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EX-31.1 - Federal Home Loan Bank of Indianapolisv184043_ex31-1.htm
EX-32 - Federal Home Loan Bank of Indianapolisv184043_ex32.htm
EX-31.2 - Federal Home Loan Bank of Indianapolisv184043_ex31-2.htm
EX-31.3 - Federal Home Loan Bank of Indianapolisv184043_ex31-3.htm
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  000-51404


FEDERAL HOME LOAN BANK OF INDIANAPOLIS
(Exact name of registrant as specified in its charter)


Federally chartered corporation
(State or other jurisdiction of incorporation or organization)
 
35-6001443
(I.R.S. employer identification number)
8250 Woodfield Crossing Boulevard
Indianapolis, IN
(Address of principal executive offices)
 
46240
(Zip code)

(317) 465-0200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days.
x  Yes            ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨  Yes            ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
   
o  Large accelerated filer
¨  Accelerated filer
   
x  Non-accelerated filer (Do not check if a smaller reporting company)
¨  Smaller reporting company
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
¨  Yes            x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 
  
Shares outstanding
as of April 30, 2010
Class B Stock, par value $100
  
25,014,202
 

 
Table of Contents
   
Page
Number
PART I.
FINANCIAL INFORMATION
 
     
Item 1.
FINANCIAL STATEMENTS (unaudited)
 
 
Statements of Condition as of March 31, 2010, and December 31, 2009
1
 
Statements of Income for the Three Months Ended March 31, 2010, and 2009
2
 
Statements of Capital for the Three Months Ended March 31, 2010, and 2009
3
 
Statements of Cash Flows for the Three Months Ended March 31, 2010, and 2009
4
 
Notes to Interim Unaudited Financial Statements (unaudited):
 
 
Note   1 – Basis of Presentation
6
 
Note   2 – Recently Issued Accounting Standards & Interpretations
6
 
Note   3 – Available-for-Sale Securities
8
 
Note   4 – Held-to-Maturity Securities
9
 
Note   5 – Other-Than-Temporary Impairment Analysis
13
 
Note   6 – Advances
16
 
Note   7 – Mortgage Loans Held for Portfolio
18
 
Note   8 – Derivative and Hedging Activities
19
 
Note   9 – Deposits
23
 
Note 10 – Consolidated Obligations
23
 
Note 11 – Capital
25
 
Note 12 – Segment Information
27
 
Note 13 – Estimated Fair Values
28
 
Note 14 – Commitments and Contingencies
33
 
Note 15 – Transactions with Shareholders
34
     
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
Special Note Regarding Forward-looking Statements
36
 
Executive Summary
37
 
Summary of Selected Financial Data
41
 
Results of Operations for the Three Months Ended March 31, 2010, and 2009
42
 
Business Segments
46
 
Analysis of Financial Condition
47
 
Liquidity and Capital Resources
49
 
Off-Balance Sheet Arrangements
51
 
Critical Accounting Policies and Estimates
51
 
Recent Accounting and Regulatory Developments
53
 
Risk Management
56
     
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
69
Item 4.
CONTROLS AND PROCEDURES
73
     
PART II.
OTHER INFORMATION
 
     
Item 1A.
RISK FACTORS
73
Item 6.
EXHIBITS
74
     
 
Signatures
76
 
Exhibit 31.1
 
 
Exhibit 31.2
 
 
Exhibit 31.3
 
 
Exhibit 32
 
 
As used in this Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” “FHLBI,” and the “Bank” refer to the Federal Home Loan Bank of Indianapolis.
 

 
Federal Home Loan Bank of Indianapolis
Statements of Condition
(Unaudited, $ amounts and shares in thousands, except par value)

   
March 31,
   
December 31,
 
   
2010
   
2009
 
Assets:
           
Cash and Due from Banks
  $ 1,412,026     $ 1,722,077  
Interest-Bearing Deposits, members and non-members
    43       25  
Federal Funds Sold, members and non-members
    6,883,000       5,532,000  
Available-for-Sale Securities (a) (Note 3)
    1,764,316       1,760,714  
Held-to-Maturity Securities (b) (Note 4)
    8,177,769       7,701,151  
Advances (Note 6)
    21,581,565       22,442,904  
Mortgage Loans Held for Portfolio, net (Note 7)
    6,990,015       7,271,895  
Loans to Other Federal Home Loan Banks
    35,000       -  
Accrued Interest Receivable
    110,217       114,246  
Premises, Software, and Equipment, net
    10,547       10,786  
Derivative Assets, net (Note 8)
    5,944       1,714  
Other Assets
    101,260       41,554  
Total Assets
  $ 47,071,702     $ 46,599,066  
                 
Liabilities:
               
Deposits (Note 9):
               
Interest-Bearing Deposits
  $ 546,353     $ 821,431  
Non-Interest-Bearing Deposits
    2,769       3,420  
Total Deposits
    549,122       824,851  
Consolidated Obligations, net (Note 10):
               
Discount Notes
    11,536,974       6,250,093  
Bonds
    31,267,356       35,907,789  
Total Consolidated Obligations, net
    42,804,330       42,157,882  
                 
Accrued Interest Payable
    188,483       211,504  
Affordable Housing Program Payable
    38,781       37,329  
Payable to Resolution Funding Corporation
    8,207       6,533  
Derivative Liabilities, net (Note 8)
    764,359       712,716  
Mandatorily Redeemable Capital Stock (Note 11)
    750,697       755,660  
Other Liabilities
    206,373       146,180  
Total Liabilities
    45,310,352       44,852,655  
                 
Commitments and Contingencies (Note 14)
               
                 
Capital (Note 11):
               
Capital Stock Class B-1 Putable ($100 par value) issued and outstanding
               
shares: 17,324 and 17,260, respectively
    1,732,362       1,726,000  
Capital Stock Class B-2 Putable ($100 par value) no shares issued or outstanding
    -       -  
Total Capital Stock Putable
    1,732,362       1,726,000  
Retained Earnings
    372,611       349,013  
Accumulated Other Comprehensive Income (Loss):
               
Net Unrealized Gains (Losses) on Available-for-Sale Securities, before
               
Derivative and Hedging Adjustments (Note 3)
    (18,466 )     2,140  
Net Non-Credit Portion of Other-Than-Temporary Impairment Losses on
               
Held-to-Maturity Securities (Note 5)
    (318,652 )     (324,041 )
Pension and Postretirement Benefits
    (6,505 )     (6,701 )
Total Accumulated Other Comprehensive Income (Loss)
    (343,623 )     (328,602 )
Total Capital
    1,761,350       1,746,411  
Total Liabilities and Capital
  $ 47,071,702     $ 46,599,066  

(a) Amortized cost: $1,670,626 and $1,672,918 at March 31, 2010, and December 31, 2009, respectively
(b) Estimated fair values: $8,278,152 and $7,690,482 at March 31, 2010, and December 31, 2009, respectively
 
The accompanying notes are an integral part of these financial statements.
 
1

 
Federal Home Loan Bank of Indianapolis
Statements of Income
(Unaudited, $ amounts in thousands)

   
For the Three Months Ended March 31,
 
   
2010
   
2009
 
Interest Income:
           
Advances
  $ 50,434     $ 151,324  
Prepayment Fees on Advances, net
    693       150  
Interest-Bearing Deposits, members and non-members
    36       106  
Federal Funds Sold, members and non-members
    2,533       10,536  
Available-for-Sale Securities
    1,621       7,895  
Held-to-Maturity Securities
    63,431       76,739  
Mortgage Loans Held for Portfolio, net
    90,655       113,316  
Other Interest Income
    528       -  
Total Interest Income
    209,931       360,066  
                 
Interest Expense:
               
Deposits
    78       330  
Consolidated Obligation Bonds
    142,162       238,122  
Discount Notes
    2,465       56,197  
Mandatorily Redeemable Capital Stock
    3,579       3,933  
Other Interest Expense
    -       1  
Total Interest Expense
    148,284       298,583  
                 
Net Interest Income
    61,647       61,483  
                 
Other Income (Loss):
               
Total Other-Than-Temporary Impairment Losses
    (14,453 )     (147,292 )
Portion of Impairment Losses Recognized in Other
               
Comprehensive Income (Loss), net
    8,387       128,742  
Net Other-Than-Temporary Impairment Losses
    (6,066 )     (18,550 )
Net Gains (Losses) on Derivatives and Hedging Activities
    (1,175 )     (1,243 )
Service Fees
    301       283  
Standby Letters of Credit Fees
    363       186  
Other, net
    262       242  
Total Other Income (Loss)
    (6,315 )     (19,082 )
                 
Other Expenses:
               
Compensation and Benefits
    6,704       8,155  
Other Operating Expenses
    2,934       2,873  
Finance Agency/Finance Board
    599       452  
Office of Finance
    465       449  
Other
    284       316  
Total Other Expenses
    10,986       12,245  
                 
Income Before Assessments
    44,346       30,156  
                 
Assessments:
               
Affordable Housing Program
    3,985       2,863  
Resolution Funding Corporation
    8,072       5,459  
                 
Total Assessments
    12,057       8,322  
                 
Net Income
  $ 32,289     $ 21,834  
 
The accompanying notes are an integral part of these financial statements.
 
2

 
Federal Home Loan Bank of Indianapolis
Statements of Capital
(Unaudited, $ amounts and shares in thousands)

   
Capital Stock
   
Capital Stock
         
Accumulated
       
   
Class B-1
   
Class B-2
         
Other
       
   
Putable
   
Putable
   
Retained
   
Comprehensive
   
Total
 
   
Shares
   
Par Value
   
Shares
   
Par Value
   
Earnings
   
Income (Loss)
   
Capital
 
                                           
Balance, December 31, 2008
    18,792     $ 1,879,179       2     $ 196     $ 282,731     $ (71,398 )   $ 2,090,708  
Proceeds from Sale of Capital Stock
    178       17,775       -       -                       17,775  
Transfers of Capital Stock
    2       195       (2 )     (195 )                     -  
Comprehensive Income:
                                                       
Net Income
                                    21,834               21,834  
Other Comprehensive Income (Loss):
                                                       
Net Unrealized Gain (Loss) on Available-
                                                       
for-Sale Securities
                                            (1,968 )     (1,968 )
Non-Credit Portion of Other-Than-
                                                       
Temporary Impairment Losses on
                                                       
Held-to-Maturity Securities
                                            (128,742 )     (128,742 )
Reclassification of Non-Credit
                                                       
Losses to Other Income (Loss)
                                            -       -  
Net Non-Credit Portion Before Accretion
                                            (128,742 )     (128,742 )
Accretion of Non-Credit Portion
                                            -       -  
Net Non-Credit Portion
                                            (128,742 )     (128,742 )
Pension and Postretirement Benefits
                                            1,657       1,657  
Total Comprehensive Income (Loss)
                                    21,834       (129,053 )     (107,219 )
Distributions on Mandatorily Redeemable
                                                       
Capital Stock
                                    -               -  
Dividends on Capital Stock:
                                                       
Cash (3.85% annualized)
                                    (18,651 )             (18,651 )
Balance, March 31, 2009
    18,972     $ 1,897,149       -     $ 1     $ 285,914     $ (200,451 )   $ 1,982,613  
                                                         
                                                         
Balance, December 31, 2009
    17,260     $ 1,726,000       -     $ -     $ 349,013     $ (328,602 )   $ 1,746,411  
Proceeds from Sale of Capital Stock
    42       4,212       -       -                       4,212  
Net Shares Reclassified from Mandatorily
                                                       
Redeemable Capital Stock
    22       2,150       -       -                       2,150  
Comprehensive Income:
                                                       
Net Income
                                    32,289               32,289  
Other Comprehensive Income (Loss):
                                                       
Net Unrealized Gain (Loss) on Available-
                                                       
for-Sale Securities
                                            (20,606 )     (20,606 )
Non-Credit Portion of Other-Than-
                                                       
Temporary Impairment Losses on
                                                       
Held-to-Maturity Securities
                                            (14,169 )     (14,169 )
Reclassification of Non-Credit
                                                       
Losses to Other Income (Loss)
                                            5,782       5,782  
Net Non-Credit Portion Before Accretion
                                            (8,387 )     (8,387 )
Accretion of Non-Credit Portion
                                            13,776       13,776  
Net Non-Credit Portion
                                            5,389       5,389  
Pension and Postretirement Benefits
                                            196       196  
Total Comprehensive Income (Loss)
                                    32,289       (15,021 )     17,268  
Distributions on Mandatorily Redeemable
                                                       
Capital Stock
                                    -               -  
Dividends on Capital Stock:
                                                       
Cash (2.00% annualized)
                                    (8,691 )             (8,691 )
Balance, March 31, 2010
    17,324     $ 1,732,362       -     $ -     $ 372,611     $ (343,623 )   $ 1,761,350  
 
The accompanying notes are an integral part of these financial statements.
 
3

 
Federal Home Loan Bank of Indianapolis
Statements of Cash Flows
(Unaudited, $ amounts in thousands)

   
For the Three Months Ended March 31,
 
   
2010
   
2009
 
             
Operating Activities:
           
Net Income
  $ 32,289     $ 21,834  
Adjustments to Reconcile Net Income to Net Cash provided by (used in)
               
Operating Activities:
               
Depreciation and Amortization
    (20,036 )     (32,625 )
Net Other-Than-Temporary Impairment Losses
    6,066       18,550  
(Gain) Loss on Derivative and Hedging Activities
    2,207       7,745  
Net Change in:
               
Accrued Interest Receivable
    4,025       14,456  
Net Accrued Interest on Derivatives
    51,659       43,242  
Other Assets
    440       (41 )
Accrued Interest Payable
    (23,020 )     (29,428 )
Other Liabilities
    1,799       (14,714 )
Total Adjustments
    23,140       7,185  
Net Cash provided by (used in) Operating Activities
    55,429       29,019  
                 
Investing Activities:
               
Net Change in:
               
Interest-Bearing Deposits, members and non-members
    (23,157 )     60,870  
Federal Funds Sold, members and non-members
    (1,351,000 )     (2,591,000 )
Premises, Software, and Equipment
    (103 )     (187 )
Held-to-Maturity Securities:
               
Net (Increase) Decrease in Short-Term Held-to-Maturity Securities
    (411,000 )     -  
Proceeds from Maturities of Long-Term Held-to-Maturity Securities
    491,928       608,184  
Purchases of Long-Term Held-to-Maturity Securities
    (533,425 )     (1,611,468 )
Advances:
               
Principal Collected
    5,115,810       9,270,503  
Made to Members
    (4,223,897 )     (6,040,914 )
Mortgage Loans Held for Portfolio:
               
Principal Collected
    361,959       542,770  
Purchases
    (82,207 )     (199,080 )
Payments (Proceeds) from Sales of Foreclosed Properties
    (33 )     1  
Other Federal Home Loan Banks:
               
Principal Collected on Loans
    25,735       -  
Loans Made
    (60,735 )     -  
Net Cash provided by (used in) Investing Activities
  $ (690,125 )   $ 39,679  
 
The accompanying notes are an integral part of these financial statements.
 
4

 
Federal Home Loan Bank of Indianapolis
Statements of Cash Flows, continued
(Unaudited, $ amounts in thousands)

   
For the Three Months Ended March 31,
 
   
2010
   
2009
 
             
Financing Activities:
           
Net Change in:
           
Deposits
  $ (271,786 )   $ 233,286  
Net Proceeds (Payments) on Derivative Contracts with Financing Elements
    (42,543 )     (25,806 )
Net Proceeds from Issuance of Consolidated Obligations:
               
Discount Notes
    147,423,048       25,833,344  
Consolidated Obligation Bonds
    8,110,390       10,890,633  
Payments for Maturing and Retiring Consolidated Obligations:
               
Discount Notes
    (142,136,272 )     (28,629,577 )
Consolidated Obligation Bonds
    (12,750,900 )     (9,226,250 )
Proceeds from Sale of Capital Stock
    4,212       17,775  
Payments for Redemption of Mandatorily Redeemable Capital Stock
    (2,813 )     (731 )
Cash Dividends Paid
    (8,691 )     (18,651 )
Net Cash provided by (used in) Financing Activities
    324,645       (925,977 )
                 
Net Increase (Decrease) in Cash and Cash Equivalents
    (310,051 )     (857,279 )
                 
Cash and Cash Equivalents at Beginning of the Period
    1,722,077       870,810  
                 
Cash and Cash Equivalents at End of the Period
  $ 1,412,026     $ 13,531  
                 
Supplemental Disclosures:
               
Interest Paid
  $ 174,687     $ 323,959  
Affordable Housing Program Payments, net
    2,533       1,061  
Resolution Funding Corporation Assessments Paid
    6,399       17,024  
 
The accompanying notes are an integral part of these financial statements.
 
5

 
Federal Home Loan Bank of Indianapolis
Notes to Interim Unaudited Financial Statements
($ amounts in thousands unless otherwise indicated)
 
Note 1 — Basis of Presentation

The accompanying interim financial statements of the Federal Home Loan Bank of Indianapolis (“Bank”) are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions provided by Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements.  The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the Bank’s financial position, results of operations and cash flows for the interim periods presented.  All such adjustments were of a normal recurring nature.  The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.

The interim financial statements presented herein should be read in conjunction with the Bank’s audited financial statements and notes thereto, which are included in the Bank’s Annual Report on Form 10-K as filed with the SEC under the Securities Exchange Act of 1934 on March 19, 2010 (“2009 Form 10-K”).  The Bank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements in the 2009 Form 10-K.  There have been no significant changes to these policies as of March 31, 2010.  

We have reclassified certain amounts from the prior periods to conform to the 2010 presentation. These reclassifications had no effect on Net Income or Capital.

All dollar amounts included in the notes are presented in thousands, unless otherwise indicated.

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management 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 significantly from these estimates.

Subsequent Events. We have evaluated events and transactions through the time of filing our first quarter 2010 Form 10-Q with the SEC, and believe there have been no material subsequent events requiring additional disclosure or recognition in the financial statements.

Note 2 — Recently Issued Accounting Standards & Interpretations

Accounting for Transfers of Financial Assets.  On June 12, 2009, the Financial Accounting Standards Board (“FASB”) issued guidance intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets.  Key provisions of the guidance include: (i) the removal of the concept of qualifying special purpose entities; (ii) the introduction of the concept of a participating interest, in circumstances in which a portion of a financial asset has been transferred; and (iii) the requirement that to qualify for sale accounting, the transferor must evaluate whether it maintains effective control over transferred financial assets either directly or indirectly.  The guidance also requires enhanced disclosures about transfers of financial assets and a transferor’s continuing involvement.  This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 (January 1, 2010, for us), for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter.  We adopted this guidance as of January 1, 2010.  Our adoption of this guidance did not have a material effect on our financial condition, results of operations or cash flows.
 
6

 
Federal Home Loan Bank of Indianapolis
Notes to Interim Unaudited Financial Statements, continued
($ amounts in thousands unless otherwise indicated)
 
Accounting for the Consolidation of Variable Interest Entities.  On June 12, 2009, the FASB issued guidance intended to improve financial reporting by enterprises involved with variable interest entities (“VIEs”), by providing more relevant and reliable information to users of financial statements.  This guidance amends the manner in which entities evaluate whether consolidation is required for VIEs.  An entity must first perform a qualitative analysis in determining whether it must consolidate a VIE, and if the qualitative analysis is not determinative, the entity must perform a quantitative analysis.  The guidance also requires that an entity continually evaluate VIEs for consolidation, rather than making such an assessment based upon the occurrence of triggering events.  Additionally, the guidance requires enhanced disclosures about how an entity’s involvement with a VIE affects its financial statements and its exposure to risks.  We adopted this guidance as of January 1, 2010.  Our adoption of this guidance did not have a material effect on our financial condition, results of operations or cash flows.

Fair Value Measurements and Disclosures — Improving Disclosures about Fair Value Measurements. On January 21, 2010, the FASB issued amended guidance for the fair value measurements and disclosures. The update requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. Furthermore, this update requires a reporting entity to present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs; clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value; and amends guidance on employers’ disclosures about postretirement benefit plan assets to require that disclosures be provided by classes of assets instead of by major categories of assets. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2009 (January 1, 2010, for us), except for the disclosures about purchases, sales, issuances, and settlements in the reconciliation in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 (January 1, 2011, for us), and for interim periods within those fiscal years. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. Early adoption was permitted. We adopted this guidance as of January 1, 2010 with the exception of the required changes noted above related to the reconciliation of Level 3 fair values.  Its adoption resulted in increased annual and interim financial statement disclosures but did not have a material effect on our results of operations, financial condition, or cash flows.

Scope Exception Related to Embedded Credit Derivatives. On March 5, 2010, the FASB issued amended guidance to clarify that the only type of embedded credit derivative feature related to the transfer of credit risk that is exempt from derivative bifurcation requirements is one that is in the form of subordination of one financial instrument to another.  As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination will need to assess those embedded credit derivatives to determine if bifurcation and separate accounting as a derivative is required.  This guidance is effective at the beginning of the first interim reporting period beginning after June 15, 2010 (July 1, 2010, for us).  Early adoption is permitted at the beginning of an entity’s first interim reporting period beginning after issuance of this guidance.  We are currently evaluating the effect that the adoption of this guidance may have on our financial condition, results of operations and cash flows.
 
7

 
Federal Home Loan Bank of Indianapolis
Notes to Interim Unaudited Financial Statements, continued
($ amounts in thousands unless otherwise indicated)
 
Note 3 — Available-for-Sale Securities

Major Security Types. Available-for-Sale Securities (“AFS”) include AAA-rated agency debentures issued or guaranteed by Government Sponsored Enterprises (“GSEs”) purchased from non-member counterparties.  These GSEs include Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal National Mortgage Association (“Fannie Mae”).  AFS were as follows:

         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Estimated
 
March 31, 2010
 
Cost
   
Gains
   
Losses
   
Fair Value
 
                         
GSEs
  $ 1,670,626     $ 93,690     $ -     $ 1,764,316  
Total AFS
  $ 1,670,626     $ 93,690     $ -     $ 1,764,316  

         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Estimated
 
December 31, 2009
 
Cost
   
Gains
   
Losses
   
Fair Value
 
                         
GSEs
  $ 1,672,918     $ 87,796     $ -     $ 1,760,714  
Total AFS
  $ 1,672,918     $ 87,796     $ -     $ 1,760,714  

Gross unrealized gains as of March 31, 2010, include unrealized losses on AFS of $18,466 and a hedging gain of $112,156.  Gross unrealized gains as of December 31, 2009, include unrealized gains on AFS of $2,140 and a hedging gain of $85,656.  The unrealized gains and losses on AFS are included in Accumulated Other Comprehensive Income (Loss) (“AOCI”) and the changes in fair value are included in Net Gains (Losses) on Derivatives and Hedging Activities in the Statements of Income.

Redemption Terms. The amortized cost and estimated fair value of AFS by contractual maturity are shown below.

   
March 31, 2010
   
December 31, 2009
 
   
Amortized
   
Estimated
   
Amortized
   
Estimated
 
Year of Contractual Maturity
 
Cost
   
Fair Value
   
Cost
   
Fair Value
 
                         
Due in one year or less
  $ -     $ -     $ -     $ -  
Due after one year through five years
    -       -       -       -  
Due after five years through ten years
    1,670,626       1,764,316       1,672,918       1,760,714  
Due after ten years
    -       -       -       -  
Total AFS
  $ 1,670,626     $ 1,764,316     $ 1,672,918     $ 1,760,714  

Interest Rate Payment Terms. All of the AFS pay a fixed rate of interest ranging from 4.88% to 5.50%.

Realized Gains and Losses.  There were no sales of AFS during the three months ended March 31, 2010, or 2009.
 
8

 
Federal Home Loan Bank of Indianapolis
Notes to Interim Unaudited Financial Statements, continued
($ amounts in thousands unless otherwise indicated)
 
Note 4 — Held-to-Maturity Securities

Major Security Types. Held-to-Maturity Securities (“HTM”) consist primarily of mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”) and corporate debentures guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) and backed by the full faith and credit of the United States under the Temporary Liquidity Guarantee Program (“TLGP”).  Our MBS include residential MBS (“RMBS”) and commercial MBS (“CMBS”).  Our ABS include both manufactured housing and home equity loans.  Private-label MBS and ABS in our portfolio refer to our private-label RMBS, CMBS and ABS (“Private-label MBS and ABS”). Our HTM also include certificates of deposit (“CDs”) and bank notes, state or local housing finance agency obligations, and corporate debentures issued by GSEs.

Our HTM were as follows:

         
OTTI
         
Gross
   
Gross
       
         
Recognized
         
Unrecognized
   
Unrecognized
   
Estimated
 
   
Amortized
   
In
   
Carrying
   
Holding
   
Holding
   
Fair
 
March 31, 2010
 
Cost (1)
   
AOCI
   
Value (2)
   
Gains (3)
   
Losses (3)
   
Value
 
                                     
Non-MBS and ABS:
                                   
GSE debentures
  $ 125,705     $ -     $ 125,705     $ 465     $ -     $ 126,170  
State or local housing
                                               
finance agency obligations
    -       -       -       -       -       -  
CDs
    411,000       -       411,000       -       (1 )     410,999  
TLGP
    2,066,986       -       2,066,986       6,845       (1 )     2,073,830  
Total Non-MBS and ABS
    2,603,691       -       2,603,691       7,310       (2 )     2,610,999  
MBS and ABS:
                                               
Other U.S. Obligations –
                                               
guaranteed RMBS
    1,403,144       -       1,403,144       18,897       -       1,422,041  
GSE RMBS
    1,974,994       -       1,974,994       60,562       (1,924 )     2,033,632  
Private-label RMBS
    2,490,372       (318,652 )     2,171,720       94,169       (73,226 )     2,192,663  
Private-label CMBS
    -       -       -       -       -       -  
Private-label ABS
    24,220       -       24,220       -       (5,403 )     18,817  
Total MBS and ABS
    5,892,730       (318,652 )     5,574,078       173,628       (80,553 )     5,667,153  
Total HTM
  $ 8,496,421     $ (318,652 )   $ 8,177,769     $ 180,938     $ (80,555 )   $ 8,278,152  
 
9


Federal Home Loan Bank of Indianapolis
Notes to Interim Unaudited Financial Statements, continued
($ amounts in thousands unless otherwise indicated)
 
         
OTTI
         
Gross
   
Gross
       
         
Recognized
         
Unrecognized
   
Unrecognized
   
Estimated
 
   
Amortized
   
In
   
Carrying
   
Holding
   
Holding
   
Fair
 
December 31, 2009
 
Cost (1)
   
AOCI
   
Value (2)
   
Gains (3)
   
Losses (3)
   
Value
 
                                     
Non-MBS and ABS:
                                   
GSE debentures
  $ 125,893     $ -     $ 125,893     $ 446     $ -     $ 126,339  
State or local housing
                                               
finance agency obligations
    260       -       260       -       -       260  
CDs
    -       -       -       -       -       -  
TLGP
    2,067,311       -       2,067,311       8,407       (26 )     2,075,692  
Total Non-MBS and ABS
    2,193,464       -       2,193,464       8,853       (26 )     2,202,291  
MBS and ABS:
                                               
Other U.S. Obligations –
                                               
guaranteed RMBS
    865,160       -       865,160       164       (7,965 )     857,359  
GSE RMBS
    2,136,381       -       2,136,381       58,880       (2,985 )     2,192,276  
Private-label RMBS
    2,805,348       (324,041 )     2,481,307       56,915       (116,891 )     2,421,331  
Private-label CMBS
    -       -       -       -       -       -  
Private-label ABS
    24,839       -       24,839       -       (7,614 )     17,225  
Total MBS and ABS
    5,831,728       (324,041 )     5,507,687       115,959       (135,455 )     5,488,191  
Total HTM
  $ 8,025,192     $ (324,041 )   $ 7,701,151     $ 124,812     $ (135,481 )   $ 7,690,482  

 
(1)
Amortized cost of HTM includes adjustments made to the cost basis of an investment for accretion, amortization, collection of cash, and/or previous other-than-temporary-impairment (“OTTI”) losses recognized in earnings.  OTTI may also refer to “Other-than-Temporarily Impaired” as the context indicates.
 
 
(2)
Carrying value of HTM represents amortized cost after adjustment for non-credit related impairment recognized in AOCI.
 
 
(3)
Gross unrecognized holding gains (losses) represent the difference between estimated fair value and carrying value.
 
10

 
Federal Home Loan Bank of Indianapolis
Notes to Interim Unaudited Financial Statements, continued
($ amounts in thousands unless otherwise indicated)
 
The following tables summarize the HTM with unrealized losses, which are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

   
Less than 12 months
   
12 months or more
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized