Bulletin No.: 2008-07
June 30, 2008

TO: STOCKHOLDERS

SUBJECT: FHLB Dallas to Offer Interest Rate Swaps, Caps and Floors to Members

New Interest Rate Management Tools:

Starting July 1, 2008, the FHLB of Dallas will begin offering interest rate swaps, caps and floors to its Members.  This new product offering is designed to allow Members to remain competitive in today’s volatile marketplace, enhance business development opportunities and better manage interest rate risk.

Common Uses:

Common uses of interest rate swaps include hedging fixed rate assets and liabilities such as fixed rate commercial loans and deposits.  Additionally, interest rate sensitive assets and liabilities exposed to movements in LIBOR can be hedged through the use of caps and floors.

Member Eligibility:

In order to be eligible, a Member must be on a blanket lien and must have executed a Master Swap Agreement, the Schedule to the Master Swap Agreement, the Corporate Certificate of Authority that specifically relates to interest rate derivatives, and Derivative Signature Cards authorizing the appropriate officers of the member institution to execute derivative trades and sign trade confirmations.

Collateral Usage:

Collateral requirements may be satisfied with all collateral types available to Members on blanket lien status.  The collateralization requirement will equal the sum of the net market value of the Member’s derivative transactions (if the value is positive to the Dallas Bank), and 2.5% of the notional amount of any interest rate swaps that the Member enters into with the Bank.  For collateral determination purposes, market values will be determined on at least a monthly basis.  Any Member that enters into interest rate derivatives with the Dallas Bank will be able to view the collateral requirements for the transactions on their Customer Profile screen on Secure Connect.

The minimum transaction size will be $500,000 and requests for quotes must be received by Member Sales no later than 3:30 p.m. CST.  To obtain a pricing quote, the Member should be prepared to discuss with Member Sales the type of instrument (interest rate swap, cap or floor), the notional amount of the instrument and the maturity of the instrument.

Technical Expertise:

The Bank has formed a strategic alliance with Echo Partners to provide Members with turnkey advice with respect to interest rate derivatives.  Echo Partners’ staff has arranged hundreds of derivative transactions for financial institutions of all sizes.  To date, the management at Echo Partners has arranged interest rate swaps with an aggregate notional amount in excess of $250 billion.  Echo Partners is available to assist in the areas of asset/liability management, derivative education, and transaction reporting.

For additional information or to learn more about derivatives, please contact your Member Sales Officer at 800.442.9841.

Sincerely,

Mike Sims

Senior Vice President, Chief Financial Officer

###