News Column

FEDERAL HOME LOAN BANK OF ATLANTA - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

August 8, 2014

Forward-Looking Information

Some of the statements made in this quarterly report on Form 10-Q may be "forward-looking statements" which include statements with respect to the plans, objectives, expectations, estimates, and future performance of the Bank and involve known and unknown risks, uncertainties, and other factors, many of which may be beyond the Bank's control and which may cause the Bank's actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Bank's use of words such as "may," "will," "anticipate," "hope," "project," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "could," "intend," "seek," "target," and other similar words and expressions of the future. Such forward-looking statements include statements regarding any one or more of the following topics:



• the Bank's business strategy and changes in operations, including, without

limitation, product growth and change in product mix;

• future performance, including profitability, developments, or market

forecasts;

• forward-looking accounting and financial statement effects; and

• those other factors identified and discussed in the Bank's public filings

with the SEC. The forward-looking statements may not be realized due to a variety of factors, including, without limitation, those risk factors provided under Item 1A of the Bank's Form 10-K and those risk factors presented under Item 1A in Part II of this quarterly report on Form 10-Q. All written or oral statements that are made by or are attributable to the Bank are expressly qualified in their entirety by this cautionary notice. The reader should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. The Bank has no obligation and does not undertake publicly to update, revise, or correct any of the forward-looking statements after the date of this quarterly report, or after the respective dates on which these statements otherwise are made, whether as a result of new information, future events, or otherwise, except as otherwise may be required by law. The discussion presented below provides an analysis of the Bank's financial condition as of June 30, 2014 and December 31, 2013, and results of operations for the second quarter and first six months of 2014 and 2013. Management's discussion and analysis should be read in conjunction with the financial statements and accompanying notes presented elsewhere in this report, as well as the Bank's audited financial statements for the year ended December 31, 2013. Executive Summary Financial Condition As of June 30, 2014, total assets were $128.9 billion, an increase of $6.6 billion, or 5.42 percent, from December 31, 2013. This increase was primarily due to a $5.5 billion, or 6.18 percent, increase in advances and a $4.0 billion, or 14.7 percent, increase in total investments, partially offset by a $2.8 billion, or 64.3 percent, decrease in cash and due from banks. As of June 30, 2014, total liabilities were $122.2 billion, an increase of $6.5 billion, or 5.65 percent, from December 31, 2013. This increase was primarily due to a $7.2 billion, or 6.36 percent, increase in consolidated obligations (COs). As of June 30, 2014, total capital was $6.7 billion, an increase of $92 million, or 1.38 percent, from December 31, 2013. This increase was primarily due to the issuance of $2.3 billion of capital stock related to new advance activity and the recording of $139 million in net income and $18 million in other comprehensive income, partially offset by the repurchase/redemption of $2.3 billion in excess capital stock, excluding capital stock classified as mandatorily redeemable capital stock, and the payment of $88 million in dividends. 38



--------------------------------------------------------------------------------

Table of Contents

Results of Operations

The Bank recorded net income of $62 million for the second quarter of 2014, a decrease of $24 million, or 28.4 percent, from net income of $86 million for the second quarter of 2013. Interest income decreased by $22 million offset by a $28 million decrease in interest expense, which resulted in an increase in net interest income of $6 million for the second quarter of 2014. In the second quarter of 2014, the Bank recorded a decrease in net gains on derivatives and hedging activities of $59 million, partially offset by a decrease in net losses on trading securities of $27 million, compared to the second quarter of 2013. For further discussion, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Noninterest Income (Loss). The Bank recorded net income of $139 million for the first six months of 2014, a decrease of $18 million, or 11.6 percent, from net income of $157 million during the same period in 2013. Interest income decreased by $44 million offset by a $53 million decrease in interest expense, which resulted in an increase in net interest income of $9 million for the first six months of 2014. For the first six months of 2014, the Bank recorded a decrease in net gains on derivatives and hedging activities of $86 million, partially offset by a decrease in net losses on trading securities of $37 million, compared to the same period in 2013. Additionally, the Bank recorded a $15 million gain on early extinguishment of debt. One way in which the Bank analyzes its performance is by comparing its annualized return on equity (ROE) to three-month average LIBOR. The Bank's ROE was 3.81 percent for the second quarter of 2014, compared to 5.61 percent for the second quarter of 2013. ROE decreased for the second quarter of 2014, compared to the second quarter of 2013, primarily as a result of a decrease in net income, and an increase in average total capital during the period. ROE spread to three-month average LIBOR decreased to 358 basis points for the second quarter of 2014, compared to 533 basis points for the second quarter of 2013. The decrease in the ROE spread to LIBOR was primarily due to the decrease in ROE. The Bank's annualized ROE was 4.28 percent for the first six months of 2014, compared to 5.13 percent during the same period in 2013. ROE decreased for the first six months of 2014, compared to the same period in 2013, primarily as a result of a decrease in net income, and an increase in average total capital during the period. ROE spread to three-month average LIBOR decreased to 405 basis points for the first six months of 2014, compared to 485 basis points for the same period in 2013. The decrease in the ROE spread to LIBOR was primarily due to the decrease in ROE, as previously discussed. The Bank's interest rate spread was 27 basis points for the second quarter and the first six months of 2014, and 26 basis points for the second quarter and the first six months of 2013. Business Outlook The Bank's business outlook remains largely unchanged from the discussion in the Bank's Form 10-K. Overall advances increased during the second quarter of 2014 due to an increase in new short-term advances by larger members. Although the Bank continues to see some shift toward slightly longer maturities, overall advances balances are expected to continue fluctuating during 2014, given the large percentage of short-term advances, and members continue to experience high levels of liquidity and low loan demand. The prolonged low interest rate environment continues to place pressure on the Bank's investment portfolio, as higher-yielding investments mature or prepay in an environment with limited attractive reinvestment opportunities. 39



--------------------------------------------------------------------------------

Table of Contents

Selected Financial Data

The following table presents a summary of certain financial information for the Bank for the periods indicated (dollars in millions):

As of and for the Three Months Ended June 30, March 31, December 31, September 30, June 30, 2014 2014 2013 2013 2013 Statements of Condition (at period end) Total assets $ 128,942$ 119,467$ 122,316$ 112,068$ 121,778 Investments (1) 30,894 32,206 26,944 28,991 30,825 Mortgage loans held for portfolio 838 883 929 983 1,076 Allowance for credit losses on mortgage loans (6 ) (4 ) (11 ) (11 ) (12 ) Advances 95,128 84,166 89,588 78,193 89,450 Interest-bearing deposits 1,432 1,465 1,752 1,890 2,172



Consolidated obligations, net:

Discount notes 30,679 22,801 32,202 16,282 26,161 Bonds 89,438 88,276 80,728 87,139 89,196 Total consolidated obligations, net (2) 120,117 111,077 112,930 103,421 112,357 Mandatorily redeemable capital stock 21 23 24 24 25 Affordable Housing Program payable 71 76 74 72 75 Capital stock - putable 4,906 4,412 4,883 4,351 4,847 Retained earnings 1,708 1,690 1,657 1,579 1,537 Accumulated other comprehensive income 130 117 112 83 67 Total capital 6,744 6,219 6,652 6,013 6,451 Statements of Income (for the period ended) Net interest income 92 90 82 86 86 Provision (reversal) for credit losses 2 (4 ) 1 1 1 Net impairment losses recognized in earnings - (1 ) - - - Net losses on trading securities (13 ) (14 ) (21 ) (15 ) (40 ) Net gains on derivatives and hedging activities 16 15 53 34 75 Letters of credit fees 6 7 6 4 5 Other income (3) 1 16 38 2 1 Noninterest expense 32 31 35 31 31 Income before assessments 68 86 122 79 95 Affordable Housing Program assessments 6 9 12 8 9 Net income 62 77 110 71 86 Performance Ratios (%) Return on equity (4) 3.81 4.75 6.86 4.50 5.61 Return on assets (5) 0.19 0.25 0.36 0.24 0.29 Net interest margin (6) 0.29 0.29 0.27 0.29 0.29 Regulatory capital ratio (at period end) (7) 5.15 5.13 5.37 5.31 5.26 Equity to assets ratio (8) 5.03 5.24 5.19 5.23 5.16 Dividend payout ratio (9) 71.35 56.88 29.59 40.25 30.99 40



--------------------------------------------------------------------------------

Table of Contents

____________

(1) Investments consist of interest-bearing deposits, securities purchased under

agreements to resell, federal funds sold, and securities classified as trading, available-for-sale, and held-to-maturity.



(2) The amounts presented are the Bank's primary obligations on consolidated

obligations outstanding. The par value of the FHLBanks' outstanding

consolidated obligations for which the Bank is jointly and severally liable

was as follows (in millions):

June 30, 2014$ 680,240March 31, 2014 643,157 December 31, 2013 654,076 September 30, 2013 617,648 June 30, 2013 592,479



(3) Other income includes service fees and other. For the periods ended March

31, 2014, December 31, 2013, and September 30, 2013, the amount includes a

$15 million, $4 million, and $2 million net gain on early extinguishment of

debt, respectively. For the period ended December 31, 2013, amount includes

a $33 million gain on litigation settlement. (4) Calculated as net income divided by average total equity. (5) Calculated as net income divided by average total assets. (6) Net interest margin is net interest income as a percentage of average earning assets.



(7) Regulatory capital ratio is regulatory capital stock plus retained earnings

as a percentage of total assets at period end. (8) Calculated as average equity divided by average total assets.



(9) Calculated as dividends declared during the period divided by net income

during the period. Financial Condition



The following table presents the distribution of the Bank's total assets, liabilities, and capital by major class as of the dates indicated (dollars in millions). These items are discussed in more detail below.

As of June 30, 2014 As of December 31, 2013 Increase (Decrease) Percent Percent Amount of Total Amount of Total Amount Percent Advances $ 95,128 73.77 $ 89,588 73.24 $ 5,540 6.18 Long-term investments 24,225 18.79 24,142 19.74 83 0.34 Short-term investments 6,669 5.17 2,802 2.29 3,867 137.99 Mortgage loans, net 832 0.65 918 0.75 (86 ) (9.32 ) Other assets 2,088 1.62 4,866 3.98 (2,778 ) (57.09 ) Total assets $ 128,942 100.00 $ 122,316 100.00 $ 6,626 5.42 Consolidated obligations, net: Discount notes $ 30,679 25.11 $ 32,202 27.84 $ (1,523 ) (4.73 ) Bonds 89,438 73.19 80,728 69.80 8,710 10.79 Deposits 1,432 1.17 1,752 1.51 (320 ) (18.27 ) Other liabilities 649 0.53 982 0.85 (333 ) (33.93 ) Total liabilities $ 122,198 100.00 $ 115,664 100.00 $ 6,534 5.65 Capital stock $ 4,906 72.76 $ 4,883 73.41 $ 23 0.48 Retained earnings 1,708 25.32 1,657 24.90 51 3.07 Accumulated other comprehensive income 130 1.92 112 1.69 18 15.67 Total capital $ 6,744 100.00 $ 6,652 100.00 $ 92 1.38 Advances Total advances increased as of June 30, 2014 compared to December 31, 2013, primarily due to new advance activity during the period. As of June 30, 2014, 74.7 percent of the Bank's advances were fixed-rate, compared to 85.2 percent as of December 31, 2013. However, the Bank often simultaneously enters into derivatives with the issuance of advances to convert the rates on them, in effect, into a short-term variable interest rate, usually based on LIBOR. As of June 30, 2014 and December 31, 2013, 48.9 percent and 41.7 percent, respectively, of the Bank's fixed-rate advances were swapped and 2.94 percent and 28.2 percent, respectively, of the Bank's variable-rate advances were swapped. The majority of the Bank's variable-rate advances were indexed to LIBOR. The Bank also offers variable-rate advances tied to the federal funds rate, prime rate, and constant maturity swap rates. 41



--------------------------------------------------------------------------------

Table of Contents

The following table sets forth the par value of outstanding advances by product characteristics (dollars in millions):

As of June 30, 2014 As of December 31, 2013 Percent of Percent of Amount Total Amount Total Fixed rate (1) $ 44,805 48.09 $ 49,768 56.63



Adjustable or variable rate indexed 23,141 24.83 12,584

14.32 Hybrid 20,196 21.67 20,333 23.14 Convertible 3,371 3.62 3,510 3.99 Amortizing (2) 1,668 1.79 1,687 1.92 Total par value $ 93,181 100.00 $ 87,882 100.00 ____________



(1) Includes convertible advances whose conversion options have expired.

(2) The Bank offers a fixed-rate advance that may be structured with principal

amortization in either equal increments or similar to a mortgage.

Refer to Note 7-Advances to the Bank's interim financial statements for the concentration of the Bank's advances to its 10 largest borrowing institutions.

Investments

The following table sets forth more detailed information regarding short- and long-term investments held by the Bank (dollars in millions):

Increase (Decrease) As of June 30, 2014 As of December 31, 2013 Amount Percent Short-term investments: Interest-bearing deposits (1) $ 1,009 $ 1,007 $ 2 0.18 Securities purchased under agreements to resell 1,000 - 1,000 100.00 Federal funds sold 4,660 1,795 2,865 159.61 Total short-term investments 6,669 2,802 3,867 137.99 Long-term investments: State or local housing agency debt obligations 88 93 (5 ) (5.62 ) U.S. government agency debt obligations 6,161 5,404 757 14.00 Mortgage-backed securities: U.S. government agency securities 414 465 (51 ) (10.93 ) Government-sponsored enterprises 13,705 13,952 (247 ) (1.78 ) Private-label residential 3,857 4,228 (371 ) (8.76 ) Total mortgage-backed securities 17,976 18,645 (669 ) (3.59 ) Total long-term investments 24,225 24,142 83 0.34 Total investments $ 30,894 $ 26,944 $ 3,950 14.66 ____________



(1) As of June 30, 2014 and December 31, 2013, interest-bearing deposits

includes a $1.0 billion business money market account with Branch Banking

and Trust Company, one of the Bank's ten largest borrowers.

The increase in short-term investments from December 31, 2013 to June 30, 2014 was primarily due to an increase in federal funds sold, along with an increase in securities purchased under agreements to resell. The amount held in federal funds sold will vary each day based on the federal funds rates, the Bank's liquidity requirements as a result of advances demand, and the availability of high quality counterparties in the federal funds market. As of June 30, 2014, the federal funds rate on federal funds sold was at or above the Bank's minimum investment target rate, as determined by the Bank's internal policy, which allowed the Bank to invest its available cash in federal funds sold. The increase in securities purchased under agreements to resell is consistent with the Bank's efforts to reduce its unsecured credit exposure. 42



--------------------------------------------------------------------------------

Table of Contents

The Finance Agency limits an FHLBank's investment in MBS and asset-backed securities by requiring that the total amortized historical costs for these securities classified as held-to-maturity or available-for-sale, and fair value for MBS securities classified as trading owned by the FHLBank, generally may not exceed 300 percent of the FHLBank's previous month-end total capital, as defined by regulation, plus its mandatorily redeemable capital stock on the day it purchases the securities. The Bank was in compliance with this regulatory requirement as of June 30, 2014 and December 31, 2013, as these investments amounted to 269 percent and 282 percent of total capital plus mandatorily redeemable capital stock, respectively.



Mortgage Loans Held for Portfolio

The decrease in mortgage loans held for portfolio from December 31, 2013 to June 30, 2014 was primarily due to the maturity and prepayment of these assets during the period. The Bank ceased purchasing new mortgage loans in 2008. As of June 30, 2014 and December 31, 2013, the Bank's conventional mortgage loan portfolio was concentrated in the southeastern United States because those members selling loans to the Bank were located primarily in that region. The following table provides the percentage of unpaid principal balance of conventional single-family residential mortgage loans held for portfolio for the five largest state concentrations. As of June 30, 2014 As of December 31, 2013 Percent of Total Percent of Total Florida 26.50 27.04 South Carolina 25.14 24.59 Georgia 14.34 14.34 North Carolina 10.74 10.92 Virginia 8.10 7.95 All other 15.18 15.16 Total 100.00 100.00



Consolidated Obligations

The Bank funds its assets primarily through the issuance of consolidated obligation bonds and, to a lesser extent, consolidated obligation discount notes. The increase in overall consolidated obligations from December 31, 2013 to June 30, 2014 is a result of additional advances outstanding during the period, and the shift from consolidated obligation discount notes to consolidated obligation bonds during the period reflects the Bank's issuing more longer term advances as opposed to shorter term advances during the period. As of June 30, 2014, CO issuances financed 93.2 percent of the $128.9 billion in total assets, remaining relatively stable from the financing ratio of 92.3 percent as of December 31, 2013. As of June 30, 2014 and December 31, 2013, COs outstanding were primarily fixed rate. However, the Bank often simultaneously enters into derivatives with the issuance of CO bonds to convert the interest rates, in effect, into short-term variable interest rates, usually based on LIBOR. As of June 30, 2014 and December 31, 2013, 79.9 percent and 77.5 percent, respectively, of the Bank's fixed-rate CO bonds were swapped and 0.48 percent and 0.34 percent of the Bank's variable-rate CO bonds were swapped, respectively. As of June 30, 2014 and December 31, 2013, the Bank had no fixed-rate CO discount notes that were swapped to a variable rate.



Deposits

The Bank offers demand and overnight deposit programs to members primarily as a liquidity management service. In addition, a member that services mortgage loans may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of those funds to the owners of the mortgage loan. For demand deposits, the Bank pays interest at the overnight rate. Most of these deposits represent member liquidity investments, which members may withdraw on demand. Therefore, the total account balance of the Bank's deposits may be volatile. Member loan demand, deposit flows, and liquidity management strategies influence the amount and volatility of deposit balances carried with the Bank. To support its member deposits, the FHLBank Act requires the Bank to have as a reserve an amount equal to or greater than the current deposits received from members. These reserves are required to be invested in obligations of the United States, deposits in eligible banks or trust companies or advances with maturities not exceeding five years. The Bank was in compliance with this depository liquidity requirement as of June 30, 2014. 43



--------------------------------------------------------------------------------

Table of Contents

Other Liabilities

Other liabilities decreased by $322 million from December 31, 2013 to June 30, 2014. This decrease is primarily attributable to $309 million of investment securities that were traded but not yet settled as of December 31, 2013. These trades were subsequently settled and the related accrued liability was extinguished in early January 2014, which impacted the Bank's net cash used in operating activities for the six months ended June 30, 2014.



Capital

The increase in total capital from December 31, 2013 to June 30, 2014 was primarily due to the issuance of $2.3 billion in capital stock related to new advance activity and $157 million in comprehensive income during the period. The main components of comprehensive income include $139 million of net income and $18 million in other comprehensive income during the first six months of 2014. This increase was partially offset by the repurchase/redemption of $2.3 billion in excess capital stock, excluding capital stock classified as mandatorily redeemable capital stock, and the payment of $88 million in dividends. The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank was in compliance with these regulatory capital rules and requirements as shown in Note 11-Capital and Mandatorily Redeemable Capital Stock to the Bank's interim financial statements. Finance Agency regulations establish criteria based on the amount and type of capital held by an FHLBank for four capital classifications as follows: • Adequately Capitalized - FHLBank meets both risk-based and minimum capital



requirements;

• Undercapitalized - FHLBank does not meet one or both of its risk-based or

minimum capital requirements;

• Significantly Undercapitalized - FHLBank has less than 75 percent of one or

both of its risk-based or minimum capital requirements; and

• Critically Undercapitalized - FHLBank total capital is two percent or less

of total assets. Under the regulations, the Director of the Finance Agency (Director) will make a capital classification for each FHLBank at least quarterly and notify the FHLBank in writing of any proposed action and provide an opportunity for the FHLBank to submit information relevant to such action. The Director is permitted to make discretionary classifications. An FHLBank must provide written notice to the Finance Agency within 10 days of any event or development that has caused or is likely to cause its permanent or total capital to fall below the level required to maintain its most recent capital classification or reclassification. The regulations delineate the types of prompt corrective actions the Director may order in the event an FHLBank is not adequately capitalized, including submission of a capital restoration plan by the FHLBank and restrictions on its dividends, stock redemptions, executive compensation, new business activities, or any other actions the Director determines will ensure safe and sound operations and capital compliance by the FHLBank. On June 24, 2014, the Bank received notification from the Director that, based on March 31, 2014 data, the Bank meets the definition of "adequately capitalized." As of June 30, 2014 and December 31, 2013, the Bank had capital stock subject to mandatory redemption from 12 and 17 members and former members, respectively, consisting of B1 membership stock and B2 activity-based capital stock. The Bank is not required to redeem or repurchase such capital stock until the expiration of the five-year redemption period or, with respect to activity-based capital stock, until the later of the expiration of the five-year redemption period or the activity no longer remains outstanding. The Bank, in its discretion, may repurchase excess capital stock subject to certain limitations and thresholds in the Bank's capital plan. The Bank's capital management plan is discussed in more detail in the Bank's Form 10-K, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Capital.



Results of Operations

The following is a discussion and analysis of the Bank's results of operations for the second quarter and first six months of 2014 and 2013.

44



--------------------------------------------------------------------------------

Table of Contents

Net Income

The following table sets forth the Bank's significant income items for the second quarter and first six months of 2014 and 2013, and provides information regarding the changes during the periods (dollars in millions). These items are discussed in more detail below. For the Three Months For the Six Months Ended June Ended June 30, Increase (Decrease) 30, Increase (Decrease) 2014 2013 Amount Percent 2014 2013 Amount Percent Net interest income $ 92$ 86$ 6 7.14 $ 182$ 173$ 9 5.06 Provision (reversal) for credit losses 2 1 1 182.18 (2 ) 3 (5 ) (179.49 ) Noninterest income 10 41 (31 ) (75.55 ) 33 65 (32 ) (49.67 ) Noninterest expense 32 31 1 1.84 63 61 2 3.76 Affordable Housing Program assessments 6 9 (3 ) (28.32 ) 15 17 (2 ) (11.49 ) Net income $ 62$ 86$ (24 ) (28.44 ) $ 139$ 157$ (18 ) (11.59 ) Net Interest Income The primary source of the Bank's earnings is net interest income. Net interest income equals interest earned on assets (including member advances, mortgage loans, MBS held in portfolio, and other investments), less the interest expense incurred on liabilities (including COs, deposits, and other borrowings). Also included in net interest income are miscellaneous related items such as prepayment fees earned and the amortization of debt issuance discounts, concession fees, and certain derivative instruments and hedging activities related adjustments. The increase in net interest income during the second quarter and first six months of 2014, compared to the same periods in 2013, is primarily due to a reduction in rates on the Bank's long-term debt. This increase was partially offset by a reduction in yield on the Bank's long-term investments and advance portfolio and a reduction in the average balance of the Bank's mortgage loans held for portfolio during the periods. As discussed above, net interest income includes components of hedging activity. When a hedging relationship is discontinued, the cumulative fair value adjustment on the hedged item will be amortized into interest income or expense over the remaining life of the asset or liability. Also, when hedging relationships qualify for hedge accounting, the interest components of the hedging derivatives will be reflected in interest income or expense. As shown in the table summarizing the net effect of derivatives and hedging activity on the Bank's results of operations, the impact of hedging on net interest income was a decrease of $140 million and $147 million for the second quarters of 2014 and 2013, respectively, and a decrease of $270 million and $307 million for the first six months of 2014 and 2013, respectively. The following table presents spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the second quarter and first six months of 2014 and 2013 (dollars in millions). The interest-rate spread is affected by the inclusion or exclusion of net interest income or expense associated with the Bank's derivatives. For example, as discussed above, if the derivatives qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is included in net interest income and in the calculation of interest-rate spread. If the derivatives do not qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is excluded from net interest income and the calculation of the interest-rate spread and recorded in noninterest income (loss) as "Net gains on derivatives and hedging activities." Amortization associated with some hedging-related basis adjustments is also reflected in net interest income, which affects interest-rate spread. 45



--------------------------------------------------------------------------------

Table of Contents For the Three Months Ended June 30, 2014 2013 Yield/ Yield/ Rate Rate Average Balance Interest (%) Average Balance Interest (%) Assets Interest-bearing deposits (1) $ 2,718 $ 1 0.16 $ 3,432 $ 1 0.15 Certificates of deposit - - - 275 - 0.18 Securities purchased under agreements to resell 1,481 - 0.06 902 - 0.09 Federal funds sold 8,433 2 0.10 7,299 3 0.14 Long-term investments (2) 24,253 110 1.83 20,843 117 2.26 Advances 89,552 52 0.23 84,083 62 0.29 Mortgage loans (3) 860 13 5.82 1,121 17 5.99 Loans to other FHLBanks - - 0.09 - - 0.15 Total interest-earning assets 127,297 178 0.56 117,955 200 0.68 Allowance for credit losses on mortgage loans (4 ) (13 ) Other assets 1,492 1,084 Total assets $ 128,785$ 119,026 Liabilities and Capital Interest-bearing deposits (4) $ 1,477 - 0.01 $ 2,227 - 0.03 Short-term debt 27,460 6 0.09 22,122 6 0.10 Long-term debt 90,861 79 0.35 85,092 108 0.51 Other borrowings 23 1 3.74 30 - 2.16 Total interest-bearing liabilities 119,821 86 0.29 109,471 114 0.42 Other liabilities 2,487 3,413 Total capital 6,477 6,142 Total liabilities and capital $ 128,785$ 119,026 Net interest income and net yield on interest-earning assets $ 92 0.29 $ 86 0.29 Interest rate spread 0.27 0.26 Average interest-earning assets to interest-bearing liabilities 106.24 107.75 ____________



(1) Includes amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties. (1) Includes trading securities at fair value and available-for-sale securities

at amortized cost. (2) Nonperforming loans are included in average balances used to determine average rate.



(3) Includes amounts recognized for the right to return cash collateral received

under master netting agreements with derivative counterparties. 46



--------------------------------------------------------------------------------

Table of Contents For the Six Months Ended June 30, 2014 2013 Yield/ Yield/ Rate Rate Average Balance Interest (%) Average Balance Interest (%) Assets Interest-bearing deposits (1) $ 2,726 $ 2 0.14 $ 3,530 $ 3 0.16 Certificates of deposit - - - 328 - 0.21 Securities purchased under agreements to resell 1,185 - 0.06 917 - 0.10 Federal funds sold 8,081 4 0.09 7,906 6 0.15 Long-term investments (2) 24,242 223 1.86 20,892 241 2.33 Advances 88,594 109 0.25 83,895 125 0.30 Mortgage loans (3) 882 26 5.86 1,165 33 5.67 Loans to other FHLBanks - - 0.06 1 - 0.12 Total interest-earning assets 125,710 364 0.58 118,634 408 0.69 Allowance for credit losses on mortgage loans (6 ) (12 ) Other assets 1,357 1,052 Total assets $ 127,061$ 119,674 Liabilities and Capital Interest-bearing deposits (4) $ 1,467 - 0.01 $ 2,239 - 0.04 Short-term debt 29,015 14 0.10 23,397 14 0.12 Long-term debt 87,525 167 0.39 84,358 221 0.53 Other borrowings 24 1 4.25 35 - 2.22 Total interest-bearing liabilities 118,031 182 0.31 110,029 235 0.43 Other liabilities 2,507 3,492 Total capital 6,523 6,153 Total liabilities and capital $ 127,061$ 119,674 Net interest income and net yield on interest-earning assets $ 182 0.29 $ 173 0.29 Interest rate spread 0.27 0.26 Average interest-earning assets to interest-bearing liabilities 106.51 107.82



____________

(1) Includes amounts recognized for the right to reclaim cash collateral paid

under master netting agreements with derivative counterparties.

(2) Includes trading securities at fair value and available-for-sale securities

at amortized cost. (3) Nonperforming loans are included in average balances used to determine average rate.



(4) Includes amounts recognized for the right to return cash collateral received

under master netting agreements with derivative counterparties. 47



--------------------------------------------------------------------------------

Table of Contents

Net interest income for the periods presented was affected by changes in average balances (volume change) and changes in average rates (rate change) of interest-earning assets and interest-bearing liabilities. The following table presents the extent to which volume changes and rate changes affected the Bank's interest income and interest expense (in millions). As noted in the table below, the overall changes in net interest income during the second quarter and first six months of 2014, compared to the same periods in 2013, were primarily volume related. For the Three Months Ended June 30, For the Six Months Ended June 30, 2014 vs. 2013 2014 vs. 2013 Volume (1) Rate (1) Increase (Decrease) Volume (1) Rate (1) Increase (Decrease) Increase (decrease) in interest income: Interest-bearing deposits $ - $ - $ - $ (1 ) $ - $ (1 ) Federal funds sold - (1 ) (1 ) - (2 ) (2 ) Long-term investments 17 (24 ) (7 ) 35 (53 ) (18 ) Advances 4 (14 ) (10 ) 6 (22 ) (16 ) Mortgage loans (4 ) - (4 ) (8 ) 1 (7 ) Total 17 (39 ) (22 ) 32 (76 ) (44 ) Increase (decrease) in interest expense: Short-term debt 1 (1 ) - 3 (3 ) - Long-term debt 7 (36 ) (29 ) 8 (62 ) (54 ) Other borrowings - 1 1 - 1 1 Total 8 (36 ) (28 ) 11 (64 ) (53 ) Increase (decrease) in net interest income $ 9$ (3 ) $ 6 $ 21$ (12 ) $ 9 ____________



(1) Volume change is calculated as the change in volume multiplied by the

previous rate, while rate change is the change in rate multiplied by the

previous volume. The rate/volume change, change in rate multiplied by change

in volume, is allocated between volume change and rate change at the ratio

each component bears to the absolute value of its total.

Noninterest Income (Loss)

The following table presents the components of noninterest income (loss) (dollars in millions):

For the Three Months Ended June 30, Increase (Decrease) For the Six Months Ended June 30, Increase (Decrease) 2014 2013 Amount Percent 2014 2013 Amount Percent Net impairment losses recognized in earnings $ - $ - $ - (100.00 ) $ (1 ) $ - $ (1 ) * Net losses on trading securities (13 ) (40 ) 27 67.16 (27 ) (64 ) 37 57.08 Net gains on derivatives and hedging activities 16 75 (59 ) (78.72 ) 31 117 (86 ) (73.60 ) Gain on early extinguishment of debt - - - - 15 - 15 100.00 Letters of credit fees 6 5 1 39.06 13 10 3 41.60 Other 1 1 - (10.20 ) 2 2 - (1.18 ) Total noninterest income $ 10 $ 41 $ (31 ) (75.55 ) $ 33 $ 65 $ (32 ) (49.67 ) ____________ * Not meaningful. The decrease in net gains on derivative and hedging activities and net losses on trading securities is primarily due to more stable interest rates during the second quarter and first six months of 2014, compared to the same periods in 2013. Net gains on derivatives and hedging activities in the above table includes derivative gains of $13 million and $29 million for the second quarter and first six months of 2014, respectively, that are used to offset the fair value changes on the trading securities of $13 million and $27 million for the same periods. 48



--------------------------------------------------------------------------------

Table of Contents

The following tables summarize the net effect of derivatives and hedging activity on the Bank's results of operations (in millions):

For the Three Months Ended June 30, 2014 Consolidated Obligation Advances Investments Bonds Balance Sheet Total Net interest income: Amortization or accretion of hedging activities in net interest income (1) $ (51 ) $ - $ - $ - $ (51 ) Net interest settlements included in net interest income (2) (224 ) - 135 - (89 ) Total effect on net interest (expense) income $ (275 ) $ - $ 135 $ - $ (140 ) Net gains on derivatives and hedging activities:



Gains (losses) on fair value hedges $ 28 $ - $

(2 ) $ - $ 26

(Losses) gains on derivatives not receiving hedge accounting including net interest settlements - (5 ) 1 (6 ) (10 ) Total net gains (losses) on derivatives and hedging activities 28 (5 ) (1 ) (6 ) 16 Net losses on trading securities (3) - (13 ) - - (13 ) Total effect on noninterest income (loss) $ 28$ (18 ) $ (1 ) $ (6 ) $ 3 ____________



(1) Represents the amortization or accretion of hedging fair value adjustments

for both open and closed hedge positions. (2) Represents interest income or expense on derivatives included in net interest income. (3) Includes only those gains or losses on trading securities or financial



instruments held at fair value that have an economic derivative "assigned,"

therefore, this line item may not agree to the income statement. For the Three Months Ended June 30, 2013 Consolidated Obligation Advances Investments Bonds Balance Sheet Total Net interest income: Amortization or accretion of hedging activities in net interest income (1) $ (50 ) $ - $ 8 $ - $ (42 ) Net interest settlements included in net interest income (2) (264 ) - 159 - (105 ) Total effect on net interest (expense) income $ (314 ) $ - $ 167 $ - $ (147 ) Net gains on derivatives and hedging activities:



Gains (losses) on fair value hedges $ 60 $ - $

(7 ) $ - $ 53 Gains (losses) on derivatives not receiving hedge accounting including net interest settlements 2 11 (2 ) 11 22 Total net gains (losses) on derivatives and hedging activities 62 11 (9 ) 11 75 Net losses on trading securities (3) - (39 ) - - (39 ) Total effect on noninterest income (loss) $ 62$ (28 ) $ (9 ) $ 11 $ 36 ____________



(1) Represents the amortization or accretion of hedging fair value adjustments

for both open and closed hedge positions. (2) Represents interest income or expense on derivatives included in net interest income. (3) Includes only those gains or losses on trading securities or financial



instruments held at fair value that have an economic derivative "assigned,"

therefore, this line item may not agree to the income statement. 49



--------------------------------------------------------------------------------

Table of Contents For the Six Months Ended June 30, 2014 Consolidated Obligation Advances Investments Bonds Balance Sheet Total Net interest income: Amortization or accretion of hedging activities in net interest income (1) $ (96 ) $ - $ 3 $ - $ (93 ) Net interest settlements included in net interest income (2) (442 ) - 265 - (177 ) Total effect on net interest (expense) income $ (538 ) $ - $ 268 $ - $ (270 ) Net gains on derivatives and hedging activities: Gains on fair value hedges $ 51 $ - $



- $ - $ 51

Losses on derivatives not receiving hedge accounting including net interest settlements - (7 ) - (13 ) (20 ) Total net gains (losses) on derivatives and hedging activities 51 (7 ) - (13 ) 31 Net losses on trading securities (3) - (27 ) - - (27 ) Total effect on noninterest income (loss) $ 51$ (34 ) $ - $ (13 )$ 4 ____________



(1) Represents the amortization or accretion of hedging fair value adjustments

for both open and closed hedge positions. (2) Represents interest income or expense on derivatives included in net interest income. (3) Includes only those gains or losses on trading securities or financial



instruments held at fair value that have an economic derivative "assigned,"

therefore, this line item may not agree to the income statement. For the Six Months Ended June 30, 2013 Consolidated Obligation Advances Investments Bonds Balance Sheet Total Net interest income: Amortization or accretion of hedging activities in net interest income (1) $ (104 ) $ - $ 16 $ - $ (88 ) Net interest settlements included in net interest income(2) (538 ) - 319 - (219 ) Total effect on net interest (expense) income $ (642 ) $ - $ 335 $ - $ (307 ) Net gains on derivatives and hedging activities:



Gains (losses) on fair value hedges $ 107 $ - $

(12 ) $ - $ 95 Gains (losses) on derivatives not receiving hedge accounting including net interest settlements 4 11 (2 ) 9 22 Total net gains (losses) on derivatives and hedging activities 111 11 (14 ) 9 117 Net losses on trading securities (3) - (63 ) - - (63 )



Total effect noninterest income (loss) $ 111$ (52 ) $

(14 ) $ 9 $ 54



____________

(1) Represents the amortization or accretion of hedging fair value adjustments

for both open and closed hedge positions. (2) Represents interest income or expense on derivatives included in net interest income. (3) Includes only those gains or losses on trading securities or financial



instruments held at fair value that have an economic derivative "assigned,"

therefore, this line item may not agree to the income statement.

Noninterest Expense and Assessments

Total noninterest expense and Affordable Housing Program assessments remained relatively stable for the second quarter and first six months of 2014, compared to the same periods in 2013.



Liquidity and Capital Resources

Liquidity is necessary to satisfy members' borrowing needs on a timely basis, repay maturing and called COs, and meet other obligations and operating requirements. Many members rely on the Bank as a source of standby liquidity, and the Bank attempts to be in a position to meet member funding needs on a timely basis. The Bank complies with operational liquidity and contingent liquidity, and other regulatory requirements. The Bank also performs a separate and independent measure of liquidity, the 45-day liquidity measurement, to validate the level of liquidity reserves. Finance Agency regulations require the Bank to maintain operational liquidity (generally, the ready cash and borrowing capacity available to meet the Bank's intraday needs), and contingent liquidity in an amount sufficient to meet its liquidity 50



--------------------------------------------------------------------------------

Table of Contents

needs for five business days if it is unable to access the capital markets. The Bank met these regulatory liquidity requirements throughout the first six months of 2014. The Finance Agency has also provided liquidity guidance to the FHLBanks generally to provide ranges of days within which each FHLBank should maintain positive cash balances based upon different assumptions and scenarios. The Bank has operated within these ranges since the Finance Agency issued this guidance. The Bank has established an internal liquidity measurement separate from the Finance Agency requirements described above. The Bank performs a supplemental analysis to confirm that liquidity reserves are sufficient to service debt obligations for at least 45 days. This analysis assumes no access to debt market issuance and other management assumptions which are completely independent of the operational and contingent liquidity calculation measured above. The Bank met its 45 day internal liquidity goal throughout the first six months of 2014. The Bank's principal source of liquidity is CO debt instruments. To provide liquidity, the Bank also may use other short-term borrowings, such as federal funds purchased, securities sold under agreements to repurchase, and loans from other FHLBanks. These funding sources depend on the Bank's ability to access the capital markets at competitive market rates. Although the Bank may maintain secured and unsecured lines of credit with money market counterparties, the Bank's income and liquidity would be adversely affected if it were not able to access the capital markets at competitive rates for an extended period. Historically, the FHLBanks have had excellent capital market access, although pricing and investor appetite tend to favor discount notes during times of market volatility. Contingency plans are in place that prioritize the allocation of liquidity resources in the event of operational disruptions at the Bank or the Office of Finance, as well as systemic Federal Reserve wire transfer system disruptions. Under the FHLBank Act, the Secretary of Treasury has the authority, at his discretion, to purchase COs up to an aggregate amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977. 51



--------------------------------------------------------------------------------

Table of Contents

Off-balance Sheet Commitments

The Bank's primary off-balance sheet commitments are as follows: • the Bank's joint and several liability for all FHLBank COs; and

• the Bank's outstanding commitments arising from standby letters of credit.

Should an FHLBank be unable to satisfy its payment obligation under a CO for which it is the primary obligor, any of the other FHLBanks, including the Bank, could be called upon to repay all or any part of such payment obligation, as determined or approved by the Finance Agency. As of June 30, 2014, none of the other FHLBanks defaulted on their consolidated obligations, the Finance Agency was not required to allocate any obligation among the FHLBanks, and no amount of the joint and several obligation was fixed. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks' COs as of June 30, 2014 and December 31, 2013. As of June 30, 2014, the FHLBanks had $800.0 billion in aggregate par value of COs issued and outstanding, $119.7 billion of which was attributable to the Bank. No FHLBank has ever defaulted on its principal or interest payments under any CO, and the Bank has never been required to make payments under any CO as a result of the failure of another FHLBank to meet its obligations. The Bank generally requires standby letters of credit to contain language permitting the Bank, upon annual renewal dates and prior notice to the beneficiary, to choose not to renew the standby letter of credit, which effectively terminates the standby letter of credit prior to its scheduled final expiration date. The Bank may issue standby letters of credit for terms of longer than one year without annual renewals, or that have no stated maturity and are subject to renewal on an annual basis, based on the creditworthiness of the member applicant and appropriate additional fees. Commitments to extend credit, including standby letters of credit, are agreements to lend. The Bank issues a standby letter of credit for the account of a member in exchange for a fee. A member may use these standby letters of credit to facilitate a financing arrangement. Based on management's credit analyses and collateral requirements, the Bank does not deem it necessary to have an allowance for credit losses for these unfunded standby letters of credit as of June 30, 2014. Management regularly reviews its standby letter of credit pricing in light of several factors, including the Bank's potential liquidity needs related to draws on its standby letters of credit. For more information about the Bank's outstanding standby letters of credit refer to Note 15-Commitments and Contingencies to the Bank's interim financial statements. Contractual Obligations



As of June 30, 2014, there has been no material change outside the ordinary course of business in the Bank's contractual obligations as reported in the Bank's Form 10-K.

Legislative and Regulatory Developments

Significant regulatory actions and developments for the period covered by this report are summarized below.

Final Rule on Money Market Mutual Fund Reform. On June 19, 2013, the SEC proposed two alternatives for amending rules that govern money market mutual funds under the Investment Company Act of 1940. On July 23, 2014, the SEC approved final regulations governing money market mutual funds. The final regulations, among other things, will:

• require institutional prime money market funds (including institutional

municipal money market funds), to sell and redeem shares based on their

floating net asset value, which would result in the daily share prices of

these money market funds fluctuating along with changes in the market-based value of the funds' investments;



• allow money market fund boards of directors to directly address a run on a

fund by imposing liquidity fees or suspending redemptions temporarily; and

• include enhanced diversification, disclosure and stress testing requirements, as well as provide updated reporting by money market funds and private funds that operate like money market funds. The final regulations do not change the existing regulatory treatment of government agency debt (including FHLBank COs) as liquid assets. FHLBank consolidated obligation discount notes continue to be included in the definition of "daily liquid assets," and the definition of "weekly liquid assets" continues to include FHLBank consolidated obligation discount notes with a remaining maturity up to 60 days. At this time, the future impact of these regulations on demand for FHLBank consolidated obligations is unknown. 52



--------------------------------------------------------------------------------

Table of Contents Risk Management The Bank's lending, investment, and funding activities and the use of derivative hedge instruments expose the Bank to a number of risks. A robust risk management framework aligns risk-taking activities with the Bank's strategies and risk appetite. A risk management framework also balances risks and rewards. The Bank's risk management framework consists of risk governance, risk appetite, and risk management policies. The Bank's board of directors and management recognize that risks are inherent to the Bank's business model and that the process of establishing a risk appetite does not imply that the Bank seeks to mitigate or eliminate all risk. By defining and managing to a specific risk appetite, the board of directors and management ensure that there is a common understanding of the Bank's desired risk profile which enhances their ability to make improved strategic and tactical decisions. Additionally, the Bank aspires to achieve and exceed best practices in governance, ethics, and compliance, and to sustain a corporate culture that fosters transparency, integrity, and adherence to legal and ethical obligations. The Bank's board of directors and management have established this risk appetite statement and risk metrics for controlling and escalating actions based on the nine continuing objectives that represent the foundation of the Bank's strategic and tactical planning, as described in the Bank's Form 10-K.



Discussion of the Bank's management of its credit risk and market risk is provided below. Further discussion of these risks, as well as the Bank's management of its liquidity, operational, and business risks, is contained in the Bank's Form 10-K.

Credit Risk



The Bank faces credit risk primarily with respect to its advances, investments, derivatives, and mortgage loan assets.

Advances

Secured advances to member financial institutions account for the largest category of Bank assets; thus, advances are a major source of the Bank's credit risk exposure. The Bank uses a risk-focused approach to credit and collateral underwriting. The Bank attempts to reduce credit risk on advances by monitoring the financial condition of borrowers and the quality and value of the assets borrowers pledge as eligible collateral. The Bank utilizes a credit risk rating system for its members, which focuses primarily on an institution's overall financial health and takes into account quality of assets, earnings, and capital position. The Bank assigns each borrower that is an insured depository institution or an insurance company a credit risk rating from one to 10 according to the relative amount of credit risk such borrower poses to the Bank (one being the least amount of credit risk and 10 the greatest amount of credit risk). In general, borrowers in category 10 may have more restrictions on the types of collateral they may use to secure advances, may be required to maintain higher collateral maintenance levels and deliver loan collateral, may be restricted from obtaining further advances, and may face more stringent collateral reporting requirements. At times, the Bank may place more restrictive requirements on a borrower than those generally applicable to borrowers with the same rating based upon the Bank's assessment of the borrower and its collateral. Beginning March 31, 2014, the Bank assigns each borrower that is not an insured depository institution or insurance company, such as housing associates, certified community development financial institutions, and corporate credit unions, a risk level rating based on a risk matrix developed for each entity type. Each matrix has risk levels that generally correspond to the 1-10 credit risk rating for insured depository institutions and insurance companies. Development of these risk matrices for borrowers that are not insured depository institutions or insurance companies enables the Bank to monitor and analyze the financial condition of these borrowers in a more consistent and complete manner. 53



--------------------------------------------------------------------------------

Table of Contents

The following table sets forth the number of borrowers and the par amount of advances outstanding to borrowers with the specified ratings as of the specified dates (dollars in millions). As of June 30, 2014 As of December 31, 2013 Number of Outstanding Number of Outstanding Rating Borrowers Advances Borrowers Advances 1 9 $ 2,943 7 $ 63 2 17 1,849 32 4,742 3 54 25,580 48 9,919 4 89 16,888 50 14,433 5 126 14,128 114 13,792 6 110 28,032 101 21,296 7 58 1,425 92 20,333 8 34 863 56 1,063 9 18 464 27 883 10 42 668 52 898 The Bank establishes a credit limit for each borrower. The credit limit is not a committed line of credit, but rather an indication of the borrower's general borrowing capacity with the Bank. The Bank determines the credit limit in its sole and absolute discretion, by evaluating a wide variety of factors indicating the borrower's overall creditworthiness. The credit limit generally is expressed as a percentage equal to the ratio of the borrower's total liabilities to the Bank (including the face amount of outstanding letters of credit, the principal amount of outstanding advances and the total exposure of the Bank to the borrower under any derivative contract) to the borrower's total assets. Generally, borrowers are held to a credit limit of no more than 30 percent. However, the Bank's board of directors, or a relevant committee thereof, may approve a higher limit at its discretion, and such borrowers may be subject to certain additional collateral reporting and maintenance requirements. As of June 30, 2014, eight borrowers have been approved for a credit limit higher than 30 percent. Each borrower must maintain an amount of qualifying collateral that, when discounted to the lendable collateral value (LCV), is equal to at least 100 percent of the outstanding principal amount of all advances and other liabilities of the borrower to the Bank. The LCV is the value that the Bank assigns to each type of qualifying collateral for purposes of determining the amount of credit that such qualifying collateral will support. For each type of qualifying collateral, the Bank discounts the market value of the qualifying collateral to calculate the LCV. The Bank regularly reevaluates the appropriate level of discounting. The following table provides information about the types of collateral held for the Bank's advances (dollars in millions). Total Par LCV of Value of Collateral Other Real Estate Outstanding Pledged by First Mortgage Securities Related Advances Members Collateral (%) Collateral (%) Collateral (%) As of June 30, 2014 $ 93,181$ 263,408 71.01 6.18 22.81 As of December 31, 2013 87,882 231,342 67.20 8.18 24.62 For purposes of determining each member's LCV, the Bank estimates the current market value of all residential first mortgage loans, multifamily and commercial real estate loans, and home equity loans and lines of credit pledged as collateral based on information provided by the member on individual loans or its loan portfolio through the regular collateral reporting process. The estimated market value is discounted to account for the price volatility of loans as well as estimated liquidation and servicing costs in the event of the member's default. Market values, and thus LCVs, change monthly. The use of this market-based valuation methodology allows the Bank to establish its collateral discounts with greater precision and provides greater transparency with respect to the valuation of collateral pledged for advances and other credit products offered by the Bank. The FHLBank Act affords any security interest granted to the Bank by any member of the Bank, or any affiliate of any such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), other than claims and rights of a party that (1) would be entitled to priority under otherwise applicable law; and (2) is an actual bona fide purchaser for value or is an actual secured party whose security interest is perfected in accordance with applicable state law. In its history, the Bank has never experienced a credit loss on an advance. In consideration of this, and the Bank's policies and practices detailed above, the Bank has not established an allowance for credit losses on advances as of June 30, 2014 and December 31, 2013. 54 --------------------------------------------------------------------------------



Investments

The Bank is subject to credit risk on unsecured investments, such as interest-bearing deposits and federal funds sold. These investments are generally transacted with government agencies and large financial institutions that are considered to be of investment quality. The Finance Agency defines investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. The Bank follows guidelines approved by its board of directors regarding unsecured extensions of credit, in addition to Finance Agency regulations, with respect to term limits and eligible counterparties. On November 8, 2013, the Finance Agency issued a final rule implementing Section 939A of the Dodd-Frank Act, which requires Federal agencies to remove provisions from their regulations that require the use of ratings issued by a NRSRO. The final rule requires the Bank to make its own determination of credit quality with respect to its investments, but does not prevent the Bank from using NRSRO ratings or other third party analysis in its credit determinations. The final rule became effective on May 7, 2014. To minimize credit risk on investments, Finance Agency regulations prohibit the Bank from investing in any of the following securities: • instruments such as common stock that represent an ownership interest in an



entity, other than stock in small business investment companies or certain

investments targeted to low-income people or communities;

• instruments issued by non-United States entities, other than those issued by

United States branches and agency offices of foreign commercial banks; • debt instruments that are not investment quality, other than certain



investments targeted to low-income people or communities and instruments

that the Bank determined became less than investment quality because of developments or events that occurred after purchase by the Bank;



• whole mortgages or other whole loans, other than (1) those acquired under

the Bank's mortgage purchase programs; (2) certain investments targeted to

low-income people or communities; (3) certain marketable direct obligations

of state, local, or tribal government units or agencies that are investment

quality; (4) MBS or asset-backed securities backed by manufactured housing

loans or home equity loans; and (5) certain foreign housing loans authorized

under section 12(b) of the FHLBank Act;

• interest-only or principal-only stripped MBS, collateralized mortgage

obligations (CMOs), collateralized debt obligations, and real estate

mortgage investment conduits (REMICs);

• residual-interest or interest-accrual classes of CMOs and REMICs;

• fixed-rate or variable-rate MBS, CMOs, and REMICs that on the trade date are

at rates equal to their contractual cap and that have average lives that

vary by more than six years under an assumed instantaneous interest-rate

change of 300 basis points; and

• non-U.S. dollar denominated securities.

55 -------------------------------------------------------------------------------- The Bank enters into investments only with U.S. counterparties or U.S. branches and agency offices of foreign commercial banks that have been approved by the Bank through its internal approval process, but may have exposure to foreign entities if a counterparty's parent entity is located in another country. The tables below represent the Bank's gross exposure, by instrument type, according to the location of the parent company of the counterparty (in millions): As of June 30, 2014 Federal Funds Sold Interest-bearing Net Derivative Deposits Exposure (1) Total Australia $ 875 $ - $ - $ 875 Canada 1,100 - - 1,100 Germany 1,150 - 50 1,200 Netherlands 300 - - 300 Switzerland 250 - 11 261 United States of America 985 1,009 - 1,994 Total $ 4,660 $ 1,009 $ 61 $ 5,730 ____________



(1) Amounts do not reflect collateral; see the table under Risk

Management-Credit Risk-Derivatives below for a breakdown of the credit

ratings of and the Bank's credit exposure to derivative counterparties,

including net exposure after collateral.

As of December 31, 2013 Federal Funds Sold Interest-bearing Net Derivative Deposits Exposure (1) Total Canada $ 250 $ - $ - $ 250 Germany - - 67 67 United Kingdom 510 - - 510 United States of America 1,035 1,007 4 2,046 Total $ 1,795 $ 1,007 $ 71 $ 2,873 ____________



(1) Amounts do not reflect collateral; see the table under Risk

Management-Credit Risk-Derivatives below for a breakdown of the credit

ratings of and the Bank's credit exposure to derivative counterparties,

including net exposure after collateral.

The Bank experienced an increase in unsecured credit exposure in its investment portfolio related to non-U.S. government and non-U.S. government agency counterparties from $2.8 billion as of December 31, 2013 to $5.7 billion as of June 30, 2014. There were four such counterparties, Landesbank Baden-Wuerttemberg, Bank of Nova Scotia, Branch Banking and Trust, and Australia & New Zealand Banking Group, that each represented greater than 10 percent, and collectively represented 72.9 percent of the total unsecured credit exposure to non-U.S. government or non-U.S. government agencies counterparties. As reported in the Bank's Form 10-K, Branch Banking and Trust was one of the Bank's top 10 advances borrowers as of December 31, 2013. One of the Bank's member directors is a senior executive vice president of Branch Banking and Trust Company and was elected chairman of the Bank's board of directors effective January 1, 2013. Pursuant to Finance Agency regulation, the Bank's member directors serve as officers or directors of a Bank member, and the Bank may enter into business transactions with such members from time to time in the ordinary course of business. As of June 30, 2014, the Bank's unsecured credit portfolio consisted primarily of federal funds sold with overnight maturities. The Bank's Risk Management Policy (RMP) permits the Bank to invest in U.S. agency (Fannie Mae, Freddie Mac and Ginnie Mae) obligations, including CMOs and REMICS backed by such securities, and other MBS, CMOs, and REMICS rated AAA by S&P or Aaa by Moody's at the time of purchase. The private-label MBS purchased by the Bank originally attained their triple-A ratings through credit enhancements, which primarily consisted of the subordination of the claims of the other tranches of these securities. In addition to NRSRO ratings, the Bank considers a variety of credit quality factors when analyzing potential investments, such as collateral performance, marketability, asset class considerations, local and regional economic conditions, and the financial health of the underlying issuer. The tables below provide information on the credit ratings of the Bank's investments held as of June 30, 2014 and December 31, 2013, based on the lowest long-term credit rating as reported by an NRSRO as of June 30, 2014 and December 31, 2013 (in millions), respectively. 56 -------------------------------------------------------------------------------- As of June 30, 2014 Carrying Value (1) Investment Grade Below Investment Grade AAA AA A BBB BB B CCC CC C D Unrated Total Short-term investments: Interest-bearing deposits $ - $ 2$ 1,007 $ - $ - $ - $ - $ - $ - $ - $ - $ 1,009 Securities purchased under agreements to resell - - - 1,000 - - - - - - - 1,000 Federal funds sold - 1,175 2,660 825 - - - - - - - 4,660 Total short-term investments - 1,177 3,667 1,825 - - - - - - - 6,669 Long-term investments: State or local housing agency debt obligations - 88 - - - - - - - - - 88 U.S. government agency debt obligations - 6,161 - - - - - - - - - 6,161 Mortgage-backed securities: U.S. government agency securities - 414 - - - - - - - - - 414 Government-sponsored enterprises 466 13,239 - - - - - - - - - 13,705 Private-label - 39 110 452 479 712 428 227 195 1,209 6 3,857 Total mortgage-backed securities 466 13,692 110 452 479 712 428 227 195 1,209 6 17,976 Total long-term investments 466 19,941 110 452 479 712 428 227 195 1,209 6 24,225 Total investments $ 466$ 21,118$ 3,777$ 2,277$ 479$ 712$ 428$ 227$ 195$ 1,209$ 6$ 30,894 ____________



(1) Investment amounts noted in the above table represent the carrying value and

do not include related accrued interest receivable of $44 million as of June 30, 2014. As of December 31, 2013 Carrying Value (1) Investment Grade



Below Investment Grade

AAA AA A BBB BB B CCC CC C D unrated Total Short-term investments: Interest-bearing deposits $ - $ 1$ 1,006 $ - $ - $ - $ - $ - $ - $ - $ - $ 1,007 Federal funds sold - - 1,395 400 - - - - - - - 1,795 Total short-term investments - 1 2,401 400 - - - - - - - 2,802 Long-term investments: State or local housing agency debt obligations - 93 - - - - - - - - -



93

U.S. government agency debt obligations - 5,404 - - - - - - - - - 5,404 Mortgage-backed securities: U.S. agency obligations-guaranteed residential - 465 - - - - - - - - -



465

Government-sponsored

enterprises residential 466 13,486 - - - - - - - - - 13,952 Private-label residential - 62 123 511 523 809 534 323 161 1,176 6 4,228 Total mortgage-backed securities 466 14,013 123 511 523 809 534 323 161 1,176 6 18,645 Total long-term investments 466 19,510 123 511 523 809 534 323 161 1,176 6 24,142 Total investments $ 466$ 19,511$ 2,524$ 911$ 523$ 809$ 534$ 323$ 161$ 1,176$ 6$ 26,944 ____________



(1) Investment amounts noted in the above table represent the carrying value and

do not include related accrued interest receivable of $49 million as of December 31, 2013. 57

-------------------------------------------------------------------------------- The Bank monitors the financial condition of investment counterparties to ensure that they are in compliance with the Bank's RMP and Finance Agency regulations. Unsecured credit exposure to any counterparty is limited by the credit quality and capital of the counterparty and by the capital of the Bank. On a regular basis, management produces financial monitoring reports detailing the financial condition of the Bank's counterparties. These reports are reviewed by the Bank's board of directors. The Bank may further limit or suspend overnight and term trading in addition to RMP and regulatory requirements. Limiting or suspending counterparties limits the pool of available counterparties, shifts the geographical distribution of counterparty exposure, and may reduce the Bank's overall short-term investment opportunities.



Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell are considered collateralized financing arrangements and effectively represent short-term secured loans with investment-grade counterparties. The Bank is inherently exposed to credit risk associated with the risk of default by, or insolvency of, any counterparty with whom it conducts business; however, based upon the collateral held as security and the investment-grade of the related counterparties, the Bank considers its credit exposure related to these investments to be minimal. Non-Private-label MBS Unrealized losses related to U.S. agency MBS and GSE MBS are caused by interest rate changes. Because these securities are guaranteed by government agencies or GSEs, it is expected that these securities would not be settled at a price less than the amortized cost basis. The Bank does not consider these investments to be other-than-temporarily impaired as of June 30, 2014 because the decline in fair value is attributable to changes in interest rates and not credit quality, the Bank does not intend to sell the investments, and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. Private-label MBS For disclosure purposes, the Bank classifies private-label MBS as either prime or Alt-A based upon the overall credit quality of the underlying loans as determined by the originator at the time of origination, unless otherwise noted. Although there is no universally accepted definition of Alt-A, generally loans with credit characteristics that range between prime and subprime are classified as Alt-A. Participants in the mortgage market have used the Alt-A classification principally to describe loans for which the underwriting process has been streamlined in order to reduce the documentation requirements of the borrower or allow alternative documentation. As of June 30, 2014, based on the classification by the originator at the time of origination, approximately 86.4 percent of the underlying mortgages collateralizing the Bank's private-label MBS were considered prime, of which 94.6 percent were variable-rate, and the remaining underlying mortgages collateralizing these securities were considered Alt-A, of which 65.1 percent were variable-rate. The table below provides information on the interest-rate payment terms of the Bank's private-label MBS backed by prime and Alt-A loans (in millions). As of June 30, 2014 As of December 31, 2013 Fixed-Rate Variable-Rate Total Fixed-Rate Variable-Rate Total Prime $ 196 $ 3,416 $ 3,612 $ 246 $ 3,736 $ 3,982 Alt-A 197 369 566 233 391 624 Total unpaid principal balance $ 393 $ 3,785 $ 4,178 $ 479 $ 4,127 $ 4,606 58

-------------------------------------------------------------------------------- The tables below provide additional information, including changes in ratings since the original purchase date, on the Bank's private-label MBS by year of securitization as of June 30, 2014 (dollars in millions). Year of Securitization - Prime 2004 and 2008 2007 2006 2005 Prior Total Investment Ratings: AA $ - $ - $ - $ - $ 39$ 39 A - - - 10 99 109 BBB - - - 106 292 398 BB - 10 - 122 268 400 B - 15 - 301 280 596 CCC - 8 34 184 104 330 CC 32 143 44 30 - 249 C 80 12 54 71 - 217 D - 583 401 284 - 1,268 Unrated - - - - 6 6 Total unpaid principal balance $ 112$ 771$ 533$ 1,108$ 1,088$ 3,612 Amortized cost $ 95$ 596$ 431$ 1,014$ 1,075$ 3,211 Gross unrealized losses $ - $ (1 ) $ - $ (4 )$ (9 )$ (14 ) Fair value $ 100$ 661$ 473$ 1,052$ 1,078$ 3,364 Other-than-temporary impairment (Year-to-date):



Credit-related losses $ - $ (1 ) $ - $

- $ - $ (1 )

Non-credit-related losses - (1 ) - - - (1 ) Total other-than-temporary impairment losses $ - $ - $ - $ - $ - $ - Weighted average percentage of fair value to unpaid principal balance 89.21 % 85.75 % 88.80 % 94.91 % 99.09 % 93.14 % Original weighted average credit support 15.72 % 14.29 % 10.45 % 6.99 % 3.70 % 8.34 % Weighted average credit support 2.70 % 0.70 % 0.51 % 4.36 % 9.97 % 4.65 % Weighted average collateral delinquency 12.83 % 19.64 % 16.83 % 9.71 % 8.36 % 12.57 % Year of Securitization - Alt-A 2004 and 2008 2007 2006 2005 Prior Total Investment Ratings: A $ - $ - $ - $ - $ 2$ 2 BBB - - - - 56 56 BB - - - - 78 78 B - - - - 121 121 CCC - - - 147 4 151 D - 39 - 119 - 158 Total unpaid principal balance $ - $ 39 $ - $ 266$ 261$ 566 Amortized cost $ - $ 28 $ - $ 215$ 261$ 504 Gross unrealized losses $ - $ - $ - $ (14 )$ (1 )$ (15 ) Fair value $ - $ 31 $ - $ 206$ 263$ 500 Other-than-temporary impairment (Year-to-date): Credit-related losses $ - $ - $ - $ - $ - $ - Non-credit-related losses - - - - - - Total other-than-temporary impairment losses $ - $ - $ - $ - $ - $ - Weighted average percentage of fair value to unpaid principal balance 0.00 % 80.69 % 0.00 % 77.15 % 100.94 % 88.35 % Original weighted average credit support 0.00 % 12.29 % 0.00 % 27.78 % 8.25 % 17.72 % Weighted average credit support 0.00 % 0.00 % 0.00 % 9.62 % 12.51 % 10.29 % Weighted average collateral delinquency 0.00 % 28.25 % 0.00 % 27.66 % 8.98 % 19.10 % 59

--------------------------------------------------------------------------------



The following table represents a summary of the significant inputs used to evaluate each of the Bank's private-label MBS for other-than-temporary impairment as of June 30, 2014:

Significant Inputs(1) Current Credit Prepayment Rate Default Rates



Loss Severities Enhancement

Weighted Weighted Weighted Weighted Average Average Average Average Classification (%) (%) (%) (%) Prime 15.23 6.57 32.89 6.61 Alt-A 12.90 23.45 39.72 3.84 Total of all private-label residential MBS 14.22 13.87 35.84 5.41 ____________



(1) The classification (prime and Alt-A) is based on the model used to run the

estimated cash flows for the individual securities, which may not

necessarily be the same as the classification at the time of origination.

For the security for which an other-than-temporary impairment was determined to have occurred during the second quarter of 2014, a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings is contained in Note 6 -Other-than-temporary Impairment to the Bank's interim financial statements.



The tables below summarize the total other-than-temporary impairment losses by newly impaired and previously impaired securities (in millions):

For the Six Months Ended June 30, 2014 2013 Net Net Credit Noncredit Total Credit Noncredit Total Losses Losses Losses Losses Losses Losses Securities newly impaired during the period $ - $ - $ - $ - $ 1 $ (1 ) Securities previously impaired prior to current period (1) (1 ) (1 ) - - - - Total $ (1 )$ (1 ) $ - $ - $ 1 $ (1 ) ____________



(1) For the six months ended June 30, 2014 and 2013, "Securities previously

impaired prior to current period" represents all securities that were also

previously impaired prior to January 1, 2014 and 2013, respectively.

In addition to the cash flow analysis of the Bank's private-label MBS under a base case (best estimate) housing price scenario as described in Note 6-Other-than-temporary Impairment to the Bank's interim financial statements, a cash flow analysis was also performed based on a housing price scenario that is more adverse than the base case (adverse case housing price scenario). This more stressful scenario was based on a short-term housing price forecast that was decreased five percentage points relative to the base case, followed by a recovery path that is 33.0 percent lower than the base case. The adverse case housing price scenario and associated results should not be construed as a prediction of the Bank's future results, market conditions, or the actual performance of these securities. Rather, the results from this hypothetical adverse case housing price scenario provide a measure of the credit losses the Bank might incur if home price declines (and subsequent recoveries) are more adverse than those projected in the Bank's base case assessment. The following table shows the base case scenario and what the impact on other-than-temporary impairment would have been under the more stressful adverse case housing price scenario (dollars in millions). Under the adverse case housing price scenario, the Bank may recognize a credit loss in excess of the maximum credit loss, the difference between the security's amortized cost basis and fair value, because the Bank believes fair value would decrease in the adverse case housing price scenario. 60 -------------------------------------------------------------------------------- For the Three Months Ended June 30, 2014 Housing Price Scenario Base Case (1) Adverse Case Other-Than-Temporary Other-Than-Temporary Number of Unpaid Principal Impairment Related Number of Unpaid Principal Impairment Related to Securities balance to Credit Loss Securities balance Credit Loss Prime loan (2) 1 $ 38 $ - 1 $ 38 $ (1 ) ____________ (1) Represents the security and related other-than-temporary-impairment credit loss for the three months ended June 30, 2014. (2) Based on the originator's classification of collateral at the time of origination or based on classification of collateral by an NRSRO upon issuance of the MBS. The Bank continues to actively monitor the credit quality of its private-label MBS investments. It is not possible to predict the magnitude of additional other-than temporary impairment losses in future periods because that prediction depends on the actual performance of the underlying loan collateral as well as the Bank's future modeling assumptions. Many factors could influence the Bank's future modeling assumptions, including economic, financial market, and housing market conditions. If performance of the underlying loan collateral deteriorates and/or the Bank's modeling assumptions become more pessimistic, the Bank could experience further losses on its investment portfolio.



Derivatives

The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures, collateral requirements, and other credit enhancements are used and are effective in mitigating the risk. The Bank manages credit risk through credit analysis, collateral management, and other credit enhancements. The Bank is also required to follow the requirements set forth by applicable regulations.

For bilateral derivative transactions, the Bank is subject to nonperformance by counterparties to its bilateral derivative transactions. The Bank generally requires collateral on bilateral derivative transactions. The amount of net unsecured credit exposure that is permissible with respect to each counterparty depends on the credit rating of that counterparty. A counterparty must deliver collateral to the Bank if the total market value of the Bank's exposure to that counterparty rises above a specific trigger point. As a result of these risk mitigation initiatives, the Bank does not anticipate any credit losses on its bilateral derivative transactions as of June 30, 2014. For cleared derivatives, the Bank is subject to credit risk due to nonperformance by the Clearinghouse and clearing agent. The requirement that the Bank post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties and collateral is posted daily for changes in the value of cleared derivatives through a clearing agent. The Bank does not anticipate any credit losses on its cleared derivatives as of June 30, 2014. The contractual or notional amount of derivatives transactions reflects the involvement of the Bank in the various classes of financial instruments; however, the maximum credit risk of the Bank with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there is default, minus the value of any related collateral, including initial and variation margin. In determining maximum credit risk, the Bank considers, accrued interest receivables and payables as well as the netting requirements to net assets and liabilities. The tables below provide information on the credit ratings of, and the Bank's credit exposure to, its derivative counterparties (in millions). The credit ratings reflect the lowest long-term credit rating by an NRSRO. 61



--------------------------------------------------------------------------------

Table of Contents As of June 30, 2014 Cash Other Collateral Collateral Derivatives Fair Pledged To Pledged To Net Credit Notional Value Before (From) (From) Exposure to Amount Collateral



Counterparty Counterparty Counterparties Non-member counterparties:

Asset positions with credit exposure: Single-A $ 8,988 $ 50 $ (48 ) $ - $ 2 Cleared derivatives 6,645 11 (4 ) - 7 Liability positions with credit exposure: Cleared derivatives 34,591 (273 ) 369 - 96 Total derivative positions with non-member counterparties to which the Bank had credit exposure 50,224 (212 ) 317 - 105 Member institutions (1) 74 1 - (1 ) - Total $ 50,298 $ (211 ) $ 317$ (1 ) $ 105 ____________ (1) Collateral held with respect to derivatives with member institutions where the Bank is acting as an intermediary represents the amount of eligible collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank. As of December 31, 2013 Cash Collateral Derivatives Fair Pledged To Net Credit Value Before (From) Exposure to Notional Amount Collateral Counterparty Counterparties

Non-member counterparties: Asset positions with credit exposure: Single-A $ 11,026 $ 67 $ (65 ) $ 2 Cleared derivatives 1,965 4 1 5 Liability positions with credit exposure: Cleared derivatives 11,030 (94 ) 140 46 Total derivative positions with non-member counterparties to which the Bank had credit exposure 24,021 (23 ) 76 53 Member institutions (1) 44 - - - Total $ 24,065 $ (23 ) $ 76 $ 53 ____________ (1) Collateral held with respect to derivatives with member institutions where the Bank is acting as an intermediary represents the amount of eligible collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank. Certain of the Bank's bilateral derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is a deterioration in the Bank's credit rating. If the Bank's credit ratings had been lowered from its current rating to the next lower rating that would have triggered additional collateral to be delivered, the Bank would have been required to deliver up to an additional $114 million of collateral at fair value to its derivative counterparties as of June 30, 2014. The net exposure after collateral is treated as unsecured credit consistent with the Bank's RMP and Finance Agency regulations if the counterparty has an NRSRO rating. If the counterparty does not have an NRSRO rating, the Bank requires collateral for the full amount of the exposure.



Mortgage Loan Programs

The Bank seeks to manage the credit risk associated with the Mortgage Purchase Program (MPP) and the Mortgage Partnership Financeฎ Program (MPFฎ Program or MPF) by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the participating financial institutions. In some cases, a portion of the credit support for MPP and MPF loans is provided under a primary and/or supplemental mortgage insurance policy. Currently, eight mortgage insurance companies provide primary and/or supplemental mortgage insurance for loans in which the Bank has a retained interest. As of June 30, 2014, all of the Bank's mortgage insurance providers have been rated below "A" by one or more NRSROs for their claims paying ability or insurer financial strength. Ratings downgrades imply an increased risk that these 62



--------------------------------------------------------------------------------

Table of Contents

mortgage insurers may be unable to fulfill their obligations to pay claims that may be made under the insurance policies. The Bank holds additional risk-based capital to mitigate the incremental risk, if any, that results from the supplemental mortgage insurance providers. As of June 30, 2014 and December 31, 2013, the allowance for credit losses on MPF loans was $6 million and $11 million, respectively. The decrease in the allowance for credit losses was related to certain enhancements to the Bank's allowance for credit loss calculation. For additional information related to the Bank's allowance for credit losses policy, see Note 1-Basis of Presentation to the Bank's interim financial statements. 63



--------------------------------------------------------------------------------

Table of Contents

Critical Accounting Policies and Estimates

During the three-month period ended March 31, 2014, the Bank made certain enhancements to its allowance for credit loss calculation related to the Bank's conventional single-family residential mortgage loan portfolio. The allowance for conventional single-family residential mortgage loans is determined by an analysis (at least quarterly) that includes segregating the portfolio into various aging groups. For loans that are 60 days or less past due, the Bank calculates a loss severity, default rate, and the expected loss based on individual loan characteristics. For loans that are more than 60 days past due, the allowance is determined using an automated valuation model. Inherent in the Bank's evaluation of loan performance is an analysis of various credit enhancements at the individual master commitment level to determine the credit enhancement available to recover losses on conventional single-family residential mortgage loans under each individual master commitment. Additionally, during the three-month period ended March 31, 2014, the Bank began to classify as a loss and charge-off the portion of outstanding conventional single-family residential mortgage loan balances in excess of the fair value of the underlying property, less costs to sell and adjusted for any available credit enhancements, once the loans are 180 days delinquent. These changes did not have a material effect on the Bank's financial condition or results of operations.



A description of the Bank's critical accounting policies and estimates is contained in detail in the Bank's Form 10-K. There have been no other updates to these policies and estimates during the period reported.

Recently Issued and Adopted Accounting Guidance

See Note 2-Recently Issued and Adopted Accounting Guidance to the Bank's interim financial statements for a discussion of recently issued and adopted accounting guidance.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters