Federal Home Loan Bank of Indianapolis - FORM 10-Q

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

¨ 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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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
March 31, 2010	Value		Losses			Value		Losses		Value		Losses (1)

Non-MBS and ABS:
CDs	$	220,999	$	(1	)	$	-	$	-	$	220,999	$	(1	)
TLGP		14,356		(1	)		-		-		14,356		(1	)
Total Non-MBS and ABS		235,355		<

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Federal Home Loan Bank of Indianapolis - FORM 10-Q - May 12, 2010