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Federal Home Loan Banks FEDERAL HOME LOAN BANKS 2009 Combined Financial Report This Combined Financial Report provides financial information on the Federal Home Loan Banks. Investors should use this Combined Financial Report, together with the other information expressly provided by the Federal Home Loan Banks for this purpose, when considering whether or not to purchase the consolidated bonds and consolidated discount notes (collectively referred to in this Combined Financial Report as consolidated obligations) of the Federal Home Loan Banks. The Securities Act of 1933, as amended, does not require the registration of consolidated obligations. No registration statement has been filed with the Securities and Exchange Commission with respect to the consolidated obligations. None of the Securities and Exchange Commission, the Federal Housing Finance Agency or any State securities commission has approved or disapproved the consolidated obligations or has passed upon the accuracy or adequacy of any offering material. The consolidated obligations are not obligations of the United States and are not guaranteed by the United States. Neither this Combined Financial Report nor any offering material provided by the Office of Finance on behalf of the Federal Home Loan Banks concerning any offering of consolidated obligations describes all the risks of investing in consolidated obligations. Investors should consult their financial and legal advisors about the risks of investing in any particular issue of consolidated obligations prior to investing in consolidated obligations. The combined financial reports of the Federal Home Loan Banks are intended to be used by investors who invest in the consolidated obligations of the Federal Home Loan Banks. Even though the consolidated obligations are the joint and several obligations of all of the Federal Home Loan Banks, each Federal Home Loan Bank is a separately chartered entity with its own board of directors and management. There is no centralized system-wide management or oversight by a single board of directors of the Federal Home Loan Banks. Please see “Explanatory Statement about Federal Home Loan Banks Combined Financial Report” on page 2 for important background information regarding the publication of this Combined Financial Report. The financial information contained in this Combined Financial Report is as of and for periods ended on or before December 31, 2009. This document is available on the Federal Home Loan Banks Office of Finance web site at: www.fhlb-of.com. Investors should direct questions about the Federal Home Loan Banks’ combined financial reports to the Federal Home Loan Banks Office of Finance, Chief Accounting Officer & Senior Director of Accounting Policy & Financial Reporting. Investors should direct questions about the Federal Home Loan Banks’ consolidated obligations to the Federal Home Loan Banks Office of Finance, Marketing & Corporate Communications Division. The address is Federal Home Loan Banks Office of Finance, 1818 Library Street, Suite 200, Reston, VA 20190, (703) 467-3600, and the web site is www.fhlb-of.com. The Office of Finance will provide additional copies of this Combined Financial Report upon request. Please contact the Office of Finance to receive subsequent annual and quarterly combined financial reports. The financial condition of the Federal Home Loan Banks may have changed since December 31, 2009. The date of this Combined Financial Report is March 30, 2010. TABLE OF CONTENTS Page Explanatory Statement about FHLBanks Combined Financial Report ........................... 2 Available Information on Individual FHLBanks ........................................... 4 Business........................................................................ 5 General Information ........................................................... 5 Historical Perspective .......................................................... 7 Advances ................................................................... 7 Investments .................................................................. 9 Acquired Member Asset Programs—Mortgage Loans Held for Portfolio ..................... 10 Debt Financing—Consolidated Obligations .......................................... 11 Debt Financing—Subordinated Notes............................................... 14 Deposits .................................................................... 14 Capital, Capital Rules and Dividends ............................................... 14 Other Mission-Related Activities .................................................. 25 Use of Interest-Rate Exchange Agreements .......................................... 26 Competition ................................................................. 28 Oversight, Audits and Examinations................................................ 29 Tax Status ................................................................... 32 Office of Finance ............................................................. 32 Properties and Geographic Distribution ................................................. 33 Employees ...................................................................... 35 Legal Proceedings ................................................................ 35 Submission of Matters to Vote of Capital Stockholders Other than Election of Directors ............. 36 Market for FHLBanks’ Capital Stock and Related Stockholder Matters ......................... 36 Risk Factors ..................................................................... 38 Selected Financial Data ............................................................ 49 Financial Discussion and Analysis of Combined Financial Condition and Combined Results of Operations .................................................................... 51 Forward-Looking Information .................................................... 51 Business Overview ............................................................ 52 Comparative Highlights ......................................................... 53 Financial Trends .............................................................. 56 Combined Statement of Condition ................................................. 67 Combined Results of Operations .................................................. 95 REFCORP Payment ........................................................... 111 Capital Adequacy ............................................................. 112 Liquidity.................................................................... 112 Critical Accounting Estimates .................................................... 114 Off-Balance Sheet Arrangements and Other Commitments ............................... 127 Contractual Obligations ......................................................... 128 Legislative and Regulatory Developments ........................................... 128 Recent Rating Agency Actions ................................................... 134 Risk Management................................................................. 134 Quantitative and Qualitative Disclosures about Market Risk .............................. 135 Liquidity Risk ................................................................ 141 Credit Risk .................................................................. 142 Operational Risk .............................................................. 178 Business Risk ................................................................ 179 Financial Statements and Supplementary Data ............................................ 180 Changes in and Disagreements with Accountants on Combined Accounting and Financial Disclosures . 181 Controls and Procedures ............................................................ 181 Directors and Executive Officers of FHLBanks ........................................... 183 Executive Compensation ............................................................ 185 Security Ownership of Certain Beneficial Owners ......................................... 185 Certain Relationships and Related Transactions ........................................... 188 Index to Combined Financial Statements ................................................ 191 Page Supplemental Information Additional Information on FHLBanks’ Regulator and Business ............................... 330 FHLBanks’ Regulator .......................................................... 330 Mortgage Partnership Finance» (MPF») Program and Mortgage Purchase Program (MPP)........ 331 FHLBank Management and Compensation .............................................. 343 Five Largest Regulatory Capital Stockholders of and Borrowers from Each FHLBank .............. 365 Audit Fees ...................................................................... 370 “Audit Committee” Charter, Combined Financial Reports and for General Office of Finance Operations .................................................................... 370 Individual FHLBank Selected Financial Data and Financial Ratios ............................. 371 Consolidated obligations issued under the Federal Home Loan Banks’ Global Debt Program may be listed on the Euro MTF market of the Luxembourg Stock Exchange. The Luxembourg Stock Exchange has allocated the number 2306 to the Federal Home Loan Banks’ Global Debt Program for listing purposes. Under the Federal Home Loan Banks’ agreement with the underwriter(s) of a particular series of consolidated obligations, any series of consolidated obligations listed on the Luxembourg
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