exv4w1






Exhibit 4.1









CAPITAL PLAN




for the




Federal Home Loan Bank of Dallas



This capital plan is neither an offer to sell or exchange nor a solicitation of an offer to
purchase or exchange any capital stock of the Federal Home Loan Bank of Dallas.




Amended and Revised

May 28, 2008

(Approved by the Federal Housing Finance Board on June 11, 2008)




 









 








Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008




Table of Contents




	 	 	 	 	 	 	 	 	 
	Section	 	Page
	 	 	 	 	 
	 	 	 	 
	Definition of Terms	 	 	4	 
	 	 	 	 	 
	 	 	 	 
	Section 1:	 	Overview
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	 	1.1	 	General
	 	 	 	 
	 	 	1.2	 	Legal Authorities
	 	 	 	 
	 	 	1.3	 	Amendments to the Capital Plan
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	Section 2:	 	Capital Structure
	 	 	5	 
	 	 	 	 	 
	 	 	 	 
	 	 	2.1	 	Authorized Class of Capital Stock
	 	 	 	 
	 	 	2.2	 	Par Value of Capital Stock
	 	 	 	 
	 	 	2.3	 	Ownership of Retained Earnings
	 	 	 	 
	 	 	2.4	 	Preference in Liquidation, Consolidation or Merger
	 	 	 	 
	 	 	2.5	 	Finance Board Authority
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	Section 3:	 	Capital Stock
	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	 	 	3.1	 	Purchase of Capital Stock
	 	 	 	 
	 	 	3.2	 	Transfers of Capital Stock
	 	 	 	 
	 	 	3.3	 	Redemption of Capital Stock
	 	 	 	 
	 	 	3.4	 	Repurchase of Capital Stock
	 	 	 	 
	 	 	3.5	 	Limitations on Redemption or Repurchase of Capital Stock
	 	 	 	 
	 	 	3.6	 	Retirement of Capital Stock
	 	 	 	 
	 	 	3.7	 	Dividends on Capital Stock
	 	 	 	 
	 	 	3.8	 	Voting Rights
	 	 	 	 






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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	 	 	 	 	 	 	 
	Section	 	Page
	 	 	 	 	 
	 	 	 	 
	Section 4:	 	Minimum Investment Requirements
	 	 	10	 
	 	 	 	 	 
	 	 	 	 
	 	 	4.1	 	Membership Investment Requirement
	 	 	 	 
	 	 	4.2	 	Activity-Based Investment Requirement
	 	 	 	 
	 	 	4.3	 	Periodic Review of Minimum Investment Requirements
	 	 	 	 
	 	 	4.4	 	Member Compliance
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	Section 5:	 	Termination of Membership
	 	 	13	 
	 	 	 	 	 
	 	 	 	 
	 	 	5.1	 	Voluntary Withdrawal
	 	 	 	 
	 	 	5.2	 	Involuntary Termination of Membership
	 	 	 	 
	 	 	5.3	 	Termination by Charter Dissolution
	 	 	 	 
	 	 	5.4	 	General Membership Termination Provisions
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	Section 6:	 	Capital Structure Conversion
	 	 	15	 
	 	 	 	 	 
	 	 	 	 
	 	 	6.1	 	Capital Structure Conversion Process
	 	 	 	 
	 	 	6.2	 	Transition Procedures
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	Section 7:	 	Capital Plan Reviews
	 	 	18	 
	 	 	 	 	 
	 	 	 	 
	 	 	7.1	 	Independent Certified Public Accountant
	 	 	 	 
	 	 	7.2	 	Nationally Recognized Statistical Rating Organization
	 	 	 	 
	 	 	7.3	 	Good Faith Determination
	 	 	 	 






3









 






Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008




Definition of Terms





	1.	 	Acquired Member Assets (“AMA”) means assets that may be acquired by the Bank through
its members in accordance with the Regulations.
	 
	2.	 	Capital Plan means the plan for a new capital structure as required by Section 6(b)
of the Bank Act, 12 U.S.C. §1426(b).
	 
	3.	 	Class B Stock means capital stock held by members and issued by the Bank pursuant to
the Capital Plan, which will be redeemable by the Bank for cash at Par Value with five years
prior written notice provided by a member to the Bank.
	 
	4.	 	Conversion Date means the date upon which the Bank converts to the new capital
structure described in this Capital Plan and the existing capital stock is exchanged for Class
B Stock.
	 
	5.	 	Excess Stock means that amount of Class B Stock held by a member in excess of the
member’s minimum investment requirement as defined in this Capital Plan.
	 
	6.	 	Minimum Capital Requirement(s) means the amount of capital the Bank is required to
hold in order to comply with all statutory and regulatory capital requirements, or any other
capital requirement that may be imposed on the Bank by the Finance Board.
	 
	7.	 	Par Value means the par value specified in Section 2.2 of this Capital Plan for shares of Class B Stock issued in accordance with this Capital Plan.
	 
	8.	 	Stock Redemption means redemption of Class B Stock by the Bank pursuant to a stock
redemption notice in accordance with Section 3.3 of the Capital Plan or pursuant to a
withdrawal notice in accordance with Section 5.1 of the Capital Plan.
	 
	9.	 	Stock Repurchase means repurchase of Class B Stock by the Bank at its discretion in
accordance with the Regulations and Section 3.4 of the Capital Plan. The decision to
repurchase Class B Stock rests with the Bank and cannot be compelled by a member.




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	1.	 	Overview






	1.1	 	General
	 
	 	 	Pursuant to the Federal Home Loan Bank Act, as amended (12 U.S.C. §1421, et seq.) (“the Bank
Act”) and the governing Regulations (“Regulations”) of the Federal Housing Finance Board
(“Finance Board”), the Board of Directors of the Federal Home Loan Bank of Dallas (“the
Bank”) hereby establishes this Capital Plan to provide a new capital structure for the Bank,
and ensure that the Bank is able to comply with its Minimum Capital Requirements at all
times after the Conversion Date. This Capital Plan is designed to facilitate the
continuation of the Bank’s cooperative business model.
	 
	1.2	 	Legal Authorities
	 
	 	 	This document is governed by the Bank Act and the Regulations. Any action designated by
this Capital Plan as being subject to the “discretion” or “sole discretion” of the Bank or
the Board of Directors shall nevertheless be subject to the regulatory oversight of the
Finance Board.
	 
	1.3	 	Amendments to the Capital Plan
	 
	 	 	In accordance with the Regulations, any amendments to this Capital Plan must be submitted by
the Bank’s Board of Directors to the Finance Board for approval prior to implementation.






	2.	 	Capital Structure






	2.1	 	Authorized Class of Capital Stock
	 
	 	 	The Board of Directors of the Bank hereby authorizes the issuance of one class of capital
stock to be designated as Class B Stock, which will have a five year redemption notice
period.
	 
	2.2	 	Par Value of Capital Stock
	 
	 	 	All Class B Stock will have a Par Value of $100 per share. All Class B Stock will be
issued, redeemed, repurchased and transferred only at Par Value.
	 
	2.3	 	Ownership of Retained Earnings
	 
	 	 	In accordance with the Bank Act (12 U.S.C. §1426(h)(1)), the retained earnings, surplus,
undivided profits and equity reserves, if any, of the Bank are owned by the holders of Class
B Stock in proportion to each holder’s share of the total outstanding shares of Class B
Stock. Holders of Class B Stock have no right to receive any portion of the retained
earnings, surplus, undivided profits and equity reserves, if any, of the Bank except through
the declaration of a dividend or capital distribution approved by the Board of Directors, or
upon liquidation of the Bank.
	 
	2.4	 	Preference in Liquidation, Consolidation or Merger
	 
	 	 	In the event of liquidation of the Bank, the Board of Directors may authorize the pro rata
distribution of any retained earnings, surplus, undivided profits, and equity reserves of
the Bank, to holders of Class B Stock in proportion to each holder’s share of the total shares of outstanding Class B Stock, provided that all payment obligations to the Bank’s
existing creditors have been fully satisfied, and all Class B Stock has been redeemed at Par
Value.
	 
	 	 	In the event the Bank is merged or consolidated into another Federal Home Loan Bank, the
holders of the outstanding Class B Stock of the Bank will be entitled to the rights and
benefits set forth in any applicable plan of merger and/or terms established or approved by
the Finance Board. In the event another Federal Home Loan Bank is merged or consolidated
into the Bank, the




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	holders of the outstanding capital stock of the other Federal Home Loan
Bank will be entitled to the rights and benefits set forth in any applicable plan of merger
and/or terms established or approved by the Finance Board.
	 
	2.5	 	Finance Board Authority
	 
	 	 	No part of Section 2.4 of this Capital Plan will be construed to limit the authority granted
to the Finance Board under 12 U.S.C. §1446 to prescribe rules, regulations or orders
governing the liquidation, reorganization or merger of a Federal Home Loan Bank.






	3.	 	Capital Stock






	 	 	All members are required to purchase and redeem capital stock in accordance with the
requirements of the Bank Act, the Regulations and this Capital Plan, and the Bank will not
issue capital stock other than in accordance with the Regulations.
	 
	3.1	 	Purchase of Capital Stock
	 
	 	 	All members are required to purchase Class B Stock as a condition of
membership in accordance with the requirements of Section 4 of this
Capital Plan. The Class B Stock of the Bank may be issued only to
members of the Bank and institutions that have been approved by the
Bank to be members, and may be held only by members of the Bank,
non-member institutions that acquire Class B Stock by virtue of
acquiring member institutions, or by former members that retain Class
B Stock in accordance with this Capital Plan following termination of
membership. The Class B Stock of the Bank may be traded only between
the Bank and its members. All Class B Stock will be issued in book
entry form, and the Bank will act as its own transfer agent.
	 
	3.2	 	Transfers of Capital Stock
	 
	 	 	In accordance with the Regulations, and only with the prior approval
of the Bank as it deems appropriate, a member may transfer, at Par
Value, any Excess Stock to any other member or institution that has
satisfied all conditions for becoming a member other than the purchase
of the Class B Stock required to satisfy its minimum investment
requirement. All transfers of Class B Stock will be effective upon
being recorded on the appropriate books and records of the Bank.
Approval for all transfers is subject to the requirement that,
following the transfer, the transferring member would continue to hold
sufficient stock to meet the member’s minimum investment requirement.
Except as provided in Section 5.3 of the Capital Plan, stock
redemption notices will not transfer with Excess Stock that is
transferred.
	 
	3.3	 	Redemption of Capital Stock
	 
	 	 	Subject to the limitations in this Capital Plan, Class B Stock will be redeemable for cash
at Par Value with five (5) years prior written notice provided by the member to the Bank. A
member may request redemption of Class B Stock by providing a written stock redemption
notice to the Bank in accordance with Section 3.3.1 of this Capital Plan indicating the
number of shares of Class B Stock to be redeemed and the date(s) those shares were issued to
the member, or by submitting a membership withdrawal notice in accordance with Section 5.1
of this Capital Plan. If the redemption notice fails to properly identify the particular shares to be redeemed, the member shall be deemed to have requested redemption of the most
recently issued shares that are not already subject to a pending redemption request. The
five-year stock redemption notice period will commence upon receipt by the Bank of the written stock redemption or withdrawal notice.
A member may not have more than one stock redemption or withdrawal notice outstanding at
any one time for the same shares of Class B Stock.




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	The Bank will not be obligated to redeem a
member’s Class B Stock other than in
accordance with this Capital Plan. Nothing in
this section will preclude the Bank from
repurchasing Excess Stock in accordance with
Section 3.4 of this Capital Plan, including
Class B Stock for which a stock redemption
notice has been submitted.






	 	3.3.1	 	Notice of Redemption
	 
	 	 	 	Subject to the limitations in this Capital Plan, a member may request redemption of
Class B Stock by submitting five years written notice to the Bank. No member may
have more than one stock redemption notice outstanding for the same share(s) of
Class B Stock. To facilitate this limitation, no member may have one or more stock
redemption notices in effect at any one time that represent an aggregate amount of
Class B Stock that is greater than the total amount of Class B Stock the member
owns. If, subsequent to submitting a stock redemption notice, a member’s holdings of
Class B Stock fall below the amount of Class B Stock subject to outstanding stock
redemption notices, the Bank will automatically reduce the number of shares of stock
subject to stock redemption notices. If a member has more than one stock redemption
notice outstanding, this reduction will be applied first to the most recently
received stock redemption notice unless specified otherwise by the member in writing
within 30 days of the reduction in Class B Stock.
	 
	 	 	 	At the expiration of the five year period following receipt by the Bank of the stock
redemption notice, and subject to the limitations contained in Section 3.5 of this
Capital Plan, the Bank will pay the stated Par Value of the Class B Stock covered by
the stock redemption notice to the member in cash to the extent the Bank determines
that the Class B Stock is Excess Stock, as determined in accordance with the minimum
investment requirements in effect at the end of the redemption notice period.
	 
	 	 	 	Only Class B Stock that is Excess Stock at the expiration of the five year
redemption notice period will be redeemed pursuant to a stock redemption notice. A
stock redemption notice does not constitute a withdrawal notice as described in
Section 5.1 of this Capital Plan. At the expiration of the redemption notice
period, if the amount of Class B Stock subject to the stock redemption notice
exceeds the amount of Excess Stock held by the member, the Bank will redeem Class B
Stock equal to the amount of Excess Stock held by the member, and the stock
redemption notice for the remaining shares of Class B Stock subject to that notice
will be cancelled and a redemption cancellation fee will be assessed in accordance
with Section 3.3.2 of this Capital Plan. Alternatively, within five business days
of the expiration of the redemption notice period, the member may reduce its
activity with the Bank (subject to any applicable prepayment fees) to reduce its
minimum investment requirement and increase its holdings of Excess Stock which would
then be eligible for redemption.
	 
	 	3.3.2	 	Redemption Cancellation Notice
	 
	 	 	 	A member that has previously notified the Bank in writing of its intent to redeem
some or all of its Class B Stock may cancel the stock redemption notice for all or a
portion of the shares of Class B Stock subject to the stock redemption notice prior
to the expiration of the redemption notice period by providing a written redemption
cancellation notice to the Bank. A member may rescind a redemption cancellation
notice by providing written notice to the Bank within 30 days of the original
redemption cancellation notice.
	 
	 	 	 	A member that cancels a stock redemption notice more than 30 days after it is
received by the Bank and prior to its expiration will be subject to a redemption
cancellation fee calculated as a percentage of the Par Value of the shares of Class
B Stock subject to the redemption cancellation notice.




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	 	When a member submits a redemption cancellation notice more than 30 days after the
original redemption notice is received by the Bank but during the first year after
the Bank receives the original stock redemption notice, the redemption cancellation
fee will be 1.0 percent of the Par Value of the shares of Class B Stock subject to
the redemption cancellation notice; the fee during the second year will be 2.0
percent of the Par Value of the shares of Class B Stock subject to the redemption
cancellation notice; the fee during the third year will be 3.0 percent of the Par
Value of the shares of Class B Stock subject to the redemption cancellation notice;
the fee during the fourth year will be 4.0 percent of the Par Value of the shares of
Class B Stock subject to the redemption cancellation notice; and the fee during the
fifth year will be 5.0 percent of the Par Value of the shares of Class B Stock
subject to the redemption cancellation notice.
	 
	 	 	 	The Bank’s Board of Directors may from time to time modify the redemption
cancellation fee to any percentage(s) of the Par Value of the shares of Class B
Stock subject to the redemption cancellation notice that is not less than 0.0
percent and not more than the percentages specified in the preceding paragraph. In
the event the Board of Directors reduces the redemption cancellation fee, the Board
of Directors will also determine whether the reduced fee will apply to cancellation
of previously submitted stock redemption notices as well as those submitted in the
future. Otherwise, the fee in effect at the time the stock redemption notice was
originally received by the Bank will apply to the cancellation of that notice. The
Bank will notify members in writing at least 30 days in advance of any changes in
the redemption cancellation fee. Any change in the redemption cancellation fee will
be applied equally and without discrimination to all members.






	3.4	 	Repurchase of Capital Stock
	 
	 	 	The Bank in its sole discretion may repurchase Excess Stock from time to time without regard
to the five year redemption notice period. Excess Stock repurchases may be initiated by the
Bank or requested by members, and will be subject to the limitations contained in Section
3.5 of this Capital Plan. The decision to repurchase Excess Stock will rest with the Bank
and cannot be compelled by a member.
	 
	 	 	Upon 15 days written notice, the Bank may initiate the repurchase of any amount of members’
Excess Stock. The Bank will determine the criteria for Excess Stock repurchases from time
to time, and will apply the repurchase criteria equally and without discrimination to all
members. Pursuant to an application submitted by a member to the Bank in writing or in such
other form as the Bank may designate from time to time, the Bank may repurchase Class B
Stock that the Bank determines to be Excess Stock.
	 
	 	 	Unless the Bank is notified by a member otherwise in writing within 30 days of a Class B
Stock repurchase transaction, repurchases of Excess Stock will automatically reduce the
amount of Class B Stock subject to any outstanding stock redemption or withdrawal notices by
the amount of Class B Stock repurchased. If a member has more than one stock redemption and
/ or withdrawal notice outstanding, this reduction will be applied first to the most
recently received stock redemption or withdrawal notice.
	 
	 	 	A member’s submission of a withdrawal notice in accordance with Section 5.1 of this Capital
Plan, or its termination of membership in any other manner, will not, in and of itself,
cause any Class B Stock to be deemed Excess Stock for purposes of this section.
	 
	3.5	 	Limitations on Redemption or Repurchase of Capital Stock
	 
	 	 	The Bank will not redeem or repurchase Class B Stock without the prior
written approval of the Finance Board if the Finance Board or the
Board of Directors has determined that the Bank has




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	incurred, or is likely to incur, losses that result in, or are likely to result in,
charges against the capital of the Bank, as defined in the
Regulations. This prohibition will apply even if a Bank is in
compliance with its Minimum Capital Requirements, and will remain in
effect for however long the Bank continues to incur such charges or
until the Finance Board determines that such charges are not expected
to continue.
	 
	 	 	The Bank will not redeem or repurchase Class B Stock if the redemption or repurchase would
cause the Bank to be out of compliance with its Minimum Capital Requirements, or if the
redemption or repurchase would cause the member to be out of compliance with its minimum
investment requirement.
	 
	 	 	In accordance with the Regulations, the Bank’s Board of Directors may suspend redemption of
Class B Stock if the Bank reasonably believes that continued redemption of Class B Stock
would cause the Bank to fail to meet its Minimum Capital Requirements in the future, would
prevent the Bank from maintaining adequate capital against a potential risk that may not be
adequately reflected in its Minimum Capital Requirements, or would otherwise prevent the
Bank from operating in a safe and sound manner.
	 
	 	 	In accordance with the Regulations, the Bank will not repurchase any Class B Stock without
the written consent of the Finance Board during any period in which the Bank has suspended
redemptions of Class B Stock in accordance with this section. As required by the
Regulations, in the event the Bank suspends Class B Stock redemptions, the Bank will notify
the Finance Board in writing within two business days of the date of the decision to suspend
redemptions, informing the Finance Board of the reasons for the suspension and the Bank’s
strategies and time frames for addressing the conditions that led to the suspension. The
Finance Board may require the Bank to re-institute the redemption of Class B Stock.
	 
	 	 	If at any time the Bank determines that the total amount of Class B Stock subject to
outstanding stock redemption or withdrawal notices with expiration dates within the
following 12 months exceeds the amount of Class B Stock the Bank could redeem and still
comply with its Minimum Capital Requirements, the Bank will determine whether to suspend
redemption and repurchase activities altogether, to fulfill requests for redemption
sequentially in the order in which they were received, to fulfill the requests on a pro rata
basis, or to take other action deemed appropriate by the Bank.
	 
	3.6	 	Retirement of Capital Stock
	 
	 	 	All shares of Class B Stock that are acquired by the Bank pursuant to redemption or
repurchase transactions will be retired.
	 
	3.7	 	Dividends on Capital Stock
	 
	 	 	The Board of Directors may declare dividends to be paid on Class B Stock on a quarterly
basis or otherwise as it determines in its discretion. Each member will be entitled to
receive dividends on all Class B Stock held during the applicable period for the period of
time that the member owns
the Class B Stock. Dividends are non-cumulative with respect to payment obligation. A
member that has provided a withdrawal notice, or whose membership is otherwise terminated,
will continue to receive dividends on its Class B Stock as long as the institution or its
successor owns Class B Stock.
	 
	 	 	In accordance with the Bank Act and the Regulations, dividends may only be paid from current
earnings or previously retained earnings. In accordance with the Regulations, the Bank’s
Board of Directors may not declare or pay a dividend if the Bank is not in compliance with
its Minimum Capital Requirements or if the Bank would fall below its Minimum Capital
Requirements as a result of the payment of the dividend. Dividend payments may be made in
the form of cash,





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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	additional shares of Class B Stock, or a combination thereof as determined
by the Bank’s Board of Directors.
	 
	 	 	Except as otherwise provided herein or by regulation or statute, the Bank’s Board of
Directors has sole discretion to determine the amount, form, frequency and timing of
dividend payments.
	 
	3.8	 	Voting Rights
	 
	 	 	Members’ voting rights are limited to the election of directors as provided by the Bank Act.
The voting rights of holders of the Bank’s Class B Stock are as follows:






	 	3.8.1	 	Allocation of Elected Director Seats and Votes
	 
	 	 	 	In accordance with the Bank Act and the Regulations, the Finance Board will
designate elected director seats by state annually. Each member will be entitled to
vote in the election of directors representing the state in which the member is
located. Each member will be entitled to cast one vote in the election of directors
for each share of capital stock that the member was required to hold as of the
immediately preceding December 31, except that no member may cast a number of votes
greater than the average number of shares of capital stock required to be held by
all members in the state as of the preceding December 31. Shares of capital stock
held by members that were Excess Stock as of the preceding December 31 will not
convey voting rights in the election of directors.
	 
	 	3.8.2	 	Initial Election of Directors after Conversion
	 
	 	 	 	In accordance with the Regulations, the number of votes eligible to be cast in the
initial election of directors after the Conversion Date will be based on the number
of shares of capital stock that members were required to hold as of the immediately
preceding December 31. If this Capital Plan was in effect on the preceding December
31, the minimum investment requirements of this Capital Plan will be used to
determine the number of votes; otherwise, the number of votes will be determined
based on the number of shares required to be held in accordance with the Regulations
in effect prior to the implementation of the Capital Plan.
	 
	 	 	 	If any member’s actual holdings of capital stock were less than the applicable
minimum investment requirement on the preceding December 31, the number of shares
eligible to be voted will be based on the number of shares of capital stock actually
held by that member as of the preceding December 31.






	4.	 	Minimum Investment Requirements






	 	 	The Bank requires all members to purchase Class B Stock of the Bank and to maintain a
minimum investment in Class B Stock equal to the sum of the membership investment
requirement described in Section 4.1 plus the activity-based investment requirement
described in
Section 4.2. The Bank’s Board of Directors will periodically review and may adjust these
investment requirements as described in Section 4.3.
	 
	4.1	 	Membership Investment Requirement
	 
	 	 	Beginning on the Conversion Date, each member will be required to maintain at all times a
membership investment requirement equal to 0.25 percent of the member’s total assets as of
the most recent December 31, as reported on the member’s regulatory financial report for
that date, or its audited financial statements for that date if the member does not file
regulatory financial





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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	reports, subject to a minimum membership investment requirement of
$1,000 and a maximum membership investment requirement of $25 million.
	 
	 	 	As described in Section 4.3, the Bank’s Board of Directors may from time to time increase or
decrease the membership investment requirement to an amount not less than 0.05 percent of
each member’s total assets nor more than 0.30 percent of each member’s total assets. The
Bank’s Board of Directors may also increase or decrease the maximum membership investment
requirement to an amount not less than $10 million or more than $50 million.
	 
	 	 	The membership investment requirement will be calculated for all members at least annually
during the first calendar quarter of the year, or as soon thereafter as members’ applicable
financial data becomes available. The annual recalculation of membership investment
requirements will become effective on or within 30 days of April 1 of each year. For new
members, the membership investment requirement will be calculated based on the new member’s
total assets as of the end of the most recent calendar quarter for which financial
information is available. Members will be notified in writing of the amount of their
membership investment requirements at least 10 days in advance of the effective date.
	 
	 	 	The Bank may recalculate all members’ membership investment requirements more often than
annually if it deems appropriate, and may recalculate individual members’ membership
investment requirements more often than annually at the member’s request. In each of these
cases, membership investment requirements will be recalculated based on members’ total
assets as of the end of the most recent calendar quarter for which financial data is
available. In addition, after the end of each calendar quarter, at the time the quarterly
financial data used to calculate members’ membership investment requirements becomes
available, the Bank will recalculate the membership investment requirements for institutions
whose membership terminated during the quarter.
	 
	 	 	Notwithstanding any other provision of this Capital Plan, in the event that (a) a receiver
has been appointed for the member, and (b) the Bank has terminated the member’s membership,
then that member’s membership investment requirement shall be zero.
	 
	4.2	 	Activity-Based Investment Requirement
	 
	 	 	In addition to its membership investment requirement, each member must maintain an
activity-based investment requirement equal to the sum of the advances investment
requirement described in Section 4.2.1 and the AMA investment requirement described in
Section 4.2.2. Each member, former member, or successor to a member with applicable
activity outstanding must comply with the activity-based investment requirement for as long
as the relevant activity remains outstanding, including periods beyond the termination of
the member’s membership in the Bank.
	 
	 	 	The activity-based investment requirement for each member, former member, or successor to a
member will change whenever the institution’s activity with the Bank changes. In addition,
the Bank’s Board of Directors may periodically adjust the activity-based investment
requirements in accordance with Section 4.3 of this Capital Plan.






	 	4.2.1	 	Advances Investment Requirement
	 
	 	 	 	Beginning on the Conversion Date, each member must maintain an activity-based
investment in Class B Stock in an amount equal to 4.25 percent of the outstanding
principal balance of all advances outstanding. The Bank’s Board of Directors may
from time to time increase or decrease the advances-based investment requirement to
an amount not less than 3.5 percent of members’ advances outstanding nor more than
5.0 percent of members’ advances outstanding. The Bank’s Board of Directors may apply




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	 	changes to the advances investment requirement only to new advances, or to
current and new advances.
	 
	 	 	 	The advances investment requirement will be calculated daily and each time a member
enters into a new advances transaction. Complying with the advances investment
requirement at the time a new advances transaction is funded will be a condition of
funding the new transaction.
	 
	 	4.2.2	 	Acquired Member Asset (AMA) Investment Requirement
	 
	 	 	 	Beginning on the Conversion Date, each member must maintain an activity-based
investment in Class B Stock in an amount equal to 4.25 percent of the outstanding
principal balance of all Acquired Member Assets (AMA) acquired by the Bank through
the member and currently outstanding on the Bank’s balance sheet. However, this AMA
investment requirement will apply only to AMA acquired pursuant to commitments
executed after the Conversion Date, or AMA acquired pursuant to commitments executed
prior to the Conversion Date that explicitly stipulate that those AMA will be
subject to AMA investment requirements.
	 
	 	 	 	The Bank’s Board of Directors may from time to time increase or decrease the AMA
investment requirement to an amount not less than 0.0 percent of AMA outstanding on
the Bank’s balance sheet nor more than 5.0 percent of AMA outstanding on the Bank’s
balance sheet. At the discretion of the Board of Directors, any reduction in the
AMA investment requirement percentage may be applied only to AMA acquired pursuant
to commitments executed after the reduction becomes effective, or to previously
acquired and new AMA. Any increase in the AMA investment requirement will apply
only to AMA acquired pursuant to commitments executed after the effective date of
the change, or to AMA acquired pursuant to commitments executed prior to the
effective date of such change that explicitly stipulate that those AMA will be
subject to future changes in AMA investment requirements.
	 
	 	 	 	The AMA investment requirement for outstanding AMA will be calculated at least
monthly (and as often as daily at the Bank’s discretion), and for new AMA each time
new AMA are funded. Complying with the AMA investment requirement at the time
applicable AMA transactions are funded will be a condition of funding the new
transactions.






	4.3	 	Periodic Review of Minimum Investment Requirements
	 
	 	 	In accordance with the Bank Act and the Regulations, and to ensure ongoing compliance with
the Bank’s Minimum Capital Requirements, the Bank’s Board of Directors will review the
Bank’s Capital Plan at least annually, or more often as the Board of Directors deems
necessary. As part of this review, the Board of Directors will determine whether changes in
the minimum investment requirements are necessary to ensure that the Bank remains in
compliance with its Minimum Capital Requirements, or are otherwise appropriate. Adjustments
may be made to the specific percentages and the maximum amount for the membership investment
requirement as specified in Section 4.1, and the specific percentages for the activity-based
investment requirements as specified in Section 4.2. Any changes the Bank’s Board of
Directors makes to the minimum investment requirements will be communicated by written
notice (and otherwise as deemed appropriate by the Bank in its sole discretion) to be sent
to Bank members at least 30 days in advance of their effective date.




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	Any changes to members’ minimum investment requirement deemed appropriate by the Bank’s
Board of Directors but not authorized by this Capital Plan may be implemented only after the
Finance Board approves an amended Capital Plan reflecting such changes.
	 
	4.4	 	Member Compliance
	 
	 	 	The Bank will monitor the minimum investment requirement of each member on an ongoing basis
to ensure that the member remains in compliance with the applicable requirement. Each
member is required to comply promptly with any adjusted minimum investment requirements
established by the Board of Directors. However, members will be allowed a reasonable time
to comply, not to exceed 30 days from the effective date established by the Board of
Directors for the change in minimum investment requirement. Members may reduce their
outstanding activity with the Bank (subject to any prepayment fees applicable to the
reduction in activity) as an alternative to purchasing additional Class B Stock.
	 
	 	 	To facilitate the sale of additional stock which members are required to purchase as a
result of any changes in their minimum investment requirements, the Bank is authorized to
issue stock in the name of a member and to debit the member’s demand deposit account at the
Bank.






	5.	 	Termination of Membership






	 	 	Membership in the Bank may be terminated through voluntary withdrawal, through involuntary
termination by action of the Bank’s Board of Directors, through acquisition of a member by
another member institution, through acquisition of a member by a non-member institution, or
otherwise through dissolution of a member’s charter.
	 
	5.1	 	Voluntary Withdrawal
	 
	 	 	A member may withdraw from membership in the Bank by providing five years prior written
notice to the Bank. During the five year period following receipt by the Bank of the
member’s withdrawal notice, the member will be entitled to all the benefits and will incur
all the obligations of membership, including the obligation to comply with all minimum
investment requirements throughout the five year period. However, the Bank may limit any
new advances or AMA to terms that would mature on or before the expiration of the withdrawal
notice period. The membership of an institution that has submitted a withdrawal notice will
terminate at the expiration of the five year period following receipt by the Bank of the
withdrawal notice.
	 
	 	 	A withdrawal notice will also constitute a stock redemption notice for the amount of Class B
Stock held by the member at the time the Bank receives the withdrawal notice. At the
expiration of the five year period following receipt by the Bank of the member’s withdrawal notice, the
member’s membership in the Bank will terminate and, subject to the limitations contained in
Section 3.5 of this Capital Plan, the Bank will pay the stated Par Value of the Class B Stock
covered by the withdrawal notice to the member in cash in accordance with the following
conditions.
	 
	 	 	If the withdrawing member has no outstanding advances or AMA that require maintenance of
Class B Stock in accordance with Section 4.2 of this Capital Plan, the Bank will redeem all
of the outstanding Class B Stock subject to the withdrawal notice. If the withdrawing
member has outstanding advances or AMA that require maintenance of Class B Stock in
accordance with Section 4.2 of this Capital Plan, the Bank will redeem all the shares of
Class B Stock subject to the withdrawal notice, except those shares of Class B Stock
required to be held to comply with the activity-based investment requirement related to the
remaining advances and AMA.
	 
	 	 	During the remaining term of advances or AMA outstanding after the termination of
membership,




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	the former member or its successor must continue to comply with any changes in
the activity-based investment requirements related to the remaining advances or AMA. If the
withdrawing member holds any Class B Stock subject to a withdrawal notice that cannot be
redeemed at the expiration of the withdrawal notice period because it is required to meet a
continuing activity-based investment requirement, that stock will become redeemable when it
is no longer needed to comply with an activity-based investment requirement.
	 
	 	 	Nothing in this section will preclude the Bank from repurchasing Excess Stock in accordance
with Section 3.4 of this Capital Plan.






	 	5.1.1	 	Automatic Stock Redemption Notice
	 
	 	 	 	If a member has filed a withdrawal notice, that notice will also automatically
constitute a stock redemption notice for any shares of Class B Stock subsequently
acquired, with such automatic redemption notice to be effective and the redemption
notice period to begin on the date any additional Class B Stock is acquired. Such
Class B Stock will be redeemable at the end of its respective redemption notice
period in accordance with Section 3.3.1 or, if such Class B Stock is required to
comply with an ongoing activity-based investment requirement, that Class B Stock
will become redeemable when it is no longer needed to comply with an activity-based
investment requirement.
	 
	 	5.1.2	 	Withdrawal Cancellation Notice
	 
	 	 	 	A member that has previously submitted a withdrawal notice to the Bank in writing in
accordance with Section 5.1 of this Capital Plan may cancel its withdrawal notice
prior to the expiration of the withdrawal notice period by providing written notice
to the Bank. A member may also rescind a withdrawal cancellation notice by
providing written notice to the Bank within 30 days of the original withdrawal
cancellation notice and incur no redemption cancellation fee.
	 
	 	 	 	A withdrawal cancellation notice or withdrawal notice rescission will constitute a
redemption cancellation notice for the amount of Class B Stock subject to redemption
pursuant to the original withdrawal notice. The redemption cancellation fees and
conditions contained in Section 3.3.2 of this Capital Plan will also apply to a
withdrawal cancellation notice. A withdrawal cancellation notice or withdrawal
notice rescission will also cancel without fee any related automatic notices of
redemption created by the original withdrawal notice pursuant to Section 5.1.1 of
this Capital Plan, unless otherwise directed by the member.






	5.2	 	Involuntary Termination of Membership
	 
	 	 	The Bank Act and the Regulations grant the Board of Directors the authority to terminate an
institution’s membership under certain specified conditions. In the event the Board of
Directors terminates a member’s membership, that membership will terminate on the date the
Board of Directors acts to terminate the membership, and the five year stock redemption
notice period will begin on the same date.
	 
	5.3	 	Termination by Charter Dissolution
	 
	 	 	If an institution’s membership terminates by virtue of the dissolution of its charter either
through acquisition by another institution or otherwise, the membership of the disappearing
institution will terminate upon the cancellation of its charter. In the event of an
acquisition of a member, the Class B Stock held by the member will be transferred
automatically to the acquiring institution.
	 
	 	 	If the acquiring institution is a member of the Bank, the acquired Class B Stock may be
applied to the acquiring member’s minimum investment requirement, and any outstanding stock
redemption




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	notices will remain in effect. If the acquiring institution is not a member of
the Bank, and does not apply for membership as provided in the Regulations, the five year
stock redemption notice period will begin on the date the institution’s membership
terminates, or earlier if the Bank has received a withdrawal notice from the disappearing
member.
	 
	5.4	 	General Membership Termination Provisions
	 
	 	 	Upon the termination of an institution’s membership, or upon the conclusion of the
transition period provided in the Regulations for acquiring institutions to make application
for membership in the Bank, the Bank will determine an orderly manner for liquidating all
remaining outstanding indebtedness (including prepayment fees) owed by that member to the
Bank, and settling all other claims against the member. After the expiration of any
redemption notice periods required by this Capital Plan, the Bank will redeem any remaining
Class B Stock in accordance with the provisions of this Capital Plan and applicable Finance
Board regulations. After all remaining obligations and claims have been extinguished or
settled, the Bank will redeem the remaining shares of Class B Stock.
	 
	 	 	Nothing in this section will preclude the Bank from repurchasing any Excess Stock in
accordance with the provisions of this Capital Plan prior to the expiration of the stock
redemption notice periods, or redeeming Class B Stock in accordance with the provisions of
this Capital Plan prior to the extinguishment or settlement of all obligations and claims
against a member whose membership is being or has been terminated. However, in accordance
with the Regulations and this Capital Plan, the Bank may not redeem or repurchase any Class
B Stock required to support advances or AMA in accordance with Section 4.2 of this Capital
Plan until the respective advances or AMA have been repaid.






	6.	 	Capital Structure Conversion






	 	 	The Conversion Date for this Capital Plan will be not later than 25 months following Finance
Board approval of the Capital Plan.
	 
	6.1	 	Capital Structure Conversion Process






	 	6.1.1	 	Preliminary Estimate of Members’ New Minimum Investment Requirements
	 
	 	 	 	At least 60 days prior to the Conversion Date, the Bank will calculate an estimate
of each member’s new minimum investment requirement, with the membership investment
requirement calculated based on the member’s total assets as of the immediately
preceding December 31 for which financial information is available, and the
activity-based investment requirement calculated based on the member’s outstanding
balances of advances and applicable AMA as of the most recent month end. The Bank
will provide this preliminary minimum investment requirement to each member by
written notice.
	 
	 	6.1.2	 	Member Choice to Opt Out of Capital Plan
	 
	 	 	 	A member that chooses to opt out of this Capital Plan must notify the Bank in
writing at least 30 days prior to the Conversion Date of its decision not to
participate in the capital structure conversion process set forth herein. An opt out
notice will constitute a notice of the member’s intention to withdraw from
membership and must be submitted to the Finance Board as well as the Bank at least
30 days prior to the Conversion Date for this Capital Plan. If the Finance Board and
the Bank receive the opt out notice more than six months prior to the Conversion
Date, the notice will be governed by the six month notification requirement and the
redemption terms in effect prior to the implementation of the Capital Plan. In this
case, the member’s membership will terminate six months from the date the Finance
Board receives the opt out / withdrawal notice, and its old capital





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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	 	stock will be redeemable on that date.
	 
	 	 	 	If the Finance Board and the Bank receive the opt out notice less than six months
but at least 30 days in advance of the Conversion Date, the member’s membership will
terminate and its old capital stock will be redeemable on the Conversion Date.
	 
	 	 	 	If the opt out notice is received less than 30 days prior to the Conversion Date,
the Bank will exchange the member’s existing shares of capital stock for an equal
number of shares of Class B Stock in accordance with Section 6.1.5 of this Capital
Plan; the member’s membership will terminate and its Class B Stock will become
redeemable five years from the date the opt out / withdrawal notice was received. A
member that elects to opt out of the Capital Plan and whose opt out notice is
received less than 30 days prior to the Conversion Date will be required to purchase
additional shares of Class B Stock to comply with the minimum investment
requirements of this Capital Plan and to support any new activity entered into by
the member after the Conversion Date until its membership terminates. Any additional shares of Class B Stock acquired after the Conversion Date by an institution that
elects to opt out of the Capital Plan will be subject to the same terms and
conditions as any other shares of Class B Stock acquired by any member after the
Conversion Date.
	 
	 	 	 	If an institution has withdrawn from membership in the Bank prior to the Conversion
Date (either through the opt out provisions of this Section of the Capital Plan or
otherwise) but still owns capital stock at the Conversion Date related to activity
that remains outstanding, that institution’s existing capital stock will be
converted to Class B Stock on the Conversion Date. The amount of Class B Stock
required to be maintained by that institution while the activity remains outstanding
will be the lesser of the amount of capital stock owned immediately prior to the
conversion date, the amount of capital stock required to be held to support that
activity immediately prior to the conversion date, or the activity-based investment
requirement specified in this Capital Plan.
	 
	 	6.1.3	 	Member Transition Period
	 
	 	 	 	In accordance with the Bank Act and the Regulations, members that joined a Federal
Home Loan Bank after November 12, 1999 must comply with the minimum investment
requirements of the Capital Plan on the Conversion Date. Any institution that
becomes a member of the Bank after the Conversion Date must comply with the minimum investment
requirements of this Capital Plan as of the date on which it becomes a member of the
Bank.
	 
	 	 	 	Members that joined a Federal Home Loan Bank on or before November 12, 1999 and for
which this Capital Plan establishes a higher minimum investment requirement than
under the requirements in effect immediately prior to implementation of this Capital
Plan will have the option to meet the additional minimum investment requirement in
four equal quarterly increments, provided, however, that members must immediately
purchase Class B Stock required to support any change in member activity subsequent
to the Conversion Date. A member must advise the Bank in writing of its intent to
exercise this option at least 30 days prior to the Conversion Date.
	 
	 	 	 	For a member eligible to elect to utilize these transition provisions and that
elects to do so, the Bank will reduce the membership investment requirement during
the first quarter following the Conversion Date by an amount equal to 100 percent of
the amount by which this Capital Plan increases the member’s total minimum
investment requirement; during the second quarter following the Conversion Date, the
Bank will reduce the membership investment requirement by 75 percent of the amount
by which the Capital




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	 	 	 	Plan increases the member’s total minimum investment requirement; during the third quarter following the Conversion Date, the Bank will
reduce the membership investment requirement by 50 percent of the amount by which
the Capital Plan increases the member’s total minimum investment requirement; and
during the fourth quarter following the Conversion Date, the Bank will reduce the
membership investment requirement by 25 percent of the amount by which the Capital
Plan increases the member’s total minimum investment requirement. At all times
beginning on the Conversion Date, the member must comply with all applicable
activity-based investment requirements.
	 
	 	6.1.4	 	Minimum Investment Requirements on Conversion Date
	 
	 	 	 	Each member’s minimum investment requirement at the opening of business on the
Conversion Date will be calculated as the sum of the membership investment
requirement based on the member’s total assets as of the immediately preceding
December 31 for which the applicable financial information is available (subject to
any applicable transition adjustments as described in Section 6.1.3), and the
application of the relevant activity-based investment requirements to the member’s
outstanding balances of advances and applicable AMA at the close of business on the
business day immediately prior to the Conversion Date.
	 
	 	6.1.5	 	Conversion Date Process
	 
	 	 	 	The following actions, which constitute the Bank’s Plan of Reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, are to be taken in order to implement this Capital Plan.
	 
	 	 	 	At the opening of business on the Conversion Date, the Bank will:






	 	1.	 	Exchange the member’s existing shares of capital stock for an
equal number of shares of Class B Stock.
	 
	 	2.	 	Advise the member by written or electronic notice the details
of its new minimum investment requirement, including an explicit notation of
the member’s excess or deficit position.
	 
	 	3.	 	A member whose investment in capital stock on the Conversion
Date exceeds the new minimum investment requirement will hold Excess Stock that
the Bank may repurchase in accordance with the provisions of Section 3.4 of
this Capital Plan.
	 
	 	4.	 	A member whose actual holdings of capital stock on the
Conversion Date are less than the minimum investment requirement on the
Conversion Date must purchase sufficient additional Class B Stock to satisfy
the new minimum investment requirement. A member eligible to utilize the
transition provisions of Section 6.1.3 of this Capital Plan and that elects to
do so may purchase the additional shares of Class B Stock in four equal
quarterly installments as described in Section 6.1.3. To facilitate the
purchase of any required additional shares of Class B Stock, the Bank is
authorized to issue Class B Stock in the member’s name and debit the member’s
demand deposit account at the Bank.






	 	6.1.6	 	Post-Conversion Activity-Based Stock Purchases
	 
	 	 	 	Any member that obtains an advance or enters into any AMA transaction subject to an
activity-based investment requirement subsequent to the Conversion Date is required
to comply with the activity-based investment requirement related to that transaction
at the time the transaction occurs.




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Federal Home Loan Bank of Dallas Capital Plan: Revised May 28, 2008





	6.2	 	Transition Procedures






	 	6.2.1	 	The Bank’s Transition
	 
	 	 	 	It is the Bank’s intent to be in full compliance with its Minimum Capital
Requirements on the Conversion Date.
	 
	 	6.2.2	 	Member Transition
	 
	 	 	 	For a member eligible to utilize the transition provisions of Section 6.1.3 of this
Capital Plan and that elects to do so, the membership investment requirement will
increase in even increments over four quarterly periods as specified in Section
6.1.3 of this Capital Plan. Additional purchases of Class B Stock required to
maintain compliance with the minimum investment requirements of this Capital Plan
will be made automatically by issuing stock in the member’s name and debiting the
member’s demand deposit account at the Bank.






	7.	 	Capital Plan Reviews






	 	7.1	 	Independent Certified Public Accountant
	 
	 	 	 	PricewaterhouseCoopers (PwC), an independent Certified Public Accounting (CPA) firm,
reviewed the October 22, 2001 draft of this Capital Plan and concluded, to the
extent possible, that the implementation of this Capital Plan would not result in
any write-down of the redeemable stock owned by the Bank’s members. A copy of PwC’s
review has been provided to the Finance Board. The Bank represents that no
substantive modifications have been made to the October 22, 2001 draft in this
Capital Plan that it believes would have an impact on PwC’s conclusion. A letter
from PwC confirming that conclusion for this Capital Plan will be provided following
Finance Board approval of the Capital Plan.
	 
	 	7.2	 	Nationally Recognized Statistical Rating Organization (NRSRO)
	 
	 	 	 	Standard & Poor’s (S&P), a Nationally Recognized Statistical Rating Organization
(NRSRO), reviewed the July 19, 2001 draft of this Capital Plan and determined, to
the extent possible, that the implementation of this Capital Plan would not have a
material effect on the credit rating of the Bank. A copy of S&P’s review has been
provided to the Finance Board with this Capital Plan. The Bank represents that no
substantive modifications have been made to the July 19, 2001 draft in this Capital
Plan that it believes would have an impact on the Bank’s credit rating. A letter
from S&P confirming that conclusion for this Capital Plan will be provided following
Finance Board approval of the Capital Plan.
	 
	 	7.3	 	Good Faith Determination
	 
	 	 	 	The Bank has made a good faith determination that this Capital Plan
can be implemented. The Bank has provided evidence of this determination to
the Finance Board.






18