October 31, 2008

Total borrowings obtained from the Bank, including a member's unused IDEAL Way line of credit, should not exceed the value of a member's qualified collateral that has not been pledged to outside sources. Qualified collateral is computed according to Appendix A of this policy.

• A member's ratio of Bank capital stock to advances may not fall below the amount required under the Federal Home Loan Bank Act, and the requirements of the Bank's Capital Plan, as amended from time to time. For the purposes of this computation, "advances" comprises all extensions of credit and credit services. If, as a condition of granting an advance, a member is required to purchase additional capital stock, the Bank may deduct the amount of the required stock purchase from the proceeds of the advance and apply it to the purchase of capital stock.
  
  
• Upon written request by a member and upon approval by the Bank, a member may redeem capital stock in excess of the borrowing requirement when advances are paid down to the required percentage. In addition, the Bank may occasionally require members to redeem capital stock in excess of the requirement.
  
  
• A member that does not comply with any of its regulatory capital requirements may be subject to maturity and/or other borrowing restrictions. Certain restrictions may also apply to members that are affiliated with a holding company or other financial institution that is not in compliance with its regulatory capital requirements.
  
  
• The Bank may curtail the availability of advances and lines of credit without prior notice when the Bank determines that market or other conditions warrant such restrictions. The Bank may also change the terms of this policy without prior notice at any time. In determining the availability of advances and lines of credit, the Bank will consider a number of factors, including the Bank's practical funding constraints, statutory and regulatory restrictions, and its responsibility to preserve its financial integrity and long-term viability as a prudent and profitable institution.
  
  
• The Bank may determine not to extend new credit to a member that is insolvent on a tangible capital basis. In its sole discretion, the Bank may renew maturing advances to such a member. These maturing advances will be renewed only as overnight Rollover Cash Manager advances. The Bank may require the repayment of these maturing advances in an expeditious manner.

  A member that is insolvent on a tangible capital basis may not maintain an IDEAL Way line of credit.

  For the Bank's purposes, tangible capital includes capital defined in accordance with generally accepted accounting principles less goodwill and other intangible assets. In addition, if a member is operating under the control of its primary federal regulator, the member may be deemed by the Bank to be insolvent on a tangible capital basis.

• A member’s total advances may not exceed 50 percent of the member’s total assets as determined by the Bank at any time. Members are required to contact the Bank immediately if advances exceed 50 percent of assets due to a decline in the member’s assets or for any other reason.

  The Bank’s staff, with the approval of the President, may grant exceptions to this limitation on a case-by-case basis when necessary or in the Bank’s interest.

  The Bank will consider the following factors in determining whether a member will be allowed to obtain advances in excess of 50 percent of assets:

• Whether the member has an NRSRO rating, and if so, the rating level;
  
  
• The quality of the member’s collateral;
  
  
• The member’s asset size;
  
  
• Asset quality and the level of the loan loss reserve;
  
  
• The level and stability of the member’s capital;
  
  
• The level and stability of earnings; and
  
  
• Whether the member has support (or risk exposure) within a holding company structure, or from an affiliate or a subsidiary.
  
  
  
• A member whose total advances exceed 50 percent of assets will be placed in listing (or if necessary, delivery) collateral status with the Bank. Placing the member in listing status recognizes the increasing importance of collateral at this high level of borrowing.