Advances

General Terms. The Bank offers a wide range of fixed- and variable-rate advance products with different maturities, interest rates, payment characteristics and optionality. Fixed-rate advances generally have maturities ranging from one day to 30 years. Variable-rate advances generally have maturities ranging from less than 30 days to 10 years, where the interest rates reset periodically at a fixed spread to LIBOR or other specified indices.

At September 30, 2012 and December 31, 2011, the Bank had advances outstanding, including AHP advances, with interest rates ranging from zero to 7.40%. AHP subsidized loans have interest rates ranging between zero and 5.50%.

The following table details the Bank’s advances portfolio by year of contractual maturity as of September 30, 2012 and December 31, 2011.



(dollars in thousands)	September 30, 2012					December 31, 2011
Year of Contractual Maturity	Amount			Weighted Average Interest Rate		Amount			Weighted Average Interest Rate
Due in 1 year or less	$	19,018,266		0.85	%	$	14,129,734		1.12	%
Due after 1 year through 2 years	3,054,594			1.94		2,614,149			2.89
Due after 2 years through 3 years	4,666,804			2.88		3,071,155			2.63
Due after 3 years through 4 years	2,655,836			4.79		3,560,115			4.05
Due after 4 years through 5 years	4,744,309			1.51		2,193,086			4.51
Thereafter	2,503,450			3.69		3,744,103			4.20
Total par value	36,643,259			1.77	%	29,312,342			2.44	%
Discount on AHP advances	(256		)			(377		)
Deferred prepayment fees	(14,527		)			(16,653		)
Hedging adjustments	1,110,145					1,309,489
Total book value	$	37,738,621				$	30,604,801

The Bank also offers convertible advances. Convertible advances allow the Bank to convert an advance from one interest rate structure to another. When issuing convertible advances, the Bank may purchase put options from a member that allow the Bank to convert the fixed-rate advance to a variable-rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed-rate advance without the conversion feature. Variable- to fixed-rate convertible advances have a defined lockout period during which the interest rates adjust based on a spread to LIBOR. At the end of the lockout period, these advances may convert to fixed-rate advances. The fixed rates on the converted advances are determined at origination. At September 30, 2012 and December 31, 2011, the Bank had convertible advances outstanding of $2.8 billion and $4.0 billion, respectively.

The Bank offers certain advances to members that provide a member the right, based upon predetermined option exercise dates, to call the advance prior to maturity without incurring prepayment or termination fees (returnable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the member pays a higher fixed rate for the advance relative to an equivalent maturity, non-callable, fixed-rate advance. If the call option is exercised, replacement funding may be available. At September 30, 2012 and December 31, 2011, the Bank had returnable advances of $6.9 billion and $1.0 billion, respectively.

The following table summarizes advances by year of contractual maturity or next call date or next convertible date as of September 30, 2012 and December 31, 2011.



	Year of Contractual Maturity or Next Call Date				Year of Contractual Maturity or Next Convertible Date
(in thousands)	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
Due in 1 year or less	$	19,418,266	$	14,129,734	$	21,350,266	$	17,478,985
Due after 1 year through 2 years	3,054,594		2,614,149		2,999,094		2,283,148
Due after 2 years through 3 years	4,666,804		3,071,155		4,556,304		2,922,405
Due after 3 years through 4 years	2,655,836		3,560,115		1,643,336		3,287,615
Due after 4 years through 5 years	4,744,309		2,193,086		4,097,309		1,044,586
Thereafter	2,103,450		3,744,103		1,996,950		2,295,603
Total par value	$	36,643,259	$	29,312,342	$	36,643,259	$	29,312,342

Interest Rate Payment Terms. The following table details interest rate payment terms for advances as of September 30, 2012 and December 31, 2011.



(in thousands)	September 30, 2012		December 31, 2011
Fixed rate – overnight	$	165,890	$	588,583
Fixed rate – term:
Due in 1 year or less	18,802,376		13,487,574
Thereafter	10,936,700		12,483,536
Total fixed rate	29,904,966		26,559,693
Variable rate:
Due in 1 year or less	50,000		53,577
Thereafter	6,688,293		2,699,072
Total variable rate	6,738,293		2,752,649
Total par value	$	36,643,259	$	29,312,342

At September 30, 2012 and December 31, 2011, 33.0% and 39.1%, respectively, of the Bank's fixed-rate advances were swapped to a floating rate. At September 30, 2012 and December 31, 2011, 13.4% and 32.7%, respectively, of the Bank's variable-rate advances were swapped to a different variable-rate index.

Credit Risk Exposure and Security Terms. The Bank’s potential credit risk from advances is concentrated in commercial banks and savings institutions. As of September 30, 2012, the Bank had advances of $28.8 billion outstanding to its five largest borrowers, which represented 78.6% of total advances outstanding. Of these five, four had outstanding advance balances in excess of 10% of the total portfolio at September 30, 2012. As of December 31, 2011, the Bank had advances of $20.6 billion outstanding to the five largest borrowers, which represented 70.4% of total advances outstanding. Of these five, two had outstanding advance balances in excess of 10% of the total portfolio at December 31, 2011.

The Bank lends to financial institutions involved in housing finance within Delaware, Pennsylvania and West Virginia according to Federal statutes, including the Act. The Act requires each FHLBank to hold, or have access to, collateral to secure its advances. The Bank does not expect to incur any credit losses on advances. The Bank has policies and procedures in place to manage credit risk appropriately, including requirements for physical possession or control of pledged collateral, restrictions on borrowing, verifications of collateral and continuous monitoring of borrowings and the member's financial condition. Based on the collateral pledged as security for advances and management's credit analyses of members' financial condition as well as credit extension and collateral policies, the Bank expects to collect all amounts due according to the contractual terms of the advances. See Note 9 for information related to the Bank's credit risk on advances and allowance for credit losses.