226 | ) | (102,641 | ) | |||||||||
$ | (174,667 | ) | $ | 162,214 | $ | (12,453 | ) | $ | (39,313 | ) | ||||||
(1) | The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item. |
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2009 | 2008 | |||||||
Interest bearing: | ||||||||
Demand and overnight | $ | 1,969,815 | $ | 1,074,138 | ||||
Term | 80,200 | 94,150 | ||||||
Other | 26,811 | 24,305 | ||||||
Total interest bearing | 2,076,826 | 1,192,593 | ||||||
Non-interest bearing: | ||||||||
Other | 7,995 | 868 | ||||||
Total non-interest bearing | 7,995 | 868 | ||||||
Total deposits | $ | 2,084,821 | $ | 1,193,461 | ||||
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Indexed principal redemption Consolidated Bonds(index amortizing notes) repay principal according to predetermined amortization schedules that are linked to the level of a certain index. At December 31, 2009 and 2008, the index amortizing notes had fixed-rate coupon payment terms. Usually, as market interest rates rise (fall), the maturity of the index amortizing notes extends (contracts); and |
Optional principal redemption Consolidated Bonds(callable bonds) that the FHLBank may redeem in whole or in part at its discretion on predetermined call dates according to the terms of the Consolidated Bond offerings. |
2009 | 2008 | |||||||
Par value of Consolidated Bonds: | ||||||||
Fixed-rate | $ | 40,087,689 | $ | 35,789,957 | ||||
Variable-rate | 1,000,000 | 6,424,400 | ||||||
Total par value | $ | 41,087,689 | $ | 42,214,357 | ||||
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2009 | 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Year of Contractual Maturity | Amount | Rate | Amount | Rate | ||||||||||||
Due in 1 year or less | $ | 14,319,000 | 1.80 | % | $ | 17,162,400 | 3.02 | % | ||||||||
Due after 1 year through 2 years | 6,666,750 | 2.47 | 5,271,000 | 3.98 | ||||||||||||
Due after 2 years through 3 years | 6,048,600 | 3.11 | 5,316,750 | 4.03 | ||||||||||||
Due after 3 years through 4 years | 3,946,450 | 3.44 | 3,805,000 | 4.57 | ||||||||||||
Due after 4 years through 5 years | 2,422,500 | 3.78 | 3,090,450 | 4.40 | ||||||||||||
Thereafter | 7,477,000 | 4.44 | 7,317,000 | 5.15 | ||||||||||||
Index amortizing notes | 207,389 | 4.99 | 251,757 | 4.99 | ||||||||||||
Total par value | 41,087,689 | 2.87 | 42,214,357 | 3.89 | ||||||||||||
Premiums | 62,871 | 35,868 | ||||||||||||||
Discounts | (28,955 | ) | (35,726 | ) | ||||||||||||
Deferred net loss on terminated hedges | 524 | 1,496 | ||||||||||||||
Hedging adjustments | 100,461 | 176,790 | ||||||||||||||
Total | $ | 41,222,590 | $ | 42,392,785 | ||||||||||||
2009 | 2008 | |||||||
Par value of Consolidated Bonds: | ||||||||
Non-callable/nonputable | $ | 28,256,689 | $ | 30,239,957 | ||||
Callable | 12,831,000 | 11,974,400 | ||||||
Total par value | $ | 41,087,689 | $ | 42,214,357 | ||||
Year of Contractual Maturity or Next Call Date | 2009 | 2008 | ||||||
Due in 1 year or less | $ | 24,630,000 | $ | 28,372,400 | ||||
Due after 1 year through 2 years | 6,516,750 | 4,786,000 | ||||||
Due after 2 years through 3 years | 3,703,600 | 2,396,750 | ||||||
Due after 3 years through 4 years | 2,336,450 | 2,430,000 | ||||||
Due after 4 years through 5 years | 1,271,500 | 1,815,450 | ||||||
Thereafter | 2,422,000 | 2,162,000 | ||||||
Index amortizing notes | 207,389 | 251,757 | ||||||
Total par value | $ | 41,087,689 | $ | 42,214,357 | ||||
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Weighted Average | ||||||||||||
Book Value | Par Value | Interest Rate (1) | ||||||||||
December 31, 2009 | $ | 23,186,731 | $ | 23,188,797 | 0.08 | % | ||||||
December 31, 2008 | $ | 49,335,739 | $ | 49,388,776 | 0.79 | % | ||||||
(1) | Represents an implied rate. |
2009 | 2008 | |||||||
Balance at beginning of year | $ | 102,615 | $ | 103,374 | ||||
Expense (current year additions) | 30,819 | 27,170 | ||||||
Subsidy uses, net | (35,093 | ) | (27,929 | ) | ||||
Balance at end of year | $ | 98,341 | $ | 102,615 | ||||
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2009 | 2008 | |||||||
Balance at beginning of year | $ | 14,054 | $ | 16,539 | ||||
Expense | 67,005 | 59,084 | ||||||
Cash payments | (68,869 | ) | (61,569 | ) | ||||
Balance at end of year | $ | 12,190 | $ | 14,054 | ||||
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2009 | 2008 | |||||||||||||||
Required | Actual | Required | Actual | |||||||||||||
Regulatory capital requirements: | ||||||||||||||||
Risk-based capital | $ | 389,380 | $ | 4,150,734 | $ | 542,630 | $ | 4,399,053 | ||||||||
Capital-to-assets ratio | 4.00% | 5.81% | 4.00% | 4.48% | ||||||||||||
Regulatory capital | $ | 2,855,465 | $ | 4,150,734 | $ | 3,928,243 | $ | 4,399,053 | ||||||||
Leverage capital-to-assets ratio | 5.00% | 8.72% | 5.00% | 6.72% | ||||||||||||
Leverage capital | $ | 3,569,332 | $ | 6,226,101 | $ | 4,910,303 | $ | 6,598,580 |
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2009 | 2008 | |||||||||||||||
Number of | Number of | |||||||||||||||
Stockholders | Amount | Stockholders | Amount | |||||||||||||
Capital stock subject to mandatory redemption due to: | ||||||||||||||||
Withdrawals(1) | 18 | $ | 596,366 | 15 | $ | 110,679 | ||||||||||
Other redemptions | 5 | 79,113 | 1 | 230 | ||||||||||||
Total | 23 | $ | 675,479 | 16 | $ | 110,909 | ||||||||||
(1) | Withdrawals primarily include members that attain non-member status by merger or acquisition, charter termination, or involuntary termination of membership. |
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2009 | 2008 | 2007 | ||||||||||
Balance, beginning of year | $ | 110,909 | $ | 117,624 | $ | 137,109 | ||||||
Capital stock subject to mandatory redemption reclassified from equity: | ||||||||||||
Withdrawals | 535,850 | 10,495 | 530,928 | |||||||||
Other redemptions | 454,728 | 23,230 | 10,125 | |||||||||
Redemption (or other reduction) of mandatorily redeemable capital stock: | ||||||||||||
Withdrawals | (50,163 | ) | (22,433 | ) | (463,143 | ) | ||||||
Other redemptions | (375,845 | ) | (23,000 | ) | (97,395 | ) | ||||||
Stock dividend classified as mandatorily redeemable | - | 4,993 | - | |||||||||
Balance, end of year | $ | 675,479 | $ | 110,909 | $ | 117,624 | ||||||
Contractual Year of Redemption | 2009 | 2008 | ||||||
Due in 1 year or less | $ | 7,025 | $ | 335 | ||||
Due after 1 year through 2 years | 7,231 | 7,043 | ||||||
Due after 2 years through 3 years | 48,269 | 7,524 | ||||||
Due after 3 years through 4 years | 9,375 | 83,057 | ||||||
Due after 4 years through 5 years | 603,579 | 12,950 | ||||||
Total | $ | 675,479 | $ | 110,909 | ||||
§ | The FHLBank may not redeem any capital stock if, following the redemption, the FHLBank would fail to satisfy any of its minimum capital requirements. By law, no FHLBank stock may be redeemed if the FHLBank becomes undercapitalized. | ||
§ | The FHLBank may not redeem any capital stock without approval of the Finance Agency if either its Board of Directors or the Finance Agency determines that the FHLBank has incurred or is likely to incur losses resulting or expected to result in a charge against capital while such charges are continuing or expected to continue. |
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2009 | 2008 | |||||||||||||||||
Percent | Percent | |||||||||||||||||
Name | Balance | of Total | Name | Balance | of Total | |||||||||||||
U.S. Bank, N.A. | $ | 591 | 16 | % | U.S. Bank, N.A. | $ | 841 | 21 | % | |||||||||
PNC Bank, N.A.(1) | 404 | 11 | PNC Bank, N.A.(1) | 404 | 10 | |||||||||||||
Fifth Third Bank | 401 | 11 | Fifth Third Bank | 394 | 10 | |||||||||||||
The Huntington National Bank | 241 | 6 | The Huntington National Bank | 241 | 6 | |||||||||||||
AmTrust Bank | 223 | 5 | ||||||||||||||||
Total | $ | 1,637 | 44 | % | Total | $ | 2,103 | 52 | % | |||||||||
(1) | Formerly National City Bank. |
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2009 | 2008 | 2007 | ||||||||||
Matching contributions | $ | 124 | $ | 130 | $ | 100 | ||||||
Market related earnings (losses) | 883 | (1,059 | ) | 262 | ||||||||
Net | $ | 1,007 | $ | (929 | ) | $ | 362 | |||||
Postretirement | ||||||||||||||||
Benefits | ||||||||||||||||
BEP | Plan | |||||||||||||||
Change in benefit obligation(1): | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Benefit obligation at beginning of year | $ | 17,978 | $ | 16,404 | $ | 3,496 | $ | 3,126 | ||||||||
Service cost | 502 | 407 | 59 | 50 | ||||||||||||
Interest cost | 1,180 | 1,027 | 197 | 183 | ||||||||||||
Actuarial loss (gain) | 2,837 | 1,014 | (78 | ) | 207 | |||||||||||
Benefits paid | (1,075 | ) | (874 | ) | (51 | ) | (70 | ) | ||||||||
Benefit obligation at end of year | 21,422 | 17,978 | 3,623 | 3,496 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | - | - | - | - | ||||||||||||
Employer contribution | 1,075 | 874 | 51 | 70 | ||||||||||||
Benefits paid | (1,075 | ) | (874 | ) | (51 | ) | (70 | ) | ||||||||
Fair value of plan assets at end of year | - | - | - | - | ||||||||||||
Funded status at end of year | (21,422 | ) | (17,978 | ) | (3,623 | ) | (3,496 | ) | ||||||||
Unrecognized net actuarial loss | 7,552 | 5,548 | 193 | 271 | ||||||||||||
Unrecognized prior service benefit | (1 | ) | (2 | ) | - | - | ||||||||||
Net amount recognized in earnings | $ | (13,871 | ) | $ | (12,432 | ) | $ | (3,430 | ) | $ | (3,225 | ) | ||||
(1) | Represents projected benefit obligation and accumulated postretirement benefit obligation for the BEP and postretirement benefits plan, respectively. |
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Postretirement | ||||||||||||||||
Benefits | ||||||||||||||||
BEP | Plan | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net actuarial loss | $ | 7,552 | $ | 5,548 | $ | 193 | $ | 271 | ||||||||
Prior service benefit | (1 | ) | (2 | ) | - | - | ||||||||||
$ | 7,551 | $ | 5,546 | $ | 193 | $ | 271 | |||||||||
Postretirement | ||||||||||||||||||||||||
Benefits | ||||||||||||||||||||||||
BEP | Plan | |||||||||||||||||||||||
Net Periodic Benefit Cost | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||
Service cost | $ | 502 | $ | 407 | $ | 328 | $ | 59 | $ | 50 | $ | 47 | ||||||||||||
Interest cost | 1,180 | 1,027 | 930 | 197 | 183 | 178 | ||||||||||||||||||
Amortization of unrecognized prior service benefit | (1 | ) | (1 | ) | (1 | ) | - | - | - | |||||||||||||||
Amortization of unrecognized net loss | 833 | 608 | 816 | - | - | - | ||||||||||||||||||
Net periodic benefit cost | 2,514 | 2,041 | 2,073 | 256 | 233 | 225 | ||||||||||||||||||
Other Changes in Benefit Obligations | ||||||||||||||||||||||||
Recognized in Other Comprehensive Income | ||||||||||||||||||||||||
Net loss (gain) | 2,837 | 1,014 | 267 | (78 | ) | 207 | (43 | ) | ||||||||||||||||
Amortization of unrecognized net loss | (833 | ) | (608 | ) | (816 | ) | - | - | - | |||||||||||||||
Amortization of unrecognized prior service benefit | 1 | 1 | 1 | - | - | - | ||||||||||||||||||
Total recognized in other comprehensive income | 2,005 | 407 | (548 | ) | (78 | ) | 207 | (43 | ) | |||||||||||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 4,519 | $ | 2,448 | $ | 1,525 | $ | 178 | $ | 440 | $ | 182 | ||||||||||||
Postretirement | ||||||||
Benefits | ||||||||
BEP | Plan | |||||||
Net actuarial loss | $ | 902 | $ - | |||||
Prior service benefit | (1 | ) | - | |||||
Total | $ | 901 | $ - | |||||
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2009 | 2008 | 2007 | ||||||||||
Discount rate | 5.58% | 6.21% | 6.13% | |||||||||
Salary increases | 4.50% | 4.50% | 4.50% | |||||||||
Benefits paid during the year | $1,075 | $874 | $906 |
2009 | 2008 | 2007 | ||||||||||
Discount rate (to determine net periodic benefit cost) | 5.75% | 6.00% | 6.00% | |||||||||
Discount rate at the end of the year (to determine benefit obligations) | 6.15% | 5.75% | 6.00% | |||||||||
Health care cost trend rates: | ||||||||||||
Assumed for next year | 9.00% | 8.00% | 8.50% | |||||||||
Ultimate rate | 5.25% | 5.25% | 5.25% | |||||||||
Year that ultimate rate is reached | 2020 | 2017 | 2017 |
Postretirement Benefit Plan | ||||||||||||
Gross Benefit | Estimated Medicare | |||||||||||
Years | BEP | Payments | Retiree Drug Subsidy | |||||||||
2010 | $ | 1,088 | $ | 180 | $ | 21 | ||||||
2011 | 1,256 | 187 | 22 | |||||||||
2012 | 1,456 | 196 | 25 | |||||||||
2013 | 1,543 | 204 | 28 | |||||||||
2014 | 1,945 | 216 | 29 | |||||||||
Years 2015 - 2019 | 9,776 | 1,264 | 163 |
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Traditional Member | Mortgage Purchase | |||||||||||
Finance | Program | Total | ||||||||||
2009 | ||||||||||||
Net interest income | $ | 276,071 | $ | 110,899 | $ | 386,970 | ||||||
Other income (loss) | 38,466 | (885 | ) | 37,581 | ||||||||
Other expenses | 50,291 | 8,415 | 58,706 | |||||||||
Income before assessments | 264,246 | 101,599 | 365,845 | |||||||||
Affordable Housing Program | 22,525 | 8,294 | 30,819 | |||||||||
REFCORP | 48,344 | 18,661 | 67,005 | |||||||||
Total assessments | 70,869 | 26,955 | 97,824 | |||||||||
Net income | $ | 193,377 | $ | 74,644 | $ | 268,021 | ||||||
Average assets | $ | 75,054,187 | $ | 9,615,520 | $ | 84,669,707 | ||||||
Total assets | $ | 61,979,463 | $ | 9,407,169 | $ | 71,386,632 | ||||||
Traditional Member | Mortgage Purchase | |||||||||||
Finance | Program | Total | ||||||||||
2008 | ||||||||||||
Net interest income | $ | 304,671 | $ | 59,455 | $ | 364,126 | ||||||
Other income | 6,202 | 2,545 | 8,747 | |||||||||
Other expenses | 43,094 | 7,187 | 50,281 | |||||||||
Income before assessments | 267,779 | 54,813 | 322,592 | |||||||||
Affordable Housing Program | 22,695 | 4,475 | 27,170 | |||||||||
REFCORP | 49,016 | 10,068 | 59,084 | |||||||||
Total assessments | 71,711 | 14,543 | 86,254 | |||||||||
Net income | $ | 196,068 | $ | 40,270 | $ | 236,338 | ||||||
Average assets | $ | 85,592,850 | $ | 8,763,730 | $ | 94,356,580 | ||||||
Total assets | $ | 89,534,119 | $ | 8,671,950 | $ | 98,206,069 | ||||||
Traditional Member | Mortgage Purchase | |||||||||||
Finance | Program | Total | ||||||||||
2007 | ||||||||||||
Net interest income | $ | 331,428 | $ | 89,870 | $ | 421,298 | ||||||
Other (loss) income | (7,675 | ) | 1,551 | (6,124 | ) | |||||||
Other expenses | 40,313 | 8,337 | 48,650 | |||||||||
Income before assessments | 283,440 | 83,084 | 366,524 | |||||||||
Affordable Housing Program | 24,068 | 6,782 | 30,850 | |||||||||
REFCORP | 51,875 | 15,260 | 67,135 | |||||||||
Total assessments | 75,943 | 22,042 | 97,985 | |||||||||
Net income | $ | 207,497 | $ | 61,042 | $ | 268,539 | ||||||
Average assets | $ | 74,225,302 | $ | 10,067,217 | $ | 84,292,519 | ||||||
Total assets | $ | 78,046,267 | $ | 9,289,195 | $ | 87,335,462 | ||||||
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Level 1– defined as those instruments for which inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market is a market in which the transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
Level 2– defined as those instruments for which inputs to the valuation methodology include quoted prices for similar instruments in active markets, and for which inputs are observable, either directly or indirectly, for substantially the full term of the financial instrument. The FHLBank’s trading securities, available-for-sale securities and derivative instruments are considered Level 2 instruments based on the inputs utilized to derive fair value. |
Level 3– defined as those instruments for which inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those supported by little or no market activity or by the entity’s own assumptions. |
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Fair Value Measurements at December 31, 2009 Using: | ||||||||||||||||||||
Netting | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Adjustment(1) | Total | ||||||||||||||||
Assets | ||||||||||||||||||||
Trading securities: | ||||||||||||||||||||
Non mortgage-backed securities government-sponsored enterprise debt | $ | - | $ | 3,799,336 | $ | - | $ | - | $ | 3,799,336 | ||||||||||
Other U.S. obligation residential mortgage-backed securities | - | 2,677 | - | - | 2,677 | |||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Certificates of deposit | - | 6,669,636 | - | - | 6,669,636 | |||||||||||||||
Derivative assets | - | 187,847 | - | (178,782 | ) | 9,065 | ||||||||||||||
Total assets at fair value | $ | - | $ | 10,659,496 | $ | - | $ | (178,782 | ) | $ | 10,480,714 | |||||||||
Liabilities | ||||||||||||||||||||
Derivative liabilities | $ | - | $ | (833,057 | ) | $ | - | $ | 604,860 | $ | (228,197 | ) | ||||||||
Total liabilities at fair value | $ | - | $ | (833,057 | ) | $ | - | $ | 604,860 | $ | (228,197 | ) | ||||||||
Fair Value Measurements at December 31, 2008 Using: | ||||||||||||||||||||
Netting | ||||||||||||||||||||
Adjustment | ||||||||||||||||||||
and Cash | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral(1) | Total | ||||||||||||||||
Assets | ||||||||||||||||||||
Trading securities: | ||||||||||||||||||||
Other U.S. obligation residential mortgage-backed securities | $ | - | $ | 2,985 | $ | - | $ | - | $ | 2,985 | ||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Certificates of deposit and bank notes | - | 2,511,630 | - | - | 2,511,630 | |||||||||||||||
Derivative assets | - | 239,957 | - | (222,647 | ) | 17,310 | ||||||||||||||
Total assets at fair value | $ | - | $ | 2,754,572 | $ | - | $ | (222,647 | ) | $ | 2,531,925 | |||||||||
Liabilities | ||||||||||||||||||||
Derivative liabilities | $ | - | $ | (1,238,018 | ) | $ | - | $ | 951,542 | $ | (286,476 | ) | ||||||||
Total liabilities at fair value | $ | - | $ | (1,238,018 | ) | $ | - | $ | 951,542 | $ | (286,476 | ) | ||||||||
(1) | Amounts represent the effects of legally enforceable master netting agreements that allow the FHLBank to settle positive and negative positions and also cash collateral held or placed with the same counterparties. |
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§ | the Mortgage Purchase Program’s credit enhancements; | ||
§ | marketing adjustments that reflect the FHLBank’s cooperative business model, and preferences for particular kinds of loans and mortgage note rates. |
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December 31, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Financial Instruments | Value | Fair Value | Value | Fair Value | ||||||||||||
Assets: | ||||||||||||||||
Cash and due from banks | $ | 1,807,343 | $ | 1,807,343 | $ | 2,867 | $ | 2,867 | ||||||||
Interest-bearing deposits | 126 | 126 | 19,906,234 | 19,906,234 | ||||||||||||
Securities purchased under resale agreements | 100,000 | 100,000 | - | - | ||||||||||||
Federal funds sold | 2,150,000 | 2,150,000 | - | - | ||||||||||||
Trading securities | 3,802,013 | 3,802,013 | 2,985 | 2,985 | ||||||||||||
Available-for-sale securities | 6,669,636 | 6,669,636 | 2,511,630 | 2,511,630 | ||||||||||||
Held-to-maturity securities | 11,471,081 | 11,837,712 | 12,904,200 | 13,163,337 | ||||||||||||
Advances | 35,818,425 | 35,977,680 | 53,915,972 | 54,150,919 | ||||||||||||
Mortgage loans held for portfolio, net | 9,365,752 | 9,617,913 | 8,631,873 | 8,888,577 | ||||||||||||
Accrued interest receivable | 151,690 | 151,690 | 275,560 | 275,560 | ||||||||||||
Derivative assets | 9,065 | 9,065 | 17,310 | 17,310 | ||||||||||||
Liabilities: | ||||||||||||||||
Deposits | (2,084,821 | ) | (2,084,975 | ) | (1,193,461) | (1,193,818 | ) | |||||||||
Consolidated Obligations: | ||||||||||||||||
Discount Notes | (23,186,731 | ) | (23,187,365 | ) | (49,335,739) | (49,383,752 | ) | |||||||||
Bonds | (41,222,590 | ) | (41,836,797 | ) | (42,392,785) | (43,298,966 | ) | |||||||||
Mandatorily redeemable capital stock | (675,479 | ) | (675,479 | ) | (110,909) | (110,909 | ) | |||||||||
Accrued interest payable | (309,007 | ) | (309,007 | ) | (394,346) | (394,346 | ) | |||||||||
Derivative liabilities | (228,197 | ) | (228,197 | ) | (286,476) | (286,476 | ) | |||||||||
Other: | ||||||||||||||||
Commitments to extend credit for Advances | - | - | - | 284 | ||||||||||||
Standby bond purchase agreements | - | 1,947 | - | 2,155 |
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2009 | 2008 | |||
Outstanding Notional (in thousands) | $4,414,743 | $7,916,613 | ||
Original Terms | 16 days to 18 years | 15 days to 18 years | ||
Final Expiration Year | 2024 | 2024 |
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Year | Premises | Equipment | Total | |||||||||
2010 | $ | 927 | $ | 108 | $ | 1,035 | ||||||
2011 | 870 | 105 | 975 | |||||||||
2012 | 889 | 105 | 994 | |||||||||
2013 | 904 | 92 | 996 | |||||||||
2014 | 678 | - | 678 | |||||||||
Thereafter | - | - | - | |||||||||
Total | $ | 4,268 | $ | 410 | $ | 4,678 | ||||||
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Average Daily Balances | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Loans to other FHLBanks | $ | 19,033 | $ | 17,634 | $ | 7,112 | ||||||
Borrowings from other FHLBanks | 1,370 | - | - | |||||||||
Investments in other FHLBanks | 6,800 | - | - |
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2009 | 2008 | |||||||||||||||
Balance | % of Total (1) | Balance | % of Total(1) | |||||||||||||
Advances | $ | 1,146 | 3.3 | % | $ | 734 | 1.4 | % | ||||||||
Mortgage Purchase Program | 113 | 1.2 | 29 | 0.3 | ||||||||||||
Mortgage-backed securities | - | - | - | - | ||||||||||||
Regulatory capital stock | 179 | 4.8 | 61 | 1.5 | ||||||||||||
Derivatives | - | - | - | - |
(1) | Percentage of total principal (Advances), unpaid principal balance (Mortgage Purchase Program), principal balance (mortgage-backed securities), regulatory capital stock, and notional balances (derivatives). |
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Regulatory | Mortgage Purchase | |||||||||||||||
Capital Stock | Advance | Program Unpaid | ||||||||||||||
December 31, 2009 | Balance | % of Total | Principal | Principal Balance | ||||||||||||
U. S. Bank, N.A. | $ | 591 | 16 | % | $ | 9,315 | $ | 94 | ||||||||
PNC Bank, N.A.(1) | 404 | 11 | 4,282 | 3,608 | ||||||||||||
Fifth Third Bank | 401 | 11 | 2,538 | 12 | ||||||||||||
The Huntington National Bank | 241 | 6 | 170 | 322 | ||||||||||||
Total | $ | 1,637 | 44 | % | $ | 16,305 | $ | 4,036 | ||||||||
(1) | Formerly National City Bank. |
Regulatory | Mortgage Purchase | |||||||||||||||
Capital Stock | Advance | Program Unpaid | ||||||||||||||
December 31, 2008 | Balance | % of Total | Principal | Principal Balance | ||||||||||||
U. S. Bank, N.A. | $ | 841 | 21 | % | $ | 14,856 | $ | 116 | ||||||||
PNC Bank, N.A.(1) | 404 | 10 | 6,435 | 4,709 | ||||||||||||
Fifth Third Bank | 394 | 10 | 5,639 | 15 | ||||||||||||
The Huntington National Bank | 241 | 6 | 2,590 | 310 | ||||||||||||
AmTrust Bank | 223 | 5 | 2,338 | - | ||||||||||||
Total | $ | 2,103 | 52 | % | $ | 31,858 | $ | 5,150 | ||||||||
(1) | Formerly National City Bank. |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
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Item 9A. | Controls and Procedures. |
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Item 9B. | Other Information. |
Name | Votes Received | |||
B. Proctor Caudill, Jr. | 583,560 | |||
Billie W. Wade | 466,609 | |||
Claude E. Bentley | 209,084 | |||
Linda D. Blanchard | 101,157 | |||
William W. James | 93,731 |
Name | Votes Received | |||
William J. Small | 1,639,680 | |||
A. Barry Parmiter | 659,699 | |||
Mark A. Klein | 254,843 |
B. Proctor Caudill, Jr. | Billie W. Wade | William J. Small | ||
Director | Chief Executive Officer | Chairman | ||
Kentucky Bank | Citizens Union Bank | First Federal Bank of the Midwest | ||
Paris, Kentucky | Shelbyville, Kentucky | Defiance, Ohio |
William Y. Carroll
James R. DeRoberts
Mark N. DuHamel
Stephen D. Hailer
Michael R. Melvin
R. Stan Puckett
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Name | Votes Received | |||
Donald J. Mullineaux | 3,336,413 | |||
Grady P. Appleton | 3,224,347 |
Charles J. Koch
Alvin J. Nance
Charles J. Ruma
Carl F. Wick
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Item 10. | Directors, Executive Officers and Corporate Governance. |
Expiration of | Independent or | |||||||||||
Name | Age | Director Since | Term as Director | Member (State) | ||||||||
Grady P. Appleton | 62 | 2007 | 12/31/13 | Independent (OH) | ||||||||
Robert E. Brosky | 66 | 2003 | 12/31/12 | Member (OH) | ||||||||
William Y. Carroll | 70 | 2002 | 12/31/10 | Member (TN) | ||||||||
B. Proctor Caudill, Jr., Vice Chair | 60 | 2004 | 12/31/13 | Member (KY) | ||||||||
James R. DeRoberts | 53 | 2008 | 12/31/10 | Member (OH) | ||||||||
Mark N. DuHamel | 52 | 2009 | 12/31/11 | Member (OH) | ||||||||
Leslie D. Dunn | 64 | 2007 | 12/31/12 | Independent (OH) | ||||||||
Stephen D. Hailer | 59 | (1993-1998) 2002 | 12/31/12 | Member (OH) | ||||||||
Charles J. Koch | 63 | 2008(1) | 12/31/10 | Independent (OH) | ||||||||
Michael R. Melvin | 65 | (1995-2001) 2006 | 12/31/11 | Member (OH) | ||||||||
Donald J. Mullineaux | 64 | 2010 | 12/31/11 | Independent (KY) | ||||||||
Alvin J. Nance | 52 | 2009 | 12/31/12 | Independent (TN) | ||||||||
R. Stan Puckett | 53 | 2005 | 12/31/10 | Member (TN) | ||||||||
Charles J. Ruma | 68 | (2002-2004) 2007 | 12/31/11 | Independent (OH) | ||||||||
William J. Small | 59 | 2007 | 12/31/13 | Member (OH) | ||||||||
Billie W. Wade | 60 | 2007 | 12/31/13 | Member (KY) | ||||||||
Carl F. Wick, Chair | 70 | 2003 | 12/31/10 | Independent (OH) |
(1) | Mr. Koch, an independent director beginning in 2008, also served as a member director from 1990-1995 and 1998-2006. |
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Employee of | ||||||
Name | Age | Position | the FHLBank Since | |||
David H. Hehman | 61 | President and Chief Executive Officer | 1977 | |||
Andrew S. Howell | 48 | Executive Vice President and Chief Operating Officer | 1989 | |||
Donald R. Able | 49 | Senior Vice President-Controller; Principal Financial Officer | 1981 | |||
Thomas J. Ciresi | 56 | Senior Vice President-Member Services | 1981 | |||
Carole L. Cossé | 62 | Senior Vice President and Chief Financial Officer | 1979 | |||
R. Kyle Lawler | 52 | Senior Vice President-Credit Services | 2000 | |||
Robin C. McNulty | 61 | Senior Vice President-Mortgage Purchase Program | 2005 | |||
Stephen J. Sponaugle | 47 | Senior Vice President and Chief Risk Officer | 1992 |
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Item 11. | Executive Compensation. |
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2009 Only | Both 2009 and 2010 | 2010 Only | ||
AEGON USA Realty Advisors, Inc. | Banco Bilbao Vizcaya Argentaria | Banco Santander | ||
AIB Capital Markets | Bank of America | Bank of the West | ||
Australia & New Zealand Banking Group | Bank of Tokyo – Mitsubishi UFJ | BBVA Compass | ||
Bank Hapoalim | BMO Financial Group | Brown Brothers Harriman & Co. | ||
CALYON | BNP Paribas | Capital One | ||
Cargill | Branch Banking & Trust Co. | Fannie Mae | ||
CIBC World Markets | Citigroup | Freddie Mac | ||
Credit Industriel et Commercial | Commerzbank | Huntington Bancshares, Inc. | ||
GMAC | Fifth Third Bank | Marshall & Ilsley Corporation | ||
Hypo Vereinsbank | Fortis Financial Services LLC | Mizuho Corporate Bank, Ltd. | ||
KBC Bank | GE Commercial Finance | National City Corporation | ||
Nordea Bank | HSBC | PNC Bank | ||
Prudential Financial | ING | Regions Financial Corporation | ||
Skandinaviska Enskilda Banken | JP Morgan | Sovereign Bank | ||
Standard Chartered Banks | KeyCorp | State Street Bank & Trust Company | ||
Washington Mutual | Lloyds | Sumitomo Mitsui Banking Corporation | ||
Rabobank Nederland | SVB Financial Group | |||
Royal Bank of Scotland | Synovus | |||
Royal Bank of Canada | The Bank of New York Mellon | |||
Societe Generale | The Bank of Nova Scotia | |||
SunTrust Banks | UniCredit | |||
The CIT Group | ||||
The Northern Trust Company | ||||
Wachovia Corporation | ||||
Wells Fargo Bank |
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Change in | ||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||
Value & | ||||||||||||||||||||||||
Non-Equity | Non-Qualified | |||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||
Plan | Compensation | All Other | ||||||||||||||||||||||
Name and Principal Position | Year | Salary(1) | Compensation(2) | Earnings(3) | Compensation(4) | Total | ||||||||||||||||||
David H. Hehman | 2009 | $ | 613,124 | $ | 531,068 | $ | 1,757,000 | $ | 62,086 | $ | 2,963,278 | |||||||||||||
President and Chief Executive Officer | 2008 | 600,023 | 575,923 | 1,034,000 | 67,106 | 2,277,052 | ||||||||||||||||||
Principal Executive Officer | 2007 | 561,481 | 550,588 | 668,000 | 57,042 | 1,837,111 | ||||||||||||||||||
Donald R. Able | 2009 | 194,115 | 108,110 | 300,000 | 16,697 | 618,922 | ||||||||||||||||||
Senior Vice President – Controller | 2008 | 181,619 | 113,852 | 228,000 | 15,040 | 538,511 | ||||||||||||||||||
Principal Financial Officer | 2007 | 171,115 | 93,897 | 102,000 | 14,166 | 381,178 | ||||||||||||||||||
Andrew S. Howell | 2009 | 297,000 | 195,215 | 359,000 | 27,104 | 878,319 | ||||||||||||||||||
Executive Vice President and Chief | 2008 | 274,954 | 190,835 | 221,000 | 24,089 | 710,878 | ||||||||||||||||||
Operating Officer | 2007 | 227,704 | 158,556 | 82,000 | 18,469 | 486,729 | ||||||||||||||||||
Carole L. Cossé | 2009 | 260,846 | 146,019 | 652,000 | 16,065 | 1,074,930 | ||||||||||||||||||
Senior Vice President and Chief | 2008 | 242,365 | 152,547 | 373,000 | 11,427 | 779,339 | ||||||||||||||||||
Financial Officer | 2007 | 233,831 | 147,578 | 282,000 | 19,612 | 683,021 | ||||||||||||||||||
R. Kyle Lawler | 2009 | 223,600 | 130,015 | 129,000 | 19,595 | 502,210 | ||||||||||||||||||
Senior Vice President | 2008 | 213,385 | 141,609 | 88,000 | 18,015 | 461,009 | ||||||||||||||||||
Credit Services | 2007 | 209,575 | 138,806 | 48,000 | 17,772 | 414,153 |
(1) | Includes excess accrued vacation benefits automatically paid in accordance with established policy (applicable to all employees), which for 2009 were as follows: Mr. Hehman, $26,174; Mr. Able, $11,115; Mr. Howell, $13,000; Mrs. Cossé, $13,846; and Mr. Lawler, $9,600. | |
(2) | Amounts shown for 2009 reflect total payments pursuant to the 2009 Short-Term Non-Equity Incentive Plan and the 2007-2009 Long-Term Non-Equity Incentive Plan performance period, as follows: |
Short-Term | Long-Term | |||||||||||
Name | Incentive Plan | Incentive Plan | Total | |||||||||
David H. Hehman | $ | 326,174 | $ | 204,894 | $ | 531,068 | ||||||
Donald R. Able | 67,514 | 40,596 | 108,110 | |||||||||
Andrew S. Howell | 126,279 | 68,936 | 195,215 | |||||||||
Carole L. Cossé | 91,125 | 54,894 | 146,019 | |||||||||
R. Kyle Lawler | 78,951 | 51,064 | 130,015 |
(3) | Represents change in the actuarial present value of accumulated pension benefits only, which is primarily dependent on changes in interest rates, years of benefit service and salary. No above market or preferential earnings are paid on deferred compensation. | |
(4) | All 2009 amounts represent matching contributions to the qualified and non-qualified defined contribution pension plans. |
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(Dollars in thousands) | ||||||||||||
Incentive | Target | Results | ||||||||||
Member Asset Activity | Weight | Performance | Achieved | |||||||||
a) Average Advances | 5.0 | % | $ | 54,000,000 | $ | 43,623,332 | ||||||
b) Average Credit Balances for Members with Assets£ $1billion | 7.5 | $ | 8,900,000 | $ | 8,054,463 | |||||||
c) New Credit Services Users | 7.5 | 85 | 44 | |||||||||
d) MPP New Delivery Commitments | 5.0 | $ | 900,000 | $ | 1,208,210 | |||||||
e) MPP Participating Financial Institutions – 2009 New Users | 5.0 | 18 | 26 | |||||||||
Community Outreach | ||||||||||||
Community Outreach Events | 10.0 | 47 | 50 | |||||||||
Risk | ||||||||||||
Ratio of Market Value of Equity to Par Value of Regulatory Capital Stock Post Interest Rate Shock | 15.0 | 92.0 | % | 105.5 | % | |||||||
Profitability | ||||||||||||
Adjusted Net Income(1) Divided by Average Shares Outstanding compared to Average Three-Month LIBOR Plus Basis Point Spread (bps) | 35.0 | 250 | bps | 565 | bps | |||||||
New Membership | ||||||||||||
2009 Membership Approvals | 10.0 | 22 | 19 |
(1) | Adjusted Net Income is a non-GAAP measure and is equal to Regulatory Net Income adjusted to remove the non-interest income impact of hedge accounting and further adjusted to amortize Advance prepayment fees over their remaining weighted average term (at the time of prepayment) instead of when they occur. |
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Incentive | Incentive | Incentive | ||||||||||
Opportunity | Opportunity | Opportunity | ||||||||||
Name | at Threshold | at Target | at Maximum | |||||||||
David H. Hehman | 25.0 | % | 55.0 | % | 75.0 | % | ||||||
Donald R. Able | 17.5 | 35.0 | 50.0 | |||||||||
Andrew S. Howell | 17.5 | 45.0 | 60.0 | |||||||||
Carole L. Cossé | 17.5 | 35.0 | 50.0 | |||||||||
R. Kyle Lawler | 17.5 | 35.0 | 50.0 |
Member Asset Activity | ||||
a) Average Advances for Members | Weight: 7.5% | |||
b) Average Advance Balances for Members with Assets of $1 Billion or Less | Weight: 7.5% | |||
c) MPP New Delivery Commitments | Weight: 5.0% | |||
d) MPP Sellers | Weight: 5.0% | |||
e) AHP Competitive Program Disbursement and Deobligation Rate | Weight: 5.0% | |||
Community Outreach | ||||
Community Outreach Events | Weight: 5.0% | |||
Risk | ||||
Market Value of Equity Volatility | Weight: 20.0% | |||
Profitability | ||||
Adjusted Net Income(1) Divided by Average Shares Outstanding compared to Average Three-Month LIBOR Plus Basis Point Spread (bps) | Weight: 35.0% | |||
New Membership | ||||
Membership Approvals | Weight: 10.0% |
(1) | Adjusted Net Income is a non-GAAP measure and is equal to Regulatory Net Income adjusted to remove the non-interest income impact of hedge accounting and further adjusted to amortize Advance prepayment fees over their remaining weighted average term (at the time of prepayment) instead of when they occur. |
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OPERATING EFFICIENCY: | ||
Ranking of Operating Efficiency Ratio in comparison to other FHLBanks | Weight: 33 1/3% | |
RISK ADJUSTED PROFITABILITY: | ||
Ranking of Return on Average Equity (ROAE) in comparison to other FHLBanks | Weight: 33 1/3% | |
MARKET PENETRATION: | ||
Ratio of Member Advances to Member Assets | Weight: 33 1/3% | |
AFFORDABLE HOUSING/COMMUNITY INVESTMENT: | ||
Percent of Participating Members using one or more HCI Programs | Multiplier: +/- 10% |
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Incentive | Target | Results | ||||||||||
Weight | Performance | Achieved | ||||||||||
OPERATING EFFICIENCY: | ||||||||||||
Ranking of Operating Efficiency Ratio in comparison to other FHLBanks | 33 1/3 | % | 2nd quartile | 1st quartile | ||||||||
RISK ADJUSTED PROFITABILITY: | ||||||||||||
Ranking of Return on Average Equity (ROAE) in comparison to other FHLBanks | 33 1/3 | % | 2nd quartile | 1st quartile | ||||||||
MARKET PENETRATION: | ||||||||||||
Ratio of Member Advances to Member Assets | 33 1/3 | % | 5.50 | % | 5.30 | % |
Target | Results | |||||||||||
Multiplier | Performance | Achieved | ||||||||||
AFFORDABLE HOUSING/COMMUNITY INVESTMENT: | ||||||||||||
Percent of Participating Members using one or more HCI Programs | +/- 10 | % | 32.00 | % | 37.10 | % |
OPERATING EFFICIENCY: | ||
Ranking of Operating Efficiency Ratio in comparison to other FHLBanks | Weight: 25% | |
RISK ADJUSTED PROFITABILITY: | ||
Ranking of Return on Average Equity (ROAE) in comparison to other FHLBanks | Weight: 25% | |
MARKET CAPITALIZATION RATIO: | ||
Ratio of Market Value of Equity (MVE) to Par Value of Regulatory Capital Stock | Weight: 25% | |
MARKET PENETRATION: | ||
Ratio of Member Advances to Member Assets | Weight: 25% | |
AFFORDABLE HOUSING/COMMUNITY INVESTMENT: | ||
Percent of Participating Members using one or more HCI Programs | Multiplier: +/- 10% |
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Estimated Future Payouts Under | ||||||||||||||||
Grant | Non-Equity Incentive Plan Awards | |||||||||||||||
Name | Plan | Date | Threshold | Target | Maximum | |||||||||||
David H. Hehman | STI | February 19, 2009 | $ | 146,738 | $ | 322,823 | $ | 440,213 | ||||||||
LTI | March 19, 2009 | 79,238 | 176,085 | 290,540 | ||||||||||||
Donald R. Able | STI | February 19, 2009 | 32,025 | 64,050 | 91,500 | |||||||||||
LTI | March 19, 2009 | 16,470 | 36,600 | 60,390 | ||||||||||||
Andrew S. Howell | STI | February 19, 2009 | 49,700 | 127,800 | 170,400 | |||||||||||
LTI | March 19, 2009 | 31,950 | 71,000 | 117,150 | ||||||||||||
Carole L. Cossé | STI | February 19, 2009 | 43,225 | 86,450 | 123,500 | |||||||||||
LTI | March 19, 2009 | 22,230 | 49,400 | 81,510 | ||||||||||||
R. Kyle Lawler | STI | February 19, 2009 | 37,450 | 74,900 | 107,000 | |||||||||||
LTI | March 19, 2009 | 19,260 | 42,800 | 70,620 |
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Plan | Number of Years | Present Value (2) of | ||||||
Name | Name | Credited Service(1) | Accumulated Benefits | |||||
David H. Hehman | Pentegra DB | 31.92 | $ | 1,908,000 | ||||
DB/BEP | 31.92 | 6,354,000 | ||||||
Donald R. Able | Pentegra DB | 28.42 | 860,000 | |||||
DB/BEP | 28.42 | 88,000 | ||||||
Andrew S. Howell | Pentegra DB | 19.50 | 552,000 | |||||
DB/BEP | 19.50 | 389,000 | ||||||
Carole L. Cossé | Pentegra DB | 29.92 | 2,008,000 | |||||
DB/BEP | 29.92 | 1,013,000 | ||||||
R. Kyle Lawler | Pentegra DB | 8.50 | 297,000 | |||||
DB/BEP | 8.50 | 103,000 |
(1) | For pension plan purposes, the calculation of credited service begins upon completion of a required waiting period following the date of employment. Accordingly, the years shown are less than the executive’s actual years of employment. Because IRS regulations generally prohibit the crediting of additional years of service under the qualified plan, such additional service also is precluded under the DB/BEP, which only restores those benefits lost under the qualified plan. | |
(2) | See Note 17 of the Notes to Financial Statements for details regarding valuation assumptions. |
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Executive | FHLBank | Aggregate | Aggregate | |||||||||||||
Contributions | Contributions | Earnings | Balance | |||||||||||||
Name | In 2009(1) | In 2009(2) | In 2009 | 12/31/2009(3) | ||||||||||||
David H. Hehman | $ | 614,728 | $ | 56,601 | $ | 510,833 | $ | 3,122,023 | ||||||||
Donald R. Able | 11,329 | 6,757 | 7,341 | 48,934 | ||||||||||||
Andrew S. Howell | 74,060 | 18,819 | 97,086 | 395,677 | ||||||||||||
Carole L. Cossé | 32,452 | 4,870 | 11,618 | 119,733 | ||||||||||||
R. Kyle Lawler | 73,259 | 11,359 | 21,143 | 418,530 |
(1) | Deferral amounts shown are included as “Salary” and/or “Non-Equity Incentive Plan Compensation” reported on the Summary Compensation Table. | |
(2) | These amounts represent the non-qualified portion of the matching contributions identified in Note 4 to the Summary Compensation Table. | |
(3) | Includes executive and FHLBank contributions that previously have been reported in the Summary Compensation Table since 2006 as follows: Mr. Hehman, $1,264,667; Mr. Able, $29,055; Mr. Howell, $121,609; Mrs. Cossé, $46,079; and Mr. Lawler, $111,402. |
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Robert E. Brosky
William Y. Carroll
B. Proctor Caudill, Jr.
Stephen D. Hailer
Charles J. Koch
Michael R. Melvin
Per Meeting Fee | Annual Cap | |||||||
Chair | $ | 7,800 | $ | 60,000 | ||||
Vice Chair | 7,150 | 55,000 | ||||||
Other Members | 5,800 | 45,000 |
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Fees | ||||||||||||
Earned or | Total | |||||||||||
Name | Paid in Cash | Expenses (1) | Total | |||||||||
Grady P. Appleton | $ | 50,000 | $ | 1,124 | $ | 51,124 | ||||||
Donald R. Ball | 45,000 | - | 45,000 | |||||||||
Robert E. Brosky | 50,000 | 928 | 50,928 | |||||||||
William Y. Carroll | 50,000 | 1,007 | 51,007 | |||||||||
B. Proctor Caudill, Jr., Vice Chair | 55,000 | 1,775 | 56,775 | |||||||||
James R. DeRoberts | 50,000 | 530 | 50,530 | |||||||||
Mark N. DuHamel | 45,600 | - | 45,600 | |||||||||
Leslie D. Dunn | 50,000 | 770 | 50,770 | |||||||||
Stephen D. Hailer | 55,000 | 974 | 55,974 | |||||||||
Charles J. Koch | 45,000 | - | 45,000 | |||||||||
Michael R. Melvin | 45,000 | 1,114 | 46,114 | |||||||||
Alvin J. Nance | 45,000 | - | 45,000 | |||||||||
R. Stan Puckett | 50,000 | 295 | 50,295 | |||||||||
Charles J. Ruma | 45,000 | - | 45,000 | |||||||||
William J. Small | 45,000 | 1,271 | 46,271 | |||||||||
Billie W. Wade | 55,000 | - | 55,000 | |||||||||
Carl F. Wick, Chair | 60,000 | 986 | 60,986 | |||||||||
Total | $ | 840,600 | $ | 10,774 | $ | 851,374 | ||||||
(1) | Total expenses are comprised of spousal travel expenses reimbursed to the director by the FHLBank; directors’ travel expenses are not included. |
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Number of Meetings Held | ||||
Meeting Type | 2009 | |||
Board Meeting | 13 | |||
Audit Committee | 11 | |||
Financial and Risk Management Committee (1) | 6 | |||
Governance (1) | 5 | |||
Housing and Community Development Committee | 5 | |||
Personnel Committee | 6 |
Number of Meetings Held | ||||
Meeting Type | 2008 | |||
Board Meeting | 13 | |||
Audit Committee | 11 | |||
Financial Management Committee(2) | 3 | |||
Housing and Community Development Committee | 3 | |||
Personnel Committee | 7 | |||
Information Technology Committee (2) | 2 | |||
Credit Policy Committee (2) | 2 |
(1) | New committee created in 2009. | |
(2) | Committee combined in 2009 to create the Financial and Risk Management Committee. |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
(Dollars in millions) | ||||||||||||||
Capital | Percent of Total | Number | ||||||||||||
Name | Address | Stock | Capital Stock | of Shares | ||||||||||
U.S. Bank, N.A. | Cincinnati, OH | $ | 591 | 17 | % | 5,912,089 | ||||||||
Fifth Third Bank | Cincinnati, OH | 401 | 12 | 4,006,191 | ||||||||||
PNC Bank, N.A. | Pittsburgh, PA | 285 | 8 | 2,851,871 | ||||||||||
KeyBank, N.A. | Brooklyn, OH | 179 | 5 | 1,789,971 |
(Dollars in millions) | ||||||||||||||
Capital | Percent of Total | |||||||||||||
Name | Address | Stock | Capital Stock | |||||||||||
FirstMerit Bank, N.A. | Akron, OH | $ | 119 | 3.4 | % | |||||||||
First Federal Bank of the Midwest | Defiance, OH | 19 | 0.6 | |||||||||||
GreenBank | Greeneville, TN | 12 | 0.3 | |||||||||||
Citizens Union Bank(1) | Shelbyville, KY | 8 | 0.2 | |||||||||||
Kentucky Bank | Paris, KY | 7 | 0.2 | |||||||||||
First Federal S&LA of Lorain | Lorain, OH | 4 | 0.1 | |||||||||||
Perpetual Federal Savings Bank | Urbana, OH | 3 | 0.1 | |||||||||||
North Akron Savings Bank | Akron, OH | 2 | 0.1 | |||||||||||
The Arlington Bank | Columbus, OH | 1 | 0.0 | |||||||||||
SmartBank | Pigeon Forge, TN | 1 | 0.0 |
(1) | Includes one affiliate institution which is an FHLBank member. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
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Item 14. | Principal Accountant Fees and Services. |
For the Years Ended | ||||||||
(In thousands) | December 31, | |||||||
2009 | 2008 | |||||||
Audit fees | $ | 809 | $ | 874 | ||||
Audit-related fees | 45 | 88 | ||||||
Tax fees | - | - | ||||||
All other fees | - | - | ||||||
Total fees | $ | 854 | $ | 962 | ||||
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Item 15. | Exhibits and Financial Statement Schedules. |
(a) | Financial Statements.The following financial statements of the Federal Home Loan Bank of Cincinnati, set forth in Item 8. above, are filed as a part of this registration statement. |
Statements of Condition as of December 31, 2009 and 2008
Statements of Income for the years ended December 31, 2009, 2008 and 2007
Statements of Capital for the years ended December 31, 2009, 2008 and 2007
Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
Notes to Financial Statements
(b) | Exhibits. | |
See Index of Exhibits |
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FEDERAL HOME LOAN BANK OF CINCINNATI (Registrant) | ||||
By: | /s/ David H. Hehman | |||
David H. Hehman | ||||
President and Chief Executive Officer (principal executive officer) |
Signatures | Title | |||||
/s/ David H. Hehman | President and Chief Executive Officer | |||||
David H. Hehman | (principal executive officer) | |||||
/s/ Donald R. Able | Senior Vice President - Controller | |||||
Donald R. Able | (principal financial officer) | |||||
/s/ Grady P. Appleton* | Director | |||||
Grady P. Appleton | ||||||
/s/ Robert E. Brosky* | Director | |||||
Robert E. Brosky | ||||||
/s/ William Y. Carroll* | Director | |||||
William Y. Carroll | ||||||
/s/ B. Proctor Caudill, Jr.* | Director (Vice Chair) | |||||
B. Proctor Caudill, Jr. | ||||||
/s/ James R. DeRoberts* | Director | |||||
James R. DeRoberts | ||||||
/s/ Mark N. DuHamel* | Director | |||||
Mark N. DuHamel | ||||||
/s/ Leslie D. Dunn* | Director | |||||
Leslie D. Dunn | ||||||
/s/ Stephen D. Hailer* | Director | |||||
Stephen D. Hailer | ||||||
/s/ Charles J. Koch* | Director | |||||
Charles J. Koch | ||||||
/s/ Michael R. Melvin* | Director | |||||
Michael R. Melvin | ||||||
/s/ Donald J. Mullineaux* | Director | |||||
Donald J. Mullineaux |
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/s/ Alvin J. Nance* | Director | |||||
Alvin J. Nance | ||||||
/s/ R. Stan Puckett* | Director | |||||
R. Stan Puckett | ||||||
/s/ Charles J. Ruma* | Director | |||||
Charles J. Ruma | ||||||
/s/ William J. Small* | Director | |||||
William J. Small | ||||||
/s/ Billie W. Wade* | Director | |||||
Billie W. Wade | ||||||
/s/ Carl F. Wick* | Director (Chair) | |||||
Carl F. Wick | ||||||
* Pursuant to Power of Attorney | ||||||
/s/ David H. Hehman | ||||||
David H. Hehman | ||||||
Attorney-in-fact |
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Document incorporated by | ||||
Exhibit | reference from a previous filing or | |||
Number* | Description of exhibit | filed herewith, as indicated below | ||
3.1 | Organization Certificate | Form 10, filed December 5, 2005 | ||
3.2 | Bylaws, as amended through March 18, 2010 | Filed Herewith | ||
4 | Capital Plan, as amended through November 19, 2009 | Filed Herewith | ||
10.1.A | Form of Blanket Agreement for Advances and Security Agreement, as in effect for signatories prior to November 21, 2005 | Form 10, filed December 5, 2005 | ||
10.1.B | Form of Blanket Security Agreement, for new signatories on and after November 21, 2005 | Form 10, filed December 5, 2005 | ||
10.2 | Form of Mortgage Purchase Program Master Selling and Servicing Master Agreement | Form 10, filed December 5, 2005 | ||
10.3 | Federal Home Loan Banks P&I Funding and Contingency Plan Agreement, entered into as of July 20, 2006, by and among the Office of Finance and each of the Federal Home Loan Banks | Form 8-K, filed June 28, 2006 | ||
10.5** | Executive Incentive Compensation Plan, as amended February, 2009 | Form 10-K, filed March 19, 2009 | ||
10.6** | Executive Long-Term Incentive Plan, as amended March, 2009 | Form 10-K, filed March 19, 2009 | ||
10.7** | Federal Home Loan Bank of Cincinnati Benefit Equalization Plan, (December 2008 Restatement) | Filed Herewith | ||
10.8** | First Amendment to the Federal Home Loan Bank of Cincinnati Benefit Equalization Plan (December 2008 Restatement) | Filed Herewith | ||
10.9** | Federal Home Loan Bank of Cincinnati Nonqualified Deferred Compensation Program for Directors [terminated December 23, 2009] | Form 10, filed December 5, 2005 | ||
10.10** | Form of indemnification agreement effective as of July 29, 2009 between the Federal Home Loan Bank and each of its directors and executive officers | Form 8-K, filed July 30, 2009 | ||
12 | Statements of Computation of Ratio of Earnings to Fixed Charges | Filed Herewith | ||
24 | Powers of Attorney | Filed Herewith | ||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | Filed Herewith | ||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer | Filed Herewith | ||
32 | Section 1350 Certifications | Furnished Herewith | ||
99.1 | Audit Committee Letter | Furnished Herewith | ||
99.2 | Audit Committee Charter | Furnished Herewith |
* | Numbers coincide with Item 601 of Regulation S-K. | |
** | Indicates management compensation plan or arrangement. |
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