FOR IMMEDIATE RELEASE

Contact:
Larry Marshall
Federal Home Loan Bank of Dallas
larry.marshall@fhlb.com
www.fhlb.com
(214) 441-8442

FHLBank Dallas Announces Second Quarter Dividend; Revised Dividend Declaration and Payment Process

DALLAS, TEXAS, June 29, 2006 – The Board of Directors of the Federal Home Loan Bank of Dallas has declared a dividend in the form of capital stock for the second quarter of 2006 at an annualized rate equivalent to the average effective federal funds rate for the quarter, currently estimated to be 4.91 percent. The second quarter dividend, applied to average capital stock held during the period from March 31, 2006 through June 29, 2006, will be paid on June 30, 2006.

Taking into consideration its retained earnings targets, as well as current earnings expectations and anticipated market conditions, the Bank currently expects to pay dividends during the remainder of 2006 at the low end of its target range of 0 to 50 basis points above the average effective federal funds rate for the applicable dividend period. 

Revised Dividend Declaration and Payment Process

As announced in the press release dated December 19, 2005, and reported in subsequent SEC filings, in light of earnings volatility related to the accounting requirements of SFAS 133, the Bank has been exploring alternative ways to adjust the dividend declaration and payment process so that it can declare and pay dividends with the benefit of knowing its actual earnings for the dividend period. In addition, the Federal Housing Finance Board (Finance Board) published on March 15, 2006 a proposed regulation entitled “Excess Stock Restrictions and Retained Earnings Requirements for the Federal Home Loan Banks.” Among other things, the proposed regulation, which remains open for comment until July 13, 2006, would require FHLBanks to declare and pay dividends only after the close of the calendar quarter to which the dividend pertains and the earnings for that quarter have been calculated. 

Effective with the third quarter of 2006, the Bank will change its dividend declaration and payment process in a manner that will conform with the timing provisions of the proposed regulation. The third quarter dividend will be paid on September 29, 2006, and will be based upon the Bank’s operating results, members’ average capital stock holdings and the average effective federal funds rate for the second quarter of 2006. The fourth quarter dividend will be paid on December 29, 2006, and will be based upon the Bank’s operating results, members’ average capital stock holdings and the average effective federal funds rate for the third quarter of 2006. The Bank anticipates that this pattern will continue for future periods.

Depending on the effective date and exact provisions of a final regulation that may be adopted by the Finance Board, if any, the combination of the proposed requirements related to the dividend declaration and payment process and the measurement of retained earnings for purposes of complying with the proposed regulation’s minimum retained earnings requirements could have an impact on the date the Bank achieves compliance with the minimum retained earnings provisions of the regulation. This could potentially restrict the amount the Bank would be allowed to pay in dividends immediately following the date the proposed regulation becomes effective.

In addition, the proposed regulation’s prohibition on the payment of dividends in the form of capital stock, if included in a final regulation as proposed, would also require a change from current practice, since the Bank has historically paid dividends in the form of capital stock.

A copy of the Finance Board’s proposed capital regulation and the Bank’s comment letter to the Finance Board regarding the proposed regulation can be found on the Bank’s website at www.fhlb.com.

The Bank also said that it will repurchase on July 31, 2006, the portion of members’ excess stock identified as surplus stock. Beginning with this mandatory stock repurchase cycle, surplus stock will be defined as the amount of capital stock held by a member that exceeds 110 percent of the minimum investment requirement. A member’s surplus stock will not be repurchased if the amount of surplus stock is $250,000 or less.

The FHLBank Dallas is one of 12 district banks in the FHLBank System created by Congress in 1932. The Bank, with total assets of $56.9 billion, is a member-owned cooperative that supports housing and community development through low-cost funding and other credit products provided to more than 900 members and associated institutions in Arkansas, Louisiana, Mississippi, New Mexico and Texas. 

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