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2000 09 13 IABjt& 4 4 Qu4 P.O. Box 1504 78-495 CALLE TAMPICO (760) 777-7000 LA QUINTA, CALIFORNIA 92253 (TDD) (760) 777-1227 AGENDA INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 September 13, 2000 - 5:30 P.M. I CALL TO ORDER a. Pledge of Allegiance b. Roll Call II PUBLIC COMMENT- (This is the time set aside for public comment on any matter not scheduled on the agenda.) III CONFIRMATION OF AGENDA IV CONSENT CALENDAR Approval of Minutes of Meeting on July 12, 2000 for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for June and July, 2000 B. Review of Investment Policy Investments in GSE's VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - August 2000 B. Pooled Money Investment Board Reports - May and June, 2000 VII BOARD MEMBER ITEMS Vill ADJOURNMENT INVESTMENT ADVISORY BOARD Meeting Date: September 13, 2000 ITEM TITLE: Transmittal of Treasury Report for June 30, 2000 and July 31, 2000 BACKGROUND: Business Session: A Attached please find the Treasury Report for June 30, 2000 and July 31, 2000. RECOMMENDATION: Review, Receive and File the Treasury Report for June 30, 2000 and July 31, 2000. n M. Falconer, Finance Director T0 0 61 4,Y't 4 Q1,MrA . MEMORANDUM TO: La Quinta City Council FROM: John M. Falconer, Finance Director/Treasurer SUBJECT: Treasurer's Report for June 30, 2000 DATE: August 2, 2000 Attached is the Treasurer's Report for the month ending June 30, 2000. The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Dept. The following table summarizes the changes in investment types for the month: :Investment Beginning ! Purchased Sold/Matured Other EndingChange Cash (1) $718,281 I 637,098 1,355,379 $637,098 LAIF $11,072,960 j 1,100,000 700,000 11,472,960 400,000 US Treasuries (2) $24,939,391 i 6,573,615 (88,502) 31,424,504 6,485,113 US Gov't Agencies (2) ' $19,903,725 , 6,159,798 7,000,000 i 47,249 19,110,772 (792,953) Commercial Paper (2) $3,978,974 j 4,000,000 21,026 0 (3,978,974) :Mutual Funds $4,081,636 49,305 4,032,331 (4%305) Total $64,694,967 ;$13 2,7009794 I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and ins in conformity with the City Investment Policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. the City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. John M. Falconer I Finance Director/Treasurer U d a. Date Footnote (1) The amount reported in the other column represents the net increase (decrease) of deposits and withdrawals from the previous month. (2) The amount reported in the other column represents the amortization of premium/discount for the month on US Treasury, Commercial Paper and Agency investments. b�U 3 i Cc i I� 41 u x Z Z, Z Z Z :2 j Z Z, i MM W !T7 0 h C c ^ d � : (p t C C Q y .Y A � I IN y I 1 � g m m 1I m �r � ea I � N N N N _ e7 I N i C S �pp t! a. ►. p a -E 1 �`1 4 � c l� C a 2e I all C! 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O to O :. N O M tO — CO �QNe'O!M N e.- 0 ON�MNO a�pp A O Q P. `m0 COCQO00n CMLnNPO�O 0 N tMO U. tM0 N�Na0r, M�OMMA !� � as NS� CO P-CCOOCOOIVM O p 0 Q O w O �or OwQ AM Oa0P- t�D N P-Oa U.m QM tNNao� •? Ne�NN0 M�OO�� IV M t in b Q M 8a, efl 00O) tO to N t000eO0co0 a 0 a0 N �0 in �CtppO�� M��t�O nQj'�,Q�'1AQMf ^QP O �0j' W 1ff 0 In m tiin NQNN� IVmc QQeA�� 0 v 01 co^ C d t yt d o > c L ~ N C ` m U) A d m X m M 7 w A d F >, 0) c C C c � m V L m C C CO O) to C3 O C A M eo a m N =.,a_ c a 7 (/1 C .�. N m C m C ~ m U- a C 'a Y c O C iin d C •• Kcm > d °� O ` ZCOL d Ci C c Im ry~`c �CD cm>'�NW L x d tCM r m CD W CL co0lz m m m E m wcnIt00 O - 0 M,C z 0 1 w d z I s_� Q Ln O 0 M co co O aj l7 1co cn cn tO�f aoti0 Q N Q v tO O N eM'! t0 Oti0 O N N � � � N � N eM!. M co f- O eh CN v M N M M .- cn �Q. ec i M L m O to r- co N to N � Q � co cn co Lo cn O, C7 co eh 0 Q) M M eN O � O � Q O Q N H W A ' E > r c y E m a d c °c E a o V Q �fN SOS C N c A Q C m C O O u- O 0 O A L eN0 V �i mC U A O c a� c y o mcr yZ _C fY J U �_ O tU Q y ol A tCp a V m V) j t tv V dmON C c c n �] z CL z w � � co CITY OF LA QUINTA CITY CITY RDA RDA FA BALANCE SHEET O6/30100 FDOED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND ASSETS: CITY ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL POOLi D CASH LORP INVESTMENT IN POOLED CASH (4.509.132.05) 16.281.023.75 (805 14) t t 751 086 55 INVESTMENT T-BILLINOTES i OTHER 41.980.000.00 605.000.00 80500001, AUTO MALL CASH 200.714.511 41 980.000 OC LORP CASH 70.537.78 200 0 7 t 4 055 59 BOND REDEMPTION CASH 255.336.31 28.73 255.365 04 BOND RESERVE CASH BOND'PROJECT CASH BOND ESCROW CASH 12.197.29024 594.676.69 12.791.966 93 PETTY CASH 1.000.00 CASH i INVESTMENT TOTAL 37.672,582.S3 29.SW9,168.08 _ 593.9W.28 -- — 1.000 00 - 67.655.670 89 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE 319,624.00 60.900.00 8.2110.000.00 8.640.S24.00 PREMIUWDISCOUNT ON INVESTMENT (391.327.91) (61.407.87) (6.988.07) (459.723,85) LORP-ACCOUNTS RECEIVABLE 59.451.36 INTEREST RECEIVABLE 572.633.82 S9.451 36 LOANINOTES RECEIVABLE 1626B21 2,678,631.60 572.633 82 DUE FROM OTHER AGENCIES 342.908.82 2.694.899.81572332 DUE FROM OTHER GOVERNMENT'S 601,430.19 342.90592 4 905 82 DUE FROM OTHER FUNDS 1,386,931.38 551,629.04 19 DUE FROM RDA 8,613,127.20 1.601.430 42 1.938.560 INTEREST ADVANCE -DUE FROM RDA 1,851,116.34 20 ADVANCES TO OTHER FUNDS 111.508.10 1.613.127 34 NSF CHECKS RECEIVABLE 3.154.11 111 506 10 ACCRUED REVENUE 833.40 3.154 11 TRAVEL ADVANCES 1,449.00 40 EMPLOYEE ADVANCES t.9340 PREPAID EXPENSES 65.323.00 332.097.50 --- 397.410.50 RECEIVABLE TOTAL 13.494.14426 3.622.125.03 _ -- 8,253,011.93 — -- 25.369.281.22 WORKER COMPENSATION DEPOSIT 37.637.00 RENT DEPOSITS 37.637.00 UTILITY DEPOSITS 75.W MISC. DEPOSITS 2.350.00 7600 DEPOSITS TOTAL 40,0B2.00 — - ` — -- 2 350 00 40.092.00 GENERAL FIXED ASSETS 1.386.331.67 15,693,354.00 10,236,506.05 27.316.191.72 ACCUMULATED DEPRECIATION (68S,58127) (885 S81 27) AMOUNT AVAILABLE TO RETIRE L/T DEBT 3,395,117.03 3.395.117.03 AMOUNT TO BE PROVIDED FOR L/T DEBT 1,612,148.34 94.555.923.56 8_010.000.00 104.176.069.90 TOTAL OTHER ASSETS 700,750.10 15,693,354.00 1,012 716.34 10236,506.05 97,951,040.59 - - - - — 8,010,000.00 134,203,797.38 TOTAL ASSETS $1,907,639.19 15,693,364.00 1,612 146 34 33,211,313.11 10 236 506 O5 97 951,040.59 5,846,912.21 8,010_000.00 227.4s8.611_40 LIABILITY ACCOUNTS PAYABLE 1.788.261.48 133.177.86 1.921.439.34 DUE TO OTHER AGENCIES 1.377.907.94 S89,835.01 1 967 742 95 DUE TO OTHER FUNDS 602,005.19 1.327.250.23 9,305.00 1.936.5W.42 INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES 3S1,119.18 351.119A8 PAYROLL LIABILITIES 5.044.58 5.044 58 STRONG MOTION INSTRUMENTS (30.08) (30.05) FRINGE TOED LIZARD FEES 29.661.50 29.861.50 SUSPENSE 6.702.65 6.702.65 DUE TO THE CITY OF LA QUINTA PAYABLES TOTAL 4,160,672.46 2.050.263.10 - -- - 9.305.00 - — 6,220,240.56 ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS 488,065.22 4611.065 22 LORP DEPOSITS 14,808.00 14,806.00 DEVELOPER DEPOSIT'S 1,057,653.88 1.057.653.611 MISC. DEPOSITS 408.481.61 406,461.61 AGENCY FUND DEPOSITS 1.804.767.35 1.804.787.35 TOTAL DEPOSITS 3,739,008.06 14.8W.00 -- - -- 3.753.814.06 DEFERRED REVENUE 8.270.67 8,250,000.00 8.268.270.67 OTHER LIABILITIES TOTAL 8.270.67 8,280,000.00 — 111.211111.270.67 COMPENSATED ABSENCES PAYABLE 321.991.94 321.991.94 DUE TO THE CITY OF LA QUINTA 1290,154.40 10,373,716.34 11,063,870.74 DUE TO COUNTY OF RIVERSIDE 12.249.102.00 12 249102 00 DUE TO C.V. UNIFIED SCHOOL DIST. 9,418,222.25 9.418.222.25 DUE TO DESERT SANDS SCHOOL DIST. BONDS PAYABLE 65,910,000.00 8,010,000.W TOTAL LONG TERM DEBT 1,612,146.34 97,951,040.59 _ _ _73,920,000.00_ 8,010,000.00 107,573,186.93 TOTAL LIABILITY 7,907,951.19 1.612.146.34 2.065.069.10 27.951.040.52 8.269.305.00 8,010,000.00 126,815,512.22 EQUITY -FUND BALANCE TOTAL LIABILITY i EQUITY CASH i INVESTMENT TOTAL PREMIUMIDISCOUNT ON INVESTMENT TOTAL 43,999,S88.00 15,693,354.00 31,146,244.01 10,236.506.OS 577.W7.21 101.653.299.27 51,907,539.19 15,093,364.00 1,012,146.34 33,211 313 11 10,238,506.05 _ 97.957.040.59 a 848 9,2.21 _ a olo.000.00 227.406.611.40 67,11"197C.89 (489.723.681 $7,395.947.04 010' T a 0 4hf 4 4 QUM& MEMORANDUM TO: La Quinta City Council FROM: John M. Falconer, Finance Director/Treasurer SUBJECT: Treasurer's Report for July 31, 2000 DATE: August 25, 2000 Attached is the Treasurer's Report for the month ending July 31, 2000. The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Dept. The following table summarizes the changes in investment types for the month: Investment Beginning Purchased Sold/Matured Other Ending Change Cash (1) $1,355,379 (732,231) 623,148 ($732,231) LAIF $11,472,960 172,962 4,600,000 7,045,922 (4,427,038) US Treasuries (2) $31,424,504 13,887 31,438,391 13,887 US Gov't Agencies (2) $19,110,772 61,736 19,172,508 61,736 Commercial Paper (2) $0 4,000,000 0 (4,513) 3,995,487 3,995,487 Mutual Funds $4,032,331 6,858 4,025,473 Total $67 395 946 $4 172 962 $3 945,737 �$656,608j $66,300,929 _�-( --(6,858) I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and ins in conformity with the City Investment Policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. the City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. -441 - - L � )hn M. Falconer nance Director/Treasurer Date Footnote (1) The amount reported in the other column represents the net increase (decrease) of deposits and withdrawals from the previous month. 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(D I C' u' p (n gi (n m U c m p c, LL E c •N (°� cl >. 'n3 >1 dI pa o c 8, 0) d' t a U a) c c a _ �I > W N t CI 'N N C) c .0 ro N O fc�0 t-00 w l d X N N« MO N Q 00 C c a)) m�aP(nOIl wcnx0Ua� zl .Oc U w z m 0 O a M (U (M (D I v' O O N O O N r- M co M M 00 O Go (D co N O COO (MD (D � M O tD (D O r' O O 0 0 N N 0 N (~A M O O 0 0) O) C)O O v IT N O o00 (D N I N .- 'i N N 0 OOi I 0 Lo 0 'V � C. O q'i 0.v O (p (D M (v) co (A OI O r N fh N r O IV (A (A Ol m (0 E m I C E E m U) c � _ I F .y C d m c Y IU) UI a n127 E cm c c CU(0 Z U uCOUCO t �O LL z a�m0 cl z z o O z u) ,Q) 7 U: c cc 0 > d �I w w 017 CITY OF LA QUINTA CITY CITY RDA RDA FA BALANCE SHEET 07/31/00 FIXED LONG TERM FIXED LONG TERM FINANCING LONG TERM GRAND ASSETS: CITY ASSETS DEBT RDA ASSETS DEBT AUTHORITY DEBT TOTAL POOLED CASH LQRP INVESTMENT IN POOLED CASH (8,483,559.71) 15,043,695.20 (805.14) 6,579,330.35 INVESTMENT T-BILL/NOTES 3 OTHER 45,980,000.00 805,000.00 805,000.00 AUTO MALL CASH 2O1,409.77 45,980,000.00 LQRP CASH 82,328.88 . ,40977 201 0188 BOND REDEMPTION CASH 271,787.07 ,409.77 BOND RESERVE CASH 28.73 271,815.80 BOND PROJECT CASH BOND ESCROW CASH 12,173,530.70 595,124.06 12,768,654.76 PETTY CASH 1,000.00 CASH & INVESTMENT TOTAL 77,718,850.06 28,376,341.85 __ 594,347.65 1.000.00 66,689,539.56 INVESTMENT IN LAND HELD FOR RESALE ACCOUNTS RECEIVABLE PREMIUMIDISCOUNT ON INVESTMENT 38,730.09 (341,489.79) 60.900.00 8,010,000.00 8,109,630.09 LQRP-ACCOUNTS RECEIVABLE (42,743.87) (4,378.07) (388,611.73) INTEREST RECEIVABLE 293,888.62 61,534.86 61,534.86 LOAN/NOTES RECEIVABLE 15,099.23 2,678,631.60 261,534.86 DUE FROM OTHER AGENCIES 651,913.19 2,293,888.62 CVAG ALLOWANCE (651,913.19) 69 ,730.83 19 DUE FROM OTHER GOVERNMENTS 601,430.19 (651,913.19) DUE FROM OTHER FUNDS 1,386,931.38 551,629.04 651,913.19 DUE FROM RDA 8,497,550.20 1,601,430.19 1,938.560.42 INTEREST ADVANCE -DUE FROM RDA 1,937,355.26 ADVANCES TO OTHER FUNDS 111,894.311 1,937,355.2649500 NSF CHECKS RECEIVABLE 2,289.86 31 ACCRUED REVENUE 833.40 2,894.31 289.86 TRAVEL ADVANCES 2,649.00 EMPLOYEE ADVANCES 2,833.40 PREPAID EXPENSES RECEIVABLE TOTAL 12,546,328.35 3,310,785.03 8,005,621.93 23.862.735.31 WORKER COMPENSATION DEPOSIT 37,637.00 RENT DEPOSITS 37,637.00 UTILITY DEPOSITS 75.00 MISC. DEPOSITS 2,100.00 .00 DEPOSITS TOTAL 39,812.00 2,,1757500.00 _ _ 3.00 GENERAL FIXED ASSETS 1,386,331.67 15,590,699.00 9,988,279.05 26,965,309.72 ACCUMULATED DEPRECIATION (677,077.47) AMOUNT AVAILABLE TO RETIRE LIT DEBT (677,077.47) 3,395,117.03 3,395,117.03 AMOUNT TO BE PROVIDED FOR LIT DEBT 1,578,645.34 94,617,118 48 8,010,000.00 104.2205,7_61.82 TOTAL OTHER ASSETS 709,264.20 15,590,699.00 1,578,645.34 9,988,279.05 98,012,233.51 8,010,000.00 133,889,111.10 TOTAL ASSETS 51,014,244.61 15,590,699.00 1 578 645 34 31 687 1. 26.88 9,988,279.05 98 012 233 51 _.-__ 8.599.W%58 _ 8 010 0�00_00 ,224,481,197.97 LIABILITY ACCOUNTS PAYABLE (40,330.00) (40.330.00) DUE TO OTHER AGENCIES 1,413,450.51 DUE TO OTHER FUNDS 602,005.19 1,327,250.23 1,413,450.51 9,305.00 1,938,5W.42 INTEREST ADVANCE -DUE TO CITY ACCRUED EXPENSES 351,119.18 351,119.18 PAYROLL LIABILITIES 89.52 STRONG MOTION INSTRUMENTS 2,267.38 8989 .52 FRINGE TOED LIZARD FEES 29,661.50 22 38 SUSPENSE 3,104.52 2 9 6150 DUE TO THE CITY OF LA QUINTA 3,.5 104.52 PAYABLES TOTAL 2,361,367.80 1,327,250.23 9,305.00 3,697,923.03 ENGINEERING TRUST DEPOSITS SO. COAST AIR QUALITY DEPOSITS ARTS IN PUBLIC PLACES DEPOSITS 430,805.43 430,805.43 LQRP DEPOSITS 15.156.00 15,156.00 DEVELOPER DEPOSITS 1,097,712.85 1,097,712.85 MISC. DEPOSITS 446,823.82 446,823.82 AGENCY FUND DEPOSITS 1,881,056.87 1,881,056.87 TOTAL DEPOSITS 3,856,398.97 15,156.00 3 871 55497 DEFERRED REVENUE 8,270.67 8,010,000.00 OTHER LIABILITIES TOTAL 8.270.67 _ 8,010,000.00 __ _8,018,270.67 81018,270.67 COMPENSATED ABSENCES PAYABLE 321,991.94 321.991.94 DUE TO THE CITY OF LA QUINTA 1,256,653.40 10,434,909.26 11,691,562.66 DUE TO COUNTY OF RIVERSIDE 12,249,102.00 12.249.102.00 DUE TO C.V. UNIFIED SCHOOL DIST. 9,418,222.25 9,418,222.25 DUE TO DESERT SANDS SCHOOL DIST. BONDS PAYABLE 65,910,000.00 8,010,000.00 73,920,000.00 TOTAL LONG TERM DEBT 1,578,645.34 98,012,233.51 8,010,000.00 107,600,878.85 TOTAL LIABILITY 6,226,037.44 1,578,645.34 1,342,406.23 98,012,233.51 8,019,305.00 8,010,000.00 123,188,627.52 EQUITY -FUND BALANCE 44,788,207.17 15,590,699.00 30,344,720.65 9,988,279.05 580,664.58 101,292,570.45 TOTAL LIABILITY a EQUITY 41.014.24,111 1-5 94.499.44 _ 1.476.045,34 .31.087.124.66 9 9Q4 279,05 9$.412 233,;f! 4.;f99.989,8@ 6,010,000,40 224,401.197,97 ------ ---- CASH & INVESTMENT TOTAL 88,689,539.58 PREMIUM/DISCOUNT ON INVESTMENT (388,611,73) TOTAL $6,300,927.83 • INVESTMENT ADVISORY BOARD MEETING BUSINESS SESSION: B Meeting Date: September 13, 2000 ITEM TITLE Review of the Investments in GSE's BACKGROUND: At the July Meeting the Board directed Staff to obtain financial material and receive Board Member information pertaining to Government Sponsored Enterprises (GSE's). Attached find the financial information from FHLB and FNMA as well as Board Member information. RECOMMENDATION: Provide Staff with direction based upon review of documentation and Board 7Memb discussion. L� '.!t, John M. Falconer, I Finance Director INDEPENDENT AUDITOR�s REPORT The Board of Directors Fannie Mae Foundation: We have audited the accompanying balance sheets of the Fannie Mae Foundation (the Foundation) as of December 31, 1999 and 1998, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Foundation's management. Our responsibility is to express an opinion on these financial state - menu based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examin- ing, on a test basis, evidence supporting the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fannie Mae Foundation as of December 31, 1999 and 1998, and its changes in net assets and its cash flows for the years then ended, in conformity with gener- ally accepted accounting principles. K �n Washington, DC 0 a April 14, 2000 w 0 0 i z z c a r r� ro O 7d H ID 68 ,03 December 31, i999 and ryy8 Assets Cash and cash equivalents: Bank deposits $ 3,743,223 $ 1,164,326 Short-term investments 804,565 34,132,671 Total cash and cash equivalents 4,547,788 35,296,997 Investments (note 3) 234,399,127 335,223,952 Accrued dividends and interest 194,056 1,190,837 Community and Neighborhood Development Fund loans (note 4) 11,017,449 10,917,663 Contribution receivable from Fannie Mae (note 5) 154,687,624 — Property and equipment, net (note 6) 1,854,524 1,881,274 Other assets (note 7) 569,258 868,662 Total assets $407,269,826 $385,379,385 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses (notes 7 and 8) $ 663,854 $ 426,565 Deferred taxes (note 8) 2,222,714 3,075,777 Grant commitments (note 9) 11,348,784 14,998,435 Total liabilities 14,235,352 18,500,777 Net assets: Unrestricted 238,346,850 366,878,608 Temporarily restricted 154,687,624 — Total net assets 393,034,474 366,878,608 Commitments (notes 4 and 10) Total liabilities and net assets $407,269,826 $385,379,385 See accompanying notes to financial statements. STATEMENTS oP i%TrvITIES Years ended December gr, r999 and r998 Changes in unrestricted net assets: Revenues and other support: Net unrealized investment gain (loss) (note 3) $ (42,673,719) $ 62,183,026 Interest and dividends 8,021,954 12,842,567 Contributions from Fannie Mae (note 5) 99,750 111,500 Total revenues and other support (34,552,015) 75,137,093 Expenses: Program services: Public service outreach 50,870,824 45,569,060 Community outreach 5,395,919 6,817,670 Research, evaluation, and innovation 3,356,329 2,209,717 Grants 30,236,516 34,402,889 Supporting services: Foundation administration 4,813,097 4,731,341 Total expenses from operations 94,672,685 93,730,677 Change in unrestricted net assets from operations (129,224,700) (18593,584) Excise tax benefit (expense) (note 8) 692,942 (1,560,638) Change in unrestricted net assets (128,531,758) (20,154,222) Change in temporarily restricted net assets — contribution from Fannie Mae (note 5) 154,687,624 — Change in net assets 26,155,866 (20,154,222) Net assets beginning of year 366,878,608 387,032,830 Net assets end of year $393,034,474 $366,878,608 See accompanying notes to financial statements. 70 j STATEMENTS OF CASH FLOWS 77, Years ended December ;r, rppp and iyy8 t ! Cash flows from operating activities: Dividends and interest received $ 9,018,735 $ 14,657,575 Cash paid for outreach advertising, direct mail and fulfillment (46,256,627) (41,561,149) Cash paid to other vendors (8,780,437) (9,125,403) Grant payments (33,886,167) (32,665,877) Community and Neighborhood Development Fund loans 195,570 (4,902,800) Cash paid to and on behalf of employees (8,551,380) (7,830,162) Net cash used by operating activities (88,260,306) (81,427,816) Cash flows from investing activities: Proceeds from sales/maturities of investments 78,014,389 82,926,945 Purchases of investments (19,863,283) — Purchases of property and equipment (640,009) (583,113) Net cash provided by investing activities 57,511,097 82,343,832 Net increase (decrease) in cash and cash equivalents (30,749,209) 916,016 Cash and cash equivalents at beginning of year 35,296,997 34,380,981 Cash and cash equivalents at end of year $ 4,547,788 $ 35,296,997 Reconciliation of change in net assets to net cash used by operating activities: Change in net assets $ 26,155,866 $(20,154,222) Adjustments to reconcile change in net assets to cash flow provided (used) by operating activities: Net unrealized investment (gain) loss 42,673,719 (62,183,026) Depreciation and amortization 666,759 612,124 Provision for uncollectible loans (75,938) 691,250 Provision for deferred taxes (853,063) 1,244,150 (Increases) decreases in operating assets: Accrued dividends and interest 996,781 1,815,008 Community and Neighborhood Development Fund loans (23,848) (4,599,441) Contribution receivable from Fannie Mae (154,687,624) — Other assets 299,404 (705,554) Increases (decreases) in operating liabilities: ITJ ] Accounts payable and accrued expenses 237,289 114,883 a 0 Grant commitments (3,649,651) 1,737,012 Net cash used by operating activities $ (88,260,306) $(81,427,816) Y z Supplemental information: ' r Cash paid for excise taxes $ 176,500 $ 302,250 V 0 x H See accompanying notes to financial statements. �o _ �D NOTES TO FINANCIAL STATEMENTS December 3r, r999 and r998 Note 1. Organization The Fannie Mae Foundation (the Foundation) is an independent private foundation, organized in 1979 pursuant to the District of Columbia Nonprofit Corporation Act. The Foundation creates affordable homeownership and housing opportunities through innovative partnerships and initiatives that transform and revitalize communities across America. Fannie Mae is the sole provider of contributions to the Foundation. The Foundation is headquartered in Washington, DC and has regional offices in Atlanta, Chicago, Dallas, Pasadena, and Philadelphia. Note 2. Summary of Significant Accounting Policies BASIS OF ACCOUNTING The financial statements have been prepared on the accrual basis of accounting. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS Cash equivalents include highly liquid debt instruments such as overnight repurchase agreements, money market funds, and short-term investment funds that are reported at cost and are readily convertible to known amounts of cash. Such debt instruments have maturities of three months or less from the date of purchase by the Foundation. INVESTMENTS Investments consist of equity securities and debt instruments with original maturities to the Foundation in excess of three months. The investments are reported at their fair values based on quoted market prices. Changes in fair value are recognized in the statement of activities. Realized and unrealized gains or losses are determined by comparison of specific amortized cost of acquisitions/donation to proceeds at the time of disposal or fair values at the balance sheet date, respectively. y PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Furniture, fixtures and equipment are depreciated w on the straight-line basis over estimated useful lives of three to five years. Leasehold improve- ments are amortized on the straight-line basis over the shorter of the asset life or the remaining term of the lease. a. w CONTRIBUTED SERVICES z The Foundation recognizes in the financial statements the fair value of contributed services c meeting certain criteria. Generally, only professional services provided by specialists are r recognized. 0 a 72 00 COMMUNITY AND NEIGHBORHOOD DEVELOPMENT FUND (CNDF) LOANS CNDF loans consist of notes receivable due over one or more years at below -market rates of interest. These notes are discounted to their net present value using current market rates and are reported in the accompanying balance sheets net of the discount. The reported value of these notes receivable approximates fair value. GRANTS Grants to other parties are recognized as expenses and liabilities when the Foundation makes an unconditional promise to fund another organization. Unpaid grant commitments are discounted to their net present value using current market rates and are reported in the accompanying balance sheets net of the discount. The reported value of these commitments approximates fair value. CONTRIBUTIONS AND NET ASSETS The Foundation reports gifts of cash and other assets, including pledges, as restricted support if they are received with donor -imposed restrictions that limit the use of the donated assets. When a donor -imposed restriction expires, that is, when a time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets. Contributions and net assets are classified as follows: Unrestricted — includes all contributions received without donor -imposed restrictions on use or time. Temporarily restricted — includes contributions and net assets that are available for general use by the Foundation, however are time restricted by the donor. RECLASSIFICATIONS Certain amounts in the 1998 financial statements have been reclassified to conform to the 1999 presentation. Note 3. Investments Equity and debt securities consisted of the following at December 31: Equity securities Corporate debt securities Total investments 1999 1998 COST FAIR VALUE COST FAIR VALUE $121,269,298 $229,398,427 5,000,000 5,000,700 $126,269,298 $234,399,127 $121,269,298 $271,879,630 63,171,671 63,344,322 $184,440,969 $335,223,952 NOTES To FINANCIAL STATEMENTS (continued) December gr, r999 and r998 At December 31, 1999 and 1998, all of the Foundation's equity investments consisted of donated shares of Fannie Mae common stock. Unrealized investment gains and losses are reported net of investment and asset management fees of approximately $21,000 and $24,000 for the years ended December 31, 1999 and 1998, respectively. Note 4. Community and Neighborhood Development Fund (CNDF) Loans In furtherance of its charitable purposes, the Foundation makes CNDF loans to expand housing opportunities for underserved families and individuals in neighborhoods and communities throughout the United States. These CNDF loans bear interest at below -market rates ranging from 0 percent to 2 percent and have terms ranging from one to five years. CNDF loan activity for 1999 and 1998 is summarized as follows: 1999 1998 Gross CNDF loans receivable, beginning of year $15,534,800 $10,632,000 CNDF loans funded 950,000 5,895,000 CNDF loans repaid (1,145,570) (992,200) Gross CNDF loans receivable, end of year 15,339,230 15,534,800 Discount to net present value (at rates ranging from 7.98% to 8.36%) (2,076,419) (2,295,837) Provision for uncollectible CNDF loans (2,245,362) (2,321,300) Net CNDF loans receivable, end of year $11,017,449 $10,917,663 Unpaid loan commitments, end of year $ 2,325,000 $ 250,000 At December 31, 1999, loan principal in the amount of $3,576,730 is due to the Foundation within one year. Note 5. Contributions from Fannie Mae In March 1999, Fannie Mae made an unconditional pledge of stock in an emerging technology company in which Fannie Mae holds an investment. The contribution terms commit Fannie Mae to transfer the underlying securities to the Foundation on or before December 31, 2009. The gift is reported within temporarily restricted net assets based on its implied time restriction. The contribution is reported in the accompanying financial statements based on the fair value of the shares at December 31, 1999, which was approximately $155 million. As of April 14, 2000, the value of the pledged shares was approximately $43 million. 74 During 1999 and 1998, Fannie Mae contributed professional services to the Foundation. The fair value of these contributed services was approximately $100,000 and $112,000, respectively, and is included in the statement of activities. In January 2000, Fannie Mae made a $10 million cash donation to the Foundation. Note 6. Property and Equipment Property and equipment consist of the following at December 31: j999 X998 Furniture and fixtures $ 690,845 $ 610,450 Office equipment 95,400 56,000 Computer hardware and software 1,126,453 747,300 Leasehold improvements 1,602,042 1,460,980 Property and equipment, at cost 3,514,740 2,874,730 Less accumulated depreciation (1,660,216) (993,456) Property and equipment, net $ 1,854,524 $1,881,274 During 1999, the Foundation adopted the American Institute of Certified Public Accountants' Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Accordingly, the Foundation capitalized approximately $69,000 of such costs. Note 7. Employee Benefit Plans DEPINED BENEFIT PLAN The Foundation sponsors a qualified noncontributory defined benefit retirement plan that covers substantially all employees. The plan provides retirement benefits equal to the actuarial equivalent of an employee's account balance, payable on an annuity basis as a single life annuity commencing as of the normal retirement date. The plan assets are invested primarily in investment -grade equity and debt securities. The Foundation makes annual contributions to the plan at least equal to the minimum funding required by the Employee Retirement Income Security Act (ERISA). Contributions are intended to provide not only for benefits attributed to services to date but also for those expected to be earned in the future. The projected unit credit method is used in determining the actuarial value of benefit obligations. NOTES To FINANCIAL STATEMENTS (continued) December gt, IM and ryy8 The following table sets forth the plan's funded status as of December 31: j999 ry98 Projected pension obligation $(2,542,568) $(2,240,498) Plan assets at fair value 2,415,829 1,656,934 Funded status — projected pension obligation in excess of plan assets $ (126,739) $ (583,564) The following table sets forth the amounts recognized in the Foundation's financial statements as of and for the years ended December 31: z999 _j998 Prepaid pension cost included in other assets $ 264,198 $ — Accrued pension cost included in accounts payable • and accrued expenses $ — $163,003 Additional minimum liability included in accounts payable and accrued expenses $ — $ 46,514 Intangible asset included in other assets $ — $ 46,514 Net periodic pension cost $ 572,799 $529,092 Employer contributions $1,000,000 $476,988 Benefits paid $ 374,705 $ 35,999 The weighted -average assumptions used in determining net periodic pension cost were as follows for the years ended December 31: j999 j998 Discount rate 7.50% 6.50% Rates of increase in compensation 6.00% 6.00% Expected long-term rate of return on assets 8.50% 8.50% DEFINED CONTRIBUTION PLAN The Foundation provides all eligible employees an annual pre-tax retirement savings plan contribution, which is funded in the year the benefit is earned. For the years ended December 31, 1999 and 1998, employees could contribute on a pre-tax basis up to 12 percent of compensation up to a maximum of $10,000. The Foundation matches an employee's contribution up to three percent of compensation on annual earnings up to $160,000. Each year the Foundation may choose to make an additional discretionary contribution. Retirement savings plan expense for the years ended December 31, 1999 and 1998 was $275,000 and $257,000, respectively. Note 8. Excise Taxes The Foundation is recognized as exempt from federal income taxes under Internal Revenue Code Section 501(c)(3) except on net income from unrelated business activities (none in 1999 or 1998). As a private foundation, the Foundation is subject to a maximum 2 percent federal excise tax on its net investment income. Unrealized gains and losses are excluded since they do not become taxable until realized. The Foundation provides for deferred taxes on these unrealized gains and losses. Excise tax expense consisted of the following for the years ended December 31: j999 j99 Current excise tax expense $(160,121) $ (316,488) Deferred excise tax benefit/(expense) 853,063 (1,244,150) Total excise tax benefit/(expense) $ 692,942 $0,560,638) The amounts currently payable for excise taxes at December 31, 1999 and 1998, were approxi- mately $2,000 and $18,000, respectively, and are included in accounts payable and accrued expenses. Note 9. Grant Commitments At December 31, 1999, gross grant commitments are expected to be paid to recipients as follows: Years ending December 31: 2000 $ 8,474,432 2001 2,485,255 2002 900,000 2003 115,000 Gross grant commitments 11,974,687 Discount to net present value (at rates ranging from 5.98% to 6.33%) (625,903) Net grant commitments $11,348,784 V NoTEs To FINANCIAL STATEMENTS (continued) December ;r, r999 and r998 N o t e 10. Operating Leases The Foundation has obligations under two non -cancelable leases for office space, which have simultaneous termination dates of April 30, 2003. Both leases are for space located in the same building, have provisions for inflationary rent increases, and require the Foundation to pay for its share of increases in building operating costs and real estate taxes above a base year amount. Future minimum rents to be paid under these leases, excluding future escalation for rents, realizable taxes, and building operating expenses, are approximately as follows: Years ending December 31: 2000 $ 523,000 2001 528,000 2002 534,000 2003 179,000 Total $1,764,000 Rent expense inclusive of real estate taxes and operating expenses, for the years ended December 31, 1999 and 1998, was approximately $520,000 and $514,000, respectively. 0 0 0 a w o' 0 Y z z a r rn O 7d H M 78 013 DIRECTORS AND OFFICERS Board of Directors Franklin D. Raines Chairman Jamie S. Gorelick Vice Chair Stacey H. Davis Director Kenneth J. Bacon Director John Buckley Director Floyd Flake Director Colleen Hernandez Director Louis W. Hoyes Director Stewart Kwoh Director Robert J. Levin Director Monica Lozano Director William R. Maloni Director Ann D. McLaughlin Director Daniel H. Mudd Director Tom Nides Treasurer/Director John Sasso Director Karen Hastie Williams Director Barry Zigas Director Glen S. Howard Secretary Officers Stacey H. Davis President and CEO James H. Carr Senior Vice President, Innovation, Research, and Technology Glen S. Howard Senior Vice President and General Counsel Andrew Plepler Senior Vice President, Housing and Community Initiatives Diane Tomb Senior Vice President, Communications Peter Beard Vice President, National Philanthropy Isaac Megbolugbe Vice President, Research Kevin Smith Vice President, Finance and Operations Anthony Tansimore Vice President, Regional and Community Initiatives Lisa Williams Vice President, Capital City Initiatives 014 79 The Home -buying Process The Fannie Mae Foundatiods "Opening Doors" campaign provides information to help people —particularly low- and moderate -income families, minorities, and new Americans —achieve the American dream of homeownership. The Foundation has reached almost nine million people since 1993. THE FOUNDATION OFFERS THREE FREE HOME -BUYING GUIDES: Knowing and Understanding Your Credit is for people who are just starting the home - buying process. This guide explains what credit is and why having good credit is so important, especially when people want to buy a home. This guide is available in English, Spanish, Chinese, Korean, and Vietnamese. Opening the Door to a Home of Your Own is a step-by-step guide to the home -buying process to help people decide if they are ready to buy a home now, or to see if they need more time and help getting ready. This guide is available in English, Spanish, Chinese, Vietnamese, Korean, Russian, Haitian -Creole, Polish, and Portuguese. Choosing the Mortgage Thats Right for You is for those who are further along in the home -buying process and want to under- stand what it takes to finance a home and how the mortgage process works. This guide is available in English and Spanish. 8o To order these guides: Tek 1(800) 688-HOME Visit the Foundation's multilingual Web site. www.homebuyingguide.org Grant Guidelines To receive grant guidelines send request and complete address information to: Tek (202) 274-8078 Fax (202) 274-8126 (attn: grants) E-maik grantapp@fanniemaefoundation.org or visit our Web site. Publications For information about Foundation publications: Tek (202) 274-8074 Fax (202) 274-8126 E-maik fmfpubs@fanniemaefoundation.org National Office Fannie Mae Foundation 4000 Wisconsin Avenue, NW North Tower, Suite One Washington, DC 20016-2804 Tek (202) 274-8000 Regional Offices To address local needs efficiently, the Foundation maintains five regional offices: NORTHEASTERN REGIONAL OFFICE Philadelphia, PA Tek (215) 575-1511 Serves: Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jerse}s New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont SOUTHEASTERN REGIONAL OFFICE Atlanta, GA Tek (404) 398-6068 Serves: Alabama, Florida, Georgia, Kentucky Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia MIDWESTERN REGIONAL OFFICE Chicago, IL Tel. (312) 368-6067 Serves: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin SOUTHWESTERN REGIONAL OFFICE Dallas, TX Tek (972) 773-7527 Serves: Arkansas, Colorado, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, Texas, Utah WESTERN REGIONAL OFFICE Pasadena, CA Tek (626) 396-5310 Serves: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Wyoming 015 FEDERAL HOME LOAN BANK SYSTEM 1999 FINANCIAL REPORT This report provides financial information on the Federal Home Loan Bank System. The Federal Housing Finance Board and the Federal Home Loan Bank System intend that you should use this Financial Report, with other information the Federal Home Loan Bank System specifically provides, when you consider whether or not to purchase the consolidated bonds and consolidated notes of the Federal Home Loan Banks offered and issued by the Federal Housing Finance Board. The Securities Act of 1933, as amended, does not require the Federal Housing Finance Board to register consolidated bonds and consolidated notes. Accordingly, the Federal Housing Finance Board has not filed a registration statement with the Securities and Exchange Commission. Neither the Securities and Exchange Commission nor any State securities commission has approved or disapproved the consolidated bonds and consolidated notes or has passed upon the accuracy or adequacy of any offering material. The consolidated bonds and consolidated notes are not obligations of the United States and are not guaranteed by the United States. This Financial Report provides information on the business of the Federal Home Loan Bank System as of March 29, 2000. The financial information is as of and for periods ended December 31, 1999. Neither this Financial Report nor any offering material provided by the Office of Finance on behalf of the Federal Housing Finance Board concerning any offering of consolidated bonds and consolidated notes describes all the risks of investing in consolidated bonds or consolidated notes. Prospective investors should consult their financial and legal advisors about the risks of investing in any particular issue of consolidated bonds or consolidated notes. You should direct questions about the Federal Home Loan Banks' Combined Financial Statements to the Deputy Chief Economist, Federal Housing Finance Board, 1.777 F Street, N.W., Washington, D.C. 20006, (202) 408-2845. You should direct questionsabout the consolidated bonds and consolidated notes to Marketing and Debt Services, Office of Finance, Federal Home Loan Banks, 11921 Freedom Drive, Suite 1000, Reston, VA 20190, (703) 487-9500, www.fhlb-of.com. The Office of Finance will provide additional copies of this Financial Report upon request. Please contact the Office of Finance if you want to receive subsequent annual and quarterly financial reports. The delivery of this Financial Report does not imply that there has been no change in the financial condition of the Federal Home Loan Bank System since December 31, 1999. The date of this Financial Report is March 29, 2000. TABLE OF CONTENTS Page Federal Home Loan Bank System ................................................ 3 Summary Financial Data ........................................................ 5 Selected Five -Year Financial Highlights ........................................... 6 Discussion and Analysis of Financial Condition and Results of Operations ............... 7 Forward -Looking Information ................................................ 7 1999 Highlights............................................................ 7 Regulatory Developments.................................................... 10 Business Overview.......................................................... 12 Federal Home Loan Bank System Membership Trends ........................... 13 FinancialTrends........................................................... 19 Results of Operations....................................................... 22 Quarterly Results of Operations .............................................. 27 Risk Management.......................................................... 28 Capital Adequacy.......................................................... 34 Transactions with Related Parties ............................................. 34 Other Development......................................................... 34 Business...................................................................... 35 General................................................................... 35 Advances................................................................. 35 Investments............................................................... 37 Debt Financing —Consolidated Obligations ..................................... 38 Deposits.................................................................. 40 Capitalization............................................................... 41 Dividends................................................................. 42 Interest -Rate Exchange Agreements ........................................... 42 Oversight, Audits, and Examinations .......................................... 42 TaxStatus................................................................ 42 The Finance Board............................................................. 43 FHLBank Management and Compensation ......................................... 44 Index to Combined Financial Statements ........................................... 65 The Luxembourg Stock Exchange has allocated the number 2306 to the Federal Home Loan Banks' global debt program for listing purposes. Application may be made to list consolidated obligations issued under the program on the Luxembourg Stock Exchange. 2 017 FEDERAL HOME LOAN BANK SYSTEM The 12 Federal Home Loan Banks (FHLBanks) and the Office of Finance under the supervision of the Federal Housing Finance Board (Finance Board) compose the Federal Home Loan Bank System (Bank System or System). The Finance Board is an independent agency in the executive branch of the U.S. Government. The 12 FHLBanks are instrumentalities of the United States organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (Act or Bank Act). The Office of Finance is a joint office of the Bank System established to facilitate issuing and servicing of consolidated obligations. The Bank System serves the public by enhancing the availability of residential mortgage and community investment credit. It provides a readily available, low-cost source of funds to its member institutions. The FHLBanks are cooperatives; only member institutions own the capital stock of each FHLBank and the members receive dividends on their investment. Each FHLBank has its own management, employees, and board of directors. The Finance Board is both the safety -and - soundness regulator and mission regulator of the FHLBanks, and the Finance Board, through the Office of Finance, is the issuer of consolidated debt for which the FHLBanks are jointly and severally liable. Each FHLBank operates in a specifically defined geographic district. The district number, FHLBank's name and address, and the States and territories composing each district are as follows: District 1 FHLBank of Boston .................... Connecticut, Maine, Massachusetts, One Financial Center, 20th Floor New Hampshire, Rhode Island, Vermont Boston, Massachusetts 02111 Business number: (617) 542-0150 District 2 FHLBank of New York ................. New Jersey, New York, Puerto Rico, 7 World Trade Center, Floor 22 Virgin Islands New York, New York 10048 Business number: (212) 441-6600 District 3 FHLBank of Pittsburgh .................. Delaware, Pennsylvania, West Virginia 601 Grant Street Pittsburgh, Pennsylvania 15219 Business number: (412) 288-3400 District 4 FHLBank of Atlanta .................... Alabama, District of Columbia, Florida, 1475 Peachtree Street, N.E. Georgia, Maryland, North Carolina, Atlanta, Georgia 30309 South Carolina, Virginia Business number: (404) 888-8000 District 5 FHLBank of Cincinnati ................. Kentucky, Ohio, Tennessee Atrium Two, Suite 1000 221 East Fourth Street Cincinnati, Ohio 45202 Business number: (513) 852-7500 District 6 FHLBank of Indianapolis ................ Indiana, Michigan 8250 Woodfield Crossing Boulevard Indianapolis, Indiana 46240 Business number: (317) 465-0200 District 7 FHLBank of Chicago ................... Illinois, Wisconsin I1 1. East Wacker Drive, Suite 700 Chicago, Illinois 60601 Business number: (312) 565-5700 District 8 FHLBank of Des Moines ................ Iowa, Minnesota, Missouri, North Dakota, 907 Walnut Street South Dakota Des Moines, Iowa 50309 Business number: (515) 243-4211 District 9 FHLBank of Dallas ..................... Arkansas, Louisiana, Mississippi, 5605 North MacArthur Boulevard New Mexico, Texas Irving, Texas 75038 Business number: (214) 944-8500 District 1.0 FHLBank of Topeka .................... Colorado, Kansas, Nebraska, Oklahoma 2 Townsite Plaza 200 East 6th Street Topeka, Kansas 66603 Business number: (785) 233-0507 District 11 FHLBank of San Francisco .............. Arizona, California, Nevada 600 California Street San Francisco, California 94108 Business number: (415) 616-1000 District 1.2 FHLBank of Seattle .................... Alaska, Guam, Hawaii, Idaho, Montana, 1501 Fourth Avenue, 19th Floor Oregon, Pacific Islands, Utah, Seattle, Washington 98101 Washington, Wyoming Business number: (206) 340-2300 Office of Finance Federal Home Loan Banks 11.921 Freedom Drive, Suite 1000 Reston, Virginia 20190 Business number: (703) 487-9500 www..jhlb-of com Federal Housing Finance Board 1777 F Street, N.W. Washington, D.C. 20006 Business number: (202) 408-2500 4 FEDERAL HOME LOAN BANK SYSTEM SUMMARY FINANCIAL DATA (Dollars in millions) 1999 1998 1997 1996 1995 At December 31, Advances to members ................. $395,747 $288,189 $202,265 $161,372 $132,264 Investments(1) ....................... 171,425 137,193 140,106 125,231 135,426 Total assets .......................... 583,212 434,002 348,575 292,035 272,661 Deposits and borrowings ............... 17,624 25,805 18,445 18,257 20,599 Consolidated obligations ............... 525,419 376,715 304,493 251,316 231,417 Capital stock ......................... 28,361 22,287 18,833 16,540 14,850 Retained earnings(2) .................. 654 465 341 336 366 Average balances for the year ended December 31, Advances to members ................. $336,713 $229,932 $170,963 $141,277 $121,948 Investments(l) ....................... 151,682 144,946 136,020 126,409 123,387 Total assets .......................... 487,249 381,909 311,931 272,801 249,402 Deposits and borrowings ............... 19,907 22,185 16,084 17,651 18,920 Consolidated obligations ............... 442,158 332,265 270,904 233,436 211,645 Capital stock ......................... 24,615 20,026 17,542 15,645 13,892 Retained earnings(2) .................. 527 330 342 450 390 Operating results for the year ended December 31, Net income .......................... $ 2,128 $ 1,778 $ 1,492 $ 1,330 $ 1,300 Dividends paid in cash and stock ........ 1,636 1,353 1,191 1,049 916 Weighted average dividend rate(3) ...... 6.65% 6.76% 6.79% 6.71% 6.60% Return on average equity ............... 8.46% 8.73% 8.33% 8.26% 9.10% Return on average assets ............... 0.44% 0.47% 0.49% 0.49% 0.52% Net interest margin(4) ................ 0.52% 0.57% 0.58% 0.59% 0.57% At December 31, Total capital ratio (5) .................. 5.0% 5.2% 5.5% 5.8% 5.6% Ratio of total unsecured liabilities to total capital ............................ 19.1:1 17.9 :1 17.2:1 16.3 :1 16.9:1 (1) Investments includes interest -bearing deposits in banks, securities purchased under resale agreements, and federal funds sold. (2) Retained earnings also includes unrealized net (losses) gains on available -for -sale securities. (3) Weighted average dividend rates are dividends paid in cash and stock divided by the average of capital stock eligible for dividends. (4) Net interest margin is net interest income before loan loss provision as a percentage of average earning assets. (5) Total capital ratio is capital stock plus retained earnings as a percentage of total assets at year end. 5 0.0 FEDERAL HOME LOAN BANK SYSTEM SELECTED FIVE-YEAR FINANCIAL HIGHLIGHTS (Dollars in millions) At December 31, 19" 1998 1997 1996 1995 Balance Sheet Advances to members ...................... $395,747 $288,189 $202,265 $161,372 $132,264 Mortgage loans, net ........................ 2,026 966 37 Investments (1) ............................ 171,425 137,193 140,106 125,231. 1.35,426 Other assets (2) ............................ 14,014 7,654 6,167 5,432 4,971 Total assets ....................... $583,212 $434,002 $348,575 $292,035 $272,661 Deposits and borrowings ..................... $ 17,624 $ 25,805 $ 18,445 $ 1.8,257 $ 20,599 Consolidated obligations ..................... 525,419 376,715 304,493 251,316 231,417 Other liabilities(3) ......................... 11,154 8,730 6,463 5,586 5,429 Total liabilities ..................... $554,197 $411,250 $329,401 $275,159 $257,445 Capital stock outstanding .................... $ 28,361 $ 22,287 $ 18,833 $ 16,540 $ 14,850 Retained earnings (4) ....................... 654 465 341 336 366 Total capital ....................... $ 29,015 $ 22,752 $ 19,174 $ 16,876 $ 15,216 For the Year Ended December 31, 1999 1998 1997 1996 1995 Income Statement Total interest income ....................... Total interest expense ....................... Net interest income before loan loss provision ........................ Loan loss provision ......................... Net interest income after loan loss provision ........................ Prepayment fees, net ....................... Other non -interest income, net ............... Total non -interest income ........... Operating expenses ......................... Assessments (5) ............................ Affordable Housing Program ................. Other.................................... Total other expenses ................ Extraordinary item: Gain (loss) on early extinguishment of debt Net income ............................... $ 26,520 $ 21,478 $ 18,030 $ 15,596 $ 1.5,315 23,986 19,362 16,258 14,012 13,914 2,534 2,116 1,772 1,584 1,401 1 2,533 21116 1,772 1,584 1,401 13 80 26 20 47 94 39 86 94 200 107 119 112 114 247 282 258 229 21.9 213 29 28 24 23 23 199 169 137 119 104 3 2 3 513 457 390 364 340 1 (2) (4) (8) $ 2,128 $ 1,778 $ 1,492 $ 1,330 $ 1,300 (1) Investments includes interest -bearing deposits in banks, securities purchased under resale agreements, and federal funds sold. (2) Other assets include cash and due from banks, accrued interest receivable, and bank premises and equipment, net. (3) Other liabilities include accrued interest payable, Affordable Housing Program, and payable to REFCORP. (4) Retained earnings also includes unrealized net (losses) gains on available -for -sale securities. (5) Consists of the cost of operating the Finance Board and the Office of Finance. 0 FEDERAL HOME LOAN BANK SYSTEM DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read this discussion and analysis of financial condition and results of operations with the combined financial statements and the notes beginning on page 65 of this Financial Report. Forward -Looking Information Statements contained in this report, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Housing Finance Board (Finance Board), the Federal Home Loan Banks (FHLBanks), and the Office of Finance may be "forward -looking statements." These statements may use forward -looking terminology, such as "anticipates," "be- lieves," "could," "estimates," "may," "should," "will," or their negative or other variations on these terms. The Federal Home Loan Bank System (System or Bank System) cautions that, by their nature, forward -looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward -looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward -looking statements involve risks and uncertainties including, but not limited to, the following: • economic and market conditions; • volatility of market prices, rates, and indices that could affect the value of collateral held by the FHLBanks as security for the obligations of FHLBank members and counterparties to interest -rate exchange agreements and similar agreements; • political events, including legislative, regulatory, judicial, or other developments that affect the FHLBanks, their members, counterparties, and/or investors in the consolidated obliga- tions of the FHLBanks; • competitive forces, including without limitation other sources of capital available to FHLBank members, other entities borrowing funds in the capital markets, and the ability to attract and retain skilled individuals; • ability to develop and support technology and information systems, including the Internet, sufficient to manage the risks of the FHLBanks' business effectively; • changes in investor demand for consolidated obligations and/or the terms of interest -rate exchange agreements and similar agreements; • timing and volume of market activity; • ability to introduce and manage successfully the risks associated with new FHLBank products and services, including new types of collateral securing advances; • risk of loss arising from litigation filed against one or more of the FHLBanks; and • inflation. 1999 Highlights Legislation. On November 12, 1999, President Clinton signed the Gramm -Leach -Bliley Act, S. 900 (formerly known as the Financial Services Modernization Act of 1999), Title VI of this Act is entitled the "Federal Home Loan Bank System Modernization Act (Modernization Act) of 1999." This legislation contains the first major legislative changes affecting the Bank System since the passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. of)2 Some of the provisions of the Modernization Act were effective upon enactment. Other provisions require the Finance Board to adopt implementing regulations before they are effective. Among other things, the legislation will: • eliminate mandatory membership for Federal savings associations, and allow a Federal savings association to withdraw from membership after May 12, 2000; • allow FHLBanks to make long-term advances to "community financial institutions" (FDIC - insured depository institutions with less than $500 million in assets) to fund small businesses, small farms, and small agri-businesses; • allow community financial institutions to use secured small business and agricultural loans as collateral for advances; • exempt community financial institutions from the requirement that member institutions must have 10 percent of their assets in residential mortgages to qualify for membership; • eliminate the cap on the amount of advances that can be secured by "other real estate owned" (formerly 30 percent of a member's capital); • eliminate all provisions that discriminate against members that are not Qualified Thrift Lenders (QTL), thereby providing equal access to Bank System advances for all members without regard to QTL status; • effective January 1, 2000, change the FHLBanks' payment to the Resolution Funding Corporation (REFCORP) from a flat $300 million per year to 20 percent of each FHLBank's earnings net of operating expenses and Affordable Housing Program expense. These payments will cease when the total amounts of the FHLBanks' payments to REFCORP are equivalent to a $300 million annual annuity whose final maturity date is April 15, 2030; • change the term of all FHLBank directors to three years, establish limits on FHLBank director compensation, and allow each FHLBank's board of directors to elect its own chair and vice chair; • confer independent litigation authority on the Finance Board; • confer on the Finance Board the same types of enforcement powers as have been granted to the Office of Federal Housing Enterprise Oversight; and • create a new capital structure for the Bank System by directing the Finance Board to prescribe uniform capital regulations, including a leverage limit (generally not less than 5 percent of total assets) and a risk -based capital requirement, and requiring each FHLBank to establish its own capital structure plan, which may authorize the FHLBank to issue two classes of stock, redeemable at par on either six months or five years notice. The current capital structure of the Bank System will remain in place until such time as the new capital regulations are in effect and the capital structure plans of each FHLBank have been approved and implemented. (See "Discussion and Analysis of Financial Condition and Results of Operations —Business Overview —Historical Perspective," "Discussion and Analysis of Financial Condition and Results of Operation —Federal Home Loan Bank System Membership Trends," "Business —Advances," "Business —Capitalization," and Notes 1, 5, and 11 to the accompanying combined financial statements.) Financial Highlights. The Bank System and each FHLBank experienced substantial growth in 1999. Advances increased by 37.3 percent to $395.7 billion, assets increased by 34.4 percent to $583.2 billion, consolidated obligations outstanding increased by 39.5 percent to $525.4 billion, and total capital increased by 27.5 percent to $29.0 billion. 02W The growth in advances reflects strong demand by members for term funding. Some of the growth in advances reflects strategies of members to lock in term funding that bridged the turn of the century. Advances increased every month in 1999, with monthly increases in excess of $15 billion in June, August, September, and December. Advances increased in January and February 2000, which suggests there was no systemic liquidation of advances after the turn of the century. A significant part of advances growth over the past several years has been attributable to convertible advances, which entail a put option (s) sold by the member to the FHLBank that allows the FHLBank to convert the advance from fixed-rate to floating rate. A convertible advance carries an interest rate considerably lower than a comparable -maturity advance that does not have the conversion feature. (See "Discussion and Analysis of Financial Condition and Results of Opera- tions -Risk Management -Derivatives" and Note 10 to the accompanying combined financial statements). In preparation for potential demands for advances from members at year end 1999, the FHLBanks amassed significant liquidity portfolios in 1999. Investments other than mortgage - backed securities (MBS) increased by 21.9 percent to $98.4 billion. MBS increased by 29.2 percent to $73.0 billion. Finance Board policy limits an FHLBank's investments in MBS to three times its capital, and aggregate MBS investments were 2.52 times System capital at December 31, 1999, compared with 2.48 times capital one year earlier. Consolidated obligations, which are the joint -and -several obligation of the FHLBanks, are the System's principal funding source, and they reached $525.4 billion at December 31, 1999, up from $376.7 billion one year earlier. Because of the significant balance sheet growth, System leverage increased to 19.1 to 1 at December 31, 1999, from 17.9 to 1 at December 31, 1998. The 27.5 percent increase in capital to $29.0 billion is due to three factors. First, the number of System members grew by 7.2 percent to 7,383. New members must purchase stock in their FHLBank based on their level of residential mortgage assets. Second, borrowing members must hold capital stock at least equal to 5 percent of their advances outstanding. As aggregate advances grew, some borrowers needed to purchase additional capital stock to be in compliance with this statutory requirement. Third, five of the FHLBanks pay stock dividends, and this gives rise to increased levels of capital. The System's capital to asset ratio was 5.0 percent at December 31, 1999, compared with 5.2 percent at December 31, 1998. The FHLBanks operate deposit programs primarily for the benefit of their members, and member deposits at the end of 1999 decreased 31.0 percent from the end of 1998 to $17.1 billion. Most of these deposits are very short term, and the FHLBanks, as a matter of prudence, hold short- term assets with maturities similar to the deposits. The level of deposits at the end of 1999 was very similar to the $17.9 billion level at the end of 1997. The FHLBanks do not actively manage their deposits; the level of deposits is driven by member demand and the liquidity situation of members. The spread between the yield on earning assets and the cost of interest -bearing liabilities in 1999 was 24 basis points, 2 basis points lower than in 1998. The return on average assets was 44 basis points in 1999, 3 basis points lower than in 1998. The return on average capital was 8.46 percent in 1999, which is 27 basis points lower than in 1998. The weighted average dividend rate was 6.64 percent in 1999, compared with 6.76 percent one year earlier. Net interest income after loan loss provision increased 19.7 percent to $2.5 billion in 1999 because of the higher levels of advances. Average assets of $487.2 billion during 1999 were 27.6 percent higher than a year ago. Partially offsetting the higher level of net interest income were increases in System operating expenses and other expenses, Affordable Housing Program (AHP) contributions, and assessments. System operating expenses, which were $282 million in 1999, increased 9.3 percent from 1998 operating expenses. Net income of $2.1 billion for 1999 exceeded 1998 net income by 19.7 percent. 0 Regulatory Developments Financial Management and Mission Achievement. On July 28, 1999, the board of directors of the Finance Board proposed a regulation that would modernize the financial management, mission achievement, and business activities of the FHLBanks. The Financial Management and Mission Achievement (FMMA) proposal would promulgate for the first time regulatory standards for mission achievement by the FHLBanks and an accompanying definition of core mission assets. It would authorize new activities and new classes of assets that build on the cooperative structure of the System. FMMA would supersede the current Financial Management Policy that governs the financial operations of the FHLBanks. FMMA eventually would require each FHLBank to hold core mission assets at least equal to the amount of consolidated obligations it has outstanding. The proposal would also require that each FHLBank maintain a stand-alone credit rating of at least double -A from a nationally recognized statistical rating organization and that the System maintain a triple-A rating on its consolidated obligations. FMMA, as proposed, had four key elements: • It articulated standards for each FHLBank's board of directors' responsibility for adopting both a risk management and mission achievement policy and for directing the establishment and maintenance of an effective system of internal controls. It also articulated standards for an independent audit committee within each FHLBank's board of directors to review and implement both internal and external accounting policies and policies that ensure meaningful assessment, monitoring, and control of mission achievement. • It would create a risk -based capital requirement for the FHLBanks based on credit risk, market risk, and operations risk. The Finance Board must approve the risk models used in the stress testing of market risk, and the Finance Board would also specify those components of capital that may go to meet the capital requirement. The proposal would establish a minimum capital requirement of 3 percent of assets to replace the existing liabilities -based leverage ratio. FMMA also would establish a contingency liquidity requirement. • It would authorize the FHLBanks to acquire a broader range of assets than currently allowed, but would prohibit the holdings of equities (other than those defined as core mission assets), foreign, non -traded, or below -investment -grade securities, commodities, and foreign currencies. Trading for speculative purposes and speculative use of hedging instruments would continue to be prohibited. • The proposal required that by January 1, 2005, the ratio of core mission assets to consolidated obligations for each FHLBank must equal at least 100 percent. The require- ment would start at 80 percent, effective January 1, 2001, and increase by 5 percentage points annually until January 1, 2005. Core mission assets are defined as financial products and services that assist members and nonmember mortgagees in financing housing and targeted community lending. Core mission assets include advances, letters of credit, certain targeted equity investments (such as investments in Small Business Investment Corporations (SBIC) ), and a new class of assets called Member Mortgage Assets. These assets are mortgages or pools of mortgages that • finance housing or community lending, • are acquired pursuant to a transaction between an FHLBank and its members or nonmember mortgagees, and • require the member or nonmember mortgagee to bear and benefit from the credit risk performance of the asset. Mortgage -backed securities generally would not be catego- rized as core mission assets. 10 0n t-r �J At December 31, 1999, the ratio of core mission assets to consolidated obligations for the Bank System was approximately 76 percent. The proposed FMMA regulation was subject to a 90-day comment period, which commenced on the date it was published in the Federal Register, September 27, 1999. However, in a letter to the Senate and House Banking Committee chairmen dated October 18, 1999, the chairman of the Finance Board stated that it was the intention of the Finance Board, upon final enactment of the Gramm -Leach -Bliley Act, to (1) withdraw its proposed FMMA, and (2) not take action to promulgate proposed or final regulations limiting FHLBank advances or assets beyond those currently in effect (except to the extent necessary to protect the safety and soundness of the FHLBanks) until capital regulations required pursuant to the Gramm -Leach -Bliley Act governing a risk -based capital system and a minimum leverage requirement for the FHLBanks have become final and the statutory period for the submission of capital plans by the FHLBanks under the Gramm -Leach -Bliley Act have expired. On November 15, 1999, the Finance Board withdrew its proposed FMMA regulation. However, in March 2000, the Finance Board approved in final form governance rules similar to those contained in the original FMMA proposal. The. Finance Board may propose and adopt in 2000 other provisions similar to those contained in the original FMMA proposal. Office of Finance Reorganization. On December 14, 1999, the Finance Board proposed amending its regulations governing the Office of Finance, a joint office of the FHLBanks. The proposed rule would reorganize the Office of Finance and broaden its duties, functions, and responsibilities in two key respects. First, the Office of Finance would perform consolidated obligation issuance functions, including preparation of the Bank System's combined financial reports, for the FHLBanks. Second, the Office of Finance would be authorized to serve as a vehicle for the FHLBanks to carry out joint activities in a way that promotes operating efficiency and effectiveness in achieving the mission of the FHLBanks. With respect to the issuance of consolidated obligations, the proposed rule would make the FHLBanks, rather than the Finance Board, the issuer of consolidated obligations under the authority of section 11(a) of the Bank Act. This is consistent with devolutionary actions taken by Congress to give the FHLBanks greater autonomy over the management of their business and to remove the Finance Board from involvement in FHLBank management functions. If the proposal is adopted, the FHLBanks would issue debt collectively, and such debt also would continue to be the joint -and -several obligation of all the FHLBanks. Mortgage Loans. As provided by the Financial Management Policy of the Finance Board, an FHLBank may invest in assets that support housing and community development, provided that before entering into such investments, the FHLBank: • ensures the appropriate levels of expertise, establishes policies, procedures, and controls, and provides for any reserves required effectively to limit and manage risk exposure and preserve the FHLBank's and the System's triple-A rating; • ensures that its involvement in such investment activity assists in providing housing and community development financing that is not generally available, or that is available at lower levels or under less attractive terms; • ensures that such investment activity promotes (or at the very least, does not detract from) the cooperative nature of the System; • provides a complete description of the contemplated investment activity (including a comprehensive analysis of how the above three requirements are fulfilled) to the Finance Board; and. • receives written confirmation from the Finance Board, before entering into such investments, that the above investment eligibility standards and requirements have been satisfied. In 1997 the Finance Board authorized the FHLBank of Chicago to establish a $750 million Mortgage Partnership Finance® (MPF®) pilot program. The objective of the pilot program was to unbundle the risks associated with home mortgage lending and allocate the individual risk components between the FHLBank of Chicago (and other participating FHLBanks) and its members in a manner that uses the cooperative structure of the Bank System to maximize their respective core competencies. MPF provides members with a strategic alternative to holding loans in portfolio or sell- ing/securitizing them in the secondary market. The member continues to be responsible for functions involving the customer relationship, including all aspects of mortgage marketing, origina- tion, and servicing. The novel feature of MPF is that the FHLBank acquires, either through a purchase or funding transaction, and retains in portfolio home mortgage loans originated, serviced, and credit -enhanced by its members. The member receives compensation for managing the customer relationship and the credit risk, while the FHLBank retains the risks it has the most expertise in managing —liquidity, interest -rate, and prepayment risks. The FHLBank holds these mortgage assets on its books. MPF is designed to limit the credit risk associated with investing in home mortgages faced by the FHLBank and other participating FHLBanks. In return for a fee, MPF participating members provide credit enhancement at least equivalent to the level of subordination afforded double -A -rated mortgage -backed securities, although MPF loans are not rated. In 1998, the Finance Board replaced the MPF pilot program cap of $750 million applicable to one FHLBank with a Systemwide limit of $9 billion. On October 4, 1999, the Finance Board authorized all FHLBanks to offer single-family Member Mortgage Asset (MMA) programs within certain defined parameters, terms, and condi- tions. MMA is a generic designation for programs that efficiently allocate mortgage risks to best use the core competencies of the entities involved, provide appropriate capital treatment to the participating financial institution members, and provide capital market funding and risk manage- ment alternatives, all for the ultimate benefit of consumers. The terms and conditions of this authorization require, among other things, that the Finance Board staffs determinations about an FHLBank's request to operate a single-family MMA program shall be subject to a pre -implementa- tion safety and soundness examination. MPF and MPF products continue to be authorized under this action. That authorization also reduced the minimum credit quality of loans purchased in MMA programs from the equivalent of double A to the equivalent of investment grade, subject to the FHLBank having adequate risk -based capital. Business Overview Historical Perspective. The fundamental business of the Bank System is to provide member institutions with advances and other credit products in a wide range of maturities to meet member demand. Congress created the Bank System in 1932 to improve the availability of funds to support home ownership. As a government -sponsored enterprise, the FHLBanks are Federal instrumentali- ties specifically designed to carry out Federal housing policy. Although initially capitalized with government funds, their members have provided all the Bank System's capital for more than 45 years. To accomplish its public purpose, the Bank System offers a readily available, low-cost source of funds, called advances, to member institutions and certain nonmember mortgagees. Congress originally granted access to advances only to those institutions with the potential to make and hold long-term, amortizing home mortgage loans. Such institutions were primarily Federally and State - chartered savings and loan associations, cooperative banks, and State -chartered savings banks (thrift institutions) . FHLBanks and their member thrift institutions became an integral part of the home mortgage financing system in the United States. However, a variety of factors, including a severe recession, record -high interest rates, and deregulation, resulted in significant losses for thrift institutions in the 12 O ,,.'7 1980s. In reaction to the very significant cost to the American taxpayer of resolving failed thrift institutions, Congress restructured the home mortgage financing system in 1989. While Congress reaffirmed the housing finance mission of the Bank System, it expanded membership eligibility in the Bank System beyond traditional thrift institutions to include commercial banks and credit unions with a commitment to housing finance. The 1999 amendments to the FHLBank Act (the Act) also require the FHLBanks to provide 20 percent of their net earnings annually to pay part of the interest due on REFCORP bonds until the payments made are equivalent to a $300 million annuity whose final maturity is April 15, 2030. This is a change from the flat $300 million annual contribution that the FHLBanks faced in previous years. In addition, the 1989 changes to the Act directed the FHLBanks to establish an AHP to enhance the availability of affordable housing for very low-, low-, and moderate -income families. The annual AHP obligation is the greater of 10 percent of net income after the charge for REFCORP or $100 million. In 1999, the FHLBanks expensed AHP contributions of $199 million, which was a 17.8 percent increase from 1998. (See Notes 6 and 11 to the accompanying combined financial statements.) Despite these two annual financial obligations, the FHLBanks have remained well -capitalized, profitable, and highly liquid. Federal Home Loan Bank System Membership Trends At December 31, 1999, there were 7,383 members of the Bank System, a net increase of 499 since December 31, 1998. As of December 31, 1999, Bank System membership was comprised of 1,610 thrift institutions (savings and loan associations and savings banks), 5,329 commercial banks, 405 credit unions, and 39 insurance companies. Federal Home Loan Bank System Membership Total December 31,1996.................................................... 6,146 December 31,1997.................................................... 6,504 December 31, 1998.................................................... 6,884 December31, 1999 .................................................... 7,383 Voluntary Members. The Modernization Act made membership voluntary for all members. Previously membership was voluntary for all members except Federally chartered savings associa- tions regulated by the Office of Thrift Supervision (OTS). While membership now is voluntary for these institutions, existing Federally chartered savings associations regulated by OTS may not withdraw from membership before May 12, 2000. As of December 31, 1999, 926 Federally chartered savings associations regulated by the Office of Thrift Supervision (OTS) were FHLBank members. These members held 48.0 percent of all advances to members and 38.4 percent of member capital stock. A member must give six months notice of its intent to withdraw. Members that withdraw from membership may not reapply for membership for five years. While 177 OTS-regulated, State - chartered savings associations have been voluntary members since April 19, 1995, only one has given notice of its intent to withdraw from membership since then for reasons other than merger or acquisition. Between January 1, 1993, and December 31, 1999, only 36 FHLBank members withdrew from membership for reasons other than merger or acquisition, and only 2 members have given notice to withdraw before July 1, 2000, for reasons other than merger or acquisition. The withdrawal of these two members will not have a material adverse effect on any FHLBank or the Bank System. 13 V 019 The following table presents information on the 10 largest holders of FHLBank capital stock in the Bank System at December 31, 1999. - Federal Home Loan Bank System Top 10 Capital Stock Holding Members in the Bank System at December 31, 1999 Name Washington Mutual Bank, FA* California Federal Bank A FSB* Norwest Bank Minnesota Washington Mutual Bank* Sovereign Bank, FSB Charter One Bank FSB* PNC Bank, N.A. Bank United* Dime Savings Bank of New York, FSB* World SB, FSB* Percent of Capital Stock System City State ($Millions) Capital Stock Stockton CA $2,278.1 8.0% San Francisco CA 1,167.1 4.1 Minneapolis MN 678.4 2.4 Seattle WA 586.2 2.1 Wyomissing PA 524.4 1.8 Cleveland OH 415.8 1.5 Pittsburgh PA 370.0 1.3 . Houston TX 335.1 1.2 New York NY 328.7 1.2 Oakland CA 320.0 1.1 $7,003.8 24.7% * An asterisk indicates that an officer of the member was an FHLBank director in 1999. The information presented on advances in the tables is for individual FHLBank members. The data is not aggregated to the holding -company level. Some of the institutions listed are affiliates of the same holding company, and other members listed may have affiliates that are members but that are not listed in the tables. The following table identifies the five largest holders of capital stock of each FHLBank and their holding at December 31, 1999. Federal Home Loan Bank System Top 5 Capital Stock Holding Members by FHLBank at December 31, 1999 Capital Percent of Stock FHLBank FHLBank Name City State ($Millions) Capital Stock Boston Fleet National Bank Providence RI $ 226.8 12.4% Webster Bank Waterbury CT 103.9 5.7 Family Bank, FSB Haverhill MA 81.0 4.4 People's Bridgeport Bridgeport CT 73.3 4.0 Citizens Bank of MA Boston MA 71.6 3.9 $ 556.5 30.4% New York Dime Savings Bank of New York, FSB* New York NY $ 328.7 10.9% Astoria FS&LA* Long Island City NY 265.3 8.8 North Fork Bank Melville NY 158.6 5.2 Summit Bank Hackensack NJ 144.4 4.8 HSBC Bank USA Buffalo NY 109.4 3.6 $1,006.4 33.3% 14 06.9 Capital Percent of Stock FHLBank FHLBank Name City State ($Millions) Capital Stock Pittsburgh Sovereign Bank, FSB Wyomissing PA $ 524.4 22.6% PNC Bank, N.A. Pittsburgh PA 370.0 16.0 Keystone Financial Bank, N.A. Harrisburg PA 61.9 2.7 National City Bank of Pennsylvania Pittsburgh PA 55.1 2.4 Lehman Brothers Bank, FSB Wilmington DE 51.6 2.2 $1,063.0 45.9% Atlanta SouthTrust Bank, N.A. :Birmingham AL $ 319.2 9.6% Waehovia Bank, N.A. Winston-Salem NC 186.0 5.6 SunTrust Bank, Atlanta Atlanta GA 154.8 4.7 Regions Bank Birmingham AL 150.5 4.5 First Union Direct Bank, N.A. Augusta GA 149.4 4.5 $ 959.9 28.9% Cincinnati Charter One Bank FSB* Cleveland OH $ 415.8 17.6% Union Planters National Bank Memphis TN 162.2 6.9 Firstar Bank, N.A. Cincinnati OH 103.6 4.4 First American National Bank Nashville TN 101.5 4.3 National City Bank Cleveland OH 98.2 4.2 $ 881.3 37.4% Indianapolis Standard FSB* Troy MI $ 218.1 15.4% Flagstar Bank, FSB Bloomfield Hills MI 79.9 5.6 National City Bank Of Indiana Indianapolis IN 65.8 4.6 Old Kent Bank Grand Rapids MI 60.8 4.3 Michigan National Bank* Farmington Hills MI 60.1 4.2 $ 484.7 34.1 % Chicago LaSalle Bank, FSB Chicago IL $ 120.5 8.3% LaSalle Bank, N.A.* Chicago IL 96.3 6.6 The Northern Trust Company Chicago IL 89.5 6.2 Mid America Bank, FSB* Clarendon Hills IL 75.0 5.2 TCF National Bank Illinois Burr Ridge IL 35.1 2.4 $ 416.4 28.7% Des Moines Nor�vest Bank Minnesota Minneapolis MN $ 678.4 30.4% U.S. Bank National Association Minneapolis MN 223.2 10.0 Mercantile Bank, N.A. Saint Louis MO 222.8 10.0 Superior Guaranty Insurance Co. Minneapolis MN 109.0 4.9 Bank Midwest Kansas City MO 88.5 4.0 $1,321.9 59.3% Dallas Bank United* Houston TX $ 335.1 18.6% World Savings Bank, SSB Austin TX 154.3 8.6 Guaranty Federal Bank Dallas TX 134.4 7.5 International Bank of Commerce Laredo TX 70.0 3.9 Bluebonnet Savings Bank, FSB Dallas TX 58.6 3.3 $ 752.4 41.9% 15 Capital Percent of Stock FHLBank FHLBank Name City State ($Millions) Capital Stock Topeka Commercial Federal Bank Omaha NE $ 226.7 19.8% Midfirst Bank Oklahoma City OK 165.2 14.4 Capitol Savings Bank Topeka KS 96.4 8.4 Security Benefit Life Ins. Co. Topeka KS 74.4 6.5 Bank of Oklahoma Tulsa OK 42.4 3.7 $ 605.1 52.8% San Francisco Washington Mutual Bank, FA* Stockton CA $2,278.1 42.4% California Federal Bank A FSB* San Francisco CA 1,167.1 21.7 World SB, FSB* Oakland CA 320.0 6.0 Citibank, FSB San Francisco CA 145.7 2.7 Downey S&LA Newport Beach CA 102.4 1.9 $4,013.3 74.7% Seattle Washington Mutual Bank* Seattle WA $ 586.2 28.1% Bank of America Oregon, N.A. Portland OR 209.2 10.0 Washington Federal Savings Seattle WA 110.8 5.3 First Security- Bank of Utah* Ogden UT 99.3 4.8 Zions First National Bank Salt Lake City UT 94.5 4.5 $1,100.0 52.7% * An asterisk indicates that an officer of the member was an FHLBank director in 1999. The information presented on advances in the tables is for individual FHLBank members. The data is not aggregated to the holding -company level. Some of the institutions listed are affiliates of the same holding company, and other members listed may have affiliates that are members but that are not listed in the tables. Member Borrowers. The total number of borrowing members has increased in recent years, and rose to 5,092 or 69.0 percent of total members at year end 1999 from 4,239 or 61.6 percent of total members at year end 1998. Federal Home Loan Bank System Borrowers Total December 31,1996........................................... 3,443 December 31,1997........................................... 3,713 December 31, 1998 ........................................... 4,239 December 31, 1999........................................... 5,092 While 69.0 percent of the System's members held advances at December 31, 1999, the 61 borrowers with advance holdings of $1 billion or more at December 31, 1999, held 58.7 percent of System total advances. At year end 1998, 45 borrowers held advances greater than $1 billion, representing 54.9 percent of total System advances. 16 031 The following table presents information on the 10 largest borrowers of advances in the Bank System at December 31, 1999. Federal Home Loan Bank System Top 10 Advance Holding Members at December 31, 1999 Advances Percent of Name City State ($Millions) Total Advances Washington Mutual Bank, FA* Stockton CA $ 45,511.1 11.5% California Federal Bank A FSB* San Francisco CA 23,342.9 5.9 Washington Mutual Bank* Seattle WA 11,151.2 2.8 Sovereign Bank, FSB Wyomissing PA 10,487.9. 2.7 Charter One Bank FSB* Cleveland OH 8,135.1 2.1 PNC Bank, N.A. Pittsburgh PA 6,650.5 1.7 Bank United* Houston TX 6,593.3 1.7 Norwest Bank Minnesota Minneapolis MN 6,100.0 1.5 World SB, FSB* Oakland CA 5,654.6 1.4 Astoria FS&LA* Long Island City NY 5,305.0 1.3 $128,931.6 32.6% * An asterisk indicates that an officer of the member was an FHLBank director in 1999. The information presented on advances in the tables is for individual FHLBank members. The data is not aggregated to the holding -company level. Some of the institutions listed are affiliates of the same holding company, and other members listed may have affiliates that are members but that are not listed in the tables. The following table presents information on the five largest borrowers of advances by FHLBank at December 31, 1999. Federal Home Loan Bank System Top 5 Advance Holding Members by FHLBank at December 31, 1999 Percent of Advances FHLBank FHLBank Name City State ($Millions) Advances Boston Webster Bank Waterbury CT $ 1,714.4 7.6% Family Bank, FSB Haverhill MA 1,469.1 6.5 People's Bridgeport Bridgeport CT 1,465.0 6.5 Citizens Bank of MA Boston MA 1,432.1 6.4 Bank of New Hampshire Manchester NH 1,186.3 5.3 $ 7,266.9 32.3% New York Astoria FSLA* Long Island City NY $ 5,305.0 11.9% Dime Savings Bank of New York, FSB* New York NY 4,462.7 10.0 North Fork Bank Melville NY 3,143.0 7.1 Summit Bank Hackensack NJ 2,887.2 6.5 Hudson United Bank Mahwah NJ 1,984.4 4.5 $17,782.3 40.0% 17 032 Percent of Advances FHLBank F11LBank Name City State ($Millions) Advances Pittsburgh Sovereign Bank, FSB Wyomissing PA $10,487.9 28.7% PNC Bank, N.A. Pittsburgh PA 6,650.5 18.2 Harris Savings Bank Harrisburg PA 805.0 2.2 United National Bank Parkersburg WV 800.8 2.2 National City Bank of Pennsylvania Pittsburgh PA 758.8 2.1 $19,503.0 53.4% Atlanta SouthTrust :Bank, N.A. Birmingham AL $ 3,530.3 7.8% Regions Bank Birmingham AL 3,009.2 6.7 First Union Direct Bank, N.A. Augusta GA 2,987.0 6.6 AmSouth Bank Birmingham AL 2,875.1 6.4 BB&T of NC Winston-Salem NC 2,758.9 6.1 $15,160.5 33.6% Cincinnati Charter One Bank FSB* Cleveland OH $ 8,135.1 28.9% Union Planters National Bank Memphis TN 3,201.1 11.4 Ohio Savings Bank Cleveland OH 1,623.2 5.8 First American National Bank Nashville TN 1,396.4 5.0 National City Bank Cleveland OH 918.5 3.3 $15,274.3 54.4% Indianapolis Standard FSB* Troy MI $ 4,221.8 21.7% Flagstar Bank, FSB Bloomfield :Hills MI 1,477.0 7.6 Civitas Bank* Saint Joseph MI 943.7 4.9 Old Kent Bank Grand Rapids MI 931.9 4.8 National City Bank of Michigan/Illinois Bannockburn IL 800.3 4.1 $ 8,374.7 43.1% Chicago LaSalle Bank, FSB Chicago IL $ 1,825.0 10.6% Mid America Bank, FSB* Clarendon Hills IL 1,480.5 8.6 Anchor:Bank, SSB* Madison WI 686.9 4.0 TCF National Bank Illinois Burr Ridge IL 601.0 3.5 St Francis Bank, FSB Milwaukee WI 600.0 3.5 $ 5,193.4 30.2% Des Moines Norwest Bank Minnesota Minneapolis MN $ 6,100.0 26.6% Superior Guaranty Insurance Co. Minneapolis MN 2,180.0 9.5 U.S. Bank National Association Minneapolis MN 1,997.7 8.7 Mercantile Bank, N.A. Saint Louis MO 1,953.7 8.5 Bank Midwest Kansas City MO 661.4 2.9 $12,892.8 56.2% Dallas Bank United* Houston TX $ 6,593.3 24.4% World Savings Bank, SSB Austin TX 3,000.0 11.1 Guaranty Federal Bank Dallas TX 2,151.0 8.0 International Bank of Commerce Laredo TX 1,355.0 5.0 Bluebonnet Savings Bank, FSB Dallas TX 1,158.7 4.3 $14,258.0 52.8% 18 033 Percent of Advances FHLBank F11LBank Name City State ($Millions) Advances Topeka Commercial Federal Bank Omaha NE $ 4,420.0 28.3% Midfirst Bank Oklahoma City OK 2,740.7 17.6 Capitol Savings Bank Topeka KS 1,900.0 12.2 Bank of Oklahoma Tulsa OK 474.5 3.0 Security Benefit Life Ins. Co. Topeka KS 349.3 2.2 $ 9,884.5 63.3% San Francisco Washington Mutual Bank, FA* Stockton CA $45,511.1 50.3% California Federal Bank A FSB* San Francisco CA 23,342.9 25.8 World SB, FSB* Oakland CA 5,654.6 6.2 Downey S&LA Newport Beach CA 2,047.4 2.3 Bay View Bank, N.A. San Mateo CA 1,367.3 1.5 $77,923.3 86.1% Seattle Washington Mutual Bank* Seattle WA $11,151.2 42.4% Bank of America Oregon NA Portland OR 3,987.8 15.2 First Security Bank of Utah* Ogden UT 1,953.9 7.4 American Savings Bank, FSB Honolulu HI 1,189.1 4.5 Washington Federal Savings Seattle WA 950.0 3.6 $19,232.0 73.1 % * An asterisk indicates that an officer of the member was an FHLBank director in 1999. The information presented on advances in the tables is for individual FHLBank members. The data is not aggregated to the holding -company level. Some of the institutions listed are affiliates of the same holding company, and other members listed may have affiliates that are members but that are not listed in the tables. Nonmember Borrowers. At year end 1999, the System had $356.4 million in advances outstanding to 19 nonmember borrowers, down from $374.4 million at year end 1998. These nonmember borrowers include 35 state housing finance agencies, 1 city housing development corporation, 1 city community development agency, 1 tribal housing corporation, 6 county housing finance agencies, and 1 city housing authority. Financial Trends Balance Sheet. System advances to members rose to $395.7 billion at year end 1999. Advances have been increasing in recent years reflecting the use of advances by new commercial bank members and the development of advance products tailored to specific member funding needs. Advances increased by 25.3 percent in 1997, 42.5 percent in 1998 and by 37.3 percent in 1999. Advances to members increased in each quarter of 1999 and by a total of $107.6 billion by year end. (See Note 5 to the accompanying combined financial statements.) Investments grew by $14.9 billion or 11.9 percent during 1997, then fell by $2.9 billion or 2.1 percent in 1998. In 1999 investments grew by $34.2 billion, or 24.9 percent. The principal investments of the FHLBanks are mortgage -backed securities, overnight and term federal funds sold, commercial paper, agency securities, and U.S. Government securities. In addition, the FHLBanks hold smaller amounts of repurchase agreements. The Finance Board's Financial Management Policy limits the mortgage -backed security investments of any FHLBank to 300 percent of that FHLBank's capital. Aggregate mortgage -backed security investments of $73.0 bil- lion at December 31, 1999, were 252 percent of total System capital. These investments represented 248 percent of total System capital at December 31, 1998. As Note 3 discusses, the FHLBanks make significant use of interest -rate exchange agreements to transform the cash flows on certain of their investment securities. 19 Historically, the FHLBanks collectively have been one of the largest providers of federal funds. Federal funds sold were $57.0 billion (33.2 percent of total investments) at year end 1999, compared with $47.2 billion (34.4 percent of total investments) at year end 1998. The FHLBanks held commercial paper of $11.5 billion (6.7 percent of total investments) at year end 1999, compared with $8.6 billion (6.3 percent of total investments) at year end 1998. The FHLBanks also invest in U.S. agency obligations, primarily structured debt issued by other government -sponsored enterprises and also in the consolidated obligations of other FHLBanks. The FHLBanks use interest -rate exchange agreements to hedge the interest -rate risk associated with investments in structured debt. U.S. agency obligations rose to $13.3 billion or 7.7 percent of total investments at year end 1999, up from $13.2 billion or 9.6 percent of total investments at year end 1998. ( See Notes 3 and 4 to the accompanying combined financial statements.) Advances and investments grew in 1999. Advances to members as a percentage of total assets have increased to 67.9 percent at December 31, 1999, from 66.4 percent at December 31, 1998. Conversely, investments as a percentage of total assets have decreased, falling to 29.4 percent from 31.6 percent over the same period. Total assets reached $583.2 billion at year end 1999, up $149.2 billion or 34.4 percent over total assets at year end 1998. The principal funding source for FHLBank operations is consolidated obligations, which consist of consolidated bonds and consolidated discount notes. Member deposits and capital are also funding sources. Generally, discount notes are consolidated obligations with a maturity up to 360 days, and consolidated bonds have maturities of one year or longer. Discount notes have become a significant funding source for advances with short-term maturities or repricing intervals, for convertible advances, and for money-market investments. As Note 10 discusses, the FHLBanks make significant use of interest -rate exchange agreements to transform the cash flows on consoli- dated obligations and to reduce funding costs. Consolidated obligations outstanding increased 39.5 percent between year end 1998 and year end 1999, rising to $525.4 billion at year end 1999. Consolidated discount notes outstanding increased 22.1 percent over the same period, reaching $141.2 billion at year end 1999, and consolidated bonds outstanding increased by 47.1 percent to end 1999 at $384.2 billion. (See Notes 8, 9, and 10 to the accompanying combined financial statements.) System total capital grew by $6.3 billion or 27.5 percent between 1998 and 1999 due to increases in membership, advance use, and the payment of stock dividends by the FHLBanks of Cincinnati, Dallas, Topeka, San Francisco, and Seattle. Over the same period, total assets grew more than total capital causing the System's capital -to -asset ratio to decrease to 5.0 percent at year end 1999 from 5.2 percent at year end 1998. (See Note 11 to the accompanying combined financial statements.) During 1999, Finance Board regulations prohibited the issuance of senior bonds, other than bonds issued to refund consolidated bonds previously issued, if, immediately following such issuance, the aggregate amount of senior bonds and unsecured senior liabilities of the FHLBanks would exceed 20 times the total paid -in capital stock, retained earnings, and reserves of all the FHLBanks. However, to allow the FHLBanks to provide Year 2000-related credit to their members, the Finance Board allows, through June 30, 2000, an FHLBank to have leverage of up to 25 to 1 if that FHLBank's non -mortgage investments do not exceed 12 percent of the consolidated obligations for which that FHLBank is the primary obligor. At year end 1999, System leverage was 19.1 to 1, up from 17.9 to 1 at year end 1998, and up from 17.2 to 1 at year end 1997. At December 31, 1999, two FHLBanks had leverage in excess of 20.0 to 1, but it was.less than 21.0 to 1 in both cases. The increase in leverage during 1999 was due to the growth in consolidated obligations relative to capital. (See `Business —Debt Financing —Consolidated Obligations," "Discussion and Analysis of Finan- cial Condition and Results of Operations-1999 Highlights —Regulatory Development," and Note 10 to the accompanying combined financial statements.) Advances Activity. More than 50.3 percent of the advances outstanding at December 31, 1999, had a remaining maturity greater than one year compared with 61.6 percent at December 31, 20 0 3 1998. About 34.1 percent of the par amount of advances outstanding at December 31, 1999, were floating-rate advances compared with 26.2 percent one year earlier. Advance originations totaled $2.577 trillion in 1999, up 151.2 percent from 1998 originations of $1.026 trillion, reflecting the increased activity in short-term advances. (See Note 5 to the accompanying combined financial statements.) Debt Financing Activity. An increase in consolidated obligations outstanding of $148.7 billion or 39.5 percent in 1999 financed most of the increase in System assets. Consolidated bonds composed 73.1 percent of consolidated obligations at year end 1999, with the remainder being consolidated discount notes. Acting on behalf of the Finance Board, the Office of Finance offers consolidated bonds and consolidated discount notes (collectively, consolidated obligations) on a daily basis. Since 1992, the increasingly sophisticated funding requirements of the FHLBanks' members and the demands of the investment community have led to the use of negotiated and competitively bid transactions, instead of single large monthly auctions. (See "Business —Debt Financing —Consolidated Obligations," "Discussion and Analysis of Financial Condition and Results of Operations —Risk Management," and Notes 10 and 13 to the accompanying combined financial statements.) On behalf of the Finance Board, the Office of Finance sells consolidated bonds through 102 underwriters. In 1999, 82.8 percent of bond sales by par amount were negotiated transactions and 17.2 percent by par amount were competitively bid. In 1999, 41.8 percent bonds sold were fixed-rate, fixed -term, non -callable (bullet) bonds; 41.8 percent were callable bonds; and 13.7 percent were simple floating-rate bonds. Bonds sold by the Office of Finance often have investor -determined features. The decision to issue a bond using a particular structure is based upon the funding level to be acquired and the ability of the FHLBank(s) receiving proceeds of the bonds issue to hedge the risks. The issuance of a bond with an associated interest -rate exchange agreement, which effectively converts the consolidated bond into a simple fixed- or floating-rate bond, usually results in a funding vehicle with a lower cost than the FHLBanks could otherwise achieve. The continued attractiveness of such debt depends on price relationships in both the bond and interest -rate exchange markets. If conditions in these markets change, then the Finance Board may alter the types or terms on the bonds it issues. The increase in funding alternatives available to the FHLBanks through negotiated transactions has diversified the investor base, reduced funding costs, and resulted in additional asset - liability management tools. (See "Discussion and Analysis of Financial Condition and. Results of Operations —Risk Management" and Notes 10 and 13 to the accompanying combined financial statements.) The Office of Finance, on behalf of the Finance Board, issued $244.7 billion of consolidated bonds in 1999. This compares with $284.4 billion in 1998 and $165.4 billion in 1997. Some of this activity reflects the recent trend of issuing callable bonds, often with short lock -out periods. As the yield curve flattened and interest rates declined in 1998, many of these bonds were called and replaced with lower -coupon debt. Call activity declined significantly in 1999 with the increase in interest rates. The FHLBanks are extensive users of callable debt, with $185.0 billion outstanding as of year end 1999. At December 31, 1999, an estimated $2.3 billion of bonds had in -the -money calls that could be exercised in 2000 based on interest rates prevailing on December 31, 1999. The amount of bonds that will be called in 2000 will depend on the level and volatility of interest rates and other factors. Discount notes have become a significant funding source for the FHLBanks. Discount notes are short-term instruments, and the issuance of discount notes with maturities of one business day influences the aggregate origination volume. Through a 19-member selling group, the Office of Finance, on behalf of the Finance Board, offers discount notes daily in a wide range of maturities up to 360 days. In addition, the Office of Finance, on behalf of the Finance Board, also offers discount notes in four standard maturities in two auctions each week. The FHLBanks use discount notes to fund short-term advances, longer -term advances with short repricing intervals, some putable 21 OvV advances, and money market investments. Discount notes composed 26.9 percent of outstanding consolidated obligations at year end 1999 but accounted for 92.2 percent of the proceeds from the sale of consolidated obligations in 1999. Much of the discount note activity reflects the rolling over of overnight discount notes, which averaged $9.1 billion in 1999. Federal Home Loan Bank System Average Consolidated Obligations Outstanding (Amounts in billions) 1999 1998 Overnight discount notes ............................ $ 9.1 $ 8.3 Term discount notes ................................ 89.0 71.7 Total discount notes ............................ 98.1 80.0 Bonds ............................................ 344.1 252.3 Total consolidated obligations .................... $442.2 $332.3 Early in 2000, the FHLBanks and the Office of Finance implemented an Internet -based platform for discount note auctions. This platform, created by MuniAuction to Office of Finance and FHLBank specifications, uses the Internet to automate manual tasks in the auction process to improve productivity and responsiveness to the discount note selling group. The Bank System has emphasized diversification of funding sources and channels as the need for funding from the capital markets has grown. In July 1994, the Office of Finance initiated a Global Debt Program. By issuing debt under this program, the Bank System can expand and diversify its investor base. In 1999, the Global Debt Program provided $39 billion in term funds. In mid 1999, the Office of Finance implemented the TAP issue program. This program consolidates previous bullet bond issuance through periodic auction of five common maturities. By consolidating these small issues, the Office of Finance seeks to enhance the liquidity of these issues. From July 6 through the end of 1999, TAP issuance was $18.5 billion. The TAP program has also reduced System funding costs. Results of Operations Bank System net income for 1999 was $2.128 billion, $350 million or 19.7 percent above 1998 net income, continuing a trend that began in 1992. System net income for 1998 was 19.2 percent above 1997 net income, while net income for 1997 was 12.2 percent above 1996 net income. During 1999, higher earning asset and capital levels generated a higher level.of net interest income that was only partially offset by other items. For 1999, the increase in net interest income after loan loss provision was $417 million, and the increase in net income was $350 million. Earnings Analysis. The following table presents changes in the components of Bank System earnings for the past three years: 22 037 Federal Home Loan Bank System Change in Earnings Components (Dollars in millions) 19" 1998 1997 VS. 1998 vs. 1997 VS. 1996 Increase (decrease) in: Total interest income ............................ $5,042 $3,448 $2,434 Total interest expense ........................... 4,624 3,104 29246 Net interest income before loan loss provision ... 418 344 188 Loan loss provision .............................. 1 Net interest income after loan loss provision .... 417 344 188 Prepayment fees, net ............................ (67) 54 6 Other non -interest income, net .................... 55 47) (8) Total non -interest income .................... (12) 7 _(2) Operating expenses .............................. 24 29 10 Assessments ................................... 1 4 1 Affordable Housing Program ..................... 30 32 18 Other......................................... 1 2 _(3) Total other expenses ........................ 56 67 26 Extraordinary item Gain on early extinguishment of debt ............ 1 2 2 Net income .................................... $ 350 $ 286 $ 162 Net Income and Net Interest Income. Bank System net income for 1999 was $2.128 billion, $350 million or 19.7 percent greater than net income in 1998. System average assets increased 27.6 percent during 1999; average advances grew 46.4 percent, while average investments increased 4.6 percent over the year. 23 0.3)8 The following table presents average balances (calculated using quarterly balances) and yields of major earning asset categories and the sources funding those earning assets. It also presents spreads between yields on total earning assets and the cost of interest -bearing liabilities and spreads between yields on total earning assets and the cost of total funding sources (i.e., interest -bearing liabilities plus capital plus other interest -free liabilities funding earning assets) . Federal Home Loan Bank System Spread and Yield Analysis (Dollars in millions) 1999 1998 1997 Average Balance Yield Average Balance Yield Average Balance Yield Earning assets: Advances and other loans ............... $336,713 5.29% $235,199 5.60% $170,971 5.84% Investments ........................... 151,682 5.74% 137,736 6.03% 136,020 5.99% Total earning assets .................. $488,395 5.43% $372,935 5.76% $306,991 5.90% Funded by: Consolidated obligations ................. $442,158 5.21% $329,350 5.53% $270,904 5.69% Interest -bearing deposits and other borrowings .......................... 19,907 4.74% 22,502 5.17% 1.6,084 5.34% Total interest -bearing liabilities ......... 462,065 5.19% 351,852 5.50% 286,988 5.67% Capital and other non -interest -bearing funds 26,330 21,083 18,380 Total funding ........................ $488,395 4.91% $372,935 5.19% $305,368 5.32% Spread on: Total interest -bearing liabilities ........... 0.24% 0.26% 0.23% Total funding (net interest margin) ....... 0.52% 0.57% 0.58% Bank System net interest income after loan loss provision in 1999 was $2.533 billion, $417 million or 19.7 percent greater than net interest income in 1998. Interest income and interest expense increased in 1999 relative to 1998, reflecting higher capital levels, the growth in System average assets, and the corresponding increase in liabilities. Net interest income as a percentage of average earning assets (net interest margin) was 52 basis points in 1999, 57 basis points in 1998, and 58 basis points in 1997. The decline in the net interest margin and the decline in the return on average assets reflects the increase in the System's leverage as non -interest -bearing capital has declined in the overall funding mix. The relative decrease in capital, apart from any changes in asset yields or liability costs, will cause a decline in the return on average assets. A significant portion of net interest income results from earnings on assets funded by Bank System capital. Average total capital for 1999 was $25.1 billion, $4.7 billion or 23.0 percent greater than average total capital for 1998. Average total capital also increased from 1997 to 1998, growing 14.0 percent to $20.4 billion in 1998. Growth in Bank System membership, increased advance levels, and stock dividends contrib- uted to the increase in average total capital. Even though interest rates increased in late 1999, FHLBank System profitability declined only modestly in relative terms. Compared with 1998, the spread between the yield in earning assets and interest -bearing liabilities decreased to 0.24 percent from 0.26 percent. This relatively stable profitability reflects the extensive use of hedging vehicles to limit interest -rate risk. (See "Discus- sion and Analysis of Financial Condition and Results of Operations —Risk Management" and Note 13 to the accompanying combined financial statements.) In 1999, both the average yield on earning assets and average cost of interest -bearing liabilities decreased by small amounts relative to 1998. In 1999, the earning assets yield decreased 33 basis points, primarily due to lower yields on advances, while the cost of interest -bearing liabilities 24 0r9 decreased by 31 basis points. The yield on advances decreased by 31 basis points in 1999 relative to 1998 and the cost of consolidated obligations decreased by 32 basis points. Changes in both volume and interest rates influence changes in net interest income and net interest margin. The following table summarizes changes in interest income and interest expense between 1999 and 1998 and between 1998 and 1997. Changes in interest income and interest expense attributable to both volume and rate changes have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes. Federal Home Loan Bank System Rate and Volume Analysis (Dollars in millions) 1999 vs. 1998 1998 vs. 1997 Increase/(Decrease) Increase/ (Decrease) due to due to Volume Rate Total Volume Rate Total Interest income: Advances and other loans .......... $5,405 $ (769) $4,636 $3,612 $(420) $3,192 Investments ..................... 814 (408) 406 102 154 256 Total interest income ............ 6,219 (1,177) 5,042 31714 (266) 3,448 Interest expense: Consolidated obligations ........... 5,930 (1,085) 4,845 3,240 (443) 2,797 Deposits and other borrowings ...... (128) (93) (221) 333 (26) 307 Total interest expense ........... 5,802 (1,178) 4,624 3,573 (469) 3,104 Changes in net interest income ....... $ 417 $ 1 $ 418 $ 141 $ 203 $ 344 Other Income. The following table presents other income for each of the last three years: For the Year Ended December 31, 1999 1998 1997 (Dollars in millions) Other income: Prepayment fees, net ................................. $ 13 $ 80 $ 26 Services to members ................................. 43 52 49 Realized net loss on sales of available -for -sale securities, net.............................................. (1) Unrealized gain (loss) on change in fair value of interest - rate exchange agreements associated with the elimination of interbank bonds ................................. 24 (30) 52 Other, net .......................................... 27 17 (14) Total other income ................................ $107 $119 $112 In 1998 the unrealized loss on change in fair value of interest -rate exchange agreements associated with the elimination of interbank bonds was reclassified from an extraordinary item to a part of other income. Other than the reclassification, total other income reported by the FHLBanks has changed primarily because of changes in prepayment fees. The FHLBanks charge their members a prepayment fee when they prepay certain advances before their original maturity. The Finance Board's regulations generally require advances with a maturity or repricing period greater than six months to carry a fee sufficient to make an FHLBank financially indifferent to the borrower's decision to prepay the advances. (See Note 14 to the accompanying combined financial statements.) 25 040 During 1999, total other income was $107 million, $12 million less than total other income in 1998. Prepayment fees reported during 1999 of $13 million were $67 million lower than the 1998 prepayment fees of $80 million. Operating Expenses. The following table presents operating expenses for the last three years: Federal Home Loan Bank System Operating Expenses (Dollars in millions) For the Year Ended December 31, Percentage Increase 1999 1998 1997 1999/1998 1998/1997 Salaries and employee benefits ....... $155 $138 $124 12.3% 11.3% Cost of quarters .................... 19 19 17 11.8% Other ............................ 108 101 88 6.9% 14.8% Total operating expenses ........ $282 $258 $229 9.3% 12.7% System total operating expenses for 1999 were $282 million, $24 million or 9.3 percent above total operating expenses in 1998. The increase in salaries and benefits in 1999 reflects general pay and benefits increases. Operating expenses as a percent of average assets were 5.8 basis points in 1999 and 6.8 basis points in 1998. Operating expenses includes the costs of providing member correspondent services, as well as credit operations. Assessments. The FHLBanks are assessed the costs of operating the Finance Board and the Office of Finance. Assessments totaled $29 million in 1999, $1 million greater than total assessments for 1998. Affordable Housing Program. The AHP expense for 1999 was $199 million, 17.8 percent greater than the 1998 AHP expense of $169 million. For both 1999 and 1998, the AHP assessment was 10 percent of net income after capital distributions to REFCORP. The increases in 1999 and 1998 reflect increased System net income. (See Note 6 to the accompanying combined financial statements.) r7. 041 Quarterly Results of Operations The following table presents combined results of operations for the Bank System, by quarter, for the past two years: Federal Home Loan Bank System Income Statement (Dollars in millions) 1999 Quarter Ended March 31 June 30 Sept 30 Dec 31 Total interest income ............................ $5,668 $5,988 $6,800 $8,064 Total interest expense ........................... 5,094 5,399 6,146 7,347 Net interest income before loan loss provision ... 574 589 654 717 Loan loss provision .............................. 1 (1) 1 Net interest income after loan loss provision .... 573 590 654 716 Prepayment fees, net ............................ 8 4 2 (1) Other non -interest income, net .................... 29 22 25 18 Total non -interest income .................... 37 26 27 17 Operating expenses .............................. 67 68 68 79 Assessments ................................... 8 7 6 8 Affordable Housing Program ..................... 47 45 51 56 Other......................................... 1 2 Total other expenses ........................ 122 120 126 145 Extraordinary item: Gain on early extinguishment of debt ............ 1 Net income .................................... $ 488 $ 496 $ 556 $ 588 27 0 4 1998 Quarter Ended March 31 June 30 Sept 30 Dec 31 Total interest income ............................ $5,060 $5,034 $5,411 $5,973 Total interest expense ........................... 4,551 4,516 4,882 5,413 Net interest income ......................... 509 518 529 560 Prepayment fees, net ............................ 12 15 19 34 Other non -interest income, net .................... (9) (2) 8 42 Total non -interest income .................... 3 13 27 76 Operating expenses .............................. 59 64 62 73 Assessments ................................... 5 7 6 10 Affordable Housing Program ..................... 40 38 42 49 Other......................................... 2 Total other expenses ........................ 104 109 110 134 Extraordinary item: (Loss) gain on early extinguishment of debt ...... _(1) (1) 2 Net income .................................... $ 408 $ 421 $ 445 $ 504 1997 Quarter Ended March 31 June 30 Sept 30 Dec 31 Total interest income ............................ $4,045 $4,422 $4,715 $4,848 Total interest expense ........................... 3,618 3,968 4,244 4,428 Net interest income ......................... 427 454 471 420 Prepayment fees, net ............................ 1 1 4 20 Other non -interest income, net .................... 13 12 15 46 Total non -interest income .................... 14 13 19 66 Operating expenses .............................. 53 56 55 65 Assessments ................................... 6 6 6 6 Affordable Housing Program ..................... 31 33 35 38 Total other expenses ........................ 90 95 96 109 Extraordinary item: Gain (loss) on early extinguishment of debt ...... 1 _(3) Net income .................................... $ 352 $ 372 $ 394 $ 374 Risk Management The fundamental business of the Bank System is to provide member institutions with advances and other credit products in a wide range of maturities and terms to meet member demand. The principal sources of funds for these activities are consolidated obligations and, to a lesser extent, members' deposits. Lending and investing funds and engaging in off -balance -sheet interest -rate exchange agreements have the potential for exposing the FHLBanks to a number of risks, including credit and interest -rate risk. To control the Bank System's risk exposure, the Finance Board has established regulations and policies that FHLBanks must follow to evaluate and manage their credit and interest -rate risk. FHLBanks must file periodic compliance reports with the Finance Board. The Finance Board conducts an annual on -site examination of each FHLBank and the Office of Finance as well as off -site analyses. In addition, each FHLBank's board of directors must establish risk management policies that comport with Finance Board guidelines. 28 The FHLBanks face very low credit risk from advances. Members must fully collateralize all advances. In addition, the FHLBanks have certain statutory lien protections for any collateral a member pledges, and a member's capital stock serves as additional collateral for advances. Even in the late 1980s and early 1990s when many members were liquidated, the FHLBanks experienced no credit losses on advances. (See "Discussion and Analysis of Financial Condition and Results of Operations —Other Development".) In 1999, the Finance Board authorized all of the FHLBanks to establish programs similar to MPF in which the FHLBanks may acquire certain mortgage loans. By their very nature, these assets may have more credit risk than advances, even though the member that originates the loan provides credit enhancement. At year end 1999, the programs had an outstanding balance of $2.0 billion of mortgage loans, all credit enhanced by members to an investment -grade rating, although these loans are not rated. The Finance Board imposed a Systemwide limit of $9 billion in such loans outstanding. Certain funding strategies of the FHLBanks may incur some credit risk as an effect of eliminating or reducing interest -rate risk. In particular, the FHLBanks are extensive users of interest -rate exchange agreements with $494.6 billion of notional amount of interest -rate exchange agreements at December 31, 1999, compared with $382.4 billion at December 31, 1998. Often, these agreements eliminate or nearly eliminate interest -rate risk associated with a funding strategy. In return, however, an FHLBank may accept the unsecured credit risk of potential nonperformance by the counterparty to the interest -rate exchange agreement, as well as operations and other risks. The FHLBanks require collateral agreements on some interest -rate exchange agreements. As with other sources of risk, Finance Board policies and procedures govern credit risk and interest -rate risk arising from interest -rate exchange agreements. As Note 13 details, the maximum unsecured credit exposure on interest -rate exchange agreements was $2.1 billion at year end 1999, of which $1.0 billion was accrued interest receivable. In determining maximum credit risk, the FHLBanks consider accrued interest receivables and payables, and the legal right to offset assets and liabilities by counterparty. The FHLBanks held securities with a fair value of $1.0 billion as collateral as of December 31, 1999. The counterparties to most interest -rate exchange agreements are swap dealers and major domestic and international commercial banks, which may also be affiliated with underwriters of consolidated obligations and members. (See Note 13 to the accompanying combined financial statements.) Managing Interest -Rate Risk. Interest -rate risk is the risk that relative and absolute changes in interest rates may adversely affect an institution's financial condition. The goal of an interest -rate risk management strategy is not necessarily to eliminate interest -rate risk but to manage it by setting appropriate limits. The general approach of the FHLBanks toward managing interest -rate risk is to acquire and maintain a portfolio of assets and liabilities, which, together with their associated interest -rate exchange agreements, limit the expected duration mismatch. The Bank System manages interest -rate risk in several different ways. Each of the FHLBanks uses sophisticated computerized financial models to measure its exposure to changes in interest rates. The financial literature describes many interest -rate risk measures, including interest -rate gaps, duration, modified duration, duration of equity, income simulation, changes in the market value of equity, and value at risk. Each of these measures has advantages and drawbacks. The internal models used by the FHLBanks often use several of these interest -rate risk measures. The Finance Board reviews an FHLBank's use of these models and the interest -rate risk limits established by an FHLBank's board and management in the annual safety - and -soundness examination. The Finance Board measures interest -rate risk exposure by calculation of duration of equity. Duration of equity shows the sensitivity of market value of equity to changes in interest rates. Higher duration numbers, whether positive or negative, infer greater volatility of market value of equity. Under the Finance Board's Financial Management Policy, duration of equity must stay within a range of 5 to -5 years assuming current interest rates. It must stay within a range of 7 to -7 years assuming an instantaneous parallel increase or decrease in interest rates of 200 basis points. The FHLBanks report the results of their duration of equity calculations to the Finance Board each quarter. The Finance Board is considering adopting different or additional measures of interest -rate risk. In particular, the FMMA proposal would have imposed a market -risk capital requirement using a value at risk approach derived from an FHLBank's internal risk models and using shock parameters prescribed by the Finance Board. Each of the FHLBanks has adopted an interest -rate risk management policy. While each of the FHLBanks is governed by a different board of directors that has adopted somewhat different interest -rate risk management policies, the general objective of the policies is to limit the exposure to changes in interest rates on financial instruments and financial contracts in a manner consistent with Finance Board policies. In their interest -rate risk management policies, several of the FHLBanks have adopted duration -of -equity limits narrower than those contained in the Finance Board's Financial Management Policy. Derivatives. Interest -rate exchange agreements (interest -rate swaps, futures, forwards, caps, and floors) may alter the effective maturities, repricing frequencies, or optionality characteristics of financial instruments. The FHLBanks use interest -rate exchange agreements in their overall interest -rate risk management to adjust the interest -rate sensitivity of consolidated obligations to approximate more closely the interest -rate sensitivity of assets (both advances and investments), and/or to adjust the interest -rate sensitivity of advances or investments to approximate more closely the interest -rate sensitivity of liabilities. In addition to using interest -rate exchange agreements to manage mismatches of interest rates between assets and liabilities, the FHLBanks also use interest - rate exchange agreements to manage embedded options in assets and liabilities and to hedge the market value of existing assets and liabilities, and anticipated transactions. The FHLBanks also enter into interest -rate exchange agreements simultaneously with the issuance of consolidated obligations to convert the investor -specified characteristics of these obligations into characteristics more useful in the context of the asset and liability structure of the FHLBanks and to reduce funding costs. In most cases, the interest -rate exchange agreements associated with the issuance of consolidated obligations effectively simulate the conversion of the instrument into a synthetic fixed-rate bond or a simple floating-rate bond tied to a common index such as LIBOR. The FHLBanks execute their interest -rate exchange agreements in connection with the issuance of consolidated obligations. The FHLBanks manage the risk arising from changing market prices and volatility by matching the cash inflow on the interest -rate exchange agreement with the cash outflow on the consolidated obligation. This process may create credit risk exposure to the interest -rate exchange agreement counterparties, which the FHLBanks manage within the parame- ters of the Financial Management Policy. In addition, the FHLBanks require collateral agreements on some interest -rate exchange agreements. While the Office of Finance issues consolidated obligations on behalf of the Finance Board, which are the joint -and -several obligations of the FHLBanks, one or more FHLBanks serve as counterparties to interest -rate exchange agreements associated with specific debt issues. In a typical transaction, the Finance Board issues fixed-rate consolidated obligations for one or more FHLBanks, and each of those FHLBanks simultaneously enters into a matching interest -rate exchange agreement in which the counterparty pays fixed cash flows to the FHLBank designed to mirror in timing and amount the cash outflows the FHLBank pays on the consolidated obligation. In this typical transaction, the FHLBank pays a variable cash flow that closely matches the interest payments it receives on short-term or variable -rate advances. This intermediation between the capital and swap markets permits the FHLBanks to raise funds at lower costs than would otherwise be available through the issuance of simple fixed- or floating-rate consolidated obligations in the capital markets. The optionality embedded in certain financial instruments held by the FHLBanks can create interest -rate risk. When a member prepays an advance, the FHLBank could suffer lower future 30 income if the principal portion of the prepaid advance were invested in lower -yielding assets that continue to be funded by higher -cost debt. To protect against this risk, each FHLBank generally charges a prepayment fee that makes it financially indifferent to a borrower's decision to prepay an advance. When the FHLBanks offer other than short-term advances that a member may prepay without a prepayment fee, the FHLBanks usually finance such advances with callable debt or otherwise hedge this option. The FHLBanks invest in mortgage -backed securities. The prepayment options embedded in mortgage -backed securities can result in extensions or contractions in the expected maturities of these investments, depending on changes in interest rates. The Financial Management Policy limits this source of interest -rate risk by restricting the types of mortgage -backed securities the FHLBanks may own to those with limited average life changes under certain interest -rate shock scenarios. (See "Business —Investments.") The FHLBanks may hedge against contraction risk by funding some mortgage -backed securities with consolidated obligations that have call features. In addition, the FHLBanks may use caps, floors, and other interest -rate exchange agreements to manage the extension and contraction variability of mortgage -backed securities. The FHLBanks may also use interest -rate exchange agreements to transform the characteristics of investment securities other than mortgage -backed securities. The FHLBanks had $184.7 billion of callable debt outstanding at December 31, 1999. Often with the issuance of this debt, the FHLBanks enter into a cancelable interest -rate exchange agreement. Together, these transactions allow the FHLBanks to provide to their members attrac- tively priced floating-rate financing that members can prepay without penalty. The option on the swap mirrors the call option in the debt in that the same financial condition that would give rise to the swap counterparty canceling the interest -rate exchange agreement, generally a decline in interest -rates, would also cause the FHLBank to call the debt. The FHLBanks had $85.6 billion of convertible advances outstanding at the end of 1999. With a convertible advance, an FHLBank has purchased from the member a put option(s) that enables the FHLBank to convert an advance from fixed rate to floating rate if interest rates increase or to terminate the advance and extend additional credit on new terms. An FHLBank may fund a convertible advance by using short-term floating-rate funds and entering into a cancelable interest - rate exchange agreement where the FHLBank pays fixed and receives variable. If interest rates increase, the swap counterparty can cancel the interest -rate exchange agreement, and the FHLBank can convert the advance to a floating rate. To meet the off -balance -sheet hedging needs of their members, the FHLBanks enter into offsetting interest -rate exchange agreements, acting as an intermediary between members and other counterparties. This intermediation allows smaller members indirect access to the swap market. At December 31, 1999, the notional amount of interest -rate exchange agreements in which the FHLBanks were intermediaries was $2.7 billion. (See Note 13 to the accompanying combined financial statements). An FHLBank may convert interest payments on an advance to a LIBOR floater and convert the interest cost of the consolidated obligation supporting the advance to a LIBOR floater. The use of two interest -rate exchange agreements in one financing transaction locks in a fixed spread. The Financial Management Policy prohibits speculative use of interest -rate exchange agreements. Some interest -rate exchange agreements are used for asset -liability management purposes and are not associated with specific assets or liabilities. The FHLBanks are not derivatives dealers and thus do not trade derivatives for short-term profit. The notional amount serves as a factor in determining periodic interest payments or cash flows received and paid and does not represent actual amounts exchanged or the FHLBanks' exposure to credit and market risk. The amount potentially subject to credit loss is much less. Notional values are not meaningful measures of the risks associated with derivatives. The risk of derivatives can only be measured meaningfully on a portfolio basis, taking into account the derivatives, the item being hedged, and any offsets between them. 31 Each FHLBank is subject to credit risk due to the risk of nonperformance by counterparties to the agreements and operational risks. The degree of counterparty risk on derivatives depends critically on the extent to which netting procedures are used to mitigate the risk. Each FHLBank manages counterparty credit risk through credit analysis and collateral requirements and by following the requirements set forth in the Financial Management Policy. Based on credit analyses and collateral requirements, the management of each FHLBank does not anticipate any credit losses on its agreements. ( See Note 13 to the accompanying combined financial statements.) While various FHLBanks may have adopted changes in the particular details of their interest - rate risk management policies in 1999, for the System as a whole there were no major changes in 1999 in the primary interest -rate risk exposure or how that exposure was measured or managed. The Finance Board, on behalf of the FHLBanks, issues some consolidated obligations denominated in currencies other than U.S. dollars, and the FHLBanks use forward exchange contracts to hedge currency risk. These contracts are agreements to exchange different currencies at specified future dates and at specified rates. The use of these contracts effectively simulates the conversion of these consolidated obligations denominated in foreign currencies to ones denominated in U.S. dollars. At December 31, 1999, consolidated obligations denominated in foreign currencies represented less than 1 percent of consolidated obligations outstanding. Therefore, the FHLBanks are not exposed to material amounts of currency risk. (See Note 10 to the accompanying combined financial statements.) In March 1999, the Finance Board authorized the Office of Finance to use the euro as an allowable index and currency of denomination, subject to certain conditions, in addition to indices and currencies previously authorized. Quantitative Disclosure About Market Risk. Duration is the primary means used by the FHLBanks to measure their exposure to changes in interest rates. Duration is the weighted -average maturity (typically measured in months or years) of an instrument's cash flows, weighted by the present value of those cash flows. Duration measures the time required to recapture an investment, reinvesting repaid principal. As duration lengthens, the risk increases. Duration is also a measure of price volatility. The value of an instrument with a duration of 5 years will change by approximately 5 percent with a 1 percent change in interest rates. Duration of equity is the duration of assets less the duration of liabilities. The Finance Board's Financial Management Policy requires that each FHLBank's duration of equity (at current interest rate levels using the consolidated obligation cost curve or an appropriate discounting methodology) be maintained within a range of +/-5 years. Each FHLBank is required to maintain its duration of equity, under an assumed instantaneous +/-200 basis points shift in interest rates, within a range of +/-7 years. . Each FHLBank has an internal modeling system for measuring duration of equity. The table below reflects the results of each FHLBank's own measurement of its exposure to interest -rate risk in accordance with the Finance Board's Financial Management Policy. The table pertains to the interest -rate risk associated with instruments entered into for other than trading purposes. The FHLBanks do not have trading portfolios. The FHLBanks use derivative instruments to swap out equity risk related to consolidated obligations whose interest payments are linked to equity indices. 32 Federal Home Loan Bank System Duration of Equity (In years) December 31, 1999 FHLBank Up Base Down Boston ........................... 2.3 New York ........................ 1.9 Pittsburgh ........................ 2.9 Atlanta .......................... 3.1 Cincinnati ........................ 4.3 Indianapolis ...................... 2.1 Chicago .......................... 5.4 Des Moines ....................... 3.6 Dallas ........................... 2.1 Topeka.......................... 5.6 San Francisco ..................... 1.9 Seattle ........................... 6.9 Up = -+-200 basis points. Down = -200 basis points. December 31, 1998 Up Base Down 2.1 0.7 2.3 (0.7) (2.3) 1.8 0.9 1.2 0.7 (5.3) 1_9 (1.1) 4.1 1.0 (1.0) 2.6 (1.9) 3.6 1.5 (1.5) 4.0 (0.1) 5.6 1.2 (0.5) 1..9 2.0 1.8 0.6 0.0 3.7 1.4 4.8 0.8 (2.4) 2.3 0.3 6.9 4.0 2.4 2.3 1.8 0.7 0.2 (0.3) 2.9 (1.9) 2.9 (1.6) (2.4) 1.3 0.2 1.3 0.7 0.4 4.1 (4.0) 6.7 1..3 (6.4) Managing Credit Risk. Credit risk is the risk of loss due to default. The Bank System protects against credit risk through collateralization of all advances. In addition, each FHLBank can call for additional or substitute collateral during the life of an advance to protect its security interest. No FHLBank has ever experienced a credit loss on an advance. (See "Business -Advances.") While the FHLBanks face minimal credit risk on advances, they are subject to credit risk on some investments. The FHLBanks follow guidelines established by the Finance Board and their individual boards of directors on unsecured extensions of credit, whether on- or off -balance sheet. The Financial Management Policy limits the amounts and terms of unsecured credit exposure to any counterparty other than to the U.S. Government. Unsecured credit exposure to any counterparty is limited by the credit quality and capital level of the counterparty and by the capital level of the FHLBank. At December 31, 1999, the FHLBanks' unsecured credit exposure to counterparties other than the U.S. Government or U.S. Government agencies and instrumentalities was $77.1 billion, most of which was overnight and term federal funds sold and commercial paper. This is a $16.5 billion increase from the unsecured credit exposure at December 31, 1998, and the increase reflects the FHLBanks' Year 2000 preparedness. Twenty-one percent of the exposure at December 31, 1999, had an overnight maturity, 41 percent had a maturity from 2 to 30 days, and the remainder had a maturity less than 271 days. At December 31, 1999, the FHLBanks had aggregate unsecured credit exposure of more than $1 billion to each of 24 counterparties. The aggregate unsecured credit exposure to these counterparties represented 52 percent of the System's unsecured credit exposure to nongovernment counterparties. Included in this total is unsecured credit of $400 million to Washington Mutual Bank. As of the same date, Washington Mutual Bank had advances of $11.2 billion from the FHLBank of Seattle, the affiliated Washington Mutual Bank, FA, had advances of $45.5 billion from the FHLBank of San Francisco, and the affiliated Washington Mutual Bank, FSB, had advances of $316 million from the FHLBank of Seattle. All these advances were secured borrowings. An officer of Washington Mutual Bank FA serves as a director and vice chairman of the FHLBank of San Francisco, and an officer of Washington Mutual Bank serves as a director and vice chairman of the FHLBank of Seattle. 33 Capital Adequacy The Act prescribes minimum member capital stock requirements. At December 31, 1999, 98 percent of the System's capital was capital stock, and 2 percent was retained earnings. At December 31, 1999, the System had a capital -to -asset ratio of 5.0 percent. This compares with a capital -to -asset ratio of 5.2 percent at December 31, 1998. (See "Business —Debt Financ- ing —Consolidated Obligations," "Business —Capitalization," "Discussion and Analysis of Financial Condition and Results of Operations-1999 Highlights," and Note 11 to the accompanying combined financial statements.) Transactions with Related Parties The Bank System is a cooperative system. The members own all the stock of the FHLBanks, the majority of the directors of each FHLBank is elected by and from the membership, and the FHLBanks conduct their advances and other business almost exclusively with members. Therefore, in the normal course of business, the FHLBanks extend credit to members whose officers may serve as directors of the FHLBanks. At December 31, 1999, the FHLBanks had $132.9 billion of advances outstanding to members, whose officers were serving as directors of the FHLBanks. This amounted to 33.6 percent of total advances. Other Development On February 29, 2000, Congressmen Richard Baker and James Leach introduced the Housing Finance Regulatory Improvement Act (H.R. 3703). This bill would combine into a single Federal agency the responsibilities for both the safety -and -soundness and mission oversight of the FHLBanks, Fannie Mae, and Freddie Mac. In particular, it would combine the functions of the Finance Board, the Office of Federal Housing Enterprise Oversight (the safety -and -soundness regulator of Fannie Mae and Freddie Mac), and those activities of the Department of Housing and Urban Development dealing with the mission oversight of Fannie Mae and Freddie Mac. Among other things, the proposed legislation would repeal the Treasury Department's authorization to purchase up to $4 billion of FHLBank obligations, eliminate the statutory lien priority given an FHLBank's security interest in the collateral pledged by a member, limit the non -mission -related assets the FHLBanks may hold at any time, and establish an FHLBank Finance Corporation as a Federally chartered instrumentality to perform the functions now performed by the Office of Finance. As of the date of this report, no committee of the House of Representatives has considered this bill. It is impossible to predict what actions, if any, the House of Representatives will take, whether the Senate will consider the bill, and whether Congress will enact the bill, whether the President would sign the bill, and the effect this legislation, or any other legislation, would have on the FHLBanks and Finance Board. 34 049 BUSINESS General The Federal Home Loan Bank System (Bank System or System) serves the public by enhancing the availability of housing finance, including community investment credit, through its member institutions. It provides a readily available, low-cost source of funds to its members and a means of liquefying home mortgages held in portfolio. The Federal Home Loan Banks (FHLBanks) are cooperatives; only members may own the stock of each FHLBank, and the members receive dividends on their investment. Regulated financial depositories and insurance companies engaged in housing finance can apply for membership. Each member must purchase stock in its district FHLBank. The Bank System has a unique role in housing finance. The FHLBanks make loans, called advances, to their members and eligible nonmember mortgagees on the security of mortgages and other collateral pledged by those members. Advances generally support mortgage originations, provide term funding for portfolio lending, and may be used to provide funds to any member "community financial institution" for loans to small business, small farms, and small agri-business. Since portfolio lenders may originate loans that they are unwilling or unable to sell in the secondary mortgage market, FHLBank advances serve as a funding source for a variety of conforming and nonconforming mortgages. This flexibility allows FHLBank advances to support important housing markets, including those focused on low- and moderate -income households. For those members that choose to securitize their mortgages, FHLBank advances can provide interim funding. FHLBank advances can provide funding to smaller lenders that lack diverse funding sources. Smaller community lenders very often do not have access to many funding alternatives available to larger financial entities, including repurchase agreements, commercial paper, and brokered deposits. The Bank System gives these lenders access to the competitively priced wholesale funding. FHLBank credit products also help members in asset -liability management. FHLBanks offer advances matched to the maturity and prepayment characteristics of mortgage loans. Such advances can reduce a member's interest -rate risk associated with holding long-term fixed-rate mortgages. Alternatively, members can enter interest -rate exchange agreements directly with an FHLBank to reduce their exposure to interest -rate risk. The Bank System helps members meet their Community Reinvestment Act (CRA) responsi- bilities. Through Community Investment Cash Advance programs such as the Affordable Housing Program (AHP) and the Community Investment Program (CIP), members have access to subsidized and other low-cost funding to create affordable rental and home ownership opportunities, and for commercial and economic development activities that benefit low- and moderate -income neighborhoods, thus contributing to the revitalization of these communities. The Bank System serves as a source of liquidity for its members. Access to FHLBank advances for liquidity purposes can reduce the amount of low -yielding liquid assets a member would otherwise need to hold. Some FHLBanks also provide correspondent services, such as the purchase, sale, and safekeeping of securities on behalf, and at the direction, of their members. Consolidated obligations are the principal funding source for the FHLBanks. To a lesser extent, member deposits, FHLBank capital stock, and retained earnings also provide funding. The FHLBanks have traditionally used these sources of funds to make advances to members. Advances Advances to members are the largest category of the FHLBanks' assets. (See "Discussion and Analysis of Financial Condition and Results of Operations —Financial Trends" and Note 5 to the accompanying combined financial statements.) Each FHLBank develops its own advances pro- grams, as authorized in the FHLBank Act (Act) and regulations established by the Federal Housing Finance Board (Finance Board), to meet the particular needs of its members. 35 0S Flexible advance policies have helped to satisfy the short-term and long-term business objectives of the Bank System's members. Beyond providing funding for housing finance, advances also give members a supplementary source of funds for expansion and liquidity during seasonal imbalances in savings deposits and mortgage loan disbursements. Additionally, specialized advances programs provide funds for community investment and affordable housing programs. Prepayment Fees. The Finance Board's advances regulations provide that the FHLBanks should price advances based on each FHLBank's marginal cost of raising matching -maturity funds and related administrative and operating costs. Advances with a maturity or repricing period greater than six months generally require a fee sufficient to make the FHLBank financially indifferent should the borrower decide to prepay the advance. Collateral. The Act requires each FHLBank, at the time it originates or renews an advance, to obtain and maintain a security interest in collateral eligible in one or more of the following categories: • fully disbursed, whole first mortgages on improved residential property (not more than 90 days delinquent) or securities representing a whole interest in such mortgages; • securities issued, insured, or guaranteed by the United States Government or any of its agencies (including, without limitation, mortgage -backed securities issued or guaranteed by Fannie Mae, Freddie Mac, or the Government National Mortgage Association (Ginnie Mae); • cash or deposits of an FHLBank; • other real estate -related collateral acceptable to the FHLBank, provided such collateral has a readily ascertainable value and the FHLBank can perfect a security interest in such property; or • after the Finance Board adopts implementing regulations, secured loans for small business, agriculture, or securities representing a whole interest in such secured loans, in the case of any "community financial institution," which is an FDIC -insured institution with assets of $500 million or less. Each FHLBank retains the right to require additional collateral at any time (whether or not such additional collateral would be eligible to originate an advance) or substitutions of collateral by the borrower. As additional security for a member's indebtedness, an FHLBank has a statutory lien upon that member's FHLBank stock. The Act affords any security interest granted to an FHLBank by any member of an FHLBank 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) . The only two exceptions are claims and rights that would be entitled to priority under otherwise applicable law or are held by actual bona fide purchasers for value or by parties that are secured by actual perfected security interests. Residential mortgage loans are the principal form of collateral for advances. The FHLBanks perfect the security interests granted to them if the financial condition of a particular borrower so warrants. In addition, the FHLBanks must take any steps necessary to ensure that the security interest in all collateral pledged by non -depository institutions for an advance is as secure as the security interest in collateral pledged by depository institutions. None of the FHLBanks has ever recorded a credit loss on an advance. Based on repayment history and collateral held as security on advances, neither any FHLBank nor the Finance Board believes any allowance for losses on advances is necessary. Member Mortgage Asset Programs. The FHLBanks of Chicago, New York, Atlanta, Dallas, Des Moines, Pittsburgh, and Seattle have each established various member mortgage asset programs to further assist their members. The programs all involve the investment by the FHLBank 36 in loans originated by members. In 1998, the Finance Board permitted all FHLBanks to offer programs similar to that of the Mortgage Partnership Finance (MPF) program initiated by the FHLBank of Chicago. There is a $9 billion combined System limit on these programs as prescribed by the Finance Board. All of the FHLBanks participating in these programs have established an appropriate loan loss allowance, although no FHLBank has experienced a loss. Letters of Credit. The FHLBanks also issue letters of credit for members' accounts. Members must-collateralize letters of credit. (See Note 15 to the accompanying combined financial statements.) Nonmember Borrowers. Section 10b of the Act permits the FHLBanks to make advances to nonmembers that are approved mortgagees under Title II of the National Housing Act. Eligible nonmember borrowers must also be chartered under law and have succession, be subject to inspection and supervision by some governmental agency, and lend their own funds as their principal activity in the mortgage field. Nonmember borrowers are not subject to certain provisions applicable to members in the Act. For example, they do not purchase capital stock in an FHLBank. However, the same regulatory lending requirements generally apply to them as apply to members. (See "Discussion and Analysis of Financial Condition and Results of Operations —Federal Home Loan Bank System Membership Trends —Nonmember Borrowers") Commitments for Advances. An FHLBank may make commitments for advances to a member covering a predefined period. This program aids members and the FHLBanks in their cash - flow planning and enables members to reduce their funding risk. (See Note 15 to the accompanying combined financial statements.) Investments Permitted Investments. Under the guidelines included in the Financial Management Policy, allowable investments for FHLBank portfolios, to the extent specifically authorized under Sec- tion 11(g), 11(h), or 16(a) of the Act or to the extent an FHLBank has determined that they are securities that a fiduciary or trust fund may purchase under the laws of the State in which the FHLBank is located, are as follows: • overnight and term fund placements, having maturities not exceeding 271 days, with eligible financial institutions; • overnight and term resale agreements, having maturities not exceeding 271 days, with eligible counterparties, using for collateral securities that are eligible investments under the investment guidelines and Federal Housing Administration (FHA) -insured and Veterans Administration (VA) -guaranteed mortgages; • deposits, having a term to maturity of not more than 271 days, placed with eligible financial institutions; • commercial paper, having a term to maturity of not more than 271 days, issued in the domestic market by financial companies rated P-1 by Moody's or A-1 by Standard & Poor's; • bankers' acceptances, having a term to maturity of not more than 271 days, drawn on and accepted by eligible financial institutions; • marketable direct obligations of the United States; • marketable direct obligations of U.S. government -sponsored agencies and instrumentalities (including consolidated obligations of other FHLBanks) for which such institutions have pledged their credit for repayment of both principal and interest; • securities representing an interest in pools of mortgages issued, guaranteed, or fully insured by Ginnie Mae, Freddie Mac, or Fannie Mae, and collateralized mortgage obligations (CMOs), including real estate mortgage investment conduits (REMICs), backed by 37 mortgage securities issued, guaranteed, or fully insured by Ginnie Mae, Freddie Mac, or Fannie Mae; • nonfederal agency mortgage -backed securities rated Aaa by Moody's or AAA by Standard & Poor's; • asset -backed securities collateralized by manufactured housing loans or home equity loans rated Aaa by Moody's or AAA by Standard & Poor's; • marketable direct obligations of State or local governments or agencies, rated at least Aa by Moody's or AA by Standard & Poor's, where the purchase of such obligations by an FHLBank provides the issuer the customized terms, necessary liquidity, or favorable pricing required to generate needed funding for housing or community development; and • other investments that support housing and community development, if, before entering such investments, the FHLBank: • ensures the appropriate levels of expertise, establishes policies, procedures, and controls, and provides for any reserves required to limit and manage risk exposure and preserve the FHLBank's and System's triple-A credit rating; • ensures its involvement in such investment activity helps in providing housing and community development financing that is not generally available, or that is available at lower levels or under less attractive terms; • ensures that such investment activity promotes (or at the very least, does not detract from) the cooperative nature of the System; • provides a complete description of the contemplated investment activity to the Finance Board; and • receives written confirmation from the Finance Board, before entering such investments, that the FHLBank has met the eligibility standards and requirements. Prohibited Investments. The guidelines, as amended, contain certain limitations on the FHLBanks' investments in mortgage -backed securities. The total book value of mortgage -backed securities owned by an FHLBank may not exceed 300 percent of the FHLBank's previous month - end capital on the day it purchases the mortgage -backed securities. The FHLBanks may not purchase: • interest -only or principal -only stripped mortgage -backed securities; • residual -interest or interest -accrual classes of CMOs and REMICs; • fixed-rate mortgage -backed securities or floating-rate mortgage -backed securities that on the trade date are at rates equal to their contractual cap and that have average lives that vary more than 6 years under an assumed instantaneous interest rate change of 300 basis points; and • non-U.S. dollar denominated securities. ( See Notes 3 and 4 to the accompanying combined financial statements.) Debt Financing —Consolidated Obligations The primary source of funds for the FHLBanks is the sale of debt securities, known as consolidated obligations, in the capital markets. Consolidated obligations are the joint -and -several obligations of the FHLBanks, backed only by the financial resources of the 12 FHLBanks. Consolidated obligations are not obligations of the United States, and the United States does not guarantee them. Moody's has rated consolidated obligations Aaa/P-1, and Standard & Poor's has rated them AAA/A-1;-. 38 0j3 The Act expressly authorizes the Finance Board to issue consolidated obligations. Finance Board regulations generally prohibit the issuance of senior bonds, other than bonds issued to refund consolidated bonds previously issued, if, immediately following such issuance, the aggregate amount of senior bonds and unsecured senior liabilities of the FHLBanks exceed 20 times the total paid -in capital stock, retained earnings, and reserves of all the FHLBanks. The Finance Board applies a 20 to 1 leverage limit to individual FHLBanks by policy, and applies an identical leverage limit on a Systemwide basis by regulation. On December 14, 1999, the Finance Board proposed to remove the Systemwide leverage limit from its regulations, and to restate the individual FHLBank leverage limit as a ratio of assets to capital. Instead of liabilities being limited to no more than 20 times capital, assets would be limited to no more than 21 times capital. Accordingly, if implemented, the proposed changes would result in an asset based leverage limit for individual FHLBanks contained in the Finance Board's Financial Management Policy. To allow the FHLBanks to provide additional Year 2000-related credit to their members, the Finance Board temporarily increased the leverage limit for both individual FHLBanks and the FHLBank System to 25 to 1 through June 30, 2000. For an FHLBank to exceed the 20 to 1 leverage limit, its net liquidity (defined as total investments less mortgage -backed securities, pilot program assets, member deposits, member capital investment in the FHLBank, and binding advances commitments) cannot exceed 12 percent of outstanding consolidated obligations for which that FHLBank is the primary obligor. In addition, the FHLBanks must maintain the following types of assets free from any lien or pledge in an amount at least equal to the amount of senior bonds outstanding: • cash; • obligations of, or fully guaranteed by, the United States; • secured advances; • mortgages, which have any guaranty, insurance, or commitment from the United States or any agency of the United States; • investments described in Section 16(a) of the Act, which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the State in which the FHLBank is located; and • other securities that are rated Aaa by Moody's or AAA by Standard & Poor's. The Office of Finance, a joint office of the Bank System has responsibility for facilitating and executing the issuance of the consolidated obligations of the Bank System. It also services all outstanding debt, provides the FHLBanks with credit information, serves as a source of information for the System on capital market developments, and administers the Resolution Funding Corpora- tion (REFCORP) and the Financing Corporation (FICO). With prior Finance Board approval, an FHLBank may issue its own obligations. However, as of the date of this Report, the Finance Board has not granted such approval, and no individual FHLBank obligations are outstanding. On December 14, 1999, the Finance Board proposed a regulation that would restructure the Office of Finance. One of the proposed changes would be for the FHLBanks, no later than January 2, 2001, to issue debt in their own name through the Office of Finance under the authority of Section 11(a) of the Act. Currently, the Finance Board issues the debt on behalf of the FHLBanks through the Office of Finance under the authority of Section 11(c) of the Act. If the proposed regulation is adopted, the debt issued by the FHLBanks would also be the joint -and - several obligation of all the FHLBanks. Consolidated Bonds. FHLBank consolidated bonds satisfy term funding requirements. Typically, the maturity of these securities ranges from 1 year to 10 years, but their maturity is not subject to any statutory or regulatory limit. Consolidated bonds can be issued and distributed through negotiated or 39 0:' 4 competitively bid transactions with approved underwriters or selling group members. (See "Discussion and Analysis of Financial Condition and Results of Operations —Financial Trends" and "Discussion and Analysis of Financial Condition and Results of Operations Risk Management.") On July 1, 1999, the Bank System commenced the TAP issue program for fixed-rate, non - callable (bullet) bonds. This program uses specific maturities that may be reopened daily during a three-month period through competitive auctions. The aim of the TAP program is to cumulate frequent smaller issues into a larger bond issue that may have greater market liquidity. Consolidated Discount Notes. The Office of Finance on behalf of the Finance Board also sells consolidated discount notes to provide short-term funds for seasonal and cyclical fluctuations in savings flows and mortgage financing, short-term investments, and variable -rate and putable advance programs. These securities have maturities up to 360 days, and are offered daily through a 19-member consolidated discount note selling group. Discount notes are sold at a discount and mature at par. Daily discount note issuances have increased significantly since 1993 when the Office of Finance began selling discount notes with original maturities less than 30 days. Interest -Rate Exchange Agreements. Certain securities dealers and banks and their affiliates engage in transactions with and perform services for the FHLBanks, including the purchase and sale of investment securities. In connection with the sale of any particular issue of consolidated obligations, the FHLBanks may enter into interest -rate exchange agreements or other transactions with or arranged by the applicable securities dealer, bank, or affiliate, or an unaffiliated third party. (See "Discussion and Analysis of Financial Condition and Results of Operations —Risk Manage- ment" and Note 13 to the accompanying combined financial statements.) Deposits The Act allows each of the 12 FHLBanks to accept deposits from its members, from any institution for which it is providing correspondent services, from other FHLBanks, or from other government instrumentalities. Deposit programs provide some of the FHLBanks' funding resources, while also giving members a low -risk earning asset that satisfies their regulatory liquidity require- ments. The FHLBanks generally offer several types of deposit programs to their members including demand, overnight, and term deposits. Liquidity Requirements. To support its member deposits, the Act requires each FHLBank to have an amount equal to the current deposits invested in obligations of the United States, deposits in eligible banks or trust companies, or advances with a maturity not exceeding five years. In addition, the liquidity guidelines in the Finance Board's Financial Management Policy require each FHLBank to maintain an average daily liquidity level each month in an amount not less than the sum of. • 20 percent of the sum of its daily average demand and overnight deposits and other overnight borrowings, and • 10 percent of the sum of its daily average term deposits, consolidated obligations, and other borrowings that mature within one year. Assets eligible for meeting these liquidity requirements include: • overnight funds and overnight deposits placed with eligible financial institutions; • overnight and term resale agreements with eligible counterparties, which mature in 271 days or less, using for collateral securities that are eligible investments under the investment guidelines, and FHA -insured and VA -guaranteed mortgages; • negotiable certificates of deposit placed with eligible financial institutions, bankers' accept- ances drawn on and accepted by eligible financial institutions, and commercial paper issued in U.S. financial markets and rated P-1 by Moody's or A-1 by Standard & Poor's, all having a remaining term to maturity of not more than 271 days; 40 • marketable direct obligations of the United States that mature in 36 months or less; • marketable direct obligations of U.S. government -sponsored agencies and instrumentalities that mature in 36 months or less for which the credit of such institution is pledged for repayment of both principal and interest; and • cash and collected balances held at a Federal Reserve Bank and other eligible financial institutions, net of member pass-throughs. A security pledged under a repurchase agreement cannot satisfy liquidity requirements. (See Notes 2 and 9 to the accompanying combined financial statements.) Capitalization The Federal Home Loan Bank System Modernization Act of 1999 (Title VI of the Gramm - Leach -Bliley Act) (Modernization Act), will change member stock purchase and maintenance requirements, and these changes will occur over the next three to five years. The Modernization Act created a permanent capital structure for the FHLBanks, and the Finance Board must adopt regulations by November 12, 2000, which will prescribe uniform capital standards for the FHLBanks. The Modernization Act authorizes two classes of stock: Class A stock, redeemable at par with six months' written notice; and Class B stock, redeemable at par with five years' written notice. The Modernization Act defines permanent stock to be Class B stock and retained earnings. The paid -in value of all stock and retained earnings will be used to meet a targeted 5 percent leverage ratio. Class B stock and retained earnings are weighted at 150 percent, reducing the actual minimum leverage ratio, but no less than 4 percent. Class B stock and retained earnings will be used to meet a (still to be determined) minimum risk -based capital requirement. Until such time as the Finance Board adopts implementing regulations and approves the capital structure plans of the FHLBanks, and the FHLBanks implement these plans, the capital structure of the System will conform to the laws and regulations in effect at the time of the passage of the Modernization Act. Each member of an FHLBank must purchase and hold stock in its FHLBank based upon the level of its assets or upon the amount of its FHLBank borrowings. The Modernization Act provides that stock in an FHLBank may be issued to and held by only members of that FHLBank. Members may, at the FHLBank's discretion, redeem any capital stock in excess of the minimum stock requirement at its par value. The Act provides, however, that if the Finance Board or the board of directors of an FHLBank determines that the FHLBank has incurred or is likely to incur losses that will impair capital stock, then the FHLBank shall not redeem or repurchase any capital stock without the prior approval of the Finance Board. Furthermore, an FHLBank may not redeem or repurchase any capital stock if, following the redemption, the FHLBank would fail to satisfy any minimum capital requirement. All members of the Bank System are voluntary members, and may withdraw from membership and redeem their capital after giving six months notice to do so. However, former mandatory members, Federally chartered savings institutions regulated by the Office of Thrift Supervision, cannot withdraw from membership before May 12, 2000. Members that withdraw from membership may not re -apply for membership for 5 years. Capital Structure. At December 31, 1999, capital stock composed approximately 98 percent of the System's capital base with retained earnings making up the remaining 2 percent. Retained earnings are classified as either restricted or unrestricted. The restricted portion of retained earnings represents income from advance prepayment ,fees that, if allocated on a pro-rata basis over the remaining maturity of the prepaid advances, the FHLBank would realize in future periods. Other extraordinary gains and losses related to financial instruments can adjust the level of restricted retained earnings. (See Note 11 to the accompanying combined financial statements.) Voting Rights. Members holding capital stock as of December 31 of the preceding year can participate in the annual election process for FHLBank directors. Their year-end minimum required stock holdings determine the voting rights of members. Eligible members may nominate and elect 41 0J representatives from members in their State to serve three-year terms on the board of directors of their FHLBank. (See "FHLBank Management and Compensation.") Dividends The FHLBanks may pay dividends from net earnings after providing for all reserves and charge -offs required under the Act. (See Note 11 to the accompanying combined financial statements.) Interest -Rate Exchange Agreements The Finance Board's Financial Management Policy establishes guidelines for interest -rate exchange agreements. The FHLBanks can use interest -rate swaps, futures and forward contracts, and interest -rate caps and floors as part of their interest -rate risk management and funding strategies. The Financial Management Policy prohibits speculative use of these instruments and limits credit risk arising from these instruments. (See "Discussion and Analysis of Financial Condition and Results of Operations —Risk Management" and Note 13 to the accompanying combined financial statements.) Oversight, Audits, and Examinations The Government Corporation Control Act provides that before a government corporation issues and offers obligations to the public, the Secretary of the Treasury shall prescribe the form, denomination, maturity, interest rate, and conditions of the obligations; the way and time issued; and the selling price. The Bank Act also authorizes the Secretary of the Treasury, in his or her discretion, to purchase consolidated obligations issued by the Finance Board up to an aggregate principal amount of $4 billion. No borrowings under this authority have been outstanding since 1977. The U.S. Department of the Treasury receives the Finance Board's annual report to the Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks. Each FHLBank and the Office of Finance has an internal audit department, and an independent public accounting firm audits the annual financial statements of each FHLBank. The independent accountant conducts these audits following generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General. The FHLBanks, the Finance Board, and the Congress all receive the audit reports. The FHLBanks must submit annual management reports to the Congress, the President, the Office of Management and Budget, and the Comptroller General. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent public accountants on the financial statements. In addition, the Finance Board conducts an annual on -site examination of each FHLBank and the Office of Finance and off -site reviews of their financial operations. The Comptroller General has authority under the Bank Act to audit or examine the Finance Board and the FHLBanks and to decide the extent to which they fairly and effectively fulfill the purposes of the Bank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent public accounting firm. If the Comptroller General conducts such a review, then he must report the results and provide his recommendations to the Congress, the Office of Management and Budget, and the FHLBank in question. The Comptroller General may also conduct his own audit of any financial statements of an FHLBank. Tax Status The FHLBanks are exempt from all Federal, State, and local taxation except for real property taxes. All FHLBank dividends received by members, however, are subject to taxation. 42 THE FINANCE BOARD The Finance Board is an independent agency in the executive branch of the U.S. Government. The Finance Board's purpose is to ensure that the FHLBanks operate in a safe and sound manner. In addition, the Finance Board ensures that the FHLBanks carry out their housing finance and community investment mission and remain adequately capitalized and able to raise funds in the capital markets. The Act requires the Finance Board to conduct annual examinations and obtain reports of condition of the FHLBanks. The Finance Board assesses the FHLBanks for the costs of operating the Finance Board. A five -member board of directors manages the Finance Board. The secretary of the Depart- ment of Housing and Urban Development (HUD) serves ex officio as a director of the Finance Board. The President appoints the other four directors, with the advice and consent of the Senate. Members of the board of directors hold office for terms of seven years. The President designates one of the four appointed directors to serve as chairman of the Finance Board. Each of the four appointed directors must have experience or training in housing finance or a commitment to providing specialized housing credit. Not more than three directors may be members of the same political party. At least one director must come from an organization with more than a two-year history of representing consumer or community interests in banking services, credit needs, housing, or financial consumer protections. The directors serve on a full-time basis. At December 31, 1999, the directors of the Finance Board were Chairman Bruce A. Morrison, Andrew M. Cuomo, and J. Timothy O'Neill. Two director positions were vacant for all of 1999. Bruce A. Morrison, 55, has served as the chairman of the Finance Board since June 1, 1995. His term expired on February 27, 2000, but he has continued to serve in a hold -over capacity. President Clinton has nominated Mr. Morrison to a new seven-year term, but the Senate has taken no action on that nomination. Mr. Morrison, of New Haven, Connecticut, represented the third district of Connecticut in the House of Representatives from 1983 until 1991. While a member of Congress, Mr. Morrison served on the Committee on Banking, Finance, and Urban Affairs, where he earned a reputation as a strong advocate for affordable housing and community development and strong capital standards for financial institutions. As a member of the House Banking Committee, Mr. Morrison helped craft legislation to improve the regulation and supervision of insured financial institutions and authored legislation on the use of federal funds for the development of owner - occupied housing in urban areas. Before his appointment to the Finance Board, Mr. Morrison practiced law with the firm of Morrison & Swain in New Haven, and specialized in immigration issues and international trade and investment. Mr. Morrison is paid at executive level III of the Federal executive pay schedule, which was $125,900 in 1999 and 1998 and $123,000 in 1997. Mr. Morrison receives the same benefits as other Federal employees paid under the executive schedule. On January 29, 1997, the Senate confirmed Andrew M. Cuomo, 42, as secretary of HUD. In that capacity, Secretary Cuomo serves as a director of the Finance Board. From 1993 to 1997, Mr. Cuomo was assistant secretary for Community Planning and Development at HUD. In 1991, Mr. Cuomo served as chairman of the Commission on the Homeless in New York City. Mr. Cuomo founded H.E.L.P. in 1986. This organization became the nation's largest provider of transitional housing for the homeless. Secretary Cuomo has continued a delegation, effective since May 23, 1993, of all of the secretary's functions, powers, and duties as director of the Finance Board to the Assistant Secretary for Housing —Federal Housing Commissioner at HUD, and William C. Apgar, 53, has served in this position since October 23, 1998. Before his current appointment, Mr. Apgar served as the director of the Joint Center for Housing Studies at Harvard University. The HUD Secretary and his designee serve the Finance Board without additional compensation. J. Timothy O'Neill, 45, has served as a director of the Finance Board since June 1, 1995. Although his term expired on February 28, 1997, Mr. O'Neill has continued to serve in a holdover capacity. President Clinton has nominated Mr. O'Neill to a term that expires on February 28, 2004, but the Senate has taken no action on that nomination. Before his service on the Finance Board, 43 OJB Mr. O'Neill most recently was a partner in the Washington law firm of O'Connor & Hannan, and focused on trade and international law and matters relating to legislation and regulation. He has represented both international and domestic clients before the Congress and the Executive Branch. He is the former director of congressional affairs for the Finance Board. Mr. O'Neill has served as senior legislative manager for international affairs for the U.S. Department of the Treasury, and was deputy director of congressional affairs for the U.S. Agency for International Development. Before his Executive Branch experience, he was the legislative director for U.S. Senator John Heinz of Pennsylvania. Mr. O'Neill is paid at executive level IV of the Federal executive pay schedule, which was $118,400 in 1999 and 1998 and $115,700 in 1997. Mr. O'Neill receives the same benefits as other Federal employees paid under the executive schedule. On June 8, 1999, the President nominated Franz S. Leichter to be a director of the Finance Board for a term that expires February 27, 2006, and Douglas L. Miller to a term that expires on February 27, 2002. Mr. Leichter, 68, practices law with the firm of Walter, Conston, Alexander, and Green, P.C., and is a former State Senator in New York. Mr. Miller, 57, served as chief of staff to former Senator Larry Pressler of South Dakota. The Senate has not taken any action on these nominations. FHLBANK MANAGEMENT AND COMPENSATION FHLBank Directors. The Act provides that a board of at least 14 directors will govern each FHLBank. Directors elected by the members to three-year terms are a majority of the directors at each FHLBank. However, the Finance Board appoints at least six public -interest directors to three- year terms. Before the passage of the Modernization Act, elected directors served two-year terms and appointed directors served four-year terms. At least two of the directors of each FHLBank appointed by the Finance Board must come from organizations with more than a two-year history of representing consumer or community interests in banking services, credit needs, housing, or financial consumer protections. The board of directors of each FHLBank has the responsibility to monitor that FHLBank's compliance with Bank System regulations and to establish policies and programs that carry out the Bank System's housing finance mission. Each board of directors adopts and reviews policies governing the FHLBank's credit, investment, and funding activities, and oversees the implementa- tion of these policies. The directors also must adopt policies to manage the FHLBank's exposure to credit, liquidity, and interest -rate risk. In 1999, the chair of each FHLBank was a public -interest director, and the vice chair of each FHLBank was an industry -elected director. The Finance Board designated the chair and vice chair of each FHLBank. Beginning with 2000, the Modernization Act requires that each Bank's board of directors elects a chair and vice chair from among its members to two-year terms. Charles W. Smith, 56, is chair of the FHLBank of Boston. He is chairman and chief executive officer of Granite Bank, Keene, New Hampshire, and of its holding company, Granite State Bankshares, Inc. He is chairman and director of the New Hampshire Bankers Association. Before joining Granite Bank, Mr. Smith was executive vice president and treasurer, Raritan Savings Bank, Raritan, New Jersey. He has served as president of the Greater Keene Chamber of Commerce and the Keene Downtown Revitalization Corporation. He was also a director of the Savings and Community Bankers Association. Mr. Smith has also served as vice chair of the FHLBank of Boston. Elizabeth H. Mitchell, 59, is vice chair of the FHLBank of Boston. She is a public policy fellow at the Muskie School of Public Policy, University of Southern Maine, in Portland, Maine, and serves as a director of Maine General Associates, in Augusta, Maine, and chairs the housing committee of the Kennebec Valley Community Action Program. A former state representative, Ms. Mitchell was speaker of the Maine House of Representatives from 1996-1998. From 1986- 1990, she was chair and director of the Maine State Housing Authority. She is the former director of 44 OJT the Maine Homeless Coalition and Home Resources of Maine and a former chair of the FHLBank of Boston. Nicolas P. Retsinas, 53, was chair of the FHLBank of Boston in 1999. He is director of the Joint Center for Housing Studies, Harvard University, in Cambridge, Massachusetts, and is a lecturer in housing studies at the Harvard Design School and the Kennedy School of Government. Before his Harvard appointment, Mr. Retsinas served for almost five years as Assistant Secretary for Housing -Federal Housing Commissioner at the U.S. Department of Housing and Urban Develop- ment. He also served as acting director of the Office of Thrift Supervision, and on the boards of the Federal Deposit Insurance Corporation, the Federal Housing Finance Board, and the Neighborhood Reinvestment Corporation. He was also the executive director of the Rhode Island Housing and Mortgage Finance Corporation. Mr. Retsinas currently serves on the boards of the National Housing Endowment, the Enterprise Foundation, Habitat for Humanity International, Shorebank, the National Community Capital Association, the Community Development Trust, Inc., the Low Income Housing Fund, and the National Low Income Housing Coalition, as well as the executive committee for the National Housing Conference. Robert T. Kenney, 57, was vice chair of the FHLBank of Boston in 1999. He is chairman, president, and chief executive officer of American Savings Bank, New Britain, Connecticut. Mr. Kenney serves as a corporator of the New Britain/Berlin YMCA, New Britain General Hospital, and Hospital for Special Care, and is a director of Mutual Investment Fund of Connecticut, Inc., and Savings Bank Life Insurance Company. He also serves as chairman of New Britain General Hospital and the Central Connecticut Sate University Foundation, and is trustee of the Connecticut Policy and Economic Council, YWCA, and Jerome Home. James J. Florio, 62, is chair of the FHLB of New York and served in that position in 1999. In addition to being a partner in the law firm of Fischbein, Badillo, Wagner and Harding, he is a University professor for Public Policy and Administration at Rutgers, the State University of New Jersey. He is serving on the U.S. Secretary of Energy's Advisory Board and is a member of the Trade and Environment Policy Advisory Committee (TEPAC) to the U.S. Trade Representative. Mr. Florio served as the governor of New Jersey from 1990 through 1994. He was a member of the U.S. House of Representatives from 1974 through 1990. Before that, he served three terms in the New Jersey General Assembly. Herbert G. Chorbajian, 61, is vice chair of the FHLB of New York and served in that position in 1999. He is vice chairman and a director of Charter One Financial, Inc. He is a board member of the RSI Retirement Trust, the Albany Memorial Hospital Foundation, the Albany College of Pharmacy, the Albany Arts Commission, and several other organizations. Mr. Chorbajian is a graduate of Boston University and a certified public accountant. Besides a career in public accounting, he held a number of positions with the State Bank of Albany and the Norstar Bancorp. David W. Curtis, 44, serves as chair of the FHLBank of Pittsburgh. Appointed as a public interest director of the Bank in 1996 and chair in 1999, Mr. Curtis is the executive vice president and chief financial officer of Leon N. Weiner & Associates, Inc., a multi -faceted real estate development firm providing housing to individuals and families of moderate means. He is also the president of Arbor Management, LLC, a multifamily residential management company with a portfolio of more than 8,000 units in 75 properties. Mr. Curtis holds a Master of Arts Degree from the University of Delaware's College of Urban Affairs, where he was a Graduate Fellow. John T. Connelly, 64, is vice chair of the FHLBank of Pittsburgh and served in that position in 1999. He has been in banking for 35 years, most recently with The First National Bank of Leesport, Leesport, Pennsylvania, where he was president and chief executive officer from 1976 until 1998, when he become chairman of the board. Retired as an active officer of the First National Bank of Leesport on August 1, 1999, he now serves as chair of its board of directors' executive committee. A graduate of Williams College, he is a past president of the Pennsylvania Bankers Association and active in many civic organizations in Berks County, Pennsylvania. He has served as an elected director of the FHLBank of Pittsburgh since 1996. 45 Rita I. Fair, 63, assumed the chair of the FHLBank of Atlanta on July 1, 1997. Ms. Fair served as managing director of the Finance Board from April 1994 to March 1997. Before that, she was managing director of the Secura Group, a financial institutions consulting firm in Washington. Ms. Fair was formerly senior vice president for regulatory operations at the U.S. League of Savings Institutions and chief of staff of the Federal Home Loan Bank Board, and served in a number of positions at HUD. Joseph S. Bracewell, III, 53 is vice chair of the FHLBank of Atlanta and served in that position in 1999. He was elected to the board of directors in 1995. Mr. Bracewell is chairman and chief executive officer of Century National Bank in Washington, D.C. He also serves as a director of the Independent Bankers Association of America, Hankey Oil Company, and Hadron Inc. Paul Tipps, 63, was elected chairman of the FHLBank of Cincinnati for a two-year term beginning January 1, 2000. He has served as a director since 1997 and was reappointed for an additional three year term effective January 1, 2000. Mr. Tipps is a principal of State Street Consultants, a firm recently created by the merger of Public Policy Consultants, of which Mr. Tipps served as president and founder, and NSC Consulting. State Street Consultants is based in Columbus, Ohio, and provides a number of public policy services, such as issue analysis and research and the monitoring of important legislative and regulatory developments. Before that, Mr. Tipps was a real estate broker and developer and was president for 17 years of Federal Property Management, which managed and developed 10,000 multifamily housing units in seven states. He served as chairman of the Ohio Democratic Party from 1975 to 1983. Nancy C. Miller -Herron, 43, was chair of the board of the FHLBank of Cincinnati in 1999. She began her service as a community interest director in January 1994. She is a partner with the law firm of Neese, Herron & Miller -Herron, Dresden, Tennessee. She is secretary of the local affiliate of the Habitat for Humanity, and chairs its fund raising committee. While presently on leave from the Tennessee Conference of the United Methodist Church, she continues to serve occasionally as a minister. Michael R. Melvin, 55, is vice chair of the FHLBank of Cincinnati and served in that position in 1999. He has been a director since 1995. In addition, he is president, chief executive officer, and a director of Perpetual Federal Savings Bank, Urbana, Ohio, with which he has been associated since 1969. Mr. Melvin served as chairman of the Ohio League of Financial Institutions in 1994 and continues to serve on the Trade Associations Board and Executive Committee. Mr. Melvin also serves as a president of the Champaign County Community Improvement Corporation, director of Springfield -Clark County Chamber of Commerce, and secretary -treasurer of the board of the Rotary Manor Senior Housing Project. He is now serving his sixth year as an elected director of the FHLBank of Cincinnati. Carolyn Sparks Hutting, 53, is chair of the FHLBank of Indianapolis, and she served in that position in 1999. She serves as the director of sales and marketing for Team Telcom, an East Lansing, Michigan telemarketing firm. Ms. Hutting has held numerous positions in both Kentucky and Michigan State governments including executive assistant to Michigan Governor James Blanchard, chief of staff for State Senator Jim Berryman, and communications analyst for House Speaker Curtis Hertel. She also served as operations director of the Michigan Democratic Party. William R. White, 46, is vice chair of the FHLBank of Indianapolis, and he served in that position in 1.999. He is the chairman and president of Dearborn Federal Savings Bank, Dearborn, Michigan. Before his current appointment, Mr. White served the bank in the positions of president, executive vice president, and treasurer. Mr. White is a certified public accountant, having worked 13 years with Deloitte & Touche, L.L.P., primarily serving financial institution clients. He is involved in many professional and community organizations, including: Michigan League of Community Banks, Dearborn Chamber of Commerce, West Dearborn Downtown Development Authority, Henry Ford Community College Foundation Board, Financial Managers Society, and the President's Advisory Council for Henry Ford Museum and Greenfield Village. 46 Douglas J. Timmerman, 59, chairman of the FHLBank of Chicago, was elected to a three-year term as a director beginning on January 1, 1998. Mr. Timmerman is the chairman, president, and chief executive officer of Anchor Bancorp Wisconsin Inc., Madison, Wisconsin. He is also a director of the Wisconsin Bankers Association, a trustee of the University of Wisconsin Research Park, and a director of Chorus Communications, a southwest Wisconsin telephone holding company. Mr. Timmerman served as vice chair of the FHLBank of Chicago in 1999. Mindy W. Turbov, 43, vice chair of the FHLBank of Chicago, was appointed to a three-year term as director beginning on January 1, 1998. Ms. Turbov is president of Turbov Associates, a Chicago, Illinois, based community development consulting firm. Previously, she served as special assistant to the chairman of the Finance Board and as a special assistant to the HUD Secretary. Ms. Turbov was formerly a vice president of McCormack Baron & Associates, a real estate development firm, and a senior associate at Shorebank Corporation. She also served as deputy commissioner for development for Chicago's Department of Housing. Ms. Turbov served as chair of the FHLBank of Chicago in 1999. Dale J. Torpey, 54, chair of the board of the FHLBank of Des Moines was first elected to the board in 1996. He is the president and chief executive officer of Community State Bank in West Branch, Iowa. Mr. Torpey has been very active with the Independent Community Bankers of America servings on its Operations Committee and as chair of its Lending Subcommittee. Mr. Torpey has served on several committees for the Iowa Bankers Association and has taught classes at the Iowa School of Banking. He has served on several civic boards including the Kirkwood College Foundation and the Tipton Economic Development Corporation. Anthony J. Scallon, 54, was chair of the FHLBank of Des Moines in 1999. He has been a community interest director and chair of the board of the FHLBank of Des Moines since 1994. Mr. Scallon works to create alternative schools, including charter schools, with a focus on transitioning students from school to careers and work. He is currently a work experience coordinator for Independent School District # 197, Mendota Heights, Minnesota, and a founder and member of the board of directors of the Minnesota Transitions Charter School. Mr. Scallon served on the Minneapolis City Council for 13 years and was commissioner of the Minneapolis Community Development Agency. He is an active member of the Longfellow Neighborhood Group focusing on loans for housing rehabilitation and neighborhood improvement. Linda R. Cottington, 51, began her term as vice chair of the FHLBank of Des Moines in January 2000. Ms. Cottington is the vice president, Strategic Planning and Business Development for Mercy Health Network, Des Moines, Iowa. She was formerly a partner with Watson Wyatt Worldwide and the regional managing director of consulting for Deloitte & Touche, Des Moines, Iowa. Ms. Cottington's community service includes being a member of the board of directors of the Greater Des Moines Partnership and serving as a member of the City of Des Moines Strategic Planning Committee. She was first appointed to the board in 1995. Curtis L. Hage, 54, was vice chair of the FHLBank of Des Moines in 1999. He is chairman, president, and chief executive officer of HF Financial Corp. and its subsidiaries, including Home Federal Savings Bank, Sioux Falls, South Dakota. Mr. Hage has been affiliated with Home Federal Savings Bank since 1968. A past president of the South Dakota Savings League, he has served as chair of the Community Appeals Committee of the Sioux Falls Chamber of Commerce and is a past chair of the Evangelical Lutheran Good Samaritan Society. Mr. Hage currently serves on the board of directors of America's Community Banks and is the current chair of the Council of Federal Home Loan Banks. He has served as a director of the FHLBank of Des Moines since 1994. Henry Flores, 44, has been chair of the FHLBank of Dallas since January 1995 and a community interest director on the board since January 1994. Mr. Flores currently serves as principal with Flores, Elizondo and Associates, a company that specializes in real estate develop- ment, public/private investment partnerships, tax -credit syndication, and property management. Before this position, he served as the executive director of the Texas Department of Housing and Community Affairs. Mr. Flores also serves on the executive boards of the Austin Housing 47 0s2, Authority, Texas Housing Finance Corporation, National Housing Trust, and was a founding member and first president of the National Hispanic Housing Council. George W. Mitchell, 56, is vice chair of the FHLBank of Dallas and served in that position in 1999. He has been a director since 1995. Mr. Mitchell is chairman of the board, president, and a director of Pioneer Savings Bank, Roswell, New Mexico. During his tenure with Pioneer, which began in 1977, Mitchell has been very active in local and state civic activities which includes: the Governor's Task Force Commission on Interstate Banking, president of the New Mexico League of Financial Institutions, president of the Roswell Rotary Club, director of the Roswell Chamber of Commerce, president of the Conquistador Council of Boy Scouts of America, and president of the Spectacular Air Show New Mexico. Ron Wente, 49, is chair of the FHLBank of Topeka and president and chief executive officer of Golden Belt Bank, FSA, Hays, Kansas. He joined Golden Belt Bank in 1973 after graduating from Fort Hays State University. He began serving as president and CEO the following year. He is past chairman of the Heartland Community Bankers Association and serves on the board of directors of the Ellis County Economic Development Corp. Paul Barru, 74, is vice chair of the FHLBank of Topeka. He is president of BHI, Inc., Littleton, Colorado, and is a builder, developer, and affordable housing advocate. He was appointed to the Bank's board in 1995 as a public interest director. An ordained Presbyterian minister, he earned a theology degree from Harvard University Divinity School. -He has a bachelor's degree in humanities from Michigan State University and business administration and accounting degrees from New York University School of Commerce. He is a past director of the National Association of Home Builders and has been named to that organization's Housing Hall of Fame. Mr. Barru served as chair of the FHLBank of Topeka in 1999. Richard C. Berg, 62, served as vice chair of the FHLBank of Topeka in 1999. He is chairman and chief executive officer of the First National Bank of Ordway, Ordway, Colorado. He is a graduate of the University of North Dakota, Grand Forks. Following graduation he joined the investment department of Northwestern National Life Insurance Co. in Minneapolis. After that he worked for the U.S. Office of the Comptroller of the Currency in Denver as a national bank examiner. He later worked for Cherry Creek National Bank, Commercial Bancorporation of Colorado and Colfax National Bank before joining the First National Bank of Ordway. Berg has served as a director of the Colorado Bankers Association and has been a member of the Colorado governor's task force to restructure the Colorado Division of Banking. Mr. Berg was elected to the FHLBank of Topeka board of directors in 1996. Mary Lee Widener, 61, is chair of the FHLBank of San Francisco, and she served in that position in 1999. She is president of Neighborhood Housing Services of America, Inc., in Oakland, California. She developed, co-founded, and administers this nonprofit secondary, market program to provide liquidity to community loan funds nationally. She serves on the board of PMI Group, Inc., the Social Compact, the S. H. Cowell Foundation, and the advisory board of the Pew Partnership for Civic Change. She also is trustee emeritus of the San Francisco Foundation and Partners for Livable Communities. J. Lance Erikson, 56, is vice chair of the FHLBank of San Francisco. He is an officer of Washington Mutual Bank, Stockton, California. He was formerly executive vice president, secre- tary, and general counsel of Great Western Financial Corporation and its principal subsidiary, Great Western Bank, which Washington Mutual acquired in July 1997. Mr. Erikson joined Great Western in 1982 and was named to the company's executive management committee in 1987. Robert N. Barone, 55, was vice chair of the FHLBank of San Francisco in 1999. He is currently director of First Security Bank of Nevada. Before the merger of Comstock Bank/Bankcorp and First Security Bank/Bankcorp in 1999, he was chairman of the board and chief executive officer of Comstock, a position he held since 1984. Mr. Barone holds a Ph.D. in Economics from Georgetown University and was an associate professor of finance at the University of Nevada, Reno. Mr. Barone 48 063 is a director of the California State Automobile Association, which serves Northern California, Nevada, and Utah. He is also a member of the Reno South Rotary Club. Michael P. Radway, 46, is chair of the FHLBank of Seattle, and he served in that position in 1999. From 1997 through 1998, Mr. Radway served as the legislative director to two senior members of the House Banking Committee (Rep. Norman D'Amours and Rep. Paul Kanjorksi). In the 103rd Congress, he also served as the deputy staff director of the Subcommittee on Economic Growth and Credit Formation. In the last two Congresses, he served as the Democratic professional staff of the Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises. A native of Hanover, New Hampshire, he graduated cum laude from Yale University with distinction in political science. Kerry K. Killinger, 50, is vice chair of the FHLBank of Seattle, and he served in that position in 1999. He has served on the board since January 1994. Mr. Killinger has been chairman of Washington Mutual, Inc., and its predecessor, Washington Mutual Savings Bank, since Janu- ary 1991. He joined Washington Mutual as an executive vice president in 1982, and became its chief executive officer in 1990. Mr. Killinger currently serves on the boards of directors for numerous community and industry organizations, including the Washington Savings League, America's Community Bankers, Greater Seattle Chamber of Commerce, Seattle Foundation, the Alliance for Education and the Washington Roundtable. Compensation of Directors. Beginning with 2000, the Modernization Act limits the annual compensation to $25,000 for a chair, $20,000 for a vice chair, and $15,000 for all other directors. Beginning with 2001, the Finance Board must adjust these amounts based on the percentage annual increase in the Consumer Price Index. FHLBank Presidents. Each FHLBank president is responsible to that FHLBank's board of directors. The FHLBank presidents' responsibilities include the management of the FHLBank, the administration of the FHLBank's programs and of System objectives set forth in the Act, and the execution of the regulations and policies of the Finance Board. Each FHLBank president participates in regular meetings with the other FHLBank presidents. The following persons served as presidents of the FHLBanks during 1999: Michael A. Jessee, 53, has been president of the FHLBank of Boston since June 1989. Before that, he served 12 years with the FHLBank of San Francisco as executive vice president and chief operating officer; executive vice president, economics and corporate policy; senior vice president and chief economist; and assistant vice president and director of research. Mr. Jessee also worked as an economist with the Federal Reserve Bank of New York and in corporate planning and correspon- dent banking with the Bank of Virginia. Alfred A. DelliBovi, 53, has been president of the FHLBank of New York since Decem- ber 1992. His experience includes 11 years of executive service with the U.S. Government. From June 1989 to November 1992, he served as the deputy secretary and chief operating officer of HUD. Before that, he worked at the U.S. Department of Transportation's Urban Mass Transportation Administration as administrator and regional administrator. Mr. DelliBovi was also a member of, and worked for, the New York State Assembly. James D. Roy, 59, has been president of the FHLBank of Pittsburgh since November 1987. Before that, he spent 25 years with Mellon Bank, N.A., serving as the senior vice president, finance; as vice president and manager, corporate financial planning and control; and in various management positions within the finance department. Raymond R. Christman, 50, became president of the FHLBank of Atlanta on July 1, 1999. He had been a community interest director and chair of the FHLBank of Pittsburgh since 1994. Mr. Christman was president of the Pittsburgh Technology Council, a business association that fosters the growth of the technology industry in southwestern Pennsylvania. He also served as president of a related organization, the Southwestern Pennsylvania Industrial Resource Center, 49 064 which is a not -for -profit economic development organization that provides technical consulting, financing assistance, and workforce development services to small- and medium-sized manufactur- ing companies. Charles L. Thiemann, 62, has been president of the FHLBank of Cincinnati since Janu- ary 1976. Before that, he spent 12 years with the FHLBank of Cincinnati as the executive vice president; senior vice president; vice president, director of research; and economist. Mr. Thiemann also worked as an economist with the Federal Reserve Bank of St. Louis, where he served as an advisor to the president and the board of directors. Martin L. Heger, 54, has been president of the FHLBank of Indianapolis since February 1992. During the previous 12 years, he served as the FHLBank of Indianapolis' executive vice president and chief operating officer, and vice president and division head for the Michigan division. Earlier, Mr. Heger spent 13 years in various management positions with the National Bank of Detroit. Alex J. Pollock, 56, has been president of the FHLBank of Chicago since October 1991. Before that, he was a visiting scholar at the Federal Reserve Bank of St. Louis and served as president and chief executive officer at the Community Federal Savings and Loan Association in St. Louis; president of Marine Bank, Milwaukee; and senior vice president of Continental Illinois National Bank, where he served in various capacities in Europe and the United States. Patrick J. Conway, 49, became president of the FHLBank of Des Moines in October 1999. Before that, he served as executive vice president of finance and banking for the FHLBank of San Francisco. Mr. Conway joined the FHLBank of San Francisco in 1975 and held a variety of finance and management positions before being named executive vice president. Earlier, Mr. Conway spent six years with Merrill Lynch. George M. Barclay, 65, has been president of the FHLBank of Dallas since November 1987. Before that, he served for four years as that FHLBank's senior and executive vice president for financial operations and member services. He previously spent 13 years with Carondelet Savings and Loan Association in St. Louis and seven years with the National Biscuit Company in various capacities. Frank A. Lowman, 60, has been president of the FHLBank of Topeka since April 1989. Before that, he spent six years as president and chief operating officer of Fourth Financial Corporation/ BANK IV Wichita, and 14 years as president and chief executive officer of Heritage Savings Association in Hays, Kansas., Dean M. Schultz, 52, has been president of the FHLBank of San Francisco since April 1991. His experience includes serving seven years as executive vice president of the FHLBank of New York; four years as senior vice president, general counsel, and director of corporate services and human resources for First Federal Savings and Loan Association in Rochester, New York; and seven years with the law firm of Robinson, Williams and Angeloff in Rochester. Norman B. Rice, 56, has served as president of the FHLBank of Seattle since February 1, 1999. Before that he served as the FHLBank's executive vice president. Mr. Rice was mayor of Seattle from 1990 through 1997. Managing Director, Office of Finance. John K. Darr, 55, has served as managing director of the Office of Finance since July 1992. Before joining the Office of Finance, he served as president of Ryland Acceptance Advisors, managing director of Prudential Bache Capital Funding, executive vice president of administration and finance of the Student Loan Marketing Association (Sallie Mae), and treasurer of the FHLBank of San Francisco. Finance Board Regulations Governing the Selection and Compensation of FHLBank Employees Before the enactment of the Modernization Act, the FHLBank Act provided that an FHLBank may select, employ, and fix the compensation of such officers and employees as may be necessary for the transaction of its business, subject to the approval of the Finance Board. Pursuant to this 50 t_ statutory authority, the Finance Board promulgated regulations governing the selection and compensation of FHLBank employees, which are described below. The Modernization Act devolved responsibility for FHLBank employee compensation to the FHLBanks by removing the requirement that the Finance Board must approve FHLBank employee compensation. As a result of the amendment of the Bank Act, the Finance Board rescinded its compensation regulation effective for compensation years starting after December 21, 1999. The discussion in this section describes the rules in effect through December 31, 1999. Selection of FHLBank Employees. The FHLBanks may hire officers and employees without prior Finance Board approval. The Finance Board prohibits the FHLBanks from entering into employment contracts with their employees. Compensation of FHLBank Employees. Each FHLBank may set the base salary of its president, subject to a salary cap established annually by the Finance Board. The Finance Board's regulations provide for the salary cap for each FHLBank president to be based upon the average base salary of a chief executive officer of a subsidiary financial institution in the FHLBank's primary metropolitan statistical area with an asset size comparable to that of the FHLBank, as of June of the prior year, reduced by five percent and rounded to the nearest $5,000. The Finance Board established salary caps for the FHLBank presidents for 1997 through 1999 based on nationwide salary survey data. In addition to base salary, each FHLBank may make an incentive payment to its president up to an amount equal to the difference between the president's base salary and 125 percent of the president's base salary cap. At least 50 percent of a president's incentive payment must be based on the extent to which the FHLBank meets reasonable numerical performance targets established by the FHLBank's board of directors related to the FHLBank's achievement of its housing finance mission. In November 1998, the Finance Board adopted the Community Investment Cash Advance Programs regulation, which amended, effective in 1999, the elements upon which an FHLBank's board of directors must base the FHLBank president's numerical performance targets for incentive compensation. These targets must include substantial consideration of innovative products directed at unmet credit needs, Community Investment Cash Advances (including Community Investment Program advances), non -advance credit support, and risk -management products for members, as well as advances, including long-term advances. No incentive payment may be made to an FHLBank president if the most recent examination of the FHLBank by the Finance Board identified an unsafe or unsound practice or condition. The FHLBanks may set compensation levels for officers and employees below the level of president without prior Finance Board approval. The base salaries and any incentive compensation for such employees must be reasonable and comparable with the base salaries and incentive compensation of employees of other FHLBanks and other similar businesses (including financial institutions) with similar duties and responsibilities. 51 066 The following table shows the 1999 FHLBank presidents' base salary caps and maximum total compensation (125 percent of base salary cap) as set by the Finance Board. Federal Home Loan Bank Presidents 1999 Base Salary Caps and Maximum Total Compensation Base Maximum Total FHLBank President Salary Cap Compensation(1) Boston ................................. Michael A. Jessee $345,000 $431,250 New York .............................. Alfred A. DelliBovi $345,000 $431,250 Pittsburgh .............................. James D. Roy $345,000 $431,250 Atlanta ................................ Raymond R. Christman $345,000 $431,250 Cincinnati .............................. Charles L. Thiemann $345,000 $431,250 Indianapolis ............................ Martin L. Heger $345,000 $431,250 Chicago ................................ Alex J. Pollock $345,000 $562,500(2) Des Moines ............................. Patrick J. Conway $345,000 $431,250 Dallas ................................. George M. Barclay $345,000 $431,250 Topeka ................................ Frank A. Lowman $345,000 $431,250 San Francisco ........................... Dean M. Schultz $375,000 $468,750 Seattle ................................. Norman B. Rice $345,000 $431,250 (1) 125 percent of Base Salary Cap. (2) The FHLBank of Chicago's board received Finance Board approval to pay its president a supplemental retention payment of $105,000, which increased his incentive compensation opportunity to $112,500 and his maximum total compensation opportunity to $562,500. In 1998, the Finance Board required the incentive compensation performance targets to include substantial consideration of growth in innovative products directed at unmet credit needs, growth in pre -committed Community Investment Program advances, growth in non -advance credit support and risk management products for members, as well as growth in advances, including long-term advances. The remaining portion of a president's incentive payment had to be based on the extent to which the FHLBank met reasonable numerical performance targets related to the achievement of goals established by the FHLBank's board of directors, in its discretion. In June 1998, the Finance Board amended the section of the compensation regulation regarding compensation of FHLBank employees other than the president. The amendment states that the sum of annual base salary and all incentive payments received in a single calendar year by an employee other than the FHLBank president must not exceed 125 percent of the annual base salary cap established for the FHLBank president, as published by the Finance Board. 52 1- 0 611 The following table shows the 1998 FHLBank presidents' base salary caps and maximum total compensation (125 percent of base salary cap) as set by the Finance Board. Federal Home Loan Bank Presidents 1998 Base Salary Caps and Maximum Total Compensation Base Maximum Total FHLBank President Salary Cap Compensation(1) Boston ................................ Michael A. Jessee $315,000 $393,750 New York ............................ Alfred A. DelliBovi $315,000 $393,750 Pittsburgh ............................. James D. Roy $315,000 $393,750 Atlanta ............................... Paul D. Hill $315,000 $393,750 Cincinnati ............................. Charles L. Thiemann $315,000 $393,750 Indianapolis ........................... Martin L. Heger $315,000 $393,750 Chicago .............................. Alex J. Pollock $315,000 $393,750 Des Moines ........................... Thurman C. Connell $315,000 $393,750 Dallas ................................ George M. Barclay $315,000 $393,750 Topeka ............................... Frank A. Lowman $265,000 $331,250 San Francisco ......................... Dean M. Schultz $345,000 $431,250 Seattle ............................... James R. Faulstich $315,000 $393,750 (1) 125 percent of Base Salary Cap. In January 1997, the Finance Board amended its regulation governing the selection and compensation of FHLBank employees and established the requirements for base salary caps and limitations on total compensation. In 1997, no employee's base salary could exceed the base salary of the president, and no employee could be paid an incentive award, expressed as a percentage of base salary, greater than the president's incentive payment opportunity, expressed as a percentage of base salary. 53 The following table shows the 1997 FHLBank Presidents' base salary caps and maximum total compensation (125 percent of base salary cap) as set by the Finance Board. Federal Home Loan Bank Presidents 1997 Base Salary Caps and Maximum Total Compensation Base Maximum Total Bank President Salary Cap Compensation(2) Boston ................................ Michael A. Jessee $290,000(1) $362,500 New York ............................ Alfred A. DelliBovi $310,000 $387,500 Pittsburgh ............................. James D. Roy $295,000 $368,750 Atlanta ............................... Paul D. Hill $315,000 $393,750 Cincinnati ............................. Charles L. Thiemann $300,000(l) $375,000 Indianapolis ........................... Martin L. Heger $275,000 $343,750 Chicago .............................. Alex J. Pollock $285,000 (1) $356,250 Des Moines ........................... Thurman C. Connell $305,000 $381,250 Dallas ................................ George M. Barclay $290,000 $362,500 Topeka ............................... Frank A. Lowman $265,000 $331,250 San Francisco ......................... Dean M. Schultz $345,000 $431,250 Seattle ............................... James R. Faulstich $285,000(1) $356,250 (1) Actual base salary as recommended by the FHLBank's board of directors exceeded the Finance Board's salary cap. Since base salary recommendations were considered at the same time the Finance Board set the salary caps, the Finance Board determined that the board of director's salary recommendation would be "grandfathered" with the condition that the base salary would not be increased until the salary cap set by the Finance Board exceeded the 1997 base salary. (2) 125 percent of Base Salary Cap. Finance Board Regulations Governing Selection and Compensation of Office of Finance Employees The Finance Board exercises similar supervisory and examination authority over the Office of Finance and the Office of Finance board of directors that it exercises over an FHLBank and its board of directors. Finance Board regulations governing the Office of Finance make selection and employment of the managing director of the Office of Finance (managing director) a responsibility of the Office of Finance board of directors subject to Finance Board approval. In December 1998, the Finance Board determined that it was appropriate to subject the compensation of the managing director to the same limits that apply to the FHLBank presidents, other than the president of the FHLBank of San Francisco, as revised to reflect differences in their respective responsibilities. At the time the Finance Board subjected the managing director's compensation to the same limits as the FHLBank presidents' compensation, it rescinded all prior Finance Board resolutions addressing the compensation of the managing director. In 1999, the managing director's compensation was governed by the $345,000 base salary cap and $431,250 cap on total compensation that applied to the FHLBank presidents other than the president of the FHLBank of San Francisco. In amending its regulations governing the selection and compensation of FHLBank employees in January 1997, the Finance Board deferred action on the selection and compensation of Office of Finance employees. As a result, for 1997 and 1999, the selection and compensation of the managing director remained under the guidelines of the FHLBank presidents' compensation plan while the FHLBank presidents' selection and compensation was determined under the Finance Board's regulations governing selection and compensation of FHLBank employees. The FHLBank presi- dents' compensation plan established base salary guidelines, merit increase guidelines, and criteria 54 0f9 for incentive payments for FHLBank presidents. For 1997 and 1998, base salary and merit increase guidelines for the managing director under the compensation plan were as follows: Salary Range: $205,000 (minimum) $255,000 (midpoint) $325,000 (maximum) Merit Increase: 4.2 percent benchmark merit increase 8.4 percent maximum merit increase Amendments to the compensation plan in 1996, which affected the 1997 incentive awards, provided that the managing director's incentive award must be based on numerically expressed performance targets established by the Office of Finance board of directors that must illustrate an improvement in performance over the prior year or illustrate extraordinary achievement. Addition- ally, the maximum award was reduced to 31.25 percent of base salary. 55 070 The following table presents information on the compensation of the FHLBank presidents and the managing director of the Office of Finance for 1999, 1998, and 1997. Long Term Compensation Awards Payouts Annual Compensation Restricted Securities Other Annual Stock Underlying LTIP All Other Name and Incentive Compensation Awards Options/ Payouts Compensation Principal Position Year Salary Payment($) ($) (1) ($) SARs (#) ($) ($) (2) Michael A. Jessee ........... 1999 335,600 95,650 26,609(3) (4) President, FHLBank 1998 315,000 78,750 23,988(3) (4) of Boston 1997 303,400 59,100 24,666(3)(4) Alfred A. DelliBovi .......... 1999 345,000 86,250 23,011(5) (6) President, FHLBank 1998 315,000 78,750 20,974(5) (6) of New York 1997 302,100 65,828 15,885(5) (6) James D. Roy ............... 1999 337,296 93,954 25,381(7) President, FHLBank 1998 308,022 85,728 23,415(7) of Pittsburgh 1997 286,530 82,220 22,067(7) Raymond R. Christman ...... 1999 162,500 53,125 1,181(7) President, FHLBank of Atlanta(8) Charles L. Thiemann......... 1999 345,000 86,250 26,152(7) President, FHLBank 1998 315,000 78,750 23,513(7) of Cincinnati 1997 307,206. 67,794 24,227(7) Martin L. Heger ............. 1999 312,338 108,352 18,740(7) President, FHLBank 1998 289,198 102,217 17,352(7) of Indianapolis 1997 265,304 78,446 1.5,918(7) Alex J. Pollock .............. 1999 397,500 112,500 21,000(7) President, FHLBank 1998 315,000 79,000 19,000(7) of Chicago 1997 285,282 70,968 17,112(7) Patrick J. Conway ........... 1999 169,869 82,500 9,422(7) President, FHLBank of Des Moines(9) George M. Barclay........... 1999 307,912 76,496 18,484(7) President, FHLBank 1998 267,500 16,065(7) of Dallas 1997 255,000 15,050(7) Frank A. Lowman ........... 1999 287,750 99,763 20,758(7) President, FHLBank 1998 257,500 56,967 18,700(7) of Topeka 1997 249,375 54,164 17,303(7) Dean M. Schultz ............ 1999 360,000 99,100 28,478(7) President, FHLBank 1998 345,000 74,500 20,700(7) of San Francisco 1997 329,000 90,000 19,740(7) Norman B. Rice ............. 1999 270,833 54,200 4,419(7) President, FHLBank 1998 166,667 36,468 of Seattle (1.0) John K. Darr ............... 1999 330,000 101,250 25,172(7) Managing Director, 1998 305,231 89,531 23,263(7) Office of Finance 1997 283,936 82,519 21,991(7) (1) Perquisite and other personal benefits, securities or property are only reported with respect to a person named in the Summary Compensation Table ("Named Person") if they exceed the lesser of $50,000 or 10 percent of the total of annual salary and incentive payment for the year. (2) Except as indicated in note (6) below, the dollar value of premiums paid for group term life insurance is not reported because the plans under which these benefits are provided do not discriminate in scope, terms, or operation in favor of executive officers or directors of the FHLBank or the Office of Finance and are available generally to all salaried employees. (3) Includes $24,861, $22,446, and $23,294 in contributions or other allocations made by the FHLBank to qualified and/or non -qualified vested and unvested defined contribution plans in 1999, 1998, and 1997, and $1,748, $1,542, and $1,372 in insurance premiums paid by, or on behalf of, the FHLBank with respect to term life insurance for the benefit of the president in 1999, 1998, and 1997. (4) To match and fund the FHLBank's Benefit Equalization Plan liability, the FHLBank is providing a collateral assignment split -dollar life insurance policy in which the president has rights to a cash surrender value not to exceed the present value of his benefit under the Benefit Equalization Plan. To the extent the cash value offsets a liability under the Benefit Equalization Plan, the liability under the Plan will be reduced. The premium of the term -life 56 071 component of the policy has been separately disclosed in note (5) above. The benefits under the Benefit Equalization Plan are reported below. (5) Includes $20,700, $18,900, and $14,350 in contributions or other allocations made by the FHLBank to qualified and/or non -qualified vested and unvested contribution plans in 1999, 1998, and 1.997, and $2,311, $2,074, and $1,535 in insurance premiums paid by, or on behalf of, the FHLBank with respect to term life insurance for the benefit of the president in 1999, 1998, and 1997. (6) To match and fund the FHLBank's Benefit Equalization Plan liability, the FHLBank is providing a collateral assignment split -dollar life insurance policy in which the president has rights to a cash surrender value not to exceed the present value of his benefit under the Benefit Equalization Plan. To the extent the cash value offsets a liability under the Benefit Equalization Plan, the liability under the Plan will be reduced. The premium of the term -life component of the policy has been separately disclosed in note (5) above. The benefits under. the Benefit Equalization Plan are reported below. (7) Represents contributions or other allocations made by the FHLBank with whom the Named Person is employed or the Office of Finance to qualified and/or non -qualified vested and unvested defined contribution plans. (8) Mr. Christman became president of the FHLBank of Atlanta on July 1, 1999. (9) Mr. Conway became president of the FHLBank of Des Moines in October 1999..Before that, he served as acting interim president beginning in April 1999. (10) Mr. Rice became president of the FHLBank of Seattle on February 1, 1999. Before that, he served as executive vice president beginning March 1, 1998. FHLBank Presidents and Managing Director of the Office of Finance Pension Plans and Benefit Equalization Plans All of the FHLBank presidents, except the president of the FHLBank of San Francisco, and the managing director of the Office of Finance participate in the Financial Institutions Retirement Fund (FIRE), a tax -qualified defined benefit plan. The managing director of the Office of Finance and all of the FHLBank presidents, except the president of the FHLBank of Dallas, have retirement Benefit Equalization Plans (BEP), a non -qualified retirement plan. A BEP ensures, among other things, that participants receive the full amount of benefits to which they would have been entitled under their pension plans in the absence of limits on benefit levels imposed by the Internal Revenue Service (IRS) . The following tables show estimated annual benefits payable from FIRF and BEP combined upon retirement at age 65 and calculated in accordance with the formula currently in effect for specified years -of -service and remuneration classes for the FHLBank presidents participating in both plans and the managing director of the Office of Finance. The table for the president of the FHLBank of Dallas shows estimated annual benefits payable from FIRF only. Retirement benefits are not subject to any offset provision for Social Security benefits that are received in the defined - benefit plans. Following each table, the formula for calculating annual benefits, the credited years of service for each president and the managing director as of December 31, 1999, and any other information relevant to understanding the table are set forth. 57 0 7' President, FHLBank of Boston Years of Service Remuneration 15 20 25 30 35 $125,000 $ 44,531 $ 59,375 $ 74,219 $ 89,063 $103,906 $150,000 $ 53,438 $ 71,250 $ 89,063 $106,875 $124,688 $175,000 $ 62,344 $ 83,125 $103,906 $124,688 $145,469 $200,000 $ 71,250 $ 95,000 $118,750 $142,500 $166,250 $225,000 $ 80,156 $106,875 $1.33,594 $160,313 $187,031. $250,000 $ 89,063 $1 18,750 $148,438 $178,125 $207,813 $300,000 $106,875 $142,500 $178,125 $213,750 $249,375 $400,000 $142,500 $190,000 $237,500 $285,000 $332,500 $450,000 $160,313 $21.3,750 $267,1.88 $320,625 $374,063 $500,000 $178,125 $237,500 $296,875 $356,250 $415,625 • Formula: 2.375 percent x high three-year average compensation x credited years of service. • Compensation is the highest three-year compensation (base and incentive) paid in the year. • Credited years of service as of December 31, 1999, is 22 years, 10 months. • The regular form of retirement benefits is a straight -life annuity including a lump -sum retirement death benefit. President, FHLBank of New York Years of Service Remuneration 15 20 25 30 35 $125,000 $ 46,875 $ 62,500 $ 78,125 $ 93,750 $ 93,750 $150,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $112,500 $175,000 $ 65,625 $ 87,500 $109,375 $131,250 $131,250 $200,000 $ 75,000 $100,000 $125,000 $150,000 $150,000 $225,000 $ 84,375 $1.1.2,500 $140,625 $168,750 $168,750 $250,000 $ 93,750 $125,000 $156,250 $187,500 $187,500 $300,000 $112,500 $150,000 $187,500 $225,000 $225,000 $400,000 $150,000 $200,000 $250,000 $300,000 $300,000 $450,000 $168,750 $225,000 $281,250 $337,500 $337,500 $500,000 $187,500 $250,000 $312,500 $375,000 $375,000 • Formula: 2.5 percent x years of benefit service (not to exceed 30) x high three-year average salary. • Salary includes basic annual salary rate plus incentive payments. • Credited years of service as of December 31, 1999, is 6 years, 8 months. • The regular form of retirement benefits is a straight -life annuity with a death benefit equal to 12 times the annual retirement allowance less the sum of such allowance payments made before death. 58 073 President, FHLBank of Pittsburgh Years of Service Remuneration 15 20 25 30 35 $125,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 87,500 $150,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $105,000 $175,000 $ 52,500 $ 70,000 $ 87,500 $105,000 $122,500 $200,000 $ 60,000 $ 80,000 $100,000 $120,000 $140,000 $225,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500 $250,000 $ 75,000 $1.00,000 $125,000 $150,000 $175,000 $300,000 $ 90,000 $120,000 $150,000 $180,000 $210,000 $400,000 $120,000 $160,000 $200,000 $240,000 $280,000 $450,000 $135,000 $1.80,000 $225,000 $270,000 $315,000 $500,000 $150,000 $200,000 $250,000 $300,000 $350,000 • Formula: 2 percent x years of benefit service x high three-year average salary. • Compensation covered includes annual base salary plus incentive compensation without regard to IRS limitations. • Estimated credited years of service as of December 31, 1999, is 12 years, 1. month. • The regular form of retirement benefits provides a life annuity; lump -sum option is also available. President, FHLBank of Atlanta Years of Service Remuneration 15 20 25 30 35 $125,000 $ 46,875 $ 62,500 $ 78,125 $ 93,750 $ 93,750 $150,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $112,500 $175,000 $ 65,625 $ 87,500 $109,375 $131,250 $131,250 $200,000 $ 75,000 $100,000 $125,000 $150,000 $150,000 $225,000 $ 84,375 $1.1.2,500 $140,625 $168,750 $168,750 $250,000 $ 93,750 $125,000 $156,250 $187,500 $187,500 $300,000 $112,500 $150,000 $187,500 $225,000 $225,000 $400,000 $150,000 $200,000 $250,000 $300,000 $300,000 $450,000 $168,750 $225,000 $281,250 $337,500 $337,500 $500,000 $187,500 $250,000 $31.2,500 $375,000 $375,000 • Formula: 2.5 percent x years of service (not to exceed 30 years) x high three-year average salary. • Includes salary and incentive compensation. • Credited years of service as of December 31, 1999, is 6 months. • The regular form of retirement benefits is a straight -life annuity including a lump -sum retirement death benefit. 59 074 President, FHLBank of Cincinnati Years of Service Remuneration 15 20 25 30 35 $125,000 $ 46,875 $ 62,500 $ 78,125 $ 93,750 $109,375 $150,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250 $175,000 $ 65,625 $ 87,500 $109,375 $131,250 $153,125 $200,000 $ 75,000 $100,000 $125,000 $150,000 $175,000 $225,000 $ 84,375 $112,500 $140,625 $168,750 $196,875 $250,000 $ 93,750 $1.25,000 $156,250 $187,500 $218,750 $300,000 $112,500 $150,000 $187,500 $225,000 $262,500 $400,000 $150,000 $200,000 $250,000 $300,000 $350,000 $450,000 $168,750 $225,000 $281,250 $337,500 $393,750 $500,000 $187,500 $250,000 $312,500 $375,000 $437,500 • Formula: 2.5 percent x years of benefit service x high three-year average salary. • Salary is defined as the basic annual salary rate plus overtime and incentive. Salary is recognized annually on a paid basis versus an earned basis. • Credited years of service as of December 31, 1999, is 34 years, 8 months. • The regular form of retirement benefits is a straight -life annuity including a lump -sum retirement death benefit. President, FHLBank of Indianapolis Years of Service Remuneration 15 20 25 30 35 $125,000 $ 46,875 $ 62,500 $ 78,125 $ 93,750 $109,375 $150,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250 $175,000 $ 65,625 $ 87,500 $109,375 $131,250 $153,125 $200,000 $ 75,000 $100,000 $125,000 $150,000 $175,000 $225,000 $ 84,375 $112,500 $140,625 $168,750 $196,875 $250,000 $ 93,750 $1.25,000 $156,250 $187,500 $218,750 $300,000 $112,500 $150,000 $187,500 $225,000 $262,500 $400,000 $150,000 $200,000 $250,000 $300,000 $350,000 $450,000 $168,750 $225,000 $281,250 $337,500 $393,750 $500,000 $187,500 $250,000 $312,500 $375,000 $437,500 • Formula: 2.5 percent x years of benefit service x high three-year average compensation. • The remuneration covered by the plan includes salary, bonus, and any other compensation, that is reflected on the Internal Revenue Service Form W-2 (exclusive of any compensation deferred from a prior year). • Credited years of service as of December 31, 1999, is 18 years, 8 months. • The retirement benefits are computed on a straight -life annuity basis. 073 President, FHLBank of Chicago Years of Service Remuneration 15 20 25 30 35 $125,000 $ 42,188 $ 56,250 $ 70,313 $ 84,375 $ 98,438 $150,000 $ 50,625 $ 67,500 $ 84,375 $101,250 $118,125 $175,000 $ 59,063 $ 78,750 $ 98,438 $118,125 $137,813 $200,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500 $225,000 $ 75,938 $101,250 $126,563 $151,875 $177,188 $250,000 $ 84,375 $11.2,500 $140,625 $168,750 $196,875 $300,000 $101,250 $135,000 $168,750 $202,500 $236,250 $400,000 $135,000 $180,000 $225,000 $270,000 $315,000 $450,000 $151,875 $202,500 $253,1.25 $303,750 $354,375 $500,000 $168,750 $225,000 $281,250 $337,500 $393,750 • Formula: 2.25 percent x years and months of benefit service x high three-year average salary. • Salary equals basic annual salary rate plus overtime and incentives. • Estimated credited years of service as of December 31, 1999, is 7 years, 9 months. • The regular form of retirement benefits is a straight -life annuity including a lump -sum retirement death benefit. President, FHLBank of Des Moines Years of Service Remuneration 15 20 25 30 35 $125,000 $ 42,188 $ 56,250 $ 70,313 $ 84,375 $ 98,438 $150,000 $ 50,625 $ 67,500 $ 84,375 $101,250 $118,125 $175,000 $ 59,063 $ 78,750 $ 98,438 $118,125 $137,813 $200,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500 $225,000 $ 75,938 $1.01.,250 $126,563 $151,875 $177,188 $250,000 $ 84,375 $112,500 $140,625 $168,750 $196,875 $300,000 $101,250 $135,000 $168,750 $202,500 $236,250 $400,000 $135,000 $1.80,000 $225,000 $270,000 $315,000 $450,000 $151,875 $202,500 $253,125 $303,750 $354,375 $500,000 $168,750 $225,000 $281,250 $337,500 $393,750 • Formula: 2.25 percent x years of benefit service x high three-year average compensation. • The compensation covered by each plan is base salary plus incentive compensation (as paid in a calendar year) . • Estimated credited years of service as of December 31, 1999, is approximately 20 years. • Benefits are computed on the basis of a modified cash refund form of annuity with a death benefit equal to 12 times the annual retirement allowance less the sum of such allowance payments made before death. 61 076 President, FHLBank of Dallas Years of Service Remuneration 15 20 25 30 35 $125,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $112,500 $150,000 $ 67,500 $ 90,000 $112,500 $135,000 $135,000 $175,000 $ 76,500 $1.02,000 $127,500 $153,000 $153,000 $200,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 $225,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 $250,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 $275,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 $300,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 $400,000 $ 76,500 $1.02,000 $127,500 $153,000 $153,000 $450,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 $500,000 $ 76,500 $102,000 $127,500 $153,000 $153,000 • Formula: 3 percent x years of service x high three-year average salary. • Salary equals W-2 earnings up to the maximum IRS compensation limit, which is currently $170,000. The plan limits the maximum years of benefit service to 30 years. • Estimated credited years of service as of December 31, 1999, is 16 years, 8 months. • The regular form of retirement benefits is a straight -life annuity that includes a lump -sum death benefit. The normal retirement age is 65, but the plan does provide for an unreduced retirement benefit beginning at age 60. President, FHLBank of Topeka Years of Service Remuneration 15 20 25 30 35 $125,000 $ 83,750 $ 83,750 $ 83,750 $ 84,375 $ 84,375 $150,000 $100,500 $100,500 $100,500 $101,250 $101,250 $175,000 $117,250 $1.1.7,250 $117,250 $118,125 $118,125 $200,000 $134,000 $134,000 $134,000 $135,000 $135,000 $225,000 $150,750 $150,750 $1.50,750 $151,875 $151,875 $250,000 $167,500 $167,500 $167,500 $168,750 $168,750 $300,000 $201,000 $201,000 $201,000 $202,500 $202,500 $400,000 $268,000 $268,000 $268,000 $270,000 $270,000 $450,000 $301,500 $301,500 $301,500 $303,750 $303,750 $500,000 $335,000 $335,000 $335,000 $337,500 $337,500 • Formula: FIRF Benefit = 2.25 percent x years of benefit service x high three-year average salary (the table does not reflect compensation and benefit limits imposed by law on qualified defined benefit plans) BEP Benefit = 15.25 percent of high three-year average salary after 5 years of benefit service to 67 percent of high -three-year average salary for benefit service in excess of 13 years, less the applicable FIRE benefit • The salary definition for both FIRF and BEP is comprised of base salary plus incentive compensation and any overtime paid, except that the FIRF plan does not recognize salary and incentive deferred under the nonqualified deferral option of the BEP. Benefit service begins one year after employment for both plans. • Credited years of service as of December 31, 1999, is 9 years, 8 months. • FIRF and BEP benefits are computed based on a straight -life annuity with 10 years certain. There are no benefit offsets other than that the BEP benefit is based on a total benefit less the applicable FIRF benefit. 62 077 President, FHLBank of San Francisco The FHLBank of San Francisco provides a retirement pension to the president with benefits provided under two plans (which are also available to all employees): (i) the Cash Balance Plan, a qualified plan consisting of a transition benefit account component and a cash balance account component; and (ii) the Benefit Equalization Plan, a non -qualified plan, which restores benefits lost under the transition benefit account and the cash balance account of the qualified plan due to limitations under the Internal Revenue Code. Before January 1, 1996, the FHLBank of San Francisco participated in the Financial Institutions Retirement Fund ("FIRF"), a qualified pension plan. Effective December 31, 1995, the FHLBank of San Francisco withdrew from the FIRF and adopted the Cash Balance Plan. The full value of benefits earned under the FIRF at age 65 calculated as of December 31, 1995, is preserved and vested for those employees who participated in the FIRF before January 1, 1996 (the "frozen FIRE benefit account"), including the president. The FIRF benefits were based on the highest three-year average pay multiplied by credited years of benefit service multiplied by 2 percent. The transition benefit account is designed to supplement the frozen FIRF benefit by maintain- ing the employee's percentage ratio of his or her frozen FIRF annuity payments to the employee's highest three-year average pay, calculated as of December 31, 1995 (the "annuity ratio"). At December 31, 1995, the FHLBank of San Francisco president's annuity ratio was 22 percent. Upon retirement, the employee will receive benefits equal to his or her highest three-year average pay multiplied by his or her annuity ratio. The benefits would be paid from the frozen FIRF benefit account plus the transition benefit account. If the president terminated his service at the FHLBank as of December 31, 1999, with approximately 15 years of service, his pension annuity payments would be $94,666 per year beginning in 2012 (at age 65), which is equal to his highest three-year average pay of $430,300 multiplied by 22 percent. The annuity payments would be paid from the frozen FIRF benefit account ($48,005 annual annuity) with the remainder paid from the transition benefit account under the Benefit Equalization Plan. If he continues his service at the FHLBank until he reaches age 65 and assuming: (i) he receives an annual base salary of $360,000 for 1999 and incentive pay of $74,500 in 1999 (earned in 1998); and (ii) his annual base salary increases by 4 percent each year and he receives an annual incentive pay of 45 percent of his prior year's base salary for 13 years until the year 2012, his annuity payment would be $174,770 per year. The cash balance account provides the president with benefits consisting of a service credit equal to 6 percent of his total annual pay (base salary plus incentive pay) and an interest credit equal to 6 percent of the opening balance at the beginning of each plan year. He may withdraw this amount in a lump sum or convert the amount into an annuity. He will have a balance of $124,855 in his cash balance account as of December 31, 1999. If he terminated his service at the FHLBank as of December 31, 1999, and annuitized his cash balance account, his annuity payments would be $23,713 per year beginning in 2012. If he continues his service at the FHLBank until he reaches age 65 and assuming: (i) he receives an annual base salary of $360,000 for 1999 and incentive pay of $74,500 in 1999 (earned in 1998); and (ii) his annual base salary increases by 4 percent each year and he receives an annual incentive pay of 45 percent of his prior year's base salary for 13 years until the year 2012, his annuity payments would be $87,907 per year beginning in 2012. The benefits under the Cash Balance Plan and the Benefit Equalization Plan vest 20 percent per year and are fully vested after completing 5 years of service. 63 President, FHLBank of Seattle Years of Service Remuneration 15 20 25 30 35 $125,000 $ 46,875 $ 62,500 $ 78,125 $ 93,750 $109,375 $150,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250 $175,000 $ 65,625 $ 87,500 $109,375 $131,250 $153,125 $200,000 $ 75,000 $100,000 $125,000 $150,000 $175,000 $225,000 $ 84,375 $112,500 $140,625 $168,750 $196,875 $250,000 $ 93,750 $125,000 $156,250 $187,500 $218,750 $300,000 $112,500 $150,000 $187,500 $225,000 $262,500 $400,000 $150,000 $200,000 $250,000 $300,000 $350,000 $450,000 $168,750 $225,000 $281,250 $337,500 $393,750 $500,000 $187,500 $250,000 $312,500 $375,000 $437,500 • Formula: 2.5 percent x years of benefit service (less 1 year waiting period) x high three-year average salary. • Compensation includes base salary and incentive compensation. • Estimated credited years of service as of December 31, 1999, is 1 year, 7 months. • The regular form of retirement benefit is a straight -life annuity including a lump -sum retirement death benefit, which is 12 times the annual retirement allowance less the sum of such allowance payments made before death. Managing Director, Office of Finance Years of Service Remuneration 15 20 25 30 35 $125,000 $ 42,188 $ 561250 $ 70,313 $ 84,375 $ 98,438 $150,000 $ 50,625 $ 67,500 $ 84,375 $101,250 $118,125 $175,000 $ 59,063 $ 78,750 $ 98,438 $118,125 $137,813 $200,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500 $225,000 $ 75,938 $101,250 $126,563 $151,875 $177,188 $250,000 $ 84,375 $112,500 $140,625 $168,750 $196,875 $300,000 $101,250 $135,000 $168,750 $202,500 $236,250 $400,000 $135,000 $180,000 $225,000 $270,000 $315,000 $450,000 $151,875 $202,500 $253,1.25 $303,750 $354,375 $500,000 $168,750 $225,000 $281,250 $337,500 $393,750 • Formula: 2.25 percent x years of benefit service x high three-year average compensation. • For years before 1998, compensation is defined as base salary as defined by FIRF. For 1998 and 1999, compensation includes base salary and incentive compensation. • Estimated credited years of service as of December 31, 1999, is 12 years, 4 months. • The regular form of retirement benefit is a straight -life annuity including a lump -sum retirement death benefit. 64 079 FEDERAL HOME LOAN BANKS INDEX TO COMBINED FINANCIAL STATEMENTS Page Report of Independent Accountants ............................................... 66 Combined Statements of Condition as of December 31, 1999 and 1998 ................. 67 Combined Statements of Income for the Years Ended December 31, 1999, 1998, and 1997........................................... 68 Combined Statements of Capital for the Years Ended December 31, 1999, 1998, and 1997............................................. 69 Combined Statements of Cash Flows for the Years Ended December 31, 1999, 1998, and 1997............................................. 70 Notes to Combined Financial Statements .......................................... 72 Combining Information: Statement of Condition as of December 31, 1999................................. 100 Statement of Condition as of December 31, 1998................................. 102 Statement of Income for the Year Ended December 31, 1999 ....................... 104 Statement of Income for the Year Ended December 31, 1998 ....................... 106 Statement of Income for the Year Ended December 31, 1997 ....................... 108 Statements of Capital for the Years Ended December 31, 1999, 1998, and 1997........................................... 110 Statement of Cash Flows for the Year Ended December 31, 1999 ................... 118 Statement of Cash Flows for the Year Ended December 31, 1998 ................... 122 Statement of Cash Flows for the Year Ended December 31, 1997 ................... 126 65 REPORT OF INDEPENDENT ACCOUNTANTS To the Boards of Directors of the Federal Home Loan Banks and the Federal Housing Finance Board In our opinion, the accompanying combined statements of condition and the related combined statements of income, of capital, and of cash flows present fairly, in all material respects, the combined financial position of the Federal Home Loan Banks (the FHLBanks) at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These combined financial statements are the responsibility of the management of the Federal Housing Finance Board and the FHLBanks; our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Also, in accordance with those standards and as part of our audit of the combined financial statements, we issued separate reports on internal controls and on compliance with laws and regulations. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the account- ing principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were made for the purpose of forming an opinion on the combined financial statements taken as a whole; we have also audited each of the individual FHLBank financial statements. The combining information included herein is presented for purposes of additional analysis rather than to present the financial position, results of operations and cash flows of the individual FHLBanks. However, the combining information has been subjected to the auditing procedures applied in the audits of the combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the combined financial statements taken as a whole. Washington, D.C. March 29, 2000 66 L 081 FEDERAL HOME LOAN BANKS COMBINED STATEMENTS OF CONDITION (In millions of dollars) December 31, 19" 1998 ASSETS Cash and due from banks (Note 2)....................................... $ 4,047 $ 686 Interest -bearing deposits in banks ......................................... 9,956 4,718 Securities purchased under resale agreements ............................... 2,754 3,988 Federal funds sold (Note 3)............................................. 56,984 47,208 Investments: Held -to -maturity securities (Note 3).................................. 97,1.59 77,142 Available -for -sale securities (Note 4)................................. 4,572 4,137 Advances (Note 5)..................................................... 395,747 288,189 Mortgage loans (Note 7)................................................ 2,027 966 Less: allowance for credit losses on mortgage loans .......................... 1 Mortgage loans, net ..................................................... 2,026 966 Accrued interest receivable .............................................. 9,380 6,317 Bank premises and equipment, net ........................................ 98 149 Other assets........................................................... 489 502 Total assets ................................................... $583,21.2 $434,002 LIABILITIES Deposits (Note 8) : Demand and overnight .............................................. $ 15,151 $ 21,712 Term............................................................. 1,478 2,590 Other............................................................ 452 520 Total deposits .................................................. 17,081. 24,822 Borrowings: Securities sold under repurchase agreements (Note 9) ................... 543 647 Other............................................................ 336 Total borrowings ............................................... 543 983 Consolidated obligations (Note 10): Discount notes ..................................................... 141,249 1.15,555 Bonds............................................................ 384,170 261,160 Total consolidated obligations .................................... 525,419 376,715 Accrued interest payable ................................................ 9,804 6,439 Affordable Housing Program (Note 6).................................... 520 455 Payable to REFCORP (Note 11)........................................ 75 75 Other liabilities........................................................ 755 1,761 Total liabilities ................................................. 554,197 4111250 Commitments and contingencies (Notes 6, 10, 11, 13 and 15 ) CAPITAL Capital stock ($100 par value) -issued and outstanding shares: 283,605 in 1999 and 222,896 in 1998 (Note 11) .......................... 28,361 22,287 Retained earnings -Subject to restrictions (Note 11) ........................ 660 468 Accumulated other comprehensive loss: Unrealized net losses on available -for -sale securities (Note 4) ............. (6) (3) Total capital ................................................... 29,015 22,752 Total liabilities and capital ....................................... $583,212 $434,002 The accompanying notes are an integral part of these combined financial statements. 67 080 FEDERAL HOME LOAN BANKS COMBINED STATEMENTS OF INCOME (In millions of dollars) For the Years Ended December 31, 1999 1998 1997 INTEREST INCOME Advances ................................................... $17,721 $13,1.55 $ 9,981 Interest -bearing deposits in banks ............................... 445 248 299 Securities purchased under resale agreements ..................... 177 212 241 Federal funds sold ............................................ 2,620 2,842 2,840 Investments: Held -to -maturity securities .................................. 5,193 4,792 4,458 Available -for -sale securities .................................. 262 205 206 Trading securities .......................................... 1 Mortgage loans .............................................. 88 18 Other...................................................... 14 6 4 Total interest income ................................... 26,520 21,478 18,030 INTEREST EXPENSE Consolidated obligations ....................................... 23,043 18,1.98 1.5,401 Deposits .................................................... 910 1,137 836 Securities sold under repurchase agreements ...................... 24 3 9 Other borrowings ............................................. 9 24 12 Total interest expense ................................... 23,986 19,362 16,258 NET INTEREST INCOME BEFORE LOAN LOSS PROVISION ... 2,534 2,116 1,772 Loan loss provision ........................................... 1 NET INTEREST INCOME AFTER LOAN LOSS PROVISION..... 2,533 2,116 1,772 OTHER INCOME Prepayment fees, net ......................................... 13 80 26 Service fees ................................................. 43 52 49 Realized net losses from sale of available -for -sale securities ......... (1) Unrealized gain (loss) on change in fair value of interest -rate exchange agreements associated with the elimination of interbank bonds ............................................ 24 (30) 52 Other, net ................................................... 27 17 14) Total other income ..................................... 107 1.1.9 112 OTHER EXPENSE Operating expenses ........................................... 282 258 229 Assessments ................................................. 29 28 24 Affordable Housing Program ................................... 199 169 137 Other...................................................... 3 2 Total other expenses .................................... 513 457 390 INCOME BEFORE EXTRAORDINARY ITEM ................... 2,127 1,778 1,494 Extraordinary gain (loss) on early extinguishment of debt .......... 1 (2) NET INCOME ................................................ $ 2,128 $ 1,778 $ 1,492 The accompanying notes are an integral part of these combined financial statements. 68 �- 083 FEDERAL HOME LOAN BANKS COMBINED STATEMENTS OF CAPITAL FOR THE YEARS ENDED DECEMBER 31, 19999 19989 AND 1997 (In millions of dollars) Accumulated Other Capital Stock P Total Comprehensive Shares Retained Income Total (In millions) Par Value Restricted Unrestricted Earnings (Loss) Capital BALANCE, DECEMBER 31, 1996........... 165 $16,540 $33 $ 309 $ 342 $(7) $16,875 Proceeds from sale of capital stock ............ 42 4,1.95 4,195 Redemption of capital stock .................. (24) (2,431) (2,431) Comprehensive income: Net income ........................... 1,492 1,492 1,492 Other comprehensive income: Net unrealized gain on available -for -sale securities ............................ 4 4 Total comprehensive income ................. 1,496 Transfers .................................. (15) 15 Dividends on capital stock: Cash ................................. (661) (661) (661) Stock ................................. 6 529 (529) (529) Capital distribution to REFCORP ............ _ _ (300) (300) _ (300) BALANCE, DECEMBER 31, 1997........... 189 18,833 18 326 344 (3) 19,174 Proceeds from sale of capital stock ............ 59 6,064 6,064 Redemption of capital stock .................. (31) (3,212) (3,212) Comprehensive income: Net income ........................... 1,778 1,778 1,778 Total comprehensive income ................. 1,778 Transfers .................................. 59 (59) Dividends on capital stock: Cash ................................. (752) (752) (752) Stock ................................. 6 602 (602) (602) Capital distribution to REFCORP ............ _ _ (300) (300) _ (300) BALANCE, DECEMBER 31, 1"8 ........... 223 22,287 77 391 468 (3) 22,752 Proceeds from sale of capital stock ............ 88 8,851 8,851 Redemption of capital stock .................. (35) (3,478) (3,478) Comprehensive income: Net income ........................... 2,128 2,128 2,128 Other comprehensive loss: Net unrealized loss on available -for -sale securities ............................ (3) (3) Total comprehensive income ................. 2,125 Transfers .................................. (8) 8 Dividends on capital stock: Cash ................................. (935) (935) (935) Stock ................................. 8 701 (701) (701) Capital distribution to REFCORP ............ _ _ (300) (300) (300) BALANCE, DECEMBER 31, 1999........... 284 $28,361 $69 $ 591 $ 660 $(6) $29,015 The accompanying notes are an integral part of these combined financial statements. 69 FEDERAL HOME LOAN BANKS COMBINED STATEMENTS OF CASH FLOWS (In millions of dollars) For the Years Ended December 31, 1999 1998 1997 OPERATING ACTIVITIES Net income .......................................... $ 2,128 $ 1,778 $ 1.,492 Extraordinary (gain) loss on early extinguishment of debt ... (1) 2 Income before extraordinary item ................: 2027 1,778 1,494 Adjustments to reconcile income before extraordinary item to net cash provided by operating activities: Depreciation and amortization: Net premiums and discounts on consolidated obligations, investments, and interest -rate exchange agreements ....................... I ............ 3,283 3,499 2,613 Concessions on consolidated obligations .............. 120 145 117 Deferred losses (gains) on interest -rate exchange agreements, net ................................ 15 3 (70) Bank premises and equipment ...................... 12 15 17 Other........................................... (2) Provision for credit losses on mortgage loans ............ 1 Loss due to change in net mark to market adjustment for interest -rate exchange agreements ................... 9 Gain on disposal of bank premises and equipment ....... (5) Net realized losses on available -for -sale securities ....... 1 Decrease in accrued interest receivable ................ (2,946) (1,122) (1,127) (Decrease) increase in other assets .................... (281) (58) 6 Increase in Affordable Housing Program (AHP) liability and discount on AHP advances ..................... 64 70 55 Increase in accrued interest payable ................... 3,329 1,066 1,036 ( Decrease) increase in other liabilities ................. 537) 616 LL41) Total adjustments .............................. 3,064 4,234 2,505 Net cash provided by operating activities ........... 5,191 6,012 3,999 INVESTING ACTIVITIES Net (increase) decrease in interest -bearing deposits in banks (5,238) 3,312 (1,665) Net (increase) decrease in federal funds sold ............. (9,687) 6,726 (16,410) Net decrease (increase) in securities purchased under resale agreements ........................................ 1,234 (1,016) 1,967 Net. (increase) decrease in short-term held -to -maturity securities .......................................... (3,260) 2,901 3,319 Net decrease in trading securities ....................... 47 Proceeds from sales of long-term held -to -maturity securities ... 8 242 5 Purchases of long-term held -to -maturity securities ......... (40,868) (47,772) (27,386) Proceeds from maturities of long-term held -to -maturity securities .......................................... 24,806 42,403 22,222 Proceeds from sales of available -for -sale securities ......... 303 325 231 Purchases of available -for -sale securities ................. (43,759) (57,754) (6,996) Proceeds from maturities of available -for -sale securities .......................................... 43,119 55,386 10,1.80 Principal collected on advances ......................... 2,469,535 939,607 791,098 70 Advances made ...................................... Principal collected on mortgage loans .................... Mortgage loans made ................................. Principal collected on other loans ....................... Decrease (increase) in bank premises and equipment ...... Net cash used in investing activities ............... FINANCING ACTIVITIES Net (decrease) increase in deposits ..................... Net (decrease) increase in securities sold under repurchase agreements........................................ Net (decrease) increase in other borrowings .............. Net proceeds from sale of consolidated obligations: Bonds............................................ Discount notes ..................................... Payments for maturing and retiring consolidated obligations: Bonds............................................ Discount notes ..................................... Proceeds from issuance of capital stock .................. Payments for redemption of capital stock ................. Cash dividends paid .................................. Distribution to REFCORP ............................. Net cash provided by financing activities ........... Net increase (decrease) in cash and cash equivalents ........ Cash and cash equivalents at beginning of year .............. Cash and cash equivalents at end of year ................... For the Years Ended December 31, 1999 1998 1997 $(2,577,096) $(1,025,853) $ (832,005) 110 27 (1,166) (956) (37) 1 4 65 15) _�11) (141,893) (82,437) (55,437) (7,739) 6,875 229 (105) 405 (16) (336) 80 (30) 244,700 284,375 165,423 2,883,705 2,275,824 1,963,163 (122,854) (241,889) (129,107) (2,861,458) (2,250,973) (1,949,198) 8,849 6,064 4,197 (3,480) (3,212) (2,430) (919) (751) (660) (300) (300) (300) 140,063 76,498 51,271 3,361 73 (167) 686 613 780 $ 4,047 $ 686 $ 613 Supplemental Disclosures: Interest paid during the year ........................... $ 19,166 $ 17,060 $ 14,049 Stock dividends issued during the year ................... $ 701 $ 602 $ 529 The accompanying notes are an integral part of these combined financial statements. 71 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS Background Information These financial statements present the combined financial position and results of operations of the 12 Federal Home Loan Banks (FHLBanks) . Each FHLBank is a Federally chartered corporation that is exempt from all Federal, State, and local taxation except real property taxes. The FHLBanks and the Office of Finance, operating under the supervision of the Federal Housing Finance Board (Finance Board), compose the Federal Home Loan Bank System (Bank System or System). The Bank System serves the public by enhancing the availability of credit for residential mortgages and community investment. It provides a readily available, low-cost source of funds to its member institutions. The FHLBanks are cooperatives whose member institutions own the capital stock of each FHLBank and receive dividends on their investment. All members must purchase stock in their district FHLBank. Each FHLBank has its own management, employees, and board of directors. The Finance Board, an independent agency in the executive branch of the United States Government, supervises and regulates the FHLBanks. The Finance Board ensures that the FHLBanks operate in a safe and sound manner, carry out their housing finance mission, remain adequately capitalized, and can raise funds in the capital markets. Also, the Finance Board establishes policies and regulations governing the operations of the FHLBanks. Bank System debt instruments (consolidated obligations), the joint -and -several obligations of all FHLBanks, are the primary source of funds for the FHLBanks. Deposits, other borrowings, and the issuance of capital stock provide other funds. Some FHLBanks also offer to their members correspondent services, such as item processing, collection, and settlement. Note 1—Summary of Significant Accounting Policies Principles of Combination. For the purposes of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, the Finance Board considers each FHLBank to be a segment. The combined financial statements include the financial records of the 12 FHLBanks. Material transactions among the FHLBanks have been eliminated. The principal transactions among segments are purchases of interbank bonds —consolidated obliga- tions issued on behalf of one FHLBank and purchased by one or more other FHLBanks. All these transactions occur at market prices, and the purchasing FHLBanks treat these bonds as investments. In the past, upon combination any interest -rate exchange agreements associated with such consolidated obligations were marked to their fair value and any unrealized gains or losses resulting from changes in fair value flowed through the income statement. Because the level of interbank holdings has diminished, from about $11.7 billion at year end 1995 to about $3.6 billion at December 31, 1999, the amounts of such unrealized gains and losses have become immaterial and in the future will no longer be measured. At December 31, 1998, the fair value of interest -rate exchange agreements associated with interbank holdings was ($24) million. To implement this decision, this ($24) million appears as a gain on the income statement for the year ending December 31, 1999. No other transactions among the FHLBanks have a material effect on operating results. The following paragraphs describe the more significant accounting policies followed by the FHLBanks. Use of Estimates. The preparation of combined financial statements requires the preparer to make assumptions and estimates. These assumptions and estimates may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Actual results could differ from those estimates. 72 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) Investments. The FHLBanks carry at cost investments for which they have both the ability and intent to hold to maturity, adjusted for the amortization of premiums and accretion of discounts using a method that approximates the level -yield method. In addition, the FHLBanks adjust the carrying value of these investments for the unamortized costs of, and deferred gains and losses from, associated interest -rate exchange agreements. The FHLBanks classify investments that they may sell before maturity as available -for -sale and carry them at fair value. In addition, the FHLBanks adjust the carrying value of these investments for the fair value of interest -rate exchange agreements that are associated with them. The FHLBanks record changes in the fair value of these investments and associated interest -rate exchange agreements through a . separate component of capital. The FHLBanks compute gains and losses on sales of investment securities using the specific identification method and include these gains and losses in other income. The FHLBanks treat repurchase agreements as financings. Advances to Members. The FHLBanks present advances to members, net of unearned commitment fees and discounts on advances for the Affordable Housing Program (AHP), as discussed below. In addition, the FHLBanks adjust the carrying value of advances for the unamortized cost of, and deferred gains and losses from, associated interest -rate exchange agree- ments. The FHLBanks credit interest on advances to income as earned. Following the requirements of the Federal Home Loan Bank Act of 1932 (the Act), as amended, each FHLBank is to obtain sufficient collateral on advances to protect the FHLBank from losses. The Act limits eligible collateral to certain investment securities, residential mortgage loans, deposits with the FHLBank, and other real estate -related assets, as Note 5 more fully describes. Beginning with the Moderniza- tion Act, "community financial institutions," FDIC -insured institutions with assets of $500 million or less, are subject to more liberal collateral and membership rules. The FHLBanks have not incurred any credit losses on advances since their inception. Because of the collateral held as security on the advances and repayment history, management of each FHLBank believes that an allowance for losses on advances is unnecessary. AJJordable Housing Program. The Act requires each FHLBank to establish and fund an AHP (see Note 6). The FHLBanks charge required AHP funding to earnings and establish a liability. The AHP funds provide direct subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate -income households. In addition, some FHLBanks grant AHP advances at interest rates below the customary interest rate for nonsub- sidized advances. When an FHLBank makes an AHP advance, the present value of the variation in the cash flow caused by the difference in the interest rate between the AHP advance rate and the Bank System's related cost of funds for comparable -maturity funding is charged against the AHP liability and recorded as a discount on the AHP advance. Prepayment Fees. The FHLBanks charge their members a prepayment fee when members prepay certain advances before the original maturity. The FHLBanks credit prepayment fees to income when received. They net, gains and losses on interest -rate exchange agreements associated with prepaid advances with prepayment fees on the statements of income. Commitment Fees. The FHLBanks defer commitment fees for advances and amortize them to interest income using the straight-line method. They defer refundable fees until the commitment expires or until they make the advance. The FHLBanks record commitment fees for letters of credit as a deferred credit when they receive the fees and amortize them over the term of the letter of credit. Interest -Rate Exchange Agreements. The FHLBanks enter into interest -rate swaps, interest - rate cap and floor agreements, and futures and forward contracts (collectively, interest -rate 73 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) exchange agreements) to manage their exposure to changes in interest rates (see Notes 13 and 14). These interest -rate exchange agreements, when linked with a designated financial instrument, effectively alter the financial characteristics of the underlying instrument. They may adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk -management objectives. The FHLBanks use interest -rate exchange agreements in three ways: either by designating them to an underlying financial instrument, by acting as an intermediary, or in asset -liability management. The two accounting methodologies described below differ in the timing of income recognition arising from gains and losses and are used depending on the way the FHLBanks use interest -rate exchange agreements. The differential between accruals to interest receivable and payable resulting from interest -rate exchange agreements designated to an underlying financial instrument is recognized as an adjust- ment to the interest yield or interest expense of the underlying financial instrument. The differential between accruals to interest receivable and payable, plus unrealized gains and losses, on interest -rate exchange agreements in which an FHLBank acts as an intermediary is recognized as other income. A designated interest -rate exchange agreement's association with an underlying financial instrument ceases upon termination of the underlying financial instrument. When this happens, the FHLBanks mark to market the interest -rate exchange agreement and include the resulting gain or loss with the gain or loss on the underlying financial instrument. The FHLBanks may then re- designate interest -rate exchange agreements originally designated to the terminated financial instrument or to other financial instruments. The FHLBanks may also enter new interest -rate exchange agreements and designate them to the original interest -rate exchange agreements to offset the economic effects of the original interest -rate exchange agreements. The FHLBanks defer gains and losses on terminated interest -rate exchange agreements and re- designated interest -rate exchange agreements, which were linked with a designated underlying financial instrument, as long as the designated underlying financial instrument remains outstanding. They report these deferred gains and losses as adjustments to the carrying value of the designated underlying financial instrument. The FHLBanks amortize, using the level -yield method, deferred gains and losses related to futures and forward contracts over the remaining life of the associated financial instrument. They amortize deferred gains and losses related to interest -rate swaps, caps, and floors over the shorter of the remaining life of the underlying financial instrument or the period ending on the original maturity date of the interest -rate swap, cap, or floor agreement had it not been terminated. The FHLBanks report unamortized costs and unamortized fees related to outstanding interest -rate exchange agreements as adjustments to the carrying value of the designated financial instrument and amortize them, using the level -yield method, over the remaining life of the interest - rate exchange agreement. The FHLBanks also intermediate interest -rate exchange agreements between members and third parties. The FHLBanks classify these interest -rate exchange agreements as other assets and other liabilities and measure them at fair value in the statements of condition. In addition, the FHLBanks recognize changes in fair value and realize gains and losses on these interest -rate exchange agreements as other income in the period when incurred. The FHLBanks recognize changes in the fair value of interest -rate exchange agreements used in asset -liability management and realize gains and losses on these agreements as other income in the period when incurred. Interest -rate exchange agreements, which are not designated to an underlying financial instrument, are used as part of the Bank's asset -liability management. These interest -rate exchange agreements are included in other assets and other liabilities and measured at fair value in the statements of condition. Changes in fair value and realized gains and losses on these interest -rate exchange agreements are recognized in income in the period incurred and classified in other income. 74 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) Premises and Equipment. The FHLBanks state premises and equipment at cost less accumu- lated depreciation and amortization of approximately $98 million and $149 million at December 31, 1999 and 1998. The FHLBanks compute depreciation on the straight-line method over the estimated useful lives of assets ranging from 1 to 50 years. They amortize leasehold improvements on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. The FHLBanks capitalize improvements and major renewals but expense ordinary maintenance and repairs when incurred. The FHLBanks include gains and losses on disposal of premises and equipment in other income. Concessions on Consolidated Obligations. The FHLBanks defer and amortize, using the straight-line method, the amounts paid to dealers in connection with the sale of consolidated obligation bonds over the term of the bonds or to the first call date for callable bonds. The Office of Finance prorates the amount of the concession among the FHLBanks. The FHLBanks charge to expense as incurred the concessions applicable to the sale of consolidated obligation discount notes because of the short maturities of these notes. Discounts and Premiums on Consolidated Obligations. The FHLBanks expense the discounts on consolidated obligation discount notes using the straight-line method over the term of the related notes due to their short maturity. They amortize the discounts and premiums on consolidated bonds to expense using a method that approximates the level -yield method over the term to maturity of the consolidated obligation bond or through the first call date for callable bonds. Capital Distributions to Resolution Funding Corporation. For years up through 1999, the FHLBanks charged the annual capital distribution to Resolution Funding Corporation (REFCORP) directly to retained earnings. Beginning with 2000, the FHLBanks will expense the annual contribution to REFCORP ( see Note 11) . A.vsessments. The FHLBanks are assessed the costs of operating the Finance Board and the Office of Finance. Estimated Fair Values. Many of the FHLBanks' financial instruments lack an available trading market characterized by transactions between willing parties other than in a forced or liquidation sale. Therefore, the FHLBanks use significant estimates and present -value calculations when disclosing estimated fair values. The FHLBanks assume that book value approximates fair value for financial instruments with three months or less to repricing or maturity. Note 14 details the estimated fair values of the FHLBanks' financial instruments. Cash Flows. In the statements of cash flows, the FHLBanks consider cash on hand and due from banks as cash and cash equivalents. Reclassifications. Certain amounts in the 1998 and 1997 combined financial statements have been reclassified to conform with the year end 1999 presentation. Most of these reclassifications reflect a Finance Board policy adopted on June 24, 1998, to have the financial statements conform, to the greatest extent practicable as determined by the Finance Board, to the disclosure standards of the Securities and Exchange Commission. Recently Issued Accounting Standards. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, that amends SFAS 133, deferring its effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000 (January 1, 2001 for the FHLBanks). On March 3, 2000, the FASB issued an exposure draft of a proposed statement of financial accounting standards "Accounting for Certain Derivative Instruments and Certain Hedging Activities" an 75 090 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) amendment of SFAS 133. The exposure draft seeks to clarify certain aspects of SFAS 133. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current -period earnings. The effect of the impending adoption of SFAS 133 on the System is still unknown. Note 2—Cash and Due from Banks Compensating Balances. The FHLBanks maintain collected cash balances with commercial banks in return for certain services. These agreements contain no legal restrictions about the withdrawal of funds. The average compensating balances for the years ended December 31, 1999 and 1998, were approximately $46.7 million and $40.0 million. In addition, the FHLBanks maintained average required clearing balances with various Federal Reserve Banks and branches of approximately $105.4 million and $98.2 million for the years ended December 31, 1999 and 1998. These are required clearing balances and may not be withdrawn; however, the FHLBanks may use earnings credits on these balances to pay for services received from the Federal Reserve Banks. Pass -through Deposit Reserves. The FHLBanks act as a pass -through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks. The amount shown as cash and due from banks includes pass -through reserves deposited with Federal Reserve Banks of approximately $41.0 million and $109.4 million as of December 31, 1999 and 1998. The FHLBanks include member reserve balances in "other liabilities" on the statements of condition. Note 3—Held-to-Maturity Securities and Federal Funds Sold Major Security Types. Held -to -maturity securities as of December 31, 1999, were as follows (in millions) : Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Treasury obligations .............................. $ 232 $ $ (7) $ 225 Commercial paper .................................... 9,988 2 9,990 U.S. agency obligations ................................ 11,614 15 (416) 11,213 State or local housing agency obligations ................. 3,018 1 (253) 2,766 Other ............................................... 552 (10) 542 25,404 18 (686) 24,736 Mortgage -backed securities ............................. 71,688 128 (1,809) 70,007 97,092 146 (2,495) 94,743 Deferred gains on terminated or redesignated interest -rate exchange agreements ................................ (1) (1) 97,091 146 (2,495) 94,742 Associated interest -rate exchange agreements, net .......... 68 504 (73) 499 Total ....................................... $971159 $650 $(2,568) $95,241 76 091 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) Federal funds sold as of December 31, 1999, which are separately classified on the statements of condition, were as follows (in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value Federal funds sold ............................ :....... $56,984 $7 $(1) $56,990 Associated interest -rate exchange agreements, net .......... 1 1 Total ....................................... $56,984 $8 $(1) $56,991 Major Security Types. Held -to -maturity securities as of December 31, 1998, were as follows (in millions) : Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Treasury obligations .............................. $ 432 $ 6 $ $ 438 Commercial paper .................................... 6,901 2 6,903 U.S. agency obligations ................................ 12,005 416 (23) 12,398 State or local housing agency obligations ................. 1,882 41 (11) 1,912 Other............................................... 194 194 21,414 465 (34) 21,845 Mortgage -backed securities ............................. 55,664 656 (102) 56,218 77,078 1,121 (136) 78,063 Deferred losses (deferred gains) on terminated or redesignated interest -rate exchange agreements .......... 1 (1) 77,079 1,121 137) 78,063 Associated interest -rate exchange agreements, net .......... 63 52 (728) 61.3) Total ....................................... $77,142 $1,173 $(865) $77,450 Federal funds sold as of December 31, 1998, which are separately classified on the statements of condition, were as follows (in millions) : Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value Federal funds sold .................................... $47,208 $2 $ $47,210 Associated interest -rate exchange agreements, net .......... 5 5 Total ....................................... $47,208 $7 $ $47,215 Redemption Terms. The amortized cost and estimated fair value of held -to -maturity securi- ties, excluding associated interest -rate exchange agreements, as of December 31, 1999 and 1998, by contractual maturity, are shown below (in millions). Expected maturities of some securities and 77 w 099 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) mortgage -backed securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. 1999 1998 Amortized Estimated Amortized Estimated Year of Maturity Cost Fair Value Cost Fair Value Due in one year or less .................. $10,753 $10,754 $ 8,285 $ 8,283 Due after one year through five years ...... 5,891 5,762 4,328 41,449 Due after five through ten years .......... 3,372 3,232 3,493 3,570 Due after ten years ..................... 5,388 4,988 5,275 5,510 25,404 24,736 21,381 21,812 Mortgage -backed securities .............. 71,688 70,007 55,697 56,251 Total ......................... $97,092 $94,743 $77,078 $78,063 The amortized cost of the FHLBanks' mortgage -backed securities classified as held -to - maturity includes net discounts of $1,541 million and $3 million at December 31, 1999 and 1998. Interest -Rate Payment Terms. The following table details additional interest -rate payment terms for investment securities classified as held -to -maturity and interest -rate exchange agreements associated with these securities at December 31, 1999 and 1998 (in millions): 19" 1998 Amortized cost of held -to -maturity securities other than mortgage -backed securities: Fixed-rate ........................................... $23,812 $17,898 Variable -rate ........................................ 1,592 3,483 25,404 21,381 Amortized cost of held -to -maturity mortgage -backed securities: Pass -through securities: Fixed-rate ....................................... 12,644 12,727 Variable -rate .................................... 5,023 7,100 Collateralized mortgage obligations: Fixed-rate ....................................... 41,254 27,480 Variable -rate .................................... 12,767 8,390 71,688 55,697 Total ....................................... $97,092 $77,078 Notional principal of interest -rate exchange agreements by class type associated with held -to -maturity securities: Interest -rate swaps ................................... $12,056 $12,877 Interest -rate caps purchased ........................... 6,739 5,211 Interest -rate floors purchased .......................... 21268 21192 Other .............................................. 465 765 Total ........................................... $21,528 $21,045 78 09j FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) Note 13 shows the effect of the FHLBanks' interest -rate exchange agreements on interest income from held -to -maturity securities. Gains and Losses. During 1998, one FHLBank sold investment securities classified as held - to -maturity with an amortized cost of $213 million, resulting in a loss of $484,000. The sale of these securities was prompted by a regulatory interpretation that these were impermissible investments. Securities Purchased Under Resale Agreements. Certain FHLBanks have entered into purchases of securities under agreements to resell. These amounts represent short-term loans and are assets in the statements of condition. The securities purchased under agreements to resell are held in safekeeping in the name of the FHLBank by one of the Federal Reserve Banks. Should the market value of the underlying securities decrease below the market value required as collateral, the counterparty must place an equivalent amount of additional securities in safekeeping in the name of the FHLBank or the dollar value of the resale agreement will be decreased accordingly. Note 4—Available-for-Sale Securities Available -for -sale securities consisted primarily of U.S. Treasury obligations, commercial paper, U.S. agency obligations, and mortgage backed securities at December 31, 1999 and 1998. These securities as of December 31, 1999, and December 31, 1998, had a total amortized cost of $4,570 million and $4,140 million, including associated interest -rate exchange agreements. The estimated fair values including associated interest -rate exchange agreements for 1999 and 1998 were $4,572 million and $4,137 million. The FHLBanks realized no gains on the sale of available -for -sale securities for 1999, 1998, and 1997. The FHLBanks realized no gross losses on the sale of available - for -sale securities in 1999, 1998, and $1.1 million in 1997. The notional amount of interest -rate exchange agreements associated with available -for -sale securities totaled $1,669 million and $1,335 million as of December 31, 1999 and 1998. Note 13 shows the effect of the FHLBanks' interest -rate exchange agreements on interest income from available -for -sale securities. 79 094, FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) Note 5—Advances Redemption Terms. At both December 31, 1999 and 1998, the FHLBanks had advances outstanding, including AHP advances (see Note 6), at interest rates ranging from 0 percent to 12.90 percent, as summarized below (in millions). Advances with interest rates of 0 percent are AHP-subsidized advances. Year of Maturity Overdrawn demand deposit accounts ................. 1999............................................ 2000............................................ 2001............................................. 2002............................................ 2003............................................ 2004............................................ Thereafter ........................................ Index amortizing advances .......................... Total par value ................................ Unamortized commitment fees ...................... Discount on AHP advances ......................... Other Loans ...................................... Deferred net loss on terminated interest -rate exchange agreements ............................ Associated interest -rate exchange agreements, net ..... Total................................... UZ Weighted Average Interest Amount Rate $ 135 196,655 43,982 27,215 27,056 26,799 73,301 641 395,784 (2) (39) 395,743 4 $395,747 5.73% 5.94 5.89 5.46 5.75 5.45 6.36 5.69 1998 Amount $ 101 11.0,418 45,943 21,163 19,289 31,018 3,030 55,253 1,727 287,942 (2) (37) 280 2 288,185 4 $288,189 Weighted Average Interest Rate 5.32% 5.48 5.41 5.63 5.26 5.75 5.27 6.1.4 5.36 Index amortizing advances require repayment according to predetermined amortization sched- ules linked to the level of various indices. Usually, as market interest rates rise (fall), the maturity of an index amortizing advance extends (contracts). Many of the FHLBanks' advances are callable at the member's option. However, the FHLBanks charge a prepayment fee when members or nonmember mortgagees terminate certain advances. Members may repay other advances on pertinent dates (call dates) without incurring prepayment fees (callable advances) . At December 31, 1999 and 1998, the FHLBanks had callable advances outstanding totaling $13,102 million and $19,015 million. 095 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS -(Continued) The following table summarizes advances at December 31, 1999 and 1998, by year of maturity or next call date for callable advances (in millions): Year of Maturity or Next Call Date 19" 1998 Overdrawn demand deposit accounts .......................... $ 133 $ 100 1999..................................................... 122,272 2000..................................................... 208,695 39,163 2001..................................................... 39,947 20,073 2002..................................................... 25,646 18,713 2003..................................................... 25,979 29,964 2004..................................................... 25,568 2,248 Thereafter ................................................ 69,175 53,682 Index amortizing advances .................................. 641 1,727 Total par value ........................................ $395,784 $287,942 The FHLBanks also offer convertible advances. With a convertible advance, the FHLBank effectively purchases a put option from the member that allows the FHLBank to convert the advance from fixed to floating rate if interest rates increase or to terminate the advance and extend. additional credit on new terms. At December 31, 1999 and 1998, the FHLBanks had convertible advances outstanding totaling $85,568 million and $81,261 million. The following table summarizes advances at December 31, 1999 and 1998, by year of maturity or next put date (in millions): Advances by Year of Maturity or Next Put Date 1999 1998 Overdrawn demand deposit accounts .......................... $ 133 $ 1.00 1999..................................................... 158,654 2000..................................................... 234,759 52,811 2001..................................................... 54,208 25,709 2002..................................................... 26,216 8,512 2003...................................................... 27,161 26,852 2004..................................................... 18,356 1.,887 Thereafter ................................................ 34,310 11,690 Index amortizing advances .................................. 641 1,727 Total par value ........................................ $395,784 $287,942 Securitv Terms. The individual FHLBanks lend to financial institutions involved in housing finance within their districts according to Federal statutes, including the Act. The Act requires the FHLBanks to obtain sufficient collateral on advances to protect against losses and to accept only certain U.S. government or government agency securities, residential mortgage loans, deposits in the applicable FHLBank, and other real estate -related assets as collateral on such advances. After the Finance Board adopts new collateral rules and the FHLBanks adopt new collateral policies, community financial institutions may pledge secured loans for small businesses or agriculture as collateral for advances. Borrowing members pledge their capital stock of the FHLBanks as additional collateral for advances. The Act requires that total advances from an FHLBank to a member not exceed 20 times the member's capital stock in the FHLBank. At December 31, 1999 81 i-I 0 9 G FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) and 1998, the FHLBanks had rights to collateral with an estimated value greater than outstanding advances. Based upon the financial condition of the member, an FHLBank: • Allows a member to retain possession of the collateral assigned to the FHLBank, if the member executes a written security agreement and agrees to hold such collateral for the benefit of the FHLBank; or • Requires the member specifically to assign or place physical possession of collateral with the FHLBank or its safekeeping agent. Beyond these provisions, Section 10(e) of the Act affords any security interest granted by a member to an FHLBank priority over the claims or rights of any other party. The only two exceptions are claims that would be entitled to priority under otherwise applicable law or perfected security interests. Credit Risk. The FHLBanks have experienced no credit losses on advances since the System was founded, nor does the management of any FHLBank anticipate any credit losses on advances. Accordingly, the FHLBanks have not provided any allowances for losses on advances. The FHLBanks' potential credit risk from advances is concentrated in commercial banks and savings institutions. At year end 1999, 61 members held advances that exceeded $1 billion. As of December 31, 1999, the FHLBanks had advances of $232.3 billion outstanding to these 61 members, and this represented 58.7 percent of total advances outstanding. The FHLBanks held sufficient collateral to cover the advances to these institutions, and the FHLBanks do not expect to incur any credit losses on these advances. Interest -Rate Payment Terms. The following table details additional interest -rate payment terms for advances and the notional amount of interest -rate exchange agreements associated with advances at December 31, 1999 and 1998 (in millions): 1999 1998 Par amount of advances: Fixed-rate ............................................ $260,978 $212,643 Variable -rate .......................................... 134,806 75,299 Total ............................................. $395,784 $287,942 Notional principal of interest -rate exchange agreements by class type associated with advances: Interest -rate swaps ..................................... $139,383 $125,222 Interest -rate caps purchased ............................. 592 563 Interest -rate floors purchased ............................ 340 440 Other................................................ 420 290 Total ............................................. $140,735 $126,515 Note 13 shows the effect of the FHLBanks' interest -rate exchange agreements on interest income from advances. Prepayment Fees. During 1999, 1998, and 1997, the FHLBanks charged members prepay- ment fees when they prepaid the principal on certain advances before original maturity. Further, some of these advances had associated interest -rate exchange agreements. Upon termination of these advances, the FHLBanks either terminated or marked -to -market the associated interest -rate exchange agreements, and netted the resulting gains or losses (see Note 13) with the prepayment fees on the statements of income. The FHLBanks received prepayment fees, net of gains or losses on 82 097 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS ---(Continued) associated interest -rate exchange agreements, of $14 million, $80 million, and $26 million during the years ended December 31, 1999, 1998, and 1997. The corresponding principal amount prepaid during these same years was $5,030 million, $12,535 million, and $5,530 million. Note 6—Affordable Housing Program Section 10(j) of the Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies to members who use the funds to assist the purchase, construction, or rehabilita- tion of housing for very low-, low-, and moderate -income households. In 1999, approximately 94 percent of AHP subsidies awarded were direct grants. The AHP liability represents funds accrued in 1999 to be awarded in 2000 and the portion of previously approved awards that the member has not yet used. Annually, the FHLBanks must set aside for the AHPs the greater of $100 million or 10 percent of the current year's income before charges for AHP (but after charges for REFCORP) (see Note 11) . The FHLBanks charge the amount set aside to income and recognize it as a liability. As members use subsidies, the FHLBanks relieve the AHP liability. If the result of the aggregate 10 percent calculation described above is less than $100 million, then the Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank's income before AHP and REFCORP to the sum of the income before AHP and REFCORP of the 12 FHLBanks. There was no shortfall in either 1999 or 1998. Note 7—Mortgage Loans The FHLBanks hold single-family mortgage loans that are originated, credit -enhanced, and serviced by members. The Finance Board has placed a System -wide cap of $9 billion of loans outstanding under such programs. The Finance Board has also authorized different and much smaller mortgage loan purchase programs at the FHLBanks of New York, Atlanta, and Seattle. The following table presents information as of December 31, 1999 and 1998 on mortgage loans held by all FHLBanks under all four programs (in millions): 19" 1998 Real Estate: Fixed 15-year single-family mortgages ...................... $ 430 $295 Fixed 30-year single-family mortgages ...................... 1,363 653 Multifamily mortgages .................................... 231 11 Nonresidential mortgages ................................. 1 Unamortized premiums ................................... (2) 6 Defined loan costs, net ................................... 5 Total mortgage loans ................................. $2,027 $966 19" 1998 Allowance for credit losses .................................... Provision for credit losses ..................................... $ 1 Balance, end of year ................................. $ 1 At year end 1999, the FHLBanks had no investments in impaired loans. 83 098 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) Note 8—Deposits The FHLBanks offer demand and overnight deposits for members and qualifying nonmembers. In addition, the FHLBanks offer short-term deposit programs to members. A member that services mortgage loans may deposit in an FHLBank the funds collected in connection with the mortgage loans pending disbursement of such funds to the owners of the mortgage loans; the FHLBanks classify these items as other deposits on the statements of condition. The following table shows the notional amount of interest -rate exchange agreements associated with deposits at December 31, 1999 and 1998 (in millions): 19" 1998 Notional principal of interest -rate exchange agreements by class type associated with deposits: Interest -rate swaps: ........................................ $ $ Interest -rate caps purchased ................................ 150 Other................................................... 125 Total................................................ $ $275 Note 13 shows the effect of the FHLBanks' interest -rate exchange agreements on interest expense on deposits. Note 9—Borrowings Securities Sold Under Agreements to Repurchase. Certain FHLBanks have entered sales of securities under agreements to repurchase. The amounts received under these agreements represent short-term borrowings and are liabilities on the statements of condition. The FHLBanks have delivered securities sold under agreements to repurchase to the primary dealer. Should the market value of the underlying securities fall below the market value required as collateral, the FHLBanks must deliver additional securities to the dealer. Note 10—Consolidated Obligations Consolidated obligations are the joint -and -several obligations of the FHLBanks and consist of consolidated bonds and discount notes. The Finance Board issues consolidated bonds through the Office of Finance primarily to raise intermediate- and long-term funds for the FHLBanks. Usually, the maturity of consolidated bonds ranges from 1 year to 10 years, but they are not subject to any statutory or regulatory limits on maturity. The Finance Board, through the Office of Finance, issues consolidated discount notes to raise short-term funds sold at less than the notes' face amount and redeems them at par value when they mature. The book value of outstanding consolidated obligations for all of the FHLBanks, including consolidated obligations held by other FHLBanks that have been eliminated in combination, was approximately $529,005 million and $382,105 million at December 31, 1999 and 1998. Regulations require the 12 FHLBanks to maintain unpledged Qualifying Assets equal to the consolidated obligations outstanding. Qualifying Assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities as fiduciary and. trust funds may invest in under the laws of the State in which the FHLBank is located. In addition, effective January 29, 1993, Finance Board regulations generally prohibit the issuance of senior bonds, other than bonds issued to refund consolidated bonds previously issued, if, immediately following such issuance, the 84 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) aggregate amount of senior bonds and unsecured senior liabilities of the FHLBanks exceeds 20 times the total paid -in capital stock, retained earnings, and reserves of all the FHLBanks. To allow the FHLBanks to provide additional Year 2000-related credit to their members, the Finance Board has temporarily increased the leverage limit for both individual FHLBanks and the FHLBank System to 25 to 1 through June 30, 2000. For an FHLBank to exceed the 20 to 1 leverage limit, its net liquidity (defined as total investments less mortgage -backed securities, pilot program assets, member deposits, member capital investment in the FHLBank, and binding advances commitments) cannot exceed 12 percent of outstanding consolidated obligations for which that FHLBank is the primary obligor. (See "Business —Debt Financing —Consolidated Obligations.") At December 31, 1999 and 1998, the ratio of total Bank System debt to total Bank System capital, as defined, was 19.1 to 1 and 17.9 to 1, and, accordingly, the Bank System met this regulation at December 31, 1999 and 1998. To provide the holders of consolidated obligations issued before January 29, 1993 (prior bondholders), the protection equivalent to that provided under the Bank System's previous leverage limit of 12 times Bank System capital stock, prior bondholders have a claim on a certain amount of the Qualifying Assets (Special Asset Account (SAA)) if capital stock is less than 8.33 percent of consolidated obligations. At December 31, 1999 and 1998, the Bank System's capital stock was 5.5 percent and 5.6 percent of the par value of consolidated obligations outstanding, and the SAA balance was approximately $67 million and $152 million. Further, the regulations require each FHLBank to transfer Qualifying Assets in the amount of its allocated share of the System's SAA to a trust for the benefit of the prior bondholders if its capital -to -assets ratio falls below 2 percent. General Terms. The Finance Board issues consolidated obligations with either fixed-rate coupon payment terms or variable -rate coupon payment terms that use a variety of indices for interest -rate resets including the London Interbank Offered Rate (LIBOR), Constant Maturity Treasury (CMT), llth District Cost of Funds (COFI), and others. In 1997, the Finance Board issued consolidated bonds whose interest rate varies according to changes in the Consumer Price Index (CPI). In addition, to meet the expected specific needs of certain investors in consolidated obligations, both fixed-rate bonds and variable -rate bonds may also contain certain features, which may result in complex coupon payment terms and call options. When the Finance Board issues such consolidated obligations, the FHLBanks enter interest -rate exchange agreements containing offset- ting features that effectively convert the terms of the bond to those of a simple variable -rate bond or a fixed-rate bond. These consolidated obligations, beyond having fixed-rate or simple variable -rate coupon payment terms, may also have the following broad terms regarding either principal repayment or coupon payment terms: • Indexed principal redemption bonds (index amortizing notes) repay principal according to predetermined amortization schedules that are linked to the level of a certain index. As of December 31, 1999 and 1998, most of the index amortizing notes had fixed-rate coupon payment terms. Usually, as market interest rates rise (fall), the maturity of the index amortizing notes extends (contracts); and • Optional principal redemption bonds (callable bonds) that the FHLBank may redeem in whole or in part at its discretion on predetermined call dates according to terms of bond offerings. Callable bonds may be priced at or close to par or at a deep discount (zero -coupon bonds). 85 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) With respect to interest payments, consolidated bonds may also have the following terms: • Step-up bonds generally pay interest at increasing fixed rates for specified intervals over the life of the bond. These bonds generally contain provisions enabling the FHLBanks to call bonds at their option on the step-up dates; • Inverse floating bonds have coupons that increase as an index declines and decrease as an index rises; • Conversion bonds have coupons that the FHLBank may convert from fixed to floating, or floating to fixed, or from one U.S. or other currency index to another, at its discretion; • Range bonds pay interest at variable rates provided a specified index is within a specified range. The computation of the variable interest rate differs for each bond issue, but the bond generally pays zero interest if the specified index is outside the specified range; and • Comparative index bonds have coupon rates determined by the difference between two or more market indices, typically CMT and LIBOR. Redemption Terms. The following is a summary of consolidated bonds outstanding at December 31, 1999 and 1998, by year of maturity (in millions): 1999 Year of Maturity Amount 1999............................................ 2000............................................ $118,704 2001............................................. 63,206 2002............................................ 44,896 2003............................................ 40,775 2004............................................ 38,761 Thereafter ....................................... 91,647 Index amortizing notes ............................. 3,383 Total par value ................................... 401,372 Concessions ...................................... (80) Bond premium ................................... 43 Bond discount .................................... (17,294) Forward exchange. contracts associated with bonds denominated in foreign currencies ................. 177 Deferred net losses (gains) on terminated interest -rate exchange agreements ............................ 2 384,220 Bonds held in treasury ............................. (80) Associated interest -rate exchange agreements .......... 30 Total .................................... $3841170 Weighted Average Interest Rate 5.36% 5.58 5.70 5.66 6.22 6.39 6.11 5.79 1"8 Amount $ 63,172 31,077 35,947 22,425 42,511 15,047 60,395 4,488 275,062 (93) 16 (13,853) 90 (4) 261,218 (83) 25 $261,160 Weighted Average Interest Rate 5.42% 5.52 5.72 6.03 5.65 6.40 6.28 6.16 5.81 Consolidated bonds outstanding at December 31, 1999 and 1998, include callable bonds totaling $184,952 million and $149,493 million. The FHLBanks use fixed-rate callable debt to finance callable advances (see Note 5) and mortgage -backed securities. Contemporaneous with such a debt issue, an FHLBank may also enter an interest -rate swap (in which the FHLBank pays 86 101 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) variable and receives fixed) with a call feature that mirrors the option embedded in the debt (a sold callable swap) . The combined sold callable swap and callable debt allows an FHLBank to provide members attractively priced variable -rate advances, while converting its own payment to a variable rate. 19" 1998 Par amount of consolidated bonds: Non -callable /nonputable .................... $217,731 $127,840 Callable .................................. 183,032 146,619 Putable................................... 609 603 Total par value ........................ $401,372 $275,062 The following table summarizes consolidated bonds outstanding at December 31, 1999 and 1998, by year of maturity or next call date (in millions): Year of Maturity or Next Call Date 1999 1998 1999......................................... $167,640 2000......................................... $255,629 40,541 2001......................................... 57,583 18,004 2002......................................... 29,314 7,864 2003......................................... 21,568 19,145 2004......................................... 11,266 2,930 Thereafter .................................... 22,634 14,163 Index Amortizing Notes ......................... 3,378 4,775 Total par value ........................ $401,372 $275,062 Interest -Rate Payment Terms. The following table details interest -rate payment terms for consolidated bonds and the notional amount of interest -rate exchange agreements associated with consolidated bonds at December 31, 1999 and 1998 (in millions) . Range bonds are classified as comparative -index bonds. 1999 1998 Par amount of consolidated bonds: Fixed rate ................................. $329,583 $231,034 Step-up ................................... 49149 2,710 Simple variable -rate ........................ 33,599 19,742 Inverse floating rate ........................ 500 496 Fixed that converts to variable ............... 19273 1,033 Variable that converts to fixed ................ 180 106 Comparative -index ......................... 1,451 1,198 Zero -coupon .............................. 24,464 18,150 Other .................................... 6,173 593 Total par value ........................ $401,372 $275,062 87 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) 1999 1998 Notional principal of interest -rate exchange agreements by class type associated with consolidated obligations: Interest -rate swaps ......................... $323,050 $219,798 Interest -rate caps purchased ................. 1,637 5,859 Interest -rate floors purchased ................ 205 1,045 Forward and futures contracts ................ 13 245 Other.................................... 4 41 $324,909 $226,988 Note 13 shows the effects of the FHLBanks' interest -rate exchange agreements on interest expenses from consolidated obligations. Bonds Denominated in Foreign Currencies. The Finance Board issues consolidated bonds denominated in foreign currencies. Concurrent with these issuances, the FHLBanks exchange the interest and principal payment obligations related to the issues for equivalent amounts denominated in U.S. dollars. Bonds denominated in foreign currencies and the related forward exchange contracts have been translated into U.S. dollars at the exchange rate as of December 31, 1999 and 1998, in the preceding tables that presented these bonds by year of maturity, by year of maturity or next call date, and by interest -rate payment terms. Bonds denominated in foreign currencies as of December 31, 1999 and 1998, are as follows (in millions) : Amount Denominated in Foreign Currency Year of Par in Interest 19" 1998 Maturity Dollars Rate German Marks ............. 1,000 1,000 2000 $717.4 6.00% British Pounds .............. 400 400 2003 677.2 5.63 Discount Notes. The Bank System's consolidated discount notes, all of which are due within one year, are as follows (in millions): Weighted Average Book Value Par Value Interest Rate December 31, 1999 ................. $141,249 $142,477 5.12% December 31, 1998 ................. $115,555 $116,276 5.11% The Act authorizes the Secretary of the Treasury, in his or her discretion, to purchase consolidated obligations of the FHLBanks aggregating not more than $4 billion. The terms, conditions, and interest rates are determined by the Secretary of the Treasury. There were no such purchases by the U.S. Treasury during the two years ended December 31, 1999. Extraordinary Item —Early Extinguishment of Debt. During 1999, 1998, and 1997, the FHLBanks extinguished consolidated bonds by purchasing consolidated bonds in the open market. Further, some of these bonds had associated interest -rate exchange agreements, which were terminated or marked to market at the date of the extinguishment. The FHLBanks netted the resulting gain or loss with the gain or loss on the early extinguishment of the debt. The FHLBanks extinguished consolidated bonds with net gains (losses) on associated interest -rate exchange agreements of $1.8 million, $0.4 million, and $(2.2) million for the years ended December 31, 1999, 88 o ,,3 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) 1998, and 1997. The corresponding principal retired for these three years was $2,307 million, $16,654 million, and $8,051 million. Note 11—Capital The Act requires members to purchase capital stock equal to the greater of 1 percent of their mortgage -related assets or 5 percent of outstanding FHLBank advances. Members may, at the FHLBank's discretion, redeem at par value any capital stock greater than their statutory require- ment or sell ' it to other FHLBank members at par value. Members may withdraw from membership and redeem their capital six months after giving notice to do so. Before the passage of the Federal Home Loan Bank System Modernization Act (Modernization Act) in November 1999, Federal savings associations regulated by the Office of Thrift Supervision were mandatory members. The Modernization Act made membership totally voluntary and allows these members to withdraw from membership after May 12, 2000. All newly chartered. Federal savings associations are voluntary members. Members that withdraw from membership may not re -apply for membership for 5 years. Finance Board regulations require the FHLBanks to retain in restricted retained earnings the portion of prepayment fee income that, if prorated over the maturity of the advances prepaid, would be allocated to future dividend periods. The FHLBanks can treat certain other gains and losses similarly, such as those from the early retirement of consolidated obligations. Finance Board policy allows the FHLBanks to pay quarterly dividends from unrestricted retained earnings. An FHLBank may pay dividends in cash or capital stock, as authorized by the FHLBank's board of directors. The Modernization Act changed the form of the FHLBanks' obligation to REFCORP. For years up through 1999, the FHLBanks paid $300 million annually to fund part of the interest on REFCORP debt. Before paying dividends, each FHLBank had to pay up to 20 percent of its net income after AHP contributions to meet this obligation. If 20 percent of net income was less than the $300 million assessment in any year, the Bank Act allocated the shortfall among all FHLBanks based on the percentage equal to the ratio of each FHLBank's average advances to insured. depository institutions, which are Savings Association Insurance Fund (SAIF) members, to the Bank System's total average advances to SAIF-insured members. If the initial 20 percent assessment calculation exceeded the required $300 million, the $300 million was allocated among the FHLBanks based on their net income after their AHP contribution to the System net income after AHP contributions. There was no shortfall in 1999 or 1998. Beginning with 2000, each FHLBank will contribute to REFCORP 20 percent of its net earnings (after AHP contributions). This will continue until the aggregate amount of payments by all the FHLBanks are equivalent to the value of a $300 million annual annuity whose final maturity date is April 15, 2030. Instead of treating the REFCORP contribution as a capital charge, beginning with 2000 the FHLBanks will expense their REFCORP contributions. If the FHLBanks' REFCORP payment in 1999 been determined using the formula for years 2000 and later, the 1999 payment would have been $425.6 million instead of $300 million. Note 12—Employee Retirement Plans The FHLBanks, except for the FHLBank of San Francisco, participate in the Financial Institutions Retirement Fund (FIRF), a defined -benefit plan. The plan covers substantially all officers and employees of the FHLBanks. The FHLBanks' contributions to FIRF through June 30, 1987, represented the normal cost of the plan. The plan reached the full -funding limitation, as defined by the Employee Retirement Income Security Act, for the plan year beginning July 1, 1987, because of favorable investment and other actuarial experience during previous years. As a result, 89 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) FIRF suspended employer contributions for all plan years ending after June 30, 1987. Contributions to the plan will resume when the plan is no longer in full -funding status based on annual determinations by FIRE. FIRE does not segregate its assets, liabilities, or costs by participating employer. As a result, disclosure of the accumulated benefit obligations, plan assets, and the components of annual pension expense attributable to the FHLBanks cannot be made. The FHLBanks, except for the FHLBanks of Atlanta and Seattle, also participate in the Financial Institutions Thrift Plan, a defined -contribution plan. The FHLBanks of Atlanta and Seattle have similar defined -contribution plans. The FHLBanks' contributions are equal to a percentage of participants' compensation and a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations. The FHLBanks contributed $4.6 million, $4.2 million, and $4.1 million in the years ended December 31, 1999, 1998, and 1997. In addition, several FHLBanks maintain deferred compensation plans, available to all employ- ees, which are, in substance, unfunded supplemental retirement plans. The plans' liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals. Note 13—Interest-Rate Exchange Agreements The FHLBanks use interest -rate exchange agreements in the normal course of business to manage exposure to fluctuations in interest rates. In addition, the FHLBanks may act as intermediaries between members and third parties. Interest -rate exchange transactions involve the contractual exchange of payments that are based on a notional principal amount and determined using different interest rates, as defined in the agreement. Usually, the agreement calls for the exchange of a payment determined using a short- term or floating interest rate and another payment, based on the same notional amount, determined using a long-term or fixed interest rate. Futures and forward contracts are commitments to buy or sell a financial instrument or a foreign currency at a future date and at a contracted price. Interest - rate caps and floors obligate one party to make payment to the other if an interest -rate index exceeds the upper "capped" level or if the index falls below a specified "floor" level. While swaps, futures, forwards, caps, and floors usually reduce interest -rate or currency risk, they introduce some credit risk. This off -balance -sheet credit risk arises from the possible nonperformance by the other party to nonexchange-traded agreements. However, based on each FHLBank's credit analyses and collateral requirements, the FHLBanks do not anticipate any credit losses on these agreements. The contractual or notional amount of interest -rate exchange agreements reflects the involve- ment of an FHLBank in the various classes of financial instruments. The notional amount of interest -rate exchange agreements does not measure the credit -risk exposure of an FHLBank, and the maximum credit exposure of an FHLBank is much less than the notional amount. The maximum credit risk is the estimated cost of replacing favorable interest -rate swaps, forward agreements, and purchased caps and floors if the counterparty defaults, and the related collateral, if any, is of no value to the FHLBank. At December 31, 1999 and 1998, the FHLBanks' maximum credit risk, as defined above, was approximately $2,073 million and $1,665 million. These totals include $1,031 million and $1,079 million of net accrued interest receivable. In determining maximum credit risk, the FHLBanks consider accrued interest receivables and payables, and the legal right to offset assets and liabilities by counterparty. The FHLBanks held securities with a fair value of $991 million and $730 million as collateral as of December 31, 1999 and 1998. 90 105 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) The FHLBanks transact most of their interest -rate exchange agreements with large banks and major broker -dealers. Some of these banks and dealers or their affiliates buy, sell, and distribute consolidated obligations. Note 15 discusses assets pledged by the FHLBanks to these counterparties. Note 14 presents the notional principal, amortized costs, and estimated fair values by class type of all interest -rate exchange agreements outstanding at December 31, 1999 and 1998. Notes 3, 4, 5, 8, and 10 discuss the notional principal by class type of designated interest -rate exchange agreements associated with held -to -maturity securities, available -for -sale securities, advances, deposits, and consolidated obligations outstanding at December 31, 1999 and 1998. Intermediation. Interest -rate exchange agreements in which an FHLBank is an intermediary may arise when the FHLBank: (1) enters into offsetting interest -rate exchange agreements with members and other counterparties to meet the needs of their members, (2) enters into interest -rate exchange agreements to offset the economic effect of other interest -rate exchange agreements that are no longer designated to either advances, investments, or consolidated obligations, and (3) purchases consolidated obligations of other FHLBanks that have interest -rate exchange agreements associated with them either by the FHLBank that issued the bond or by the FHLBank that purchased the bond. The following table summarizes at December 31, 1999 and 1998, the notional principal of interest -rate exchange agreements by class type in which the FHLBanks are intermediaries (in millions) : 1999 1998 Interest -rate swaps ................................. $2,087 $2,802 Interest -rate caps purchased ......................... 374 297 Interest -rate floors purchased ........................ 18 Interest -rate caps sold .............................. 281 296 Interest -rate floors sold .............................. 18 Total ......................................... $2,742 $3,431 91 106 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) Income Effect. The effect of the FHLBanks' interest -rate exchange agreements for the years ended December 31, 1999, 1998 and 1997, was to (decrease) increase interest income, interest expense, other net income and net extraordinary item as follows (in millions) : 1999 1998 1997 Interest income: Advances to members ......................................... $ 85 $ 121 $ 10 Securities purchased under resale agreements ...................... (4) (4) Federal funds ................................................ 1 Held -to -maturity securities ..................................... (147) (95) (71) Available -for -sale securities ..................................... (13) (2) 22 Interest expense: Consolidated obligations ....................................... (1,312) (1,070) (1,077) Deposits..................................................... (1) 1 Other income: Prepayment fees (see Note 5).................................. 1 (8) (5) Sale of available -for -sale securities ............................... 8 Unrealized net (losses) gains on redesignation of interest -rate exchange agreements ........................................ (2) (20) Realized net gains on sales of interest -rate exchange agreements not associated with an underlying financial instrument ............... (19) 2 (3) Change in net mark -to -market adjustment for interest -rate exchange agreements in which the FHLBanks are intermediaries ........... (1) Net extraordinary item (see Note 10)................................ 1 1 (2) Note 14--Estimated Fair Values Cash and due from banks. The estimated fair value approximates the recorded book balance. Investments. The FHLBanks determine the fair value of investments based on quoted prices, excluding accrued interest, as of the last business day of the year. Advances to members and other loans. The FHLBanks determine the estimated fair value of advances with fixed -rates and more than three months to maturity and advances with complex floating -rates by calculating the present value of expected cash flows from the advances and reducing this amount for accrued interest receivable. The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Following the Finance Board's advances regulations, advances with a maturity or repricing period greater than six months require a prepayment fee sufficient to make an FHLBank financially indifferent to the borrower's decision to prepay the advances. Therefore, the estimated fair value of advances does not assume prepayment risk. The estimated fair value approximates the recorded book balance of advances with floating rates and fixed rates with three months or less to maturity or repricing. Accrued interest receivable and payable. The estimated fair value approximates the recorded book value. Deposits. The FHLBanks determine fair values of deposits with fixed -rates and more than three months to maturity by calculating the present value of expected future cash flows from the deposits and reducing this amount for accrued interest payable. The discount rates used in these calculations are the cost of deposits with similar terms. The estimated fair value approximates the recorded book balance for deposits with floating -rates and fixed -rates with three months or less to maturity or repricing. 92 107 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) Consolidated obligations. The FHLBanks daily determine the estimated cost of issuing comparable -term debt based on the secondary market for debt of government -sponsored enterprises and other indications from the Office of Finance and securities dealers. The estimated cost of issuing debt includes noninterest selling costs. Borrowings. The FHLBanks determine the estimated fair value of borrowings with fixed -rates and more than three months to maturity by calculating the present value of expected future cash flows from the borrowings and reducing this amount for accrued interest payable. The discount rates used in these calculations are the cost of borrowings with similar terms. For borrowings with floating -rates and fixed -rates with three months or less to maturity or repricing, the estimated fair value approximates the recorded book balance. Commitments. The estimated fair value of the FHLBanks' commitments to extend credit, including letters of credit, was immaterial at December 31, 1999 and 1998. Interest -rate Exchange Agreements. The FHLBanks base the estimated fair values of these agreements on the cost of interest -rate exchange agreements with similar terms or available market prices, excluding accrued interest receivable and payable. The carrying value of all the FHLBanks' financial instruments at December 31, 1999 and 1998, except available -for -sale securities and interest -rate exchange agreements in which an FHLBank is an intermediary, is amortized cost. The carrying value of available -for -sale securities and interest - rate exchange agreements in which the FHLBanks are an intermediary at December 31, 1999 and 1998, is estimated fair value. The amortized cost and estimated fair values of the FHLBanks' financial instruments at December 31, 1999, are as follows (in millions): 93 108 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS --(Continued) 1999 FAIR VALUE SUMMARY TABLE Net Amortized Unrealized Estimated Financial Instruments Cost Gains (Losses) Fair Value Assets: Cash and due from banks .................................. $ 4,047 $ $ 4,047 Interest -bearing deposits in banks ........................... 9,956 2 9,958 Securities purchased under resale agreements ................. 2,754 1. 2,755 Held -to -maturity securities ................................. 97,091 (2,347) 94,744 Interest -rate exchange agreements associated with held -to -maturity securities ............................ 68 431 499 Held -to -maturity securities, net ......................... 97,159 (1,916) 95,243 Available -for -sale securities ................................. 4,570 (56) 4,514 Interest -rate exchange agreements associated with available -for -sale securities ........................... 58 58 Available -for -sale securities, net ......................... 4,570 2 4,572 Federal funds sold ........................................ 56,984 7 56,991 Advances ................................................ 395,743 (3,023) 392,720 Interest -rate exchange agreements associated with advances to members ........................................ 4 1,969 1,973 Advances to members, net ............................. 395,747 (1,054) 394,693 Mortgage loans held ....................................... 2,027 (72) 1,955 Allowance for credit losses ................................. (1) 1 Mortgage loans, net ....................................... 2,026 (71) 1,955 Otherloans.............................................. 54 (2) 52 Accrued interest receivable ................................. 9,380 9,380 Interest -rate exchange agreements used in asset -liability management at market .................................. 16 16 Liabilities: Deposits ................................................. (17,081) 36 (17,045) Securities sold under repurchase agreements .................. (543) (543) Other borrowings ....................................... . Consolidated obligations: Bonds ............................................... (384,140) 9,149 (374,991) Discount notes ....................................... (141,249) 4 (1.41,245) Interest -rate exchange agreements associated with consolidated obligations .............................. (30) (6,257) (6,287) Consolidated obligations, net ............................ (525,419) 2,896 (522,523) Accrued interest payable ................................... (9,804) (9,804) Other: Interest -rate exchange agreements in which the FHLBanks are intermediaries .......................................... (3) 1 (2) Standby letters of credit ................................... 1 3 4 Commitments to extend credit .............................. (1) (1) 94 109 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) 1999 FAIR VALUE SUPPLEMENTAL TABLE Gross Gross Total by Class hype of All Interest -rate Exchange Agreements Notional Amount Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Interest -rate swaps: Non -cancelable: FHLBanks pay fixed, receive variable ...... $ 46,740 $ 2 $1,072 $ (25) $ 1,049 FHLBanks pay variable, receive fixed ...... 122,846 (1) 327 (2,025) (1,699) FHLBanks pay variable, receive variable.... 51,841 21 225 (206) 40 Cancelable by counterparty: FHLBanks pay fixed, receive variable ...... 88,302 44 1,334 (9) 1,369 FHLBanks pay variable, receive fixed ...... 155,640 29 471 (5,092) (4,592) FHLBanks pay variable, receive variable.... 10,921 (5) 32 (133) (106) Cancelable by FHLBank: FHLBanks pay fixed, receive variable ...... 3,055 (17) 134 (2) 115 FHLBanks pay variable, receive fixed ...... FHLBanks pay variable, receive variable .... 133 4 (1) 3 Subtotal ................................... 479,478 77 3,595 (7,493) (3,821) Interest -rate caps purchased .................. 10,667 87 43 (19) 111 Interest -rate floors purchased ................. 3,213 22 1 (9) 14 Interest -rate caps sold ....................... 286 (2) 1 (2) (3) Interest -rate floors sold ...................... Forward and futures contracts ................. 72 Other... ................................ 905 4 2 (2) 4 Total .............................. $494,621 $188 $3,642 $(7,525) $(3,695) M L 11io FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) The amortized cost and estimated fair values of the FHLBanks' financial instruments at December 31, 1998, are as follows (in millions): 1998 FAIR VALUE SUMMARY TABLE Net Amortized Unrealized Estimated Financial Instruments Cost Gains (Losses) Fair Value Assets: Cash and due from banks .................................. $ 686 $ $ 686 Interest -bearing deposits in banks ........................... 4,718 1 4,719 Securities purchased under resale agreements ................. 3,988 (2) 3,986 Held -to -maturity securities ................................. 77,079 984 78,063 Interest -rate exchange agreements associated with held -to - maturity securities .................................. 63 (676) (613) Held -to -maturity securities, net ......................... 77,142 308 77,450 Available -for -sale securities ................................. 4,140 99 4,239 Interest -rate exchange agreements associated with available - for -sale securities . .................................. (102) (102) Available -for -sale securities, net ......................... 4,140 (3) 4,137 Federal funds sold ........................................ 47,208 7 47,215 Advances ................................................ 288,185 2,538 290,723 Interest -rate exchange agreements associated with advances to members ....................................... 4 1.,705) 1,701) Advances to members, net ............................. 288,189 833 289,022 Mortgage loans, net ....................................... 966 7 973 Otherloans.............................................. 6 6 Accrued interest receivable ................................. 6,317 6,317 Interest -rate exchange agreements used in asset -liability management at market .................................. 22 22 Liabilities: Deposits ................................................. (24,822) (24,822) Securities sold under repurchase agreements .................. (647) (647) Other borrowings ......................................... (336) (1) (337) Consolidated obligations: Bonds ............................................... (261,135) (1,942) (263,077) Discount notes ....................................... (115,589) (26) (1.15,615) Interest -rate exchange agreements associated with consolidated obligations ............................. 9 628 637 Consolidated obligations, net ............................ (376,71.5) (1.,340) (378,055) Accrued interest payable ................................... (6,439) (6,439) Other: Interest -rate exchange agreements in which the FHLBanks are intermediaries ......................................... (3) 4 1 Standby letters of credit ................................... 1 4 5 96 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) 1998 FAIR VALUE SUPPLEMENTAL TABLE Gross Gross Total by Class Type of All Notional Amortized Unrealized Unrealized Interest -rate Exchange Agreements Amount Cost Gains Losses Interest -rate swaps: Non -cancelable: FHLBanks pay fixed, receive variable ...... $ 48,790 $ (87) $ 56 FHLBanks pay variable, receive fixed ...... 59,536 (17) 609 FHLBanks pay variable, receive variable.... 47,766 29 294 Cancelable by counterparty: FHLBanks pay fixed, receive variable ...... 87,027 (33) 91 FHLBanks pay variable, receive fixed ...... 110,279 (19) 554 FHLBanks pay variable, receive variable .... 6,007 2 4 Cancelable by FHLBank: FHLBanks pay fixed, receive variable ...... 2,936 (25) 10 FHLBanks pay variable, receive fixed ...... FHLBanks pay variable, receive variable .... 314 12 Subtotal ................................... 362,655 (138) 1,618 Interest -rate caps purchased .................. 13,088 93 4 Interest -rate floors purchased ................. 4,647 39 38 Interest -rate caps sold ....................... 485 (3) 2 Interest -rate floors sold ...................... 18 Forward and futures contracts ................. 245 Other ..................................... 1,283 2 1 Total .............................. $382,421. L$7) $1,663 Note 15—Commitments and Contingencies $ (755) (136) (323) (1,669) (284) (27) (88) (11) (3,293) (67) Estimated Fair Value $ (786) 456 (103) -(5) -(2) $(3,365) $(1,709) As described in Note 10, all FHLBanks have joint -and -several liability for the consolidated obligations issued by the Finance Board. Accordingly, should one or more of the FHLBanks be unable to repay their participation in the consolidated obligations, each of the other FHLBanks could be called upon to repay all or part of such obligations. Notes 6, 11, and 13 discuss other commitments and contingencies. Commitments that legally bind and unconditionally obligate the FHLBanks for additional advances totaled approximately $3,260 million and $11,583 million at December 31, 1999 and 1998. Commitments generally are for periods up to 12 months. Outstanding standby letters of credit were approximately $4,520 million and $3,955 million at December 31, 1999 and 1998. Based on management's credit analyses and collateral requirements, the FHLBanks do not deem it necessary to have any allowance for credit losses on these commitments and letters of credit. Commitments and letters of credit are fully collateralized at the time of issuance in the same way as advances to members (see Note 5). The FHLBanks generally execute interest -rate exchange agreements with major banks and broker -dealers and generally enter bilateral collateral agreements. As of December 31, 1999, the FHLBanks had pledged as collateral securities of $1,466 million to broker -dealers who have market - risk exposure from the FHLBanks related to interest -rate exchange agreements. 97 FEDERAL HOME LOAN BANKS NOTES TO COMBINED FINANCIAL STATEMENTS —(Continued) The FHLBanks charged to operating expenses net rental costs of approximately $16 million, $14 million, and $12 million for the years ending December 31, 1999, 1998, and 1997. Future minimum rentals at December 31, 1999, are as follows (in millions): Year Premises Equipment Total 2000........................................ $ 14 $2 $ 16 2001........................................ 13 1 14 2002........................................ 12 1 13 2003........................................ 11 11 2004......................................... 10 10 Thereafter ................................... 68 68 Total ............................... $128 $4 $132 Lease agreements for FHLBank premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the FHLBanks. 98 (This page intentionally left blank) 99 114 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES --STATEMENTS OF CONDITION DECEMBER 31, 1999 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta ASSETS Cash and due from banks .......................... $ 4,047 $ 230 $ 2,911 $ 322 $ 14 Interest -bearing deposits in banks .................... 9,956 4,341 1,406 732 Securities purchased under resale agreements .......... 2,754 Federal funds sold ................................. 56,984 5,740 895 2,062 7,504 Investments: Held -to -maturity securities ..................... 97,159 $(3,085) 7,773 9,266 7,667 14,739 Available -for -sale securities ..................... 4,572 (501) 37 1,479 Advances ........................................ 395,747 22,488 44,409 36,527 45,216 Mortgage loans ................................... 2,027 228 3 84 Less: allowance for credit losses on mortgage loans ..... I Mortgage loans, net ............................... 2,026 228 3 84 Loans to other FHLBanks .......................... (50) 50 Accrued interest receivable ......................... 9,380 (25) 467 580 1,119 1.,477 Bank premises and equipment, net ................... 98 3 7 10 30 Other assets ...................................... 489 11 6 8 8 Total assets ............................... $583,212 $ (3,661) $36,749 $62,693 $50,603 $69,804 LIABILITIES Deposits: Demand and overnight ......................... $ 15,151 $ 1,016 $ 2,439 $ 1,120 $ 3,195 Term ........................................ 1,478 49 210 7 117 Other ....................................... 452 7 6 125 92 Total deposits ............................ 17,081 1,072 2,655 1,252 3,404 Borrowings: Other FHLBanks ............................. $ (50) Securities sold under repurchase agreements ....... 543 Total borrowings .......................... 543 (50) Consolidated obligations: Discount notes ................................ 141,249 14,966 19,794 3,391 4,135 Bonds ....................................... 384,170 (3,586) 18,304 36,549 42,532 56,699 Total consolidated obligations ............... 525,419 (3,586) 33,270 56,343 45,923 60,834 Accrued interest payable ........................... 9,804 (25) 471 501 959 1,863 Affordable Housing Program ........................ 520 27 66 39 72 Payable to REFCORP ............................. 75 5 8 6 11 Other liabilities ................................... 755 35 27 11 186 Total liabilities ............................ 554,197 (3,661) 34,880 59,600 48,190 66,370 CAPITAL Capital stock outstanding ($100 par value) ............ 28,361 1,829 3,023 2,318 3,328 Retained earnings (subject to restrictions) ............ 660 39 70 98 106 Accumulated other comprehensive income: Unrealized net (losses) gains on available -for -sale securities .................................. (6) 1 (3) Total capital .............................. 29,015 1,869 3,093 2,413 3,434 Total liabilities and capital .................. $583,212 $(3,661) $36,749 $62,693 $50,603 $69,804 100 i San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle $ 37 $ 12 $ 42 $ 181 $ 292 $ 1 $ 1 $ 4 695 255 250 200 55 1,702 320 45 50 2,559 100 9,782 3,829 3,170 6,675 2,448 3,335 8,636 2,908 7,078 4,243 6,608 6,928 9,106 4,991 10,382 11,463 1,972 1,585 28,134 19,433 17,167 22,949 27,034 15,592 90,514 26,284 6 1,620 80 6 6 .1 1,619 80 6 357 368 561 629 728 405 2,100 614 4 10 8 7 14 4 1 9 10 4 18 399 1 14 1 $48,068 $29,796 $29,229 $37,717 $40,227 $24,380 $115,912 $41,695 $ 831 $ 796 $ 2,026 $ 795 $ 1,325 $ 627 $ 303 $ 678 116 4 714 119 3 7 24 108 71 137 1.4 1,018 800 2,877 914 1,328 648 327 786 50 19 124 400 19 50 124 400 19,925 8,990 6,548 9,480 3,583 6,147 30,677 13,613 24,297 18,035 17,655 24,400 32,472 15,834 76,725 24,254 44,222 27,025 24,203 33,880 36,055 21,981 107,402 37,867 348 411 574 460 802 335 2,607 498 56 24 27 25 31 23 91 39 6 5 5 5 4 4 11 5 15 66 38 119 21 1.99 36 2 45,665 28,350 27,724 35,453 38,365 23,190 110,474 39,597 2,361 1,419 1,450 2,229 1,799 1,147 5,374 2,084 46 27 55 35 63 43 64 14 (4) 2,403 1,446 1,505 2,264 1,862 1,190 5,438 2,098 $48,068 $29,796 $29,229 $37,717 $40,227 $24,380 $115,912 $41,695 101 116 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES -STATEMENTS OF CONDITION DECEMBER 31, 1998 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta ASSETS Cash and due from banks ......................... $ 686 $ 6 $ 35 $ 281 $ 75 Interest -bearing deposits in banks .................. 4,718 2,645 50 142 Securities purchased under resale agreements ........ 3,988 150 Federal funds sold ............................... 47,208 7,807 2,540 2,344 4,630 Investments: Held -to -maturity securities .................... 77,142 $(4,480) 6,279 7,045 6,71.4 10,179 Available -for -sale securities .................... 4,137 (910) 1,010 Advances ....................................... 288,189 15,419 31,517 26,050 33,561 Advances participated other FHLBanks ............. (�80) Mortgage loans, net .............................. 966 6 5 17 Loans to other FHLBanks ......................... (375) 200 75 Accrued interest receivable ........................ 6,317 (153) 398 406 663 907 Bank premises and equipment, net .................. 149 3 6 10 31 Other assets ..................................... 502 (24) 14 7 38 13 Total assets ............................. $434,002 $(5,942) $30,076 $44,407 $36,885 $49,630 LIABILITIES Deposits: Demand and overnight ........................ $ 21,712 $ 1,652 $ 2.620 $ 2,086 $ 3,620 Term ...................................... 2,590 105 356 68 310 Other ...................................... 520 14 7 118 169 Total deposits ........................... 24,822 1.771 2,983 2.272 4,099 Borrowings: Other FHLBanks ............................ $ (375) Securities sold under repurchase agreements ..... 647 Other...................................... 336 Total borrowings ......................... 983 (375) Consolidated obligations: Discount notes .............................. 115,555 12,760 21,987 3,060 3,280 Bonds ...................................... 261,160 (5,390) 13,568 16,785 28,882 38,109 Total consolidated obligations .............. 376,715 (5,390) 26,328 38,772 31,942 41,389 Accrued interest payable .......................... 6,439 (153) 388 236 604 1,082 Affordable Housing Program ...................... 455 22 54 31 66 Payable to REFCORP ............................ 75 4 8 6 8 Other liabilities .................................. 1,761 33 28 207 559 Total liabilities .......................... 411,250 (5,918) 28,546 42,081 35,062 47,203 CAPITAL Capital stock outstanding ($100 par value) .......... 22,287 1,499 2,288 1,755 2,350 Retained earnings (subject to restrictions) ........... 468 (24) 31 38 72 77 Accumulated other comprehensive income: Unrealized net (losses) gains on available -for -sale securities ................................. (3) (4) p' ................... Total capital ......... 22 752 (24 ) 1,530 2, 326 1,823 2,427 Total liabilities and capital ................ $434,002 $(5,942) $30,076 $44,407 $36,885 $49,630 102 San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle $ 14 $ 33 $ 11 $ 86 $ 77 $ 62 $ 3 $ 3 435 120 125 174 402 625 853 309 100 2,226 350 7,429 3,172 2,266 4,773 1,433 2,450 4,894 3,470 5,626 3,759 5,313 6,070 7,831 4,428 7,974 10,404 2,337 1,700 17,873 14,388 14,899 18,673 22,191 8,477 63,990 21,151 280 5 930 3 50 50 177 295 631 379 549 190 1,522 353 3 10 4 7 2 73 7 9 18 30 97 1 40 252 $33,901 $23,491 $24,925 $30,452 $32,183 $16,212 $81,124 $36,658 $ 1,324 $ 1,198 $ 3,241 $ 1,271 $ 1,754 $ 1,328 $ 233 $ 1,385 229 15 738 281 6 11 245 226 36 1 175 1,589 1,214 4,154 1,552 1,760 1,339 478 1,611 225 150 290 150 207 200 130 6 200 355 290 306 207 15,427 6,592 3,824 10,221 6,543 5,978 11,522 14,361 1.4,421 14,141 14,766 16,271 21,303 7,801 62,439 18,064 29,848 20,733 18,590 26,492 27,846 13,779 73,961 32,425 178 324 625 274 579 175 1,820 307 46 23 23 25 29 19 82 35 9 4 5 7 4 3 11 6 278 14 29 221 105 3 31 253 31,948 22,312 23,626 28,926 30,613 15,318 76,689 34,844 1,907 1,156 1,264 1,498 1,511 860 4,401 1,798 45 23 35 28 59 34 34 16 1 1,953 1,179 1,299 1,526 1,570 894 4,435 1,814 $33,901 $23,491 $24,925 $30,452 $32,183 $16,212 $81,124 $36,658 103 END-W*O, FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta INTEREST INCOME Advances ............................................... $17,721 $ 8 $1,063 $1,937 $1,584 $2,063 Advances participated other FHLBanks ...................... (8) 4 Interest -bearing deposits in banks ........................... 445 180 42 40 Securities purchased under resale agreements ................. 177 21 Federal funds sold ........................................ 2,620 230 1.22 159 359 Investments: Held -to -maturity securities ............................. 5,193 (115) 411 520 422 711 Available -for -sale securities ............................ 262 (22) 1 70 Mortgage loans .......................................... 88 1 3 Loans to other FHLBanks................................. (4) 3 1 Other................................................... 14 . Total interest income ............................. 26,520 (141) 1,726 2,763 2,281 3,1.77 INTEREST EXPENSE Consolidated obligations ................................... 23,043 (137) 1,492 2,364 1,984 2,664 Deposits ................................................ 910 61 107 73 178 Borrowings from other FHLBanks .......................... (4) 1 Securities sold under repurchase agreements .................. 24 Other borrowings ......................................... 9 Total interest expense ............................. 23,986 (141) NET INTEREST INCOME BEFORE LOAN LOSS PROVISION .......................................... 2,534 Loan loss provision ....................................... 1 NET INTEREST INCOME AFTER LOAN LOSS PROVISION .......................................... 2,533 OTHER INCOME Prepayment fees, net ...................................... 13 Service fees ............................................. 43 Unrealized gain on change in fair value of interest -rate exchange agreements associated with the elimination of interbank bonds ........................................ 24 24 Other, net ............................................... 27 Total other income ............................... 107 24 OTHER EXPENSE Operating expenses ....................................... 282 Assessments ............................................. 29 Affordable Housing Program ............................... 199 Other................................................... 3 Total other expenses .............................. 513 INCOME BEFORE EXTRAORDINARY ITEM ............... 2,127 24 Extraordinary gain on early extinguishment of debt ............ 1 NET INCOME .......................................... $ 2,128 $ 24 104 3 2 1 1,556 2,473 2,059 2,842 170 290 222 335 170 290 222 335 2 3 1 7 3 10 21 30 2 3 1.3 23 36 56 137 244 $ 137 $ 244 1 14 3 1 14 5 33 26 2 3 17 27 2 52 58 184 282 $ 184 $ 282 San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle $1,204 $ 882 $ 871 $1,055 $1,246 $ 637 $3,970 $1,201 4 49 11 9 2 9 68 35 2 23 11 111 9 443 180 137 241 131 132 355 131 365 262 352 338 456 288 525 658 127 86 1 82 1 14 2,188 1,424 1,465 1,655 1,849 1,070 5,029 2,034 1,928 1,229 1,128 1,443 1,624 916 4,628 1,780 56 45 168 46 69 42 12 53 3 1 1 1 11 1 1 2 9 1,985 1,276 1,296 1,492 1,705 959 4,642 1,842 203 148 169 163 144 111 387 192 1 203 148 168 163 144 111 387 192 4 l 2 1 6 1 4 3 1 1 1 1 3 1 1 17 3 6 9 2 4 4 2 20 4 17 18 24 21 27 13 39 13 3 2 2 2 2 1 5 2 16 12 12 1 12 10 9 32 16 36 32 39 35 39 23 76 31, 173 125 131 132 1.09 90 331 1 1.65 $ 173 $ 125 $ 131 $ 132 $ 109 $ 90 $ 332 $ 165 105 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta INTEREST INCOME Advances............................................... $13,155 Advances participated other FHLBanks ...................... Interest -bearing deposits in banks ........................... 248 Securities purchased under resale agreements ................. 212 Federal funds sold ........................................ 2,842 Investments: Held -to -maturity securities ............................. 4,792 Available -for -sale securities ............................ 205 Mortgage loans .......................................... 18 Loans to other FHLBanks................................. Other................................................... 6 Total interest income ............................. 21,478 INTEREST EXPENSE Consolidated obligations ................................... 18,198 Deposits................................................ 1,137 Borrowings from other FHLBanks .......................... Securities sold under repurchase agreements .................. 3 Other borrowings ......................................... 24 Total interest expense ............................. 19,362 NET INTEREST INCOME ............................... 2,116 OTHER INCOME Prepayment fees, net ...................................... 80 Service fees ............................................. 52 Unrealized loss on change in fair value of interest -rate exchange agreements associated with the elimination of interbank bonds ........................................ (30) Other, net ............................................... 17 Total other income ............................... 119 OTHER EXPENSE Operating expenses ....................................... 258 Assessments ............................................. 28 Affordable Housing Program ............................... 169 Other................................................... 2 Total other expenses .............................. 457 NET INCOME .......................................... $ 1,778 106 (1) (380) (375) (5) $ 787 $1,249 83 40 367 367 342 480 3 1 1,537 2,182 1,311 1,829 81 131 1 2 (380) 1,393 1,962 144 220 2 5 1 7 (30) (30) 3 18 2 11 12 26 3 17 31 46 $ (30) $ 1.16 $ 1.86 $1,211 $1,618 4 8 128 274 395 638 34 1 1 1,772 2,540 1,501 2,081 95 189 2 1 1,598 2,271 174 269 2 2 13 3 1 15 6 31 28 2 3 13 21 2 46 54 $ 143 $ 221 12.E San Cincinnati Indianapolis Chicago Des Moines Dallas 'Copeka Francisco Seattle $ 905 $ 715 $ 704 $ 772 $ 885 $386 1 $2,987 $ 936 46 40 1 13 14 10 11 18 1 38 5 18 32 68 10 445 190 171 247 1.11 145 258 139 345 277 377 365 450 335 487 655 137 53 17 1 1 5 1,879 1,275 1,308 1,403 1,483 909 3,812 1,758 1,629 1,092 957 1,206 1,249 749 3,465 1,504 68 52 214 61 92 61 15 78 1 3 1 1 2 l 16 1 1,698 1,145 1,171 1,270 1,357 812 3,481 1,584 181 130 137 133 126 97 331 174 27 2 4 6 1 1 25 3 1 6 1 4 4 10 1 1 1 2 2 2 5 4 29 10 5 12 5 13 31 8 16 17 19 15 21 20 35 12 2 2 2 2 2 1 5 2 16 10 10 12 9 8 28 14 34 29 31 29 32 29 68 28 $ 176 $ 111 $ 111 $ 116 $ 99 $ 81 $ 294 $ 1.54 107 `»� 122 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta INTERESTINCOME Advances ............................................... $ 9,981 $ 623 $ 976 $ 819 $1,095 Interest -bearing deposits in banks ........................... 299 1 62 14 16 Securities purchased under resale agreements .......... I ...... 241 24 Federal funds sold ........................................ 2,840 282 406 178 240 Investments: Held -to -maturity securities ............................. 4,458 $(678) 375 455 429 760 Available -for -sale securities ................ I ........... 206 (49) 37 Trading securities ........................................ 1 Loans to other FHLBanks................................. (3) 3 Other................................................... 4 1 Total interest income ............................. 18,030 (730) 1,306 1,902 1,477 2,11.1 INTEREST EXPENSE Consolidated obligations ................................... 15,401 (645) 1,120 1,618 1,280 1,732 Deposits ................................................ 836 51 109 59 138 Borrowings from other FHLBanks .......................... (3) Securities sold under repurchase agreements .................. 9 9 Other borrowings ......................................... 12 (1) 6 1 Total interest expense ............................. 16,258 (649) 1,177 1,727 1,340 1,879 NET INTEREST INCOME ............................... 1,772 (81) 129 175 137 232 OTHER INCOME Prepayment fees, net ...................................... 26 1 1 Service fees ............................................. 49 1 7 11 3 Realized net losses from sale of available -for -sale securities ..... (1) (1) Unrealized gain on change in fair value of interest -rate exchange agreements associated with the elimination of interbank bonds ........................................ 52 52 Other, net ............................................... (1.4) 1 Total other income ............................... 1.12 52 2 7 10 5 OTHER EXPENSE Operating expenses ....................................... 229 17 22 25 23 Assessments ............................................. 24 2 3 2 3 Affordable Housing Program ............................... 137 9 13 10 17 Total other expenses .............................. 390 28 38 37 43 INCOME BEFORE EXTRAORDINARY ITEM ............. 1,494 (29) 103 144 110 194 Extraordinary loss on early extinguishment of debt ............. (2) (2) NET INCOME .......................................... $ 1,492 $ (29) $ 103 $ 144 $ 110 $ 192 108 San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle $ 711 $ 603 $ 571 $ 563 $ 597 $332 $2,396 $ 695 78 54 1 22 20 6 9 16 27 2 9 34 142 3 404 199 143 444 115 124 146 159 281 235 389 443 461 309 431 568 172 46 1 3 1,646 1,137 1,131 1,474 1,205 805 3,124 1,442 1,445 988 816 1,295 1,020 684 2,811 1,237 41 34 190 43 67 40 11 53 3 4 1 1 1,486 1,022 1,006 1,341 1,091 724 2,823 1,291 160 115 125 133 114 81 301 151 2 1 1 18 2 1 6 1 3 3 11 1 1 3 (1-) (2) (1) 1 (16) 1 3 9 1 1 3 12 3 4 14 16 17 12 21 21 29 12 2 1 1 2 1 1 4 2 12 9 9 10 8 6 22 12 28 26 27 24 30 28 55 26 135 98 99 110 87 65 249 129 $ 135 $ 98 $ 99 $ 110 $ 87 $ 65 $ 249 $ 129 109 44 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CAPITAL FOR THE. YEARS ENDED DECEMBER 31, 19999 1998, AND 1997 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta CAPITAL STOCK SHARES BALANCE, DECEMBER 31, 1996 ..................... 165 Proceeds from sale of capital stock ...................... 42 :Redemption of capital stock .... I ...... I ................ (24) Capital stock dividends ................................ 6 BALANCE, DECEMBER 31, 1997 ..................... 189 Proceeds from sale of capital stock ...................... 59 Redemption of capital stock ............................ (31) Capital stock dividends ................................ 6 BALANCE, DECEMBER 31, 1998 ............. I ....... 223 Proceeds from sale of capital stock ...................... 88 Redemption of capital stock ............................ (35) Capital stock dividends ................................ 8 BALANCE, DECEMBER 31, 1999 ..................... 284 CAPITAL STOCK —PAR VALUE BALANCE, DECEMBER 31, 1996 ..................... $16,540 Proceeds from sale of capital stock ...................... 4,195 Redemption of capital stock ............................ (2,431) Capital stock dividends ................................ 529 BALANCE, DECEMBER 31, 1997 ..................... 18,833 Proceeds from sale of capital stock ...................... 6,064 Redemption of capital stock ............................ (3,212) Capital stock dividends ................................ 602 BALANCE, DECEMBER 31, 1998 ..................... 22,287 Proceeds from sale of capital stock ...................... 8,851 Redemption of capital stock ............................ (3,478) Capital stock dividends ................................ 701 BALANCE, DECEMBER 31, 1999 .............. I ...... $28.361 110 12 16 12 18 2 3 8 9 (1) (6) (7) 13 19 14 20 2 5 10 8 (1) (7) (5) 15 23 17 23 4 8 16 19 (1) (1) (10) (9) 18 30 23 33 $1,214 $1,586 $1,185 $1,808 226 313 756 864 (122) (48) (553) (646) 1,318 1,851 212 492 (31) (55) 1,499 2,288 392 788 (62) (53) $1,829 $3,023 1,388 2,026 1,044 843 (677) (519) 1,755 2,350 1,577 1,921 (1,014) (943) $2,318 $3,328 San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle 14 9 11 12 11 6 31 13 2 2 2 2 4 2 4 2 (2) (1) (3) (1) (2) (1) 1 1 1 2 1 17 11 11 13 13 8 35 15 2 2 5 8 6 1 8 2 (1) (1) (3) (6) (5) (1) (1) 1 1 1 2 1 19 12 13 15 15 9 44 18 3 2 4 9 4 4 13 2 (2) (2) (2) (2) (6) 2 1 1 3 1 24 14 15 22 18 12 54 21 $1,358 $ 882 $1,075 $1,227 $1,100 $ 641 $3,140 $1,324 247 186 263 234 369 153 349 235 (38) (201) (159) (251) (80) (155) (178) 105 69 50 201 104 1,672 1,068 1,137 1,302 1,287 764 3,535 1,485 191 214 473 836 621 140 781 217 (80) (126) (346) (640) (472) (104) (136) (26) 124 75 60 221 122 1,907 1,156 1,264 1,498 1,511 860 4,401 1,798 341 280 352 893 446 398 1,294 169 (34) (17) (166) (162) (247) (179) (575) (26) 147 89 68 254 143 $2,361 $1,419 $1,450 $2,229 $1,799 $1,147 $5,374 $2,084 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CAPITAL FOR THE YEAR ENDED DECEMBER 319 1999, 1998 AND 1997—(Continued) (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta RESTRICTED RETAINED EARNINGS BALANCE, DECEMBER 31, 1996...................... $ 33 $ 3 $ 2 $ 2 $ 2 Transfers (to) from unrestricted retained earnings .......... (15) (2) (1) (1) (1) BALANCE, DECEMBER 31, 1997...................... 18 1 1 1 1 Transfers (to) from unrestricted retained earnings .......... 59 3 1 BALANCE, DECEMBER 31, 1998...................... 77 1 4 2 1 Transfers (to) from unrestricted retained earnings .......... (8) 1 (1) BALANCE, DECEMBER 31, 1999...................... $ 69 $ 2 $ 3 $ 2 $ 1 UNRESTRICTED RETAINED EARNINGS BALANCE, DECEMBER 31, 1996...................... $ 309 $ 35 $ 21 $ 28 $ 44 $ 37 Net income .......................................... 1,492 (29) 103 144 110 192 Transfers (to) from restricted retained earnings ............ 15 2 1 1 1 Dividends on capital stock: Cash ............................................ (661) (82) (115) (81) (141) Stock............................................ (529) Capital distributions to REFCORP ...................... (300) (20) (28) (22) (38) BALANCE, DECEMBER 31, 1997...................... 326 6 24 30 52 51 Net income .......................................... 1,778 (30) 116 186 143 221 Transfers (to) from restricted retained earnings ............ (59) (3) (1) Dividends on capital stock: Cash ............................................ (752) (91) (147) (101) (159) Stock............................................ (602) Capital distributions to REFCORP ...................... (300) (19) (32) (23) (37) BALANCE, DECEMBER 31, 1998...................... 391 (24) 30 34 70 76 Net income .......................................... 2,128 24 137 244 184 282 Transfers (to) from restricted retained earnings ............ 8 (1) 1 Dividends on capital stock: Cash ............................................ (935) (110) (177) (132) (213) Stock............................................ (701) Capital distributions to REFCORP ...................... (300) (19) (35) (26) (40) BALANCE, DECEMBER 31, 1999...................... $ 591 $ $ 37 $ 67 $ 96 $ 105 112 147 San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle $ 1 $ 1 $ 5 $ 10 $ 7 (2) (7) (1) 1 1 3 3 6 16 $ 1 $ 2 5 1 28 2 17 1 2 6 4 31 8 (10) (2) (2) (1) $ 1 8 (2) $ 7 $ 1 $ $ 4 $ 3 $ 1 $ 39 $ 6 $ 18 $ 21 $ 16 $ 18 $ 45 $ 24 $ 2 135 98 99 110 87 65 $ 249 129 2 7 1 (79) (74) (89) (105) (69) (50) (201) (104) (27) (19) (20) (22) (17) (13) (49) (25) 21 21 21 17 48 26 6 3 176 111 111 116 99 81 294 154 (16) (1) (2) (5) (1) (28) (2) (91) (79) (84) (124) (75) (60) (221) (122) (29) (18) (18) (22) (16) (13) (48) (25) 28 22 33 22 55 34 3 8 173 125 131 132 109 90 332 165 10 2 2 1 (1) (8) 2 (103) (92) (108) (147) (89) (68) (254) (143) (25) (18) (19) (17) (16) (13) (48) (24) $ 39 $ 26 $ 55 $ 31 $ 60 $ 42 $ 25 $ 8 113 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CAPITAL —(Continued) FOR THE YEARS ENDED DECEMBER 31, 19999 1998 AND 1997 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta TOTAL RETAINED EARNINGS BALANCE, DECEMBER 31, 1996...................... Net income .......................................... Dividend on capital stock: Cash............................................ Stock............................................ Capital distributions to REFCORP ...................... BALANCE, DECEMBER 31, 1997...................... Net income .......................................... Dividends on capital stock: Cash............................................ Stock............................................ Capital distributions to REFCORP ...................... BALANCE, DECEMBER 31, 1998...................... Netincome .......................................... Dividend on capital stock: Cash............................................ Stock............................................ Capital distributions to REFCORP ...................... BALANCE, DECEMBER 31, 1999...................... $ 342 1,492 (661) (529) (300) 344 1,778 (752) (602) (300) 468 2,128 (935) (701) (300) $ 660 114 $ 35 (29) 6 (30) (24) 24 $ 24 103 (82) (20) 25 116 (91) (19) 31 137 (110) (19) $ 39 $ 30 144 (115) (28) 31 186 (147) (32) 38 244 (177) (35) $ 70 $ 46 $ 39 110 192 (81) (22) 53 143 (101) (23) 72 184 (132) (26) $ 98 (141) (38) 52 221 (159) (37) 77 282 (213) (40) $ 106 129 San Cincinnati Indianapolis Chicago Des :Moines Dallas Topeka Francisco Seattle $ 19 $ 21 $ 16 $ 19 $ 50 $ 24 $ 10 $ 9 135 98 99 110 87 65 249 129 (79) (74) (89) (105) (69) (50) (201) (104) (27) (19) (20) (22) (17) (13) (49) (25) 22 21 21 18 51 26 9 9 176 111 111 116 99 81 294 154 (91) (79) (84) (124) (75) (60) (221) (122) (29) (18) (18) (?2) (16) (13) (48) (Z5) 45 23 35 28 59 34 34 16 173 125 131 132 109 90 332 165 (103) (92) (108) (147) (89) (68) (254) (143) (25) (18) (19) (17) (16) (13) (48) (24) $ 46 $ 27 $ 55 $ 35 $ 63 $ 43 $ 64 $ 14 115 �- - 130 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES -STATEMENTS OF CAPITAL -(Continued) FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta ACCUMULATED OTHER COMPREHENSIVE INCOME BALANCE, DECEMBER 31, 1996 ........................... $ (7) $ $ $ $ (6) $ Other Comprehensive Income: Net unrealized gain on available -for -sale securities ........... 4 3 BALANCE, DECEMBER 31, 1997 ........................... (3) (3) Other Comprehensive Income: Net unrealized (loss) gain on available -for -sale securities ..... (1) BALANCE DECEMBER 31, 1998 ............................ (3) (4) Other Comprehensive Income: Net unrealized (loss) gain on available -for -sale securities ..... (3) 1 1 BALANCE DECEMBER 31, 1999 ........... I ................ $ (6) $ $ 1 $ $ (3) $ TOTAL CAPITAL BALANCE DECEMBER 31, 1996 ............................ $16,875 $ 35 $1,238 $1,616 $ 1,225 $1,847 Proceeds from sale of capital stock ............................ 4,195 226 313 756 864 Redemption of capital stock .................................. (2,431) (122) (48) (553) (646) Comprehensive income: Net Income ............................................ 1,492 (29) 103 144 110 192 Other Comprehensive Income: Net unrealized gain on available -for -sale securities ........... 4 3 Total Comprehensive Income ................................. $ 1,496 $ (29) $ 103 $ 144 $ 113 $ 192 Dividend on Capital stock: Cash .................................................. (661) (82) (115) (81) (141) Capital distributions to REFCORP ............................ (300) (20) (28) (22) (38) BALANCE DECEMBER 31, 1997 ............................ $19,174 $ 6 $1,343 $1,882 $ 1,438 $2,078 Proceeds from sale of capital stock ............................ 6,064 212 492 1,044 843 Redemption of capital stock .................................. (3,212) (31) (55) (677) (519) Comprehensive income: Net Income ............................................ 1,778 (30) 116 186 143 221 Other Comprehensive Income: Net unrealized (loss) gain on available -for -sale securities ..... (1) Total Comprehensive Income ................................. $ 1,778 $(30) $ 116 $ 186 $ 142 $ 221 Dividend on Capital stock: Cash .................................................. (752) (91) (147) (101) (159) Capital distributions to REFCORP ............................ (300) (19) (32) (23) (37) BALANCE DECEMBER 31, 1998 ............................ $22,752 $(24) $1,530 $2,326 $ 1,823 $2,427 Proceeds from sale of capital stock ............................ 8,851 392 788 1,577 1,921 Redemption of capital stock .................................. (3,478) (62) (53) (1,014) (943) Comprehensive income: Net Income ............................................ 2,128 24 137 244 184 282 Other Comprehensive Income: Net unrealized (loss) gain on available -for -sale securities ..... (3) 1 1 Total Comprehensive Income ................................. $ 2,125 $ 24 $ 138 $ 244 $ 185 $ 282 Dividend on Capital stock: Cash .................................................. (935) (110) (177) (132) (213) Capital distributions to REFCORP ............................ (300) (19) (35) (26) (40) BALANCE DECEMBER 31, 1999 ..................... I ....... $29,015 $ $1,869 $3,093 $ 2,413 $3,434 116 131 San Cincinnati Indianapolis Chicago Des Moines Dallas Topeka Francisco Seattle 1 1 1 (5) $ (4) $ $ $ $ $ $ $ $1,376 $ 903 $1,091 $1,246 $1,150 $ 665 $3,1.50 $1,333 247 186 263 234 369 153 349 235 (38) (201) (159) (251) (80) (155) (178) 135 98 99 110 87 65 249 129 1 $ 136 $ 98 $ 99 $ 110 $ 87 $ 65 $ 249 $ 129 (79) (74) (89) (27) (19) (20) (22) (17) (13) (49) (25) $1,694 $1,089 $1,158 $1,320 $1,338 $ 790 $3,544 $1,494 191 214 473 836 621 140 781 217 (80) (126) (346) (640) (472) (104) (136) (26) 176 111 111 116 99 81 294 154 1 $ 177 $ Ill $ Ill $ 116 $ 99 $ 81 $ 294 $ 154 (91) (79) (84) (29) (18) (18) (22) (16) (13) (48) (25) $1,953 $1,179 $1,299 $1,526 $1,570 $ 894 $4,435 $1,814 341 280 352 893 446 398 1,294 169 (34) (17) (166) (162) (247) (179) (575) (26) 173 125 131 132 109 90 332 165 (5) $ 168 $ 125 $ 131 $ 132 $ 109 $ 90 $ 332 $ 165 (103) (92) (108) (25) (18) (19) (17) (16) (13) (48) (24) $2,403 $1,446 $1,505 $2,264 $1,862 $1,190 $5,438 $2,098 117 �,- 1v FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 (Amounts in millions) Combining Combined Adjustments Boston New York Pittsburgh Atlanta OPERATING ACTIVITIES Net income ..................................... $ 2,128 $ 24 $ 137 $ 244 $ 184 $ 282 Less extraordinary gain on early extinguishment of debt (1) Income before extraordinary item ................... 2,127 24 137 244 184 282 Adjustments to reconcile income before extraordinary item to net cash provided by operating activities: Depreciation and amortization: Net premiums and discounts on consolidated obligations and investments, and deferred costs and deferred fees received on interest -rate exchange agreements ....................... 3,283 654 (9) 75 146 Concessions on consolidated obligations .......... 120 1 3 2 50 Deferred loss (gain) on interest -rate exchange agreements, net ............................ 15 (1) 1 1 2 1 1 Bank premises and equipment .................. 12 1 Other...................................... Provision for credit losses on mortgage loans ....... 1 Loss (gain) due to change in net mark to market adjustment for interest -rate exchange agreements.. 9 1 Gain on disposal of bank premises and equipment ... (5) (Increase) decrease in accrued interest receivable ... (2,946) (92) (69) (161) (456) (569) (Increase) decrease in other assets ................ (281) (24) 2 (1) 5 5 Increase in Affordable Housing Program (AHP) liability and discount on AHP advances.......... 64 5 12 7 6 Decrease (increase) in accrued interest payable ..... 3,329 92 83 265 354 781 (Decrease) increase in other liabilities ............. (537) (5) (1) (16) (373) Total adjustments .......................... 3,064 (24) 672 109 (26) 48 Net cash provided by operating activities....... 5,191 809 353 158 330 INVESTING ACTIVITIES Net (increase) decrease in interest -bearing deposits in banks ........................................ (5,238) (1,696) (1,355) (590) Net (increase) decrease in federal funds sold ......... (9,687) 2,066 1,645 282 (2,874) Net decrease (increase) in securities purchased under resale agreements .............................. 1,234 150 Net (increase) decrease in short-term held -to -maturity securities ..................................... (3,260) (274) (216) (1,438) Proceeds from sales of long-term held -to -maturity securities Purchases of long-term held -to -maturity securities..... 8 (40,868) 48 (3,026) (4,124) (2,962) (6,262) Proceeds from maturities of long-term held -to -maturity securities ..................................... 24,806 (596) 1,789 1,915 2,040 3,140 Proceeds from sales of available -for -sale securities ..... 303 Purchases of available -for -sale securities ............. (43.759) (37) (926) Proceeds from maturities of available -for -sale securities 43,119 (400) 1 456 Principal collected on advances ..................... 2,469,535 320 177,277 681,877 339,365 47,904 Principal collected on advances participated from another FHLBank .............................. Advances made .................................. (2,577,096) (320) (184,346) (694,769) (280) (349,842) (59,559) Principal collected on mortgage loans ............... 110 7 7 Mortgage loans made ............................. (1,166) (222) (4) (74) Principal collected on other loans made .............. 1 1 Net (increase) decrease in loans to other FHLBanks .. (325) 150 75 (Increase) decrease in bank premises and equipment .. 65 (1) (3) (2) Net cash used in investing activities........... (141,893) (1,273) (6,400) (15,227) (13,437) (19,671) 118 23 Des San Cincinnati Indianapolis Chicago Moines Dallas Topeka Francisco Seattle $ 173 $ 125 $ 131 $ 132 $ 109 $ 90 $ 332 $ 165 (1) 173 125 131 132 109 90 331 165 596 321 271 457 138 215 (130) 549 4 1 8 1 29 1 8 12 1 (1) 13 1 1 1 1 1 1 2 (1) 1 1 8 (5) (180) (73) 70 (250) (178) (149) (578) (261) (1) (2) 15 (3) (303) 26 12 1 5 2 4 10 170 88 (51) 186 223 160 787 191 52 2 (102) (83) (15) 4 601 389 323 299 (172) 231 118 496 774 514 454 431 (63) 321 449 661 (261) (135) (125) (200) 119 (1,300) 305 (2,453) (657) (904) (1,902) (1,015) (695) (3,742) 562 (45) 802 309 100 (332) 250 431 (830) (265) (521) 21 (867) 699 8 (3,519) (2,196) (2,203) (2,018) (2,924) (2,261) (3,000) (6,421) 1,908 1,299 1,735 1,425 2,187 1,680 1,614 4,670 303 (42,493) (303) 42,947 467,743 115 33,990 25,651 60,244 342,194 60,233 195,964 36,773 600 (478,006) (39,034) (27.919) (64,521) (347,036) (67,668) (222,490) (41,906) 96 (1) (786) (76) (3) 50 50 (1) (1) (5) (13) 91 (14,135) (6,234) (4,363) (6,929) (7,331) (7,921) (34,062) (5,010) 119 3 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CASH FLOWS —(Continued) FOR THE YEAR ENDED DECEMBER 31, 1999 (Amounts in millions) Combined Combined Adjustments Boston New York Pittsburgh Atlanta FINANCING ACTIVITIES Net decrease in deposits ........................... $ (7,739) $ (699) $ (328) $ (1,020) $ (695) Net (decrease) increase in securities sold under repurchase agreements ........................... (105) Net (decrease) increase in other borrowings .......... (336) Net increase (decrease) in loans from other FHLBanks $ 325 Net proceeds from sale of consolidated obligations: Bonds ......................................... 244,700 (48) 8,433 28,154 23,129 31,692 Discount notes ................................. 2,883,705 180,871 436,946 56,349 34,747 Payments for maturing and retiring consolidated obligations: Bonds ......................................... (122,854) 996 (3,737) (8,406) (9,456) (13,218) Discount notes ................................. (2,861,458) (179,261) (439,139) (56,088) (33,974) Proceeds from issuance of capital stock .............. 8,849 391 788 1,578 1,921 Payments for redemption of capital stock ............. (3,480) (62) (53) (1,014) (943) Cash dividends paid ............................... (919) (102) (177) (132) (213) Cash distributions to REFCORP .................... (300) (19) (35) (26) (37) Net cash provided by financing activities ......... 140,063 1,273 5,815 17,750 13,320 19,280 Net increase (decrease) in cash and cash equivalents... 3,361 224 2,876 41 (61) Cash and cash equivalents at beginning of period ...... 686 6 35 281 75 Cash and cash equivalents at end of period ........... $ 4,047 $ $ 230 $ 2,911 $ 322 $ 14 Supplemental disclosures: Interest paid during the year ........................ $ 19,166 $ 1,473 $ 2,088 $ 1,631 $ 1.929 Stock dividends issued during the period ............. $ 701 120 1 Or Des San Cincinnati Indianapolis Chicago Moines Dallas Topeka Francisco Seattle $ (570) $ (414) $ (1,277) $ (639) $ (432) $ (690) $ (151) $ (825) 19 (167) (150) 193 (200) (130) (6) (175) (150) 17,454 9,565 9,259 15,001 26,755 10,197 50,946 14,163 628,670 455,549 291,673 123,981 41,865 229,032 159,964 244,058 (7,587) (5,675) (6,368) (6,965) (15,585) (2,186) (36,690) (7,977) (624.862) (453,488) (289,228) (125,086) (45,010) (229,120) (140,822) (245,380) 340 280 351 893 446 398 1,294 169 (34) (17) (166) (162) (247) (180) (576) (26) (103) (85) (107) (27) (17) (19) (19) (16) (12) (48) (25) 13,384 5,699 3,940 6,593 7,609 7,439 33,611 4,350 23 (21) 31 95 215 (61) (2) 1 14 33 11 86 77 62 3 3 $ 37 $ 12 $ 42 $ 181 $ 292 $ 1 $ 1 $ 4 $ 1,222 $ 855 $ 1,079 $ 940 $ 1,688 $ 800 $ 3,810 $ 1,651 $ 147 $ 89 $ 68 $ 254 $ 143 121 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998 (In millions of dollars) Combining Combined Adjustment Boston New York Pittsburgh Atlanta OPERATING ACTIVITIES Net income ....................................... $ 1,778 $ (30) $ 116 $ 186 $ 143 $ 221 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization: Net premiums and discounts on consolidated obligations, investments, and interest -rate exchange agreements ......................... 3,499 534 23 97 162 Concessions on consolidated obligations ........... 145 2 9 2 59 Deferred loss (gain) on interest -rate exchange agreements, net .............................. 3 1 1 Bank premises and equipment ................... 15 1 1 2 2 Other........................................ (Increase) decrease in accrued interest receivable..... (1,122) 22 (63) (107) (174) (200) (Increase) decrease in other assets ................. (58) 30 (3) (1) (10) (7) Increase in Affordable Housing Program (AHP) liability and discount on AHP advances ........... 70 2 9 6 12 Increase (decrease) accrued interest payable ......... 1,066 (22) 34 20 141 216 Increase (decrease) in other liabilities ............... 616 5 - (18) (15) 449 Total adjustments ............................ 4,234 30 512 (64) 50 694 Net cash provided by operating activities ........ 6,012 628 122 193 915 INVESTING ACTIVITIES Net decrease (increase) in interest -bearing deposits in banks ...... .......... ***'**' 3,312 30 315 (74) Net decrease (increase) in federal funds sold .......... 6,726 (1,712) 4,300 999 672 Net (increase) decrease in securities purchased under resale agreement ................................. (1,016) 110 Net decrease (increase) in short term held -to -maturity securities ....................................... 2,901 198 27 226 Proceeds from sales of long term held -to -maturity securities....................................... 242 Purchase of long term held -to -maturity securities ....... (47,772) 3,706 (2,905) (18,096) (2,332) (4,256) Proceeds from maturities of long term held -to -maturity securities ....................................... 42,403 (6,139) 2,062 16,918 2,338 5,175 Proceeds from sales of available -for -sale securities ...... 325 Purchase of available -for -sale securities ................ (57,754) (155) (809) Proceeds from maturities of available -for -sale securities .. 55,386 242 193 Principal collected on advances ...................... 939,607 50,800 190,576 135,259 37,435 Principal collected on advances participated from another FHLBank ............................... (306) 1 6 280 7 Advances made .................................... (1,025,853) (54,168) (202,492) (144,330) (47,868) Principal collected on mortgage loans ................. 27 Mortgage loans made ............................... (956) (5) (5) (13) Principal collected on other loans made ............... 1 (1) Net (increase) decrease in loans to other FFILBanks .... (28) (150) 103 (increase) decrease in bank premises and equipment.... (15) (1) (3) (6) (2) Net cash used in investing activities ............ (82,437) (2,680) (5,584) (8,947) (8,071) (8,595) 122 Cincinnati Indianapolis Chicago $ 176 $ 111 $ 111 San Des Moines Dallas Topeka Francisco Seattle $ 116 $ 99 $ 81 $ 294 $ 154 566 147 227 1,163 67 209 (127) 431 5 6 11 2 20 1 3 25 (4) 1 (4) 7 1 1 1 1 1 1 4 (1) (2) 3 45 1 (169) (52) (126) 15 (325) 11 6 (13) (3) (55) 1 (3) 14 5 3 3 1 4 11 15 (12) 176 68 125 (31) 354 (18) 3 (9) 1 198 26 1 (25) 648 141 238 1,380 54 199 (101) 453 824 252 349 1,496 153 280 193 607 1,212 1,268 55 301 772 16 (303) (280) 1,477 959 (345) 2,981 (478) 138 (2,565) 300 (367) (284) 517 385 (1,052) (325) 569 544 856 1,048 111 1,072 (1,151) (599) 212 30 (3,057) (1,861) (2,343) (2,626) (3,162) (2,362) (1,766) (6,712) 1,999 1,750 3,084 2,206 3,000. 2,032 1,727 6,251 160 165 (55,415) (1,375) 54,634 317 171,901 31,923 15,464 25,009 108,161 39,061 101,723 32,295 2 2 5 3 (175,052) (34,870) (20,008) (33,123) (117,309) (41,974) (116,440) (38,219) 27 (5) (925) (3) 100 75 (50) (50) (1) (1) (2) (1) 4 (2) (1,471) (1,111) (4,502) (4,277) (8,386) (1,675) (19,829) (7,309) 123 198 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CASH FLOWS— (Continued) FOR THE YEAR ENDED DECEMBER 31,1998 (In millions of dollars) Combining Combined Adjustment Boston New York Pittsburgh Atlanta FINANCING ACTIVITIES Net increase in deposits ............................. $ 6,875 $ 838 $ 757 $ 1,013 $ 1,025 Net increase in securities sold under agreements to repurchase ......... 405 Net increase (decrease) in other borrowings............ 80 (50) Net increase (decrease) in loans from other FHLBanks $ 28 (228) Net proceeds from sale of consolidated obligations: Bonds .......................................... 284,375 11,316 14,047 25,887 42,119 Discount notes ................................... 2,275,824 96,098 384,337 48,735 19,360 Payments for maturing/ retiring consolidated obligations: Bonds .......................................... (241,889) 2,652 (10,561) (14,242) (17,712) (34,517) Discount notes ................................... (2,250,973) (92,805) (376,329) (49,935) (20,439) Proceeds from issuance of capital stock ................ 6,064 212 492 1,044 843 Payments for redemption of capital stock ............... (3,212) (31) (55) (677) (518) Cash dividends paid ................................. (751) (89) (147) (101) (160) Distribution to REFCORP ........................... (300) (20) (31) (23) (38) Net cash provided by fmancing activities ........... 76,498 2,680 4,958 8,829 7,953 7,675 Net increase (decrease) in cash and cash equivalents .... 731, 2 4 75 (5) Cash and cash equivalents at beginning of year.......... 613 4 31 206 80 Cash and cash equivalents at end of year ............... $ 686 $ $ 6 $ 35 $ 281 $ 75 Supplemental disclosures: Interest paid during the year ......................... $ 17,060 $ $ 1,358 $ 1,948 $ 1,355 $ 1,872 Stock dividends issued during the year ................. $ 602 $ $ $ $ $ 124 San Cincinnati Indianapolis Chicago Des ✓Moines Dallas Topeka Francisco Seattle $ 411 $ 491 $ 409 $ 727 $ 417 $ 228 $ 162 $ 397 53 150 202 (200) 200 130 50 150 10,224 18,558 12,385 30,572 15,998 7,655 75,641 19,973 637,541 290,927 260,693 47,782 12,227 125,014 133,103 220,007 (9,744) (19,693) (8,979) (28,853) (12,581) (9,682) (59,383) (18,594) (637,679) (289,407) (260,601) (47,698) (8,000) (121,847) (130,784) (215,449) 191 214 473 837 621 140 781 216 (80) (126) (346) (640) (472) (105) (136) (26) (91) (78) (85) (27) (19) (18) (19) (17) (14) (49) (25) 637 854 4,138 2,803 8,246 1,389 19,635 6,701 (10) (5) (15) 22 13 (6) (1) (1) 24 38 26 64 64 68 4 4 $ 14 $ 33 $ 11 $ 86 $ 77 $ 62 $ 3 $ 3 $ 983 $ 976 $ 778 $ 857 $ 1,369 $ 843 $ 3,119 $ 1,602 $ 124 $ $ $ $ 75 $ 60 $ 221 $ 122 125 140 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES --STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta OPERATING ACTIVITIES Net income ......................................... $ 1,492 $ (29) $ 103 $ 144 $ 110 $ 192 Add extraordinary loss on early extinguishment of debt .... 2 2 Income before extraordinary item ...................... 1,494 (29) 103 144 110 194 Adjustments to reconcile income before extraordinary item to net cash provided by operating activities: Depreciation and amortization: Net premiums and discounts on consolidated obligations, investments, and interest -rate exchange agreements ........................... 2,613 368 12 173 191 Concessions on consolidated obligations ............. 117 2 4 2 30 Deferred (gain) loss on interest -rate exchange agreements, net ............................... (70) 1 Bank premises and equipment ..................... 17 1 1 2 2 Other.......................................... (2) Net realized losses on available -for -sale securities ...... 1 1 (Increase) decrease in accrued interest receivable ...... (1,127) 1 (77) (56) (166) (193) Decrease (increase) in other assets ................... 6 29 (2) (1) Increase in Affordable Housing Program (AHP) liability and discount on AHP advances ...... 55 2 7 6 12 Increase (decrease) accrued interest payable ........... 1,036 (1) 58 14 136 270 (Decrease) increase in other liabilities ................ (141) 3 9 28 (29) Total adjustments ............................. 2,505 29 355 (10) 182 284 Net cash provided by operating activities .......... 3,999 458 134 292 478 INVESTING ACTIVITIES Net (increase) decrease in interest -bearing deposits....... (1,665) (30) (16) 311 Net (increase) decrease in federal funds sold ............ (16,410) (1,960) (1,807) (1,312) (1,745) Net decrease (increase) in securities purchased under resale agreements .................................. 1,967 705 227 Net decrease (increase) in short-term held -to -maturity securities ......................................... 3,319 446 512 449 Net decrease in trading securities ...................... 47 Proceeds from sales of long-term held -to -maturity securities 5 Purchase of long-term held -to -maturity securities......... (27,386) 2,449 (1,030) (10,403) (2,176) (2,490) Proceeds from maturities of long-term held -to -maturity securities ......................................... 22,222 (4,847) 1,766 9,465 2,129 2,598 Proceeds from sales of available -for -sale securities ........ 231 224 Purchase of available -for -sale securities ................. (6,996) (43) Proceeds from maturities of available -for -sale securities.... 10,180 163 Principal collected on advances ........................ 791,098 37.752 93,561 121,511 35,070 Advances made ..................................... (832,005) (40,150) (96,677) (126,121) (41,423) Mortgage loans made ................................ (37) (1) (3) Principal collected on other loans made ................. 4 2 1 Net decrease (increase) in loans to other FHLBanks ..... 353 (178) Increase in bank premises and equipment ............... (11) (1) (1) (2) Net cash used in investing activities .............. (55,437) (2,045) (2,500) (5,862) (5,131) (7,184) 126 141 Des San Cincinnati Indianapolis Chicago Moines Dallas Topeka Francisco Seattle $ 135 $ 98 $ 99 $ 110 $ 87 $ 65 $ 249 $ 129 135 98 99 110 87 65 249 129 538 127 180 561 (4) 108 (64) 423 3 35 7 2 11 1 3 17 (81) 1 (3) 12 1 1 1 1 1 1 5 (1) (1) (27) (52) (81) (9) (61) (62) (233) (111) 1 (10) (1) (8) (6) 16 (12) 10 2 1 2' 3 1 9 17 48 72 (24) 42 14 311 79 (4) (102) (2) (55) (29) 1 43 (4) 538 (33) 178 470 (46) 80 74 404 673 65 277 580 41 145 323 533 (484) (671) (55) 34 (772) 90 23 (95) (4,087) (1,037) (121) (1,728) 625 (1,027) (689) (1,522) (235) 25 (517) (290) 2,052 835 118 (529) 816 (90) 342 370 50 47 5 (1,400) (1,118) (1,319) (1,422) (2,469) (895) (887) (4,226) 642 520 1,418 1,185 2,274 1,270 857 2,945 7 (6,586) (367) 9,556 461 134,488 20,256 18,105 26,089 126,224 35,424 96,605 46,013 (138,330) (22,122) (18,229) (26,343) (129,182) (36.346) (106,696) (50,386) 1 (33) (100) (75) (1) (1) (1) (1) (1) (2) (5,467) (4,028) (999) (1,344) (3,908) (1,428) . (8,367) (7,174) 127 FEDERAL HOME LOAN BANKS COMBINING SCHEDULES —STATEMENTS OF CASH FLOWS —(Continued) FOR THE YEAR ENDED DECEMBER 31, 1997 (In millions of dollars) Combining Combined Adjustments Boston New York Pittsburgh Atlanta FINANCING ACTIVITIES Net increase (decrease) in deposits .................. $ 229 Net (decrease) increase in securities sold under repurchase agreements ........................... (16) Net (decrease) increase in other borrowings........... (30) Net (decrease) increase in loans from other FHLBanks Net proceeds from sale of consolidated obligations: Bonds ......................................... 165,423 Discount notes .................................. 1,963,163 Payments for maturing/retiring consolidated obligations: Bonds ......................................... (129,107) Discount notes .................................. (1,949,198) Proceeds from issuance of capital stock ............... 4,197 Payments for redemption of capital stock ............. (2,430) Cash dividends paid ............................... (660) Distribution to REFCORP ......................... (300) Net cash provided by financing activities ........ 51,271 Net (decrease) increase in cash and cash equivalents ... (167) Cash and cash equivalents at beginning of year ........ 780 Cash and cash equivalents at end of year ............. $ 613 Supplemental Disclosures: Interest paid during the year ........................ $ 14,049 Stock dividends issued during the year ................ $ 529 128 $ (68) $ 566 $ 296 $ 549 (27) (227) (?28) $ (353) 228 11,509 12,999 15,745 22,665 71,611 344,336 218,893 41,175 2,398 (11,145) (8,408) (10,812) (15,581) (69,841) (343,897) (219,378) (41,913) 226 313 756 864 (121) (49) (553) (646) (80) (115) (81) (142) (20) (28) (20) (38) 2,045 2,044 5,717 4,846 6,706 2 (11) 7 2 42 199 80 $ $ 4 $ 31 $ 206 $ 80 $ $ 1,120 $ 1,615 $ 1,022 $ 1,403 ;- ` 14 Cincinnati $ 321 200 9,770 427,081 (6,922) (425,886) 246 (38) (26) 4,746 (48) 72 $ 24 Indianapolis $ 170 12,008 192,379 (9,903) (190,777) 187 (79) (19) 3,966 3 35 $ 38 Chicago $ (2,166) 6,391 209,103 (6,205) (206,375) 264 (200) (75) (20) 717 (5) 31 $ 26 $ 818 $ 884 $ 757 $ 105 Des Moines $ (333) 125 6,602 37,024 (5,829) (36,888) 235 (159) (88) (22) 667 (97) 161 $ 64 $ 838 129 Dallas Topeka $ 199 $ 464 238 8,452 5,514 3,128 38,352 (7,380) (5,980) (900) (37,117) 369 153 (251) (80) (18) (13) 3,837 1,293 (30) 10 94 58 $ 64 $ 68 $ 1,180 $ 710 $ 69 $ 50 San Francisco Seattle $ (44) $ 275 (2) 39,107 14,661 164,006 216,075 (33,544) (9,796) (161,621) (214,605) 349 235 (155) (178) (51) (25) 8,045 6,642 1 1 3 3 $ 4 $ 4 $ 2,490 $ 1,212 $ 201 $ 104 144 Board Member Information 145 Debbie De -Renard - Part. Is your broker able to advise if this ideal was rated by both S&P and Moody's? If so are the ratings as high as they were prior to March of this year? The total debt of organizations such as Fannie, Freddie and others is absolutely stunning! August 3, 2000 Fannie Mae Sells Bonds Worth a Record $11.5 Billion By GREGORY ZUCKERMAN and PATRICK BARTA Staff Reporters of TiiE WALL STREET JouRNAL Fannie Mae, the nation's biggest mortgage purchaser, Wednesday pulled off the largest bond sale in U.S. history outside of the Treasury market. The historic sale of $11.5 billion in bonds is a striking sign that vitality has returned to bond markets around the globe. The deal also buoys the effort by Fannie Mae, a quasi -government agency, to become a benchmark security for the entire U.S. bond market. With the U.S. Treasury buying back its debt, Fannie Mae has striven to step into the void and make its securities a bellwether in the bond world. But Fannie Mae, based in Washington, whose stock trades on the New York Stock Exchange, had to pay higher interest rates relative to Treasurys than it would have just six months ago. That is because of the continuing controversy about the future of both Fannie Mae and Freddie Mac; the agencies are under scrutiny from banks, politicians and even Alan Greenspan of the Federal Reserve. Some critics fear the agencies' rapid growth could someday pose a risk to taxpayers if the agencies ever run into problems, while competitors complain the agencies are using their advantages as government -sponsored entities to poach on their turf. Heavy Into Debt Fannie Mae's borrowing has been mounting, and the agency has four issues among the top 10 corporate -bond deals of all time. Amount, in Date Issuer billions Fannie Mae $11.5 8/2/00 10.0 1/12/00 Fannie Mae 9.5 6/28/00 Deutsche Telekom 7/9/99 Ford 8.6 146 Debbie D1. e-Renard - Part.00 Paae 2 8.0 Fannie Mae 8.0 AT&T 6.11 RJR Holdings Capital 6.1 WorldCom 6.0 Freddie Mac* 6.0 Freddie Mac* 6.0 Fannie Mae* Sources: Office of Federal Housing Enterprise Oversight; Thomson Financial Securities Data In this atmosphere, the agencies are having to offer juicier terms to lure bond investors to their large amount of bond offerings. Fannie Mae, which purchases mortgage loans from lenders, certainlylured investors Wednesday. The success comes as the bond market in the U.S. has been coming back to life in the past month or so, amid growing expectations by investors that the Federal Reserve is almost through with its yearlong campaign to slow the U.S. economy s breakneck pace with a series of interest -rate increases. The tone in markets outside the U. S. is also improving, and European and Asian investors have been playing a big part in bond sales around the globe in recent weeks. d to offer a richer yield than it would In part because Fannie Mae ha have six months ago, demand was strong; the offering was originally scheduled to be sized at $10 billion but was increased in the past few weeks. Fannie Mae sold its bonds, which are known in the bond marketas "agency" bonds as opposed to Treasurys or corporates, in several parts: It sold $2.5 billion of 7.25% bonds with a maturity of 2030, at a yield of 6.97%, or 1.255 percentage points above comparable Treasurys. arys. The company sold $4 billion of 7.125% benchmark notes w maturity of 2010, at a yield of 7.053%, or 1.065 points above Treasurys. Finally, it sold $5 billion of 6.75% notes with a maturity of 2002, at a yield of 6.816%, or 0.575 point above comparable Treasurys. Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley Dean Witter & Co. served as co -lead managers on the deal. Large banks, including Chase Manhattan Corp. and Wells Fargo, have complained the company has an unfair advantage because of its ties to the federal government. Amid the worries about possible taxpayer risk, Rep. Richard Baker, a Louisiana Republican, has introduced a bill that would limit the company's growth and reorganize its regulatory oversight. 11 /2/99 3/23/99 5/12/89 8/6/98 1 /6/00 9/ 14/99 4/5/00 147 Debbie De -Renard - Part. Paae 3 In March, after Treasury Undersecretary Gary Gensler testified in support of the bill, investors reacted by dumping agency bonds, and the spread between 10-year Treasurys and benchmark Fannie Mae securities widened dramatically. That Fannie Mae continues to be able to pull off large sales suggests investors still see the company's debt as a strong alternative to U. S. Treasurys. Still, market observers note that the spreads between Fannie Mae securities and 10-year Treasurys are still around one percentage point above comparable Treasurys, much wider than the 0.60 point seen at the beginning of the year, forcing Fannie Mae to pay more when selling bonds. "They placed their debt, no problem, but at significantly wider spreads than before the Baker bill was on the horizon," said Arthur Frank, director of fixed income research at Nomura Securities International Inc. in New York. "The Gensler genie is about halfway back in the bottle." Meanwhile, the size of the sale highlighted what many critics have been saying for months -- that Fannie Mae and its smaller sibling, Freddie Mac, are taking on enormous amounts of debt. Fannie Mae, Freddie Mac and the Federal Home Loan Bank System, another similar government -sponsored enterprise, are on a pace to surpass the U.S. Treasury in debt outstanding by as early as 2003, while Fannie Mae alone has seen its debt grow to about $579 billion, compared with about $123 billion a decade ago. A Fannie Mae official said Wednesday's huge sale merely is a product of a change in the way the company packages its debt. Until the past 2 1/2 years, the company usually sold debt in smaller increments, often at unscheduled sales. But in an effort to provide more predictability to investors -- and some say to mimic Treasurys -- the company has begun packaging debt into larger, regularly scheduled sales each month. Fannie Mae, which operates under a government charter, helps finance mortgage lending by purchasing home loans. The company either holds loans in its portfolio as investments, or packages them into securities so they can be sold on Wall Street. Fannie Mae will use revenue from the bond sale to fund its purchases of home loans and mortgage -backed securities, and the pricing it achieves helps determine mortgage rates. 10 , �.......: .. Renard - Part.000 „Page 4 Debbie De- While the controversy surrounding Fannie Mae's future has forced the agency to pay higher rates to sell its bonds, Fannie Mae's plan to regularly sell big bond deals seems to be working, helping to offset some of the pressure on rates. Investors said they were eager to buy Fannie Mae's bonds because they are liquid, or easy to trade, in part thanks to the benchmark program, and now serve as a guidepost for all bond investors. "When we see a strong sale like we saw today, what that tells us is that we have read the market properly, and we're giving investors what it is they value, said Linda Knight, Fannie Mae's treasurer. "It was encouraging to see the depth of the demand." There is still widespread nervousness among bond investors and traders. In the fall of 1998 many parts of the bond market froze up, on the heels of the Russian debt default, making it hard to buy and sell bonds. With the memory of that wrenching experience still fresh, almost two years later, investors continue to flock to issuers like Fannie Mae that promise big, liquid bond deals that are easier to trade in times of financial stress. "There's real demand for very large deals that let investors get out easily, not because investors want to sell these securities but because they want the comfort of knowing they can; they want to know there won't be any adverse consequences due to illiquidity, which many suffered in 1998," said Beth Hammack, co-head of agency underwriting and trading at Goldman Sachs. W rite to Gregory Zuckerman at gegory zuckerman c wsi com and Patrick Barta at Patrick barta2wsj . com 149 John Falconer - GSE s - Today s WSJ Page 1 xJ From: Joseph Irwin <j.a.irwin@worldnet.att.net> To: LQCity.lgcc(jfalcone) Date: Fri, Jul 14, 2000 6:50 AM Subject: GSE's - Today's WSJ July 14, 2000 Why Calls Are Escalating to Clip Fannie Mae's, Freddie Mac's Wings By PATRICK BARTA Staff Reporter of THE WALL STREET JOURNAL Camilla Douglas is proof it's easier to get a home in the U.S. than ever before. A 28-year-old kindergarten teacher, she bought a house in Jacksonville, Fla., under a program that allows a down payment of just 3%. Instead of being a renter, she now works avidly on her lawn, exults over the equity she's building, and says the house "makes me feel good about myself." For that, Ms. Douglas can thank Fannie Mae and Freddie Mac, which provide the capital that keeps the housing market humming. Buying up mortgages, they keep banks flush with money for further home -lending, holding down mortgage rates in the meantime. They pioneered the 3%-down mortgage and a slew of other programs for lower -income borrowers. Fannie Mae's 15% Earnings Rise Sparks Accounting Questions Top Financial Executives to Seek Tighter Reins on Mortgage Lenders (July 12) Yet not everybody is happy with this picture. Critics from several quarters are gunning for the companies. Commercial banks and other competitors say Fannie Mae and Freddie Mac are unfairly moving onto their turf. Some academics and legislators think the companies are a potential savings -and -loan -style disaster in the making. And some housing advocates complain that they still aren't doing enough to help low-income people and minorities. Just this week, a group of lenders and mortgage insurers including American International Group Inc. and General Electric Co.'s GE Capital Services met with Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers to call for new rules to rein in the companies. The P.R. problems could get worse. Thursday, a debate emerged over whether Fannie Mae reported misleading earnings after it included a one-time gain that helped compensate for $60 million in trading losses. Trillions in Loans Why is everyone so riled up? On the surface, it looks like a matter of size: Fannie Mae and Freddie Mac, which are shareholder -owned but government -sponsored, have gotten bigger than anyone ever dreamed, squeezing out competitors in the process. Last year, when a record 6.1 million homes sold across the U.S., more than 70% of the fixed-rate mortgage loans made to middle-class Americans were purchased by either Fannie Mae or Freddie Mac. In all, they either own or guarantee about $2 trillion in mortgages. To finance all those mortgages, Fannie and Freddie have been on a borrowing binge, and today their combined debt is roughly equivalent to the size of the entire municipal -bond market, according to the U.S. Treasury. Last year alone, Fannie and Freddie issued $260 billion in long-term debt. But beyond all that, many critics are also focusing on the way the companies have grown, and whether their behavior poses a significant risk to the economy and to taxpayers. Juicing Profits 150 John Falconer - GSE s - Today s SiWPage 2' First, Fannie Mae and Freddie Mac have loosened loan standards to capture more subprime and other higher -risk loans. Second, they've begun buying up staggering amounts of their own mortgage securities. While both practices juice their profits, they're also potentially dangerous, and no one knows whether the methods used to manage those risks would hold up in a severe recession. And because the two companies have become such integral players in the nation's financial system, there is concern that even a small setback could quickly cascade through the economy, setting off financial fires at other companies, or even lead to a taxpayer -financed bailout. That puts legislators in an uncomfortable position. Do they look the other way, because of all the good that Fannie and Freddie do? Or do they rein in the companies, reducing the likelihood of future problems but also possibly driving up mortgage rates and pushing some potential homeowners out of the market? The debate is coming to a head as lawmakers weigh a bill introduced by Rep. Richard Baker, a Louisiana Republican, that would trim the companies' sails. "They've gone from being the David in the business of providing housing to the Goliath," says Thomas O'Donnell, an analyst at Salomon Smith Barney who recently lowered his price targets for the companies' stocks because of all the trouble. "It's become politically correct now to bash them." Fannie Mae and Freddie Mac say they're doing exactly what they were designed to do: boost homeownership while providing shareholders with a good return. They've succeeded on both counts. A bigger share of American families, 67.1 %, own their own homes than ever before. And until the recent controversy helped drive Fannie and Freddie's stocks down, they had well outpaced the Standard & Poor's 500-stock index. Last year, the companies had combined net income of $6.1 billion. "We are," says Fannie Mae Chairman Franklin Raines, "what people have asked for." Many analysts, believing the companies are very smart at managing risk, think Congress would be foolish to interfere. Mortgages purchased by Fannie or Freddie carry lower interest rates than others. Last week, the average rate on a 30-year fixed-rate mortgage was 8.16% for loans under $252,700, while the rate on bigger ones, which Fannie and Freddie can't buy, was 8.4%. But a lobbying group called FM Watch, backed by big banks like Chase Manhattan Corp. and Wells Fargo & Co., has emerged to muddy the waters. And even though the institutions are mostly worried about competition, their complaints have drawn attention to the potential dangers of Fannie's and Freddie's growth, and officials including Treasury Undersecretary Gary Gensler and even Alan Greenspan have suggested it's worth considering limiting the companies. "You can say, sure, the risk is small. But, because the stakes are so high," it might be time to take a closer look, says John Gibbons, Freddie Mac's former chief financial officer, who resigned earlier this year to pursue other interests. Even former Fannie Mae board member Vance Miller, a Dallas real-estate developer, says he is concerned the companies are "reaching for too much business. They're going for some much more risky loans." So what is it, exactly, that's considered so risky? It boils down to two things: The companies' decision to buy large volumes of their own securities, and their expansion into new loan categories, both of which are made possible by the fact that Fannie and Freddie can often borrow more cheaply than competing banks. Typically, Fannie and Freddie either hold the loans they buy as investments John Falconer - GSE s Today s WSJ :. n..... Page 3 , or pool them and sell them in the form of mortgage -backed securities. Despite being shareholder -owned, Fannie and Freddie operate under federal charters that exempt them from state and local corporate income taxes and give them a. $2.25 billion line of credit with the Treasury. Investors interpret those and other ties as evidence the companies would be bailed out if they got into a jam. This implicit guarantee allows them in many cases to borrow more cheaply than other financial institutions, which competitors think is unfair. Despite that advantage, Fannie and Freddie aren't allowed to expand beyond their core business of buying mortgages. The mortgage market grew about 7% a year in the 1990s. The companies want to grow more quickly. Fannie Mae, for instance, told shareholders to expect 13.6% or greater annual earnings growth over the next five years. That means the companies have to find other ways to grow within the confines of their charters. Their Own Securities So far, the most effective way has been to build up their portfolios by buying mortgage -backed securities, which the companies place on their books to play interest -rate spreads. It can be extremely lucrative. If they can borrow, say, $10 billion at 6% -- because of their lower cost of borrowing -- and invest it in securities that pay 7%, they can pocket the difference. At the end of last year, the companies owned about $493 billion of their own mortgage -backed securities, way up from about $27 billion in 1992, according to the Office of Federal Housing Enterprise Oversight, which regulates the companies. The process is more profitable than selling the securities to other investors: Last year, for example, Fannie Mae's loan portfolio including securities accounted for about 44% of its total book of business, but generated 59% of its profits. Between 1992, when the companies first started buying their own securities in large volumes, and 1999, their combined profits surged by 173%, even though the mortgage market grew only about 61 %. But there is a danger. If interest rates move unexpectedly, the companies' cost of borrowing could exceed their interest income, and they could wind up losing billions of dollars if their portfolio was improperly hedged. For example, say the companies borrow funds at 6%, then buy loan securities paying 7%. If interest rates shoot up to 8%, their cost of borrowing rises to 8% as they issue new debt, but the payoff from their securities remains at 7% as the mortgages in the securities.are slowly paid off. In the early 1980s, Fannie Mae lost about $1 million a day and was technically insolvent after a spike in interest rates rocked its portfolio. In fact, the companies used to frown on buying securities. In a 1989 congressional hearing, Freddie Mac Chairman Leland Brendsel pointed to his company's strategy of packaging just about all its loans and selling them on Wall Street as evidence that Freddie was "largely insulated from the squeeze in earnings experienced by most depository institutions when interest rates rise." Debt You Can Call That changed in the early 1990s, when the companies determined it was possible to buy large amounts of callable debt, which can be "called in" and replaced if rates suddenly change. Before the 1990s, such debt was not widely available in the mortgage market; last year, the companies issued $182 billion in callable and other related debt, according to the Office of Federal Housing Enterprise Oversight. In addition, the companies use debt with different maturities as well as interest -rate "swaps" to further hedge their risk. 152 John Falconer - GSE s - Today s WSJ Page 4 Even without those advances, though, many believe the companies would have had to start buying loads of securities in order to keep shareholders happy. In the case of Freddie Mac, a chorus of Wall Street analysts argued in research reports that the company had to build a larger portfolio if it planned to provide shareholders a decent return. "As long as we can finance them profitably and safely, we're comfortable, we want those loans on our books," says Timothy Howard, Fannie Mae's chief financial officer. "It makes our shareholders more money and enables us to finance more loans." The other way the agencies have boosted profits has been by expanding into new loan categories, including subprime loans for borrowers with blemished credit. While still a relatively small part of their business, the purchase of these "nontraditional" products accounted for a quarter of Fannie Mae's portfolio growth last year and is a key part of the companies' growth plans. Fannie's Mr. Raines has told investors the company could serve as much as half of the $300 billion of subprime loan market. Low Down Among the most controversial of the products is a 3%-down loan that caused an uproar within Fannie Mae when it was introduced in the mid-1990s. Some senior executives, including the company's chief credit officer at the time, were opposed to the loans, in large part because a Fannie Mae experiment with 5%-down loans in Texas in the early 1980s was disastrous, with one in four borrowers defaulting. Robert Levin, a Fannie Mae executive vice president who helped pioneer the 3%-down loans, recalls angry phone calls from regional executives who feared the loans were too risky. "People were saying, 'What are you doing? Nobody has ever been successful at this in the history of mankind!"' Freddie Mac felt the angst, too. It backed out of a 1994 pilot project with GE Capital Mortgage Corp. to offer 3%-down loans because Mr. Brendsel thought Freddie didn't adequately understand the risks. Technology ultimately erased the companies' fears. In the mid-1990s, both companies began using automated underwriting systems that cull data from millions of loans made over the past 20 years to predict how likely certain borrowers are to pay back their loans. The numbers gave the agencies "much greater confidence" that loans would behave as predicted, Mr. Levin says. The question, of course, is whether those systems and the risk -management procedures used to protect against interest -rate swings are sufficient. The government's oversight office has concluded they are, for the time being. But in an audit released last month, the oversight office raised questions about how those strategies would hold up in a recession. It said that the dangers of subprime loans are still poorly understood and that even with automated underwriting systems, the companies' "credit losses might increase by more than expected." And the regulator has said in the past that it isn't clear the companies have enough capital to withstand major problems. Last year, the oversight office performed a stress test on them to find out if they could maintain solvency during a 10-year period of severe economic strain. It found that Freddie Mac was adequately capitalized, but Fannie Mae fell short of the amount it needed to be considered adequately capitalized by about $3.7 billion. (The test relied on 1997 financial data, and Fannie Mae argues the test used faulty assumptions to create its models.) "Given their explosive growth, given the pressures they've imposed on themselves to meet earnings targets, and given the growth in new activities 153 John Falconer - GSE's - Today's W J Page 5 and products, I'm concerned about our ability to keep up with them," says Armando Falcon, executive director of the oversight office. Quest for Profits Although callable debt and other tools can reduce the risk of portfolio -building, they don't eliminate it. And even if the risk is small, many question whether it's worth taking, given the downside. "When you're buying back your own securities, there's no explanation for it other than bottom -line profit," says Rep. Baker, the author of the legislation to limit the agencies. Buying back securities "doesn't by itself create homeownership opportunities," he says. Another GOP congressman, Paul Ryan of Wisconsin, says the practice is "not core to [their] mission, and is merely taking on unnecessary interest -rate risk." Rep. Baker's bill would remove the companies' Treasury Department line of credit and lilmit what he calls "nonmission-related investments." The companies say somebody's got to shoulder the inherent risks in the mortgage market, and they're better equipped to manage them than smaller companies. They note that their losses from bad loans are near all-time lows, and they point out that interest rates have risen significantly over the past year and a half without affecting their profitability. Furthermore, they argue that by increasing their own profits, they are able to invest more in the housing market, which further drives mortgage rates down. Jonathan Gray, an analyst at Sanford C. Bernstein & Co., agrees the companies are doing a good job promoting homeownership, and he recommends their stocks. But as they keep getting larger, he says, people will continue to ask: "Is this what we really wanted?" Write to Patrick Barta at patrick.barta@wsj.com July 14, 2000 Fannie Mae's 15% Earnings Rise Prompts Accounting Questions By PATRICK BARTA Staff Reporter of THE WALL STREET JOURNAL Fannie Mae overcame a cooling housing market to report double-digit earnings growth for the second quarter, but some questioned whether the company's accounting practices fairly represented its quarterly results. The Washington -based company said net income rose 15% to $1.10 billion, or $1.0.5 a diluted share, compared with earnings of $957.6 million, or 91 cents a share, a year earlier. The latest per-share figure as reported by Fannie Mae matched the consensus estimate of analysts surveyed by First Call/Thomson Financal. Disputing the Numbers Fannie Mae Chairman and CEO Franklin Raines analyzes the company's earnings. "However, some pointed out that the company's results included a one-time after-tax gain of $32.7 million from the retirement of debt that helped compensate for a one-time trading loss. Typically, such gains are omitted when a company calculates its earnings -per-share results. Without the gain, the company earned just $1.02 a share, three cents below expectations. (Fannie Mae did in fact note the $1.02 figure in. its financial table, but didn't highlight it in its news release to investors.) "In our mind, [the gain] should be excluded," says Charles L. Hill, First Call's director of research. =John Falconer - GSE's - Today's WSJ 6 Even so, Mr. Hill says the rules aren't set in stone. Unsure of how to record the results, First Call surveyed analysts; nine believed the results should be $1.05, while two said $1.02, although one of the two changed his mind after talking to the company. Fannie Mae says the company has long included retirement of debt in its earnings -per-share calculations, because it considers retirement of debt to be part of its continuing operations. The company notes that it reported gains and losses from debt retirement in its earnings -per-share calculations in 27 of the last 40 quarters. "It's something we do on a regular basis," says Mary Lou Christy, vice president of investor relations. Why Calls Are Rising to Clip Fannie Mae's, Freddie Mac's Wings The debate appeared to drive the share prices lower. At 4 p.m. in New York Stock Exchange composite trading Thursday, Fannie Mae was down $2.8125 at $54.375. Indeed, "if you were looking for an excuse to sell, this became one," says Gary Gordon, an analyst at PaineWebber. Either way, Fannie Mae posted strong growth during the quarter. The company, which operates under a government charter to improve liquidity in the housing market, has two lines of business: It buys mortgages to keep in its own portfolio, and packages loans and sells them to investors as mortgage -backed securities. Higher mortgage rates have cooled the housing market slightly, but the company has found other ways to grow, in part by expanding into new loan categories, including subprime and low -down -payment loans, and also by buying mortgage -backed securities to increase the size of its portfolio. The company's loan portfolio expanded to $550 billion at the end of the second quarter, compared with $537 billion at the end of the first quarter and $473 billion a year earlier. Net interest income, or income from the interest on portfolio assets, was $1.40 billion, compared with $1.36 billion in the first quarter and $1.19 billion a year earlier. Meanwhile, mortgage -backed securities outstanding at the end of the second quarter grew to $996 billion, compared with $976 billion at the end of the first quarter and $911 billion a year earlier. Fees the company charges for securitizing mortgages grew to $339 million in the second quarter from $332.1 million in the first quarter and $320.3 million a year earlier. But for many, the debate over the earnings report eclipsed the otherwise good news. At the heart of the debate was a one-time loss of about $60 million, attributed to a hedging strategy that lost money after interest rates for Fannie Mae debt rose unexpectedly. That occurred when Treasury Undersecretary Gary Gensler testified in March in support of the bill to limit Fannie Mae. The company was able to offset much of the loss by repurchasing debt at favorable rates, which produced the $32.7 million gain. Write to Patrick Barta at patrick.barta@wsj.com �- 1a5 Debbie De -Renard - Found this nu et in the current Barron's. I am NOTromotin derivatives! Page 1 From: "Joe Irwin" <j.a.irwin@worldnet.att.net> To: LQCity.lgccafalcone) Date: Sun, Sep 3, 2000 9:44 AM Subject: Found this nugget in the current Barron's. I am NOT promoting derivatives! SEPTEMBER 4, 2000 Swapping Curves By William Pesek, Jr. Talk about unintended consequences. The Treasury Department's accelerating campaign to slash the federal debt is wreaking havoc with one of the more dependable forward -looking indicators of the economy, the yield curve. The shape of the curve -- the graph of yields from the longest to the shortest maturities -- has always provided a map of the market's forecast for interest rates and, hence, the economy. You can think of long-term interest rates as the sum of expected short-term rates into the future. If the market thinks short-term rates will be higher down the road, it will demand higher long-term yields now to compensate, resulting in an upward (or in mathematical terms, positive) slope to the yield curve. Conversely, if the market looks for short rates to fall, it will bid up long-term bond prices, pushing down their yields, resulting in an inverted or negative yield curve. If the market were agnostic about the course of interest rates, the yield curve would be relatively flat with a slight positive slope reflecting the uncertainty about the future. U.S. Treasury securities historically have provided the best baseline curve because they have no credit risk. Moreover, there was a steady stream of new issues from the bond market's biggest borrower. And Treasuries comprised the world's biggest, most actively traded and most liquid securities market, which provides an accurate read on rates. But federal surpluses have played hob with Treasuries as an indicator. Sharp reductions of new issues and buybacks of older outstanding bonds have markedly distorted the yield structure. As a result, a new international debt standard is emerging: interest -rate swaps. "It's the most natural and logical successor to Treasuries," explains Kenneth Safian, president of Safian Investment Research. In recent weeks, Safian has begun using graphs of the swaps curve in presentations to clients to demonstrate just how out of kilter the Treasury yield curve has become. Swaps, in a nutshell, are agreements between two parties to exchange interest payments, typically short-term floating rates (such as LIBOR, the London interbank offered rate on dollar deposits) and longer -term fixed rates. Swaps constitute a massive liquid market with low credit risk that is removed from political uncertainties hovering over government -sponsored enterprises like Fannie Mae and Freddie Mac. An estimated notional amount of $52 trillion of interest -rate swaps were outstanding at the end of 1999, a sharp increase from $30.2 trillion in J6 Debbie De -Renard -Found this nu et in the current Barron's. I am NOT romotin derivatives! Page 2 1997, according to Swaps Monitor, which tracks the over-the-counter derivatives market. (The notional amount represents the principal size of the theoretical loan on which the counterparties exchange interest payments. Unlike bonds, only interest flows are exchanged in swaps, not actual principal amounts.) According to Goldman Sachs economist John Youndahl, swaps are the only other dollar -based fixed -income market with identical credit across the yield curve that comes close to Treasuries in both size and liquidity. And they represent generic, high -quality bank credit rather than the rate of any individ- ual borrower or lender, which reduces potential company -specific event risk for those using swaps as an investment or hedging instrument. Michael Fleming, economist at the Federal Reserve Bank of New York, says the absence of an underlying asset is an advantage of the swaps market. Unlike Treasuries, there's no supply limit on swap contracts and no need to borrow securities, allowing an entity to enter into as many swaps contracts as it wants. Concerns about specific issuers also are mitigated by the nature of swaps. The ability to create a swap, combined with the interchangeable nature of the underlying cash flows, precludes swaps with the same cash flows from trading at widely different rates. Switching to the swaps curve may help investors make sense of the current economic outlook. Right now, the Treasury yield curve is inverted, which ordi- narily is a harbinger of slowing economic growth. Indeed, some observers say the current gap between the Treasury 30-year bond at 5.68% and the two-year T-note at 6.16% points to a coming recession and easing moves by the Federal Reserve. But the swaps curve tells quite a different story. The 30-year swap yield currently is 0.1 percentage point above the two-year swaps rate, which is far more consistent with the economy's 5%-plus growth trend and 4% unemployment rate. "The swaps curve just fits so much better with what we're seeing in the U.S. right now," notes First Union analyst Mark Vitner. Some traders and investors had assumed Fannie Mae and Freddie Mac securities would supplant Treasuries as a global yardstick. Those expectations owed much to their high credit quality and mushrooming issuance. The agencies themselves have established a regular financing schedule to provide a steady stream of issues across the maturity spectrum. But efforts on Capitol Hill to strip away a key GSE perk -- a credit facility with the U.S. Treasury -have shoulder -- checked their chances of winning broad benchmark status. (I wanted to highlight this paragraph): Last month, the New York Fed added interest -rate -swap rates to its weekly roundup of borrowing costs, which was seen as an implicit thumbs -up to their use as a benchmark. Significantly, the Fed hasn't added agency yields to its weekly release, a possibly telling omission. (Emphasis added) Swaps have received other nods of late. More and more mortgage dealers have begun using the swaps curve both to forecast future mortgage rates and to Debbie De -Renard - Found this nugget in the current Barron's. I am NOT ...... n derivatives! Page 3 calculate the value of outstanding securities. And in late May, a poll conducted at the Euromoney Global Investors & Borrowers forum in London found that 55% of respondents saw swaps as the pricing tool best suited to replacing U.S. Treasuries. Roughly 29% favored agency debt, while 8% gravitated toward high -quality corporate debt. Ten percent hadn't yet decided. Then there's the commodities bill advancing on Capitol Hill. Known as the Commodity Futures Modernization Act, the legislation would remove swaps from the scope of U.S. futures regulators and call for the creation of clearinghouses to lessen risks in the market. Both steps, Dow Jones Newswires GSE expert Henry Pulizzi wrote last month, would enhance the appeal of swaps. Yet it's far from certain that swaps will gain benchmark status. For all their merits, Fleming says counterparty risk -- the credit risk of the different parties entering into the agreements -- works against swaps. And while highly liquid, the swaps market just isn't as deep as Treasuries'. Others point to problems that include the lack of price transparency compared to Treasuries and the large bid -offer spreads that can develop during times of market turmoil. And then there's the learning curve. Officials at Flint, Michigan -based Citizens Banking, for example, think the swaps curve is more reflective of what's happening in the markets and the economy than the gamut of alternative barometers out there. Problem is, few small businesses or middle -market borrowers are likely to be very familiar with it. Moreover, notes George Darling of the Darling Consulting Group, the lender would have to take the time to give most of its customers a primer on the esoteric world of swaps trading. For its part, the U.S. Treasury has remained noncommittal on the benchmark issue. "Ultimately, only the markets can determine which instruments or combinations of instruments will most effectively substitute for Treasuries with respect to capital -market functions," says Lee Sachs, assistant Treasury secretary for financial markets. But, he adds, "we have already entered the transition period" of other securities replacing U.S. government debt. In reality, speculates Sachs, a variety of instruments, rather than a single one, may emerge to serve all of the market functions handled now by Treasury bonds. Investors and traders will simply use the ones that best suit their needs. In a recent report, economists at Goldman Sachs wrote that while they expect swaps will become the analysis and pricing benchmark for almost all investors, it's possible market participants will continue to implement hedges and investments in cash instruments, owing to their greater familiarity. Adds Safian: "Swaps may make the most sense, but the benchmark issue will remain a live one for some time." = [ 1 7-May-20001 The GSE Debate in the U.S. Congress Page 1 of 2 Date 17-May-2000 n-r,'rite-d from Ratings Direct Coalmentary The SE Debate in the U.S. Congress Analy,st: Am elie W Cagle., Washington D.C. (1) 202-383-7940 During a U.S. congressional hearing on housing Government -Sponsored Enterprises (GSEs) on May 16,Chai rman Richard H. Baker of Louisiana and other members of Congress called tor additional debate prior to taking any legislative action on a bill to consolidate the regulators of Fannie Mae and Freddie Mac with the regulator for the Federal Home Loan Banks (HR 3703). At that hearing, the U.S. House Banking Subcommittee on Capital Markets, Securities and Government Sponsored Enterprises heard from Franklin D. Raines, chairman of Fannie Mae; Leland C. Brendsel, chairman of Freddie Mac; and Curtis L. Hage, chairman of the Council of Federal Home Loan Banks. In addition to consolidating operations of the two housing GSE regulators, Rep. Baker's legislation as introduced would repeal the housing GSEs' limited access to Treasury funds (the so --called line of credit). It would also commission a Study 01 the current exposure of depository institutions to obligations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks and the effect that a GSE failure Would have on depository institutions in the United States. Yields on GSE debt securities had increased following the last hearing on this proposed legislation in late March 2000, during which Under Secretary of the Treasury Gary Gensler commented on certain provisions of the bill, specifically those limiting access to them Treasury and the. nHoweverG, ities that c�an b(:','held by commercial banks the United Stateslegislation must be passed by Congress and signed by the president before changes can be implemented orl either of these issues, both of which are of prime interest to the capital markets. The federal legislative process includes numerous steps in both the House of Representatives and the U.S. Senate before it is approved and sent to the president for signature. The original legislation can be changed at each juncture and can also be held up at points along the way. Even after passage by the full Congress, the president can veto a bill. At that point, Congress would have to vote again to override the president's veto in order for the legislation to become law. Rep. Baker has called for a full airing of the issues prior to any action oil his bill, legislation is at the very first step of this lengthy process, and not expected to pass the Congress this year. Another hearing is scheduled for June 7 and others may follow in coming months, before any vote in Congress. Congress created each GSE to serve a public mission. To accomplish this, the companies issue debt with specific characteristics accorded by the Congress that result in a broad investor base, a low cost of funds, and that link. the debt to the federal government. Over the years, Congress has supported the individual misslurlS of the GSEs and, at times, has acted to support them. As an example, throughout the legislative process for Sallie Mae's 1997 privatization both Congress and the Administration made clear that the GSE status of the securities must be maintained. Again in 1996, after interest payments on the debt of The Financing Corporation were threatened by a loss of deposits in the thrift system, Congress acted to expand the funding base for this very small GSE. http://208.243-114.183/search97cgi/s97 cgi? action= View&Collection = d.. 08/28/2000 = [ 1 7-May-20001 The GSE Debate in the U.S. Congress Page 2 of 2 Congress continues to SLIPPOIA the public missions of the GSEs, but their growth and the increasing amount of outstanding debt have enhanced the debate on safety afid soundness. According to Treasury Under Secretary Gensler, GSE debt may approach $3 trillion by 2005 and may be greater in size than privately held marketable Treasury debt in the next three years. The important public policy debate about GSEs will go on. Historically, the federal government vernment has acted to Support GSE Securities even though there is no legal obligation for it to do so. Standard & Poor's does not believe that le islation will be enacted this year a _hne nffirmprl it-, —,AAA' nn ed debt securities of Fannie Mae and Freddie Mac and the consolidated obligations of the Federal Home Loan Barr Shoal ongress act to ma GSE—ssubject toadditional market discipline and lessen the implicit government support for their securities, Standard & Poor's would incorporate a greater emphasis on the financial strength of the GSEs into the rating, as well as considering any remaining implied U.S. government Support. i-at d from Standard & poor's RatingsDirect, a premier Source of realtirne, based report was produce -)gs and research from an organization that has been a leader in objective credit analysis tornorc ".(Jit IL -ii product, please visit our RatinsDirect web site at ti#ian '140 years. To preview this dynamic on-line -dl wwvv.stand a rd and poo rs . com/rati ng sd i rect. Standard and Poor's Setting the, StanMarc http: //208.243.114.1 83/search97cgi/s97_cgi? action= View&Collection = d.. 08/28/2000 INVESTMENT ADVISORY BOARD Meeting Date: September 13, 2000 TITLE: Month End Cash Report - August 2000 BACKGROUND: Correspondence & Written Material Item A This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances, ) but would report in a timely fashion selected cash balances. RECOMMENDATION: Information item only. n M. Falconer, Finance Director O c 0 0 LL m O U) O a L O •C N O SUN J W f'M 4. «. 0 C O CA um< O ti _ M � , v 00 v 00 +0O 4 (0 C) Mc000 CD-� MN�OOOMO M O 0n° 00 -°N'I- . �\ —0 CD 1n�00�CJ>�' (D c") LO 00N'q000NOCDp MM0�ta)00M �O MO M CV) MMN p CN CT N NO�NN �� o0 �000 v O O V Z 00 00(O ui (Op ui ct) LO� N ti O c! p fLO o OD to 00 c(7 00 00 a MN 0 LO c6N�OOO V OMOM LO tt cn cn p p � 000 000 00 CV) (ONON00,v 0 _cr C 'MV' C N't �O N N V* N p p � N ` 1- Q 0Qv MO M v cM O C)(p � �v C.-JN v V) (NpNM WMp MO 0 � d ItN N N N N Ul N O CD M M M M O O ti O C)� 00 000 00 00 U O N p c o M r N r O 21 ti ti 00 0 V-NO O It C) C) "t OM 00 00 _N CCN G r 0) O 0 to LO lQ a0 O Q - �' r O N N O O C)C)O O C) p N 0 Q LO In LO LO C C 0) a a LL j O CDC)O 0 O (0 O c0 p y o O ti Ni rn m v rn O ~ cocl� M M m �� aD 0o � 0) CN LO 04 LO N LO 3 6 N co ti r- jjto `- N •- �CN ccpa-M0m M N N MLOCDNO00� 00 tA� N (p O-(v000rnMt() M��OOM (Op M M M �C)p) N N O C) O O ... O N L U a a? ca N �- o OCD M O U LO ce)y (fl04 Y 00 N 0�p C) a C) N 00 U U a) a= O M Q N 0co C O N •� L� N U N N C N �'k N = 'y0'+ � y i$ �# � CD C N N 5NE c OJN N N �' c0 mN cm m U O + cm y `N c p " m 0 `" -0 N N c Y jj E�Q oaoN a d ¢ 2<2<¢`ma) -c �cm ww 'O =a aa a Qom O NCL O O N O tea) O 3 E = -0 O a) = O=O cn a) O NE 0 au (p L C O E E .� �OC y 00 L 0 U N N N N Q. ~ON 1 N0 �� v a) Ea 0 -a >, U 00 U C m 0 m O 0- C p } .C) oa.E a a a) -0 0a N C x >NO 0 — a O 0 c ON Q t a O U a) � o O0CL - NO o O 4 NE av 0�C NO c > > C C Q Q O0 0)U O O C Cca ` O O O N C N m m 0 +,E� ,-� L a o a) Q� o N M o 0 U) aC m N �0 Q.W U 00 La N >,a ` 0 0 CU O Q 0 o N N0C C)� a)0 co c .N p aNy �O u 0 4)O-0 N� NE ii c E� N ,OL . m ,� caOQrn �, UN C U Nc (`a >' > L o `~U LaLa) (3m- a) Mc 0'- 0 U 2_ :ca=E O= CD 0 0 7 c N 0 Ea N a O C aN 0 a)Q < �V NE L Nca to 0 - > O C atf -a C O C C 0) 0 cn a) oaa CL OO 0 n a) UEv O ED Q) O—CLC O NN'�7 C E Sc3 N N•C(D-) M V- L Ci) O.N a O cC(C V to C a Q. 2NO0 c(pp 2U V aNY Q. �VN� aO mU) x O DLO "'N-0 L =-0 0x a4)) ca O- o a N O 0w C '0 a)--) NN (L) -acBC O =2ca �> a NOU 4i LL F-U�a �-.0 � CNN 002 LAIF Performance Report, Philip Angelides http://www.treasurer.ca.gov/Stolperf htm Philip An elides state Treasurer Inside the state Treesu ees Office Local Agency Investment Fund LAIF Performance Reporting Date: Effective Date: Quarter Yield: Daily: Year: Life: Quarter Ending 06/30/00 Apportionment Rate: Earnings Ratio: Fair Value Factor: Monthly Average For July: 08/30/00 08/30/00 6.47% 6.51% 6.47% 195 6.18% .00016875759188261 .998865556 6.443% 003 1 of 2 09/05/2000 1:48 PM LAIF Performance Report, Philip Angelides http://www.treasurer.ca.gov/Stolperfhtm orl Bi 6.1 Commercial Paper 24.62% Bank( Accepta 0.090 Pooled Money Investment Account Portfolio Composition 40.6 Billion Reverses 07131 /00 Loans -3.42% Treasuries 4.00% 11.10% CD's/BN's 20.48% e Depos 9.21% Mortgag 0.030� kgencies 26.84% ■ Treasuries ❑ Time Deposits ■ Mortgages Agencies ■ CD's/BN's Ej Bankers Acceptances ■ Repo ■ Commercial Paper ■ Corporate Bonds M.Loans ■ Reverses 2 of 2 09/05/2000 1:48 PM FRB: H.15--Selected Interested Rat ... y Daily Update-- September 1, 2000 http://www.federalreserve.gov/Releases/H15/update/ Selected Interest Rates Release Date: September 1, 2000 H.15: Release I Release dates ( About I ASCII I Historical data Daily update H.15 Daily Update The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. H.15 DAILY UPDATE: WEB RELEASE ONLY For immediate release SELECTED INTEREST RATES September 1, 2000 Yields in percent per annum Mon Tue Wed Thu Aug 28 Aug 29 Aug 30 Aug 31 Instruments SELECTED INTEREST RATES Federal funds (effective) 1 2 3 6.57 6.51 6.51 6.65 Commercial paper 3 4 5 6 Nonfinancial 1-month 6.47 6.47 6.48 6.49 2-month 6.47 6.48 6.48 6.49 3-month 6.47 6.48 6.48 6.48 Financial 1-month 6.47 6.50 6.50 6.49 2-month 6.49 6.50 6.48 6.49 3-month 6.50 6.49 6.48 6.48 CDs (secondary market) 3 7 1-month 6.54 6.54 6.55 6.55 3-month 6.59 6.59 6.59 6.59 6-month 6.72 6.72 6.73 6.73 Eurodollar deposits (London) 3 8 1-month 6.52 6.52 6.53 6.53 3-month 6.59 6.58 6.60 6.60 6-month 6.72 6.72 6.74 6.75 Bank prime loan 2 3 9 9.50 9.50 9.50 9.50 Discount window borrowing 2 10 6.00 6.00 6.00 6.00 U.S. Government securities Treasury bills (secondary market) 3 4 3-month 6.14 6.13 6.14 6.13 6-month 6.11 6.11 6.11 6.10 1-year 5.94 5.97 5.89 5.86 Treasury constant maturities 11 3-month 6.32 6.31 6.32 6.31 6-month 6.39 6.39 6.39 6.38 1-year 6.24 6.25 6.25 6.22 2-year 6.23 6.26 6.24 6.18 1 of 3 09/05/2000 1:49 PM FRB: H.15--Selected Interested Rat ... y Daily Update-- September 1, 2000 http://www.federalreserve.gov/Releases/Hl 5/update/ 3-year 5-year 7-year 10-year 20-year 30-year Interest rate swaps 12 1-year 2-year 3-year 4-year 5-year 7-year 10-year 30-year Corporate bonds Moody's seasoned Aaa Baa State & local bonds 13 Conventional mortgages 14 6.15 6.21 6.17 6.09 6.05 6.08 6.07 5.98 6.04 6.07 6.07 5.98 5.78 5.81 5.81 5.73 6.01 6.04 6.03 5.96 5.72 5.75 5.74 5.67 6.92 6.93 6.94 6.91 6.94 6.97 6.99 6.93 6.94 6.97 7.00 6.94 6.94 6.98 7.01 6.95 6.94 6.99 7.03 6.96 6.96 7.02 7.05 6.99 6.99 7.05 7.09 7.03 6.99 7.05 7.08 7.03 7.56 7.58 7.58 7.52 8.27 8.30 8.30 8.24 5.49 FOOTNOTES 1. The daily effective federal funds rate is a weighted average of rates on trades through N.Y. brokers. 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4. On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). See Board's Commercial Paper Web pages (http://www.federalreserve.gov/releases/cp) for more information. 6. The 1-, 2-, and 3-month rates are equivalent to the 30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page. 7. An average of dealer offering rates on nationally traded certificates of deposit. 8. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. 9. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans. 10. Rate for the Federal Reserve Bank of New York. 11. Yields on actively traded issues adjusted to constant maturities. Source: U.S. Treasury. 12. International Swaps and Derivatives Association (ISDA) mid -market par swap rates. Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates collected at 11:00 a.m. by Garban Intercapital plc and published on Reuters Page ISDAFIXI. Source: Reuters Limited. 13. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. 14. Contract interest rates on commitments for fixed-rate first mortgages. Source: FHLMC. DESCRIPTION OF THE TREASURY CONSTANT MATURITY SERIES Yields on Treasury securities at "constant maturity" are interpolated 11� 2 of 3 09/05/2000 1:49 PM FRB: H.15--Selected Interested Rat ... y Daily Update-- September 1, 2000 http://www.federalreserve.gov/Releases/Hl5/update/ by the U.S. Treasury from the daily yield curve. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 3 and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. In estimating the 20-year constant maturity, the Treasury incorporates the prevailing market yield on an outstanding Treasury bond with approximately 20 years remaining to maturity. H.15: Release I Release dates I About I ASCII I Historical data I Daily update Home I Statistical releases To comment on this site, please fill out our feedback form. Last update: September 1, 2000 007 3 of 3 09/05/2000 1:49 PM FRB:Commercial Paper Rates and Outstandings http://www.federalreserve.gov/Releases/CP/ Federal Reserve Release Commer(coial Pappi Release I About I Outstandings I Historical discount rates I Historical outstandings Data as of September 1., 2000 volume Commercial Paper Rates and Outstandings statistics Derived from data supplied by The Depository Trust Company Posted September 5, 2000 Discount rates AA Term financial AA A2/P2 r j nonfinancial nonfinancial _day i 6.53 6.53 6.71 r 7dy j 6.50 F6.50 6.71 6.50 6.50 6.78 •»day 3 6.39 648 6.70 60day 6.48 �6.48 6.74 E 90-day 6 8 6.47 6.80 Yield curve Money market basis Percent 7.0 6.9 6.8 6.7 6.6 6.5 6.4 1 7 15 30 so 90 Days is Mat a rity FinancwI---Nonfinan6aI ••••• A2/P2 Discount rate spread Thirty -day A2/P2 less AA nonfinancial commercial paper (daily) Basis points 110 100 90 8o 70 60 50 40 NON ilk - 10 O 1 MAY98 09AUG98 17NOV98 25 FE899 C5J U N99 13SE P99 22❑ EC99 31 MAROO 09J U LOD 17CCTOO -- — A2/P2 spread, 5—day ffming eve mge 1 of 3 09/05/2000 1:49 PM FRB:Commercial Paper Rates and Outstandings http://www.federalreserve.gov/Releases/CP/ Discount rate history Thirty -day commercial paper (daily) A 1 1 1 Percent 8 11 � 7 � r Ip � rt 5 r 4 01 MAY98 09AUG98 17NOV98 25 FE899 05J U N 99 13S EP99 22 ❑ EC99 31 MAROD 09J U LOD 170CTOO — Finanewl — — — Nonfinancial ••••• A2fP2 Outstandings Weekly (Wednesday), seasonally adjusted Billions of dollars 1300 i Billions of dollars 350 340 12 C) 330 320 310 1 100 300 r 290 280 1 COO 270 260 250 900,E 240 230 220 210 01 MAY98 09AUG98 17NOV98 25FEE99 OU UN99 13SEP99 22❑EC99 31 MAROO 03JU LOO 170CTOO — Rnaneial — — — NonfinaneisI The daily commercial paper'release will usually be available before 11:00am EST. However, the Federal Reserve makes no guarantee regarding the timing of the daily commercial paper release. When the Federal Reserve is closed on a business day, yields for the previous business day will appear in the historical discount rates table. This policy is subject to change at any time without notice. 009 2 of 3 09/05/2000 1:49 PM FRB:Commercial Paper Rates and Outstandings http://www.federalreserve.gov/Releases/CP/ Commercial paper outstanding Commercial D er outstanding, miscellaneous categories Release I About I OutstandI Historical discount rates I Historical outstandings Home I Statistical releases To comment on this site, please fill out our feedback form. Last update: September 5, 2000 010 3 of 3 09/05/2000 1:49 PM INVESTMENT ADVISORY BOARD Meeting Date: September 13, 2000 TITLE: Pooled Money Investment Board Report for May and June 2000 BACKGROUND: Correspondence & Written Material Item B The Pooled Money Investment Board Report for May and June, 2000 is included in the agenda packet. RECOMMENDATION: Receive & File . Falconer, Finance Director STATE OF CALIFORNIA STATE TREASURER'S OFFICE POOLED MONEY INVESTMENT BOARD REPORT DUNE 2000 TABLE OF CONTENTS SUMMARY...........................................................................1 SELECTED INVESTMENT DATA.............................................2 PORTFOLIO COMPOSITION...................................................3 INVESTMENT TRANSACTIONS...............................................4 TIMEDEPOSITS..................................................................20 BANK DEMAND DEPOSITS...................................................31 POOLED MONEY INVESTMENT BOARD DESIGNATION .......... 32 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF JUNE 2000 WITH JUNE 1999 (DOLLARS IN THOUSANDS) JUNE 3000 JUKE 3998 ' GHANGE Average Daily Portfolio $ 419903,367 $ 379534,707 +49368,660 Accrued Earnings $ 2189070 $ 1679192 +609878 Effective Yield 6.349 5.095 +1.254 Average Life -Month End (In Days) 201 206 -5 1 Total Security Transactions Amount $ 26,387,241 $ 24,644,575 +1,7429666 Number 573 547 +26 Total Time Deposit Transactions Amount $ 785,"0 $ 917,095 -131,655 Number 98 75 +23 Average Workday Investment Activity $ 1,235,122 $ 1,161,894 +73,228 Prescribed Demand Account Balances For Services $ 176,368 $ 175,403 +965 For Uncollected Funds $ 336,763 $ 175,794 +160,970 1 PHILIP ANGELIDES TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) JUNE 30, 2000 PERCENTAGE CHANGE FROM TYPE OF SECURITY AMOUNT PERCENT PRIOR MONTH Government Bills $ 2,223,185 5.16 +1.34 Bonds 0 0.00 0.00 Notes 2,322,572 5.40 +0.35 Strips 0 0.00 0.00 Total Government $ 4,645,767 10.56 +1.69 Federal Agency Coupons $ 392879995 7.64 +.07 Certificates of Deposit 79220,205 16.78 -1.42 Bank Notes 1,920,008 4.46 -.95 Bankers' Acceptances $ 36,707 0.09 0.00 Repurchases 0 0.00 0.00 Federal Agency Discount Notes 7,296,607 16.96 +1.32 Time Deposits 3,648,"0 8.48 +.33 GNMAs 1,306 0.00 0.00 Commercial Paper 10,"7,951 24.28 -3.77 FHLMC 12,643 0.03 0.00 Corporate Bonds 2,464,885 5.73 -.09 Pooled Loans 2,147,798 4.99 +1.37 GF Loans 0 0.00 0.00 Reversed Repurchases 0 0.00 -1.45 Total (All Types) ----------------- $ 43,030,302 100.00 INVESTMENT ACTIVITY JUNE, 2000 MAY, 2000 NUMBER AMOUNT NUMBER AMOUNT Pooled Money 573 $ 26,387,241 559 $ 269013,152 Other 31 310,185 36 693,464 Time Deposits 98 785,"0 109 19989,900 Totals 702 $ 27,482,866 704 $ 289696,516 PMIA Monthly Average Effective Yield 6.349 6.190 Year to Date Yield Last Day of Month 5.708 5.638 2 Pooled Money Investment Account Portfolio Composition $43.0 Billion Loans Treasuries Corporate 4.99% 10.56% Bonds 5.73% Commercial Paper 24.28% id Bankers Acceptances 0.09% CD's/BN's 21.24% 3 Time Deposits 8.48% Mortgages 0.03% Agencies 24.60% 6/30/00 8 Treasuries 8 Time Deposits ■ Mortgages 0 Agencies 0 CD's/BN's 0 Bankers Acceptances ■ Repo 0 Commercial Paper ® Corporate Bonds 0 Loans 0 Reverses 06/01/00 SALES Treas Bills 03/01/01 5.880 $50,000 7 $62,027.78 6.779 Treas Bills 03/01/01 5.880 50,000 7 62,027.78 6.779 Treas Bills 03/01/01 5.900 50,000 14 154,583.32 8.465 Treas Bills 03/01/01 5.900 50,000 14 154,583.32 8.465 REDEMPTIONS CD Wachovia 6.070% 06/01/00 6.060 50,000 36 303,003.00 6.144 CD Wachovia 6.070% 06/01/00 6.060 50,000 36 303,003.00 6.144 CP Enron 06/01/00 6.920 50,000 1 9,611.11 7.017 CP Enron 06/01/00 6.920 50,000 1 9,611.11 7.017 CP GECC 06/01/00 6.620 50,000 2 18,388.89 6.714 CP GECC 06/01/00 6.620 50,000 2 18,388.89 6.714 CP GECC 06/01/00 6.620 50,000 2 18,388.89 6.714 CP GECC 06/01/00 6.620 50,000 2 18,388.89 6.714 CP GECC 06/01/00 6.620 50,000 2 18,388.89 6.714 CP GECC 06/01/00 6.620 50,000 2 18,388.89 6.714 CP Assoc 06/01/00 6.420 50,000 8 71,333.33 6.518 CP Assoc 06/01/00 6.420 50,000 8 71,333.33 6.518 CP Amer Exp 06/01/00 6.450 50,000 8 71,666.67 6.548 CP Amer Exp 06/01/00 6.450 50,000 8 71,666.67 6.548 CP GMAC 06/01/00 6.470 25,000 8 35,944.44 6.569 CP GMAC 06/01/00 6.470 50,000 8 71,888.89 6.569 CP GMAC 06/01/00 6.470 50,000 8 71,888.89 6.569 CP Amer Exp 06/01/00 6.440 50,000 10 89,444.44 6.541 CP Amer Exp 06/01/00 6.440 50,000 10 89,444.44 6.541 CP Amer Exp 06/01/00 6.440 50,000 10 89,444.44 6.541 CP Amer Exp 06/01/00 6.460 50,000 13 116,638.89 6.565 CP Amer Exp 06/01/00 6.460 50,000 13 116,638.89 6.565 CP Amer Exp 06/01/00 6.460 50,000 13 116,638.89 6.565 CP Amer Exp 06/01/00 6.460 50,000 13 116,638.89 6.565 CP Heller 06/01/00 6.250 25,000 34 147,569.44 6.374 CP Heller 06/01/00 6.250 50,000 34 295,138.89 6.374 CP FMCC 06/01/00 6.070 50,000 34 286,638.89 6.189 CP FMCC 06/01/00 6.070 50,000 34 286,638.89 6.189 CP FMCC 06/01/00 6.070 50,000 34 286,638.89 6.189 CP FMCC 06/01/00 6.070 50,000 34 286,638.89 6.189 CP GECC 06/01/00 6.070 50,000 34 286,638.89 6.189 CP GECC 06/01/00 6.070 50,000 34 286,638.89 6.189 CP CAFCO 06/01/00 6.050 50,000 52 436,944.44 6.188 CP CAFCO 06/01/00 6.050 50,000 52 436,944.44 6.188 CP Heller 06/01/00 6.100 50,000 56 474,444.44 6.243 CP W/F 06/01/00 6.070 25,000 73 307,715.27 6.231 CP W/F 06/01/00 6.070 50,000 73 615,430.55 6.231 CP W/F 06/01/00 6.070 50,000 73 615,430.55 6.231 CP Merrill 06/01/00 6.070 50,000 73 615,430.56 6.231 CP Merrill 06/01/00 6.070 50,000 73 615,430.56 6.231 CP U/B Calif 06/01/00 5.880 20,000 132 431,200.00 6.093 CP GMAC 06/01/00 5.850 50,000 132 1,072,500.00 6.061 4 06/01/00 REDEMPTIONS (continued) CP GMAC 06/01/00 5.850 50,000 132 1,072,500.00 6.061 CP B/A 06/01/00 5.900 25,000 141 577,708.33 6.123 CP B/A 06/01/00 5.900 50,000 141 1,155,416.67 6.123 CP B/A 06/01/00 5.900 50,000 148 1,212,777.78 6.123 CP B/A 06/01/00 5.900 50,000 148 1,212,777.78 6.123 Disc Notes FNMA 06/01/00 5.220 50,000 345 2,501,250.00 5.571 RRP Treas Bills 03/01/01 5.550 50,000 36 (263,763.75) -5.627 Treas Bills 03/01/01 5.550 50,000 36 (263,763.75) -5.627 Treas Bills 03/01/01 5.750 50,000 52 (393,268.06) -5.829 Treas Bills 03/01/01 5.750 50,000 52 (393,268.06) -5.829 PURCHASES CD Svenska 6.570% 06/30/00 6.530 50,000 CD Svenska 6.570% 06/30/00 6.530 50,000 CD Deutsche 6.540% 06/30/00 6.540 50,000 CD Deutsche 6.540% 06/30/00 6.540 50,000 CP FMCC 06/05/00 6.480 50,000 CP FMCC 06/05/00 6.480 50,000 CP FMCC 06/05/00 6.480 50,000 CP FMCC 06/05/00 6.480 50,000 CP FMCC 06/05/00 6.480 50,000 CP FMCC 06/05/00 6.480 50,000 CP GMAC 06/08/00 6.510 25,000 CP GMAC 06/08/00 6.510 50,000 CP GMAC 06/09/00 6.510 10,000 CP GMAC 06/09/00 6.510 50,000 CP Bear 09/27/00 6.720 50,000 CP Bear 09/27/00 6.720 50,000 CP B/A 09/27/00 6.720 50,000 CP B/A 09/27/00 6.720 50,000 Disc Notes FNMA 05/25/01 6.690 50,000 Disc Notes FNMA 05/25/01 6.690 50,000 Treas Bills 05/31/01 5.925 50,000 Treas Bills 05/31/01 5.925 50,000 Treas Bills 05/31/01 5.927 50,000 Treas Bills 05/31/01 5.927 50,000 Treas Bills 05/31/01 5.930 50,000 Treas Bills 05/31/01 5.930 50,000 Treas Bills 05/31/01 6.025 50,000 Treas Bills 05/31/01 6.025 50,000 Treas Bills 05/31/01 6.030 50,000 Treas Bills 05/31/01 6.030 50,000 Treas Notes 5.500% 02/28/03 6.606 50,000 Treas Notes 5.500% 02/28/03 6.606 50,000 5 POOLED MONEY (INVESTMENT ACCOUNT' Al MATURITY TRANS 1RA F IYeE I PPRIPTL4 it 06/02/00 REDEMPTIONS CP FMCC 06/02/00 6.620 50,000 2 18,388.89 6.714 CP FMCC 06/02/00 6.620 50,000 2 18,388.89 6.714 CP FMCC 06/02/00 6.620 50,000 2 18,388.89 6.714 CP Amer Home 06/02/00 6.060 48,250 38 308,639.17 6.183 CP Assoc 06/02/00 6.040 50,000 45 377,500.00 6.170 CP Assoc 06/02/00 6.040 50,000 45 ' 377,500.00 6.170 CP Heller 06/02/00 6.100 50,000 57 482,916.67 6.245 CP Merrill 06/02/00 5.070 50,000 74 623,861.11 6.232 CP Merrill 06/02/00 5.070 50,000 74 623,861.11 6.232 CP B/A 06/02/00 5.890 50,000 148 1,210,722.22 6.119 CP B/A 06/02/00 5.890 50,000 148 1,210,722.22 6.119 CP GECC 06/02/00 5.850 50,000 150 1,218,750.00 6.079 CP GECC 06/02/00 5.850 50,000 150 1,218,750.00 6.079 PURCHASES CD World 6.520% 06/30/00 6.520 15,000 CD World 6.520% 06/30/00 6.520 50,000 CD World 6.520% 06/30/00 6.520 50,000 CD World 6.520% 06/30/00 6.520 50,000 CD Citibank 6.980% 11/30/00 6.850 50,000 CP SRAC 06/29/00 6.750 25,000 CP Heller 08/29/00 6.800 50,000 CP Heller 08/31/00 6.800 50,000 CP Bear 09/11/00 6.640 50,000 CP Bear 09/11/00 6.640 50,000 CP Bear 09/11/00 6.640 50,000 06/05/00 REDEMPTIONS CP FMCC 06/05/00 6.480 50,000 4 36,000.00 6.574 CP FMCC 06/05/00 6.480 50,000 4 36,000.00 6.574 CP FMCC 06/05/00 6.480 50,000 4 36,000.00 6.574 CP FMCC 06/05/00 6.480 50,000 4 36,000.00 6.574 CP FMCC 06/05/00 6.480 50,000 4 36,000.00 6.574 CP FMCC 06/05/00 6.480 50,000 4 36,000.00 6.574 CP Assoc 06/05/00 6.500 50,000 4 36,111.11 6.595 CP Amer Exp 06/05/00 6.550 50,000 5 45,486.11 6.647 CP Amer Exp 06/05/00 6.550 50,000 5 45,486.11 6.647 CP Amer Exp 06/05/00 6.550 50,000 5 45,486.11 6.647 CP GMAC 06/05/00 6.460 25,000 10 44,861.11 6.561 CP GMAC 06/05/00 6.460 50,000 10 89,722.22 6.561 CP GMAC 06/05/00 6.460 50,000 10 89,722.22 6.561 CP Amer Exp 06/05/00 6.480 50,000 10 90,000.00 6.581 CP Amer Exp 06/05/00 6.480 50,000 10 90,000.00 6.581 CP Amer Exp 06/05/00 6.480 50,000 10 90,000.00 6.581 CP Amer Exp 06/05/00 6.480 50,000 10 90,000.00 6.581 CP Amer Exp 06/05/00 6.450 50,000 12 107,500.00 6.553 CP Amer Exp 06/05/00 6.450 50,000 12 107,500.00 6.553 6 06/05/00 REDEMPTIONS (continued) CP Assoc 06/05/00 6.040 50,000 48 402,666.67 6.173 MTN Assoc 6.680% 06/05/00 6.030 7,000 242 280,744.87 6.039 PURCHASES CP Assoc 10/02/00 6.560 50,000 CP Assoc 10/02/00 6.560 50,000 CP GMAC 10/02/00 6.560 50,000 CP GMAC 10/02/00 6.560 50,000 CP AT&T 10/02/00 6.600 50,000 CP AT&T 10/02/00 6.600 50,000 06/06/00 REDEMPTIONS Disc Notes FHLMC 06/06/00 5.150 39,250 355 1,993,300.35 5.500 Disc Notes FHLMC 06/06/00 5.150 50,000 355 2,539,236.11 5.500 Disc Notes FHLMC 06/06/00 5.150 50,000 355 2,539,236.11 5.500 Disc Notes FHLMC 06/06/00 5.150 50,000 355 2,539,236.11 5.500 NO PURCHASES 06/07/00 RRS Treas Bills 12/07/00 5.400 50,000 Treas Bills 12/07/00 5.400 50,000 Treas Bills 12/07/00 5.850 50,000 Treas Bills 12/07/00 5.850 50,000 Treas Bills 03/01/01 5.250 50,000 Treas Bills 03/01/01 5.250 50,000 Treas Bills 03/01/01 5.250 50,000 Treas Bills 03/01/01 5.250 50,000 Treas Bills 03/01/01 5.250 50,000 Treas Bills 03/01/01 5.250 50,000 REDEMPTIONS CP Bear 06/07/00 6.270 40,000 35 243,833.33 6.396 CP Bear 06/07/00 6.270 50,000 35 304,791.67 6.396 PURCHASES U/ CD World 6.520% 06/30/00 6.510 50,000 CD World 6.520% 06/30/00 6.510 50,000 CP FMCC 06/14/00 6.460 50,000 CP FMCC 06/14/00 6.460 50,000 CP AT&T 06/29/00 6.470 50,000 CP AT&T 06/29/00 6.470 50,000 Disc Notes FFCB 06/27/00 6.310 12,135 Disc Notes FHLMC 06/27/00 6.310 33,852 VA MATURITY' TRANS PAR t?AYS. • 1#M+Cl1+C1'' DAL TYpE DEscttrPnON 06/07/00 PURCHASES U/ (continued) Disc Notes FHLMC 06/27/00 6.310 50,000 Disc Notes FHLB 06/30/00 6.320 50,000 Disc Notes FHLB 06/30/00 6.320 50,000 PURCHASES CD Bayer Ver 6.880% 12/27/00 6.875 50,000 CP GECC 06/08/00 6.420 50,000 CP GECC 06/08/00 6.420 50,000 CP Assoc 08/01/00 6.520 50,000 CP Assoc 08/01/00 6.520 50,000 CP Heller 08/01/00 6.650 50,000 CP GMAC 08/29/00 6.570 50,000 CP GMAC 08/29/00 6.570 50,000 CP FMCC 10/02/00 6.560 50,000 CP FMCC 10/02/00 6.560 50,000 Disc Notes FNMA 05/25/01 6.525 20,000 Disc Notes FNMA 05/25/01 6.525 50,000 06/08/00 RRS Treas Bills 05/31/01 6.200 50,000 Treas Bills 05/31/01 6.200 50,000 Treas Bills 05/31/01 6.200 50,000 Treas Bills 05/31/01 6.200 50,000 Treas Notes 4.625% 11/30/00 6.000 50,000 Treas Notes 4.625% 11 /30/00 6.000 50,000 Treas Notes 6.375% 04/30/02 6.125 50,000 Treas Notes 6.375% 04/30/02 6.125 50,000 REDEMPTIONS CP GECC 06/08/00 6.420 50,000 1 8,916.67 6.510 CP GECC 06/08/00 6.420 50,000 1 8,916.67 6.510 CP GMAC 06/08/00 6.510 25,000 7 31,645.83 6.608 CP GMAC 06/08/00 6.510 50,000 7 63,291.67 6.608 CP Household 06/08/00 6.480 50,000 20 180,000.00 6.593 CP Household 06/08/00 6.480 50,000 20 180,000.00 6.593 CP B/A 06/08/00 5.910 30,000 142 699,350.00 6.135 06/08/00 PURCHASES q/ CD ANZ 6.510% 06/28/00 6.500 50,000 CD ANZ 6.510% 06/28/00 6.500 50,000 CD Barclays 6.500% 06/29/00 6.480 50,000 CD Barclays 6.500% 06/29/00 6.480 50,000 CD Zions 6.500% 06/30/00 6.480 50,000 CD Zions 6.500% 06/30/00 6.480 50,000 CP Morg Stan 06/30/00 6.470 50,000 0 MATURITY:,;. DESC f_f P'CtON 06/08/00 PURCHASES g/ (continued) CID Morg Stan 06/30/00 6.470 50,000 06/09/00 REDEMPTIONS CID GMAC 06/09/00 6.510 10,000 8 14,466.67 6.609 CID GMAC 06/09/00 6.510 50,000 8 72,333.33 6.609 CID Salomon 06/09/00 6.220 50,000 39 336,916.67 6.349 CP Salomon 06/09/00 6.220 50,000 39 336,916.67 6.349 CID Salomon 06/09/00 6.220 50,000 39 336,916.67 6.349 CID Salomon 06/09/00 6.220 50,000 39 336,916.67 6.349 CID Bear 06/09/00 5.920 50,000 147 1,208,666.67 6.150 CID Bear 06/09/00 5.920 50,000 147 1,208,666.67 6.150 CID U/B Calif 06/09/00 5.850 50,000 157 1,275,625.00 6.086 MTN Assoc 6.330% 06/09/00 6.027 18,500 246 750,390.83 6.063 NO PURCHASES 06/12/00 RRS Treas Bills 10/12/00 5.970 50,000 Treas Bills 10/12/00 5.970 50,000 REDEMPTIONS CID FMCC 06/12/00 6.470 50,000 24 215,666.67 6.588 CID FMCC 06/12/00 6.470 50,000 24 215,666.67 6.588 CID Heller 06/12/00 6.580 50,000 24 219,333.33 6.700 PURCHASES q/ CD World 6.520% 06/23/00 6.510 50,000 CD World 6.520% 06/23/00 6.510 50,000 PURCHASES CID Conagra 07/10/00 6.700 34,864 CID Heller 07/24/00 6.650 50,000 CID Hertz 08/08/00 6.540 50,000 CP JP Morgan 08/29/00 6.570 15,000 CID W/F 08/29/00 6.570 50,000 06/13/00 REDEMPTIONS Disc Notes FHLMC 06/13/00 5.270 5,021 355 260,931.61 5.636 Disc Notes FHLMC 06/13/00 5.270 50,000 355 2,598,402.78 5.636 Disc Notes FHLMC 06/13/00 5.220 40,000 357 2,070,600.00 5.581 Disc Notes FHLMC 06/13/00 5.230 40,165 357 2,083,124.25 5.592 Disc Notes FHLMC 06/13/00 5.220 50,000 357 2,588,250.00 5.581 Disc Notes FHLMC 06/13/00 5.160 35,000 361 1,811,016.67 5.532 Pt C?t.I» MONEY INVESTIVIENTAJCCOUNT. MAWRIV Ns s D(ft 12ESCRIPMQN,YI 06/13/00 REDEMPTIONS (continued R Disc Notes FHLMC 06/13/00 5.160 50,000 Disc Notes FHLMC 06/13/00 5.160 25,000 PURCHASES MTN Assoc 6.375% 10/15/02 7.460 10,000 MTN W/F 6.125% 11 /01 /03 7.520 7,400 06/14/00 REDEMPTIONS CP FMCC 06/14/00 6.460 50,000 CP FMCC 06/14/00 6.460 50,000 RRP Treas Bills 12/07/00 5.400 50,000 Treas Bills 12/07/00 5.400 50,000 06/15/00 NO SALES PURCHASES CP Enron 06/16/00 6.750 50,000 CP Unocal 06/29/00 6.700 24,560 CP Salomon 07/03/00 6.530 50,000 CP Salomon 07/03/00 6.530 50,000 CP Salomon 07/03/00 6.530 50,000 CP Hertz 07/11/00 6.540 50,000 CP Hertz 07/12/00 6.540 50,000 CP CAFCO 07/14/00 6.540 10,000 CP Armstrong 07/14/00 6.780 20,800 CP ConAgra 07/14/00 6.730 23,991 CP CAFCO 07/14/00 6.540 50,000 CP Assoc 09/29/00 6.560 50,000 CP Assoc 09/29/00 6.560 50,000 CP Assoc 10/06/00 6.560 50,000 MTN IBM Cr Corp 6.450% 11/12/02 7.290 10,000 MTN W/F 6.625% 07/15/04 7.440 10,000 06/16/00 REDEMPTIONS CP Enron 06/16/00 6.750 50,000 PURCHASES CP Enron 06/27/00 6.650 50,000 CP Enron 06/27/00 6.650 50,000 CP GECC 06/29/00 6.480 15,000 CP GECC 06/29/00 6.480 50,000 10 361 2,587,166.67 5.532 362 1,299,680.56 5.529 7 62,805.56 6.557 7 62,805.56 6.557 7 (50,793.75) -5.475 7 (50,793.75) -5.475 1 9,375.00 6.845 06/16/00 PURCHASES (continued) CP GECC CP GECC MTN FR Assoc FHLMC 06/19/00 REDEMPTIONS CD Nat W.Mstr PURCHASES CP ConAgra CP FMCC CP FMCC CP FMCC CP FMCC CP GECC CP GECC CP GECC CP GECC 06/20/00 NO SALES PURCHASES BN Banc One BN Banc One CD Bayer Ver CD Soc Gen CP Heller CP FMCC CP FMCC CP FMCC CP FMCC CP Merrill CP Merrill 06/21/00 NO SALES PURCHASES CD US Bank CD US Bank CD Nova Scot CD Nova Scot Disc Notes FHLB Disc Notes FHLB Disc Notes FHLMC Disc Notes FHLMC 06/29/00 6.480 06/29/00 6.480 6.902% 05/08/03 6.810 6.400% 02/08/01 6.900 50,000 50,000 10,000 50,000 5.630% 06/19/00 5.580 50,000 364 07/14/00 6.730 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 10/10/00 6.570 50,000 6.810% 11 /28/00 6.810 50,000 6.810% 11 /28/00 6.810 50,000 6.970% 11 /27/00 6.780 25,000 6.830% 12/27/00 6.830 50,000 09/01 /00 6.750 30,000 10/11 /00 6.570 50,000 10/11 /00 6.570 50,000 10/11 /00 6.570 50,000 10/11 /00 6.570 50,000 10/16/00 6.580 50,000 10/16/00 6.580 50,000 6.765% 11 /28/00 6.765 50,000 6.765% 11 /28/00 6.765 50,000 6.760% 11 /28/00 6.760 50,000 6.760% 11 /28/00 6.760 50,000 06/15/01 6.450 14,000 06/15/01 6.450 50,000 06/21 /01 6.465 50,000 06/21 /01 6.465 50,000 11 2,824,020.45 5.661 uisc ivoies MMA 06/15/01 6.450 50,000 Disc Notes FNMA 06/15/01 6.450 50,000 Treas Bills 05/31/01 5.805 50,000 Treas Bills 05/31/01 5.805 50,000 Treas Bills 05/31/01 5.805 50,000 Treas Bills 05/31/01 5.805 50,000 Treas Notes 6.625% 05/31/02 6.465 50,000 Treas Notes 6.625% 05/31 /02 6.465 50,000 06/22/00 REDEMPTIONS CP Morg Stan 06/22/00 6.100 40,000 Treas Bills 06/22/00 4.880 40,000 RRP Treas Bills 06/22/00 5.770 40,000 PURCHASES CP Household 11/28/00 6.590 40,000 CP Household 11/28/00 6.590 50,000 CP Household 11/28/00 6.590 50,000 CP GMAC 11/28/00 6.570 50,000 CP GMAC 11/28/00 6.570 50,000 CP GMAC 11/28/00 6.570 50,000 CP GECC 11/28/00 6.600 50,000 CP GECC 11/28/00 6.600 50,000 CP GECC 11/28/00 6.600 50,000 CP GECC 11/28/00 6.600 50,000 CP GECC 11/28/00 6.600 50,000 CP GECC 11/28/00 6.600 50,000 CP FMCC 11/28/00 6.580 50,000 CP FMCC 11/28/00 6.580 50,000 CP FMCC 11/28/00 6.580 50,000 CP FMCC 11/28/00 6.580 50,000 CP FMCC 11/28/00 6.580 50,000 CP FMCC 11/28/00 6.580 50,000 Disc Notes FNMA 06/15/01 6.470 50,000 Disc Notes FNMA 06/15/01 6.470 50,000 06/23/00 REDEMPTIONS CD World 6.520% 06/23/00 6.510 50,000 CD World 6.520% 06/23/00 6.510 50,000 RRP 85 576,111.11 6.275 360 1,952,000.00 5.201 85 (535,952.86) -5.850 99,458.64 6.600 99,458.64 6.600 Treas Bills 10/12/00 5.970 50,000 11 (89,338.56) -6.052 12 06/23/00 RRP (continued) Treas Bills PURCHASES CP Merrill CP Merrill CP FMCC CP FMCC CP Morg Stan CP Morg Stan Disc Notes FHLB Disc Notes FNMA 06/26/00 NO SALES PURCHASES CD Zions CD Zions CD ABN Amro CP GECC CP GECC CP GECC CP GECC CP ConAgra CP ConAgra CP Salomon CP Salomon Disc Notes FNMA Disc Notes FNMA 06/27/00 REDEMPTIONS CP Enron CP Enron CP Enron CP Enron CP GMAC CP GMAC Disc Notes FFCB Disc Notes FHLMC Disc Notes FHLMC RRP Treas Bills Treas Bills 10/12/00 5.970 50,000 11 (89,338.56) -6.052 10/02/00 6.580 10/04/00 6.580 11 /08/00 6.580 11 /08/00 6.580 11 /08/00 6.600 11 /08/00 6.600 06/18/01 6.460 06/15/01 6.460 6.840% 12/27/00 6.830 6.840% 12/27/00 6.830 6.810% 12/27/00 6.810 07/05/00 6.700 07/05/00 6.700 07/05/00 6.700 07/05/00 6.700 07/18/00 6.840 07/18/00 6.840 10/04/00 6.610 10/04/00 6.610 06/18/01 6.490 06/18/01 6.490 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 45,000 50,000 50,000 50,000 50,000 50,000 50,000 38,000 50,000 50,000 50,000 50,000 50,000 06/27/00 6.650 50,000 11 101,597.22 6.756 06/27/00 6.650 50,000 11 101,597.22 6.756 06/27/00 6.400 25,000 60 266,666.67 6.558 06/27/00 6.400 50,000 60 533,333.33 6.558 06/27/00 6.180 50,000 61 523,583.33 6.332 06/27/00 6.180 50,000 61 523,583.33 6.332 06/27/00 6.310 12,135 20 42,539.92 6.420 06/27/00 6.310 33,852 20 118,670.07 6.420 06/27/00 6.310 50,000 20 175,277.78 6.42 03/01/01 5.250 50,000 20 (139,489.58) -5.322 03/01/01 5.250 50,000 20 (139,489.58) -5.322 13 8/ MATURITY MME DESCRIP33ON �tAIE 06/28/00 REDEMPTIONS BN B/A 6.000% 06/28/00 6.000 50,000 182 1,516,666.67 6.083 BN B/A 6.000% 06/28/00 6.000 50,000 182 1,516,666.67 6.083 BN NationsBk 5.640% 06/28/00 5.640 50,000 370 2,898,333.33 5.718 BN NationsBk 5.640% 06/28/00 5.640 50,000 370 2,898,333.33 5.718 CD ANZ 6.510% 06/28/00 6.500 50,000 20" 180,556.55 6.590 CD ANZ 6.510% 06/28/00 6.500 50,000 20 180,556.55 6.590 CD ANZ 5.910% 06/28/00 5.910 25,000 182 746,958.33 5.992 CD ANZ 5.910% 06/28/00 5.910 50,000 182 1,493,916.67 5.992 CD Bayer Lnds 5.910% 06/28/00 5.910 50,000 182 1,493,916.67 5.992 CD Bayer Lnds 5.910% 06/28/00 5.910 50,000 182 1,493,916.67 5.992 CD CommerzBk 5.640% 06/28/00 5.655 20,000 372 1,168,528.85 5.783 CD FNB Chic 5.650% 06/28/00 5.650 50,000 372 2,919,166.67 5.728 CD FNB Chic 5.650% 06/28/00 5.650 50,000 372 2,919,166.67 5.728 CD Toronto 5.500% 06/28/00 5.540 40,000 376 2,313,574.84 5.632 CD Toronto 5.500% 06/28/00 5.540 50,000 376 2,892,254.18 5.632 CD Deutsche 5.500% 06/28/00 5.530 25,000 377 1,447,354.78 5.606 CD Deutsche 5.500% 06/28/00 5.530 50,000 377 2,894,709.55 5.606 CD Rabo 5.500% 06/28/00 5.530 50,000 377 2,894,709.55 5.606 CD Rabo 5.500% 06/28/00 5.530 50,000 377 2,894,709.55 5.606 CD FNB Chic 5.550% 06/28/00 5.550 50,000 378 2,913,750.00 5.627 CD FNB Chic 5.550% 06/28/00 5.550 50,000 378 2,913,750.00 5.627 CD Nova Scot 5.560% 06/28/00 5.560 50,000 378 2,919,000.00 5.637 CD Nova Scot 5.560% 06/28/00 5.560 50,000 378 2,919,000.00 5.637 CD Stnrd Ch 5.570% 06/28/00 5.590 50,000 378 2,934,167.87 5.667 CD Stnrd Ch 5.570% 06/28/00 5.590 50,000 378 2,934,167.87 5.667 RRP Treas Bills 05/31/01 6.200 50,000 20 (162,147.22) -6.286 Treas Bills 05/31 /01 6.200 50,000 20 (162,147.22) -6.286 PURCHASES CD WestDeut 6.780% 11/28/00 6.780 50,000 CD WestDeut 6.780% 11/28/00 6.780 50,000 CD Zions 6.780% 11/28/00 6.770 50,000 CD Zions 6.780% 11/28/00 6.770 50,000 CD CIBC 7.060% 12/27/00 6.850 26,600 CD Zions 6.820% 12/27/00 6.810 35,000 CD US Bank 6.830% 12/27/00 6.830 50,000 CD US Bank 6.830% 12/27/00 6.830 50,000 CD WestDeut 6.820% 12/27/00 6.820 50,000 CD WestDeut 6.820% 12/27/00 6.820 50,000 CD Zions 6.820% 12/27/00 6.810 50,000 CP GECC 06/29/00 6.600 50,000 CP GECC 06/29/00 6.600 50,000 CP GECC 06/29/00 6.600 50,000 CP GECC 06/29/00 6.600 50,000 CP Amer Exp 06/30/00 6.600 50,000 14 06/28/00 PURCHASES (continued) CP Amer Exp 06/30/00 6.600 50,000 CP Country 07/11 /00 6.850 14,733 CP Country 07/11 /00 6.850 50,000 CP Country 07/25/00 6.690 50,000 CP Country 07/25/00 6.690 50,000 CP Enron 07/27/00 6.750 50,000 CP W/F 10/02/00 6.580 50,000 CP W/F 10/02/00 6.580 50,000 CP Salomon 10/06/00 6.600 50,000 CP Salomon 10/06/00 6.600 50,000 Disc Notes FNMA 12/07/00 6.500 30,953 Disc Notes FNMA 12/07/00 6.500 50,000 Disc Notes FHLB 12/22/00 6.490 45,224 Disc Notes FHLB 12/22/00 6.490 50,000 Disc Notes FNMA 06/22/01 6.480 50,000 Disc Notes FNMA 06/22/01 6.480 50,000 Disc Notes FNMA 06/22/01 6.480 50,000 Disc Notes FNMA 06/22/01 6.480 50,000 Disc Notes FNMA 06/22/01 6.480 50,000 Disc Notes FNMA 06/22/01 6.480 50,000 Disc Notes FHLMC 06/27/01 6.480 50,000 Disc Notes FHLMC 06/27/01 6.480 50,000 FR SBA 6.625% 05/25/25 6.625 8,981 Treas Bills 05/31/01 5.815 50,000 Treas Bills 05/31/01 5.815 50,000 Treas Bills 05/31/01 5.820 50,000 Treas Bills 05/31/01 5.820 50,000 FNMA 6.870% 06/28/01 6.952 50,000 06/29/00 REDEMPTIONS CD Barclays 6.500% 06/29/00 6.480 50,000 21 189,002.19 6.569 CD Barclays 6.500% 06/29/00 6.480 50,000 21 189,002.19 6.569 CP GECC 06/29/00 6.600 50,000 1 9,166.67 6.692 CP GECC 06/29/00 6.600 50,000 1 9,166.67 6.692 CP GECC 06/29/00 6.600 50,000 1 9,166.67 6.692 CP GECC 06/29/00 6.600 50,000 1 9,166.67 6.692 CP GECC 06/29/00 6.480 15,000 13 35,100.00 6.585 CP GECC 06/29/00 6.480 50,000 13 117,000.00 6.585 CP GECC 06/29/00 6.480 50,000 13 117,000.00 6.585 CP GECC 06/29/00 6.480 50,000 13 117,000.00 6.585 CP Unocal 06/29/00 6.700 24,560 14 63,992.44 6.810 CP SRAC 06/29/00 6.750 25,000 27 126,562.50 6.878 CP AT&T 06/29/00 6.470 50,000 22 197,694.44 6.585 CP AT&T 06/29/00 6.470 50,000 22 197,694.44 6.585 RRP Treas Bills 03/01/01 5.250 50,000 22 (153,438.54) -5.322 15 06/29/00 RRP (continued) Treas Bills 03/01/01 5.250 50,000 22 (153,438.54) -5.322 Treas Bills 05/31/01 6.200 50,000 21 (170,164.17) -6.286 PURCHASES CD Svenska 6.730% 10/27/00 6.710 10,000 CD Svenska 6.730% 10/27/00 6.710 50,000 CD ANZ 6.715% 10/27/00 6.710 50,000 CD ANZ 6.715% 10/27/00 6.710 50,000 CD Stnrd Ch 6.750% 10/27/00 6.740 50,000 CD Stnrd Ch 6.750% 10/27/00 6.740 50,000 CD Deutsche 6.700% 10/27/00 6.700 50,000 CD Deutsche 6.700% 10/27/00 6.700 50,000 CD Montreal 6.800% 12/27/00 6.800 50,000 CD Montreal 6.800% 12/27/00 6.800 50,000 CID FMCC 07/12/00 6.600 50,000 CID FMCC 07/12/00 6.600 50,000 CID Household 11/08/00 6.580 50,000 06/30/00 REDEMPTIONS BN Banc One 6.070% 06/30/00 6.070 5,000 191 161,023.61 6.154 BN Banc One 6.070% 06/30/00 6.070 50,000 191 1,610,236.11 6.154 CD Zions 6.500% 06/30/00 6.480 50,000 22 198,002.41 6.569 CD Zions 6.500% 06/30/00 6.480 50,000 22 198,002.41 6.569 CD World 6.520% 06/30/00 6.510 50,000 23 207,959.66 6.600 CD World 6.520% 06/30/00 6.510 50,000 23 207,959.66 6.600 CD World 6.520% 06/30/00 6.520 15,000 28 76,066.67 6.610 CD World 6.520% 06/30/00 6.520 50,000 28 253,555.56 6.610 CD World 6.520% 06/30/00 6.520 50,000 28 253,555.56 6.610 CD World 6.520% 06/30/00 6.520 50,000 28 253,555.56 6.610 CD Svenska 6.570% 06/30/00 6.530 50,000 29 263,070.07 6.621 CD Svenska 6.570% 06/30/00 6.530 50,000 29 263,070.07 6.621 CD Deutsche 6.540% 06/30/00 6.540 50,000 29 263,416.67 6.630 CD Deutsche 6.540% 06/30/00 6.540 50,000 29 263,416.67 6.630 CD Montreal 6.560% 06/30/00 6.560 50,000 31 282,444.44 6.651 CD Montreal 6.560% 06/30/00 6.560 50,000 31 282,444.44 6.651 CD Soc Gen 6.560% 06/30/00 6.560 50,000 31 282,444.44 6.651 CD Soc Gen 6.560% 06/30/00 6.560 50,000 31 282,444.44 6.651 CD Wachovia 6.500% 06/30/00 6.500 50,000 42 379,166.67 6.590 CD Wachovia 6.500% 06/30/00 6.500 50,000 42 379,166.67 6.590 CD WestDeut 6.210% 06/30/00 6.210 50,000 92 793,500.00 6.296 CD WestDeut 6.210% 06/30/00 6.210 50,000 92 793,500.00 6.296 CD Montreal 6.040% 06/30/00 6.040 5,000 123 103,183.33 6.123 CD Montreal 6.040% 06/30/00 6.040 50,000 123 1,031,833.33 6.123 CD Fst Union 6.050% 06/30/00 6.050 50,000 123 1,033,541.67 6.134 CD Fst Union 6.050% 06/30/00 6.050 50,000 123 1,033,541.67 6.134 CD Fst Union 6.050% 06/30/00 6.050 50,000 127 1,067,152.78 6.134 CD WestDeut 6.100% 06/30/00 6.100 10,000 128 216,888.89 6.184 16 06/30/00 REDEMPTIONS (continued) CD WestDeut 6.100% 06/30/00 6.100 50,000 128 1,084,444.44 6.184 CD US Bank 6.050% 06/30/00 6.050 50,000 134 1,125,972.22 6.134 CD US Bank 6.050% 06/30/00 6.050 50,000 134 1,125,972.22 6.134 CD U/B Calif 6.060% 06/30/00 6.060 50,000 154 1,296,166.67 6.144 CD U/B Calif 6.060% 06/30/00 6.060 50,000 154 1,296,166.67 6.144 CD Banc One 6.050% 06/30/00 6.050 50,000 156 2,310,833.33 6.134 CD Banc One 6.050% 06/30/00 6.050 50,000 156 2,310,833.33 6.134 CD Nova Scot 6.000% 06/30/00 6.000 20,000 164 546,666.67 6.083 CD WestDeut 6.000% 06/30/00 6.000 25,000 177 737,500.00 6.083 CD UBS 6.010% 06/30/00 6.000 50,000 177 1,475,070.43 6.083 CD UBS 6.010% 06/30/00 6.000 50,000 177 1,475,070.43 6.083 CD CIBC 6.010% 06/30/00 6.000 50,000 177 1,475,070.43 6.083 CD CIBC 6.010% 06/30/00 6.000 50,000 177 1,475,070.43 6.083 CD Toronto 6.030% 06/30/00 6.020 50,000 177 1,479,987.35 6.103 CD Toronto 6.030% 06/30/00 6.020 50,000 177 1,479,987.35 6.103 CP Amer Exp 06/30/00 6.600 50,000 2 18,333.33 6.694 CP Amer Exp 06/30/00 6.600 50,000 2 18,333.33 6.694 CP Morg Stan 06/30/00 6.470 50,000 22 197,694.44 6.585 CP Morg Stan 06/30/00 6.470 50,000 22 197,694.44 6.585 CP Morg Stan 06/30/00 6.470 50,000 42 377,416.65 6.609 CP Morg Stan 06/30/00 6.470 50,000 42 377,416.65 6.609 CP JP Morgan 06/30/00 6.350 43,000 56 424,744.44 6.502 CP JP Morgan 06/30/00 6.350 50,000 56 493,888.89 6.502 CP JP Morgan 06/30/00 6.350 50,000 56 493,888.89 6.502 CP JP Morgan 06/30/00 6.350 50,000 56 493,888.89 6.502 CP JP Morgan 06/30/00 6.350 43,000 57 432,329.17 6.503 CP JP Morgan 06/30/00 6.350 50,000 57 502,708.33 6.503 CP JP Morgan 06/30/00 6.350 50,000 57 502,708.33 6.503 CP JP Morgan 06/30/00 6.350 50,000 57 502,708.33 6.503 CP W/F 06/30/00 6.250 50,000 59 512,152.78 6.402 CP GMAC 06/30/00 6.060 50,000 73 614,416.67 6.220 CP GMAC 06/30/00 6.060 50,000 73 614,416.67 6.220 CP Heller 06/30/00 6.130 50,000 74 630,027.78 6.294 CP W/F 06/30/00 6.070 35,000 85 501,618.06 6.243 CP W/F 06/30/00 6.070 50,000 85 716,597.22 6.070 CP GMAC 06/30/00 6.070 50,000 86 725,027.78 6.244 CP GMAC 06/30/00 6.070 50,000 86 725,027.78 6.244 CP GMAC 06/30/00 6.070 50,000 86 725,027.78 6.244 CP GMAC 06/30/00 6.070 50,000 86 725,027.78 6.244 CP SRAC 06/30/00 6.100 50,000 86 728,611.11 6.276 CP GECC 06/30/00 6.100 50,000 92 779,444.44 6.282 CP GECC 06/30/00 6.100 50,000 92 779,444.44 6.282 CP GECC 06/30/00 6.100 50,000 92 779,444.44 6.282 CP GECC 06/30/00 6.100 50,000 92 779,444.44 6.282 CP Household 06/30/00 5.920 50,000 126 1,036,000.00 6.129 CP Household 06/30/00 5.920 50,000 126 1,036,000.00 6.129 CP Merrill 06/30/00 5.950 20,000 127 419,805.56 6.161 CP GMAC 06/30/00 5.930 50,000 127 1,045,986.11 6.140 CP GMAC 06/30/00 5.930 50,000 127 1,045,986.11 6.140 17 06/30/00 REDEMPTIONS (continued) CID Merrill 06/30/00 5.950 50,000 127 1,049,513.89 6.161 CID GMAC 06/30/00 5.950 50,000 149 1,231,319.44 6.184 CID GMAC 06/30/00 5.950 50,000 149 1,231,319.44 6.184 CID GMAC 06/30/00 5.950 50,000 149 1,231,319.44 6.184 CID GMAC 06/30/00 5.950 50,000 149 1,231,319.44 6.184 CID GMAC 06/30/00 5.950 50,000 149 1,231,319.44 6.184 CID GMAC 06/30/00 5.950 50,000 149 1,231,319.44 6.184 CID GECC 06/30/00 5.820 50,000 169 1,366,083.33 6.066 CID GECC 06/30/00 5.820 50,000 169 1,366,083.33 6.066 Disc Notes FHLB 06/30/00 6.320 50,000 23 201,889.00 6.433 Disc Notes FHLB 06/30/00 6.320 50,000 23 201,889.00 6.433 RRP Treas Bills 12/07/00 5.850 50,000 23 (181,081.87) -5.931 Treas Bills 12/07/00 5.850 50,000 23 (181,081.87) -5.931 Treas Bills 03/01/01 5.700 50,000 57 (429,392.58) -5.779 Treas Bills 03/01/01 5.700 50,000 57 (429,392.58) -5.779 Treas Bills 03/01/01 5.700 50,000 57 (429,392.58) -5.779 Treas Bills 03/01/01 5.700 50,000 57 (429,392.58) -5.779 Treas Bills 03/01/01 5.750 50,000 56 (424,861.11) -5.829 Treas Bills 03/01/01 5.750 50,000 56 (424,861.11) -5.829 Treas Bills 03/01/01 5.750 50,000 56 (424,861.11) -5.829 Treas Bills 03/01/01 5.750 50,000 56 (424,861.11) -5.829 Treas Bills 03/01/01 5.250 50,000 23 (160,413.02) -5.322 Treas Bills 03/01/01 5.250 50,000 23 (160,413.02) -5.322 Treas Notes 4.625% 11/30/00 6.000 50,000 22 (181,958.33) -6.083 Treas Notes 4.625% 11 /30/00 6.000 50,000 22 (181,958.33) -6.083 Treas Notes 6.375% 04/30/02 6.125 50,000 22 (187,620.66) -6.210 Treas Notes 6.375% 04/30/02 6.125 50,000 22 (187,620.66) -6.210 PURCHASES CD US Bank 6.870% 12/27/00 6.870 50,000 CD US Bank 6.870% 12/27/00 6.870 50,000 CD Zions 6.880% 12/27/00 6.860 50,000 CD Zions 6.880% 12/27/00 6.860 50,000 CID GECC 10/27/00 6.580 25,000 CID GECC 10/27/00 6.580 50,000 CID Morg Stan 11 /28/00 6.590 50,000 CID Morg Stan 11/28/00 6.590 50,000 18 a/ The abbreviations indicate the type of security purchased or sold; i.e., (U.S.) Bills, Bonds; Notes, Debentures, Discount Notes, and Participation Certificates: Federal National Mortgage Association (FNMA), Farmers Home Administration Notes (FHA), Student Loan Marketing Association (SLMA), Small Business Association (SBA), Negotiable Certificates of Deposit (CD), Negotiable Certificates of Deposit Floating Rate (CD FR), Export Import Notes (EXIM), Bankers Acceptances (BA), Commercial Paper (CP), Government National Mortgage Association (GNMA), Federal Home Loan Bank Notes (FHLB), Federal Land Bank Bonds (FLB), Federal Home Loan Mortgage Corporation Obligation (FHLMC PC) & (FHLMC GMC), Federal Farm Credit Bank Bonds (FFCB), Federal Farm Credit Discount Notes (FFC), Corporate Securities (CB), U.S. Ship Financing Bonds (TITLE XI'S), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium Term Notes (MTN). b/ Purchase or sale yield based on 360 day calculation for discount obligations and Repurchase Agreements. c/ Repurchase Agreement. d/ Par amount of securites purchased, sold, or redeemed. e/ Securities were purchased and sold as of the same date. f/ Repurchase Agreement against Reverse Repurchase Agreement. g/ Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. 19 TIME DEPOSITS DEPOSIT PAR MATURITY N_ DATE YIELD AMOUNT ($) DATE AGOURA HILLS Pacific Crest Bank 04/07/00 5.910 8,000,000.00 07/06/00 Pacific Crest Bank 04/17/00 5.870 5,000,000.00 07/17/00 Pacific Crest Bank 06/01/00 5.790 5,000,000.00 08/31/00 Pacific Crest Bank 10/12/99 5.390 5,000,000.00 10/16/00 Pacific Crest Bank 11/30/99 5.740 5,000,000.00 12/01/00 Pacific Crest Bank 12/28/99 5.980 5,000,000.00 12/27/00 ALHAMBRA Grand National Bank 04/14/00 5.850 2,000,000.00 07/14/00 Grand National Bank 04/21/00 5.820 3,095,000.00 07/20/00 Grand National Bank 05/08/00 5.950 3,000,000.00 08/07/00 Grand National Bank 03/06/00 6.060 3,000,000.00 09/06/00 Grand National Bank 06/23/00 6.170 1,000,000.00 06/25/01 Omni Bank 04/25/00 5.790 1,000,000.00 07/24/00 Omni Bank 05/01/00 5.790 300,000.00 07/31/00 Omni Bank 05/30/00 5.870 2,000,000.00 08/30/00 Omni Bank 06/05/00 5.750 6,000,000.00 09/05/00 BEVERLY HILLS City National Bank 07/27/99 5.040 10,000,000.00 07/26/00 City National Bank 09/15/99 5.280 20,000,000.00 09/15/00 City National Bank 03/31/00 6.200 50,000,000.00 09/29/00 City National Bank 10/12/99 5.360 25,000,000.00 10/16/00 City National Bank 05/03/00 6.170 25,000,000.00 10/31/00 City National Bank 02/28/00 6.220 20,000,000.00 02/28/01 CAMERON PARK Roseville First National Bank 01/24/00 5.850 1,000,000.00 07/24/00 Western Sierra National Bank 02/03/00 6.040 3,000,000.00 08/01/00 CHICO North State National Bank 08/24/99 5.210 1,000,000.00 08/24/00 North State National Bank 09/07/99 5.240 500,000.00 09/01/00 North State National Bank 08/30/99 5.160 1,000,000.00 09/01/00 North State National Bank 04/07/00 6.170 1,000,000.00 04/06/01 North State National Bank 04/06/00 6.170 1,000,000.00 04/06/01 Tri Counties Bank 04/10/00 5.940 10,000,000.00 07/10/00 Tri Counties Bank 06/07/00 6.050 10,000,000.00 09/06/00 20 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE CHICO (continued) Tri Counties Bank 06/13/00 5.930 10,000,000.00 09/12/00 Tri Counties Bank 06/20/00 5.850 10,000,000.00 09/19/00 CITY OF INDUSTRY EverTrust Bank 01/20/00 5.680 3,000,000.00 07/18/00 EverTrust Bank 06/12/00 5.910 1,000,000.00 09/11/00 EverTrust Bank 06/19/00 5.790 3,000,000.00 09/11/00 EverTrust Bank 06/26/00 5.830 2,000,000.00 09/25/00 EverTrust Bank 01/20/00 6.050 3,000,000.00 10/16/00 DU- Operating Engineers FCU 06/19/00 5.830 10,000,000.00 09/19/00 Operating Engineers FCU 06/02/00 6.290 5,000,000.00 11/30/00 EL CENTRO Valley Independent Bank 02/02/00 6.000 5,000,000.00 07/31/00 Valley Independent Bank 08/11/99 5.250 3,750,000.00 08/11/00 Valley Independent Bank 05/02/00 6.140 15,000,000.00 10/31/00 Valley Independent Bank 05/15/00 6.410 3,750,000.00 05/15/01 FR_ United Security Bank 01/31/00 5.830 15,000,000.00 07/31/00 United Security Bank 05/17/00 6.120 10,000,000.00 08/15/00 FULLERTON Fullerton Community Bank 05/22/00 5.950 9,000,000.00 08/21/00 Fullerton Community Bank 01/19/00 6.160 8,000,000.00 01/19/01 INGLEWOOD Imperial Bank 12/22/99 5.920 25,000,000.00 07/06/00 Imperial Bank 02/24/00 6.040 18,000,000.00 08/10/00 Imperial Bank 01/27/00 5.930 25,000,000.00 08/17/00 Imperial Bank 03/02/00 6.110 25,000,000.00 09/14/00 Imperial Bank 02/03/00 6.120 50,000,000.00 09/14/00 Imperial Bank 04/13/00 6.100 20,000,000.00 10/05/00 21 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE INGLEWOOD (continued) Imperial Bank 03/09/00 6.190 25,000,000.00 10/12/00 Imperial Bank 05/18/00 6.420 25,000,000.00 10/19/00 Imperial Bank 06/13/00 6.140 15,000,000.00 11/02/00 Imperial Bank 03/30/00 6.320 18,000,000.00 11/09/00 Imperial Bank 05/25/00 6.460 25,000,000.00 11/16/00 Imperial Bank 04/27/00 6.150 26,000,000.00 12/07/00 Imperial Bank 06/22/00 6.010 20,000,000.00 03/01/01 LODI Bank of Lodi 04/10/00 5.940 2,000,000.00 07/10/00 Bank of Lodi 05/16/00 6.150 2,000,000.00 08/14/00 Bank of Lodi 06/22/00 5.850 3,000,000.00 09/21/00 LOS ANGELES Broadway Federal Bank 12/28/99 5.790 1,250,000.00 07/07/00 Broadway Federal Bank 09/29/99 5.230 2,500,000.00 10/02/00 Broadway Federal Bank 06/30/00 6.250 1,250,000.00 01 /08/01 Cathay Bank 06/19/00 5.840 9,000,000.00 09/19/00 Cathay Bank 06/28/00 5.860 10,000,000.00 09/26/00 Eastern International Bank 05/09/00 6.380 900,000.00 11/06/00 General Bank 04/25/00 5.820 7,000,000.00 07/24/00 General Bank 04/28/00 5.800 28,000,000.00 08/01/00 General Bank 05/02/00 5.840 15,000,000.00 08/02/00 General Bank 05/15/00 6.190 15,000,000.00 08/08/00 General Bank 06/01/00 5.800 10,000,000.00 08/30/00 General Bank 06/08/00 6.010 25,000,000.00 09/08/00 Hanmi Bank 06/27/00 6.210 25,000,000.00 01/03/01 Manufacturers Bank 05/08/00 5.960 10,000,000.00 08/07/00 Manufacturers Bank 06/05/00 5.750 10,000,000.00 09/05/00 Manufacturers Bank 03/13/00 6.110 10,000,000.00 09/11 /00 Manufacturers Bank 06/26/00 5.860 10,000,000.00 09/25/00 Preferred Bank 04/03/00 5.910 3,000,000.00 07/03/00 Preferred Bank 04/18/00 5.820 3,000,000.00 07/17/00 Preferred Bank 05/15/00 6.170 4,000,000.00 08/14/00 Preferred Bank 05/31/00 5.780 7,000,000.00 08/30/00 Preferred Bank 06/12/00 5.920 9,000,000.00 09/11/00 Preferred Bank 06/20/00 5.830 9,000,000.00 09/18/00 Sae Han Bank 04/20/00 6.040 3,000,000.00 10/17/00 State Bank of India 11/19/99 5.600 2,000,000.00 11/30/00 22 NAME LOS ANGELES (continued) State Bank of India State Bank of India Wilshire State Bank Wilshire State Bank Wilshire State Bank Wilshire State Bank Wilshire State Bank Wilshire State Bank MERCED County Bank County Bank County Bank County Bank MONTEREY PARK Trust Bank FSB Trust Bank FSB NORWALK Cerritos Valley Bank OAKDALE Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank Oak Valley Community Bank ONTARIO Citizens Business Bank Citizens Business Bank TIME DEPOSITS DEPOSIT PAR MATURITY DATE YIELD AMOUNT ($) DATE 01 /20/00 6.110 2,000,000.00 01 /19/01 06/12/00 6.230 2,000,000.00 06/12/01 08/31 /99 5.290 4,000,000.00 08/31 /00 01/12/00 6.090 4,000,000.00 01/12/01 03/17/00 6.230 4,000,000.00 03/19/01 04/18/00 6.090 5,000,000.00 04/18/01 05/17/00 6.370 2,000,000.00 05/17/01 06/07/00 6.290 2,000,000.00 06/07/01 04/20/00 5.850 5,000,000.00 07/19/00 03/15/00 6.180 5,000,000.00 09/11/00 04/20/00 6.050 5,000,000.00 10/17/00 03/09/00 6.200 5,000,000.00 03/09/01 03/27/00 6.180 4,000,000.00 10/02/00 06/26/00 6.220 2, 000, 000.00 01 /02/01 06/01 /00 5.780 2,000,000.00 08/30/00 05/01 /00 5.790 500,000.00 07/31 /00 11 /03/99 5.390 500,000.00 07/31/00 02/04/00 5.830 500,000.00 08/02/00 08/10/99 5.220 500,000.00 08/09/00 05/22/00 5.940 500,000.00 08/21 /00 09/27/99 5.190 500,000.00 09/29/00 06/30/00 5.830 1,000,000.00 09/29/00 05/01 /00 6.090 1,000,000.00 10/31 /00 03/24/00 6.230 1,000,000.00 03/23/01 07/07/99 5.100 5,000,000.00 07/06/00 08/10/99 5.220 10,000,000.00 08/09/00 23 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE ONTARIO (continued) Citizens Business Bank 03/22/00 6.180 10,000,000.00 09/18/00 Citizens Business Bank 04/06/00 6.160 10,000,000.00 10/05/00 Citizens Business Bank 04/06/00 6.160 10,000,000.00 10/05/00 Citizens Business Bank 05/10/00 6.480 10,000,000.00 11/06/00 Citizens Business Bank 05/25/00 6.450 20,000,000.00 12/07/00 Citizens Business Bank 06/15/00 6.260 10,000,000.00 12/15/00 Citizens Business Bank 03/08/00 6.240 5,000,000.00 03/08/01 PALM SPRINGS Canyon National Bank 06/16/00 5.860 95,000.00 09/14/00 PALO ALTO Bay Area Bank 04/27/00 5.840 5,000,000.00 07/26/00 Bay Area Bank 05/05/00 5.940 5,000,000.00 08/04/00 Bay Bank of Commerce 05/05/00 5.940 5,000,000.00 08/04/00 Coast Commercial Bank 06/12/00 5.940 20,000,000.00 09/11/00 Cupertino National Bank 02/04/00 5.870 10,000,000.00 08/02/00 Cupertino National Bank 05/05/00 5.940 25,000,000.00 08/04/00 Cupertino National Bank 06/05/00 5.750 20,000,000.00 09/01/00 Cupertino National Bank 03/22/00 6.180 10,000,000.00 09/18/00 Golden Gate Bank 06/05/00 5.750 9,000,000.00 09/01/00 Mid -Peninsula Bank 02/04/00 5.870 15,000,000.00 08/02/00 Mid -Peninsula Bank 05/05/00 5.940 20,000,000.00 08/04/00 Mid -Peninsula Bank 06/05/00 5.750 5,000,000.00 09/01/00 Mid -Peninsula Bank 03/24/00 6.150 10,000,000.00 09/20/00 Peninsula Bank of Commerce 03/13/00 6.110 15,000,000.00 09/11/00 PALOS VERDES ESTATES Malaga Bank 03/28/00 6.250 6,000,000.00 09/26/00 PASADENA Community Bank 08/11/99 5.230 15,000,000.00 08/11/00 Community Bank 10/25/99 5.490 5,000,000.00 10/27/00 Community Bank 12/07/99 5.700 5,000,000.00 12/08/00 Community Bank 12/13/99 5.650 10,000,000.00 12/15/00 Community Bank 01/10/00 6.040 20,000,000.00 01/12/01 Community Bank 06/22/00 6.110 5,000,000.00 06/22/01 24 NAME PICO RIVERA Pacific West National Bank PLACERVILLE El Dorado Savings Bank El Dorado Savings Bank El Dorado Savings Bank El Dorado Savings Bank El Dorado Savings Bank POMONA PFF Bank and Trust PFF Bank and Trust PETALUMA Bank of Petaluma Bank of Petaluma RED BLUFF Tehama Bank Tehama Bank REDDING North Valley Bank RICHMOND Mechanics Bank Mechanics Bank Mechanics Bank Mechanics Bank Mechanics Bank Mechanics Bank Mechanics Bank TIME DEPOSITS DEPOSIT PAR DATE YIELD AMOUNT ($) 11 /23/99 5.650 1,000,000.00 02/08/00 6.230 5,000,000.00 03/22/00 6.250 5,000,000.00 04/13/00 6.150 5,000,000.00 05/02/00 6.180 5,000,000.00 06/16/00 6.150 5,000,000.00 11/30/99 5.900 8,000,000.00 03/10/00 6.450 10,000,000.00 01/24/00 5.840 2,500,000.00 02/07/00 6.210 1,000,000.00 06/08/00 5.980 4,000,000.00 06/28/00 6.260 5,000,000.00 03/22/00 6.190 3,000,000.00 08/12/99 5.250 10,000,000.00 10/07/99 5.330 10,000,000.00 03/07/00 6.230 10,000,000.00 04/04/00 6.260 10,000,000.00 04/25/00 6.080 10,000,000.00 05/05/00 6.190 10,000,000.00 06/12/00 6.230 10,000,000.00 MATURITY DATE 11 /30/00 02/08/01 03/22/01 04/13/01 05/02/01 06/18/01 12/01 /00 03/09/01 07/24/00 02/07/01 09/08/00 01 /05/01 09/18/00 08/11/00 10/13/00 03/07/01 04/06/01 04/25/01 05/07/01 06/12/01 25 TIME DEPOSITS DEPOSIT I PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE SACRAMENTO American River Bank 03/27/00 6.200 - 3,000,000.00 09/26/00 American River Bank 04/03/00 6.190 1,000,000.00 10/02/00 American River Bank 12/28/99 5.960 1,000,000.00 12/27/00 American River Bank 06/26/00 6.180 1,000,000.00 06/26/01 Bank of Sacramento 02/16/00 6.240 1,000,000.00 02/16/01 Bank of Sacramento 03/03/00 6.290 500,000.00 03/05/01 Golden One Credit Union 03/24/00 6.180 20,000,000.00 03/23/01 Golden One Credit Union 06/08/00 6.230 20,000,000.00 06/08/01 River City Bank 08/18/99 5.210 5,000,000.00 08/18/00 River City Bank 04/10/00 6.170 5,000,000.00 10/06/00 River City Bank 01/31/00 6.140 5,000,000.00 10/27/00 Sanwa Bank of California 07/15/99 5.000 10,000,000.00 07/14/00 Sanwa Bank of California 07/27/99 5.010 5,000,000.00 07/26/00 Sanwa Bank of Califomia 08/16/99 5.190 50,000,000.00 08/15/00 Sanwa Bank of California 08/23/99 5.180 10,000,000.00 08/22/00 Sanwa Bank of California 02/07/00 6.180 7,000,000.00 02/09/01 Union Bank of California 03/28/00 6.220 100,000,000.00 09/25/00 Union Bank of California 04/25/00 6.000 50,000,000.00 10/24/00 Union Bank of California 05/02/00 6.130 100,000,000.00 10/31/00 Union Bank of California 05/16/00 6.530 50,000,000.00 11/14/00 Union Bank of California 05/23/00 6.380 100,000,000.00 11/21/00 SAL_ Community Bk Central California 04/27/00 5.810 12,000,000.00 07/26/00 Community Bk Central California 05/01/00 5.770 10,000,000.00 07/31/00 Community Bk Central California 05/31/00 5.770 10,000,000.00 08/31/00 Community Bk Central California 06/06/00 5.870 8,000,000.00 09/07/00 SAN DIEGO First United Bank 11/30/99 5.700 1,500,000.00 12/01/00 First United Bank 06/21 /00 6.110 1,500,000.00 06/21 /01 Mission Federal Credit Union 06/23/00 5.840 10,000,000.00 09/21/00 Neighborhood National Bank 02/02/00 6.240 1,000,000.00 02/09/01 San Diego First Bank 08/04/99 5.150 1,000,000.00 08/07/00 Scripps Bank 06/19/00 5.840 5,000,000.00 09/18/00 Scripps Bank 06/27/00 5.880 5,000,000.00 10/02/00 Scripps Bank 06/21 /00 6.100 10,000,000.00 11 /02/00 Scripps Bank 06/15/00 6.260 5,000,000.00 12/12/00 26 TIME DEPOSITS DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE SAN FRANCISCO Bank of Canton California 07/21/99 4.950 5,000,000.00 07/21/00 Bank of Canton California 09/01/99 5.280 5,000,000.00 09/01/00 Bank of Canton California 11/10/99 5.430 15,000,000.00 09/01/00 Bank of Canton California 09/13/99 5.290 5,000,000.00 09/13/00 Bank of Canton California 05/12/00 6.400 5,000,000.00 11/02/00 Bank of Canton California 05/05/00 6.240 5,000,000.00 11 /03/00 Bank of Canton California 11/10/99 5.460 10,000,000.00 11/10/00 Bank of Canton California 05/31/00 6.430 10,000,000.00 01/12/01 Bank of Canton California 05/22/00 6.230 10,000,000.00 05/22/01 Bank of the West 04/04/00 5.920 34,000,000.00 07/03/00 Bank of the West 05/22/00 5.930 50,000,000.00 08/21/00 Bank of the West 03/02/00 6.070 50,000,000.00 09/01/00 Bank of the West 04/14/00 6.170 50,000,000.00 04/16/01 Bank of the West 05/01/00 6.140 25,000,000.00 04/27/01 Bank of the West 04/28/00 6.140 51,500,000.00 04/27/01 Bank of the West 05/05/00 6.190 25,000,000.00 05/04/01 Bank of the West 05/16/00 6.400 25,000,000.00 05/18/01 Bank of the West 05/25/00 6.230 142,000,000.00 05/25/01 California Federal Bank 04/17/00 5.840 100,000,000.00 07/17/00 California Federal Bank 01 /05/00 6.080 8,000,000.00 01 /05/01 Millennium Bank 05/01/00 5.810 1,000,000.00 07/31/00 Millennium Bank 06/01 /00 5.790 1,000,000.00 08/30/00 Millennium Bank 03/03/00 6.090 1,000,000.00 08/30/00 Millennium Bank 05/01/00 6.110 2,000,000.00 10/31/00 Oceanic Bank 03/07/00 6.230 2,000,000.00 03/15/01 Oceanic Bank 03/15/00 6.210 2,000,000.00 03/15/01 Trans Pacific National Bank 03/17/00 6.250 800,000.00 03/19/01 United Commercial Bank 04/03/00 5.930 10,000,000.00 07/07/00 United Commercial Bank 04/05/00 5.900 20,000,000.00 07/07/00 United Commercial Bank 04/27/00 5.810 20,000,000.00 07/26/00 United Commercial Bank 05/11/00 6.130 20,000,000.00 08/10/00 United Commercial Bank 09/03/99 5.310 20,000,000.00 09/01/00 United Commercial Bank 10/07/99 5.360 10,000,000.00 10/13/00 United Commercial Bank 03/20/00 6.240 25,000,000.00 03/20/01 SANJOSE Heritage Bank of Commerce 05/22/00 5.930 2,000,000.00 08/21/00 Santa Clara Co. Fed. C.U. 05/12/00 6.140 15,000,000.00 08/10/00 San Jose National Bank 07/12/99 5.010 5,000,000.00 07/11/00 27 TIME DEPOSITS DEPOSIT PAR NAME DATE YIELD AMOUNT ($) SAN LUIS OBISPO First Bank of San Luis Obispo 04/13/00 5.850 1,000,000.00 First Bank of San Luis Obispo 04/24/00 5.820 1,000,000.00 First Bank of San Luis Obispo 05/05/00 5.950 3,600,000.00 First Bank of San Luis Obispo 05/10/00 6.180 2,000,000.00 First Bank of San Luis Obispo 05/22/00 5.940 2,500,000.00 First Bank of San Luis Obispo 06/19/00 5.850 5,000,000.00 Mission Community Bank 01/10/00 5.700 1,000,000.00 Mission Community Bank 01/10/00 6.060 500,000.00 San Luis Trust Bank 04/12/00 5.880 350,000.00 San Luis Trust Bank 01 /31 /00 5.930 1,000,000.00 SAN MARINO MATURITY DATE 07/13/00 07/24/00 08/03/00 08/08/00 08/21 /00 09/18/00 07/10/00 01 /12/01 07/11 /00 08/04/00 East West Federal Bank 04/03/00 5.920 12,000,000.00 07/05/00 East West Federal Bank 04/13/00 5.840 35,000,000.00 08/03/00 East West Federal Bank 05/11/00 6.120 38,000,000.00 08/09/00 East West Federal Bank 05/04/00 6.200 35,000,000.00 05/04/01 SAN RAFAEL Westamerica Bank 04/14/00 5.850 25,000,000.00 07/14/00 Westamerica Bank 01/27/00 5.800 25,000,000.00 07/25/00 Westamerica Bank 01 /31 /00 5.910 25,000,000.00 07/31 /00 Westamerica Bank 01/31/00 5.910 25,000,000.00 08/07/00 Westamerica Bank 06/19/00 5.830 25,000,000.00 09/19/00 Westamerica Bank 04/18/00 6.080 25,000,000.00 04/18/01 Westamerica Bank 05/15/00 6.400 50,000,000.00 05/15/01 SANTA BARBARA FNB of Central California 01/10/00 5.690 10,000,000.00 07/10/00 FNB of Central California 03/31/00 6.080 5,000,000.00 08/07/00 FNB of Central California 02/07/00 5.870 5,000,000.00 08/07/00 FNB of Central California 06/07/00 6.050 10,000,000.00 09/07/00 FNB of Central California 04/21/00 6.040 10,000,000.00 10/18/00 Santa Barbara Bank & Trust 01/07/00 5.740 5,000,000.00 07/07/00 Santa Barbara Bank & Trust 01 /07/00 5.740 5,000,000.00 07/07/00 Santa Barbara Bank & Trust 01/14/00 5.690 5,000,000.00 07/14/00 Santa Barbara Bank & Trust 01/14/00 5.690 5,000,000.00 07/14/00 Santa Barbara Bank & Trust 01/19/00 5.710 10,000,000.00 07/21/00 Santa Barbara Bank & Trust 01/21/00 5.900 5,000,000.00 08/11/00 28 NAME SANTA BARBARA (continued) Santa Barbara Bank & Trust Santa Barbara Bank & Trust Santa Barbara Bank & Trust Santa Barbara Bank & Trust Santa Barbara Bank & Trust Santa Barbara Bank & Trust SANTA CLARA Bank of Santa Clara Bank of Santa Clara Bank of Santa Clara Bank of Santa Clara SANTA CLARITA Valencia Bank & Trust SANTA CRUZ Coast Commercial Bank SANTA ROSA National Bank of the Redwoods STOCKTON Union Safe Deposit Bank Union Safe Deposit Bank Union Safe Deposit Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank Washington Mutual Bank TIME DEPOSITS DEPOSIT PAR MATURITY DATE YIELD AMOUNT ($) DATE 02/11/00 6.030 5,000,000.00 08/11/00 03/03/00 6.070 5,000,000.00 09/08/00 03/17/00 6.170 5,000,000.00 09/08/00 04/17/00 6.100 5,000,000.00 10/10/00 04/07/00 6.160 5,000,000.00 10/10/00 06/09/00 6.260 10,000,000.00 06/08/01 05/12/00 6.140 9,000,000.00 08/10/00 05/23/00 5.880 5,000,000.00 08/22/00 03/17/00 6.170 2,000,000.00 09/13/00 03/17/00 6.230 2,000,000.00 03/19/01 9/23/99 5.28 1,000,000.00 9/22/00 04/21/00 5.810 5,000,000.00 07/20/00 05/03/00 6.250 10,000,000.00 10/30/00 05/16/00 6.170 10,000,000.00 08/14/00 03/15/00 6.260 10,000,000.00 03/15/01 04/13/00 6.200 10,000,000.00 04/13/01 09/17/99 5.260 15,000,000.00 09/15/00 03/21/00 6.160 15,000,000.00 09/15/00 04/21/00 6.030 15,000,000.00 10/27/00 10/13/99 5.370 15,000,000.00 10/27/00 06/01/00 6.330 15,000,000.00 11/13/00 11 /08/99 5.420 15,000,000.00 11 /13/00 12/20/99 5.940 15,000,000.00 12/28/00 01 /24/00 6.120 15,000,000.00 01 /23/01 02/18/00 6.210 15,000,000.00 02/22/01 29 NAME TORRANCE TIME DEPOSITS DEPOSIT PAR MATURITY DATE YIELD AMOUNT ($) DATE China Trust Bank (USA) 04/04/00 5.930 10,000,000.00 07/07/00 China Trust Bank (USA) 04/24/00 5.820 15,000,000.00 07/24/00 China Trust Bank (USA) 05/15/00 6.190 5,000,000.00 08/14/00 China Trust Bank (USA) 05/15/00 6.190 5,000,000.00 08/14/00 China Trust Bank (USA) 06/07/00 6.05 10,000,000.00 09/05/00 China Trust Bank (USA) 06/05/00 5.75 10,000,000.00 09/05/00 China Trust Bank (USA) 06/16/00 5.85 5,000,000.00 09/14/00 South Bay Bank 01 /31 /00 5.880 1,000,000.00 07/31 /00 South Bay Bank 06/12/00 5.940 2,000,000.00 09/13/00 South Bay Bank 05/01/00 6.090 2,000,000.00 10/31/00 TUSTIN First Fidelity Thrift & Loan 04/17/00 5.840 5,000,000.00 07/17/00 First Fidelity Thrift & Loan 01/19/00 5.700 5,000,000.00 07/17/00 First Fidelity Thrift & Loan 04/28/00 5.790 4,000,000.00 07/27/00 First Fidelity Investment & Loan 05/11/00 5.680 6,000,000.00 08/10/00 First Fidelity Investment & Loan 03/01/00 6.120 15,000,000.00 03/01/01 Sunwest Bank 01/11/00 5.650 3,500,000.00 07/10/00 Sunwest Bank 01/21/00 5.810 2,500,000.00 07/19/00 Sunwest Bank 01/13/00 5.720 3,300,000.00 07/27/00 Sunwest Bank 01/21/00 5.820 2,500,000.00 07/31/00 Sunwest Bank 03/08/00 6.100 1,000,000.00 09/08/00 WHITTIER Quaker City Bank 04/04/00 5.930 15,000,000.00 07/03/00 Quaker City Bank 04/12/00 5.880 7,000,000.00 07/12/00 Quaker City Bank 06/06/00 5.900 25,000,000.00 09/08/00 Quaker City Bank 04/18/00 6.090 8,000,000.00 04/18/01 TOTAL TIME DEPOSITS AS OF JUNE 30, 2000. 3,648,440,000.00 9c BANK DEMAND DEPOSITS JUNE 2000 ($ in thousands) DAILY BALANCES DAY OF BALANCES WARRANTS MONTH_ PER BANKS OUTSTANDING 1 $ 1889110 $ 89949,688 2 1629816 8,7111858 3 162,816 8,7119858 4 162,816 897119858 5 4709263 891849530 6 4909919 81119,157 7 1439974 8,0789170 8 180,805 7,918,631 9 2919986 89507,370 10 291,986 8,5079370 11 2919986 895079370 12 3039623 894099360 13 86,011 7,786,091 14 145,990 495559000 15 5111808 4,6339036 16 700,009 4,548,653 17 7009009 495489653 18 700,009 4,548,653 19 6489316 494599848 20 940,855 4,557,173 21 8069606 1,6259112 22 264,634 19759,698 23 606,884 19585,118 24 606,884 19585,118 25 6069884 195859118 26 712,635 1,6029772 27 928,009 1,600,845 28 9279646 194579310 29 354,935 732,565 30 7739395 19072,701 AVERAGE DOLLAR DAYS $ 472,121 a/ a/ The prescribed bank balance for June was $513,131. This consisted of $176,368 in compensating balances for services, balances for uncollected funds of $344,092 and a deduction of $7,328 for May delayed deposit credit. 31 DESIGNATION BY POOLED MONEY INVESTMENT BOARD OF TREASURY POOLED MONEY INVESTMENTS AND DEPOSITS No. 1612 In accordance with sections 16480 through 16480.8 of the Government Code, the Pooled Money Investment Board, at its meeting on June 21, 2000, has determined and designated the amount of money available for deposit and investment under said sections. In accordance with sections 16480.1 and 16480.2 of the Government Code, it is the intent that the money available for deposit or investment be deposited in bank accounts and savings and loan associations or invested in securities in such a manner so as to realize the maximum return consistent with safe and prudent treasury management, and the Board does hereby designate the amount of money available for deposit in bank accounts, savings and loan associ- actions, and for investment in securities and the type of such deposits and investments as follows: 1. In accordance with law, for deposit in demand bank accounts as Compensating Balance for Services $ 171,822,000 The active noninterest-bearing bank accounts designation constitutes a calendar month average balance. For purposes of computing the compensating balances, the Treasurer shall exclude from the daily balances any amounts contained therein as a result of nondelivery of securities purchased for "cash" for the Pooled Money Investment Account and shall adjust for any deposits not credited by the bank as of the date of deposit. The balances in such accounts may fall below the above amount provided that the balances computed by dividing the sum of daily balances of that calendar month by the number of days in the calendar month reasonably approximates that amount. The balances may exceed this amount during heavy collection periods or in anticipation of large impending warrant presentations to the Treasury, but the balances are to be maintained in such a manner as to realize the maximum return consistent with safe and prudent treasury management. 2. In accordance with law, for investment in securities authorized by section 16430, Government Code, or in term interest - bearing deposits in banks and savings and loan associations as follows: From To Transactions ( 1) 06/19/2000 06/23/2000 $ 2,462,800,000 (2) 06/26/2000 06/30/2000 $ (1,779,100,000) (3) 07/03/2000 07/07/2000 $ (1,234,900,000) (4) 07/10/2000 07/14/2000 $ 203,300,000 (5) 07/17/2000 07/21/2000 $ 500,000,000 (6) 07/24/2000 07/28/2000 $ (628,700,000) (7) 07/31/2000 08/04/2000 $ 272,700,000 (8) 08/07/2000 08/11/2000 $ 6,400,000 (9) 08/14/2000 08/18/2000 $ 357,700,000 Time Deposits in Various Financial Institutions In Securities (sections 16503a Estimated (section 16430)' and 16602)' Total $ 40,732,610,000 $ 3,610,190,000 $ 44,342,800,000 $ 38,953,510,000 $ 3,610,190,000 $ 42,563,700,000 $ 37,718,610,000 $ 3,610,190,000 $ 41,328,800,000 $ 37,921,910,000 $ 3,610,190,000 $ 41,532,100,000 $ 38,421,910,000 $ 3,610,190,000 $ 42,032,100,000 $ 37,793,210,000 $ 3,610,190,000 $ 41,403,400,000 $ 38,065,910,000 $ 3,610,190,000 $ 41,676,100,000 $ 38,072,310,000 $ 3,610,190,000 $ 41,682,500,000 $ 38,430,010,000 $ 3,610,190,000 $ 42,040,200,000 From any of the amounts specifically designated above, not more than 30 percent in the aggregate may be invested in prime commercial paper under section 16430(e), Government Code. Additional amounts available in treasury trust account and in the Treasury from time to time, in excess of the amounts and for the same types of investments as specifically designated above. Provided, that the availability of the amounts shown under paragraph 2 is subject to reduction in the amount by which the bank accounts under paragraph 1 would otherwise be reduced below the calendar month average balance of $ 171,822,000. POOLED MONEY INVESTMENT BOARD: IJ VJU4.- Chairperson ember Dated: June 21, 2000 Government Code 32 Memb r STATE OF CALIFORNIA STATE TREASURER'S OFFICE POOLED MONEY INVESTMENT BOARD REPORT MAY 2000 TABLE OF CONTENTS SUMMARY...........................................................................1 SELECTED INVESTMENT DATA.............................................2 PORTFOLIO COMPOSITION...................................................3 INVESTMENT TRANSACTIONS...............................................4 TIMEDEPOSITS..................................................................20 BANK DEMAND DEPOSITS...................................................31 POOLED MONEY INVESTMENT BOARD DESIGNATION .......... 32 POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF MAY 2000 WITH MAY 1999 (DOLLARS IN THOUSANDS) Average Daily Portfolio Accrued Earnings Effective Yield Average Life -Month End (In Days) Total Security Transactions Amount Number Total Time Deposit Transactions Amount Number Average Workday Investment Activity Prescribed Demand Account Balances For Services For Uncollected Funds M/41i 2D00 MAY 1599 CHANGE $ 419986,849 $ 37,503,123 $ 220,132 $ 1629008 6.190 5.086 187 199 $ 26,013,152 $ 14,332,864 559 327 +4,483,726 +589124 +1.104 -12 +11,680,288 +232 $ 1,989,900 $ 1,098,200 +8919700 109 54 +55 $ 1,272,866 $ 7719553 +5019313 $ 171,822 $ 179,416 -79594 $ 271,243 $ 263,852 +70391 1 PHILIP ANGELIDES TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) MAY 31, 2000 PERCENTAGE TYPE OF SECURITY AMOUNT PERCENT CHANGE FROM PRIOR MONTH Government Bills $ 196049021 3.82 -0.11 Bonds 0 0.00 0.00 Notes 211239271 5.05 -0.66 Strips 0 0.00 0.00 Total Government $ 3,727,292 8.87 -0.77 Federal Agency Coupons $ 3,183,171 7.57 -.51 Certificates of Deposit 7,648,214 18.20 +.39 Bank Notes 2,275,008 5.41 -.30 Bankers' Acceptances $ 36,707 0.09 0.00 Repurchases 0 0.00 0.00 Federal Agency Discount Notes 6,572,324 15.64 -.13 Time Deposits 394249190 8.15 +.34 GNMAs 1,315 0.00 0.00 Commercial Paper 119788,945 28.05 +.89 FHLMC 129922 0.03 0.00 Corporate Bonds 2,444,016 5.82 +.12 Pooled Loans 11519,863 3.62 -0.63 GF Loans 0 0.00 0.00 Reversed Repurchases (609,402) -1.45 -.60 Total (All Types) $ 42,024,565 100.00 INVESTMENT ACTIVITY Pooled Money Other Time Deposits Totals PMIA Monthly Average Effective Yield Year to Date Yield Last Day of Month MAY 2000 NUMBER AMOUNT 559 $ 26,013,152 36 693,464 109 1,989,900 704 $ 28,696,516 2 6.190 5.638 APRIL 2000 NUMBER AMOUNT 533 $ 24,394,195 18 30,483 100 1,406,390 651 $ 25,831,068 6.014 6.668 Pooled Money Investment Account Portfolio Composition $42.0 Billion Corporate Bonds 5.82%,A Commercial Paper 28.05% Bankers Acceptances 0.09% Reverses Loans _1.45% Treasuries 3.62% 8.87% CD's/BN's 23.61 % Time Deposits 8.15% Mortgages 0.03% Agencies 23.21 % 5/31 /0 0 B Treasuries 8 Time Deposits ■ Mortgages 0 Agencies B CD's/BN's El Bankers Acceptances ■ Repo 0 Commercial Paper ® Corporate Bonds ❑ Loans 0 Reverses 3 . r rev • . ewi� rre► a i V /Ttflw/ i ' # L1'i"1M4 $1 V r. 05/01/00 RRS Treas Bills 11 /09/00 5.500 $50,000 Treas Bills 11/09/00 5.500 50,000 REDEMPTIONS CD Austria 5.090% 05/01/00 5.130 50,000 368 $2,620,981.32 5.201 CD Austria 5.090% 05/01/00 5.130 50,000 368 2,620,981.32 5.201 Disc Notes FHLB 05/01/00 5.880 50,000 3 24,500.00 5.964 Disc Notes FHLB 05/01/00 5.880 50,000 3 24,500.00 5.964 Disc Notes FHLB 05/01/00 5.880 50,000 3 24,500.00 5.964 Disc Notes FHLB 05/01/00 5.880 50,000 3 24,500.00 5.964 PURCHASES q/ Disc Notes FHLB 05/11/00 5.840 21,000 Disc Notes FHLMC 05/11/00 5.860 29,000 Disc Notes FHLMC 05/11/00 5.860 50,000 PURCHASES CD Toronto 6.660% 10/27/00 6.655 50,000 CD Toronto 6.660% 10/27/00 6.655 50,000 CD ANZ 6.540% 10/27/00 6.670 15,000 CID GMAC 05/02/00 6.090 50,000 CID GMAC 05/02/00 6.090 50,000 CID Rohm 05/02/00 6.250 40,000 CID Rohm 05/02/00 6.250 50,000 CID Salomon 06/09/00 6.220 50,000 CID Salomon 06/09/00 6.220 50,000 CID Salomon 06/09/00 6.220 50,000 CID Salomon 06/09/00 6.220 50,000 CID B/A 08/08/00 6.350 50,000 CID B/A 08/08/00 6.350 50,000 CID NCAT 08/10/00 6.390 4,000 CID NCAT 08/10/00 6.390 50,000 Treas Bills 03/01/01 5.835 50,000 Treas Bills 03/01 /01 5.835 50,000 Treas Bills 03/01 /01 5.842 20,000 Treas Bills 03/01 /01 5.842 50,000 05/02/00 REDEMPTIONS CD Bayer Lnds 6.010% 05/02/00 5.980 50,000 90 747,555.24 6.063 CD Svenska 6.005% 05/02/00 6.000 50,000 90 750,009.24 6.083 CD Svenska 6.005% 05/02/00 6.000 50,000 90 750,009.24 6.083 CID Rohm 05/02/00 6.250 40,000 1 6,944.44 6.337 CP GMAC 05/02/00 6.090 50,000 1 8,458.33 6.175 CID GMAC 05/02/00 6.090 50,000 1 8,458.33 6.175 CID Rohm 05/02/00 6.250 50,000 1 8,680.56 6.337 4 05/02/00 REDEMPTIONS (continued) CP Salomon 05/02/00 CP Morg Stan 05/02/00 CP Morg Stan 05/02/00 PURCHASES CD Toronto 6.670% 10/27/00 CD WestPac Bk 6.650% 10/27/00 CD WestPac Bk 6.650% 10/27/00 CD Toronto 6.670% 10/27/00 CD Nova Scot 6.680% 11 /01 /00 CD Cr Agric 6.700% 11/06/00 CD Cr Agric 6.700% 11/06/00 CD Svenska 6.700% 11/06/00 CD Svenska 6.700% 11/06/00 CP W/F 06/30/00 CP GMAC 07/03/00 CP Assoc 07/05/00 CP Salomon 07/07/00 CP Salomon 07/10/00 CP GMAC 07/27/00 CP GMAC 07/27/00 05/03/00 REDEMPTIONS CD Rabo 5.170% 05/03/00 FFCB 5.000% 05/03/00 FFCB 5.000% 05/03/00 FFCB 5.000% 05/03/00 FFCB 5.000% 05/03/00 PURCHASES CD Den Danske 6.720% 10/27/00 CD Svenska 6.690% 10/27/00 CD Svenska 6.690% 10/27/00 CD Morg Guar 6.710% 10/27/00 CD Morg Guar 6.710% 10/27/00 CD Dresdner 6.740% 11/06/00 CD Dresdner 6.740% 11/06/00 CP Bear 06/07/00 CP Bear 06/07/00 05/04/00 RRS Treas Bills 03/01 /01 Treas Bills 03/01 /01 Treas Bills 03/01 /01 Treas Bills 03/01/01 5 6.000 50,000 13 108,333.33 6.096 5.900 50,000 90 737,500.00 6.071 5.900 50,000 90 737,500.00 6.071 6.670 10,000 6.640 50,000 6.640 50,000 6.670 50,000 6.680 50,000 6.700 50,000 6.700 50,000 6.690 50,000 6.690 50,000 6.250 50,000 6.270 50,000 6.250 50,000 6.330 50,000 6.330 50,000 6.390 50,000 6.390 50,000 5.200 50,000 365 2,635,349.45 5.286 5.068 50,000 366 2,533,000.00 5.069 5.068 50,000 366 2,533,000.00 5.069 5.110 50,000 366 2,552,950.00 5.111 5.110 50,000 366 2,552,950.00 5.111 6.700 25,000 6.670 25,000 6.670 50,000 6.710 50,000 6.710 50,000 6.730 50,000 6.730 50,000 6.270 40,000 6.270 50,000 5.700 50,000 5.700 50,000 5.700 50,000 5.700 50,000 POOLED MON Y INVES'I`MENT ACCOUNT �1 MATORITY TRANS.: i AR nAYS AtiIIDONT EFFECTIVE: SARKED EI Q 05/04/00 REDEMPTIONS CD BkBoston 5.210% 05/04/00 5.210 50,000 366 2,648,416.67 5.296 CD BkBoston 5.210% 05/04/00 5.210 50,000 366 2,648,416.67 5.296 PURCHASES g/ CID JP Morgan 06/30/0.0 6.350 43,000 CID JP Morgan 06/30/00 6.350 50,000 CID JP Morgan 06/30/00 6.350 50,000 CID JP Morgan 06/30/00 6.350 50,000 PURCHASES FHLB 6.750% 05/01 /02 7.150 50,000 FHLB 6.750% 05/01/02 7.150 50,000 05/05/00 RRS Treas Bills 03/01/01 5.750 50,000 Treas Bills 03/01/01 5.750 50,000 Treas Bills 03/01/01 5.750 50,000 Treas Bills 03/01/01 5.750 50,000 SALES Treas Bills 01/04/01 5.930 50,000 102 753,583.33 5.708 Treas Bills 01/04/01 5.930 50,000 102 753,583.33 5.708 Treas Bills 01/04/01 5.930 50,000 102 753,583.34 5.708 Treas Bills 01/04/01 5.930 50,000 105 783,600.70 5.770 Treas Bills 01/04/01 5.930 50,000 105 783,600.70 5.770 Treas Bills 02/01/01 5.960 50,000 78 611,638.89 6.072 Treas Bills 02/01/01 5.960 50,000 78 611,638.89 6.072 Treas Bills 03/01/01 5.850 20,000 42 146,000.00 6.720 Treas Bills 03/01/01 5.850 50,000 42 365,000.00 6.720 REDEMPTIONS BN FNB Chic 5.160% 05/05/00 5.160 50,000 368 2,637,333.33 5.245 BN FNB Chic 5.160% 05/05/00 5.160 50,000 368 2,637,333.33 5.245 CID FMCC 05/05/00 6.000 50,000 14 116,666.67 6.097 CID FMCC 05/05/00 6.000 50,000 14 116,666.67 6.097 CID FMCC 05/05/00 6.000 50,000 14 116,666.67 6.097 CID FMCC 05/05/00 6.000 50,000 14 116,666.67 6.097 PURCHASES g/ CID JP Morgan 06/30/00 6.350 43,000 CID JP Morgan 06/30/00 6.350 50,000 CID JP Morgan 06/30/00 6.350 50,000 CID JP Morgan 06/30/00 6.350 50,000 6 05/08/00 REDEMPTIONS CP ConAgra 05/08/00 6.140 30,000 12 61,400.00 6.238 CP ConAgra 05/08/00 6.140 50,000 12 102,333.33 6.238 CP FMCC 05/08/00 5.990 35,000 17 99,001.39 6.090 CP FMCC 05/08/00 5.990 50,000 17 141,430.56 6.090 CP Assoc 05/08/00 6.000 30,000 19 95,000.00 6.102 CP Amer Exp 05/08/00 6.000 50,000 19 158,333.33 6.102 CP Amer Exp 05/08/00 6.000 50,000 19 158,333.33 6.102 CP ConAgra 05/08/00 6.170 25,000 21 89,979.17 6.278 CP B/A 05/08/00 5.960 50,000 138 1,142,333.33 6.184 Cp B/A 05/08/00 5.960 50,000 138 1,142,333.33 6.184 NO PURCHASES 05/09/00 REDEMPTIONS CP Amer Exp 05/09/00 6.000 50,000 20 166,666.67 6.103 CP Amer Exp 05/09/00 6.000 50,000 20 166,666.67 6.103 NO PURCHASES 05110/00 REDEMPTIONS CP Amer Exp 05/10/00 6.000 50,000 21 175,000.00 6.104 CP Amer Exp 05/10/00 6.000 50,000 21 175,000.00 6.104 CP FMCC 05/10/00 6.000 50,000 21 175,000.00 6.104 CP FMCC 05/10/00 6.000 50,000 21 175,000.00 6.104 CP FMCC 05/10/00 6.000 50,000 21 175,000.00 6.104 CP FMCC 05/10/00 6.000 50,000 21 175,000.00 6.104 CP Hertz 05/10/00 6.010 50,000 21 175,291.67 6.114 CP Hertz 05/10/00 6.010 50,000 21 175,291.67 6.114 CP Household 05/10/00 6.010 50,000 21 175,291.67 6.114 CP Household 05/10/00 6.010 50,000 21 175,291.67 6.114 CP ConAgra 05/10/00 6.110 25,000 21 89,104.17 6.217 CP W/F 05/10/00 6.020 50,000 22 183,944.44 6.126 CP W/F 05/10/00 6.020 50,000 22 183,944.44 6.126 CP GMAC 05/10/00 5.810 50,000 119 960,263.89 6.006 CP GMAC 05/10/00 5.810 50,000 119 960,263.89 6.006 CP U/B Calif 05/10/00 5.840 50,000 126 1,022,000.00 6.044 PURCHASES CP ConAgra 05/11/00 6.050 15,188 CP GECC 05/11/00 5.930 40,000 CP GECC 05/11/00 5.930 50,000 CP GECC 05/11/00 5.930 50,000 CP GECC 05/11/00 5.930 50,000 CP GECC 05/11/00 5.930 50,000 CP ConAgra 05/16/00 6.210 22,900 CP ConAgra 05/16/00 6.150 26,631 7 FOOLED M+FJN .-Y NW.' t+iT 'CC:+E',�UNT I� MATUR[►TY TRANS PAR MAYS' A A 3UNT EFFECTIVE . rl i N XIEL 2 l . 1EARNED 05/10/00 PURCHASES (continued) CP W/F 05/16/00 6.020 50,000 CP W/F 05/16/00 6.020 50,000 CP W/F 05/16/00 6.020 50,000 CP W/F 05/16/00 6.020 50,000 05/11/00 REDEMPTIONS CP ConAgra 05/11/00 6.050 15,188 1 2,552.43 6.135 CP GECC 05/11/00 5.930 40,000 1 6,588.89 6.013 CP GECC 05/11/00 5.930 50,000 1 8,236.11 6.013 CP GECC 05/11/00 5.930 50,000 1 8,236.11 6.013 CP GECC 05/11/00 5.930 50,000 1 8,236.11 6.013 CP GECC 05/11/00 5.930 50,000 1 8,236.11 6.013 CP Amer Exp 05/11/00 6.000 50,000 22 183,33.33 6.105 CP Amer Exp 05/11/00 6.000 50,000 22 183,333.33 6.105 CP Household 05/11/00 6.010 50,000 22 183,638.89 6.115 CP Household 05/11/00 6.010 50,000 22 183,638.89 6.115 Disc Notes FHLB 05/11/00 5.840 21,000 10 34,066.67 5.930 Disc Notes FHLMC 05/11/00 5.860 29,000 10 47,205.56 5.951 Disc Notes FHLMC 05/11/00 5.860 50,000 10 81,388.89 5.951 MTN Bkrs Trst 5.850% 05/11/00 5.895 25,000 731 2,946,000.00 5.896 RRP Treas Bills 11/09/00 5.500 50,000 10 (74,001.74) -5.576 Treas Bills 11/09/00 5.500 50,000 10 (74,001.74) -5.576 PURCHASES CP GECC 05/12/00 5.980 30,000 CP GECC 05/12/00 5.980 50,000 CP GECC 05/12/00 5.980 50,000 CP GECC 05/12/00 5.980 50,000 CP GECC 05/12/00 5.980 50,000 CP GECC 05/12/00 5.980 50,000 CP GECC 05/12/00 5.980 50,000 CP FMCC 05/16/00 5.910 50,000 CP FMCC 05/16/00 5.910 50,000 CP FMCC 05/16/00 5.910 50,000 CP FMCC 05/16/00 5.910 50,000 Treas Notes 5.500% 02/28/03 6.781 50,000 Treas Notes 5.500% 02/28/03 6.781 50,000 05/12/00 REDEMPTIONS CP GECC 05/12/00 5.980 30,000 1 4,983.33 6.064 CP GECC 05/12/00 5.980 50,000 1 8,305.56 6.064 CP GECC 05/12/00 5.980 50,000 1 8,305.56 6.064 CP GECC 05/12/00 5.980 50,000 1 8,305.56 6.064 8 05/12/00 REDEMPTIONS (continued) CP GECC 05/12/00 5.980 50,000 1 8,305.56 6.064 CP GECC 05/12/00 5.980 50,000 1 8,305.56 6.064 CP GECC 05/12/00 5.980 50,000 1 8,305.56 6.064 CP Amer Exp 05/12/00 6.000 50,000 23 191,666.67 6.106 CP Amer Exp 05/12/00 6.000 50,000 23 191,666.67 6.106 PURCHASES CP Assoc 05/15/00 6.080 50,000 CP Assoc 05/15/00 6.080 50,000 CP GECC 05/15/00 6.080 50,000 CP GECC 05/15/00 6.080 50,000 CP B/A 11 /08/00 6.660 50,000 05/15/00 REDEMPTIONS CP Assoc 05/15/00 6.080 50,000 3 25,333.33 6.167 CP Assoc 05/15/00 6.080 50,000 3 25,333.33 6.167 CP GECC 05/15/00 6.080 50,000 3 25,333.33 6.167 CP GECC 05/15/00 6.080 50,000 3 25,333.33 6.167 CP Amer Exp 05/15/00 5.990 50,000 21 174,708.33 6.094 CP Amer Exp 05/15/00 5.990 50,000 21 174,708.33 6.094 CP Amer Exp 05/15/00 5.990 25,000 25 103,993.06 6.098 CP ConAgra 05/15/00 6.110 40,000 25 169,722.22 6.221 CP Amer Exp 05/15/00 5.990 50,000 25 207,986.11 6.098 CP Amer Exp 05/15/00 5.990 50,000 25 207,986.11 6.098 MTN GMAC 05/15/00 5.404 5,000 353 268,471.53 5.405 MTN Citicorp 05/15/00 5.140 37,300 385 2,045,148.64 5.145 PURCHASES CD U/B Calif 6.900% 11 /13/00 6.900 30,000 CD U/B Calif 6.900% 11 /13/00 6.900 50,000 CP GECC 05/16/00 6.280 40,000 CP GECC 05/16/00 6.280 50,000 CP GECC 05/16/00 6.280 50,000 CP GECC 05/16/00 6.280 50,000 CP Assoc 05/16/00 6.280 50,000 CP Assoc 05/16/00 6.280 50,000 CP Assoc 05/16/00 6.280 50,000 CP Assoc 05/16/00 6.280 50,000 CP GMAC 05/26/00 6.450 50,000 CP GMAC 05/26/00 6.450 50,000 CP SRAC 08/10/00 6.650 20,000 05/16/00 REDEMPTIONS CP GECC 05/16/00 6.280 40,000 1 6,977.78 6.368 CP GECC 05/16/00 6.280 50,000 1 8,722.22 6.368 0 EFFECTIVE Y 05/16/00 REDEMPTIONS (continued) CP GECC 05/16/00 6.280 50,000 1 8,722.22 6.368 CP GECC 05/16/00 6.280 50,000 1 8,722.22 6.368 CP Assoc 05/16/00 6.280 50,000 1 8,722.22 6.368 CP Assoc 05/16/00 6.280 50,000 1 8,722.22 6.368 CP Assoc 05/16/00 6.280 50,000 1 8,722.22 6.368 CP Assoc 05/16/00 6.280 50,000 1 8,722.22 6.368 CP FMCC 05/16/00 5.910 50,000 5 41,041.67 5.997 CP FMCC 05/16/00 5.910 50,000 5 41,041.67 5.997 CP FMCC 05/16/00 5.910 50,000 5 41,041.67 5.997 CP FMCC 05/16/00 5.910 50,000 5 41,041.67 5.997 CP ConAgra 05/16/00 6.210 22,900 6 23,701.50 6.302 CP ConAgra 05/16/00 6.150 26,631 6 27,296.78 6.241 CP W/F 05/16/00 6.020 50,000 6 50,166.67 6.109 CP W/F 05/16/00 6.020 50,000 6 50,166.67 6.109 CP W/F 05/16/00 6.020 50,000 6 50,166.67 6.109 CP W/F 05/16/00 6.020 50,000 6 50,166.67 6.109 CP Assoc 05/16/00 6.000 50,000 27 225,000.00 6.110 CP Assoc 05/16/00 6.000 50,000 27 225,000.00 6.110 PURCHASES CP ConAgra 05/17/00 6.600 19,810 CP Amer Exp 05/17/00 6.250 50,000 CP Amer Exp 05/17/00 6.250 50,000 CP Amer Exp 05/17/00 6.250 50,000 CP Amer Exp 05/17/00 6.250 50,000 CP GECC 05/17/00 6.310 50,000 CP GECC 05/17/00 6.310 50,000 CP GECC 05/17/00 6.310 50,000 CP GECC 05/17/00 6.310 50,000 CP Country 05/22/00 6.520 50,000 CP Country 05/22/00 6.520 50,000 CP ConAgra 05/26/00 6.700 24,470 CP FMCC 05/26/00 6.450 50,000 CP FMCC 05/26/00 6.450 50,000 CP FMCC 05/26/00 6.450 50,000 CP FMCC 05/26/00 6.450 50,000 CP W/F 05/26/00 6.460 50,000 CP W/F 05/26/00 6.460 50,000 CP W/F 05/26/00 6.460 50,000 CP W/F 05/26/00 6.460 50,000 Disc Notes FHLMC 04/26/01 6.650 40,000 Disc Notes FHLMC 04/26/01 6.650 50,000 05/17/00 REDEMPTIONS CP ConAgra 05/17/00 6.600 19,810 1 3,631.83 6.692 CP Amer Exp 05/17/00 6.250 50,000 1 8,680.56 6.337 CP Amer Exp 05/17/00 6.250 50,000 1 8,680.56 6.337 10 05/17/00 REDEMPTIONS (continued) CP Amer Exp 05/17/00 6.250 50,000 1 8,680.56 6.337 CP Amer Exp 05/17/00 6.250 50,000 1 8,680.56 6.337 CP GECC 05/17/00 6.310 50,000 1 8,763.89 6.398 CP GECC 05/17/00 6.310 50,000 1 8,763.89 6.398 CP GECC 05/17/00 6.310 50,000 1 8,763.89 6.398 CP GECC 05/17/00 6.310 50,000 1 8,763.89 6.398 CP Amer Exp 05/17/00 5.990 50,000 23 191,347.22 6.096 CP Amer Exp 05/17/00 5.990 50,000 23 191,347.22 6.096 CP ConAgra 05/17/00 6.130 25,000 27 114,937.50 6.243 CP Amer Exp 05/17/00 5.990 25,000 27 112,312.50 6.100 CP Amer Exp 05/17/00 5.990 50,000 27 224,625.00 6.100 CP Amer Exp 05/17/00 5.990 50,000 27 224,625.00 6.100 CP Amer Exp 05/17/00 5.990 50,000 27 224,625.00 6.100 CP Amer Exp 05/17/00 5.990 50,000 27 224,625.00 6.100 CP Amer Exp 05/17/00 5.990 50,000 27 224,625.00 6.100 CP FMCC 05/17/00 6.000 50,000 28 233,333.33 6.111 CP FMCC 05/17/00 6.000 50,000 28 233,333.33 6.111 PURCHASES CD Dresdner 6.945% 11 /13/00 6.940 50,000 CD Dresdner 6.945% 11 /13/00 6.940 50,000 CP Assoc 05/18/00 6.310 15,000 CP Dow 05/18/00 6.300 40,000 CP Amer Exp 05/18/00 6.200 50,000 CP Amer Exp 05/18/00 6.200 50,000 CP Amer Exp 05/18/00 6.200 50,000 CP Amer Exp 05/18/00 6.200 50,000 CP Assoc 05/18/00 6.310 50,000 CP Country 05/19/00 6.380 47,500 CP GECC 05/26/00 6.430 50,000 CP GECC 05/26/00 6.430 50,000 CP W/F 07/05/00 6.500 50,000 CP W/F 07/05/00 6.500 50,000 CP FMCC 08/07/00 6.540 50,000 CP FMCC 08/07/00 6.540 50,000 Disc Notes FHLMC 04/26/01 6.700 50,000 Disc Notes FHLMC 04/26/01 6.700 50,000 05/18/00 REDEMPTIONS CP Assoc 05/18/00 6.310 15,000 1 2,629.17 6.398 CP Dow 05/18/00 6.300 40,000 1 7,000.00 6.388 CP Amer Exp 05/18/00 6.200 50,000 1 8,611.11 6.287 CP Amer Exp 05/18/00 6.200 50,000 1 8,611.11 6.287 CP Amer Exp 05/18/00 6.200 50,000 1 8,611.11 6.287 CP Amer Exp 05/18/00 6.200 50,000 1 8,611.11 6.287 CP Assoc 05/18/00 6.310 50,000 1 8,763.89 6.398 Disc Notes FHLB 05/18/00 4.900 35,000 360 1,715,000.00 5.224 11 EFFECTIVE 05/18/00 REDEMPTIONS (continued) Disc Notes FHLB 05/18/00 4.900 50,000 360 2,450,000.00 5.224 Disc Notes FNMA 05/18/00 4.900 50,000 360 2,450,000.00 5.224 Disc Notes FNMA 05/18/00 4.900 50,000 360 2,450,000.00 5.224 PURCHASES CID GECC 05/19/00 6.300 50,000 CID GECC 05/19/00 6.300 50,000 CID GECC 05/19/00 6.300 50,000 CP GECC 05/19/00 6.300 50,000 CID Country 05/19/00 6.350 50,000 Cp Country 05/19/00 6.350 50,000 CID Assoc 08/16/00 6.580 50,000 CID Assoc 08/16/00 6.580 50,000 CID Assoc 10/02/00 6.620 20,000 CID Assoc 10/02/00 6.620 50,000 Disc Notes FNMA 05/11/01 6.700 50,000 MTN FR FMCC 6.360% 11/24/03 6.808 25,000 MTN FR FMCC 6.360% 11/24/03 6.808 50,000 Treas Bills 03/01 /01 6.000 50,000 Treas Bills 03/01 /01 6.000 50,000 05/19/00 REDEMPTIONS CID GECC 05/19/00 6.300 50,000 1 8,750.00 6.388 CID GECC 05/19/00 6.300 50,000 1 8,750.00 6.388 CID GECC 05/19/00 6.300 50,000 1 8,750.00 6.388 CID GECC 05/19/00 6.300 50,000 1 8,750.00 6.388 CID Country 05/19/00 6.350 50,000 1 8,819.44 6.439 CID Country 05/19/00 6.350 50,000 1 8,819.44 6.439 CID Country 05/19/00 6.380 47,500 2 16,836.11 6.470 CID Heller 05/19/00 6.120 50,000 59 501,500.00 6.267 Disc Notes FHLB 05/19/00 4.950 50,000 358 2,461,250.00 5.278 Disc Notes FHLB 05/19/00 4.950 50,000 358 2,461,250.00 5.278 FNMA 5.100% 05/19/00 5.120 50,000 366 2,559,630.00 5.122 FNMA 5.100% 05/19/00 5.120 50,000 366 2,559,630.00 5.122 PURCHASES CD Wachovia 6.500% 06/30/00 6.500 50,000 CD Wachovia 6.500% 06/30/00 6.500 50,000 CD Austria 6.980% 11 /22/00 6.970 50,000 CD Austria 6.980% 11 /22/00 6.970 50,000 CD Fst Union 7.000% 11/28/00 7.000 50,000 CD Fst Union 7.000% 11/28/00 7.000 50,000 CID Amer Exp 06/01/00 6.460 50,000 CID Amer Exp 06/01/00 6.460 50,000 CID Amer Exp 06/01/00 6.460 50,000 CID Amer Exp 06/01/00 6.460 50,000 12 05/19/00 PURCHASAES (continued) CID Household CID Household CID FMCC CID FMCC CID Heller CID Morg Stan CID Morg Stan 05/22/00 REDEMPTIONS BN FR PNC CID Country CID Country FNMA PURCHASES CID Assoc CID Assoc CID Assoc CID ConAgra CID Amer Exp CID Amer Exp CID Amer Exp 05/23/00 REDEMPTIONS CID Assoc CID Assoc CID Assoc PURCHASES CD Fst Union CD Fst Union CID Armstrong CID GECC CID GECC CID Amer Exp CP Amer Exp 05/24/00 NO SALES PURCHASES CD Stnrd Ch CD Stnrd Ch CD CIBC CD CIBC 06/08/00 6.480 50,000 06/08/00 6.480 50,000 06/12/00 6.470 50,000 06/12/00 6.470 50,000 06/12/00 6.580 50,000 06/30/00 6.470 50,000 06/30/00 6.470 50,000 5.680% 05/22/00 5.699 50,000 731 5,640,848.72 5.635 05/22/00 6.520 50,000 6 54,333.33 6.617 05/22/00 6.520 50,000 6 54,333.33 6.617 5.110% 05/22/00 5.160 50,000 367 2,586,097.22 5.166 05/23/00 6.440 50,000 05/23/00 6.440 50,000 05/23/00 6.440 50,000 05/26/00 6.620 44,257 06/01/00 6.440 50,000 06/01 /00 6.440 50,000 06/01 /00 6.440 50,000 05/23/00 6.440 50,000 1 8,944.44 05/23/00 6.440 50,000 1 8,944.44 05/23/00 6.440 50,000 1 8,944.44 6.430% 05/30/00 6.430 50,000 6.430% 05/30/00 6.430 50,000 05/30/00 6.650 25,000 05/30/00 6.380 50,000 05/30/00 6.380 50,000 05/31 /00 6.430 25,000 05/31/00 6.430 50,000 6.750% 08/31/00 6.740 50,000 6.750% 08/31 /00 6.740 50,000 7.020% 12/27/00 7.020 50,000 7.020% 12/27/00 7.020 50,000 13 6.530 6.530 6.530 EFFECTIVE 05/24/00 PURCHASES (continued) CP FMCC 05/30/00 6.350 50,000 CP FMCC 05/30/00 6.350 50,000 CP FMCC 05/31/00 6.350 50,000 CP FMCC 05/31 /00 6.350 50,000 CP GMAC 06/01/00 6.470 25,000 CP Assoc 06/01/00 6.420 50,000 CP Assoc 06/01/00 6.420 50,000 CP Amer Exp 06/01/00 6.450 50,000 CP Amer Exp 06/01/00 6.450 50,000 CP GMAC 06/01/00 6.470 50,000 CP GMAC 06/01/00 6.470 50,000 CP Amer Exp 06/05/00 6.450 50,000 CP Amer Exp 06/05/00 6.450 50,000 Treas Bills 03/01 /01 5.870 50,000 Treas Bills 03/01/01 5.870 50,000 05/25/00 REDEMPTIONS CD WestDeut 6.010% 05/25/00 6.010 50,000 90 751,250.00 6.093 CD WestDeut 6.010% 05/25/00 6.010 50,000 90 751,250.00 6.093 Treas Bills 05/25/00 4.785 50,000 338 2,246,291.65 5.079 Treas Bills 05/25/00 4.785 50,000 338 2,246,291.65 5.079 RRP Treas Bills 05/25/00 5.720 50,000 90 (704,918.50) -5.799 Treas Bills 05/25/00 5.720 50,000 90 (704,918.50) -5.799 PURCHASES BN B/A 7.020% 11/28/00 7.020 30,000 BN B/A 7.020% 11/28/00 7.020 50,000 CD Den Danske 6.770% 08/29/00 6.750 50,000 CD Rabo 6.690% 11/01/00 6.900 50,000 CD Fst Union 7.020% 11/28/00 7.020 50,000 CD Fst Union 7.020% 11/28/00 7.020 50,000 CP GECC 05/26/00 6.470 50,000 CP GECC 05/26/00 6.470 50,000 CP GECC 05/26/00 6.470 50,000 CP GECC 05/26/00 6.470 50,000 CP Armstrong 05/26/00 6.650 30,000 Disc Notes FHLMC 05/24/01 6.715 50,000 Disc Notes FHLMC 05/24/01 6.715 50,000 Treas Bills 03/01 /01 5.892 50,000 Treas Bills 03/01 /01 5.892 50,000 Treas Notes 6.375% 04/30/02 6.836 50,000 Treas Notes 6.375% 04/30/02 6.836 50,000 14 ■ rl 05/26/00 REDEMPTIONS BN Banc One 6.030% 05/26/00 6.030 50,000 150 1,256,250.00 6.113 BN Banc One 6.030% 05/26/00 6.030 50,000 150 1,256,250.00 6.113 BN B/A 6.060% 05/26/00 6.060 50,000 151 1,270,916.67 6.144 CD Montreal 5.940% 05/26/00 5.940 50,000 119 981,750.00 6.022 CD Montreal 5.940% 05/26/00 5.940 50,000 119 981,750.00 6.022 CD U/B Calif 6.030% 05/26/00 6.030 50,000 150 1,256,250.00 6.113 CD U/B Calif 6.030% 05/26/00 6.030 50,000 150 1,256,250.00 6.113 CD ANZ 6.020% 05/26/00 6.020 50,000 163 1,362,861.11 6.103 CD ANZ 6.020% 05/26/00 6.020 50,000 163 1,362,861.11 6.103 CD Soc Gen 6.030% 05/26/00 6.030 50,000 163 1,365,125.00 6.113 CD Soc Gen 6.030% 05/26/00 6.030 50,000 163 1,365,125.00 6.113 CD Soc Gen 6.030% 05/26/00 6.030 50,000 163 1,365,125.00 6.113 CD CIBC 5.300% 05/26/00 5.350 30,000 367 1,635,417.46 5.439 CD Stnrd Ch 5.320% 05/26/00 5.360 50,000 368 2,738,493.57 5.449 CD Stnrd Ch 5.320% 05/26/00 5.360 50,000 368 2,738,493.57 5.449 CD Austria 5.315% 05/26/00 5.360 50,000 368 2,738,360.83 5.449 CD Austria 5.315% 05/26/00 5.360 50,000 368 2,738,360.83 5.449 CD Nat W.Mstr 5.270% 05/26/00 5.315 20,000 375 1,106,799.86 5.403 CD Nat W.Mstr 5.270% 05/26/00 5.315 50,000 375 2,766,999.64 5.403 CP Armstrong 05/26/00 6.650 30,000 1 5,541.67 6.743 CP GECC 05/26/00 6.470 50,000 1 8,986.11 6.561 CP GECC 05/26/00 6.470 50,000 1 8,986.11 6.561 CP GECC 05/26/00 6.470 50,000 1 8,986.11 6.561 CP GECC 05/26/00 6.470 50,000 1 8,986.11 6.561 CP ConAgra 05/26/00 6.620 44,257 4 32,553.48 6.712 CP GECC 05/26/00 6.430 50,000 9 80,375.00 6.529 CP GECC 05/26/00 6.430 50,000 9 80,375.00 6.529 CP ConAgra 05/26/00 6.700 24,470 10 45,541.39 6.805 CP FMCC 05/26/00 6.450 50,000 10 89,583.33 6.551 CP FMCC 05/26/00 6.450 50,000 10 89,583.33 6.551 CP FMCC 05/26/00 6.450 50,000 10 89,583.33 6.551 CP FMCC 05/26/00 6.450 50,000 10 89,583.33 6.551 CP W/F 05/26/00 6.460 50,000 10 89,722.22 6.561 CP W/F 05/26/00 6.460 50,000 10 89,722.22 6.561 CP W/F 05/26/00 6.460 50,000 10 89,722.22 6.561 CP W/F 05/26/00 6.460 50,000 10 89,722.22 6.561 CP GMAC 05/26/00 6.450 50,000 11 98,541.67 6.552 CP GMAC 05/26/00 6.450 50,000 11 98,541.67 6.552 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 CP FMCC 05/26/00 5.630 50,000 148 1,157,277.78 5.843 15 PAR QAYS AMOUNT EFFECTIVE �t YIELD 05/26/00 PURCHASES CP GMAC 06/05/00 6.460 25,000 CP GMAC 06/05/00 6.460 50,000 CP GMAC 06/05/00 6.460 50,000 CP Amer Exp 06/05/00 6.480 50,000 CP Amer Exp 06/05/00 6.480 50,000 CP Amer Exp 06/05/00 6.480 50,000 CP Amer Exp 06/05/00 6.480 50,000 MTN FR FMCC 6.350% 03/17/03 6.820 42,578 FHLB 6.750% 05/01 /02 7.313 20,000 FHLB 7.250% 05/15/02 7.321 15,000 05/30/00 REDEMPTIONS CD Fst Union 6.430% 05/30/00 6.430 50,000 7 62,513.89 6.519 CD Fst Union 6.430% 05/30/00 6.430 50,000 7 62,513.89 6.519 CP FMCC 05/30/00 6.350 50,000 6 52,916.67 6.445 CP FMCC 05/30/00 6.350 50,000 6 52,916.67 6.445 CP Armstrong 05/30/00 6.650 25,000 7 32,326.39 6.751 CP GECC 05/30/00 6.380 50,000 7 62,027.78 6.476 CP GECC 05/30/00 6.380 50,000 7 62,027.78 6.476 PURCHASES BN B/A 6.870% 10/27/00 6.870 45,000 BN B/A 6.870% 10/27/00 6.870 50,000 CD Montreal 6.560% 06/30/00 6.560 50,000 CD Montreal 6.560% 06/30/00 6.560 50,000 CD Soc Gen 6.560% 06/30/00 6.560 50,000 CD Soc Gen 6.560% 06/30/00 6.560 50,000 CP Assoc 05/31/00 6.620 50,000 CP Assoc 05/31/00 6.620 50,000 CP Assoc 05/31/00 6.620 50,000 CP Assoc 05/31/00 6.620 50,000 CP GMAC 05/31/00 6.630 50,000 CP GMAC 05/31/00 6.630 50,000 CP GECC 06/01/00 6.620 50,000 CP GECC 06/01/00 6.620 50,000 CP GECC 06/01/00 6.620 50,000 CP GECC 06/01/00 6.620 50,000 CP GECC 06/01/00 6.620 50,000 CP GECC 06/01/00 6.620 50,000 Disc Notes FHLMC 05/24/01 6.700 50,000 Disc Notes FHLMC 05/24/01 6.700 50,000 Disc Notes FNMA 05/10/01 6.700 35,541 Disc Notes FNMA 05/18/01 6.700 17,785 Treas Notes 6.375% 04/30/02 6.790 50,000 Treas Notes 6.375% 04/30/02 6.790 50,000 FR SBA 6.625% 04/25/25 6.625 12,851 16 05/31/00 REDEMPTIONS CD Svenska 6.010% 05/31/00 6.100 25,000 43 183,431.49 6.229 CD Svenska 6.010% 05/31/00 6.100 50,000 43 366,862.96 6.229 CD Svenska 6.010% 05/31/00 6.100 50,000 43 366,862.96 6.229 CD Wachovia 6.040% 05/31/00 6.040 50,000 48 402,666.67 6.123 CD Wachovia 6.040% 05/31/00 6.040 50,000 48 402,666.67 6.123 CD U/B Calif 6.080% 05/31/00 6.080 50,000 55 464,444.44 6.164 CD U/B Calif 6.080% 05/31/00 6.080 50,000 55 464,444.44 6.164 CD Deutsche 6.020% 05/31/00 6.020 15,000 167 418,891.67 6.103 CD Deutsche 6.020% 05/31/00 6.020 50,000 167 1,396,305.56 6.103 CD Rabo 6.020% 05/31/00 6.020 50,000 168 1,404,666.67 6.103 CD Rabo 6.020% 05/31/00 6.020 50,000 168 1,404,666.67 6.103 CP Assoc 05/31/00 6.620 50,000 1 9,194.44 6.713 CP Assoc 05/31/00 6.620 50,000 1 9,194.44 6.713 CP Assoc 05/31/00 6.620 50,000 1 9,194.44 6.713 CP Assoc 05/31/00 6.620 50,000 1 9,194.44 6.713 CP GMAC 05/31/00 6.630 50,000 1 9,208.33 6.723 CP GMAC 05/31/00 6.630 50,000 1 9,208.33 6.723 CP FMCC 05/31/00 6,350 50,000 7 61,736.11 6.446 CP FMCC 05/31/00 6.350 50,000 7 61,736.11 6.446 CP Amer Exp 05/31/00 6.430 25,000 8 35,722.22 6.528 CP Amer Exp 05/31/00 6.430 50,000 8 71,444.44 6.528 CP Amer Exp 05/31/00 6.000 50,000 47 391,666.67 6.131 CP Amer Exp 05/31/00 6.000 50,000 47 391,666.67 6.131 CP Bear 05/31/00 6.090 50,000 62 524,416.67 6.240 CP Bear 05/31/00 6.090 50,000 62 524,416.67 6.240 Disc Notes FHLB 05/31/00 5.800 46,350 155 1,157,462.50 6.031 Treas Notes 5.500% 05/31/00 5.553 50,000 712 5,408,021.69 5.555 Treas Notes 5.500% 05/31/00 5.553 50,000 712 5,408,021.69 5.555 Treas Notes 5.500% 05/31/00 5.515 50,000 713 5,380,379.10 5.517 Treas Notes 5.500% 05/31/00 5.515 50,000 713 5,380,379.10 5.517 Treas Notes 5.500% 05/31/00 5.600 25,000 730 2,792,920.99 5.602 Treas Notes 5.500% 05/31/00 5.040 50,000 730 5,496,392.59 5.506 Treas Notes 5.500% 05/31/00 5.040 50,000 730 5,496,392.59 5.506 Treas Notes 5.500% 05/31/00 5.040 50,000 730 5,496,392.59 5.506 Treas Notes 5.500% 05/31/00 5.040 50,000 730 5,496,392.59 5.506 Treas Notes 5.500% 05/31/00 5.525 50,000 730 5,515,923.84 5.527 Treas Notes 5.500% 05/31/00 5.600 50,000 730 5,585,986.34 5.602 RRP Treas Notes 5.500% 05/31/00 5.715 25,000 43 (174,171.77) -5.794 Treas Notes 5.500% 05/31/00 5.715 50,000 43 (348,343.54) -5.794 Treas Notes 5.500% 05/31/00 5.715 50,000 43 (348,343.54) -5.794 Treas Notes 5.500% 05/31/00 5.760 50,000 47 (383,456.83) -5.839 Treas Notes 5.500% 05/31/00 5.760 50,000 47 (383,456.83) -5.839 Treas Notes 5.500% 05/31/00 5.760 50,000 48 (391,553.28) -5.840 Treas Notes 5.500% 05/31/00 5.760 50,000 48 (391,553.28) -5.840 Treas Notes 5.500% 05/31/00 5.760 50,000 55 (448,156.22) -5.840 Treas Notes 5.500% 05/31/00 5.760 50,000 55 (448,156.22) -5.840 17 POOLED MONEY INVESTMENT ACCOUNT TRANS PAR DAYS AMOUNT EFfECTfVE YlQ 118;62' Y� 5.763 50,000 62 (504,894.12) -5.843 5.763 50,000 62 (504,894.12) -5.843 PURCHASES Cp Enron 06/01 /00 6.920 50,000 Cp Enron 06/01 /00 6.920 50,000 CP FMCC 06/02/00 6.620 50,000 CP FMCC 06/02/00 6.620 50,000 CP FMCC 06/02/00 6.620 50,000 CP Amer Exp 06/05/00 6.550 50,000 CP Amer Exp 06/05/00 6.550 50,000 CP Amer Exp 06/05/00 6.550 50,000 CP CAFCO 08/18/00 6.640 20,000 CP CAFCO 08/18/00 6.640 50,000 CP CAFCO 08/18/00 6.640 50,000 18 a/ The abbreviations indicate the type of security purchased or sold; i.e., (U.S.) Bills, Bonds, Notes, Debentures, Discount Notes, and Participation Certificates: Federal National Mortgage Association (FNMA), Farmers Home Administration Notes (FHA), Student Loan Marketing Association (SLMA), Small Business Association (SBA), Negotiable Certificates of Deposit (CD), Negotiable Certificates of Deposit Floating Rate (CD FR), Export Import Notes (EXIM), Bankers Acceptances (BA), Commercial Paper (CP), Government National Mortgage Association (GNMA), Federal Home Loan Bank Notes (FHLB), Federal Land Bank Bonds (FLB), Federal Home Loan Mortgage Corporation Obligation (FHLMC PC) & (FHLMC GMC), Federal Farm Credit Bank Bonds (FFCB), Federal Farm Credit Discount Notes (FFC), Corporate Securities (CB), U.S. Ship Financing Bonds (TITLE XI'S), International Bank of Redevelopment (IBRD), Tennessee Valley Authority (TVA) Medium Term Notes (MTN). b/ Purchase or sale yield based on 360 day calculation for discount obligations and Repurchase Agreements. c/ Repurchase Agreement. d/ Par amount of securites purchased, sold, or redeemed. e/ Securities were purchased and sold as of the same date. f/ Repurchase Agreement against Reverse Repurchase Agreement. g/ Outright purchase against Reverse Repurchase Agreement. h/ Security "SWAP" transactions. i/ Buy back agreement. RRS Reverse Repurchase Agreement. RRP Termination of Reverse Repurchase Agreement. 19 DEPOSIT PAR MATURITY NAME DATE YIE=Q AMOUNT ($) DATE AGOURA HILLS Pacific Crest Bank 02/18/00 5.830 5,000,000.00 06/01 /00 Pacific Crest Bank 04/07/00 5.910 8,000,000.00 07/06/00 Pacific Crest Bank 04/17/00 5.870 5,000,000.00 07/17/00 Pacific Crest Bank 10/12/99 5.390 5,000,000.00 10/16/00 Pacific Crest Bank 11 /30/99 5.740 5,000,000.00 12/01 /00 Pacific Crest Bank ALHAMBRA 12/28/99 5.980 5,000,000.00 12/27/00 Grand National Bank 03/23/00 5.950 1,000,000.00 06/23/00 Grand National Bank 04/14/00 5.850 2,000,000.00 07/14/00 Grand National Bank 04/21/00 5.820 3,095,000.00 07/20/00 Grand National Bank 05/08/00 5.950 3,000,000.00 08/07/00 Grand National Bank 03/06/00 6.060 3,000,000.00 09/06/00 Omni Bank 04/25/00 5.790 1,000,000.00 07/24/00 Omni Bank 05/01/00 5.790 300,000.00 07/31/00 Omni Bank BEVERLY HILLS 05/30/00 5.870 2,000,000.00 08/30/00 City National Bank 07/27/99 5.040 10,000,000.00 07/26/00 City National Bank 09/15/99 5.280 20,000,000.00 09/15/00 City National Bank 03/31 /00 6.200 50,000,000.00 09/29/00 City National Bank 10/12/99 5.360 25,000,000.00 10/16/00 City National Bank 05/03/00 6.170 25,000,000.00 10/31/00 City National Bank CAMERON PARK 02/28/00 6.220 20,000,000.00 02/28/01 Roseville First National Bank 01 /24/00 5.850 1,000,000.00 07/24/00 Western Sierra National Bank CHICO 02/03/00 6.040 3,000,000.00 08/01/00 North State National Bank 08/24/99 5.210 1,000,000.00 08/24/00 North State National Bank 09/07/99 5.240 500,000.00 09/01/00 North State National Bank 08/30/99 5.160 1,000,000.00 09/01/00 North State National Bank 04/07/00 6.170 1,000,000.00 04/06/01 North State National Bank 04/06/00 6.170 1,000,000.00 04/06/01 Tri Counties Bank 03/09/00 5.880 10,000,000.00 06/07/00 20 CHICO (continued) Tri Counties Bank Tri Counties Bank TO Counties Bank EverTrust Bank EverTrust Bank EverTrust Bank EverTrust Bank EverTrust Bank EL CENTRO Valley Independent Bank Valley Independent Bank Valley Independent Bank Valley Independent Bank FRESNO United Security Bank United Security Bank Fullerton Community Bank Fullerton Community Bank INGLEWOOD Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank Imperial Bank TIME DEPOSITS DEPOSIT DATE YIELD PAR MATURITY AMOUNT ($) DATE 03/15/00 5.930 10,000,000.00 06/13/00 03/20/00 5.940 10,000,000.00 06/20/00 04/10/00 5.940 10,000,000.00 07/10/00 03/13/00 5.860 1,000,000.00 06/12/00 03/20/00 5.880 3,000,000.00 06/19/00 03/24/00 5.910 2,000,000.00 06/26/00 01 /20/00 5.680 3,000,000.00 07/18/00 01 /20/00 6.050 3,000,000.00 10/16/00 02/02/00 6.000 5,000,000.00 07/31 /00 08/11/99 5.250 3,750,000.00 08/11/00 05/02/00 6.140 15,000,000.00 10/31/00 05/15/00 6.410 3,750,000.00 05/15/01 01 /31 /00 05/17/00 05/22/00 01 /19/00 10/28/99 12/22/99 02/24/00 01 /27/00 03/02/00 02/03/00 04/13/00 03/09/00 5.830 15,000,000.00 6.120 10,000,000.00 5.950 9,000,000.00 6.160 8,000,000.00 5.450 2.920 6.040 5.930 6.110 6.120 6.100 6.190 20,000,000.00 25,000,000.00 18,000,000.00 25,000,000.00 25,000,000.00 50,000,000.00 20,000,000.00 25,000,000.00 07131 /00 08/15/00 08/21 /00 01 /19/01 06/22/00 07/06/00 08/10/00 08/17/00 09/14/00 09/14/00 10/05/00 10/12/00 4 DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE INGLEWOOD (continued) Imperial Bank 05/18/00 6.420 25,000,000.00 10/19/00 Imperial Bank 03/30/00 6.320 18,000,000.00 11/09/00 Imperial Bank 05/25/00 6.460 25,000,000.00 11/16/00 Imperial Bank 04/27/00 6.150 26,000,000.00 12/07/00 LODI Bank of Lodi 03/23/00 5.960 3,000,000.00 06/22/00 Bank of Lodi 04/10/00 5.940 2,000,000.00 07/10/00 Bank of Lodi LOS ANGELES 05/16/00 6.150 2,000,000.00 08/14/00 Broadway Federal Bank 07/01/99 5.200 1,250,000.00 06/30/00 Broadway Federal Bank 12/28/99 5.790 1,250,000.00 07/07/00 Broadway Federal Bank 09/29/99 5.230 2,500,000.00 10/02/00 Cathay Bank 12/20/99 5.850 9,000,000.00 06/19/00 Cathay Bank 03/28/00 5.930 10,000,000.00 06/28/00 Community Bank 06/22/99 5.030 5,000,000.00 06/22/00 Community Bank 08/11/99 5.230 15,000,000.00 08/11/00 Community Bank 10/25/99 5.490 5,000,000.00 10/27/00 Community Bank 12/07/99 5.700 5,000,000.00 12/08/00 Community Bank 12/13/99 5.650 10,000,000.00 12/15/00 Community Bank 01/10/00 6.040 20,000,000.00 01/12/01 Eastern International Bank 05/09/00 6.380 900,000.00 11/06/00 General Bank 02/18/00 5.800 10,000,000.00 06/01/00 General Bank 03/10/00 5.880 25,000,000.00 06/08/00 General Bank 04/25/00 5.820 7,000,000.00 07/24/00 General Bank 04/28/00 5.800 28,000,000.00 08/01/00 General Bank 05/02/00 5.840 15,000,000.00 08/02/00 General Bank 05/15/00 6.190 15,000,000.00 08/08/00 Manufacturers Bank 03/06/00 5.850 10,000,000.00 06/05/00 Manufacturers Bank 03/27/00 5.930 10,000,000.00 06/26/00 Manufacturers Bank 05/08/00 5.960 10,000,000.00 08/07/00 Manufacturers Bank 03/13/00 6.110 10,000,000.00 09/11/00 Preferred Bank 03/14/00 5.920 9,000,000.00 06/12/00 Preferred Bank 03/20/00 5.890 9,000,000.00 06/20/00 Preferred Bank 04/03/00 5.910 3,000,000.00 07/03/00 Preferred Bank 04/18/00 5.820 3,000,000.00 07/17/00 22 DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE LOS ANGELES (continued) Preferred Bank 05/15/00 6.170 4,000,000.00 08/14/00 Preferred Bank 05/31/00 5.780 7,000,000.00 08/30/00 Sae Han Bank 04/20/00 6.040 3,000,000.00 10/17/00 State Bank of India 11/19/99 5.600 2,000,000.00 11/30/00 State Bank of India 01/20/00 6.110 2,000,000.00 01/19/01 Wilshire State Bank 08/31/99 5.290 4,000,000.00 08/31/00 Wilshire State Bank 01/12/00 6.090 4,000,000.00 01/12/01 Wilshire State Bank 03/17/00 6.230 4,000,000.00 03/19/01 Wilshire State Bank 04/18/00 6.090 5,000,000.00 04/18/01 Wilshire State Bank 05/17/00 6.370 2,000,000.00 05/17/01 MERCED County Bank 04/20/00 5.850 5,000,000.00 07/19/00 County Bank 03/15/00 6.180 5,000,000.00 09/11/00 County Bank 04/20/00 6.050 5,000,000.00 10/17/00 County Bank PARK 03/09/00 6.200 5,000,000.00 03/09/01 MONTEREY Trust Bank FSB 12/27/99 5.790 2,000,000.00 06/26/00 Trust Bank FSB 03/27/00 6.180 4,000,000.00 10/02/00 OAKDALE Oak Valley Community Bank 03/31/00 5.930 1,000,000.00 06/30/00 Oak Valley Community Bank 05/01/00 5.790 500,000.00 07/31/00 Oak Valley Community Bank 11/03/99 5.390 500,000.00 07/31/00 Oak Valley Community Bank 02/04/00 5.830 500,000.00 08/02/00 Oak Valley Community Bank 08/10/99 5.220 500,000.00 08/09/00 Oak Valley Community Bank 05/22/00 5.940 500,000.00 08/21/00 Oak Valley Community Bank 09/27/99 5.190 500,000.00 09/29/00 Oak Valley Community Bank 05/01/00 6.090 1,000,000.00 10/31/00 Oak Valley Community Bank 03/24/00 6.230 1,000,000.00 03/23/01 ONTARIO Citizens Business Bank 06/16/99 5.150 10,000,000.00 06/15/00 Citizens Business Bank 07/07/99 5.100 5,000,000.00 07/06/00 23 ONTARIO (continued) Citizens Business Bank Citizens Business Bank Citizens Business Bank Citizens Business Bank Citizens Business Bank Citizens Business Bank Citizens Business Bank PALM SPRINGS Canyon National Bank PALO ALTO Bay Area Bank Bay Area Bank Bay Bank of Commerce Cupertino National Bank Cupertino National Bank Cupertino National Bank Mid -Peninsula Bank Mid -Peninsula Bank Mid -Peninsula Bank Peninsula Bank of Commerce Malaga Bank PICO RIVERA Pacific West National Bank PLACERVILLE El Dorado Savings Bank El Dorado Savings Bank El Dorado Savings Bank El Dorado Savings Bank TIME DEPOSITS DEPOSIT PAR DATE YIELD AMOUNT ($) MATURITY DATE 08/10/99 5.220 10,000,000.00 08/09/00 03/22/00 6.180 10,000,000.00 09/18/00 04/06/00 6.160 10,000,000.00 10/05/00 04/06/00 6.160 10,000,000.00 10/05/00 05/10/00 6.480 10,000,000.00 11 /06/00 05/25/00 6.450 20,000,000.00 12/07/00 03/08/00 6.240 5,000,000.00 03/08/01 03/17/00 5.920 95,000.00 06/16/00 04/27/00 5.840 5,000,000.00 07/26/00 05/05/00 5.940 5,000,000.00 08/04/00 05/05/00 5.940 5,000,000.00 08/04/00 02/04/00 5.870 10,000,000.00 08/02/00 05/05/00 5.940 25,000,000.00 08/04/00 03/22/00 6.180 10,000,000.00 09/18/00 02/04/00 5.870 15,000,000.00 08/02/00 05/05/00 5.940 20,000,000.00 08/04/00 03/24/00 6.150 10,000,000.00 09/20/00 03/13/00 6.110 15,000,000.00 09/11 /00 03/28/00 6.250 6,000,000.00 09/26/00 11 /23/99 5.650 1,000,000.00 11 /30/00 02/08/00 6.230 5,000,000.00 02/08/01 03/22/00 6.250 5,000,000.00 03/22/01 04/13/00 6.150 5,000,000.00 04/13/01 05/02/00 6.180 5,000,000.00 05/02/01 24 DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE POMONA PFF Bank and Trust 11/30/99 5.900 8,000,000.00 12/01/00 PFF Bank and Trust PETALUMA 03/10/00 6.450 10,000,000.00 03/09/01 Bank of Petaluma 01/24/00 5.840 2,500,000.00 07/24/00 Bank of Petaluma REDDING 02/07/00 6.210 1,000,000.00 02/07/01 North Valley Bank RICHMOND 03/22/00 6.190 3,000,000.00 09/18/00 Mechanics Bank 06/11/99 5.150 10,000,000.00 06/12/00 Mechanics Bank 08/12/99 5.250 10,000,000.00 08/11/00 Mechanics Bank 10/07/99 5.330 10,000,000.00 10/13/00 Mechanics Bank 03/07/00 6.230 10,000,000.00 03/07/01 Mechanics Bank 04/04/00 6.260 10,000,000.00 04/06/01 Mechanics Bank 04/25/00 6.080 10,000,000.00 04/25/01 Mechanics Bank SACRAMENTO 05/05/00 6.190 10,000,000.00 05/07/01 American River Bank 12/28/99 5.770 1,000,000.00 06/26/00 American River Bank 03/27/00 6.200 3,000,000.00 09/26/00 American River Bank 04/03/00 6.190 1,000,000.00 10/02/00 American River Bank 12/28/99 5.960 1,000,000.00 12/27/00 Bank of Sacramento 02/16/00 6.240 1,000,000.00 02/16/01 Bank of Sacramento 03/03/00 6.290 500,000.00 03/05/01 Golden One Credit Union 03/24/00 6.180 20,000,000.00 03/23/01 River City Bank 08/18/99 5.210 5,000,000.00 08/18/00 River City Bank 04/10/00 6.170 5,000,000.00 10/06/00 River City Bank 01/31/00 6.140 5,000,000.00 10/27/00 Sanwa Bank of California 07/15/99 5.000 10,000,000.00 07/14/00 Sanwa Bank of California 07/27/99 5.010 5,000,000.00 07/26/00 Sanwa Bank of California 08/16/99 5.190 50,000,000.00 08/15/00 Sanwa Bank of California 08/23/99 5.180 10,000,000.00 08/22/00 Sanwa Bank of California 02/07/00 6.180 7,000,000.00 02/09/01 25 (continued) Union Bank of California Union Bank of California Union Bank of California Union Bank of California Union Bank of California SALINA.S Community Bk Central California Community Bk Central California Community Bk Central California SAN DIEGO First United Bank Neighborhood National Bank SAN DIEGO (continued) San Diego First Bank San Diego First Bank SAN FRANCISCO Bank of Canton California Bank of Canton California Bank of Canton California Bank of Canton California Bank of Canton California Bank of Canton California Bank of Canton California Bank of Canton California Bank of Canton California Bank of the West Bank of the West Bank of the West Bank of the West Bank of the West Bank of the West DEPOSIT PAR MATURITY DATE YIELD AMOUNT ($) DATE 03/28/00 6.220 100,000,000.00 09/25/00 04/25/00 6.000 50,000,000.00 10/24/00 05/02/00 6.130 100,000,000.00 10/31 /00 05/16/00 6.530 50,000,000.00 11/14/00 05/23/00 6.380 100,000,000.00 11 /21 /00 04/27/00 5.810 12,000,000.00 07/26/00 05/01 /00 5.770 10,000,000.00 07/31 /00 05/31 /00 5.770 10,000,000.00 08/31 /00 11/30/99 5.700 1,500,000.00 12/01/00 02/02/00 6.240 1,000,000.00 02/09/01 06/22/99 5.030 1,500,000.00 06/21 /00 08/04/99 5.150 1,000,000.00 08/07/00 07/21/99 4.950 5,000,000.00 07/21/00 09/01 /99 5.280 5,000,000.00 09/01 /00 11 /10/99 5.430 15,000,000.00 09/01 /00 09/13/99 5.290 5,000,000.00 09/13/00 05/12/00 6.400 5,000,000.00 11 /02/00 05/05/00 6.240 5,000,000.00 11 /03/00 11 /10/99 5.460 10,000,000.00 11 /10/00 05/31 /00 6.430 10,000,000.00 01 /12/01 05/22/00 6.230 10,000,000.00 05/22/01 04/04/00 5.920 34,000,000.00 07/03/00 05/22/00 5.930 50,000,000.00 08/21/00 03/02/00 6.070 50,000,000.00 09/01 /00 04/14/00 6.170 50,000,000.00 04/16/01 05/01 /00 6.140 25,000,000.00 04/27/01 04/28/00 6.140 51,500,000.00 04/27/01 26 DEPOSIT PAR MATURITY NAME DATE YIELD AMOUNT ($) DATE Bank of the West 05/05/00 6.190 25,000,000.00 05/04/01 Bank of the West 05/16/00 6.400 25,000,000.00 05/18/01 Bank of the West 05/25/00 6.230 142,000,000.00 05/25/01 California Federal Bank 04/17/00 5.840 100,000,000.00 07/17/00 California Federal Bank 01/05/00 6.080 8,000,000.00 01/05/01 Millennium Bank 03/03/00 5.840 1,000,000.00 06/01/00 Millennium Bank 05/01 /00 5.810 1,000,000.00 07/31 /00 Millennium Bank 03/03/00 6.090 1,000,000.00 08/30/00 Millennium Bank 05/01/00 6.110 2,000,000.00 10/31/00 Oceanic Bank 03/07/00 6.230 2,000,000.00 03/15/01 Oceanic Bank 03/15/00 6.210 2,000,000.00 03/15/01 Trans Pacific National Bank 03/17/00 6.250 800,000.00 03/19/01 United Commercial Bank 04/03/00 5.930 10,000,000.00 07/07/00 United Commercial Bank 04/05/00 5.900 20,000,000.00 07/07/00 United Commercial Bank 04/27/00 5.810 20,000,000.00 07/26/00 United Commercial Bank 05/11/00 6.130 20,000,000.00 08/10/00 United Commercial Bank 09/03/99 5.310 20,000,000.00 09/01/00 United Commercial Bank 10/07/99 5.360 10,000,000.00 10/13/00 United Commercial Bank 03/20/00 6.240 25,000,000.00 03/20/01 Heritage Bank of Commerce 05/22/00 5.930 2,000,000.00 08/21 /00 San Clara Couty Fed Cred Union 05/12/00 6.140 15,000,000.00 08/10/00 San Jose National Bank 07/12/99 5.010 5,000,000.00 07/11 /00 SAN LUIS OBISPO First Bank of San Luis Obispo 04/13/00 5.850 1,000,000.00 07/13/00 First Bank of San Luis Obispo 04/24/00 5.820 1,000,000.00 07/24/00 First Bank of San Luis Obispo 05/05/00 5.950 3,600,000.00 08/03/00 First Bank of San Luis Obispo 05/10/00 6.180 2,000,000.00 08/08/00 First Bank of San Luis Obispo 05/22/00 5.940 2,500,000.00 08/21/00 Mission Community Bank 01/10/00 5.700 1,000,000.00 07/10/00 Mission Community Bank 01/10/00 6.060 500,000.00 01/12/01 San Luis Trust Bank 04/12/00 5.880 350,000.00 07/11/00 San Luis Trust Bank 01/31/00 5.930 1,000,000.00 08/04/00 27 DEPOSIT PAR MATURITY SLAM DATE YIELD AMOUNT ($) DATE East West Federal Bank 04/03/00 5.920 12,000,000.00 07/05/00 East West Federal Bank 04/13/00 5.840 35,000,000.00 08/03/00 East West Federal Bank 05/11/00 6.120 38,000,000.00 08/09/00 East West Federal Bank 05/04/00 6.200 35,000,000.00 05/04/01 Westamerica Bank 03/20/00 5.910 25,000,000.00 06/19/00 Westamerica Bank 04/14/00 5.850 25,000,000.00 07/14/00 Westamerica Bank 01/27/00 5.800 25,000,000.00 07/25/00 Westamerica Bank 01 /31 /00 5.910 25,000,000.00 07/31 /00 Westamerica Bank 01/31/00 5.910 25,000,000.00 08/07/00 Westamerica Bank 04/18/00 6.080 25,000,000.00 04/18/01 Westamerica Bank 05/15/00 6.400 50,000,000.00 05/15/01 FNB of Central California 01/10/00 5.690 10,000,000.00 07/10/00 FNB of Central California 03/31/00 6.080 5,000,000.00 08/07/00 FNB of Central California 02/07/00 5.870 5,000,000.00 08/07/00 FNB of Central California 04/21/00 6.040 10,000,000.00 10/18/00 Santa Barbara Bank & Trust 03/08/00 5.880 10,000,000.00 06/09/00 Santa Barbara Bank & Trust 01/07/00 5.740 5,000,000.00 07/07/00 Santa Barbara Bank & Trust 01/07/00 5.740 5,000,000.00 07/07/00 Santa Barbara Bank & Trust 01/14/00 5.690 5,000,000.00 07/14/00 Santa Barbara Bank & Trust 01/14/00 5.690 5,000,000.00 07/14/00 Santa Barbara Bank & Trust 01/19/00 5.710 10,000,000.00 07/21/00 Santa Barbara Bank & Trust 01 /21 /00 5.900 5,000,000.00 08/11 /00 Santa Barbara Bank & Trust 02/11/00 6.030 5,000,000.00 08/11/00 Santa Barbara Bank & Trust 03/03/00 6.070 5,000,000.00 09/08/00 Santa Barbara Bank & Trust 03/17/00 6.170 5,000,000.00 09/08/00 Santa Barbara Bank & Trust 04/17/00 6.100 5,000,000.00 10/10/00 Santa Barbara Bank & Trust SANTA CLA A 04/07/00 6.160 5,000,000.00 10/10/00 Bank of Santa Clara 03/17/00 5.900 2,000,000.00 06/15/00 Bank of Santa Clara 05/12/00 6.140 9,000,000.00 08/10/00 Bank of Santa Clara 05/23/00 5.880 5,000,000.00 08/22/00 28 TIME DEPOSITS DEPOSIT DATE YIELD SANTA CLARA (continued) Bank of Santa Clara 03/17/00 Bank of Santa Clara 03/17/00 SANTA CLARITA Valencia Bank & Trust 9/23/99 SANTA CRUZ Coast Commercial Bank 03/13/00 Coast Commercial Bank 04/21 /00 SANTA ROSA National Bank of the Redwoods 05/03/00 SARATOGA Saratoga National Bank 06/22/99 Saratoga National Bank STOCKTON 10/01 /99 Union Safe Deposit Bank 05/16/00 Union Safe Deposit Bank 03/15/00 Union Safe Deposit Bank 04/13/00 Washington Mutual Bank 09/17/99 Washington Mutual Bank 03/21/00 Washington Mutual Bank 04/21/00 Washington Mutual Bank 10/13/99 Washington Mutual Bank 11/08/99 Washington Mutual Bank 12/20/99 Washington Mutual Bank 01/24/00 Washington Mutual Bank 02/18/00 TORRANCE China Trust Bank (USA) 03/06/00 China Trust Bank (USA) 03/09/00 PAR MATURITY AMOUNT (S) DATE 6.170 2,000,000.00 6.230 2,000,000.00 5.28 1,000,000.00 5.870 20,000,000.00 5.810 5,000,000.00 6.250 10,000,000.00 5.100 1,750,000.00 5.150 5,000,000.00 09/13/00 03/19/01 9122/00 06/12/00 07/20/00 10/30/00 06/30/00 06/30/00 6.170 10,000,000.00 08/14/00 6.260 10,000,000.00 03/15/01 6.200 10,000,000.00 04/13/01 5.260 15,000,000.00 09/15/00 6.160 15,000,000.00 09/15/00 6.030 15,000,000.00 10/27/00 5.370 15,000,000.00 10/27/00 5.420 15,000,000.00 11 /13/00 5.940 15,000,000.00 12/28/00 6.120 15,000,000.00 01 /23/01 6.210 15,000,000.00 02/22/01 5.830 10,000,000.00 06/05/00 5.880 10,000,000.00 06/07/00 29 DEPOSIT PAR MATURITY DATE YIELD AMOUNT ($) DATE TORRANCE (continued) China Trust Bank (USA) 03/17/00 5.900 5,000,000.00 06/16/00 China Trust Bank (USA) 04/04/00 5.930 10,000,000.00 07/07/00 China Trust Bank (USA) 04/24/00 5.820 15,000,000.00 07/24/00 China Trust Bank (USA) 05/15/00 6.190 5,000,000.00 08/14/00 China Trust Bank (USA) 05/15/00 6.190 5,000,000.00 08/14/00 South Bay Bank 03/13/00 5.890 2,000,000.00 06/12/00 South Bay Bank 01 /31 /00 5.880 1,000,000.00 07/31 /00 South Bay Bank TUSTIN 05/01 /00 6.090 2,000,000.00 10/31 /00 First Fidelity Thrift & Loan 04/17/00 5.840 5,000,000.00 07/17/00 First Fidelity Thrift & Loan 01/19/00 5.700 5,000,000.00 07/17/00 First Fidelity Thrift & Loan 04/28/00 5.790 4,000,000.00 07/27/00 First Fidelity Investment & Loan 05/11/00 5.680 6,000,000.00 08/10/00 First Fidelity Investment & Loan 03/01 /00 6.120 15,000,000.00 03/01 /01 Sunwest Bank 01/11/00 5.650 3,500,000.00 07/10/00 Sunwest Bank 01/21/00 5.810 2,500,000.00 07/19/00 Sunwest Bank 01/13/00 5.720 3,300,000.00 07/27/00 Sunwest Bank 01/21/00 5.820 2,500,000.00 07/31/00 Sunwest Bank 03/08/00 6.100 1,000,000.00 09/08/00 Quaker City Bank 04/04/00 5.930 153000,000.00 07/03/00 Quaker City Bank 04/12/00 5.880 7,000,000.00 07/12/00 Quaker City Bank 04/18/00 6.090 8,000,000.00 04/18/01 TOTAL TIME DEPOSITS AS OF MAY 31, 2000 3,424,190,000.00 30 BANK DEMAND DEPOSITS MAY 2000 ($ in thousands) DAILY BALANCES DAY OF BALANCES WARRANTS MONTH PER BANKS OUTSTANDING 1 $ 698,887 $ 885,252 2 165,445 1,979,853 3 23,313 2,048,820 4 206,517 2,369,297 5 750,616 2,109,080 6 750,616 2,1099080 7 750,616 2,109,080 8 174,248 2,884,790 9 2319584 29935,264 10 199,567 2,896,094 11 158,628 3,203,253 12 285,303 3,164,094 13 2859303 311649094 14 285,302 3,164,094 15 213,937 796110048 16 3009587 795749194 17 110,726 7,633,247 18 1359768 7,726,847 19 194,042 7,996,511 20 194,042 7,996,511 21 194,042 7,996,511 22 117,156 7,748,506 23 292,359 7,859,755 24 164,626 7,725,755 25 102,248 8,467,670 26 218,542 893519289 27 218,542 8,351,289 28 218,642 8,5319289 29 218,542 8,351,289 30 117,270 890279857 31 252,839 79718,696 AVERAGE DOLLAR DAYS $ 265,476 a/ a/ The prescribed bank balance for May was $"3,065. This consisted of $163,276 in compensating balances for services, balances for uncollected funds of $279,789 and a deduction of $8,547 for April delayed deposit credit. 31 BANK DEMAND DEPOSITS APRIL 2000 ($ in thousands) DAILY BALANCES DAY OF *BALANCES WARRANTS MONTH PER BANKS OUTSTANDING 1 $ 2499158 $ 2,140,741 2 2499158 2,1409741 3 402,934 3,079,536 4 3639689 3,5749004 5 261,268 3,572,181 6 234,070 3,250,291 7 539349 3,5839973 8 53,349 3,583,973 9 53,349 3,583,973 10 145,964 3,956,537 11 387,275 4,023,160 12 337,406 4,089,351 13 235,738 3,824,492 14 388,059 3,938,887 15 388,059 3,9389887 16 388,059 319309117 17 1,3939468 4,1749861 18 1,000,062 4,186,699 19 2409561 4,158,843 20 6829467 3,3679333 21 1,269,625 3,833,822 22 1,2699625 39833,822 23 1,269,625 3,833,822 24 2,2369110 4,031,115 25 1,495,989 1,602,708 26 1,192,431 1,773,125 27 599,791 2,301,795 28 393,421 2,373,821 29 393,421 2,373,821 30 393,421 2,376,450 AVERAGE DOLLAR DAYS $ 6009697 a/ a/ The prescribed bank balance for April was $494,187. This consisted of $162,090 in compensating balances for services, balances for uncollected funds of $332,097 and a deduction of $6,532 for March delayed deposit credit. *Correction to April 2000 BANK DEMAND DEPOSITS DESIGNATION BY POOLED MONEY INVESTMENT BOARD OF TREASURY POOLED MONEY INVESTMENTS AND DEPOSITS No. 1611 In accordance with sections 16480 through 16480.8 of the Government Code, the Pooled Money Investment Board, at its meeting on May 17, 2000, has determined and designated the amount of money available for deposit and investment under said sections. In accordance with sections 16480.1 and 16480.2 of the Government Code, it is the intent that the money available for deposit or investment be deposited in bank accounts and savings and loan associations or invested in securities in such a manner so as to realize the maximum return consistent with safe and prudent treasury management, and the Board does hereby designate the amount of money available for deposit in bank accounts, savings and loan associ- actions, and for investment in securities and the type of such deposits and investments as follows: 1. In accordance with law, for deposit in demand bank accounts as Compensating Balance for Services $ 168,622,000 The active noninterest-bearing bank accounts designation constitutes a calendar month average balance. For purposes of computing the compensating balances, the Treasurer shall exclude from the daily balances any amounts contained therein as a result of nondelivery of securities purchased for "cash" for the Pooled Money Investment Account and shall adjust for any deposits not credited by the bank as of the date of deposit. The balances in such accounts may fall below the above amount provided that the balances computed by dividing the sum of daily balances of that calendar month by the number of days in the calendar month reasonably approximates that amount. The balances may exceed this amount during heavy collection periods or in anticipation of large impending warrant presentations to the Treasury, but the balances are to be maintained in such a manner as to realize the maximum return consistent with safe and prudent treasury management. 2. In accordance with law, for investment in securities authorized by section 16430, Government Code, or in term interest - bearing deposits in banks and savings and loan associations as follows: From To Transactions ( 1) 05/15/2000 05/19/2000 $ 462,120,000 (2) 05/22/2000 05/26/2000 $ (437,400,000) (3) 05/29/2000 06/02/2000 $ (888,800,000) (4) 06/05/2000 06/09/2000 $ (215,840,000) (5) 06/12/2000 06/16/2000 $ 3,338,740,000 (6) 06/19/2000 06/23/2000 $ 2,245,300,000 Time Deposits in Various Financial Institutions In Securities (sections 16503a Estimated (section 16430)* and 16602)* Total $ 35,734,610,000 $ 3,396,190,000 $ 39,130,800,000 $ 35,297,210,000 $ 3,396,190,000 $ 38,693,400,000 $ 34,408,410,000 $ 3,396,190,000 $ 37,804,600,000 $ 34,192,570,000 $ 3,396,190,000 $ 37,588,760,000 $ 37,531,310,000 $ 3,396,190,000 $ 40,927,500,000 $ 39,776,610,000 $ 3,396,190,000 $ 43,172,800,000 From any of the amounts specifically designated above, not more than 30 percent in the aggregate may be invested in prime commercial paper under section 16430(e), Government Code. Additional amounts available in treasury trust account and in the Treasury from time to time, in excess of the amounts and for the same types of investments as specifically designated above. Provided, that the availability of the amounts shown under paragraph 2 is subject to reduction in the amount by which the bank accounts under paragraph 1 would otherwise be reduced below the calendar month average balance of $ 168,622,000. Dated: May 17, 2000 * Government Code Membe A.,Z, Member 32